~~0000052827us-gaap:PensionPlansDefinedBenefitMember2020-04-012020-06-30~~

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2020~~March 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


			For the transition period from to

RAYONIER INC.

(Exact name of registrant as specified in its charter)

North Carolina

1-6780

13-2607329

(State or other Jurisdiction of incorporation or organization)

(Commission File Number)

(I.R.S. Employer Identification Number)

Rayonier, L.P.

(Exact name of registrant as specified in its charter)

Delaware

333-237246

91-1313292

(State or other Jurisdiction of incorporation or organization)

(Commission File Number)

(I.R.S. Employer Identification Number)

1 RAYONIER WAY

WILDLIGHT, FL 32097

(Principal Executive Office)

Telephone Number: (904) 357-9100

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:


Title of each class	Trading Symbol	Exchange
Common Shares, no par value, of Rayonier Inc.	RYN	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Rayonier Inc. Yes ☒ No ☐ Rayonier, L.P. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Rayonier Inc. Yes ☒ No ☐ Rayonier, L.P. Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Rayonier Inc.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

Rayonier, L.P.

Large Accelerated Filer

☐

Accelerated Filer

☐

Non-accelerated Filer

☒

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Rayonier Inc. o☐ Rayonier, L.P. o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Rayonier Inc. Yes ☐ No ☒ Rayonier, L.P. Yes ☐ No ☒

As of ~~July 31, 2020,~~April 30, 2021, Rayonier Inc. ~~had 136,512,112 Common~~had 139,029,941 Common Shares outstanding. As of ~~July 31, 2020,~~April 30, 2021, Rayonier, L.P. ~~had 4,446,153 Common~~had 4,278,766 Units outstanding.

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EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarterly period ended ~~June 30, 2020~~March 31, 2021 of Rayonier Inc., a North Carolina corporation, and Rayonier, L.P., a Delaware limited partnership. Unless stated otherwise or the context otherwise requires, references to “Rayonier” or “the Company” mean Rayonier Inc. and references to the “Operating Partnership” mean Rayonier, L.P. References to “we,” “us,” and “our” mean collectively Rayonier Inc., the Operating Partnership and entities/subsidiaries owned or controlled by Rayonier Inc. and/or the Operating Partnership.

Rayonier Inc. has elected to be taxed as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, commencing with its taxable year ended December 31, 2004. The Company is structured as an umbrella partnership REIT (“UPREIT”) under which substantially all of its business is conducted through the Operating Partnership. Rayonier Inc. is the sole general partner of the Operating Partnership. On May 8, 2020, Rayonier, L.P. acquired Pope Resources, a Delaware Limited Partnership (“Pope Resources”) and issued approximately 4.45 million operating partnership units (“OP Units” or “Redeemable ~~Common~~Operating Partnership Units”) of Rayonier, L.P. as partial merger consideration. These OP Units are generally considered to be economic equivalents to Rayonier common shares and receive distributions equal to the dividends paid on Rayonier common shares. See Note 2 - Merger with Pope Resources for additional information pertaining to the merger.

As of ~~June 30, 2020,~~March 31, 2021, the Company owned a ~~96.8%~~97.0% interest in the Operating Partnership, with the remaining ~~3.2~~3.0%% interest owned by limited partners of the Operating Partnership. As the sole general partner of the Operating Partnership, Rayonier Inc. has exclusive control of the day-to-day management of the Operating Partnership.

Rayonier Inc. and the Operating Partnership are operated as one business. The management of the Operating Partnership consists of the same members as the management of Rayonier Inc. As general partner with control of the Operating Partnership, Rayonier Inc. consolidates Rayonier, L.P. for financial reporting purposes, and has no material assets or liabilities other than its investment in the Operating Partnership.

We believe combining the quarterly reports of Rayonier Inc. and Rayonier, L.P. into this single report results in the following benefits:

•Strengthens investors’ understanding of Rayonier Inc. and the Operating Partnership by enabling them to view the business as a single operating unit in the same manner as management views and operates the business;

•Creates efficiencies for investors by reducing duplicative disclosures and providing a single comprehensive document; and

•Generates time and cost savings associated with the preparation of the reports when compared to preparing separate reports for each entity.

There are a few important differences between Rayonier Inc. and the Operating Partnership in the context of how Rayonier Inc. operates as a consolidated company. The Company itself does not conduct business, other than through acting as the general partner of the Operating Partnership and issuing equity or equity-related instruments from time-to-time. The Operating Partnership holds, directly or indirectly, substantially all of the Company’s assets. Likewise, all debt is incurred by the Operating Partnership or entities/subsidiaries owned or controlled by the Operating Partnership. The Operating Partnership conducts substantially all of the Company’s business and is structured as a partnership with no publicly traded equity.

To help investors understand the significant differences between the Company and the Operating Partnership, this report includes:

•Separate Consolidated Financial Statements for Rayonier Inc. and Rayonier, L.P.;

•A combined set of Notes to the Consolidated Financial Statements with separate discussions of per share and per unit information, noncontrolling interests and shareholders’ equity and partners’ capital, as applicable;

•A combined Management’s Discussion and Analysis of Financial Condition and Results of Operations which includes specific information related to each reporting entity;

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•A separate Part 1, Item 4. Controls and Procedures related to each reporting entity;

•A separate Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds section related to each reporting entity; and

•Separate Exhibit 31 and 32 certifications for each reporting entity within Part II, Item 6.

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TABLE OF CONTENTS


Item	Item		Page	Item		Page
		PART I - FINANCIAL INFORMATION			PART I - FINANCIAL INFORMATION
1.	1.	Financial Statements (unaudited)	1	1.	Financial Statements (unaudited)	1
		Rayonier Inc.:			Rayonier Inc.:
		Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended June 3 0 , 2020 and 2019	1		Consolidated Statements of Income and Comprehensive Income for the Three Months Ended March 31, 2021 and 2020	1
		Consolidated Balance Sheets as of June 3 0 , 2020 and December 31, 2019	2		Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	2
		Consolidated Statements of Changes in Shareholders’ Equity for the Quarters and Six Months ended June 30, 2020 and 2019	3		Consolidated Statements of Changes in Shareholders’ Equity for the Quarters Ended March 31, 2021 and 2020	3
		Consolidated Statements of Cash Flows for the Six Months Ended June 3 0 , 2020 and 2019	5		Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020	4
		Rayonier, L.P.:			Rayonier, L.P.:
		Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended June 3 0 , 2020 and 2019	6		Consolidated Statements of Income and Comprehensive Income for the Three Months Ended March 31, 2021 and 2020	5
		Consolidated Balance Sheets as of June 3 0 , 2020 and December 31, 2019	7		Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	6
		Consolidated Statements of Changes in Capital for the Quarters and Six Months ended June 30, 2020 and 2019	8		Consolidated Statements of Changes in Capital for the Quarters Ended March 31, 2021 and 2020	7
		Consolidated Statements of Cash Flows for the Six Months Ended June 3 0 , 2020 and 2019	10		Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020	8
		Notes to Consolidated Financial Statements	11		Notes to Consolidated Financial Statements	9
2.	2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	54	2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	41
3.	3.	Quantitative and Qualitative Disclosures about Market Risk	81	3.	Quantitative and Qualitative Disclosures about Market Risk	65
4.	4.	Controls and Procedures	83	4.	Controls and Procedures	67
		PART II - OTHER INFORMATION			PART II - OTHER INFORMATION
1A.		Risk Factors	84
1.	1.	Legal Proceedings	84	1.	Legal Proceedings	68
2.	2.	Unregistered Sales of Equity Securities and Use of Proceeds	85	2.	Unregistered Sales of Equity Securities and Use of Proceeds	69
6.	6.	Exhibits	86	6.	Exhibits	70
		Signatures	88		Signatures	71

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

RAYONIER INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands, except per share amounts)


		Three Months Ended June 30,			Six Months Ended June 30,			Three Months Ended March 31,
		2020	2019	2020	2019		2021	2020
SALES (NOTE 3)		$195,630	$184,800	$454,760	$376,346
SALES (NOTE 4)						SALES (NOTE 4)	$191,447	$259,130
Costs and Expenses	Costs and Expenses					Costs and Expenses
Cost of sales	Cost of sales	(154,891)	(140,454)	(364,390)	(283,705)	Cost of sales	(151,378)	(209,499)
Selling and general expenses	Selling and general expenses	(12,570)	(10,984)	(22,538)	(20,794)	Selling and general expenses	(14,032)	(9,968)
Other operating expense, net (Note 19)		(16,483)	(1,969)	(17,594)	(1,934)
Other operating income (expense), net (Note 18)						Other operating income (expense), net (Note 18)	2,448	(1,111)
		(183,944)	(153,407)	(404,522)	(306,433)		(162,962)	(220,578)
OPERATING INCOME	OPERATING INCOME	11,686	31,393	50,238	69,913	OPERATING INCOME	28,485	38,552
Interest expense	Interest expense	(9,820)	(7,922)	(18,036)	(15,632)	Interest expense	(10,028)	(8,216)
Interest and other miscellaneous income, net		1,579	1,057	1,370	2,390
Interest and other miscellaneous expense, net						Interest and other miscellaneous expense, net	(4)	(209)
INCOME BEFORE INCOME TAXES	INCOME BEFORE INCOME TAXES	3,445	24,528	33,572	56,671	INCOME BEFORE INCOME TAXES	18,453	30,127
Income tax expense (Note 10)		(2,990)	(3,608)	(6,696)	(7,958)
Income tax expense (Note 20)						Income tax expense (Note 20)	(3,421)	(3,706)
NET INCOME	NET INCOME	455	20,920	26,876	48,713	NET INCOME	15,032	26,421
Less: Net income attributable to noncontrolling interest in the Operating Partnership		(219)	—	(219)	—
Less: Net loss (income) attributable to noncontrolling interests in consolidated affiliates		1,499	(2,168)	931	(5,167)
Less: Net income attributable to noncontrolling interests in the Operating Partnership						Less: Net income attributable to noncontrolling interests in the Operating Partnership	(341)	0
Less: Net income attributable to noncontrolling interests in consolidated affiliates						Less: Net income attributable to noncontrolling interests in consolidated affiliates	(3,843)	(567)
NET INCOME ATTRIBUTABLE TO RAYONIER INC.	NET INCOME ATTRIBUTABLE TO RAYONIER INC.	1,735	18,752	27,588	43,546	NET INCOME ATTRIBUTABLE TO RAYONIER INC.	10,848	25,854
OTHER COMPREHENSIVE INCOME (LOSS)	OTHER COMPREHENSIVE INCOME (LOSS)					OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustment, net of income tax effect of $0, $0, $0, and $0		23,258	(5,604)	(20,765)	429
Cash flow hedges, net of income tax effect of $1,741, $91, $116 and $244		(7,276)	(19,519)	(90,751)	(30,205)
Amortization of pension and postretirement plans, net of income tax expense of $0, $0, $0 and $0		217	112	434	224
Foreign currency translation adjustment, net of income tax effect of $0, and $0						Foreign currency translation adjustment, net of income tax effect of $0, and $0	(14,288)	(44,023)
Cash flow hedges, net of income tax effect of $1,059 and $1,857						Cash flow hedges, net of income tax effect of $1,059 and $1,857	61,001	(83,475)
Amortization of pension and postretirement plans, net of income tax expense of $0 and $0						Amortization of pension and postretirement plans, net of income tax expense of $0 and $0	294	217
Total other comprehensive income (loss)	Total other comprehensive income (loss)	16,199	(25,011)	(111,082)	(29,552)	Total other comprehensive income (loss)	47,007	(127,281)
COMPREHENSIVE INCOME (LOSS)	COMPREHENSIVE INCOME (LOSS)	16,654	(4,091)	(84,206)	19,161	COMPREHENSIVE INCOME (LOSS)	62,039	(100,860)
Less: Comprehensive income attributable to noncontrolling interests in the Operating Partnership	Less: Comprehensive income attributable to noncontrolling interests in the Operating Partnership	(676)	—	(676)	—	Less: Comprehensive income attributable to noncontrolling interests in the Operating Partnership	(1,872)	0
Less: Comprehensive (income) loss attributable to noncontrolling interests in consolidated affiliates	Less: Comprehensive (income) loss attributable to noncontrolling interests in consolidated affiliates	(4,917)	(815)	5,743	(5,366)	Less: Comprehensive (income) loss attributable to noncontrolling interests in consolidated affiliates	(580)	10,661
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO RAYONIER INC.	COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO RAYONIER INC.	$11,061	($4,906)	($79,139)	$13,795	COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO RAYONIER INC.	$59,587	($90,199)
EARNINGS PER COMMON SHARE (NOTE 14)
EARNINGS PER COMMON SHARE (NOTE 8)						EARNINGS PER COMMON SHARE (NOTE 8)
Basic earnings per share attributable to Rayonier Inc.	Basic earnings per share attributable to Rayonier Inc.	$0.01	$0.14	$0.21	$0.34	Basic earnings per share attributable to Rayonier Inc.	$0.08	$0.20
Diluted earnings per share attributable to Rayonier Inc.	Diluted earnings per share attributable to Rayonier Inc.	$0.01	$0.14	$0.21	$0.34	Diluted earnings per share attributable to Rayonier Inc.	$0.08	$0.20

See Notes to Consolidated Financial Statements.

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RAYONIER INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands)

June 30, 2020 December 31, 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents, excluding Timber Funds $87,813 $68,735
Cash and cash equivalents, Timber Funds 6,973 —
Total cash and cash equivalents 94,786 68,735
Accounts receivable, less allowance for doubtful accounts of $25 and $24 36,811 27,127
Inventory (Note 21)
10,365 14,518
Prepaid expenses 18,133 14,728
Other current assets 1,135 867
Total current assets 161,230 125,975
TIMBER AND TIMBERLANDS, NET OF DEPLETION AND AMORTIZATION 3,332,067 2,482,047
HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT
INVESTMENTS (NOTE 8)
113,920 81,791
PROPERTY, PLANT AND EQUIPMENT
Land 5,566 4,131
Buildings 29,153 23,095
Machinery and equipment 4,753 4,339
Construction in progress 382 348
Total property, plant and equipment, gross 39,854 31,913
Less — accumulated depreciation (10,444) (9,662)
Total property, plant and equipment, net 29,410 22,251
RESTRICTED CASH (NOTE 22)
475 1,233
RIGHT-OF-USE ASSETS (NOTE 4)
96,710 99,942
OTHER ASSETS 35,455 47,757
TOTAL ASSETS $3,769,267 $2,860,996
LIABILITIES, NONCONTROLLING INTERESTS IN THE OPERATING PARTNERSHIP AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable $21,836 $18,160
Current maturities of long-term debt, excluding Timber Funds (Note 7)
— 82,000
Current maturities of long-term debt, Timber Funds (Note 7)
25,042 —
Accrued taxes 6,444 3,032
Accrued payroll and benefits 6,628 8,869
Accrued interest 6,500 5,205
Deferred revenue 18,434 11,440
Other current liabilities 24,405 22,480
Total current liabilities 109,289 151,186
LONG-TERM DEBT, NET OF DEFERRED FINANCING COSTS, EXCLUDING TIMBER FUNDS (NOTE 7)
1,310,506 973,129
LONG-TERM DEBT, TIMBER FUNDS (NOTE 7)
35,617 —
PENSION AND OTHER POSTRETIREMENT BENEFITS (NOTE 17)
23,767 25,311
LONG-TERM LEASE LIABILITY (NOTE 4)
87,774 90,481
OTHER NON-CURRENT LIABILITIES 178,136 83,247
COMMITMENTS AND CONTINGENCIES (NOTES 9 and 11)
NONCONTROLLING INTERESTS IN THE OPERATING PARTNERSHIP (NOTE 5)
110,220 —
SHAREHOLDERS’ EQUITY
Common Shares, 480,000,000 shares authorized,136,512,112 and 129,331,069 shares issued and outstanding 1,063,489 888,177
Retained earnings 531,681 583,006
Accumulated other comprehensive loss (Note 23)
(137,929) (31,202)
TOTAL RAYONIER INC. SHAREHOLDERS’ EQUITY 1,457,241 1,439,981
Noncontrolling interests in consolidated affiliates (Note 5)
456,717 97,661
TOTAL SHAREHOLDERS’ EQUITY 1,913,958 1,537,642
TOTAL LIABILITIES, NONCONTROLLING INTERESTS IN THE OPERATING PARTNERSHIP AND SHAREHOLDERS’ EQUITY $3,769,267 $2,860,996


	March 31, 2021	December 31, 2020
ASSETS
CURRENT ASSETS
Cash and cash equivalents, excluding Timber Funds	$77,946	$80,454
Cash and cash equivalents, Timber Funds	4,674	4,053
Total cash and cash equivalents	82,620	84,507
Accounts receivable, less allowance for doubtful accounts of $45 and $25	51,902	49,082

Inventory (Note 17)	24,993	10,594

Prepaid expenses	18,280	16,168
Assets held for sale (Note 23)	7,930	3,449
Other current assets	4,355	6,765
Total current assets	190,080	170,565
TIMBER AND TIMBERLANDS, NET OF DEPLETION AND AMORTIZATION	3,245,122	3,262,126
HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS (NOTE 16)	111,315	108,518
PROPERTY, PLANT AND EQUIPMENT
Land	6,569	6,548
Buildings	30,979	31,024
Machinery and equipment	4,395	4,615
Construction in progress	471	452
Total property, plant and equipment, gross	42,414	42,639
Less — accumulated depreciation	(12,700)	(12,238)
Total property, plant and equipment, net	29,714	30,401
RESTRICTED CASH (NOTE 22)	475	2,975
RIGHT-OF-USE ASSETS	105,146	108,992
OTHER ASSETS	67,732	45,156
TOTAL ASSETS	$3,749,584	$3,728,733
LIABILITIES, NONCONTROLLING INTERESTS IN THE OPERATING PARTNERSHIP AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$35,083	$24,790



Accrued taxes	8,317	7,347

Accrued payroll and benefits	6,094	12,327
Accrued interest	9,627	6,325
Deferred revenue	8,137	11,112
Other current liabilities	33,587	29,234
Total current liabilities	100,845	91,135
LONG-TERM DEBT, NET OF DEFERRED FINANCING COSTS, EXCLUDING TIMBER FUNDS (NOTE 9)	1,299,433	1,300,336
LONG-TERM DEBT, NET OF DEFERRED FINANCING COSTS, TIMBER FUNDS (NOTE 9)	59,967	60,179
PENSION AND OTHER POSTRETIREMENT BENEFITS (NOTE 19)	22,958	23,344
LONG-TERM LEASE LIABILITY	96,872	100,251
OTHER NON-CURRENT LIABILITIES	121,598	160,722
COMMITMENTS AND CONTINGENCIES (NOTES 12 and 13)	0	0
NONCONTROLLING INTERESTS IN THE OPERATING PARTNERSHIP (NOTE 6)	137,990	130,121
SHAREHOLDERS’ EQUITY
Common Shares, 480,000,000 shares authorized,138,970,890 and 137,678,822 shares issued and outstanding	1,146,265	1,101,675
Retained earnings	407,716	446,267
Accumulated other comprehensive loss (Note 21)	(25,146)	(73,885)
TOTAL RAYONIER INC. SHAREHOLDERS’ EQUITY	1,528,835	1,474,057
Noncontrolling interests in consolidated affiliates (Note 6)	381,086	388,588
TOTAL SHAREHOLDERS’ EQUITY	1,909,921	1,862,645
TOTAL LIABILITIES, NONCONTROLLING INTERESTS IN THE OPERATING PARTNERSHIP AND SHAREHOLDERS’ EQUITY	$3,749,584	$3,728,733

See Notes to Consolidated Financial Statements.

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RAYONIER INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands, except share data)


	Common Shares		Retained Earnings	Accumulated Other Comprehensive Loss	Noncontrolling Interests in Consolidated Affiliates	Shareholders’ Equity
	Shares	Amount
Balance, January 1, 2021	137,678,822	$1,101,675	$446,267	($73,885)	$388,588	$1,862,645
Net income	—	—	11,189	—	3,843	15,032
Net income attributable to noncontrolling interests in the Operating Partnership	—	—	(341)	—	—	(341)
Dividends ($0.27 per share) (a)	—	—	(37,532)	—	—	(37,532)
Issuance of shares under the “at-the-market” equity offering, net of commissions and offering costs of $197	1,107,814	36,708	—	—	—	36,708
Issuance of shares under incentive stock plans	39,140	1,166	—	—	—	1,166
Stock-based compensation	—	2,156	—	—	—	2,156
Repurchase of common shares	(5,020)	(155)	—	—	—	(155)
Measurement period adjustment of noncontrolling interests in consolidated affiliates	—	—	—	—	655	655
Adjustment of noncontrolling interests in the Operating Partnership	—	—	(11,867)	—	—	(11,867)
Conversion of units into common shares	150,134	4,715	—	—	—	4,715
Amortization of pension and postretirement plan liabilities	—	—	—	294	—	294
Foreign currency translation adjustment	—	—	—	(11,652)	(2,636)	(14,288)
Cash flow hedges	—	—	—	61,628	(627)	61,001
Allocation of other comprehensive income to noncontrolling interests in the Operating Partnership	—	—	—	(1,531)	—	(1,531)
Distributions to noncontrolling interests in consolidated affiliates	—	—	—	—	(8,737)	(8,737)
Balance, March 31, 2021	138,970,890	$1,146,265	$407,716	($25,146)	$381,086	$1,909,921


		Common Shares			Retained Earnings	Accumulated Other Comprehensive Loss	Noncontrolling Interests in Consolidated Affiliates				Shareholders’ Equity			Common Shares				Retained Earnings		Accumulated Other Comprehensive Loss			Noncontrolling Interests in Consolidated Affiliates		Shareholders’ Equity
		Shares	Amount										Accumulated Other Comprehensive Loss		Noncontrolling Interests in Consolidated Affiliates		Shareholders’ Equity
Balance, January 1, 2020	Balance, January 1, 2020	129,331,069	$888,177	$583,006				($31,202)				$97,661							td,537,642		Balance, January 1, 2020	129,331,069		$888,177		$583,006	($31,202)	$97,661	td,537,642

Net income	Net income	—	—	25,854	—	567	26,421		Net income	—				—		25,854		—		567			26,421
Dividends ($0.27 per share)	Dividends ($0.27 per share)	—	—	(34,813)	—	—	(34,813)		Dividends ($0.27 per share)	—				—		(34,813)		—		—			(34,813)
Issuance of shares under incentive stock plans	Issuance of shares under incentive stock plans	2,407	66	—	—	—	66		Issuance of shares under incentive stock plans	2,407				66		—		—		—			66
Stock-based compensation	Stock-based compensation	—	1,510	—	—	—	1,510		Stock-based compensation	—				1,510		—		—		—			1,510
Repurchase of common shares made under repurchase program		(152,237)	—	(3,152)	—	—	(3,152)
Repurchase of common shares									Repurchase of common shares	(152,237)				—		(3,152)		—		—			(3,152)
Amortization of pension and postretirement plan liabilities	Amortization of pension and postretirement plan liabilities	—	—	—	217	—	217		Amortization of pension and postretirement plan liabilities	—				—		—		217		—			217
Foreign currency translation adjustment	Foreign currency translation adjustment	—	—	—	(33,894)	(10,129)	(44,023)		Foreign currency translation adjustment	—				—		—		(33,894)		(10,129)			(44,023)
Cash flow hedges	Cash flow hedges	—	—	—	(82,376)	(1,099)	(83,475)		Cash flow hedges	—				—		—		(82,376)		(1,099)			(83,475)

Distributions to noncontrolling interests in consolidated affiliates	Distributions to noncontrolling interests in consolidated affiliates	—	—	—	—	(725)	(725)		Distributions to noncontrolling interests in consolidated affiliates	—				—		—		—		(725)			(725)
Balance, March 31, 2020	Balance, March 31, 2020	129,181,239	$889,753	$570,895	($147,255)	$86,275	$1,399,668		Balance, March 31, 2020	129,181,239				$889,753		$570,895		($147,255)		$86,275			$1,399,668
Issuances of shares associated with the merger with Pope Resources		7,181,071	172,418	—	—	—	172,418

Net income (loss)		—	—	1,954	—	(1,499)	455
Net income attributable to noncontrolling interest in the Operating Partnership		—	—	(219)	—	—	(219)
Dividends ($0.27 per share) (a)		—	—	(36,957)	—	—	(36,957)
Issuance of shares under incentive stock plans		215,970	222	—	—	—	222
Stock-based compensation		—	2,668	—	—	—	2,668
Repurchase of common shares		(66,168)	(1,572)	—	—	—	(1,572)
Acquisition of noncontrolling interests in consolidated affiliates		—	—	—	—	372,381	372,381
Adjustment of noncontrolling interest in the Operating Partnership		—	—	(3,992)	—	—	(3,992)
Amortization of pension and postretirement plan liabilities		—	—	—	217	—	217
Foreign currency translation adjustment		—	—	—	17,872	5,386	23,258
Cash flow hedges		—	—	—	(8,306)	1,030	(7,276)
Allocation of other comprehensive income to noncontrolling interests in the Operating Partnership		—	—	—	(457)	—	(457)
Distributions to noncontrolling interests in consolidated affiliates		—	—	—	—	(6,856)	(6,856)
Balance, June 30, 2020		136,512,112	$1,063,489	$531,681	($137,929)	$456,717	$1,913,958

(a)For information regarding distributions to noncontrolling interests in the Operating Partnership, see the Rayonier Inc. Consolidated ~~Statement~~s Statements of ~~Cash Flows~~Cash Flows and Note 5 6 —~~Noncontrolling~~ Noncontrolling Interests.

~~Table of Contents~~

Common Shares Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Noncontrolling Interests in Consolidated Affiliates Shareholders’
Equity
Shares Amount
Balance, January 1, 2019 129,488,675 $884,263 $672,371 $239 $97,677 $1,654,550
Net income — — 24,794 — 2,999 27,793
Dividends ($0.27 per share) — — (35,049) — — (35,049)
Issuance of shares under incentive stock plans 26,031 597 — — — 597
Stock-based compensation — 1,477 — — — 1,477
Repurchase of common shares (1,140) (33) — — — (33)
Amortization of pension and postretirement plan liabilities — — — 112 — 112
Foreign currency translation adjustment — — — 4,680 1,353 6,033
Cash flow hedges — — — (10,884) 198 (10,686)
Distributions to noncontrolling interests in consolidated affiliates — — — — (3,594) (3,594)
Balance, March 31, 2019 129,513,566 $886,304 $662,116 ($5,853) $98,633 $1,641,200
Net income — — 18,752 — 2,168 20,920
Dividends ($0.27 per share) — — (35,125) — — (35,125)
Issuance of shares under incentive stock plans 250,344 177 — — — 177
Stock-based compensation — 2,344 — — — 2,344
Repurchase of common shares (134,194) (4,207) — — — (4,207)
Amortization of pension and postretirement plan liabilities — — — 112 — 112
Foreign currency translation adjustment — — — (4,305) (1,299) (5,604)
Cash flow hedges — — — (19,465) (54) (19,519)
Balance, June 30, 2019 129,629,716 $884,618 $645,743 ($29,511) $99,448 $1,600,298

See Notes to Consolidated Financial Statements.

Table of Contents

RAYONIER INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)


		Six Months Ended June 30,				Three Months Ended March 31,
		2020	2019		2021	2020
OPERATING ACTIVITIES	OPERATING ACTIVITIES			OPERATING ACTIVITIES
Net income	Net income	$26,876	$48,713	Net income	$15,032	$26,421
Adjustments to reconcile net income to cash provided by operating activities:	Adjustments to reconcile net income to cash provided by operating activities:			Adjustments to reconcile net income to cash provided by operating activities:
Depreciation, depletion and amortization	Depreciation, depletion and amortization	76,195	64,093	Depreciation, depletion and amortization	45,213	34,329
Non-cash cost of land and improved development	Non-cash cost of land and improved development	13,441	5,647	Non-cash cost of land and improved development	1,813	412
Stock-based incentive compensation expense	Stock-based incentive compensation expense	4,178	3,821	Stock-based incentive compensation expense	2,156	1,510
Deferred income taxes	Deferred income taxes	9,225	7,257	Deferred income taxes	(1,128)	3,361
Amortization of losses from pension and postretirement plans	Amortization of losses from pension and postretirement plans	435	224	Amortization of losses from pension and postretirement plans	294	217

Gain on sale of large disposition of timberlands	Gain on sale of large disposition of timberlands	(28,655)	—	Gain on sale of large disposition of timberlands	0	(28,655)
Other	Other	(10,632)	987	Other	(3,681)	568
Changes in operating assets and liabilities, net of effects of merger with Pope Resources:
Changes in operating assets and liabilities:				Changes in operating assets and liabilities:
Receivables	Receivables	(7,604)	(21,031)	Receivables	(3,697)	(5,316)
Inventories	Inventories	(3,714)	(994)	Inventories	(3,512)	(3,618)
Accounts payable	Accounts payable	4,895	5,558	Accounts payable	6,684	3,353

All other operating activities	All other operating activities	(2,040)	2,679	All other operating activities	(5,306)	(3,403)
CASH PROVIDED BY OPERATING ACTIVITIES	CASH PROVIDED BY OPERATING ACTIVITIES	82,600	116,954	CASH PROVIDED BY OPERATING ACTIVITIES	53,868	29,179
INVESTING ACTIVITIES	INVESTING ACTIVITIES			INVESTING ACTIVITIES
Capital expenditures	Capital expenditures	(29,440)	(29,505)	Capital expenditures	(15,831)	(17,176)

Real estate development investments	Real estate development investments	(3,587)	(999)	Real estate development investments	(3,011)	(1,727)

Purchase of timberlands	Purchase of timberlands	(24,238)	(26,396)	Purchase of timberlands	(29,938)	(24,122)

Net proceeds from large disposition of timberlands	Net proceeds from large disposition of timberlands	115,666	—	Net proceeds from large disposition of timberlands	0	115,666

Net cash consideration for merger with Pope Resources		(231,068)	—

Other	Other	1,880	(3,888)	Other	4,356	2,070
CASH USED FOR INVESTING ACTIVITIES		(170,787)	(60,788)
CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES				CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES	(44,424)	74,711
FINANCING ACTIVITIES	FINANCING ACTIVITIES			FINANCING ACTIVITIES
Issuance of debt	Issuance of debt	320,000	—	Issuance of debt	0	20,000
Repayment of debt	Repayment of debt	(117,000)	—	Repayment of debt	0	(20,000)
Dividends paid on common stock	Dividends paid on common stock	(72,204)	(71,107)	Dividends paid on common stock	(37,490)	(34,907)
Distributions to noncontrolling interests in the Operating Partnership	Distributions to noncontrolling interests in the Operating Partnership	(1,200)	—	Distributions to noncontrolling interests in the Operating Partnership	(1,155)	0

Proceeds from the issuance of common shares under incentive stock plan	Proceeds from the issuance of common shares under incentive stock plan	66	774	Proceeds from the issuance of common shares under incentive stock plan	1,166	66
Proceeds from the issuance of common shares under the “at-the-market” (ATM) equity offering program, net of commissions and offering costs				Proceeds from the issuance of common shares under the “at-the-market” (ATM) equity offering program, net of commissions and offering costs	32,545	0

Repurchase of common shares	Repurchase of common shares	(1,572)	(4,241)	Repurchase of common shares	(155)	0
Debt issuance costs		(2,427)	—

Repurchase of common shares made under repurchase program	Repurchase of common shares made under repurchase program	(3,152)	—	Repurchase of common shares made under repurchase program	0	(3,152)

Distributions to noncontrolling interest in consolidated affiliates		(7,581)	(3,594)
Other		—	133
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES		114,930	(78,035)

Distributions to noncontrolling interests in consolidated affiliates				Distributions to noncontrolling interests in consolidated affiliates	(8,737)	(725)

CASH USED FOR FINANCING ACTIVITIES				CASH USED FOR FINANCING ACTIVITIES	(13,826)	(38,718)
EFFECT OF EXCHANGE RATE CHANGES ON CASH	EFFECT OF EXCHANGE RATE CHANGES ON CASH	(1,450)	125	EFFECT OF EXCHANGE RATE CHANGES ON CASH	(5)	(2,303)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH	CASH, CASH EQUIVALENTS AND RESTRICTED CASH			CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Change in cash, cash equivalents and restricted cash	Change in cash, cash equivalents and restricted cash	25,293	(21,744)	Change in cash, cash equivalents and restricted cash	(4,387)	62,869
Balance, beginning of year	Balance, beginning of year	69,968	156,454	Balance, beginning of year	87,482	69,968
Balance, end of period	Balance, end of period	$95,261	$134,710	Balance, end of period	$83,095	$132,837
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION	SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION			SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period:	Cash paid during the period:			Cash paid during the period:
Interest (a)	Interest (a)	$16,134	$14,377	Interest (a)	$2,945	$2,595
Income taxes	Income taxes	1,083	705	Income taxes	4,838	185
Non-cash investing activity:	Non-cash investing activity:			Non-cash investing activity:
Capital assets purchased on account	Capital assets purchased on account	2,217	3,407	Capital assets purchased on account	4,814	4,215
Non-cash financing activity:
Equity consideration for merger with Pope Resources		$172,640	—
Redeemable Common Unit consideration for merger with Pope Resources		106,752	—

(a)Interest paid is presented net of patronage payments received of ~~$4.3~~$6.2 million anand ~~$4.0~~$4.3 million for the ~~six~~three months ended ~~June 30,~~March 31, 2021 and March 31, 2020, ~~and June 30, 2019,~~ respectively. For additional information on patronage payments, see Note 68 — Debt in the ~~2019~~2020 Form 10-K.

See Notes to Consolidated Financial Statements.

Table of Contents

RAYONIER, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands, except per unit amounts)


		Three Months Ended June 30,			Six Months Ended June 30,			Three Months Ended March 31,
		2020	2019	2020	2019		2021	2020
SALES (NOTE 3)		$195,630	$184,800	$454,760	$376,346
SALES (NOTE 4)						SALES (NOTE 4)	$191,447	$259,130
Costs and Expenses	Costs and Expenses					Costs and Expenses
Cost of sales	Cost of sales	(154,891)	(140,454)	(364,390)	(283,705)	Cost of sales	(151,378)	(209,499)
Selling and general expenses	Selling and general expenses	(12,570)	(10,984)	(22,538)	(20,794)	Selling and general expenses	(14,032)	(9,968)
Other operating expense, net (Note 19)		(16,483)	(1,969)	(17,594)	(1,934)
Other operating income (expense), net (Note 18)						Other operating income (expense), net (Note 18)	2,448	(1,111)
		(183,944)	(153,407)	(404,522)	(306,433)		(162,962)	(220,578)
OPERATING INCOME	OPERATING INCOME	11,686	31,393	50,238	69,913	OPERATING INCOME	28,485	38,552
Interest expense	Interest expense	(9,820)	(7,922)	(18,036)	(15,632)	Interest expense	(10,028)	(8,216)
Interest and other miscellaneous income, net		1,579	1,057	1,370	2,390
Interest and other miscellaneous expense, net						Interest and other miscellaneous expense, net	(4)	(209)
INCOME BEFORE INCOME TAXES	INCOME BEFORE INCOME TAXES	3,445	24,528	33,572	56,671	INCOME BEFORE INCOME TAXES	18,453	30,127
Income tax expense (Note 10)		(2,990)	(3,608)	(6,696)	(7,958)
Income tax expense (Note 20)						Income tax expense (Note 20)	(3,421)	(3,706)
NET INCOME	NET INCOME	455	20,920	26,876	48,713	NET INCOME	15,032	26,421
Less: Net loss (income) attributable to noncontrolling interests in consolidated affiliates		1,499	(2,168)	931	(5,167)
NET INCOME ATTRIBUTABLE TO RAYONIER, L.P. COMMON UNITHOLDERS		1,954	18,752	27,807	43,546
Less: Net income attributable to noncontrolling interests in consolidated affiliates						Less: Net income attributable to noncontrolling interests in consolidated affiliates	(3,843)	(567)
NET INCOME ATTRIBUTABLE TO RAYONIER, L.P. UNITHOLDERS						NET INCOME ATTRIBUTABLE TO RAYONIER, L.P. UNITHOLDERS	11,189	25,854
OTHER COMPREHENSIVE INCOME (LOSS)	OTHER COMPREHENSIVE INCOME (LOSS)					OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustment, net of income tax effect of $0, $0, $0, and $0		23,258	(5,604)	(20,765)	429
Cash flow hedges, net of income tax effect of $1,741, $91, $116 and $244		(7,276)	(19,519)	(90,751)	(30,205)
Amortization of pension and postretirement plans, net of income tax expense of $0, $0, $0 and $0		217	112	434	224
Foreign currency translation adjustment, net of income tax effect of $0, and $0						Foreign currency translation adjustment, net of income tax effect of $0, and $0	(14,288)	(44,023)
Cash flow hedges, net of income tax effect of $1,059 and $1,857						Cash flow hedges, net of income tax effect of $1,059 and $1,857	61,001	(83,475)
Amortization of pension and postretirement plans, net of income tax expense of $0 and $0						Amortization of pension and postretirement plans, net of income tax expense of $0 and $0	294	217
Total other comprehensive income (loss)	Total other comprehensive income (loss)	16,199	(25,011)	(111,082)	(29,552)	Total other comprehensive income (loss)	47,007	(127,281)
COMPREHENSIVE INCOME (LOSS)	COMPREHENSIVE INCOME (LOSS)	16,654	(4,091)	(84,206)	19,161	COMPREHENSIVE INCOME (LOSS)	62,039	(100,860)
Less: Comprehensive (income) loss attributable to noncontrolling interests in consolidated affiliates	Less: Comprehensive (income) loss attributable to noncontrolling interests in consolidated affiliates	(4,917)	(815)	5,743	(5,366)	Less: Comprehensive (income) loss attributable to noncontrolling interests in consolidated affiliates	(580)	10,661
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO RAYONIER, L.P. COMMON UNITHOLDERS		$11,737	($4,906)	($78,463)	$13,795
EARNINGS PER COMMON UNIT (NOTE 14)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO RAYONIER, L.P. UNITHOLDERS						COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO RAYONIER, L.P. UNITHOLDERS	$61,459	($90,199)
EARNINGS PER UNIT (NOTE 8)						EARNINGS PER UNIT (NOTE 8)
Basic earnings per unit attributable to Rayonier, L.P.	Basic earnings per unit attributable to Rayonier, L.P.	$0.01	$0.14	$0.21	$0.34	Basic earnings per unit attributable to Rayonier, L.P.	$0.08	$0.20
Diluted earnings per unit attributable to Rayonier, L.P.	Diluted earnings per unit attributable to Rayonier, L.P.	$0.01	$0.14	$0.21	$0.34	Diluted earnings per unit attributable to Rayonier, L.P.	$0.08	$0.20

See Notes to Consolidated Financial Statements.

Table of Contents

RAYONIER, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands)

June 30, 2020 December 31, 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents, excluding Timber Funds $87,813 $68,735
Cash and cash equivalents, Timber Funds 6,973 —
Total cash and cash equivalents 94,786 68,735
Accounts receivable, less allowance for doubtful accounts of $25 and $24 36,811 27,127
Inventory (Note 21)
10,365 14,518
Prepaid expenses 18,133 14,728
Other current assets 1,135 867
Total current assets 161,230 125,975
TIMBER AND TIMBERLANDS, NET OF DEPLETION AND AMORTIZATION 3,332,067 2,482,047
HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT
INVESTMENTS (NOTE 8)
113,920 81,791
PROPERTY, PLANT AND EQUIPMENT
Land 5,566 4,131
Buildings 29,153 23,095
Machinery and equipment 4,753 4,339
Construction in progress 382 348
Total property, plant and equipment, gross 39,854 31,913
Less — accumulated depreciation (10,444) (9,662)
Total property, plant and equipment, net 29,410 22,251
RESTRICTED CASH (NOTE 22)
475 1,233
RIGHT-OF-USE ASSETS (NOTE 4)
96,710 99,942
OTHER ASSETS 35,455 47,757
TOTAL ASSETS $3,769,267 $2,860,996
LIABILITIES, REDEEMABLE OPERATING PARTNERSHIP UNITS AND CAPITAL
CURRENT LIABILITIES
Accounts payable $21,836 $18,160
Current maturities of long-term debt, excluding Timber Funds (Note 7)
— 82,000
Current maturities of long-term debt, Timber Funds (Note 7)
25,042 —
Accrued taxes 6,444 3,032
Accrued payroll and benefits 6,628 8,869
Accrued interest 6,500 5,205
Deferred revenue 18,434 11,440
Other current liabilities 24,405 22,480
Total current liabilities 109,289 151,186
LONG-TERM DEBT, NET OF DEFERRED FINANCING COSTS, EXCLUDING TIMBER FUNDS (NOTE 7)
1,310,506 973,129
LONG-TERM DEBT, TIMBER FUNDS (NOTE 7)
35,617 —
PENSION AND OTHER POSTRETIREMENT BENEFITS (NOTE 17)
23,767 25,311
LONG-TERM LEASE LIABILITY (NOTE 4)
87,774 90,481
OTHER NON-CURRENT LIABILITIES 178,136 83,247
COMMITMENTS AND CONTINGENCIES (NOTES 9 and 11)
REDEEMABLE OPERATING PARTNERSHIP UNITS (NOTE 5) 4,446,153 and 0 Common Units outstanding, respectively
110,220 —
CAPITAL
General partners’ capital 15,947 14,712
Limited partners’ capital 1,578,766 1,456,471
Accumulated other comprehensive loss (Note 23)
(137,472) (31,202)
TOTAL CONTROLLING INTEREST CAPITAL 1,457,241 1,439,981
Noncontrolling interests in consolidated affiliates (Note 5)
456,717 97,661
TOTAL CAPITAL 1,913,958 1,537,642
TOTAL LIABILITIES, REDEEMABLE OPERATING PARTNERSHIP UNITS AND CAPITAL $3,769,267 $2,860,996


	March 31, 2021	December 31, 2020
ASSETS
CURRENT ASSETS
Cash and cash equivalents, excluding Timber Funds	$77,946	$80,454
Cash and cash equivalents, Timber Funds	4,674	4,053
Total cash and cash equivalents	82,620	84,507
Accounts receivable, less allowance for doubtful accounts of $45 and $25	51,902	49,082

Inventory (Note 17)	24,993	10,594

Prepaid expenses	18,280	16,168
Assets held for sale (Note 23)	7,930	3,449
Other current assets	4,355	6,765
Total current assets	190,080	170,565
TIMBER AND TIMBERLANDS, NET OF DEPLETION AND AMORTIZATION	3,245,122	3,262,126
HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS (NOTE 16)	111,315	108,518
PROPERTY, PLANT AND EQUIPMENT
Land	6,569	6,548
Buildings	30,979	31,024
Machinery and equipment	4,395	4,615
Construction in progress	471	452
Total property, plant and equipment, gross	42,414	42,639
Less — accumulated depreciation	(12,700)	(12,238)
Total property, plant and equipment, net	29,714	30,401
RESTRICTED CASH (NOTE 22)	475	2,975
RIGHT-OF-USE ASSETS	105,146	108,992
OTHER ASSETS	67,732	45,156
TOTAL ASSETS	$3,749,584	$3,728,733
LIABILITIES, REDEEMABLE OPERATING PARTNERSHIP UNITS AND CAPITAL
CURRENT LIABILITIES
Accounts payable	$35,083	$24,790



Accrued taxes	8,317	7,347

Accrued payroll and benefits	6,094	12,327
Accrued interest	9,627	6,325
Deferred revenue	8,137	11,112
Other current liabilities	33,587	29,234
Total current liabilities	100,845	91,135
LONG-TERM DEBT, NET OF DEFERRED FINANCING COSTS, EXCLUDING TIMBER FUNDS (NOTE 9)	1,299,433	1,300,336
LONG-TERM DEBT, NET OF DEFERRED FINANCING COSTS, TIMBER FUNDS (NOTE 9)	59,967	60,179
PENSION AND OTHER POSTRETIREMENT BENEFITS (NOTE 19)	22,958	23,344
LONG-TERM LEASE LIABILITY	96,872	100,251
OTHER NON-CURRENT LIABILITIES	121,598	160,722

COMMITMENTS AND CONTINGENCIES (NOTES 12 and 13)
REDEEMABLE OPERATING PARTNERSHIP UNITS (NOTE 6) 4,278,766 and 4,428,900 Units outstanding, respectively	137,990	130,121
CAPITAL
General partners’ capital	15,499	15,454
Limited partners’ capital	1,534,411	1,529,948
Accumulated other comprehensive loss (Note 21)	(21,075)	(71,345)
TOTAL CONTROLLING INTEREST CAPITAL	1,528,835	1,474,057
Noncontrolling interests in consolidated affiliates (Note 6)	381,086	388,588
TOTAL CAPITAL	1,909,921	1,862,645
TOTAL LIABILITIES, REDEEMABLE OPERATING PARTNERSHIP UNITS AND CAPITAL	$3,749,584	$3,728,733

See Notes to Consolidated Financial Statements.

Table of Contents

RAYONIER, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL

(Unaudited)

(Dollars in thousands, except share data)


						Accumulated Other Comprehensive Loss		Noncontrolling Interests in Consolidated Affiliates		Total Capital
		Common Units																	Units				Accumulated Other Comprehensive Loss	Noncontrolling Interests in Consolidated Affiliates	Total Capital
			General Partners’ Capital	Limited Partners’ Capital									General Partners’ Capital			Limited Partners’ Capital		Accumulated Other Comprehensive Loss		Noncontrolling Interests in Consolidated Affiliates
Balance, January 1, 2020			td4,712	td,456,471	($31,202)						$97,661			td,537,642
Distributions on common units ($0.27 per common unit)			(349)	(34,464)	—			—		(34,813)
Issuance of common units under incentive stock plans			1	65	—		—		66
Balance, January 1, 2021										Balance, January 1, 2021		$15,454			$1,529,948		($71,345)					$388,588	$1,862,645
Net income										Net income		112			11,077		—		3,843		15,032
Distributions on units ($0.27 per unit)										Distributions on units ($0.27 per unit)		(387)			(38,300)		—		—		(38,687)
Issuance of units under the “at-the-market” equity offering, net of commissions and offering costs of $197										Issuance of units under the “at-the-market” equity offering, net of commissions and offering costs of $197		367			36,341		—		—		36,708
Issuance of units under incentive stock plans										Issuance of units under incentive stock plans		12			1,154		—		—		1,166
Stock-based compensation	Stock-based compensation		15	1,495	—		—		1,510	Stock-based compensation		22			2,134		—		—		2,156
Repurchase of common units made under repurchase program			(32)	(3,120)	—		—		(3,152)

Net income			259	25,595	—		567		26,421
Repurchase of units										Repurchase of units		(2)			(153)		—		—		(155)
Adjustment of Redeemable Operating Partnership Units										Adjustment of Redeemable Operating Partnership Units		(126)			(12,458)		—		—		(12,584)
Conversion of units into common shares										Conversion of units into common shares		47			4,668		—		—		4,715
Measurement period adjustment of noncontrolling interests in consolidated affiliates										Measurement period adjustment of noncontrolling interests in consolidated affiliates		—			—		—		655		655
Amortization of pension and postretirement plan liabilities	Amortization of pension and postretirement plan liabilities		—	—	217		—		217	Amortization of pension and postretirement plan liabilities		—			—		294		—		294
Foreign currency translation adjustment	Foreign currency translation adjustment		—	—	(33,894)		(10,129)		(44,023)	Foreign currency translation adjustment		—			—		(11,652)		(2,636)		(14,288)
Cash flow hedges	Cash flow hedges		—	—	(82,376)		(1,099)		(83,475)	Cash flow hedges		—			—		61,628		(627)		61,001
Distributions to noncontrolling interests in consolidated affiliates	Distributions to noncontrolling interests in consolidated affiliates		—	—	—		(725)		(725)	Distributions to noncontrolling interests in consolidated affiliates		—			—		—		(8,737)		(8,737)
Balance, March 31, 2020			$14,606	$1,446,042	($147,255)		$86,275		$1,399,668
Issuance of common units associated with the merger with Pope Resources			1,724	170,694	—		—		172,418

Distributions on common units ($0.27 per common unit)			(382)	(37,775)	—		—		(38,157)
Issuance of common units under incentive stock plans			2	220	—		—		222
Stock-based compensation			27	2,641	—		—		2,668
Repurchase of common units			(15)	(1,557)	—		—		(1,572)
Adjustment of Redeemable Common Units			(35)	(3,433)	—		—		(3,468)
Net income			20	1,934	—		(1,499)		455
Acquisition of noncontrolling interests in consolidated affiliates			—	—	—		372,381		372,381
Amortization of pension and postretirement plan liabilities			—	—	217		—		217
Foreign currency translation adjustment			—	—	17,872		5,386		23,258
Cash flow hedges			—	—	(8,306)		1,030		(7,276)
Distributions to noncontrolling interests in consolidated affiliates			—	—	—		(6,856)		(6,856)
Balance, June 30, 2020			$15,947	$1,578,766	($137,472)		$456,717		$1,913,958
Balance, March 31, 2021										Balance, March 31, 2021		$15,499			$1,534,411		($21,075)		$381,086		$1,909,921


	Units		Accumulated Other Comprehensive Loss	Noncontrolling Interests in Consolidated Affiliates	Total Capital
	General Partners’ Capital	Limited Partners’ Capital
Balance, January 1, 2020	$14,712	$1,456,471	($31,202)	$97,661	$1,537,642
Net income	259	25,595	—	567	26,421
Distributions on units ($0.27 per unit)	(349)	(34,464)	—	—	(34,813)
Issuance of units under incentive stock plans	1	65	—	—	66
Stock-based compensation	15	1,495	—	—	1,510
Repurchase of units	(32)	(3,120)	—	—	(3,152)
Amortization of pension and postretirement plan liabilities	—	—	217	—	217
Foreign currency translation adjustment	—	—	(33,894)	(10,129)	(44,023)
Cash flow hedges	—	—	(82,376)	(1,099)	(83,475)
Distributions to noncontrolling interests in consolidated affiliates	—	—	—	(725)	(725)
Balance, March 31, 2020	$14,606	$1,446,042	($147,255)	$86,275	$1,399,668

~~Table of Contents~~

Common Units Accumulated
Other
Comprehensive
Income (Loss) Noncontrolling Interests in Consolidated Affiliates Total Capital
General Partners’ Capital Limited Partners’ Capital
Balance, January 1, 2019 $15,566 $1,541,068 $239 $97,677 $1,654,550
Distributions on common units ($0.27 per common unit) (351) (34,698) — — (35,049)
Issuance of common units under incentive stock plans 6 591 — — 597
Stock-based compensation 15 1,462 — — 1,477
Repurchase of common units — (33) — — (33)
Net income 248 24,546 — 2,999 27,793
Amortization of pension and postretirement plan liabilities — — 112 — 112
Foreign currency translation adjustment — — 4,680 1,353 6,033
Cash flow hedges — — (10,884) 198 (10,686)
Distributions to noncontrolling interests in consolidated affiliates — — — (3,594) (3,594)
Balance, March 31, 2019 $15,484 $1,532,936 ($5,853) $98,633 $1,641,200
Distributions on common units ($0.27 per common unit) (351) (34,774) — — (35,125)
Issuance of common units under incentive stock plans 2 175 — — 177
Stock-based compensation 23 2,321 — — 2,344
Repurchase of common units (42) (4,165) — — (4,207)
Net income 188 18,564 — 2,168 20,920
Amortization of pension and postretirement plan liabilities — — 112 — 112
Foreign currency translation adjustment — — (4,305) (1,299) (5,604)
Cash flow hedges — — (19,465) (54) (19,519)
Balance, June 30, 2019 $15,304 $1,515,057 ($29,511) $99,448 $1,600,298

See Notes to Consolidated Financial Statements.

Table of Contents

RAYONIER, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)


		Six Months Ended June 30,				Three Months Ended March 31,
		2020	2019		2021	2020
OPERATING ACTIVITIES	OPERATING ACTIVITIES			OPERATING ACTIVITIES
Net income	Net income	$26,876	$48,713	Net income	$15,032	$26,421
Adjustments to reconcile net income to cash provided by operating activities:	Adjustments to reconcile net income to cash provided by operating activities:			Adjustments to reconcile net income to cash provided by operating activities:
Depreciation, depletion and amortization	Depreciation, depletion and amortization	76,195	64,093	Depreciation, depletion and amortization	45,213	34,329
Non-cash cost of land and improved development	Non-cash cost of land and improved development	13,441	5,647	Non-cash cost of land and improved development	1,813	412
Stock-based incentive compensation expense	Stock-based incentive compensation expense	4,178	3,821	Stock-based incentive compensation expense	2,156	1,510
Deferred income taxes	Deferred income taxes	9,225	7,257	Deferred income taxes	(1,128)	3,361
Amortization of losses from pension and postretirement plans	Amortization of losses from pension and postretirement plans	435	224	Amortization of losses from pension and postretirement plans	294	217

Gain on sale of large disposition of timberlands	Gain on sale of large disposition of timberlands	(28,655)	—	Gain on sale of large disposition of timberlands	0	(28,655)
Other	Other	(10,632)	987	Other	(3,681)	568
Changes in operating assets and liabilities, net of effects of merger with Pope Resources:
Changes in operating assets and liabilities:				Changes in operating assets and liabilities:
Receivables	Receivables	(7,604)	(21,031)	Receivables	(3,697)	(5,316)
Inventories	Inventories	(3,714)	(994)	Inventories	(3,512)	(3,618)
Accounts payable	Accounts payable	4,895	5,558	Accounts payable	6,684	3,353

All other operating activities	All other operating activities	(2,040)	2,679	All other operating activities	(5,306)	(3,403)
CASH PROVIDED BY OPERATING ACTIVITIES	CASH PROVIDED BY OPERATING ACTIVITIES	82,600	116,954	CASH PROVIDED BY OPERATING ACTIVITIES	53,868	29,179
INVESTING ACTIVITIES	INVESTING ACTIVITIES			INVESTING ACTIVITIES
Capital expenditures	Capital expenditures	(29,440)	(29,505)	Capital expenditures	(15,831)	(17,176)

Real estate development investments	Real estate development investments	(3,587)	(999)	Real estate development investments	(3,011)	(1,727)

Purchase of timberlands	Purchase of timberlands	(24,238)	(26,396)	Purchase of timberlands	(29,938)	(24,122)

Net proceeds from large disposition of timberlands	Net proceeds from large disposition of timberlands	115,666	—	Net proceeds from large disposition of timberlands	0	115,666

Cash consideration for merger with Pope Resources, net of cash acquired		(231,068)	—

Other	Other	1,880	(3,888)	Other	4,356	2,070
CASH USED FOR INVESTING ACTIVITIES		(170,787)	(60,788)
CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES				CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES	(44,424)	74,711
FINANCING ACTIVITIES	FINANCING ACTIVITIES			FINANCING ACTIVITIES
Issuance of debt	Issuance of debt	320,000	—	Issuance of debt	0	20,000
Repayment of debt	Repayment of debt	(117,000)	—	Repayment of debt	0	(20,000)
Distribution on common units		(73,404)	(71,107)
Proceeds from the issuance of common units under incentive stock plan		66	774
Distributions on units				Distributions on units	(38,645)	(34,907)
Proceeds from the issuance of units under incentive stock plan				Proceeds from the issuance of units under incentive stock plan	1,166	66
Proceeds from the issuance of units under the “at-the-market” (ATM) equity offering program, net of commissions and offering costs				Proceeds from the issuance of units under the “at-the-market” (ATM) equity offering program, net of commissions and offering costs	32,545	0

Repurchase of common units		(1,572)	(4,241)
Debt issuance costs		(2,427)	—
Repurchase of units				Repurchase of units	(155)	0

Repurchase of units made under repurchase program				Repurchase of units made under repurchase program	0	(3,152)

Repurchase of common units made under repurchase program		(3,152)	—

Distributions to noncontrolling interest in consolidated affiliates		(7,581)	(3,594)
Other		—	133
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES		114,930	(78,035)
Distributions to noncontrolling interests in consolidated affiliates				Distributions to noncontrolling interests in consolidated affiliates	(8,737)	(725)

CASH USED FOR FINANCING ACTIVITIES				CASH USED FOR FINANCING ACTIVITIES	(13,826)	(38,718)
EFFECT OF EXCHANGE RATE CHANGES ON CASH	EFFECT OF EXCHANGE RATE CHANGES ON CASH	(1,450)	125	EFFECT OF EXCHANGE RATE CHANGES ON CASH	(5)	(2,303)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH	CASH, CASH EQUIVALENTS AND RESTRICTED CASH			CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Change in cash, cash equivalents and restricted cash	Change in cash, cash equivalents and restricted cash	25,293	(21,744)	Change in cash, cash equivalents and restricted cash	(4,387)	62,869
Balance, beginning of year	Balance, beginning of year	69,968	156,454	Balance, beginning of year	87,482	69,968
Balance, end of period	Balance, end of period	$95,261	$134,710	Balance, end of period	$83,095	$132,837
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION	SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION			SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period:	Cash paid during the period:			Cash paid during the period:
Interest (a)	Interest (a)	$16,134	$14,377	Interest (a)	$2,945	$2,595
Income taxes	Income taxes	1,083	705	Income taxes	4,838	185
Non-cash investing activity:	Non-cash investing activity:			Non-cash investing activity:
Capital assets purchased on account	Capital assets purchased on account	2,217	3,407	Capital assets purchased on account	4,814	4,215
Non-cash financing activity:
Common unit consideration for merger with Pope Resources		$172,640	—
Redeemable Common Unit consideration for merger with Pope Resources		106,752	—

(a)Interest paid is presented net of patronage payments received of ~~$4.3~~$6.2 million and ~~$4.0~~$4.3 million for the ~~six~~three months ended ~~June 30,~~March 31, 2021 and March 31, 2020, ~~and June 30, 2019,~~ respectively. For additional information on patronage payments, see Note 68 — Debt in the ~~2019~~2020 Form 10-K.

See Notes to Consolidated Financial Statements.

108

Table of Contents

RAYONIER INC. AND SUBSIDIARIES

RAYONIER, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

1.BASIS OF PRESENTATION

The unaudited consolidated financial statements and notes thereto of Rayonier Inc. and its subsidiaries and Rayonier, L.P. have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”).

The Rayonier Inc. and Rayonier, L.P. year-end balance sheet information was derived from audited financial statements not included herein. In the opinion of management, these financial statements and notes reflect any adjustments (all of which are normal recurring adjustments) necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented. These statements and notes should be read in conjunction with the financial statements and supplementary data included in ~~the Company’s~~our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, as filed with the SEC (the ~~“2019~~“2020 Form 10-K”).

On May 7, 2020, Rayonier Inc. contributed its 100% ownership interest in Rayonier Operating Company LLC (the “Contribution”) to Rayonier, L.P. As a result of the Contribution, which constituted the transfer of all or substantially all of Rayonier’s assets under the terms of the Indenture, dated March 5, 2012 (as supplemented and amended from time to time, the “Indenture”), between Rayonier, as issuer, the subsidiary guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee, Rayonier, L.P. expressly assumed all the obligations of Rayonier ~~under the Indenture, including obligations~~Inc. with respect to the outstanding ~~$325 million in aggregate principal amount of 3.750% Senior Notes due 2022 (the “2022 Notes”) issued thereunder.~~

On May 7, 2020, Rayonier, Rayonier, L.P., the subsidiary guarantors party thereto and the Trustee entered into the Third Supplemental Indenture, pursuant to which (1) Rayonier, L.P. succeeded to and became substituted for the Company under the Indenture and 2022 Notes and ~~expressly assumed all the obligations of the Company under the Indenture, including obligations with respect to the 2022 Notes, and (2)~~ Rayonier Inc. agreed to irrevocably, fully and unconditionally guarantee jointly and severally, the obligations of Rayonier, L.P. under the Indenture, including the 2022 Notes.

On May 8, 2020, Rayonier, L.P. acquired Pope Resources and became the general partner of Pope Resources. The acquisition occurred pursuant to a series of mergers (the “Mergers”) provided for in Agreement and Plan of Merger, dated as of January 14, 2020, as amended by Amendment No. 1, dated as of April 1, 2020 (as amended, the “Merger Agreement”), by and among Rayonier Inc., Rayonier, L.P., Rayonier Operating Company LLC, Rayonier Operating Company Holdings, LLC, Pacific GP Merger Sub I, LLC, Pacific GP Merger Sub II, LLC, Pacific LP Merger Sub III, LLC, Pope Resources, Pope EGP, Inc. and Pope MGP, Inc. As of ~~June 30, 2020,~~March 31, 2021, the Company owned a ~~96.8%~~ 97.0% interest in the Operating Partnership, with the remaining ~~3.2%~~3.0% interest owned by limited partners of the Operating Partnership. As the sole general partner of the Operating Partnership, Rayonier Inc. has exclusive control of the day-to-day management of the Operating Partnership. Please see

~~The Rayonier, L.P. year-end balance sheet~~Note 2 - Merger with Pope Resources and Note 24 - Charges for Integration and Restructuring for further information was derived from the separate historical unaudited financial statements of Rayonier Operating Company LLC not included herein. In the opinion of management, these financial statements and notes reflect any adjustments (all of which are normal recurring adjustments) necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented. These statements and notes should be read in conjunction with the audited consolidated financial statements as of and for the years ended December 31, 2019, 2018 and 2017 included in Exhibit 99.4 of the Operating Partnership’s Amendment No. 1pertaining to the ~~Current Report on Form 8-K filed with~~merger.

Pursuant to ASC 250, the ~~SEC on July 17, 2020.~~

~~The~~ Contribution was accounted for as a change in reporting entity between entities under common control ~~in accordance with ASC 250-10-45-21. A change in reporting entity requires retrospective application~~and applied retrospectively for all periods as if the Contribution had been in effect since inception of common control. As a result, ~~the unaudited consolidated financial statements and notes thereto for Rayonier, L.P. in this combined report have been prepared as if the change in reporting entity occurred on January 1, 2019.~~

~~Table of Contents~~

~~RAYONIER INC. AND SUBSIDIARIES~~

~~RAYONIER, L.P. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Dollar amounts in thousands unless otherwise stated)~~

~~The~~he effect of the change in reporting entity on Rayonier L.P.’s operating income, net income attributable to Rayonier, L.P. and per unit amounts for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020, ~~and 2019,~~ assuming the change in reporting entity occurred on January 1, 2020 are presented below (in thousands, except per unit amounts):

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Operating income — — — —
Net income attributable to Rayonier, L.P. (a) ($3,596) ($3,596) ($7,192) ($7,192)
Basic earnings per unit attributable to Rayonier, L.P. ($0.03) ($0.03) ($0.05) ($0.06)
Diluted earnings per unit attributable to Rayonier, L.P. ($0.03) ($0.03) ($0.05) ($0.06)


						Three Months Ended March 31,
						2020

Operating income						0
Net income attributable to Rayonier, L.P. (a)						($3,596)
Basic earnings per unit attributable to Rayonier, L.P.						($0.03)
Diluted earnings per unit attributable to Rayonier, L.P.						($0.03)

(a) The effect of the change in net income attributable to Rayonier, L.P. is due to the interest expense and guarantee fees associated with the 2022 Notes.

SUMMARY OF UPDATES TO SIGNIFICANT ACCOUNTING POLICIES

~~REDEEMABLE COMMON UNITS~~

Limited partners holding common units other than the Company (“Redeemable Common Units”) have the right to put any and all of the common units to the Operating Partnership in exchange for Rayonier registered common shares, on a one-for-one basis, or cash, at Rayonier’s option. Consequently, these Redeemable Common Units are classified outside of permanent partners’ capital in the Operating Partnership's accompanying balance sheets. The recorded value of the Redeemable Common Units is based on the higher of 1) initial carrying amount, increased or decreased for its share of net income or loss, other comprehensive income or loss, and dividend or 2) redemption value as measured by the closing price of Rayonier Inc. Common Stock on the balance sheet date multiplied by the total number of Redeemable Common Units outstanding.

For a full description of our other significant accounting policies, see Note 1 — Summary of Significant Accounting Policies in ~~the Company’s 2019~~our 2020 Form ~~10-K and Note 1 — Summary of Significant Accounting Policies~~ in the audited consolidated financial statements as of and for the years ended December 31, 2019, 2018 and 2017 included in Exhibit 99.4 of the Operating Partnership’s Amendment No. 1 to the Current Report on Form 8-K filed with the SEC on July 17, 2020.

~~MERGER WITH POPE RESOURCES~~

On May 8, 2020, we completed the previously announced acquisition of Pope Resources. Therefore, Pope Resources’ balance sheet and results of operations are included in our consolidated financial statements from and after the date of acquisition. See ~~Note 2 - Merger with Pope Resources~~, ~~Note 7 - Debt, and~~ ~~Note 20 - Charges for Integration and Restructuring~~ ~~for further information pertaining to the merger.~~10-K.

~~As a result~~

Table of ~~the merger with Pope Resources, we have revised our reportable business segments, adding 1 additional segment, Timber Funds. Please see~~ ~~Note 6 - Segment and Geographical information~~Contents ~~for more information about our revised business segments.~~

~~RECENTLY ADOPTED STANDARDS~~RAYONIER INC. AND SUBSIDIARIES

RAYONIER, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

~~We adopted Accounting Standards Update (“ASU”) No. 2016-13,~~ ~~Financial Instruments-Credit Losses (Topic 326)~~ ~~on January 1, 2020, with no material impact on the consolidated financial statements.~~

NEW ACCOUNTING STANDARDS

In March 2020, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-04, Reference Rate Reform (Topic 848), which provides optional guidance to ease the potential burden in accounting due to reference rate reform. ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ~~this update provides~~ASU 2020-04 is optional ~~expedients~~ and ~~exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by~~may be elected over time as reference rate reform ~~if certain criteria are met. The amendments~~activities occur. During Q2 2020, we elected to apply ~~only~~the hedge accounting expedients related to

~~Table~~ probability and the assessments of ~~Contents~~

~~RAYONIER INC. AND SUBSIDIARIES~~

~~RAYONIER, L.P. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Dollar amounts in thousands unless otherwise stated)~~

~~contracts and hedging relationships~~effectiveness for future LIBOR-indexed cash flows to assume that ~~reference LIBOR or another reference rate expected~~the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. We continue to ~~be discontinued due to reference rate reform. These amendments are effective immediately~~evaluate the impact of the guidance and may ~~be applied prospectively to contract modifications made and hedging relationships entered into on or before December 31, 2022. We are currently evaluating our contracts and~~apply other elections as applicable as additional changes in the ~~optional expedients provided by the new standard.~~market occur.

In ~~December 2019,~~August 2020, the FASB issued ASU ~~No. 2019-12,~~2020-06, ~~Income Taxes (Topic 740) - Simplifying the~~Debt–Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging–Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for ~~Income Taxes~~Convertible Instruments and Contracts in an Entity's Own Equity~~. The guidance issued in this update~~, which simplifies the accounting for ~~income taxes~~certain financial instruments with characteristics of liabilities and equity. This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by ~~eliminating~~removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain ~~exceptions to~~criteria required for equity classification; and (3) revises the guidance in ASC ~~740 related~~260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the ~~approach~~if-converted method. In addition, entities must presume share settlement for ~~intraperiod tax allocation, the methodology for~~purposes of calculating ~~income taxes~~diluted EPS when an instrument may be settled in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU No. 2019-12 also simplifies aspects of the accounting for franchise taxes and enacted changes in tax lawscash or ~~rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.~~shares. The ~~standard will be~~pronouncement is effective for ~~annual reporting~~fiscal years, and for interim periods within those fiscal years, beginning after December 15, ~~2020, including interim reporting periods within those fiscal years.~~2021, with early adoption permitted. We ~~do not expect a material impact~~are currently in the process of evaluating the effects of the provisions of ASU 2020-06 on our ~~Consolidated Financial Statements.~~

~~On March 2, 2020, the SEC adopted amendments to the~~ financial disclosure requirements for guarantors and issuers of guaranteed securities, as well for affiliates whose securities collateralize a registrant’s securities. The amendments revise Rules 3-10 and 3-16 of Regulation S-X, and relocate part of Rule 3-10 and all of Rule 3-16 to the new Article 13 in Regulation S-X, which is comprised of new Rules 13-01 and 13-02. We early adopted the requirements of the amendments on April 1, 2020, which included replacing guarantor condensed consolidating financial information with summarized financial information for the consolidated obligor group (Parent, Issuer, and Guarantor Subsidiaries) as well as no longer requiring guarantor cash flow information, financial information for non-guarantor subsidiaries, and a reconciliation to the consolidated results.statements.

SUBSEQUENT EVENTS

We have evaluated events occurring from ~~June 30, 2020~~March 31, 2021 to the date of issuance of these Consolidated Financial Statements for potential recognition or disclosure in the consolidated financial statements. No events were identified that warranted recognition or disclosure.

2. MERGER WITH POPE RESOURCES

On May 8, 2020, Rayonier Inc. and Rayonier, L.P. ~~merged with~~acquired Pope Resources and became the general partner of Pope Resources. Pope Resources was a master limited partnership that primarily owned and managed timberlands in the U.S. Pacific Northwest. Pope Resources also managed and co-invested in 3 private equity timber funds and developed and sold real estate properties. The merger added approximately 124,000 acres of high-quality, predominantly Douglas-fir timberlands to our Pacific Northwest timberland portfolio as well as a private equity timber fund business with 3 funds comprising approximately 141,000 acres. Additionally,For additional information about the merger, ~~augmented our higher-and-better-use real estate pipeline~~see Note 2 - Merger with ~~rural and conservation land sale opportunities and high-potential improved development projects~~Pope Resources in the ~~West Puget Sound area.~~2020 Form 10-K.

The total purchase price was as follows (in millions):

~~Under~~



Cash consideration			$247,318
Equity consideration			172,640
Redeemable Operating Partnership Unit consideration			106,752
Fair value of Pope Resources units held by us (a)			11,211
Total purchase price			$537,921

(a)Based on the ~~merger agreement, each outstanding unit representing limited partnership interests of Pope Resources was, at the option of its holder, exchanged for either:~~

~~• 3.929 shares of Rayonier Inc. common stock~~

~~• 3.929 units representing limited partnership interests of Rayonier, L.P.~~

~~• $125.00 in cash~~

~~Holders~~closing price of Pope Resources units who did not make a valid election received shares of Rayonier Inc. common stock. The elections were subject to proration to ensure that the aggregate amount of Rayonier shares and Rayonier, L.P. units, on the ~~one hand, and cash,~~NASDAQ on the other hand, issued in the merger equaled the amounts issued as if every Pope Resources unit converted into merger consideration received 2.751 shares of Rayonier Inc. common stock or Rayonier, L.P. units and $37.50 in cash.May 7, 2020.

1310

Table of Contents

RAYONIER INC. AND SUBSIDIARIES

RAYONIER, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

Upon consummation of the merger, all outstanding Pope Resources restricted units were converted into equivalent equity awards with respect to Rayonier Inc. common shares. Pope Resources directors and some executive employees of Pope Resources held restricted Pope Resources units that were subject to accelerated vesting in connection with the merger. Since a portion of these Pope Resources units relate to services rendered to Pope Resources prior to the merger, a portion of the replacement Rayonier Inc. restricted stock awards’ fair value is included in the consideration transferred. See additional details about the replacement restricted stock awards in ~~Note 18 — Incentive Stock Plans~~.

~~The following table summarizes the total consideration transferred by Rayonier in the merger (dollars in thousands, except per share and per unit data):~~



~~Cash consideration:~~
~~Pope Resources units outstanding as of May 8, 2020~~	~~4,366,636~~
~~Less: Pope Resources units held by us~~	~~(114,400)~~
~~Units outstanding, net~~	~~4,252,236~~
~~Cash consideration (per Pope Resources unit)~~	~~$37.50~~
~~Cash consideration for elections~~		~~$159,463~~
~~General partner interest~~		~~10,000~~
~~Repayment of Pope Resources debt~~		~~65,943~~
~~Prepayment penalty and accrued interest on Pope Resources’ debt~~		~~2,275~~
~~Closing costs paid on behalf of Pope Resources~~		~~9,637~~
~~Cash consideration transferred~~		~~$247,318~~

~~Equity consideration:~~






~~Rayonier common shares issued~~	~~7,181,071~~
~~Rayonier share price (a)~~	~~$24.01~~
~~Equity consideration for elections~~		~~$172,418~~
~~Pope Resources replacement awards (b)(c)~~		~~222~~
~~Equity consideration transferred~~		~~$172,640~~

~~Redeemable Common Unit consideration:~~
~~Redeemable Common Units issued~~	~~4,446,153~~
~~Rayonier share price (a)~~	~~$24.01~~
~~Redeemable Common Unit consideration transferred~~		~~$106,752~~






~~Fair Value of Pope Resources units held by us (d)~~		~~$11,211~~

~~Total consideration~~		~~$537,921~~

~~(a)The closing price of Rayonier common stock on the NYSE on May 7, 2020.~~

~~(b)See~~ ~~Note 18 — Incentive Stock Plans~~ ~~for additional details.~~

~~(c)Represents the fair value of Rayonier replacement restricted stock awards for restricted Pope Resources units held by employees that relate to pre-merger services rendered to Pope Resources.~~

~~(d)Based on the closing price of Pope Resources units on the NASDAQ on May 7, 2020.~~

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~~RAYONIER INC. AND SUBSIDIARIES~~

~~RAYONIER, L.P. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Dollar amounts in thousands unless otherwise stated)~~

~~The following table contains the amounts of cash transferred in the merger and net cash consideration shown in the Consolidated Statements of Cash Flows for the six months ended June 30, 2020:~~


			~~June 30, 2020~~

~~Cash consideration transferred~~			~~$247,318~~
~~Less: Cash assumed in merger~~			~~(16,250)~~
~~Net cash consideration shown in the Consolidated Statements of Cash Flows~~			~~$231,068~~

We recognized approximately $2.5 ~~million and $13.5~~ million of merger-related costs that were expensed during ~~the~~ first ~~and second quarters~~quarter of ~~2020, respectively.~~2020. See Note 2024 — Charges for Integration and Restructuring for descriptions of the components of merger-related costs.

The acquisition of Pope Resources has been accounted for as a business combination under ASC 805, Business Combinations, (“ASC 805”). Under ASC 805, assets acquired and liabilities assumed in a business combination must be recorded at their fair value as of the acquisition date. Recorded fair valuation of assets acquired and liabilities assumed related to the acquisition of Pope Resources is preliminary and will be completed as soon as practicable, but no later than one year after the consummation of the transaction. Pursuant to ASC 805, the financial statements will not be retrospectively adjusted for any provisional amount changes that occur in subsequent periods. Rather, we will recognize any provisional amount adjustments during the reporting period in which the adjustments are determined. We will also be required to record, in the same period's financial statements, the effect on earnings of changes in depletion, depreciation, amortization, or other income effects, if any, as a result of any change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. ~~Our consolidated financial statements as~~

As a result of refinements to the preliminary purchase price allocation, higher and ~~for~~better use timberlands increased by approximately $8.2 million. This includes development properties in the ~~six months ended June 30, 2020, include results~~town of ~~operations for Pope Resources from May 8, 2020 through June 30, 2020.~~

Port Gamble, Washington, development projects in Gig Harbor, Kingston, and Bremerton, Washington and various other assets.

The preliminary estimate of fair value required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that we believe to be reasonable; however, actual results may differ from these estimates. The assessment of fair value is preliminary and is based on information that was available to management at the time the consolidated financial statements were prepared. Those estimates and assumptions are subject to change as we obtain additional information related to those estimates during the applicable measurement periods (up to one year from the acquisition date). The most significant open items necessary to complete are related to timberlands, property, plant and equipment, higher and better use timberlands and real estate development investments, long-term debt instruments, environmental liabilities, intangible assets and tax related matters.

The preliminary fair value estimates were generally based on significant inputs that are not observable in the market and thus represent Level 3 measurements as defined in ASC 820, Fair Value Measurement, (“ASC 820”) with the exception of certain long-term debt instruments assumed in the merger that can be valued using observable market inputs and are therefore Level 2 measurements. See Note 1611 — Fair Value Measurements for further information on the fair value hierarchy.

The following summarizes the fair value methodology utilized in our preliminary fair value estimates for significant assets and liabilities:

Income Approach — Estimates fair value for an asset based on the present value of cash flow projected to be generated by the asset. Projected cash flows are discounted at rates of return that reflect the relative risk of achieving the cash flows and the time value of money. This approach was primarily used to value acquired ~~timberlands~~timber in both our Pacific Northwest and Timber Funds segment.

Cost Approach — Estimates value by determining the current cost of replacing an asset with another of equivalent economic utility. This approach was primarily used for property and equipment.

Market Approach — Estimates fair value for an asset based on values of recent comparable transactions. This approach was primarily used to value timberlands, higher and better use timberlands and real estate developments investments, certain land and building assets and long-term debt instruments.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

The preliminary allocation of purchase price to the identifiable assets acquired and liabilities assumed was based on preliminary estimates of fair value as of May 8, 2020, and is as follows (in thousands):


		Core Timberlands	Timber Funds	Total		Core Timberlands	Timber Funds	Total
Timberland and Real Estate Business	Timberland and Real Estate Business				Timberland and Real Estate Business
Cash	Cash	$7,380	$8,870	$16,250	Cash	$7,380	$8,870	$16,250
Accounts receivable	Accounts receivable	2,280	1,794	4,074	Accounts receivable	2,459	1,787	4,246
Other current assets	Other current assets	651	499	1,150	Other current assets	703	260	963
Timber and Timberlands	Timber and Timberlands	515,519	471,900	987,419	Timber and Timberlands	507,526	432,500	940,026
Higher and Better Use Timberlands and Real Estate Development Investments	Higher and Better Use Timberlands and Real Estate Development Investments	27,722	—	27,722	Higher and Better Use Timberlands and Real Estate Development Investments	34,748	0	34,748
Property, plant and equipment	Property, plant and equipment	8,307	—	8,307	Property, plant and equipment	11,616	0	11,616
Other assets	Other assets	4,297	—	4,297	Other assets	3,736	269	4,005
Total identifiable assets acquired	Total identifiable assets acquired	$566,156	$483,063	$1,049,219	Total identifiable assets acquired	$568,168	$443,686	$1,011,854
				—
Accounts payable	Accounts payable	274	292	566	Accounts payable	274	293	567
Current maturities of long-term debt	Current maturities of long-term debt	—	25,084	25,084	Current maturities of long-term debt	0	25,084	25,084
Accrued interest	Accrued interest	244	275	519	Accrued interest	244	275	519
Other current liabilities	Other current liabilities	7,233	1,117	8,350	Other current liabilities	9,038	2,080	11,118
Long-term debt	Long-term debt	53,502	35,759	89,261	Long-term debt	53,502	35,759	89,261
Long-term environmental liabilities	Long-term environmental liabilities	11,000	—	11,000	Long-term environmental liabilities	10,748	0	10,748
Other non-current liabilities (a)	Other non-current liabilities (a)	4,137	—	4,137	Other non-current liabilities (a)	2,616	0	2,616
Total liabilities assumed	Total liabilities assumed	$76,390	$62,527	$138,917	Total liabilities assumed	$76,422	$63,491	$139,913

Net identifiable assets	Net identifiable assets	$489,766	$420,536	$910,302	Net identifiable assets	$491,746	$380,195	$871,941
Less: noncontrolling interest		(3,307)	(369,074)	(372,381)
Less: noncontrolling interests					Less: noncontrolling interests	(3,816)	(330,204)	(334,020)
Total net assets acquired	Total net assets acquired	$486,459	$51,462	$537,921	Total net assets acquired	$487,930	$49,991	$537,921

(a)Other non-current liabilities includes a ~~$4.0~~$2.6 million deferred income tax liability resulting from the preliminary fair value adjustment to Pope Resources’ assets and liabilities.

These estimated fair values are preliminary in nature and subject to adjustments, which could be material. We have not identified any material unrecorded pre-merger contingencies where the related asset, liability or impairment is probable and the amount can be reasonably estimated. Our valuations will be finalized when certain information arranged to be obtained has been received and our review of that information has been completed. Prior to the finalization of the purchase price allocation, if information becomes available that would indicate it is probable that such events had occurred and the amounts can be reasonably estimated, such items will be included in the final purchase price allocation.

The amount of revenue of Pope Resources included in our Consolidated Statements of Income and Comprehensive Income from the date of the merger to June 30, 2020 is approximately $11.1 million. The net income effect resulting from the merger with Pope Resources for the three and six months ended June 30, 2020 is impracticable to determine, as we immediately integrated Pope Resources into our ongoing operations.

1612

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

Pursuant to ASC 805, unaudited supplemental pro forma results of operations for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020, ~~and 2019,~~ assuming the acquisition had occurred as of January 1, ~~2019,~~2020, are presented below (in thousands, except per share and unit amounts):

Three Months Ended June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Sales $215,500 $212,800 $499,100 $429,300
Net income attributable to Rayonier Inc. $7,644 $13,016 $28,069 $32,959
Basic earnings per share attributable to Rayonier Inc. $0.06 $0.10 $0.20 $0.24
Diluted earnings per share attributable to Rayonier Inc. $0.06 $0.09 $0.20 $0.24
Net income attributable to Rayonier, L.P. $7,823 $13,414 $28,819 $34,028
Basic earnings per unit attributable to Rayonier, L.P. $0.06 $0.10 $0.20 $0.24
Diluted earnings per unit attributable to Rayonier, L.P. $0.06 $0.09 $0.20 $0.24


	Three Months Ended
		March 31, 2020
Sales		$283,500

Net income attributable to Rayonier Inc.		$18,398
Basic earnings per share attributable to Rayonier Inc.		$0.13
Diluted earnings per share attributable to Rayonier Inc.		$0.13

Net income attributable to Rayonier, L.P.		$18,998
Basic earnings per unit attributable to Rayonier, L.P.		$0.13
Diluted earnings per unit attributable to Rayonier, L.P.		$0.13

The unaudited pro forma results include certain pro forma adjustments to net earnings that were directly attributable to the acquisition, assuming the acquisition had occurred on January 1, ~~2019,~~2020, including the following:

•additional depletion expense that would have been recognized relating to the basis increase in the acquired Timber and Timberlands;

•adjustment to interest expense to reflect the removal of Pope Resources debt and the additional borrowings we incurred in conjunction with the acquisition; and

•a reduction in expenses for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 of ~~$23.3~~$7.7 million ~~and $31.2 million, respectively,~~ for acquisition-related transaction costs.

Pro forma data may not be indicative of the results that would have been obtained had these events occurred at the beginning of the periods presented, nor is it intended to be a projection of future results.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

3. SEGMENT AND GEOGRAPHICAL INFORMATION

Sales between operating segments are made based on estimated fair market value, and intercompany sales, purchases and profits (losses) are eliminated in consolidation. We evaluate financial performance based on segment operating income (loss) and Adjusted Earnings before Interest, Taxes, Depreciation, Depletion and Amortization (“Adjusted EBITDA”). Asset information is not reported by segment, as we do not produce asset information by segment internally.

Operating income as presented in the Consolidated Statements of Income and Comprehensive Income is equal to segment income. Certain income (loss) items in the Consolidated Statements of Income and Comprehensive Income are not allocated to segments. These items, which include interest income (expense), miscellaneous income (expense) and income tax expense, are not considered by management to be part of segment operations and are included under “unallocated interest expense and other.”

The following tables summarize the segment information for the three months ended March 31, 2021 and 2020:


	Three Months Ended March 31,
SALES		2021	2020
Southern Timber		$51,677	$52,982
Pacific Northwest Timber		41,522	31,075
New Zealand Timber		57,579	37,538
Timber Funds (a)		14,939	0
Real Estate (b)		10,504	118,564
Trading		16,665	18,984

Intersegment Eliminations (c)		(1,439)	(13)
Total		$191,447	$259,130

(a)The three months ended March 31, 2021 includes $11.9 million of sales attributable to noncontrolling interests in Timber Funds.

(b)The three months ended March 31, 2020 includes $116.0 million from a Large Disposition. Large Dispositions are defined as transactions involving the sale of timberland that exceed $20 million in size and do not have a demonstrable premium relative to timberland value.

(c)Primarily consists of the elimination of timberland investment management fees paid to us by the timber funds which are initially recognized as sales and cost of sales within the Timber Funds segment, as well as log marketing fees paid to our Trading segment from our Southern Timber and Pacific Northwest Timber segments for marketing log export sales.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)


	Three Months Ended March 31,
OPERATING INCOME (LOSS)		2021	2020
Southern Timber		$17,347	$15,070
Pacific Northwest Timber		1,350	(948)
New Zealand Timber		13,944	5,448
Timber Funds (a)		1,501	0
Real Estate (b)		1,687	26,774
Trading		244	(19)

Corporate and Other		(7,588)	(7,773)
Total Operating Income		28,485	38,552
Unallocated interest expense and other		(10,032)	(8,425)
Total Income before Income Taxes		$18,453	$30,127

(a)The three months ended March 31, 2021 includes $1.1 million of operating income attributable to noncontrolling interests in Timber Funds.

(b)The three months ended March 31, 2020 includes $28.7 million from a Large Disposition.


	Three Months Ended March 31,
DEPRECIATION, DEPLETION AND AMORTIZATION		2021	2020
Southern Timber		$14,359	$18,182
Pacific Northwest Timber		16,284	10,702
New Zealand Timber		7,250	4,774
Timber Funds (a)		5,500	0
Real Estate (b)		1,557	35,745


Corporate and Other		263	297
Total		$45,213	$69,700

(a)The three months ended March 31, 2021 includes $4.9 million of depreciation, depletion and amortization attributable to noncontrolling interests in Timber Funds.

(b)The three months ended March 31, 2020 includes $35.4 million from a Large Disposition.


	Three Months Ended March 31,
NON-CASH COST OF LAND AND IMPROVED DEVELOPMENT		2021	2020



Real Estate (a)		$1,813	$52,051


Total		$1,813	$52,051

(a) The three months ended March 31, 2020 includes $51.6 million from a Large Disposition.

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RAYONIER INC. AND SUBSIDIARIES

RAYONIER, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

3.4. REVENUE

~~RECLASSIFICATIONS~~

Effective April 1, 2020, we changed the composition of our Rural and Timberland & Non-Strategic Real Estate sales categories to better align with the way management internally evaluates real estate sales. The Rural category now includes all real estate sales (excluding development sales) representing a demonstrable premium above timberland value. The Timberland & Non-Strategic category now includes all real estate sales representing little to no premium to timberland value. This category consists primarily of sales of property that management views as non-strategic to our long-term portfolio as well as sales of property for capital allocation purposes that do not fit the definition of a Large Disposition. All prior period amounts have been reclassified to reflect the new composition of these two sales categories. The Improved Development, Unimproved Development and Large Disposition categories remain unchanged, and this reclassification had no impact on overall segment results.

PERFORMANCE OBLIGATIONS

We recognize revenue when control of promised goods or services (“performance obligations”) is transferred to customers, in an amount that reflects the consideration expected in exchange for those goods or services (“transaction price”). We generally satisfy performance obligations within a year of entering into a contract and therefore have applied the disclosure exemption found under ASC 606-10-50-14. Unsatisfied performance obligations as of ~~June 30, 2020~~March 31, 2021 are primarily due to advances on stumpage contracts and unearned license ~~revenue and post-closing obligations on real estate sales.~~revenue. These performance obligations are expected to be satisfied within the next twelve months. We generally collect payment within a year of satisfying performance obligations and therefore have elected not to adjust revenues for a financing component.

CONTRACT BALANCES

The timing of revenue recognition, invoicing and cash collections results in accounts receivable and deferred revenue (contract liabilities) on the Consolidated Balance Sheets. Accounts receivable are recorded when we have an unconditional right to consideration for completed performance under the contract. Contract liabilities relate to payments received in advance of performance under the contract. Contract liabilities are recognized as revenue as (or when) we perform under the contract.

The following table summarizes revenue recognized during the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ that was included in the contract liability balance at the beginning of each year:

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Revenue recognized from contract liability balance at the beginning of the year (a) $3,661 $3,440 $10,086 $8,796


	Three Months Ended March 31,
		2021	2020
Revenue recognized from contract liability balance at the beginning of the year (a)		$5,920	$6,425

(a) Revenue recognized was primarily from hunting licenses and the use of advances on pay-as-cut timber sales.

1816

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RAYONIER, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

The following tables present our revenue from contracts with customers disaggregated by product type for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:

Three Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Real Estate Trading Elim. Total
June 30, 2020
Pulpwood $24,685 $3,163 $5,766 $328 — $2,463 — $36,405
Sawtimber 16,359 22,296 34,959 6,305 — 21,805 — 101,724
Hardwood 512 — — — — — — 512
Total Timber Sales 41,556 25,459 40,725 6,633 — 24,268 — 138,641
License Revenue, Primarily from Hunting 4,337 95 83 10 — — — 4,525
Other Non-Timber/Carbon Revenue 874 617 961 4 — — — 2,456
Agency Fee Income — — — — — (1) — (1)
Total Non-Timber Sales 5,211 712 1,044 14 — (1) — 6,980
Improved Development — — — — 6,427 — — 6,427
Unimproved Development — — — — 8,426 — — 8,426
Rural — — — — 27,234 — — 27,234
Timberlands & Non-Strategic — — — — 9,606 — — 9,606
Deferred Revenue/Other (b) — — — — (1,756) — — (1,756)
Total Real Estate Sales — — — — 49,937 — — 49,937
Revenue from Contracts with Customers 46,767 26,171 41,769 6,647 49,937 24,267 — 195,558
Lease Revenue — — — — 72 — — 72
Intersegment — — — 877 — 53 (930) —
Total Revenue $46,767 $26,171 $41,769 $7,524 $50,009 $24,320 ($930) $195,630
Three Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Real Estate Trading Elim. Total
June 30, 2019
Pulpwood $19,310 $2,267 $8,581 — — $3,826 — $33,984
Sawtimber 16,286 15,407 52,427 — — 31,377 — 115,497
Hardwood 1,391 — — — — — — 1,391
Total Timber Sales 36,987 17,674 61,008 — — 35,203 — 150,872
License Revenue, Primarily from Hunting 4,296 103 142 — — — — 4,541
Other Non-Timber/Carbon Revenue 4,914 779 977 — — — — 6,670
Agency Fee Income — — — — — 184 — 184
Total Non-Timber Sales 9,210 882 1,119 — — 184 — 11,395
Improved Development — — — — 172 — — 172
Unimproved Development — — — — 14,431 — — 14,431
Rural (a) — — — — 7,107 — — 7,107
Timberlands & Non-Strategic (a) — — — — 815 — — 815
Deferred Revenue/Other (b) — — — — 8 — — 8
Total Real Estate Sales — — — — 22,533 — — 22,533
Revenue from Contracts with Customers 46,197 18,556 62,127 — 22,533 35,387 — 184,800
Intersegment — — — — — 74 (74) —
Total Revenue $46,197 $18,556 $62,127 — $22,533 $35,461 ($74) $184,800


Three Months Ended	Southern Timber	Pacific Northwest Timber	New Zealand Timber	Timber Funds	Real Estate	Trading	Elim.	Total
March 31, 2021
Pulpwood	$21,856	$2,495	$9,542	$260	—	$1,835	—	$35,988
Sawtimber	21,963	37,758	47,792	13,308	—	14,389	—	135,210
Hardwood	405	0	0	0	—	0	—	405
Total Timber Sales	44,224	40,253	57,334	13,568	—	16,224	—	171,603
License Revenue, Primarily From Hunting	4,417	91	58	3	—	0	—	4,569
Other Non-Timber/Carbon Revenue	3,036	1,178	187	14	—	0	—	4,415
Agency Fee Income	0	0	0	0	—	356	—	356
Total Non-Timber Sales	7,453	1,269	245	17	—	356	—	9,340
Improved Development	—	—	—	—	252	—	—	252

Rural	—	—	—	—	9,765	—	—	9,765


Deferred Revenue/Other (a)	—	—	—	—	255	—	—	255

Total Real Estate Sales	—	—	—	—	10,272	—	—	10,272

Revenue from Contracts with Customers	51,677	41,522	57,579	13,585	10,272	16,580	—	191,215
Lease Revenue	—	—	—	—	232	—	—	232
Intersegment	—	—	—	1,354	—	85	(1,439)	—
Total Revenue	$51,677	$41,522	$57,579	$14,939	$10,504	$16,665	($1,439)	$191,447

Three Months Ended	Southern Timber	Pacific Northwest Timber	New Zealand Timber	Timber Funds	Real Estate	Trading	Elim.	Total
March 31, 2020
Pulpwood	$27,493	$3,127	$4,847	0	—	$2,530	—	$37,997
Sawtimber	19,509	27,445	30,788	0	—	16,112	—	93,854
Hardwood	481	0	0	0	—	0	—	481
Total Timber Sales	47,483	30,572	35,635	0	—	18,642	—	132,332
License Revenue, Primarily from Hunting	4,589	97	57	0	—	0	—	4,743
Other Non-Timber/Carbon Revenue	910	406	1,846	0	—	0	—	3,162
Agency Fee Income	0	0	0	0	—	329	—	329
Total Non-Timber Sales	5,499	503	1,903	0	—	329	—	8,234


Rural	—	—	—	—	2,397	—	—	2,397

Deferred Revenue/Other (a)	—	—	—	—	140	—	—	140
Large Dispositions	—	—	—		116,027		—	116,027
Total Real Estate Sales	—	—	—	—	118,564	—	—	118,564

Revenue from Contracts with Customers	52,982	31,075	37,538	0	118,564	18,971	—	259,130
Intersegment	—	—	—	—	—	13	(13)	—
Total Revenue	$52,982	$31,075	$37,538	0	$118,564	$18,984	($13)	$259,130

(a) The three months ended June 30, 2019 reflects the reclassification of certain real estate sales between the Rural and Timberlands & Non-Strategic sales categories to better align with the way management internally evaluates real estate sales.

~~(b)~~ Includes deferred revenue adjustments, revenue true-ups and marketing fees related to Improved Development sales.

~~Table of Contents~~

~~RAYONIER INC. AND SUBSIDIARIES~~

~~RAYONIER, L.P. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Dollar amounts in thousands unless otherwise stated)~~

Six Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Real Estate Trading Elim. Total
June 30, 2020
Pulpwood $52,178 $6,290 $10,613 $328 — $4,993 — $74,402
Sawtimber 35,868 49,741 65,746 6,305 — 37,918 — 195,578
Hardwood 993 — — — — — — 993
Total Timber Sales 89,039 56,031 76,359 6,633 — 42,911 — 270,973
License Revenue, Primarily From Hunting 8,926 192 140 10 — — — 9,268
Other Non-Timber/Carbon Revenue 1,784 1,022 2,809 4 — — — 5,619
Agency Fee Income — — — — — 327 — 327
Total Non-Timber Sales 10,710 1,214 2,949 14 — 327 — 15,214
Improved Development — — — — 6,427 — — 6,427
Unimproved Development — — — — 8,426 — — 8,426
Rural — — — — 29,631 — — 29,631
Timberlands & Non-Strategic — — — — 9,606 — — 9,606
Deferred Revenue/Other (b) — — — — (1,616) — — (1,616)
Large Dispositions — — — — 116,027 — — 116,027
Total Real Estate Sales — — — — 168,501 — — 168,501
Revenue from Contracts with Customers 99,749 57,245 79,308 6,647 168,501 43,238 — 454,688
Lease Revenue — — — — 72 — — 72
Intersegment — — — 877 — 66 (943) —
Total Revenue $99,749 $57,245 $79,308 $7,524 $168,573 $43,304 ($943) $454,760
Six Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Real Estate Trading Elim. Total
June 30, 2019
Pulpwood $46,109 $5,087 $17,349 — — $8,152 — $76,697
Sawtimber 39,437 32,684 98,290 — — 58,890 — 229,301
Hardwood 2,477 — — — — — — 2,477
Total Timber Sales 88,023 37,771 115,639 — — 67,042 — 308,475
License Revenue, Primarily from Hunting 8,420 205 195 — — — — 8,820
Other Non-Timber/Carbon Revenue 10,600 1,115 3,423 — — — — 15,138
Agency Fee Income — — — — — 381 — 381
Total Non-Timber Sales 19,020 1,320 3,618 — — 381 — 24,339
Improved Development — — — — 514 — — 514
Unimproved Development — — — — 15,430 — — 15,430
Rural (a) — — — — 26,313 — — 26,313
Timberlands & Non-Strategic (a) — — — — 1,207 — — 1,207
Deferred Revenue/Other (b) — — — — 68 — — 68
Total Real Estate Sales — — — — 43,532 — — 43,532
Revenue from Contracts with Customers 107,043 39,091 119,257 — 43,532 67,423 — 376,346
Intersegment — — — — — 103 (103) —
Total Revenue $107,043 $39,091 $119,257 — $43,532 $67,526 ($103) $376,346

(a) The six months ended June 30, 2019 reflects the reclassification of certain real estate sales between the Rural and Timberlands & Non-Strategic sales categories to better align with the way management internally evaluates real estate sales.

~~(b) Includes deferred revenue adjustments and marketing fees related to Improved Development sales.~~

2017

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

The following tables present our timber sales disaggregated by contract type for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:

Three Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Trading Total
June 30, 2020
Stumpage Pay-as-Cut $16,216 — — 531 — $16,747
Stumpage Lump Sum 863 326 — — — 1,189
Total Stumpage 17,079 326 — 531 — 17,936
Delivered Wood (Domestic) 21,438 25,133 12,126 6,102 462 65,261
Delivered Wood (Export) 3,039 — 28,599 — 23,806 55,444
Total Delivered 24,477 25,133 40,725 6,102 24,268 120,705
Total Timber Sales $41,556 $25,459 $40,725 $6,633 $24,268 $138,641
June 30, 2019
Stumpage Pay-as-Cut $15,172 — — — — $15,172
Stumpage Lump Sum 581 — — — — 581
Total Stumpage 15,753 — — — — 15,753
Delivered Wood (Domestic) 17,041 17,674 21,739 — 2,669 59,123
Delivered Wood (Export) 4,193 — 39,269 — 32,534 75,996
Total Delivered 21,234 17,674 61,008 — 35,203 135,119
Total Timber Sales $36,987 $17,674 $61,008 — $35,203 $150,872


Three Months Ended	Southern Timber	Pacific Northwest Timber	New Zealand Timber	Timber Funds	Trading	Total
March 31, 2021
Stumpage Pay-as-Cut	$21,257	0	0	0	0	$21,257
Stumpage Lump Sum	3	6,131	0	0	0	6,134

Total Stumpage	21,260	6,131	0	0	0	27,391

Delivered Wood (Domestic)	18,059	34,122	17,106	13,568	1,091	83,946
Delivered Wood (Export)	4,905	0	40,228	0	15,133	60,266
Total Delivered	22,964	34,122	57,334	13,568	16,224	144,212

Total Timber Sales	$44,224	$40,253	$57,334	$13,568	$16,224	$171,603

March 31, 2020
Stumpage Pay-as-Cut	$25,407	0	0	0	0	$25,407
Stumpage Lump Sum	388	5,131	0	0	0	5,519

Total Stumpage	25,795	5,131	0	0	0	30,926

Delivered Wood (Domestic)	21,060	25,441	13,691	0	472	60,664
Delivered Wood (Export)	628	0	21,944	0	18,170	40,742
Total Delivered	21,688	25,441	35,635	0	18,642	101,406

Total Timber Sales	$47,483	$30,572	$35,635	0	$18,642	$132,332

5. LEASES

We lease commercial and residential properties primarily located in Port Gamble, Washington. Our leases are operating leases and mostly range between one and five years, and may be extended on a case by case basis. Income associated with commercial and residential property leases generally includes scheduled rent increases, but do not include variable payments based on indexes.

The following table details our lease income for the three months ended March 31, 2021 and 2020:


	Three Months Ended March 31,
Lease Income Components	2021	2020
Operating lease income	$232	0

Total lease income	$232	0

2118

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(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

Six Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Trading Total
June 30, 2020
Stumpage Pay-as-Cut $41,623 — — 531 — $42,154
Stumpage Lump Sum 1,251 5,457 — — — 6,708
Total Stumpage 42,874 5,457 — 531 — 48,862
Delivered Wood (Domestic) 42,498 50,574 25,817 6,102 934 125,925
Delivered Wood (Export) 3,667 — 50,542 — 41,977 96,186
Total Delivered 46,165 50,574 76,359 6,102 42,911 222,111
Total Timber Sales $89,039 $56,031 $76,359 $6,633 $42,911 $270,973
June 30, 2019
Stumpage Pay-as-Cut $43,180 — — — — $43,180
Stumpage Lump Sum 2,675 — — — — $2,675
Total Stumpage 45,855 — — — — 45,855
Delivered Wood (Domestic) 36,379 37,771 42,439 — 4,793 121,382
Delivered Wood (Export) 5,789 — 73,200 — 62,249 141,238
Total Delivered 42,168 37,771 115,639 — 67,042 262,620
Total Timber Sales $88,023 $37,771 $115,639 — $67,042 $308,475

~~4. LEASES~~

~~TIMBERLAND LEASES~~

U.S. timberland leases typically have initial terms of approximately 30 to 65 years, with renewal provisions in some cases. New Zealand timberland lease terms typically range between 30 and 99 years. New Zealand lease arrangements generally consist of Crown Forest Licenses (“CFLs”), forestry rights and land leases. A CFL is a license arrangement to use government or privately owned land to operate a commercial forest. CFLs generally extend indefinitely and may only be terminated upon a 35-year termination notice. If no termination notice is given, the CFLs renew automatically each year for a one-year term. Alternatively, some CFLs extend for a specific term. Once a CFL is terminated, the Company may be able to obtain a forestry right from the subsequent owner. A forestry right is a license arrangement with a private entity to use their lands to operate a commercial forest. Forestry rights terminate either upon the issuance of a termination notice (which can last 35 to 45 years), completion of harvest, or a specified termination date.

As of June 30, 2020, the New Zealand subsidiary has 2 CFLs comprising 9,000 gross acres or 8,000 net plantable acres under termination notice that are being relinquished as harvest activities are concluded, as well as 2 fixed-term CFLs comprising 3,000 gross acres or 2,000 net plantable acres expiring in 2062. Additionally, the New Zealand subsidiary has 2 forestry rights comprising 32,000 gross acres or 8,000 net plantable acres under termination notice that are being relinquished as harvest activities are concluded.

~~OTHER NON-TIMBERLAND LEASES~~

In addition to timberland holdings, we have leased properties for certain office locations. Significant leased properties include a regional office in Lufkin, Texas; a Pacific Northwest Timber office in Hoquiam, Washington and a New Zealand Timber and Trading headquarters in Auckland, New Zealand.

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~~RAYONIER, L.P. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Dollar amounts in thousands unless otherwise stated)~~

~~LEASE MATURITIES, LEASE COST AND OTHER LEASE INFORMATION~~

~~The following table details our undiscounted lease obligations as of June 30, 2020 by type of lease and year of expiration:~~

Year of Expiration
Lease obligations Total Remaining 2020 2021 2022 2023 2024 Thereafter
Operating lease liabilities $178,880 $5,675 $9,003 $8,119 $8,051 $7,946 $140,086
Total Undiscounted Cash Flows $178,880 $5,675 $9,003 $8,119 $8,051 $7,946 $140,086
Imputed interest (82,154)
Balance at June 30, 2020 96,726
Less: Current portion (8,952)
Non-current portion at June 30, 2020 $87,774

~~The following table details components of our lease cost for the three and six months ended June 30, 2020 and June 30, 2019:~~

Three Months Ended June 30, Six Months Ended June 30,
Lease Cost Components 2020 2019 2020 2019
Operating lease cost $1,341 $2,396 $3,439 $4,833
Variable lease cost (a) 136 81 214 157
Total lease cost (b) $1,477 $2,477 $3,653 $4,990

~~(a) The majority of timberland leases are subject to increases or decreases based on either the Consumer Price Index, Producer Price Index or market rates.~~

(b) Short-term leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense for these leases are expensed on a straight line basis over the lease term. Short-term lease expense was not material for the six months ended June 30, 2020.

~~The following table provides supplemental cash flow information related to our leases for the six months ended June 30, 2020 and June 30, 2019:~~

Six Months Ended June 30,
Supplemental cash flow information related to leases: 2020 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $1,138 $1,493
Investing cash flows from operating leases 2,301 3,340
Total cash flows from operating leases $3,439 $4,833
Weighted-average remaining lease term in years - operating leases 28 28
Weighted-average discount rate - operating leases 5 % 5 %

~~Lessor lease information~~

~~In the merger with Pope Resources, we acquired income generating commercial and residential leases primarily concentrated in Port Gamble, Washington. Each of these are classified as operating leases.~~

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~~RAYONIER, L.P. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Dollar amounts in thousands unless otherwise stated)~~

~~The following table details our lease income for the three and six months ended June 30, 2020:~~

Three Months Ended June 30, Six Months Ended June 30,
Lease Income Components 2020 2020
Operating lease income $72 $72
Total lease income $72 $72

~~Future lease income as of June 30, 2020, based on payments due by period under the lease contracts, are presented in the following table:~~

Year of Expiration
Lease assets Total Remaining 2020 2021 2022 2023 2024 Thereafter
Operating lease Income $708 $165 $176 $173 $137 $57 —

~~We apply the following practical expedients as allowed under ASC 842:~~


~~Practical Expedient~~						~~Description~~
~~Short-term leases~~						We do not record right-of-use assets or lease liabilities for short-term leases (a lease that at commencement date has a lease term of 12 months or less and does not contain a purchase option that is reasonably certain to be exercised).
~~Separation of lease and non-lease components~~						We do not separate non-lease components from the associated lease components if they have the same timing and pattern of transfer and, if accounted for separately, would both be classified as an operating lease.

5.6. NONCONTROLLING INTERESTS

NONCONTROLLING INTERESTS IN CONSOLIDATED AFFILIATES

Matariki Forestry Group

We maintain a 77% controlling financial interest in Matariki Forestry Group (the “New Zealand subsidiary”), a joint venture that owns or leases approximately ~~416,000~~417,000 legal acres of New Zealand timberland. Accordingly, we consolidate the New Zealand subsidiary’s balance sheet and results of operations. The portions of the consolidated financial position and results of operations attributable to the New Zealand subsidiary’s 23% noncontrolling ~~interest~~interests are reflected as an adjustment to income in our Consolidated Statements of Income and Comprehensive Income under the caption “Net ~~loss (income)~~income attributable to noncontrolling interests in consolidated affiliates.” Rayonier New Zealand Limited (“RNZ”), a wholly-owned subsidiary, serves as the manager of the New Zealand subsidiary.

The following table sets forth the income attributable to the New Zealand subsidiary’s noncontrolling interests:

Three Months Ended June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Net income attributable to noncontrolling interest in the New Zealand subsidiary $693 $2,168 $1,261 $5,167

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~~RAYONIER INC. AND SUBSIDIARIES~~

~~RAYONIER, L.P. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Dollar amounts in thousands unless otherwise stated)~~


	Three Months Ended March 31,
		2021	2020
Net income attributable to noncontrolling interests in the New Zealand subsidiary		$2,638	$567

ORM Timber Fund II, Inc. (Fund II), ORM Timber Fund III LLC (Fund III), and ORM Timber Fund IV LLC. (Fund IV) (Collectively, ~~“The Funds”~~the “Funds”)

~~Upon completion of~~We are the ~~merger with Pope Resources, we became~~ manager of 3 private equity timber funds, Fund II, Fund III, and Fund IV, and ~~obtained~~maintain ownership interests in the ~~funds~~Funds of 20%, 5%, and 15%, respectively. ~~We determined, based~~Based upon an analysis under the variable interest entity guidance, ~~that~~ we have the power to direct the activities that most significantly impact the Funds’ economic success. Therefore, we are considered the primary beneficiary and are required under ASC 810 — Consolidation to consolidate the Funds. ~~Loss~~Income attributed to third-party investors is reflected as an adjustment to income in our Consolidated Statements of Income and Comprehensive Income under the caption “Net ~~loss (income)~~income attributable to noncontrolling interests in consolidated affiliates.”

The following table sets forth the ~~(loss)~~income attributable to the Funds’ noncontrolling interests:

Three Months Ended June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Net (loss) attributable to noncontrolling interest in the Funds: ($2,146) — ($2,146) —


	Three Months Ended March 31,
		2021	2020
Net income attributable to noncontrolling interests in the Funds		$1,076	0

Prior to ~~our~~the merger with Pope Resources, the Funds were formed by ORM LLC for the purpose of generating a return on investment through the acquisition, management, value enhancement and sale of timberland properties. Each Fund is organized to operate for a specified term from the end of its respective investment period: 10 years for each of Fund II and Fund III, and 15 years for Fund IV. Fund II is scheduled to terminate in March ~~2021,~~2023, Fund III is scheduled to terminate in December 2025 and Fund IV is scheduled to terminate in ~~December 2034.~~January 2035. The obligations of each of the Funds do not have any recourse to the Company or the Operating Partnership.

Ferncliff Investors

We ~~also acquired in the merger with Pope Resources~~maintain an ownership interest in Ferncliff Investors, a real estate joint venture entity. In 2017, Ferncliff Management and Ferncliff Investors were formed for the purpose of raising capital from third parties to invest in an unconsolidated real estate joint venture entity, Bainbridge Landing LLC, which is developing a 5-acre parcel on Bainbridge Island, Washington into a multi-family community containing apartments and townhomes. Ferncliff Management is the manager and 33.33% owner of Ferncliff Investors, with the remaining ownership interest in Ferncliff Investors held by third-party investors. Ferncliff Investors holds a 50% interest in Bainbridge Landing LLC, the joint venture entity that owns and is developing the property.

~~We determined, based~~

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(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

Based upon an analysis under the variable interest entity guidance, ~~that~~ we have the power to direct the activities that most significantly impact the joint venture’s economic success. Therefore, we are considered the primary beneficiary and are required under ASC 810 — Consolidation to consolidate Ferncliff Investors. The obligations of Ferncliff Investors do not have any recourse to the Company or the Operating Partnership.

Bainbridge Landing LLC is considered a voting interests entity. Ferncliff Investors accounts for its interest in the joint venture entity under the equity method because neither it nor the other member can exercise control over Bainbridge Landing LLC.

The Ferncliff Investors joint venture agreement provides for liquidation rights and distribution priorities that are disproportionate to member’s ownership interest. Due to the complex nature of cash distributions to members, net income of the joint venture is allocated to members, including us, using the Hypothetical Liquidation at Book Value (HLBV) method. Under the ~~equity~~HLBV method, Ferncliff Investors ~~records its share of the net~~ income or loss is allocated to the members based on the period change in each member’s claim on the book value of ~~Bainbridge Landing LLC. To date, this activity has been a loss~~net assets, excluding capital contributions and ~~is included in Other operating expense, net in~~distributions made during the Real Estate segment. The portion of Ferncliff Investors’ loss attributed to third-party investors is shown within the Consolidated Statements of Income and Comprehensive Income under the caption “Net loss (income) attributable to noncontrolling interests in consolidated affiliates.”period.

The following table sets forth the ~~(loss)~~income attributable to Ferncliff Investors’ noncontrolling interests:

Three Months Ended June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Net (loss) attributable to noncontrolling interest in the Ferncliff Investors: ($46) — ($46) —


	Three Months Ended March 31,
		2021	2020
Net income attributable to noncontrolling interests in Ferncliff Investors		$129	0

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~~RAYONIER INC. AND SUBSIDIARIES~~

~~RAYONIER, L.P. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Dollar amounts in thousands unless otherwise stated)~~

NONCONTROLLING INTERESTS IN THE OPERATING PARTNERSHIP

Noncontrolling interests in the Operating Partnership relate to the third-party ownership of Redeemable ~~Common~~Operating Partnership Units. Net income attributable to the noncontrolling interests in the Operating Partnership is computed by applying the weighted average Redeemable ~~Common~~Operating Partnership Units outstanding during the period as a percentage of the weighted average total ~~common~~ units outstanding to the Operating Partnership’s net income for the period. If a noncontrolling unitholder redeems a ~~common~~ unit for a registered common share of Rayonier or cash, the noncontrolling interests in the Operating Partnership will be reduced and the Company’s share in the Operating Partnership will be increased by the fair value of each security at the time of redemption.

The following table sets forth the Company’s noncontrolling interests in the Operating Partnership:

Three Months Ended June 30, Six Months Ended June 30,
2020 2020
Beginning noncontrolling interests in the Operating Partnership — —
Issuances of Redeemable Common Units 106,752 106,752
Adjustment of noncontrolling interests in the Operating Partnership 3,992 3,992
Net Income attributable to noncontrolling interests in the Operating Partnership 219 219
Other Comprehensive Income attributable to noncontrolling interests in the Operating Partnership 457 457
Distributions to noncontrolling interests in the Operating Partnership (1,200) (1,200)
Total noncontrolling interests in the Operating Partnership $110,220 $110,220


						Three Months Ended March 31, 2021

Beginning noncontrolling interests in the Operating Partnership						$130,121

Adjustment of noncontrolling interests in the Operating Partnership						11,867
Conversions of Redeemable Operating Partnership Units to Common Shares						(4,715)
Net Income attributable to noncontrolling interests in the Operating Partnership						341
Other Comprehensive Income attributable to noncontrolling interests in the Operating Partnership						1,531
Distributions to noncontrolling interests in the Operating Partnership						(1,155)
Total noncontrolling interests in the Operating Partnership						$137,990

~~6. SEGMENT~~

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RAYONIER, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

~~As a result~~

7. VARIABLE INTEREST ENTITIES

ORM Timber Fund II, Inc. (Fund II), ORM Timber Fund III LLC (Fund III), and ORM Timber Fund IV LLC. (Fund IV) (Collectively, the “Funds”)

We are the manager of ~~the merger with Pope Resources, we have revised our reportable business segments, adding 1 additional segment, Timber Funds. The Timber Funds segment represents operations of the~~ 3 private equity timber funds, ~~included in the transaction –~~ Fund II, Fund III, and Fund IV, ~~(collectively,~~and maintain ownership interests in the ~~“Funds”). Rayonier owns 20%~~Funds of ~~Fund II,~~20%, 5% ~~of Fund III,~~, and 15% ~~of Fund IV~~, respectively. We determined, based upon an analysis under the variable interest entity guidance, that we have the power to direct the activities that most significantly impact the Funds’ economic success. Therefore, we are considered the primary beneficiary and ~~is also~~are required under ASC 810 — Consolidation to consolidate the ~~managing member~~Funds. For further information on the Funds, see Note 6 — Noncontrolling Interests.

The assets, liabilities and equity of the ~~Funds. As discussed in~~ Funds as of March 31, 2021, were as follows:


Timber Funds			March 31, 2021
Assets:
Cash and cash equivalents			$4,674
Accounts receivable			3,099
Prepaid expenses			9
Other current assets			237
Total current assets			8,019
Timber and timberlands, net of depletion and amortization			408,338
Other assets			74
Total assets			$416,431
Liabilities and Equity:
Accounts payable			$2,064
Intercompany payable (a)			698

Accrued taxes			174
Accrued interest			505
Deferred revenue			323
Other current liabilities			514
Total current liabilities			4,278
Long-term debt, net of deferred financing costs			59,967
Funds’ equity			352,186
Total liabilities and equity			$416,431

(a)~~Note 5 - Noncontrolling Interests~~, the Funds are consolidated into our financial statements. The Timber Funds segment also includes fee revenue paid to us for managing the Funds, which consists of both fixed components based on invested capitalIncludes management fees and ~~acres under management as well as variable components related~~other expenses payable to the ~~harvest volumes of the Funds.~~Operating Partnership. These ~~fees, which also represent an expense in the Timber Funds segment,~~amounts are eliminated in ~~consolidation.~~

~~We now operate in 6 reportable segments: Southern Timber, Pacific Northwest Timber, New Zealand Timber, Timber Funds, Real Estate, and Trading.~~

Sales between operating segments are made based on estimated fair market value, and intercompany sales, purchases and profits (losses) are eliminated in consolidation. We evaluate financial performance based on segment operating income (loss) and Adjusted EBITDA. Asset information is not reported by segment, as we do not produce asset information by segment internally.

~~Operating income as presented in~~ the Consolidated ~~Statements~~Balance Sheets.

Table of ~~Income and Comprehensive Income is equal~~Contents

RAYONIER INC. AND SUBSIDIARIES

RAYONIER, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

Ferncliff Investors

We maintain an ownership interest in Ferncliff Investors, a real estate joint venture entity. Based upon an analysis under the variable interest entity guidance, we have the power to ~~segment income. Certain income (loss) items in~~direct the ~~Consolidated Statements of Income and Comprehensive Income~~activities that most significantly impact the joint venture’s economic success. Therefore, we are ~~not allocated to segments. These items, which include interest income (expense), miscellaneous income (expense) and income tax expense, are not~~ considered ~~by management to be part of segment operations~~the primary beneficiary and are ~~included~~required under ~~“unallocated interest expense~~ASC 810 — Consolidation to consolidate Ferncliff Investors. For further information on Ferncliff Investors, see Note 6 — Noncontrolling Interests.

The assets, liabilities and ~~other.”~~equity of Ferncliff Investors as of March 31, 2021, were as follows:


Ferncliff Investors			March 31, 2021
Assets:
Cash and cash equivalents			$139
Intercompany receivable			61


Total current assets			200

Advances to real estate joint venture entity			1,000
Total assets			$1,200
Liabilities and equity:






Total liabilities			$1,892

Ferncliff Investors’ equity			(692)
Total liabilities and equity			$1,200

2622

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(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

8. EARNINGS PER SHARE AND PER UNIT

The following table provides details of the calculations of basic and diluted earnings per common share of the Company:


	Three Months Ended March 31,
		2021	2020
Earnings per common share - basic
Numerator:
Net Income		$15,032	$26,421
Less: Net income attributable to noncontrolling interests in the Operating Partnership		(341)	0
Less: Net income attributable to noncontrolling interests in consolidated affiliates		(3,843)	(567)
Net income attributable to Rayonier Inc.		$10,848	$25,854
Denominator:
Denominator for basic earnings per common share - weighted average shares		137,870,821	129,137,494
Basic earnings per common share attributable to Rayonier Inc.:		$0.08	$0.20
Earnings per common share - diluted
Numerator:
Net Income		$15,032	$26,421
Less: Net income attributable to noncontrolling interests in consolidated affiliates		(3,843)	(567)

Net income attributable to Rayonier Inc., before net income attributable to noncontrolling interests in the Operating Partnership		$11,189	$25,854
Denominator:
Denominator for basic earnings per common share - weighted average shares		137,870,821	129,137,494
Add: Dilutive effect of:
Stock options		4,051	1,075
Performance shares, restricted shares and restricted stock units		353,131	209,481
Noncontrolling interests in Operating Partnership units		4,330,794	0
Denominator for diluted earnings per common share - adjusted weighted average shares		142,558,797	129,348,050
Diluted earnings per common share attributable to Rayonier Inc.:		$0.08	$0.20


	Three Months Ended March 31,
		2021	2020
Anti-dilutive shares excluded from the computations of diluted earnings per common share:
Stock options, performance shares, restricted shares and restricted stock units		194,256	406,326


Total		194,256	406,326

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(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

The following ~~tables summarize~~table provides details of the ~~segment information for~~calculations of basic and diluted earnings per unit of the ~~three and six months ended June 30, 2020 and 2019:~~Operating Partnership:

Three Months Ended June 30, Six Months Ended June 30,
SALES 2020 2019 2020 2019
Southern Timber $46,767 $46,197 $99,749 $107,043
Pacific Northwest Timber 26,171 18,556 57,245 39,091
New Zealand Timber 41,769 62,127 79,308 119,257
Timber Funds (a) 7,524 — 7,524 —
Real Estate (b) 50,009 22,533 168,573 43,532
Trading 24,320 35,461 43,304 67,526
Intersegment Eliminations (c) (930) (74) (943) (103)
Total $195,630 $184,800 $454,760 $376,346


	Three Months Ended March 31,
		2021	2020
Earnings per unit - basic
Numerator:
Net Income		$15,032	$26,421
Less: Net income attributable to noncontrolling interests in consolidated affiliates		(3,843)	(567)
Net income available to unitholders		$11,189	$25,854
Denominator:
Denominator for basic earnings per unit - weighted average units		142,201,615	129,137,494
Basic earnings per unit attributable to Rayonier, L.P.:		$0.08	$0.20
Earnings per unit - diluted
Numerator:
Net Income		$15,032	$26,421
Less: Net income attributable to noncontrolling interests in consolidated affiliates		(3,843)	(567)
Net income available to unitholders		$11,189	$25,854
Denominator:
Denominator for basic earnings per unit - weighted average units		142,201,615	129,137,494
Add: Dilutive effect of unit equivalents:
Stock options		4,051	1,075
Performance shares, restricted shares and restricted stock units		353,131	209,481
Denominator for diluted earnings per unit - adjusted weighted average units		142,558,797	129,348,050
Diluted earnings per unit attributable to Rayonier, L.P.:		$0.08	$0.20

~~(a)The three and six months ended June 30, 2020 includes $5.8 million of sales attributable to noncontrolling interests in the Timber Funds.~~

~~(b)The six months ended June 30, 2020 includes $116.0 million from a Large Disposition.~~

~~(c)~~Primarily consists of the elimination of timberland investment management fees paid to us by the timber funds which are initially recognized as sales and cost of sales within the Timber Funds segment, as well as log marketing fees paid to our New Zealand Timber segment from our Southern Timber and Pacific Northwest Timber segments for marketing log export sales.

Three Months Ended June 30, Six Months Ended June 30,
OPERATING INCOME (LOSS) 2020 2019 2020 2019
Southern Timber $11,208 $14,741 $26,278 $36,261
Pacific Northwest Timber (6,681) (3,815) (7,629) (7,556)
New Zealand Timber 4,973 12,797 10,422 28,517
Timber Funds (a) (1,892) — (1,892) —
Real Estate (b) 24,848 15,468 51,622 25,495
Trading 102 (171) 83 309
Corporate and Other (c) (20,872) (7,627) (28,646) (13,113)
Total Operating Income 11,686 31,393 50,238 69,913
Unallocated interest expense and other (8,241) (6,865) (16,666) (13,242)
Total Income before Income Taxes $3,445 $24,528 $33,572 $56,671

~~(a)The three and six months ended June 30, 2020 includes $2.0 million of operating loss attributable to noncontrolling interests in the Timber Funds.~~

~~(b)The six months ended June 30, 2020 includes $28.7 million from a Large Disposition.~~

~~(c)The three and six months ended June 30, 2020 include $13.5 million and $16.0 million, respectively, of integration and restructuring costs related to the merger with Pope Resources. See~~ ~~Note 20 — Charges for Integration and Restructuring~~ ~~for additional details.~~


	Three Months Ended March 31,
		2021	2020
Anti-dilutive unit equivalents excluded from the computations of diluted earnings per unit:
Stock options, performance shares, restricted shares and restricted stock units		194,256	406,326


Total		194,256	406,326

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

Three Months Ended June 30, Six Months Ended June 30,
DEPRECIATION, DEPLETION AND AMORTIZATION 2020 2019 2020 2019
Southern Timber $15,231 $12,880 $33,414 $32,608
Pacific Northwest Timber 10,606 6,045 21,308 12,871
New Zealand Timber 4,942 7,189 9,716 13,508
Timber Funds (a) 4,070 — 4,070 —
Real Estate (b) 6,678 1,199 42,422 4,534
Corporate and Other 340 288 637 572
Total $41,867 $27,601 $111,567 $64,093

~~(a)The three and six months ended June 30, 2020 includes $3.5 million of depreciation, depletion and amortization related to noncontrolling interests in the Timber Funds.~~

~~(b)The six months ended June 30, 2020 includes $35.4 million from a Large Disposition.~~

Three Months Ended June 30, Six Months Ended June 30,
NON-CASH COST OF LAND AND IMPROVED DEVELOPMENT 2020 2019 2020 2019
Real Estate (a) $13,030 $1,617 $65,081 $5,647
Total $13,030 $1,617 $65,081 $5,647

~~(a) The six months ended June 30, 2020 includes $51.6 million from a Large Disposition.~~

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~~RAYONIER INC. AND SUBSIDIARIES~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Dollar amounts in thousands unless otherwise stated)~~

7.9. DEBT

Our debt consisted of the following at ~~June 30, 2020:~~March 31, 2021:


			~~June 30, 2020~~March 31, 2021
Debt, excluding Timber Funds:
Term Credit Agreement borrowings due 2028 at a variable interest rate of ~~1.8%~~1.7% at ~~June 30, 2020~~March 31, 2021 (a)			$350,000
Senior Notes due 2022 at a fixed interest rate of 3.75%			325,000
Incremental Term Loan Agreement borrowings due 2026 at a variable interest rate of ~~2.1%~~2.0% at ~~June 30, 2020~~March 31, 2021 (b)			300,000
2020 Incremental Term Loan Facility borrowings due 2025 at a variable interest rate of 2.0% at ~~June 30, 2020~~March 31, 2021 (c)			250,000
~~Revolving Credit Facility borrowings~~
New Zealand subsidiary noncontrolling interests shareholder loan due 2025 at ~~an average variable~~a fixed interest rate of ~~1.7% at June 30, 2020~~2.95%			~~35,000~~24,074
Northwest Farm Credit Services Credit Facility with quarterly interest-only payments, collateralized by Core Timberlands, with the following tranches ~~(d)~~
Due 2025 at a fixed interest rate of 6.1%			~~11,779~~11,512
Due 2028 at a fixed interest rate of 4.1%			~~12,085~~11,984
Due 2033 at a fixed interest rate of 5.3%			~~19,564~~19,363
Due 2036 at a fixed interest rate of 5.4%			~~9,927~~9,838
Total debt, excluding Timber Funds			~~1,313,355~~1,301,771
Less: Deferred financing costs, excluding Timber Funds			(2,338)
Long-term debt, net of deferred financing costs, excluding Timber Funds			1,299,433


Debt, Timber Funds:
Fund II Mortgages Payable, collateralized by Fund II timberlands with quarterly interest payments, as follows: (d)
Due ~~2020~~2022 at a ~~fixed~~variable interest rate of ~~4.9%~~2.0% at March 31, 2021			~~11,030~~11,000
Due ~~2020~~2022 at a ~~fixed~~variable interest rate of ~~3.8%~~2.0% at March 31, 2021			~~14,012~~14,000
Fund III Mortgages Payable, collateralized by Fund III timberlands with quarterly interest payments, as ~~follows (d):~~follows: (e)
Due 2023 at a fixed interest rate of 5.1%			~~19,827~~19,431
Due 2024 at a fixed interest rate of 4.5%			~~15,790~~15,544
Total debt, Timber Funds			~~60,659~~59,975
~~Total debt~~			~~1,374,014~~
~~Less: Current maturities of long-term debt, Timber Funds~~			~~(25,042)~~
Less: Deferred financing costs, Timber Funds			~~(2,849)~~(8)
Long-term debt, net of deferred financing costs, Timber Funds			59,967



Long-term debt, net of deferred financing costs			$~~1,346,123~~1,359,400

(a) As of ~~June 30, 2020,~~March 31, 2021, the periodic interest rate on the term ~~loan facility~~credit agreement (the “Term Credit Agreement”) was LIBOR plus 1.600%. We estimate the effective fixed interest rate on the term loan facility to be approximately 3.2% after consideration of interest rate swaps and estimated patronage refunds.

(b) As of ~~June 30, 2020,~~March 31, 2021, the periodic interest rate on the incremental term loan (the “Incremental Term Loan Agreement”) was LIBOR plus 1.900%. We estimate the effective fixed interest rate on the incremental term loan facility to be approximately 2.8% after consideration of interest rate swaps and estimated patronage refunds.

(c) As of ~~June 30, 2020,~~March 31, 2021, the periodic interest rate on the 2020 incremental term loan (the “2020 Incremental Term Loan Facility”) was LIBOR plus 1.850%. We estimate the effective fixed interest rate on the incremental term loan facility to be approximately 2.3% after consideration of interest rate swaps and estimated patronage refunds.

(d) ~~See~~As of March 31, 2021, the ~~section below labeled “Long-Term Debt Assumed in~~periodic interest rate on the ~~Pope Resources Merger” for additional details.~~Fund II Mortgages Payable was 3-month LIBOR plus 1.700%.

(e) As of March 31, 2021, we estimate the effective fixed interest rate on the Fund III Mortgages Payable due 2023 and 2024 to be approximately 3.9% and 3.2%, respectively, after consideration of estimated patronage refunds.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

Principal payments due during the next five years and thereafter are as follows:


		Excluding Timber Funds	Timber Funds	Total		Excluding Timber Funds	Timber Funds	Total
2020		—	$25,000	$25,000
2021	2021	—	—	—	2021	0	0	0
2022	2022	325,000	—	325,000	2022	325,000	25,000	350,000
2023	2023	—	17,980	17,980	2023	0	17,980	17,980
2024	2024	—	14,400	14,400	2024	0	14,400	14,400
2025					2025	284,074	0	284,074
Thereafter	Thereafter	980,000	—	980,000	Thereafter	685,000	0	685,000
Total Debt	Total Debt	$1,305,000	$57,380	$1,362,380	Total Debt	$1,294,074	$57,380	$1,351,454

~~2020~~2021 DEBT ACTIVITY

On April 1, 2020, we entered into a Second Amendment to Credit Agreement to increase the limit on our Revolving Credit Facility from $200 million to $250 million and extend its maturity date from August 5, 2020 to April 1, 2025. Additionally, the maturity date of the Term Credit Agreement was extended from August 5, 2024 to April 1, 2028.

~~On April 13, 2020, we entered into an Accordion Increase Agreement to further increase the limit on the Revolving Credit Facility from $250 million to $300 million.~~

On April 16, 2020, we entered into a Third Amendment and Incremental Term Loan Agreement, which provided for the advancement of a five-year $250 million senior unsecured incremental term loan facility (the “2020 Incremental Term Loan Facility”). The proceeds from this facility were used to fund our acquisition of Pope Resources.U.S. Debt — Excluding Timber Funds

During the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, we made 0 borrowings ~~of $70.0 million and~~or repayments ~~of $117.0 million~~ on our Revolving Credit Facility. At ~~June 30, 2020,~~March 31, 2021, we had available borrowings of ~~$264.0~~$299.1 million under the Revolving Credit Facility, net of ~~$1.0~~$0.9 million to secure our outstanding letters of credit.

~~In June 2020, the~~ U.S. Debt — Timber Funds

On January 1, 2021, both Fund II Mortgages Payable transitioned from a fixed interest rate of 2.0% to a variable rate of 3-month LIBOR plus 1.700%.

New Zealand ~~subsidiary renewed its NZ$20 million working capital facility for an additional 12-month term.~~

During the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, the New Zealand subsidiary made 0 borrowings or repayments on its working capital facility. At ~~June 30, 2020,~~March 31, 2021, the New Zealand subsidiary had NZ$20.0 million of available borrowings under its working capital facility.

~~LONG-TERM DEBT ASSUMED IN THE POPE RESOURCES MERGER~~

~~Through our merger with Pope Resources, we assumed long-term debt instruments consisting of:~~

•~~5 tranches~~As of ~~a credit facility payable to Northwest Farm Credit Services (“NWFCS”) (defined and described below) totaling $45.0 million, collateralized by~~March 31, 2021, the ~~portion of Pacific Northwest Core Timberlands acquired~~outstanding balance on the shareholder loan is $24.1 million. Except for changes in the ~~merger~~New Zealand foreign exchange rate, there have been no adjustments to the carrying value of the shareholder loan since its inception. See Note 6 — Noncontrolling Interests for more information regarding the New Zealand subsidiary.

DEBT COVENANTS — EXCLUDING TIMBER FUNDS

In connection with ~~Pope Resources;~~our $350 million Term Credit Agreement, $300 million Incremental Term Loan Agreement, $250 million 2020 Incremental Term Loan Agreement and $300 million Revolving Credit Facility, customary covenants must be met, the most significant of which include interest coverage and leverage ratios.

The covenants listed below, which are the most significant financial covenants in effect as of March 31, 2021, are calculated on a trailing 12-month basis:


	Covenant Requirement		Actual Ratio		Favorable
Covenant EBITDA to consolidated interest expense should not be less than	2.5 to 1		6.7 to 1		4.2
Covenant debt to covenant net worth plus covenant debt shall not exceed	65	%	47	%	18	%

•~~2 of Fund II's Mortgages Payable to MetLife (defined and described below) totaling $25.0 million, collateralized by a portion of Fund II timberlands; and~~

•
~~2 of Fund III's Mortgages Payable to NWFCS (defined and described below) totaling $32.4 million, collateralized by a portion of Fund III timberlands.~~

~~NWFCS CREDIT FACILITY~~

We assumed 5 tranches of a credit facility payable to NWFCS (the “NWFCS Credit Facility”) totaling $45.0 million. Quarterly payments of interest only are due on the NWFCS Credit Facility through the respective maturity of each tranche. The NWFCS Credit Facility is collateralized by a portion of the Pacific Northwest timberlands acquired in the merger with Pope Resources. The NWFCS Credit Facility allows us to receive annual patronage payments, which are profit distributions made by a cooperative to its member-users based on the quantity or value of business done with the member-user.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

~~The pertinent details of each tranche of the NWFCS Credit Facility we assumed are as follows:~~

Tranche Stated Fixed Interest Rate Effective Fixed Interest Rate (a) Stated Principal Amount Est. Fair Value at Merger Date (b)
Tranche 2 (Due 2025) 6.1 % 4.8 % $10,000 $11,838
Tranche 4 (Due 2028) 4.1 % 3.1 % 11,000 12,108
Tranches 6 & 7 (Due 2033) 5.3 % 4.2 % 16,000 19,609
Tranche 8 (Due 2036) 5.4 % 4.3 % 8,000 9,947
Total NWFCS Credit Facility assumed $45,000 $53,502

~~(a)Estimated effective fixed interest rates as of June 30, 2020 after consideration of estimated patronage refunds.~~

~~(b)The fair market value premium will be amortized as a benefit to interest expense over the maturity term of each tranche.~~

~~FUND II MORTGAGES PAYABLE~~

We assumed Fund II's 2 mortgages payable (the “Fund II Mortgages Payable”) to MetLife totaling $25.0 million. Quarterly payments of interest only are due on the Fund II Mortgages Payable through their respective maturities. The Fund II Mortgages Payable are collateralized by Fund II Timberlands and do not have any recourse to the Company or the Operating Partnership.

~~The pertinent details of the Fund II Mortgages Payable are as follows:~~

Maturity Date Stated Fixed Interest Rate Stated Principal Amount Est. Fair Value at Merger Date (a)
September 2020 4.9 % $11,000 $11,061
September 2020 3.8 % 14,000 14,023
$25,000 $25,084

~~(a)The fair market value premium will be amortized as a benefit to interest expense over the maturity term of each mortgage.~~

~~FUND III MORTGAGES PAYABLE~~

We assumed Fund III’s 2 mortgages payable (the “Fund III Mortgages Payable”) to NWFCS totaling $32.4 million. Quarterly payments of interest only are due on the Fund III Mortgages Payable through their respective maturities. The Fund III Mortgages Payable are collateralized by Fund III Timberlands and do not have any recourse to the Company or the Operating Partnership.

~~The pertinent details of the Fund III Mortgages Payable are as follows:~~

Maturity Date Stated Fixed Interest Rate Effective Fixed Interest Rate (a) Stated Principal Amount Est. Fair Value at Merger Date (b)
December 2023 5.1 % 3.9 % $17,980 $19,915
October 2024 4.5 % 3.2 % 14,400 15,844
$32,380 $35,759

~~(a)Estimated effective fixed interest rates as of June 30, 2020 after consideration of estimated patronage refunds.~~

~~(b)The fair market value premium will be amortized as a benefit to interest expense over the maturity term of each mortgage.~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Dollar amounts in thousands unless otherwise stated)~~

~~DEBT COVENANTS — EXCLUDING TIMBER FUNDS~~

In connection with our $350 million term credit agreement (the “Term Credit Agreement”), $300 million incremental term loan agreement (the “Incremental Term Loan Agreement”), $250 million incremental term loan agreement (“the “2020 Incremental Term Loan Agreement”) and $300 million revolving credit facility (the “Revolving Credit Facility”), customary covenants must be met, the most significant of which include interest coverage and leverage ratios.

~~The covenants listed below, which are the most significant financial covenants in effect as of June 30, 2020, are calculated on a trailing 12-month basis:~~

Covenant Requirement Actual Ratio Favorable
Covenant EBITDA to consolidated interest expense should not be less than 2.5 to 1 9.8 to 1 7.3
Covenant debt to covenant net worth plus covenant debt shall not exceed 65 % 47 % 18 %

In connection with our $45 million NWFCS Credit Facility, customary covenants must be met, the most significant of which include interest coverage and debt-to-capitalization ratios.

The covenants listed below, which are the most significant financial covenants in effect as of ~~June 30, 2020,~~March 31, 2021, are calculated on a trailing 12-month basis:


		Covenant Requirement		Actual Ratio		Favorable			Covenant Requirement		Actual Ratio		Favorable
Covenant loan-to-appraised value shall not exceed	Covenant loan-to-appraised value shall not exceed	50%		11%		39	%	Covenant loan-to-appraised value shall not exceed	50%		12%		38	%
Covenant EBITDA to consolidated interest expense should not be less than	Covenant EBITDA to consolidated interest expense should not be less than	2.5 to 1		9.8 to 1		7.3		Covenant EBITDA to consolidated interest expense should not be less than	2.5 to 1		6.7 to 1		4.2
Covenant debt to covenant net worth plus covenant debt shall not exceed	Covenant debt to covenant net worth plus covenant debt shall not exceed	65	%	47	%	18	%	Covenant debt to covenant net worth plus covenant debt shall not exceed	65	%	47	%	18	%

In addition to these financial covenants listed above, the ~~Senior~~2022 Notes, Term Credit Agreement, Incremental Term Loan Agreement, 2020 Incremental Term Loan Facility, Revolving Credit Facility, and NWFCS Credit Facility include customary covenants that limit the incurrence of debt and the disposition of assets, among others. At ~~June 30, 2020,~~March 31, 2021, we were in compliance with all applicable covenants.

DEBT COVENANTS — TIMBER FUNDS

The Fund II Mortgages Payable to MetLife ~~contains~~contain a requirement to maintain a loan-to-value ratio of less than 50%, with the denominator defined as fair market value of the timberland pledged as collateral.

The Fund III Mortgages Payable to NWFCS contain a requirement to maintain a minimum interest coverage ratio of 1.5:1, minimum working capital of $500,000, and a loan-to-value ratio of less than 50%, with the denominator defined as fair market value.

Both Timber Funds are in compliance with their respective debt covenants as of March 31, 2021.

10. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

We are exposed to market risk related to potential fluctuations in foreign currency exchange rates and interest rates. We use derivative financial instruments to mitigate the financial impact of exposure to these risks.

Accounting for derivative financial instruments is governed by ASC Topic 815, Derivatives and Hedging, (“ASC 815”). In accordance with ASC 815, we record our derivative instruments at fair value as either assets or liabilities in the Consolidated Balance Sheets. Changes in the instruments’ fair value are accounted for based on their intended use. Gains and losses on derivatives that are designated and qualify for cash flow hedge accounting are recorded as a component of accumulated other comprehensive loss (“AOCI”) and reclassified into earnings when the hedged transaction materializes. Gains and losses on derivatives that are designated and qualify for net investment hedge accounting are recorded as a component of AOCI and will not be reclassified into earnings until the investment is partially or completely liquidated. The changes in the fair value of derivatives not designated as hedging instruments and those which are no longer effective as hedging instruments, are recognized immediately in earnings.

FOREIGN CURRENCY EXCHANGE AND OPTION CONTRACTS

The functional currency of Rayonier New Zealand Limited, and the New Zealand subsidiary is the New Zealand dollar. The New Zealand subsidiary is exposed to foreign currency risk on export sales and ocean freight payments which are mainly denominated in U.S. dollars. The New Zealand subsidiary typically hedges 50% to 90% of its estimated foreign currency exposure with respect to the following twelve months forecasted sales and purchases, less distributions, and up to 75% of the forward 12 to 18 months. Additionally, the New Zealand subsidiary will occasionally hedge up to 50% of its estimated foreign currency exposure with respect to the following 18 to 48 months forecasted sales and purchases, less distributions, when the New Zealand dollar is at a cyclical low versus the U.S. dollar. Foreign currency exposure from the New Zealand subsidiary’s trading operations is typically hedged based on the following three months forecasted sales and purchases. As of March 31, 2021, foreign currency exchange contracts and foreign currency option contracts had maturity dates through September 2022 and August 2021, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

Foreign currency exchange and option contracts hedging foreign currency risk on export sales and ocean freight payments qualify for cash flow hedge accounting. We may de-designate these cash flow hedge relationships in advance or at the occurrence of the forecasted transaction. The portion of gains or losses on the derivative instrument previously accumulated in other comprehensive loss for de-designated hedges remains in accumulated other comprehensive loss until the forecasted transaction affects earnings. Changes in the value of derivative instruments after de-designation are recorded in earnings.

INTEREST RATE SWAPS

We are exposed to cash flow interest rate risk on our variable-rate Term Credit Agreement, Incremental Term Loan Agreement and 2020 Incremental Term Loan Facility and use variable-to-fixed interest rate swaps to hedge this exposure. For these derivative instruments, we report the gains/losses from the fluctuations in the fair market value of the hedges in AOCI and reclassify them to earnings as interest expense in the same period in which the hedged interest payments affect earnings.

The following table contains information on the outstanding interest rate swaps as of March 31, 2021:


Outstanding Interest Rate Swaps (a)
Date Entered Into	Term	Notional Amount	Related Debt Facility	Fixed Rate of Swap (b)		Bank Margin on Debt		Total Effective Interest Rate (c)
August 2015	9 years	$170,000	Term Credit Agreement	2.20	%	1.60	%	3.80	%
August 2015	9 years	180,000	Term Credit Agreement	2.35	%	1.60	%	3.95	%
April 2016	10 years	100,000	Incremental Term Loan	1.60	%	1.90	%	3.50	%
April 2016	10 years	100,000	Incremental Term Loan	1.60	%	1.90	%	3.50	%
July 2016	10 years	100,000	Incremental Term Loan	1.26	%	1.90	%	3.16	%
June 2020	10 years	250,000	2020 Incremental Term Loan	1.10	%	1.85	%	2.95	%

(a) All interest rate swaps have been designated as interest rate cash flow hedges and qualify for hedge accounting.

(b) The interest rate swap entered in June ~~30, 2020.~~2020, was an off-market derivative, meaning it contained an embedded financing element, which the counterparties recovered through an incremental charge in the fixed rate over what would have been charged for an at-market swap.

TREASURY LOCKS

During the first quarter of 2020, we entered into 3 treasury lock agreements, which were designated and qualified as cash flow hedges. Prior to expiration, we de-designated and settled the treasury locks by converting them into interest rate swap lock agreements (discussed below). To the extent we de-designate or terminate a cash flow hedging relationship and the associated hedged item continues to exist, any unrealized gain or loss of the cash flow hedge at the time of de-designation remains in accumulated other comprehensive loss and is amortized using the straight-line method through interest expense over the remaining life of the hedged item. As of March 31, 2021, there was $18.8 million recorded in accumulated other comprehensive loss in connection with the settled treasury locks which will be reclassified to earnings through interest expense over the life of the anticipated issued debt. For additional information regarding the expired treasury lock agreements, see Note 16 - Derivative Instruments and Hedging Activities in our 2020 Form 10-K.

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(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

INTEREST RATE SWAP LOCKS

Upon de-designation, we converted the above treasury lock agreements to interest rate swap lock agreements, which were designated and qualified as cash flow hedges. Prior to expiration, we de-designated and partially cash settled $11.1 million of the interest rate swap locks and converted them into interest rate swap agreements. To the extent we de-designate or terminate a cash flow hedging relationship and the associated hedged item continues to exist, any unrealized gain or loss of the cash flow hedge at the time of de-designation remains in accumulated other comprehensive loss and is amortized using the straight-line method through interest expense over the remaining life of the hedged item. As of March 31, 2021, there was $1.3 million recorded in accumulated other comprehensive loss in connection with settled interest rate swap locks which will be reclassified to earnings through interest expense over the life of the anticipated issued debt. For additional information regarding the expired interest rate swap lock agreements, see Note 16 - Derivative Instruments and Hedging Activities in our 2020 Form 10-K.

FORWARD-STARTING INTEREST RATE SWAPS

We are exposed to cash flow interest rate risk on anticipated debt issuances and use forward-starting interest rate swap agreements to hedge against changes in future cash flows resulting from changes in interest rates from the trade date through the anticipated issuance date. For these derivative instruments, we report the gains/losses from the fluctuations in the fair market value of the hedges in AOCI and reclassify them to earnings as interest expense in the same period in which the hedged interest payments affect earnings.

The following table contains information on the outstanding forward-starting interest rate swaps as of March 31, 2021:

Outstanding Forward-Starting Interest Rate Swaps (a)

Date Entered Into

Term

Notional Amount

Fixed Rate of Swap

Related Debt Facility

Forward Date

Maximum Period Ending for Forecasted Issuance Date

February 2020

10 years

$325,000

1.40

Anticipated refinancing of Senior Notes due 2022

April 2022

March 2020

4 years

100,000

0.88

Term Credit Agreement

August 2024

N/A

May 2020

4 years

50,000

0.74

Term Credit Agreement

August 2024

N/A

(a) All forward-starting interest rate swaps have been designated as interest rate cash flow hedges and qualify for hedge accounting.

CARBON OPTIONS

The New Zealand subsidiary enters into carbon options from time to time to sell carbon assets at certain prices. Changes in fair value of the carbon option contracts are recorded in “Interest and other miscellaneous expense, net” as the contracts do not qualify for hedge accounting treatment. As of March 31, 2021, all existing carbon option contracts have expired.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

The following tables demonstrate the impact, gross of tax, of our derivatives on the Consolidated Statements of Income and Comprehensive Income for the three months ended March 31, 2021 and 2020:


		Three Months Ended March 31,
	Income Statement Location	2021	2020
Derivatives designated as cash flow hedges:
Foreign currency exchange contracts	Other comprehensive income (loss)	($2,852)	($5,480)
Foreign currency option contracts	Other comprehensive income (loss)	(929)	(1,149)



Interest rate swaps	Other comprehensive income (loss)	28,512	(39,450)
	Interest expense	3,438	452
Treasury locks	Other comprehensive income (loss)	0	(20,846)
	Interest expense	521	0
Interest rate swap locks	Other comprehensive income (loss)	0	854
	Interest expense	35	0
Forward-starting interest rate swaps	Other comprehensive income (loss)	31,219	(19,710)





Derivatives not designated as hedging instruments:




Carbon option contracts	Interest and other miscellaneous income, net	0	549

During the next 12 months, the amount of the March 31, 2021 AOCI balance, net of tax, expected to be reclassified into earnings as a result of the maturation of our derivative instruments is a gain of approximately $2.6 million.

The following table contains the notional amounts of the derivative financial instruments recorded in the Consolidated Balance Sheets:


	Notional Amount
	March 31, 2021	December 31, 2020
Derivatives designated as cash flow hedges:
Foreign currency exchange contracts	$64,000	$49,000
Foreign currency option contracts	16,000	28,000
Interest rate swaps	900,000	900,000

Forward-starting interest rate swaps	475,000	475,000

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

The following table contains the fair values of the derivative financial instruments recorded in the Consolidated Balance Sheets:


	Location on Balance Sheet	Fair Value Assets / (Liabilities) (a)
		March 31, 2021	December 31, 2020
Derivatives designated as cash flow hedges:
Foreign currency exchange contracts	Other current assets	$3,477	$4,968
	Other assets	160	1,050
	Other current liabilities	(454)	0
	Other non-current liabilities	(17)	0
Foreign currency option contracts	Other current assets	592	1,526

	Other current liabilities	(7)	(11)

Interest rate swaps	Other assets	9,945	0
	Other non-current liabilities	(29,301)	(51,580)






Forward-starting interest rate swaps	Other assets	18,690	513
	Other non-current liabilities	0	(13,042)







Total derivative contracts:
Other current assets		$4,069	$6,494
Other assets		28,795	1,563
Total derivative assets		$32,864	$8,057

Other current liabilities		(461)	(11)
Other non-current liabilities		(29,318)	(64,622)
Total derivative liabilities		($29,779)	($64,633)

(a) See Note 11 — Fair Value Measurements for further information on the fair value of our derivatives including their classification within the fair value hierarchy.

OFFSETTING DERIVATIVES

Derivative financial instruments are presented at their gross fair values in the Consolidated Balance Sheets. Our derivative financial instruments are not subject to master netting arrangements, which would allow the right of offset.

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RAYONIER, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

8.11. FAIR VALUE MEASUREMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

A three-level hierarchy that prioritizes the inputs used to measure fair value was established in the Accounting Standards Codification as follows:

Level 1— Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than quoted prices included in Level 1.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table presents the carrying amount and estimated fair values of our financial instruments as of March 31, 2021 and December 31, 2020, using market information and what we believe to be appropriate valuation methodologies under GAAP:


	March 31, 2021			December 31, 2020
Asset (Liability) (a)	Carrying Amount	Fair Value		Carrying Amount	Fair Value
		Level 1	Level 2		Level 1	Level 2
Cash and cash equivalents, excluding Timber Funds	$77,946	$77,946	0	$80,454	$80,454	0
Cash and cash equivalents, Timber Funds	4,674	4,674	0	4,053	4,053	0
Restricted cash (b)	475	475	0	2,975	2,975	0


Long-term debt, excluding Timber Funds (c)	(1,299,433)	0	(1,304,371)	(1,300,336)	0	(1,313,631)
Long-term debt, Timber Funds (c)	(59,967)	0	(60,207)	(60,179)	0	(60,474)
Interest rate swaps (d)	(19,356)	0	(19,356)	(51,580)	0	(51,580)

Forward-starting interest rate swaps (d)	18,690	0	18,690	(12,529)	0	(12,529)
Foreign currency exchange contracts (d)	3,166	0	3,166	6,018	0	6,018
Foreign currency option contracts (d)	585	0	585	1,515	0	1,515


Noncontrolling Interests in the Operating Partnership (e)	137,990	137,990	0	130,121	130,121	0

(a)We did not have Level 3 assets or liabilities at March 31, 2021 and December 31, 2020.

(b)Restricted cash represents cash held in escrow. See Note 22 — Restricted Cash for additional information.

(c)The carrying amount of long-term debt is presented net of capitalized debt costs on non-revolving debt. See Note 9 — Debt for additional information.

(d)See Note 10 — Derivative Financial Instruments and Hedging Activities for information regarding the Consolidated Balance Sheets classification of our derivative financial instruments.

(e)Noncontrolling Interests in the Operating Partnership is neither an asset or liability and is classified as temporary equity in the Company’s Consolidated Balance Sheets. This relates to the ownership of Rayonier, L.P. units by various individuals and entities other than the Company.

We use the following methods and assumptions in estimating the fair value of our financial instruments:

Cash and cash equivalents and Restricted cash — The carrying amount is equal to fair market value.

Debt— The fair value of fixed rate debt is based upon quoted market prices for debt with similar terms and maturities. The variable rate debt adjusts with changes in the market rate, therefore the carrying value approximates fair value.

Interest rate swap agreements— The fair value of interest rate contracts is determined by discounting the expected future cash flows, for each instrument, at prevailing interest rates.

Foreign currency exchange contracts— The fair value of foreign currency exchange contracts is determined by a mark-to-market valuation, which estimates fair value by discounting the difference between the contracted forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

Foreign currency option contracts— The fair value of foreign currency option contracts is based on a mark-to-market calculation using the Black-Scholes option pricing model.

Noncontrolling Interests in the Operating Partnership— The fair value of noncontrolling interests in the Operating Partnership is determined based on the period-end closing price of Rayonier Inc. common shares.

12. COMMITMENTS

At March 31, 2021, the future minimum payments under non-cancellable commitments were as follows:


	Environmental Remediation (a)	Development Projects (b)	Commitments (c)	Total
Remaining 2021	$814	$17,440	$11,445	$29,699
2022	2,097	3,182	17,901	23,180
2023	1,853	267	18,512	20,632
2024	1,853	267	15,671	17,791
2025	2,338	267	10,625	13,230
Thereafter	2,575	3,899	29,987	36,461
	$11,530	$25,322	$104,141	$140,993

(a)Environmental remediation represents our estimate of potential liability associated with environmental contamination and Natural Resource Damages (NRD) in Port Gamble, Washington. See Note 14 - Environmental and Natural Resource Damage Liabilities for additional information.

(b)Primarily consisting of payments expected to be made on our Wildlight and Richmond Hill development projects.

(c)Commitments include payments expected to be made on financial instruments (foreign exchange contracts, interest rate swaps and forward-starting interest rate swaps) and other purchase obligations.

13. CONTINGENCIES

We have been named as a defendant in various lawsuits and claims arising in the normal course of business. While we have procured reasonable and customary insurance covering risks normally occurring in connection with our businesses, we have in certain cases retained some risk through the operation of large deductible insurance plans, primarily in the areas of executive risk, property, automobile and general liability. These pending lawsuits and claims, either individually or in the aggregate, are not expected to have a material adverse effect on our financial position, results of operations, or cash flow.

14. ENVIRONMENTAL AND NATURAL RESOURCE DAMAGE LIABILITIES

Various federal and state environmental laws in the states in which we operate place cleanup or restoration liability on the current and former owners of affected real estate. These laws are often a source of “strict liability,” meaning that an owner or operator need not necessarily have caused, or even been aware of, the release of contaminated materials. Similarly, there are certain environmental laws that allow state, federal, and tribal trustees (collectively, the “Trustees”) to bring suit against property owners to recover damage for injuries to natural resources. Like the liability that attaches to current property owners in the cleanup context, liability for natural resource damages (“NRD”) can attach to a property simply because an injury to natural resources resulted from releases of contaminated materials on or from the owner’s property, regardless of culpability for the release. For additional information, see Note 13 - Environmental and Natural Resource Damage Liabilities in the 2020 Form 10-K.

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RAYONIER INC. AND SUBSIDIARIES

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

Changes in environmental and NRD liabilities from December 31, 2020 to March 31, 2021 are shown below:


			Port Gamble, WA






Non-current portion at December 31, 2020			$10,615
Plus: Current portion			1,026
Total Balance at December 31, 2020			11,641
Expenditures			(111)

Total Balance at March 31, 2021			11,530
Less: Current portion			(930)
Non-current portion at March 31, 2021			$10,600

These estimates were based on assumptions that we believe to be reasonable; however, actual results may differ from these estimates. See Note 2 - Merger with Pope Resources for information regarding our preliminary estimates of fair value. It is expected that the upland mill site cleanup and NRD restoration will occur over the next two to three years, while the monitoring of Port Gamble Bay, mill site and landfills will continue for an additional 10 to 15 years. NRD costs are subject to change as the scope of the restoration projects become more clearly defined. It is reasonably possible that these components of the liability may increase as the project progresses. Management continues to monitor the Port Gamble cleanup process and will make adjustments as needed. Should any future circumstances result in a change to the estimated cost of the project, we will record an appropriate adjustment to the liability in the period it becomes known and when we can reasonably estimate the amount. For further information on the timing and amount of future payments related to our environmental remediation liabilities, see Note 12 - Commitments.

15. GUARANTEES

We provide financial guarantees as required by creditors, insurance programs, and various governmental agencies.

As of March 31, 2021, the following financial guarantees were outstanding:

Financial Commitments (a)

Maximum Potential
Payment

Standby letters of credit

$885

Surety bonds (b)

9,340

Total financial commitments

$10,225

(a)We have not recorded any liabilities for these financial commitments in our Consolidated Balance Sheets. The guarantees are not subject to measurement, as the guarantees are dependent on our own performance.

(b)Surety bonds are issued primarily to secure performance obligations related to various operational activities, to provide collateral for our Wildlight development project in Nassau County, Florida and in connection with pending and completed sales from the Harbor Hill project in Gig Harbor, Washington. These surety bonds expire at various dates during 2021, 2022, 2023 and 2024 and are expected to be renewed as required.

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RAYONIER INC. AND SUBSIDIARIES

RAYONIER, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

16. HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS

We continuously assess potential alternative uses of our timberlands, as some properties may become more valuable for development, residential, recreation or other purposes. We periodically transfer, via a sale or contribution from the real estate investment trust (“REIT”) entities to taxable REIT subsidiaries (“TRS”), higher and better use (“HBU”) timberlands to enable land-use entitlement, development or marketing activities. We also acquire HBU properties in connection with timberland acquisitions. These properties are managed as timberlands until sold or developed. While the majority of HBU sales involve rural and recreational land, we also selectively pursue various land-use entitlements on certain properties for residential, commercial and industrial development in order to enhance the long-term value of such properties. For selected development properties, we also invest in targeted infrastructure improvements, such as roadways and utilities, to accelerate the marketability and improve the value of such properties.

InChanges in higher and better use timberlands and real estate development investments from December 31, 2020 to March 31, 2021 are shown below:


	Higher and Better Use Timberlands and Real Estate Development Investments
	Land and Timber	Development Investments	Total
Non-current portion at December 31, 2020	$79,901	$28,617	$108,518
Plus: Current portion (a)	212	6,544	6,756
Total Balance at December 31, 2020	80,113	35,161	115,274
Non-cash cost of land and improved development	(549)	(232)	(781)
Amortization of parcel real estate development investments	—	(139)	(139)
Timber depletion from harvesting activities and basis of timber sold in real estate sales	(243)	0	(243)
Capitalized real estate development investments (b)	0	5,291	5,291
Capital expenditures (silviculture)	96	0	96

Intersegment transfers	1,082	0	1,082
Purchase price allocation adjustment (c)	8,238	0	8,238

Total Balance at March 31, 2021	88,737	40,081	128,818
Less: Current portion (a)	(811)	(16,692)	(17,503)
Non-current portion at March 31, 2021	$87,926	$23,389	$111,315

(a)The current portion of Higher and Better Use Timberlands and Real Estate Development Investments is recorded in Inventory. See Note 17 — Inventory for additional information.

(b)Capitalized real estate development investments include $0.1 million of capitalized interest and $2.3 million of parcel real estate development investments. Parcel real estate development investments represent investments made for specific lots and/or commercial parcels that are currently under contract or expected to be ready for market within a year.

(c)Reflects measurement period adjustments on HBU properties acquired in the merger with Pope ~~Resources, we acquired HBU properties with an~~Resources. The estimated fair value of ~~$27.7~~HBU properties acquired in the merger is approximately $34.7 million. This includes development properties in the town of Port Gamble, Washington, development projects in Gig Harbor, Kingston, and Bremerton, Washington and various other assets.

~~Changes in higher and better use timberlands and real estate development investments from December 31, 2019 to June 30, 2020 are shown below:~~

Higher and Better Use Timberlands and Real Estate Development Investments
Land and Timber Development Investments Total
Non-current portion at December 31, 2019 $58,091 $23,700 $81,791
Plus: Current portion (a) 274 12,389 12,663
Total Balance at December 31, 2019 58,365 36,089 94,454
Non-cash cost of land and improved development (280) (3,523) (3,803)
Timber depletion from harvesting activities and basis of timber sold in real estate sales (351) — (351)
Capitalized real estate development investments (b) — 3,587 3,587
HBU properties acquired in merger with Pope Resources (c) 27,722 — 27,722
Capital expenditures (silviculture) 180 — 180
Intersegment transfers (3,979) — (3,979)
Total Balance at June 30, 2020 81,657 36,153 117,810
Less: Current portion (a) (361) (3,529) (3,890)
Non-current portion at June 30, 2020 $81,296 $32,624 $113,920

~~(a)The current portion of Higher and Better Use Timberlands and Real Estate Development Investments is recorded in Inventory. See~~ ~~Note 21 — Inventory~~ ~~for additional information.~~

~~(b)Capitalized real estate development investments include $0.2 million of capitalized interest.~~

~~(c)Based on preliminary estimates of fair value as of May 8, 2020.~~ See Note 2 - Merger with Pope Resources for additional information.

17. INVENTORY

As of March 31, 2021 and December 31, 2020, our inventory consisted entirely of finished goods, as follows:


	March 31, 2021	December 31, 2020
Finished goods inventory
Real estate inventory (a)	$17,503	$6,756
Log inventory	7,490	3,838
Total inventory	$24,993	$10,594

(a)Represents the cost of HBU real estate (including capitalized development investments) under contract to be sold. See Note 16 — Higher And Better Use Timberlands and Real Estate Development Investments for additional information.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

~~9. COMMITMENTS~~18. OTHER OPERATING INCOME (EXPENSE), NET

~~At June 30, 2020,~~Other operating income (expense), net consisted of the following:


	Three Months Ended March 31,
		2021	2020
Gain on foreign currency remeasurement, net of cash flow hedges		$2,429	$1,433
Gain on sale or disposal of property and equipment		90	3
Log trading marketing fees		6	47
Costs related to the merger with Pope Resources (a)		0	(2,487)
Equity income related to Bainbridge Landing LLC joint venture (b)		19	0
Miscellaneous expense, net		(96)	(107)
Total		$2,448	($1,111)

(a) Includes legal, accounting, due diligence, consulting and other costs related to the merger with Pope Resources. See Note 2 - Merger with Pope Resources and Note 24 - Charges for Integration and Restructuring for additional information.

(b) See Note 6 - Noncontrolling Interests and Note 7 - Variable Interest Entities for additional information on Ferncliff Investors.

19. EMPLOYEE BENEFIT PLANS

We have 1 qualified non-contributory defined benefit pension plan covering a portion of our employees and an unfunded plan that provides benefits in excess of amounts allowable under current tax law in the qualified plan. Both plans are closed to new participants. Effective December 31, 2016, we froze benefits for all employees participating in the pension plan. In lieu of the pension plan, we provide those employees with an enhanced 401(k) plan match. Employee benefit plan liabilities are calculated using actuarial estimates and management assumptions. These estimates are based on historical information, along with certain assumptions about future ~~minimum~~events. Changes in assumptions, as well as changes in actual experience, could cause the estimates to change.

We are not required to make mandatory 2021 pension contributions due to our plan’s improved funding status and have made 0 pension contribution payments ~~under non-cancellable commitments were as follows:~~during the three months ended March 31, 2021.

Environmental Remediation (a) Development Projects (b) Pension Contributions (c) Commitments (d) Total
Remaining 2020 $710 $4,206 $2,476 $7,880 $15,272
2021 2,387 160 681 14,193 17,421
2022 2,023 220 — 16,992 19,235
2023 2,012 232 — 17,719 19,963
2024 2,012 232 — 14,987 17,231
Thereafter 2,784 2,770 — 39,877 45,431
$11,928 $7,820 $3,157 $111,648 $134,553
The net pension and postretirement benefit (credits) costs that have been recorded are shown in the following table:


Components of Net Periodic Benefit (Credit) Cost	Income Statement Location	Pension		Postretirement
		Three Months Ended March 31,		Three Months Ended March 31,
		2021	2020	2021	2020
Service cost	Selling and general expenses	0	0	$2	$2
Interest cost	Interest and other miscellaneous expense, net	557	677	11	13
Expected return on plan assets (a)	Interest and other miscellaneous expense, net	(936)	(876)	0	0

Amortization of losses	Interest and other miscellaneous expense, net	288	215	5	2

Net periodic benefit (credit) cost		($91)	$16	$18	$17

(a)~~Environmental remediation represents our estimate~~The weighted-average expected long-term rate of ~~potential liability associated with environmental contamination~~return on plan assets used in ~~Port Gamble, Washington.~~computing 2021 net periodic benefit cost for pension benefits is 5.7%.

~~(b)Primarily consisting of payments expected to be made on our Wildlight and Richmond Hill development projects.~~

~~(c)Pension contribution requirements are based on actuarially determined estimates and IRS minimum funding requirements.~~

~~(d)Commitments include payments expected to be made on foreign exchange contracts, timberland deeds and other purchase obligations.~~

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

~~10.~~20. INCOME TAXES

Rayonier ~~Inc.~~ is a ~~real estate investment trust (a “REIT”)~~REIT under the Internal Revenue Code and therefore generally does not pay U.S. federal or state income tax. ~~Through~~As of March 31, 2021, Rayonier owns a ~~series of transactions~~97.0% interest in ~~connection with~~ the ~~Mergers, the Company transferred all of its assets to the Operating Partnership on May 8, 2020. As a result of these transactions, the Company owns approximately 96.8% of the~~ Operating Partnership and conducts substantially all of its ~~business~~timberland operations through the Operating Partnership. The taxable income or loss generated by the Operating Partnership is passed through and reported to its unit holders (including the Company) on a Schedule K-1 for inclusion in each unitholder’s income tax return. Certain operations, including log trading and certain real estate activities, such as the entitlement, development and sale of HBU properties, are conducted through ~~taxable REIT subsidiary (“TRS”) entities.~~our TRS. The TRS ~~entities~~subsidiaries are subject to United States federal and state corporate income tax. The New Zealand timber operations are conducted by the New Zealand subsidiary, which is subject to corporate-level tax at 28% in New Zealand and is treated as a partnership for USU.S. income tax purposes.

~~PROVISION FOR INCOME TAXES~~FOREIGN CURRENCY EXCHANGE AND OPTION CONTRACTS

~~Our tax expense is principally related to~~The functional currency of Rayonier New Zealand ~~corporate-level tax on~~Limited, and the New Zealand subsidiary ~~income.~~ is the New Zealand dollar. The New Zealand subsidiary is exposed to foreign currency risk on export sales and ocean freight payments which are mainly denominated in U.S. dollars. The New Zealand subsidiary typically hedges 50% to 90% of its estimated foreign currency exposure with respect to the following twelve months forecasted sales and purchases, less distributions, and up to 75% of the forward 12 to 18 months. Additionally, the New Zealand subsidiary will occasionally hedge up to 50% of its estimated foreign currency exposure with respect to the following 18 to 48 months forecasted sales and purchases, less distributions, when the New Zealand dollar is at a cyclical low versus the U.S. dollar. Foreign currency exposure from the New Zealand subsidiary’s trading operations is typically hedged based on the following three months forecasted sales and purchases. As of March 31, 2021, foreign currency exchange contracts and foreign currency option contracts had maturity dates through September 2022 and August 2021, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

INTEREST RATE SWAPS

The following table contains information on the ~~income~~outstanding interest rate swaps as of March 31, 2021:


Outstanding Interest Rate Swaps (a)
Date Entered Into	Term	Notional Amount	Related Debt Facility	Fixed Rate of Swap (b)		Bank Margin on Debt		Total Effective Interest Rate (c)
August 2015	9 years	$170,000	Term Credit Agreement	2.20	%	1.60	%	3.80	%
August 2015	9 years	180,000	Term Credit Agreement	2.35	%	1.60	%	3.95	%
April 2016	10 years	100,000	Incremental Term Loan	1.60	%	1.90	%	3.50	%
April 2016	10 years	100,000	Incremental Term Loan	1.60	%	1.90	%	3.50	%
July 2016	10 years	100,000	Incremental Term Loan	1.26	%	1.90	%	3.16	%
June 2020	10 years	250,000	2020 Incremental Term Loan	1.10	%	1.85	%	2.95	%

(a) All interest rate swaps have been designated as interest rate cash flow hedges and qualify for hedge accounting.

(b) The interest rate swap entered in June 2020, was an off-market derivative, meaning it contained an embedded financing element, which the counterparties recovered through an incremental charge in the fixed rate over what would have been charged for an at-market swap.

TREASURY LOCKS

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

INTEREST RATE SWAP LOCKS

FORWARD-STARTING INTEREST RATE SWAPS

The following table contains information on the outstanding forward-starting interest rate swaps as of March 31, 2021:

Outstanding Forward-Starting Interest Rate Swaps (a)

Date Entered Into

Term

Notional Amount

Fixed Rate of Swap

Related Debt Facility

Forward Date

Maximum Period Ending for Forecasted Issuance Date

February 2020

10 years

$325,000

1.40

Anticipated refinancing of Senior Notes due 2022

April 2022

March 2020

4 years

100,000

0.88

Term Credit Agreement

August 2024

N/A

May 2020

4 years

50,000

0.74

Term Credit Agreement

August 2024

N/A

(a) All forward-starting interest rate swaps have been designated as interest rate cash flow hedges and qualify for hedge accounting.

CARBON OPTIONS

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

The following tables demonstrate the impact, gross of tax, ~~expense recognized in~~of our derivatives on the Consolidated Statements of Income and Comprehensive ~~Income:~~Income for the three months ended March 31, 2021 and 2020:

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Income tax expense ($2,990) ($3,608) ($6,696) ($7,958)

~~ANNUAL EFFECTIVE TAX RATE~~

~~The Company’s effective~~


		Three Months Ended March 31,
	Income Statement Location	2021	2020
Derivatives designated as cash flow hedges:
Foreign currency exchange contracts	Other comprehensive income (loss)	($2,852)	($5,480)
Foreign currency option contracts	Other comprehensive income (loss)	(929)	(1,149)



Interest rate swaps	Other comprehensive income (loss)	28,512	(39,450)
	Interest expense	3,438	452
Treasury locks	Other comprehensive income (loss)	0	(20,846)
	Interest expense	521	0
Interest rate swap locks	Other comprehensive income (loss)	0	854
	Interest expense	35	0
Forward-starting interest rate swaps	Other comprehensive income (loss)	31,219	(19,710)





Derivatives not designated as hedging instruments:




Carbon option contracts	Interest and other miscellaneous income, net	0	549

During the next 12 months, the amount of the March 31, 2021 AOCI balance, net of tax, ~~rate after discrete items~~expected to be reclassified into earnings as a result of the maturation of our derivative instruments is ~~below the 21.0% U.S. statutory rate due to tax benefits associated with being~~ a ~~REIT.~~ gain of approximately $2.6 million.

The following table contains the ~~Company’s annualized effective tax rate after discrete items:~~notional amounts of the derivative financial instruments recorded in the Consolidated Balance Sheets:

Six Months Ended
June 30,
2020 2019
Annualized effective tax rate after discrete items 19.8 % 15.5 %


	Notional Amount
	March 31, 2021	December 31, 2020
Derivatives designated as cash flow hedges:
Foreign currency exchange contracts	$64,000	$49,000
Foreign currency option contracts	16,000	28,000
Interest rate swaps	900,000	900,000

Forward-starting interest rate swaps	475,000	475,000

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

The following table contains the fair values of the derivative financial instruments recorded in the Consolidated Balance Sheets:


	Location on Balance Sheet	Fair Value Assets / (Liabilities) (a)
		March 31, 2021	December 31, 2020
Derivatives designated as cash flow hedges:
Foreign currency exchange contracts	Other current assets	$3,477	$4,968
	Other assets	160	1,050
	Other current liabilities	(454)	0
	Other non-current liabilities	(17)	0
Foreign currency option contracts	Other current assets	592	1,526

	Other current liabilities	(7)	(11)

Interest rate swaps	Other assets	9,945	0
	Other non-current liabilities	(29,301)	(51,580)






Forward-starting interest rate swaps	Other assets	18,690	513
	Other non-current liabilities	0	(13,042)







Total derivative contracts:
Other current assets		$4,069	$6,494
Other assets		28,795	1,563
Total derivative assets		$32,864	$8,057

Other current liabilities		(461)	(11)
Other non-current liabilities		(29,318)	(64,622)
Total derivative liabilities		($29,779)	($64,633)

(a) See Note 11 — Fair Value Measurements for further information on the fair value of our derivatives including their classification within the fair value hierarchy.

OFFSETTING DERIVATIVES

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(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

11. FAIR VALUE MEASUREMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

A three-level hierarchy that prioritizes the inputs used to measure fair value was established in the Accounting Standards Codification as follows:

Level 1— Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than quoted prices included in Level 1.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.


	March 31, 2021			December 31, 2020
Asset (Liability) (a)	Carrying Amount	Fair Value		Carrying Amount	Fair Value
		Level 1	Level 2		Level 1	Level 2
Cash and cash equivalents, excluding Timber Funds	$77,946	$77,946	0	$80,454	$80,454	0
Cash and cash equivalents, Timber Funds	4,674	4,674	0	4,053	4,053	0
Restricted cash (b)	475	475	0	2,975	2,975	0


Long-term debt, excluding Timber Funds (c)	(1,299,433)	0	(1,304,371)	(1,300,336)	0	(1,313,631)
Long-term debt, Timber Funds (c)	(59,967)	0	(60,207)	(60,179)	0	(60,474)
Interest rate swaps (d)	(19,356)	0	(19,356)	(51,580)	0	(51,580)

Forward-starting interest rate swaps (d)	18,690	0	18,690	(12,529)	0	(12,529)
Foreign currency exchange contracts (d)	3,166	0	3,166	6,018	0	6,018
Foreign currency option contracts (d)	585	0	585	1,515	0	1,515


Noncontrolling Interests in the Operating Partnership (e)	137,990	137,990	0	130,121	130,121	0

(a)We did not have Level 3 assets or liabilities at March 31, 2021 and December 31, 2020.

(b)Restricted cash represents cash held in escrow. See Note 22 — Restricted Cash for additional information.

(c)The carrying amount of long-term debt is presented net of capitalized debt costs on non-revolving debt. See Note 9 — Debt for additional information.

(d)See Note 10 — Derivative Financial Instruments and Hedging Activities for information regarding the Consolidated Balance Sheets classification of our derivative financial instruments.

We use the following methods and assumptions in estimating the fair value of our financial instruments:

Cash and cash equivalents and Restricted cash — The carrying amount is equal to fair market value.

Interest rate swap agreements— The fair value of interest rate contracts is determined by discounting the expected future cash flows, for each instrument, at prevailing interest rates.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

Foreign currency option contracts— The fair value of foreign currency option contracts is based on a mark-to-market calculation using the Black-Scholes option pricing model.

12. COMMITMENTS

At March 31, 2021, the future minimum payments under non-cancellable commitments were as follows:


	Environmental Remediation (a)	Development Projects (b)	Commitments (c)	Total
Remaining 2021	$814	$17,440	$11,445	$29,699
2022	2,097	3,182	17,901	23,180
2023	1,853	267	18,512	20,632
2024	1,853	267	15,671	17,791
2025	2,338	267	10,625	13,230
Thereafter	2,575	3,899	29,987	36,461
	$11,530	$25,322	$104,141	$140,993

(b)Primarily consisting of payments expected to be made on our Wildlight and Richmond Hill development projects.

(c)Commitments include payments expected to be made on financial instruments (foreign exchange contracts, interest rate swaps and forward-starting interest rate swaps) and other purchase obligations.

13. CONTINGENCIES

~~12.~~14. ENVIRONMENTAL ~~REMEDIATION~~AND NATURAL RESOURCE DAMAGE LIABILITIES

Various federal and state environmental laws in the states in which we operate place cleanup or restoration liability ~~for environmental contamination~~ on the current and former owners of affected real ~~estate on which contamination is discovered.~~estate. These laws are often a source of “strict liability,” meaning that an owner or operator need not necessarily have caused, or even been aware of, the release of ~~hazardous substances.~~contaminated materials. Similarly, there are certain environmental laws that allow state, federal, and tribal trustees (collectively, the “Trustees”) to bring suit against property owners to recover damage for injuries to natural resources. Like the liability that attaches to current property owners in the cleanup context, liability for natural resource damages (“NRD”) can attach to a property simply because an injury to natural resources resulted from releases of ~~hazardous substances~~contaminated materials on or from the owner’s property, regardless of culpability for the release. For additional information, see Note 13 - Environmental and Natural Resource Damage Liabilities in the 2020 Form 10-K.

~~In connection~~

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

Changes in environmental and NRD liabilities from December 31, 2020 to ~~the merger~~March 31, 2021 are shown below:


			Port Gamble, WA






Non-current portion at December 31, 2020			$10,615
Plus: Current portion			1,026
Total Balance at December 31, 2020			11,641
Expenditures			(111)

Total Balance at March 31, 2021			11,530
Less: Current portion			(930)
Non-current portion at March 31, 2021			$10,600

These estimates were based on assumptions that we believe to be reasonable; however, actual results may differ from these estimates. See Note 2 - Merger with Pope Resources ~~we assumed ownership~~ for information regarding our preliminary estimates of certain real estate in Port Gamble, Washington where hazardous substances had previously been discovered, requiring environmental remediation under these laws. Prior to the merger, Pope Resources had completed required remediation on the Port Gamble Bay, performed remedial investigation and drafted a cleanup action plan for the Port Gamble millsite, and started discussions relating to alleged natural resource damages.

~~As of June 30, 2020, we have accrued $11.9 million for environmental remediation, which represents our current estimate of the remaining cleanup cost and most likely outcome to various contingencies.~~fair value. It is expected that the ~~millsite~~upland mill site cleanup and ~~natural resource damages (NRD)~~NRD restoration will occur over the next two to three years, while the monitoring of ~~the~~ Port Gamble Bay, ~~millsite~~mill site and landfills ~~containing dredged and excavated contaminated sediments~~ will continue for an additional 10 to 15 years. ~~The~~ NRD costs ~~might~~are subject to change as the scope of the restoration projects become more clearly defined. It is reasonably possible that these components of the liability may increase as the project progresses. Management continues to monitor the Port Gamble cleanup process and will make adjustments as needed. Should any future circumstances result in a change to the estimated cost of the project, we will record an appropriate adjustment to the liability in the period it becomes known and when we can reasonably estimate the amount. For further information on the timing and amount of future payments related to our environmental remediation liabilities, see Note 912 - Commitments.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Dollar amounts in thousands unless otherwise stated)~~

~~13.~~15. GUARANTEES

We provide financial guarantees as required by creditors, insurance programs, and various governmental agencies.

As of ~~June 30, 2020,~~March 31, 2021, the following financial guarantees were outstanding:

Financial Commitments (a)

Maximum Potential
Payment

Standby letters of credit

$~~985~~885

Surety bonds (b)

~~10,011~~9,340

Total financial commitments

$~~10,996~~10,225

(a)We have not recorded any liabilities for these financial commitments in ~~the~~our Consolidated Balance Sheets. The guarantees are not subject to measurement, as the guarantees are dependent on our own performance.

(b)Surety bonds are issued primarily to secure performance obligations related to various operational activities, to provide collateral for our Wildlight development project in Nassau County, Florida and in connection with pending and completed sales from the Harbor Hill project in Gig Harbor, Washington. These surety bonds expire at various dates during ~~2020,~~ 2021, 2022, 2023 and ~~2022~~2024 and are expected to be renewed as required.

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(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

16. HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS

~~14. EARNINGS PER SHARE AND PER UNIT~~We continuously assess potential alternative uses of our timberlands, as some properties may become more valuable for development, residential, recreation or other purposes. We periodically transfer, via a sale or contribution from the real estate investment trust (“REIT”) entities to taxable REIT subsidiaries (“TRS”), higher and better use (“HBU”) timberlands to enable land-use entitlement, development or marketing activities. We also acquire HBU properties in connection with timberland acquisitions. These properties are managed as timberlands until sold or developed. While the majority of HBU sales involve rural and recreational land, we also selectively pursue various land-use entitlements on certain properties for residential, commercial and industrial development in order to enhance the long-term value of such properties. For selected development properties, we also invest in targeted infrastructure improvements, such as roadways and utilities, to accelerate the marketability and improve the value of such properties.

~~The following table provides details of the calculations of basic~~Changes in higher and ~~diluted earnings per common share of the Company:~~better use timberlands and real estate development investments from December 31, 2020 to March 31, 2021 are shown below:

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Earnings per common share - basic
Numerator:
Net Income $455 $20,920 $26,876 $48,713
Less: Net income attributable to noncontrolling interest in the Operating Partnership (219) — (219) —
Less: Net loss (income) attributable to noncontrolling interests in consolidated affiliates 1,499 (2,168) 931 (5,167)
Net income attributable to Rayonier Inc. $1,735 $18,752 $27,588 $43,546
Denominator:
Denominator for basic earnings per common share - weighted average shares 133,318,209 129,380,282 131,227,852 129,277,490
Basic earnings per common share attributable
to Rayonier Inc.: $0.01 $0.14 $0.21 $0.34
Earnings per common share - diluted
Numerator:
Net Income $455 $20,920 $26,876 $48,713
Less: Net loss (income) attributable to noncontrolling interest in consolidated affiliates 1,499 (2,168) 931 (5,167)
Net income attributable to Rayonier Inc., before net income attributable to noncontrolling interests in the Operating Partnership $1,954 $18,752 $27,807 $43,546
Denominator:
Denominator for basic earnings per common
share - weighted average shares 133,318,209 129,380,282 131,227,852 129,277,490
Add: Dilutive effect of:
Stock options — 13,463 537 16,580
Performance shares, restricted shares and restricted stock units 49,299 250,170 129,390 403,915
Noncontrolling interests in common units 2,589,518 — 1,294,759 —
Denominator for diluted earnings per common share - adjusted weighted average shares 135,957,026 129,643,915 132,652,538 129,697,985
Diluted earnings per common share attributable to Rayonier Inc.: $0.01 $0.14 $0.21 $0.34


	Higher and Better Use Timberlands and Real Estate Development Investments
	Land and Timber	Development Investments	Total
Non-current portion at December 31, 2020	$79,901	$28,617	$108,518
Plus: Current portion (a)	212	6,544	6,756
Total Balance at December 31, 2020	80,113	35,161	115,274
Non-cash cost of land and improved development	(549)	(232)	(781)
Amortization of parcel real estate development investments	—	(139)	(139)
Timber depletion from harvesting activities and basis of timber sold in real estate sales	(243)	0	(243)
Capitalized real estate development investments (b)	0	5,291	5,291
Capital expenditures (silviculture)	96	0	96

Intersegment transfers	1,082	0	1,082
Purchase price allocation adjustment (c)	8,238	0	8,238

Total Balance at March 31, 2021	88,737	40,081	128,818
Less: Current portion (a)	(811)	(16,692)	(17,503)
Non-current portion at March 31, 2021	$87,926	$23,389	$111,315

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Anti-dilutive shares excluded from the computations of diluted earnings per share:
Stock options, performance shares, restricted shares and restricted stock units 635,779 451,258 521,053 444,765
Total 635,779 451,258 521,053 444,765

(a)The current portion of Higher and Better Use Timberlands and Real Estate Development Investments is recorded in Inventory. See ~~Table of Contents~~Note 17 — Inventory for additional information.

~~RAYONIER INC. AND SUBSIDIARIES~~(b)Capitalized real estate development investments include $0.1 million of capitalized interest and $2.3 million of parcel real estate development investments. Parcel real estate development investments represent investments made for specific lots and/or commercial parcels that are currently under contract or expected to be ready for market within a year.

~~RAYONIER, L.P. AND SUBSIDIARIES~~(c)Reflects measurement period adjustments on HBU properties acquired in the merger with Pope Resources. The estimated fair value of HBU properties acquired in the merger is approximately $34.7 million. This includes development properties in the town of Port Gamble, Washington, development projects in Gig Harbor, Kingston, and Bremerton, Washington and various other assets. See Note 2 - Merger with Pope Resources for additional information.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~17. INVENTORY

~~(Dollar amounts in thousands unless otherwise stated)~~As of March 31, 2021 and December 31, 2020, our inventory consisted entirely of finished goods, as follows:


	March 31, 2021	December 31, 2020
Finished goods inventory
Real estate inventory (a)	$17,503	$6,756
Log inventory	7,490	3,838
Total inventory	$24,993	$10,594

(a)

~~The following table provides details~~Represents the cost of ~~the calculations of basic~~HBU real estate (including capitalized development investments) under contract to be sold. See Note 16 — Higher And Better Use Timberlands and ~~diluted earnings per common unit of the Operating Partnership:~~

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Earnings per common unit - basic
Numerator:
Net Income $455 $20,920 $26,876 $48,713
Less: Net loss (income) attributable to noncontrolling interests in consolidated affiliates 1,499 (2,168) 931 (5,167)
Net income available to unitholders $1,954 $18,752 $27,807 $43,546
Denominator:
Denominator for basic earnings per common unit - weighted average units 135,907,727 129,380,282 132,522,611 129,277,490
Basic earnings per common unit attributable
to Rayonier, L.P.: $0.01 $0.14 $0.21 $0.34
Earnings per common unit - diluted
Numerator:
Net Income $455 $20,920 $26,876 $48,713
Less: Net loss (income) attributable to noncontrolling interests in consolidated affiliates 1,499 (2,168) 931 (5,167)
Net income available to unitholders $1,954 $18,752 $27,807 $43,546
Denominator:
Denominator for basic earnings per common
share - weighted average units 135,907,727 129,380,282 132,522,611 129,277,490
Add: Dilutive effect of unit equivalents:
Stock options — 13,463 537 16,580
Performance shares, restricted shares and restricted stock units 49,299 250,170 129,390 403,915
Denominator for diluted earnings per common unit - adjusted weighted average units 135,957,026 129,643,915 132,652,538 129,697,985
Diluted earnings per common share attributable to Rayonier, L.P..: $0.01 $0.14 $0.21 $0.34

Real Estate Development Investments
for additional information.

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Anti-dilutive unit equivalents excluded from the computations of diluted earnings per unit:
Stock options, performance shares, restricted shares and restricted stock units 635,779 451,258 521,053 444,765
Total 635,779 451,258 521,053 444,765

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(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

~~15. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES~~18. OTHER OPERATING INCOME (EXPENSE), NET

Other operating income (expense), net consisted of the following:


	Three Months Ended March 31,
		2021	2020
Gain on foreign currency remeasurement, net of cash flow hedges		$2,429	$1,433
Gain on sale or disposal of property and equipment		90	3
Log trading marketing fees		6	47
Costs related to the merger with Pope Resources (a)		0	(2,487)
Equity income related to Bainbridge Landing LLC joint venture (b)		19	0
Miscellaneous expense, net		(96)	(107)
Total		$2,448	($1,111)

(b) See Note 6 - Noncontrolling Interests and Note 7 - Variable Interest Entities for additional information on Ferncliff Investors.

19. EMPLOYEE BENEFIT PLANS

We have 1 qualified non-contributory defined benefit pension plan covering a portion of our employees and an unfunded plan that provides benefits in excess of amounts allowable under current tax law in the qualified plan. Both plans are closed to new participants. Effective December 31, 2016, we froze benefits for all employees participating in the pension plan. In lieu of the pension plan, we provide those employees with an enhanced 401(k) plan match. Employee benefit plan liabilities are calculated using actuarial estimates and management assumptions. These estimates are based on historical information, along with certain assumptions about future events. Changes in assumptions, as well as changes in actual experience, could cause the estimates to change.

We are ~~exposed~~not required to ~~market risk related~~make mandatory 2021 pension contributions due to ~~potential fluctuations in foreign currency exchange rates~~our plan’s improved funding status and ~~interest rates. We use derivative financial instruments to mitigate~~have made 0 pension contribution payments during the ~~financial impact of exposure to these risks.~~three months ended March 31, 2021.

~~Accounting for derivative financial instruments is governed by ASC Topic 815,~~ ~~Derivatives~~The net pension and ~~Hedging, (“ASC 815”). In accordance with ASC 815, we record our derivative instruments at fair value as either assets or liabilities~~postretirement benefit (credits) costs that have been recorded are shown in the ~~Consolidated Balance Sheets. Changes~~following table:


Components of Net Periodic Benefit (Credit) Cost	Income Statement Location	Pension		Postretirement
		Three Months Ended March 31,		Three Months Ended March 31,
		2021	2020	2021	2020
Service cost	Selling and general expenses	0	0	$2	$2
Interest cost	Interest and other miscellaneous expense, net	557	677	11	13
Expected return on plan assets (a)	Interest and other miscellaneous expense, net	(936)	(876)	0	0

Amortization of losses	Interest and other miscellaneous expense, net	288	215	5	2

Net periodic benefit (credit) cost		($91)	$16	$18	$17

(a)The weighted-average expected long-term rate of return on plan assets used in computing 2021 net periodic benefit cost for pension benefits is 5.7%.

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(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

20. INCOME TAXES

Rayonier is a REIT under the Internal Revenue Code and therefore generally does not pay U.S. federal or state income tax. As of March 31, 2021, Rayonier owns a97.0% interest in the ~~instruments’ fair value~~Operating Partnership and conducts substantially all of its timberland operations through the Operating Partnership. The taxable income or loss generated by the Operating Partnership is passed through and reported to its unit holders (including the Company) on a Schedule K-1 for inclusion in each unitholder’s income tax return. Certain operations, including log trading and certain real estate activities, such as the entitlement, development and sale of HBU properties, are ~~accounted for based on their intended use. Gains~~conducted through our TRS. The TRS subsidiaries are subject to United States federal and ~~losses on derivatives that~~state corporate income tax. The New Zealand timber operations are ~~designated~~conducted by the New Zealand subsidiary, which is subject to corporate-level tax at 28% in New Zealand and ~~qualify for cash flow hedge accounting are recorded~~is treated as a ~~component of accumulated other comprehensive loss (“AOCI”) and reclassified into earnings when the hedged transaction materializes. Gains and losses on derivatives that are designated and qualify~~partnership for net investment hedge accounting are recorded as a component of AOCI and will not be reclassified into earnings until the investment is partially or completely liquidated. The changes in the fair value of derivatives not designated as hedging instruments and those which are no longer effective as hedging instruments, are recognized immediately in earnings.U.S. income tax purposes.

FOREIGN CURRENCY EXCHANGE AND OPTION CONTRACTS

The functional currency of Rayonier New Zealand Limited, and the New Zealand subsidiary is the New Zealand dollar. The New Zealand subsidiary is exposed to foreign currency risk on export sales and ocean freight payments which are mainly denominated in U.S. dollars. The New Zealand subsidiary typically hedges 50% to 90% of its estimated foreign currency exposure with respect to the following twelve months forecasted sales and purchases, less distributions, and up to 75% of the forward 12 to 18 months. Additionally, the New Zealand subsidiary will occasionally hedge up to 50% of its estimated foreign currency exposure with respect to the following 18 to 48 months forecasted sales and purchases, less distributions, when the New Zealand dollar is at a cyclical low versus the U.S. dollar. Foreign currency exposure from the New Zealand subsidiary’s trading operations is typically hedged based on the following three months forecasted sales and purchases. As of ~~June 30, 2020,~~March 31, 2021, foreign currency exchange contracts and foreign currency option contracts had maturity dates through ~~April~~September 2022 and August 2021, respectively.

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(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

INTEREST RATE SWAPS

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~~RAYONIER INC. AND SUBSIDIARIES~~

~~RAYONIER, L.P. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Dollar amounts in thousands unless otherwise stated)~~

The following table contains information on the outstanding interest rate swaps as of ~~June 30, 2020:~~March 31, 2021:


Outstanding Interest Rate Swaps (a)
Date Entered Into	Term	Notional Amount	Related Debt Facility	Fixed Rate of Swap (b)		Bank Margin on Debt		Total Effective Interest Rate (c)
August 2015	9 years	$170,000	Term Credit Agreement	2.20	%	1.60	%	3.80	%
August 2015	9 years	180,000	Term Credit Agreement	2.35	%	1.60	%	3.95	%
April 2016	10 years	100,000	Incremental Term Loan	1.60	%	1.90	%	3.50	%
April 2016	10 years	100,000	Incremental Term Loan	1.60	%	1.90	%	3.50	%
July 2016	10 years	100,000	Incremental Term Loan	1.26	%	1.90	%	3.16	%
June 2020	10 years	250,000	2020 Incremental Term Loan	1.10	%	1.85	%	2.95	%

(a) All interest rate swaps have been designated as interest rate cash flow hedges and qualify for hedge accounting.

TREASURY LOCKS

During the first quarter of 2020, we entered into 3 treasury lock agreements, which were designated and qualified as cash flow hedges. ~~These derivative instruments hedged the impact of changes in the benchmark interest rate to future interest payments associated with anticipated debt issuances.~~ Prior to expiration, we de-designated and settled the treasury locks by converting them into interest rate swap lock agreements (discussed below). To the extent we de-designate or terminate a cash flow hedging relationship and the associated hedged item continues to exist, any unrealized gain or loss of the cash flow hedge at the time of de-designation remains in accumulated other comprehensive loss and is amortized using the straight-line method through interest expense over the remaining life of the hedged item. As of March 31, 2021, there was ~~Amounts~~$18.8 million recorded in accumulated other comprehensive loss in connection with the settled treasury locks ~~were ($20.8) million~~ which will be reclassified to earnings through interest expense over the life of the anticipated issued debt.

~~The following table contains~~ For additional information onregarding the expired treasury lock agreements, ~~entered into during the six months ended June 30, 2020:~~

Converted Treasury Rate Locks (a)
Date Entered Into Term Notional Amount Rate Related Debt Facility (b) Expiration Date
January 2020 10 years $100,000 1.53% 2020 Incremental Term Loan Facility March 30, 2020
January 2020 10 years 100,000 1.53% 2020 Incremental Term Loan Facility March 31, 2020
February 2020 10 years 50,000 1.35% 2020 Incremental Term Loan Facility March 31, 2020
see Note 16 - Derivative Instruments and Hedging Activities in our 2020 Form 10-K.

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~~(a) At inception, all treasury locks were designated as interest rate cash flow hedges and qualified for hedge accounting.~~RAYONIER INC. AND SUBSIDIARIES

RAYONIER, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

(b) On April 16, 2020, we entered into a Third Amendment and Incremental Term Loan Agreement which provided for a five-year $250 million senior unsecured incremental term loan facility (the “2020 Incremental Term Loan Facility”). See ~~Note 7 — Debt~~ ~~for more information. We anticipate extending the term of the 2020 Incremental Term Loan facility for an additional five-year term upon maturity.~~

INTEREST RATE SWAP LOCKS

Upon de-designation, we converted the above treasury lock agreements to interest rate swap lock agreements, ~~to hedge the risk of changes in the interest payments attributable to changes in the benchmark LIBOR interest rate associated with anticipated issuances of debt. The interest rate swap locks~~which were designated and qualified as cash flow hedges.

Prior to expiration, we de-designated and partially cash settled $11.1 million of the interest rate swap locks and converted them into interest rate swap agreements. To the extent we de-designate or terminate a cash flow hedging relationship and the associated hedged item continues to exist, any unrealized gain or loss of the cash flow hedge

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~~RAYONIER, L.P. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Dollar amounts in thousands unless otherwise stated)~~

at the time of de-designation remains in accumulated other comprehensive loss and is amortized using the straight-line method through interest expense over the remaining life of the hedged item. ~~Incremental a~~As of March 31, 2021, there was ~~mounts~~$1.3 million recorded in accumulated other comprehensive loss in connection with ~~the~~ settled interest rate swap locks ~~were ($1.4) million,~~ which will be reclassified to earnings through interest expense over the life of the anticipated issued debt.

~~The following table contains~~ For additional information onregarding the ~~terminated~~expired interest rate swap lock agreements, ~~as of June 30, 2020:~~

Converted Interest Rate Swap Locks (a)
Date Entered Into Term Notional Amount Fixed Rate of Swap Lock (b) Related Debt Facility (c) Termination Date
March 2020 10 years $100,000 1.56% 2020 Incremental Term Loan Facility June 30, 2020
March 2020 10 years 100,000 1.59% 2020 Incremental Term Loan Facility June 30, 2020
March 2020 10 years 50,000 1.41% 2020 Incremental Term Loan Facility June 30, 2020

see

~~(a) All interest rate swap locks have been designated as interest rate cash flow hedges~~Note 16 - Derivative Instruments and ~~qualify for hedge accounting.~~

~~(b) These interest rate swap locks were off-market derivatives, meaning they contained an embedded financing element, which the counterparties recovered through an incremental charge~~Hedging Activities in ~~the fixed rate over what would have been charged for an at-market swap lock.~~

~~(c) On April 16,~~our 2020 we entered into a Third Amendment and Incremental Term Loan Agreement which provided for a five-year $250 million senior unsecured incremental term loan facility (the “2020 Incremental Term Loan Facility”). See ~~Note 7 — Debt~~ ~~for information. We anticipate extending the term of the 2020 Incremental Term Loan facility for an additional five-year term upon maturity.~~Form 10-K.

FORWARD-STARTING INTEREST RATE SWAPS

The following table contains information on the outstanding forward-starting interest rate swaps as of ~~June 30, 2020:~~March 31, 2021:

Outstanding Forward-Starting Interest Rate Swaps (a)

Date Entered Into

Term

Notional Amount

Fixed Rate of Swap

Related Debt Facility

Forward Date

Maximum Period Ending for Forecasted Issuance Date

February 2020

10 years

$325,000

1.40

Anticipated refinancing of Senior Notes due 2022

April 2022

March 2020

4 years

100,000

0.88

Term Credit Agreement

August 2024

N/A

May 2020

4 years

50,000

0.74

Term Credit Agreement

August 2024

N/A

(a) All forward-starting interest rate swaps have been designated as interest rate cash flow hedges and qualify for hedge accounting.

CARBON OPTIONS

The New Zealand subsidiary enters into carbon options from time to time to sell carbon assets at certain prices. Changes in fair value of the carbon option contracts are recorded in “Interest and other miscellaneous ~~income,~~expense, net” as the contracts do not qualify for hedge accounting treatment. As of ~~June 30, 2020,~~March 31, 2021, all existing carbon option contracts have expired.

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(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

The following tables demonstrate the impact, gross of tax, of ~~the Company’s~~our derivatives on the Consolidated Statements of Income and Comprehensive Income for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:

Three Months Ended
June 30,
Income Statement Location 2020 2019
Derivatives designated as cash flow hedges:
Foreign currency exchange contracts Other comprehensive income (loss) $5,340 ($219)
Foreign currency option contracts Other comprehensive income (loss) 877 (107)
Interest rate products Other comprehensive income (loss) (14,469) (18,371)
Interest Expense 2,716 (913)
Derivatives not designated as hedging instruments:
Foreign currency exchange contracts Interest and other miscellaneous income, net — 152
Carbon option contracts Interest and other miscellaneous income, net 14 12


			Six Months Ended June 30,						Three Months Ended March 31,
		Income Statement Location	2020	2019		Income Statement Location		2021	2020
Derivatives designated as cash flow hedges:	Derivatives designated as cash flow hedges:				Derivatives designated as cash flow hedges:
Foreign currency exchange contracts	Foreign currency exchange contracts	Other comprehensive income (loss)	($140)	$900	Foreign currency exchange contracts	Other comprehensive income (loss)		($2,852)	($5,480)
Foreign currency option contracts	Foreign currency option contracts	Other comprehensive income (loss)	(273)	(30)	Foreign currency option contracts	Other comprehensive income (loss)		(929)	(1,149)
Interest rate products		Other comprehensive income (loss)	(93,621)	(28,966)
		Interest Expense	3,168	(1,866)

Interest rate swaps					Interest rate swaps	Other comprehensive income (loss)		28,512	(39,450)
						Interest expense		3,438	452
Treasury locks					Treasury locks	Other comprehensive income (loss)		0	(20,846)
						Interest expense		521	0
Interest rate swap locks					Interest rate swap locks	Other comprehensive income (loss)		0	854
						Interest expense		35	0

Forward-starting interest rate swaps					Forward-starting interest rate swaps	Other comprehensive income (loss)		31,219	(19,710)

Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:						Derivatives not designated as hedging instruments:

Foreign currency exchange contracts		Interest and other miscellaneous income, net	—	135

Carbon option contracts	Carbon option contracts	Interest and other miscellaneous income, net	563	415	Carbon option contracts	Interest and other miscellaneous income, net		0	549

During the next 12 months, the amount of the ~~June 30, 2020~~March 31, 2021 AOCI balance, net of tax, expected to be reclassified into earnings as a result of the maturation of ~~the Company’s~~our derivative instruments is a ~~loss~~gain of ~~approximately $0.5~~approximately $2.6 million.

The following table contains the notional amounts of the derivative financial instruments recorded in the Consolidated Balance Sheets:


		Notional Amount				Notional Amount
		June 30, 2020	December 31, 2019		March 31, 2021	December 31, 2020
Derivatives designated as cash flow hedges:	Derivatives designated as cash flow hedges:			Derivatives designated as cash flow hedges:
Foreign currency exchange contracts	Foreign currency exchange contracts	$61,500	$56,350	Foreign currency exchange contracts	$64,000	$49,000
Foreign currency option contracts	Foreign currency option contracts	36,000	22,000	Foreign currency option contracts	16,000	28,000
Interest rate swaps	Interest rate swaps	900,000	650,000	Interest rate swaps	900,000	900,000

Forward-starting interest rate swaps	Forward-starting interest rate swaps	475,000	—	Forward-starting interest rate swaps	475,000	475,000

Derivative not designated as a hedging instrument:

Carbon options (a)		—	9,592

~~(a) Notional amount for carbon options is calculated as the number of units outstanding multiplied by the spot price as of June 30, 2020.~~

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

The following table contains the fair values of the derivative financial instruments recorded in the Consolidated Balance Sheets:


		Location on Balance Sheet	Fair Value Assets / (Liabilities) (a)					Location on Balance Sheet	Fair Value Assets / (Liabilities) (a)
			June 30, 2020	December 31, 2019				March 31, 2021	December 31, 2020
Derivatives designated as cash flow hedges:	Derivatives designated as cash flow hedges:						Derivatives designated as cash flow hedges:
Foreign currency exchange contracts	Foreign currency exchange contracts	Other current assets	$310	$424	Foreign currency exchange contracts	Other current assets		$3,477	$4,968
		Other assets	1,177	390		Other assets		160	1,050
		Other current liabilities	(968)	(172)		Other current liabilities		(454)	0
		Other non-current liabilities	(17)	—		Other non-current liabilities		(17)	0
Foreign currency option contracts	Foreign currency option contracts	Other current assets	275	151	Foreign currency option contracts	Other current assets		592	1,526
		Other assets	172	209
		Other current liabilities	(305)	(27)		Other current liabilities		(7)	(11)
		Other non-current liabilities	(112)	(30)
Interest rate swaps	Interest rate swaps	Other assets	—	2,614	Interest rate swaps	Other assets		9,945	0
		Other non-current liabilities	(65,381)	(11,068)		Other non-current liabilities		(29,301)	(51,580)

Forward-starting interest rate swaps	Forward-starting interest rate swaps	Other non-current liabilities	(22,832)	—	Forward-starting interest rate swaps	Other assets		18,690	513
						Other non-current liabilities		0	(13,042)
Derivative not designated as a hedging instrument:

Carbon options		Other current liabilities	—	(607)

Total derivative contracts:	Total derivative contracts:				Total derivative contracts:
Other current assets	Other current assets		$585	$575	Other current assets			$4,069	$6,494
Other assets	Other assets		1,349	3,213	Other assets			28,795	1,563
Total derivative assets	Total derivative assets		$1,934	$3,788	Total derivative assets			$32,864	$8,057

Other current liabilities	Other current liabilities		(1,273)	(806)	Other current liabilities			(461)	(11)
Other non-current liabilities	Other non-current liabilities		(88,342)	(11,098)	Other non-current liabilities			(29,318)	(64,622)
Total derivative liabilities	Total derivative liabilities		($89,615)	($11,904)	Total derivative liabilities			($29,779)	($64,633)

(a) See Note 1611 — Fair Value Measurements for further information on the fair value of our derivatives including their classification within the fair value hierarchy.

OFFSETTING DERIVATIVES

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

~~16.~~11. FAIR VALUE MEASUREMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

A three-level hierarchy that prioritizes the inputs used to measure fair value was established in the Accounting Standards Codification as follows:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices included in Level 1.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table presents the carrying amount and estimated fair values of our financial instruments as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, using market information and what we believe to be appropriate valuation methodologies under GAAP:


		June 30, 2020							December 31, 2019									March 31, 2021			December 31, 2020
Asset (Liability) (a)	Asset (Liability) (a)	Carrying Amount	Fair Value					Carrying Amount	Fair Value						Asset (Liability) (a)	Carrying Amount	Fair Value		Carrying Amount	Fair Value
					Level 1		Level 2				Level 1		Level 2				Level 1	Level 2		Level 1	Level 2
Cash and cash equivalents, excluding Timber Funds	Cash and cash equivalents, excluding Timber Funds	$87,813	$87,813	—		$68,735		$68,735	—	Cash and cash equivalents, excluding Timber Funds		$77,946		$77,946		0	$80,454	$80,454	0
Cash and cash equivalents, Timber Funds	Cash and cash equivalents, Timber Funds	6,973	6,973	—		—		—	—	Cash and cash equivalents, Timber Funds		4,674		4,674		0	4,053	4,053	0
Restricted cash (b)	Restricted cash (b)	475	475	—		1,233		1,233	—	Restricted cash (b)		475		475		0	2,975	2,975	0
Current maturities of long-term debt, excluding Timber Funds		—	—	—		(82,000)		—	(82,000)
Current maturities of long-term debt, Timber Funds		(25,042)	—	(25,083)		—		—	—

Long-term debt, excluding Timber Funds (c)	Long-term debt, excluding Timber Funds (c)	(1,310,506)	—	(1,297,698)		(973,129)		—	(981,500)	Long-term debt, excluding Timber Funds (c)		(1,299,433)		0		(1,304,371)	(1,300,336)	0	(1,313,631)
Long-term debt, Timber Funds (c)	Long-term debt, Timber Funds (c)	(35,617)	—	(35,741)		—		—	—	Long-term debt, Timber Funds (c)		(59,967)		0		(60,207)	(60,179)	0	(60,474)
Interest rate swaps (d)	Interest rate swaps (d)	(65,381)	—	(65,381)		(8,454)		—	(8,454)	Interest rate swaps (d)		(19,356)		0		(19,356)	(51,580)	0	(51,580)

Forward-starting interest rate swaps (d)	Forward-starting interest rate swaps (d)	(22,832)	—	(22,832)		—		—	—	Forward-starting interest rate swaps (d)		18,690		0		18,690	(12,529)	0	(12,529)
Foreign currency exchange contracts (d)	Foreign currency exchange contracts (d)	502	—	502		642		—	642	Foreign currency exchange contracts (d)		3,166		0		3,166	6,018	0	6,018
Foreign currency option contracts (d)	Foreign currency option contracts (d)	30	—	30		303		—	303	Foreign currency option contracts (d)		585		0		585	1,515	0	1,515
Carbon option contracts (d)		—	—	—		(607)		—	(607)
Marketable equity securities (e)		—	—	—		10,582		10,582	—

Noncontrolling Interests in the Operating Partnership ~~(f)~~(e)	Noncontrolling Interests in the Operating Partnership ~~(f)~~(e)	110,220	110,220	—		—		—	—	Noncontrolling Interests in the Operating Partnership ~~(f)~~(e)		137,990		137,990		0	130,121	130,121	0

(a)We did not have Level 3 assets or liabilities at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

(b)Restricted cash represents ~~the proceeds from like-kind exchange sales deposited with a third-party intermediary and~~ cash held in ~~escrow for a real estate sale.~~escrow. See Note 22 — Restricted Cash for additional information.

(c)The carrying amount of long-term debt is presented net of capitalized debt costs on non-revolving debt. See Note 79 — Debt for additional information.

(d)See Note 1510 — Derivative Financial Instruments and Hedging Activities for information regarding the Consolidated Balance Sheets classification of our derivative financial instruments.

(e)~~Investments in marketable securities are classified in “Other Assets” based on the nature of the securities and their availability for use in current operations.~~

~~(f)~~Noncontrolling Interests in the Operating Partnership is neither an asset or liability and is classified as temporary equity in the Company’s Consolidated Balance Sheets. This relates to the ownership of Rayonier, L.P. ~~Common Units~~units by various individuals and entities other than the Company.

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~~RAYONIER INC. AND SUBSIDIARIES~~

~~RAYONIER, L.P. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Dollar amounts in thousands unless otherwise stated)~~

We use the following methods and assumptions in estimating the fair value of our financial instruments:

Cash and cash equivalents and Restricted cash — The carrying amount is equal to fair market value.

Debt — The fair value of fixed rate debt is based upon quoted market prices for debt with similar terms and maturities. The variable rate debt adjusts with changes in the market rate, therefore the carrying value approximates fair value.

Interest rate swap agreements — The fair value of interest rate contracts is determined by discounting the expected future cash flows, for each instrument, at prevailing interest rates.

Foreign currency exchange contracts — The fair value of foreign currency exchange contracts is determined by a mark-to-market valuation, which estimates fair value by discounting the difference between the contracted forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

Foreign currency option contracts — The fair value of foreign currency option contracts is based on a mark-to-market calculation using the Black-Scholes option pricing model.

~~Carbon option contracts~~— The fair value of carbon option contracts is determined by a mark-to-market valuation using the Black-Scholes option pricing model, which estimates fair value by discounting the difference between the contracted forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate.

~~Marketable equity securities— The fair value of marketable equity securities is determined by quoted prices in their active market.~~

Noncontrolling Interests in the Operating Partnership — The fair value of noncontrolling interests in the Operating Partnership is determined based on the period-end closing price of Rayonier Inc. common shares.

~~The following table presents marketable equity securities that have been~~

12. COMMITMENTS

At March 31, 2021, the future minimum payments under non-cancellable commitments were as follows:


	Environmental Remediation (a)	Development Projects (b)	Commitments (c)	Total
Remaining 2021	$814	$17,440	$11,445	$29,699
2022	2,097	3,182	17,901	23,180
2023	1,853	267	18,512	20,632
2024	1,853	267	15,671	17,791
2025	2,338	267	10,625	13,230
Thereafter	2,575	3,899	29,987	36,461
	$11,530	$25,322	$104,141	$140,993

(a)Environmental remediation represents our estimate of potential liability associated with environmental contamination and Natural Resource Damages (NRD) in ~~a continuous unrealized gain position~~Port Gamble, Washington. See Note 14 - Environmental and Natural Resource Damage Liabilities for ~~less than 12 months~~additional information.

(b)Primarily consisting of payments expected to be made on our Wildlight and ~~for more than 12 months or greater at June 30, 2020~~Richmond Hill development projects.

(c)Commitments include payments expected to be made on financial instruments (foreign exchange contracts, interest rate swaps and ~~December 31, 2019:~~forward-starting interest rate swaps) and other purchase obligations.

June 30, 2020 December 31, 2019
Carrying Amount Less than 12 Months 12 Months or Greater Total Carrying Amount Less than 12 Months 12 Months or Greater Total
Fair value of marketable equity securities — — — — $10,582 10,582 — 10,582
Unrealized (losses) gains — — — — — 3,043 — 3,043

13. CONTINGENCIES

14. ENVIRONMENTAL AND NATURAL RESOURCE DAMAGE LIABILITIES

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

Changes in environmental and NRD liabilities from December 31, 2020 to March 31, 2021 are shown below:


			Port Gamble, WA






Non-current portion at December 31, 2020			$10,615
Plus: Current portion			1,026
Total Balance at December 31, 2020			11,641
Expenditures			(111)

Total Balance at March 31, 2021			11,530
Less: Current portion			(930)
Non-current portion at March 31, 2021			$10,600

15. GUARANTEES

We provide financial guarantees as required by creditors, insurance programs, and various governmental agencies.

As of March 31, 2021, the following financial guarantees were outstanding:

Financial Commitments (a)

Maximum Potential
Payment

Standby letters of credit

$885

Surety bonds (b)

9,340

Total financial commitments

$10,225

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

16. HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS

Changes in higher and better use timberlands and real estate development investments from December 31, 2020 to March 31, 2021 are shown below:


	Higher and Better Use Timberlands and Real Estate Development Investments
	Land and Timber	Development Investments	Total
Non-current portion at December 31, 2020	$79,901	$28,617	$108,518
Plus: Current portion (a)	212	6,544	6,756
Total Balance at December 31, 2020	80,113	35,161	115,274
Non-cash cost of land and improved development	(549)	(232)	(781)
Amortization of parcel real estate development investments	—	(139)	(139)
Timber depletion from harvesting activities and basis of timber sold in real estate sales	(243)	0	(243)
Capitalized real estate development investments (b)	0	5,291	5,291
Capital expenditures (silviculture)	96	0	96

Intersegment transfers	1,082	0	1,082
Purchase price allocation adjustment (c)	8,238	0	8,238

Total Balance at March 31, 2021	88,737	40,081	128,818
Less: Current portion (a)	(811)	(16,692)	(17,503)
Non-current portion at March 31, 2021	$87,926	$23,389	$111,315

(a)The current portion of Higher and Better Use Timberlands and Real Estate Development Investments is recorded in Inventory. See Note 17 — Inventory for additional information.

(c)Reflects measurement period adjustments on HBU properties acquired in the merger with Pope Resources. The estimated fair value of HBU properties acquired in the merger is approximately $34.7 million. This includes development properties in the town of Port Gamble, Washington, development projects in Gig Harbor, Kingston, and Bremerton, Washington and various other assets. See Note 2 - Merger with Pope Resources for additional information.

17. INVENTORY

As of March 31, 2021 and December 31, 2020, our inventory consisted entirely of finished goods, as follows:


	March 31, 2021	December 31, 2020
Finished goods inventory
Real estate inventory (a)	$17,503	$6,756
Log inventory	7,490	3,838
Total inventory	$24,993	$10,594

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

18. OTHER OPERATING INCOME (EXPENSE), NET

Other operating income (expense), net consisted of the following:


	Three Months Ended March 31,
		2021	2020
Gain on foreign currency remeasurement, net of cash flow hedges		$2,429	$1,433
Gain on sale or disposal of property and equipment		90	3
Log trading marketing fees		6	47
Costs related to the merger with Pope Resources (a)		0	(2,487)
Equity income related to Bainbridge Landing LLC joint venture (b)		19	0
Miscellaneous expense, net		(96)	(107)
Total		$2,448	($1,111)

(b) See Note 6 - Noncontrolling Interests and Note 7 - Variable Interest Entities for additional information on Ferncliff Investors.

19. EMPLOYEE BENEFIT PLANS

We have 1 qualified non-contributory defined benefit pension plan covering a portion of our employees and an unfunded plan that provides benefits in excess of amounts allowable under current tax law in the qualified plan. Both plans are closed to new participants. Effective December 31, 2016, we froze benefits for all employees participating in the pension plan. In lieu of the pension plan, we provide those employees with an enhanced 401(k) plan match. Employee benefit plan liabilities are calculated using actuarial estimates and management assumptions. These estimates are based on historical information, along with certain assumptions about future events. Changes in assumptions, as well as changes in actual experience, could cause the estimates to change.

~~As of June 30, 2020, we~~We are not required to make mandatory 2021 pension contributions due to our plan’s improved funding status and have ~~paid $1.1 million~~ ~~of the approximately $3.6 million in current year mandatory~~made 0 pension contribution ~~requirements (based on actuarial estimates and IRS minimum funding requirements).~~

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~~RAYONIER, L.P. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Dollar amounts in thousands unless otherwise stated)~~

payments during the three months ended March 31, 2021.

The net pension and postretirement benefit (credits) costs ~~(credits)~~ that have been recorded are shown in the following table:

Components of Net Periodic Benefit Cost (Credit) Income Statement Location Pension Postretirement
Three Months Ended
June 30, Three Months Ended
June 30,
2020 2019 2020 2019
Service cost Selling and general expenses — — $2 $1
Interest cost Interest and other miscellaneous income, net 677 799 13 13
Expected return on plan assets (a) Interest and other miscellaneous income, net (876) (777) — —
Amortization of losses Interest and other miscellaneous income, net 215 112 2 —
Net periodic benefit cost $16 $134 $17 $14


Components of Net Periodic Benefit Cost (Credit)		Income Statement Location	Pension			Postretirement
				Six Months Ended June 30,					Six Months Ended June 30,
				2020	2019	2020			2019
Components of Net Periodic Benefit (Credit) Cost							Components of Net Periodic Benefit (Credit) Cost	Income Statement Location		Pension		Postretirement
										Three Months Ended March 31,		Three Months Ended March 31,
										2021	2020	2021	2020
Service cost	Service cost	Selling and general expenses	—	—	$3	$3	Service cost	Selling and general expenses		0	0	$2	$2
Interest cost	Interest cost	Interest and other miscellaneous income, net	1,353	1,599	26	27	Interest cost	Interest and other miscellaneous expense, net		557	677	11	13
Expected return on plan assets (a)	Expected return on plan assets (a)	Interest and other miscellaneous income, net	(1,752)	(1,554)	—	—	Expected return on plan assets (a)	Interest and other miscellaneous expense, net		(936)	(876)	0	0

Amortization of losses	Amortization of losses	Interest and other miscellaneous income, net	431	224	4	—	Amortization of losses	Interest and other miscellaneous expense, net		288	215	5	2

Net periodic benefit cost			$32	$269	$33	$30
Net periodic benefit (credit) cost							Net periodic benefit (credit) cost			($91)	$16	$18	$17

(a)The weighted-average expected long-term rate of return on plan assets used in computing ~~2020~~2021 net periodic benefit cost for pension benefits isis 5.7%.

~~DEFINED CONTRIBUTION PLANS~~

Upon completion of the merger with Pope Resources, former Pope Resources employees were immediately eligible to participate in the Rayonier 401(k) plan. Pope Resources employees’ years of service were credited to the 401(k) plan for vesting purposes. Former Pope Resources employees have the option to rollover their former 401(k) account balance into our 401(k) plan. As discussed above, the defined benefit pension plan is currently frozen. In lieu of the pension plan, employees are eligible to receive an enhanced match contribution.

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(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

~~18. INCENTIVE STOCK PLANS~~

~~REPLACEMENT RESTRICTED STOCK AWARDS FROM THE MERGER WITH POPE RESOURCES~~

As a result of the merger with Pope Resources, Rayonier issued 69,176 shares of restricted stock awards (“replacement awards”) in connection with unvested Pope Resources restricted units. Eligible outstanding Pope Resources restricted units were canceled and exchanged for replacement awards, pursuant to an exchange ratio in the merger agreement designed to maintain the intrinsic value of the awards immediately prior to the exchange.

In accordance with ASC 805, these awards are considered to be replacement awards. Exchanges of share-based payment awards in conjunction with a business combination are modifications in accordance with ASC 718, ~~Compensation — Stock Compensation~~ (“ASC 718”). As a result, the portion of the fair-value of replacement awards attributable to pre-merger services were included in measuring the consideration transferred in the business combination. The fair value of the replacement awards was estimated to be approximately $1.7 million of which $0.2 million was attributable to pre-merger services. See ~~Note 2 — Merger with Pope Resources~~ ~~for additional information.~~

~~REPLACEMENT AWARD EXPENSE~~

The replacement awards issued have similar vesting provisions as the terms of existing Rayonier Inc. restricted stock. Expense for the replacement awards that were not fully vested prior to the date of the merger will continue to be recognized over a weighted average remaining service period of approximately 21 months unless a qualifying termination occurs.

A qualifying termination of an awardee will result in the acceleration of vesting and expense recognition in the period that the qualifying termination occurs. Qualifying terminations during three months and six months ended June 30, 2020 resulted in the accelerated vesting of 11,076 of the replacement awards and recognition of approximately $0.2 million of expense. This accelerated vesting expense is included in merger-related integration costs as described in ~~Note 20 — Charges for Integration and Restructuring~~.

~~A summary of the replacement awards granted as a result of the merger with Pope Resources is presented below:~~

Three Months Ended June 30, Six Months Ended
June 30,
2020 2020
Replacement restricted shares granted 69,176 69,176
Weighted average price of replacement restricted shares granted $24.01 $24.01
Replacement restricted shares vested as a result of acceleration due to qualifying terminations 11,076 11,076
Grant date fair value of replacement restricted shares vested $24.01 $24.01
Intrinsic value of replacement restricted shares outstanding (a) $1,440 $1,440
Cash used to purchase common shares from employees with vested replacement shares to pay minimum withholding tax requirements 44 44

~~(a)Intrinsic value of restricted stock outstanding is based on the market price of the Company’s stock at June 30, 2020.~~

~~For additional information related to our incentive stock plans, see Note 17 — Incentive Stock Plans in the Company’s 2019 Form 10-K.~~

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~~RAYONIER, L.P. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Dollar amounts in thousands unless otherwise stated)~~20. INCOME TAXES

Rayonier is a REIT under the Internal Revenue Code and therefore generally does not pay U.S. federal or state income tax. As of March 31, 2021, Rayonier owns a97.0% interest in the Operating Partnership and conducts substantially all of its timberland operations through the Operating Partnership. The taxable income or loss generated by the Operating Partnership is passed through and reported to its unit holders (including the Company) on a Schedule K-1 for inclusion in each unitholder’s income tax return. Certain operations, including log trading and certain real estate activities, such as the entitlement, development and sale of HBU properties, are conducted through our TRS. The TRS subsidiaries are subject to United States federal and state corporate income tax. The New Zealand timber operations are conducted by the New Zealand subsidiary, which is subject to corporate-level tax at 28% in New Zealand and is treated as a partnership for U.S. income tax purposes.

PROVISION FOR INCOME TAXES

The Company’s tax expense is principally related to corporate-level tax in New Zealand and non-resident withholding tax on repatriation of earnings from New Zealand. The following table contains the income tax expense recognized on the Consolidated Statements of Income and Comprehensive Income:


	Three Months Ended March 31,
		2021	2020
Income tax expense		($3,421)	($3,706)

ANNUAL EFFECTIVE TAX RATE

The Company’s effective tax rate after discrete items is below the 21.0% U.S. statutory rate due to tax benefits associated with being a REIT. The following table contains the Company’s annualized effective tax rate after discrete items:


	Three Months Ended March 31,
		2021		2020
Annualized effective tax rate after discrete items		11.6	%	12.1	%

~~19. OTHER OPERATING EXPENSE, NET~~

~~Other operating expense, net consisted of the following:~~

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Loss on foreign currency remeasurement, net of cash flow hedges ($2,720) ($719) ($1,287) ($690)
Gain on sale or disposal of property and equipment 4 35 7 56
Log trading marketing fees 3 80 50 137
Costs related to the merger with Pope Resources (a) (13,498) — (15,985) —
Miscellaneous expense, net (272) (1,365) (379) (1,437)
Total ($16,483) ($1,969) ($17,594) ($1,934)

~~(a) Includes legal, accounting, due diligence, consulting and other costs related to the merger with Pope Resources. See~~ ~~Note 2 - Merger with Pope Resources~~ ~~and~~ ~~Note 20 - Charges for Integration and Restructuring~~ ~~for additional information.~~

~~20. CHARGES FOR INTEGRATION AND RESTRUCTURING~~

During 2020, we have incurred and accrued for termination benefits (primarily severance) and accelerated share-based payment costs based upon actual and expected qualifying terminations of certain employees as a result of restructuring decisions made concurrent with and subsequent to the Mergers. We have also incurred non-recurring professional services costs for investment banking, legal, consulting, accounting and certain other fees directly attributable to our merger with Pope Resources.

~~A summary of the charges for integration and restructuring related to our merger with Pope Resources is presented below:~~

Three Months Ended Six Months Ended
June 30, 2020 June 30, 2020
Termination benefits $581 $581
Acceleration of share-based compensation related to qualifying terminations (Note 18)
232 232
Professional services 10,967 13,314
Other integration and restructuring costs 1,718 1,858
Total integration and restructuring charges related to our merger with Pope Resources $13,498 $15,985

~~Changes in accrued severance related to restructuring during the three and six months ended June 30, 2020 were as follows:~~

Three Months Ended Six Months Ended
June 30, 2020 June 30, 2020
Accrued severance as of March 31, 2020 — —
Charges 581 581
Payments (334) (334)
Accrued severance as of June 30, 2020 $247 $247

Accrued severance is recorded within “Accrued Payroll and Benefits” in our Consolidated Balance Sheets. The majority of the accrued severance balance as of June 30, 2020 is expected to be paid within one year.

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(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

21. ~~INVENTORY~~ACCUMULATED OTHER COMPREHENSIVE LOSS

~~As of June 30, 2020~~The following table summarizes the changes in AOCI by component for the three months ended March 31, 2021 and the year ended December 31, ~~2019, our inventory consisted entirely~~2020. All amounts are presented net of ~~finished goods, as follows:~~tax and exclude portions attributable to noncontrolling interests.

June 30, 2020 December 31, 2019
Finished goods inventory
Real estate inventory (a) $3,890 $12,663
Log inventory 6,475 1,855
Total inventory $10,365 $14,518


	Foreign currency translation (loss) gains	Net investment hedges of New Zealand subsidiary	Cash flow hedges		Employee benefit plans		Total Rayonier, L.P.	Allocation to Operating Partnership	Total Rayonier Inc.
Balance as of December 31, 2019	($226)	$1,321	($8,910)		($23,387)		($31,202)	0	($31,202)
Other comprehensive income (loss) before reclassifications	22,928	0	(71,644)		(1,794)		(50,510)	0	(50,510)
Amounts reclassified from accumulated other comprehensive loss	0	0	9,498		869	(b)	10,367	(2,540)	7,827
Net other comprehensive income (loss)	22,928	0	(62,146)		(925)		(40,143)	(2,540)	(42,683)
Balance as of December 31, 2020	$22,702	$1,321	($71,056)		($24,312)		($71,345)	($2,540)	($73,885)
Other comprehensive (loss) income before reclassifications	(11,652)	0	56,637	(a)	0		44,985	0	44,985
Amounts reclassified from accumulated other comprehensive loss	0	0	4,991		294	(b)	5,285	(1,531)	3,754
Net other comprehensive (loss) income	(11,652)	0	61,628		294		50,270	(1,531)	48,739
Balance as of March 31, 2021	$11,050	$1,321	($9,428)		($24,018)		($21,075)	($4,071)	($25,146)

(a) ~~Represents the cost~~Includes $59.7 million of ~~HBU real estate (including capitalized development investments) under contract~~other comprehensive loss related to ~~be sold.~~

interest rate swaps, treasury locks, interest rate swap locks and forward-starting interest rate swaps. See Note 810 — ~~Higher And Better Use Timberlands~~Derivative Financial Instruments and ~~Real Estate Development Investments~~Hedging Activities for additional information.

(b)This component of other comprehensive (loss) income is included in the computation of net periodic pension and post-retirement costs. See Note 19 — Employee Benefit Plansfor additional information.

The following table presents details of the amounts reclassified in their entirety from AOCI to net income for the three months ended March 31, 2021 and March 31, 2020:


Details about accumulated other comprehensive income (loss) components	Amount reclassified from accumulated other comprehensive income (loss)		Affected line item in the income statement
	March 31, 2021	March 31, 2020
Realized loss on foreign currency exchange contracts	$1,205	$18	Other operating expense, net
Realized loss on foreign currency option contracts	594	9	Other operating expense, net
Noncontrolling interests	(414)	(6)	Comprehensive (loss) income attributable to noncontrolling interests
Realized loss (gain) on interest rate contracts	3,994	(452)	Interest expense
Income tax expense from net gain on foreign currency contracts	(388)	(6)	Income tax expense


Net loss (gain) from accumulated other comprehensive income	$4,991	($437)

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RAYONIER INC. AND SUBSIDIARIES

RAYONIER, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

22. RESTRICTED CASH

Restricted cash includes cash balances held in escrow as collateral for certain contractual obligations related to our Richmond Hill development project as well as cash held in escrow for real estate sales. As of March 31, 2021 and December 31, 2020, we had $0.5 million and $3.0 million, respectively, of restricted cash held in escrow. In addition, in order to qualify for like-kind exchange (“LKE”) treatment, the proceeds from real estate sales must be deposited with a third-party intermediary. These proceeds are accounted for as restricted cash until a suitable replacement property is acquired. In the event LKE purchases are not completed, the proceeds are returned to us after 180 days and reclassified as available cash. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, we had ~~$0.5 million and $1.2 million, respectively, of~~0 proceeds from real estate sales classified as restricted cash which were deposited with an LKE ~~intermediary as well as cash held in escrow for a real estate sale.~~intermediary.

The following table contains the amounts of restricted cash recorded in the Consolidated Balance Sheets and Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~June 30, 2020:~~March 31, 2021:


			~~June 30, 2020~~March 31, 2021

Restricted cash held in escrow			$475

Total restricted cash shown in the Consolidated Balance Sheets			475
Cash and cash equivalents			~~94,786~~82,620
Total cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows			$~~95,261~~83,095

23. ASSETS HELD FOR SALE

~~Table~~Assets held for sale is composed of ~~Contents~~

~~RAYONIER INC. AND SUBSIDIARIES~~

~~RAYONIER, L.P. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Dollar amounts~~properties under contract and expected to be sold within 12 months that also meet the other relevant held-for sale criteria in ~~thousands unless otherwise stated)~~accordance with ASC 360-10-45-9. As of March 31, 2021 and December 31, 2020, the basis in properties meeting this classification was $7.9 million and $3.4 million, respectively. Since the basis in these properties was less than the fair value, including costs to sell, 0 impairment was recognized.

~~23. ACCUMULATED OTHER COMPREHENSIVE LOSS~~

The following table summarizes the changes in AOCI by component for the six months ended June 30, 2020 and the year ended December 31, 2019. All amounts are presented net of tax and exclude portions attributable to noncontrolling interest.

Foreign currency translation (loss) gains Net investment hedges of New Zealand subsidiary Cash flow hedges Employee benefit plans Total Rayonier, L.P. Allocation to Operating Partnership Total Rayonier Inc.
Balance as of December 31, 2018 ($1,010) $1,321 $21,965 ($22,037) $239 — $239
Other comprehensive (loss) income before reclassifications 784 — (29,251) (1,799) (30,266) — (30,266)
Amounts reclassified from accumulated other comprehensive (loss) income — — (1,624) 449 (b) (1,175) — (1,175)
Net other comprehensive (loss) income 784 — (30,875) (1,350) (31,441) — (31,441)
Balance as of December 31, 2019 ($226) $1,321 ($8,910) ($23,387) ($31,202) — ($31,202)
Other comprehensive loss before reclassifications (16,022) — (92,806) (a) — (108,828) — (108,828)
Amounts reclassified from accumulated other comprehensive (loss) income — — 2,124 434 (b) 2,558 (457) 2,101
Net other comprehensive (loss) income (16,022) — (90,682) 434 (106,270) (457) (106,727)
Balance as of June 30, 2020 ($16,248) $1,321 ($99,592) ($22,953) ($137,472) ($457) ($137,929)

~~(a)Includes $90.5 million of other comprehensive loss related to interest rate swaps, treasury locks, interest rate swap locks and forward-starting interest rate swaps. See~~ ~~Note 15 — Derivative Financial Instruments and Hedging Activities~~ ~~for additional information.~~

~~(b)This component of other comprehensive (loss) income is included in the computation of net periodic pension and post-retirement costs. See~~ ~~Note 17 — Employee Benefit Plansfor additional information.~~

~~The following table presents details of the amounts reclassified in their entirety from AOCI to net income for the six months ended June 30, 2020 and June 30, 2019:~~

Details about accumulated other comprehensive (loss) income components Amount reclassified from accumulated other comprehensive (loss) income Affected line item in the income statement
June 30, 2020 June 30, 2019
Realized (gain) loss on foreign currency exchange contracts ($1,892) ($190) Other operating expense, net
Realized loss (gain) on foreign currency option contracts 8 (60) Other operating expense, net
Noncontrolling interest 434 58 Comprehensive (loss) income attributable to noncontrolling interest
Realized loss (gain) on interest rate contracts 3,168 (1,866) Interest expense
Income tax expense from net gain on foreign currency contracts 406 54 Income tax expense
Net gain from accumulated other comprehensive income $2,124 ($2,004)

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RAYONIER INC. AND SUBSIDIARIES

RAYONIER, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

24. CHARGES FOR INTEGRATION AND RESTRUCTURING

During 2020, we incurred and accrued for termination benefits (primarily severance) and accelerated share-based payment costs based upon actual and expected qualifying terminations of certain employees as a result of restructuring decisions made concurrent with and subsequent to the merger with Pope Resources. We also incurred non-recurring professional services costs for investment banking, legal, consulting, accounting and certain other fees directly attributable to the merger with Pope Resources.

~~24. VARIABLE INTEREST ENTITIES~~

~~ORM Timber Fund II, Inc. (Fund II), ORM Timber Fund III LLC (Fund III),~~A summary of the charges for integration and ~~ORM Timber Fund IV LLC. (Fund IV) (Collectively, “The Funds”)~~

Inrestructuring related to the ~~May 8, 2020~~ merger with Pope Resources ~~we became manager of 3 private equity timber funds, Fund II, Fund III, and Fund IV, and obtained ownership interests~~is presented below:


	Three Months Ended March 31,
	2021	2020


Professional services	0	$2,347
Other integration and restructuring costs	0	140
Total integration and restructuring charges related to the merger with Pope Resources	0	$2,487

Changes in accrued severance related to restructuring during the funds of 20%, 5%, and 15%, respectively. We determined, based upon an analysis under the variable interest entity guidance, that we have the power to direct the activities that most significantly impact the Funds’ economic success. Therefore, we are considered the primary beneficiary and are required under ASC 810 — ~~Consolidation~~ ~~to consolidate the Funds. For further information on The Funds, see~~ ~~Note~~ 5 —~~Noncontrolling Interests~~.

~~The assets and liabilities of The Funds as of June 30, 2020,~~three months ended March 31, 2021 were as follows:


~~Timber Funds~~			~~June 30, 2020~~
~~Assets:~~
~~Cash and cash equivalents~~			~~$6,973~~
~~Accounts receivable~~			~~3,213~~
~~Prepaid expenses~~			81
~~Other current assets~~			~~361~~
~~Total current assets~~			~~10,628~~
~~Timber and timberlands, net of depletion and amortization~~			~~467,800~~
~~Other assets~~			3
~~Total assets~~			~~$478,431~~
~~Liabilities and Equity:~~
~~Accounts payable~~			~~$636~~
~~Intercompany payable (a)~~			~~3,837~~
~~Current maturities of long-term debt~~			~~25,042~~
~~Accrued taxes~~			~~251~~
~~Accrued interest~~			~~655~~
~~Deferred revenue~~			1
~~Other current liabilities~~			~~787~~
~~Total current liabilities~~			~~31,209~~
~~Long-term debt~~			~~35,617~~
~~Funds’ equity~~			~~411,605~~
~~Total liabilities and equity~~			~~$478,431~~

Three Months Ended

~~(a)Includes management fees and other expenses payable to the Operating Partnership. These amounts are eliminated in the Consolidated Balance Sheets.~~

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~~RAYONIER INC. AND SUBSIDIARIES~~

~~RAYONIER, L.P. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(Dollar amounts in thousands unless otherwise stated)~~

~~Ferncliff Investors~~

We also acquired in the merger with Pope Resources an ownership interest in a real estate joint venture entity. We determined, based upon an analysis under the variable interest entity guidance, that we have the power to direct the activities that most significantly impact the joint venture’s economic success. Therefore, we are considered the primary beneficiary and are required under ASC 810 — ~~Consolidation~~ ~~to consolidate Ferncliff Investors. For further information on Ferncliff Investors, see~~ ~~Note 5 — Noncontrolling Interests~~.

~~The assets and liabilities of Ferncliff Investors as of June 30, 2020, were as follows:~~

		March 31, 2021
Accrued severance as of December 31, 2020		$112

~~Ferncliff Investors~~Payments	~~June 30, 2020~~
	~~Assets:~~(53)
~~Cash and cash equivalents~~Accrued severance as of March 31, 2021		$~~760~~


~~Total current assets~~	~~760~~
~~Investment in real estate joint venture entity~~	~~3,141~~
~~Advances to real estate joint venture entity~~	~~1,000~~
~~Total assets~~	~~$4,901~~
~~Liabilities and equity:~~59

~~Intercompany payable (a)~~	~~$10~~




~~Total current liabilities~~	10

~~Ferncliff Investors’ equity~~	~~4,891~~
~~Total liabilities and equity~~	~~$4,901~~

~~(a)~~
~~Includes miscellaneous expenses payable to the Operating Partnership. These amounts are eliminated~~

Accrued severance is recorded within “Accrued Payroll and Benefits” in ~~the~~our Consolidated Balance Sheets.

The majority of the accrued severance balance as of March 31, 2021 is expected to be paid within one year.

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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, ~~the Company’s~~our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 (the ~~“2019~~“2020 Form 10-K”), the audited consolidated financial statements of Rayonier Operating Company LLC as of and for the years ended December 31, 2019, 2018 and 2017 included in Exhibit 99.4 of the Operating Partnership’s Amendment No. 1 to the Current Report on Form 8-K filed with the SEC on July 17, 2020 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, including the recent acquisition of Pope Resources, 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 ~~the Company’s 2019~~our 2020 Form 10-K ~~in this Report on Form 10-Q~~ 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~~“Cash Available for ~~distribution,~~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.

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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, Timber Funds, Real Estate, and Trading. As of ~~June 30, 2020,~~March 31, 2021, we owned or leased under long-term agreements ~~approximately~~approximately 2.7 million acres of timberlands located in the U.S. South ~~(1.8~~(1.75 million acres), U.S. Pacific Northwest (~~507,000~~(507,000 acres) and New Zealand (~~416,000~~ (417,000 gross acres oror 296,000 net plantable acres). We also act as the managing member in a private equity timber fund business with three funds comprising approximately 141,000 acres. On a “look-through basis,” our ownership in the timber fund business equates to approximately 17,000 acres.

SEGMENT INFORMATION

The Southern Timber, Pacific Northwest Timber, New Zealand Timber, and Timber Funds segments include all activities related to the harvesting of timber and other non-timber income activities, such as the licensing of properties for hunting, 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. The Timber Funds segment operations are managed by ORM LLC, a subsidiary acquired in the merger with Pope Resources. We own approximately 20% of Fund II, 5% of Fund III and 15% of Fund IV. When referring to our proportionate ownership share of the Timber Funds segment, we will refer to the sums as “look-through” totals. See Note 56 - Noncontrolling Interests for additional information regarding our noncontrolling interests in the New Zealand Timber and Timber Funds segments.

The Real Estate segment includes all U.S. and New Zealand land or leasehold sales disaggregated into ~~five~~six sales categories: Improved Development, Unimproved Development, Rural, ~~Timberlands~~Timberland & Non-Strategic, Conservation Easement and Large Dispositions. It also includes residential and commercial lease activity, primarily in the town of Port Gamble, Washington.

The Trading segment primarily reflects ~~the~~ log trading activities ~~that support~~in New Zealand and Australia conducted by our New Zealand ~~operations.~~subsidiary. 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. ~~It also provides~~This additional market intelligence ~~that~~also benefits our Southern and Pacific Northwest export log marketing.

ENVIRONMENTAL MATTERS

~~PORT GAMBLE ENVIRONMENTAL REMEDIATION~~

~~In the merger with Pope Resources, we acquired the town~~For a full description of ~~Port Gamble, Washington. Portions of this property require~~our environmental ~~remediation under federal and state environmental laws, and remediation activities are currently ongoing. As such, through the preliminary purchase price allocation~~matters, see Item 1 - “Business” in our Annual Report on Form 10-K for the ~~merger with Pope Resources, we recognized environmental liabilities for the estimated fair value of liabilities assumed. See~~ ~~Note 2 - Merger~~ ~~with Pope Resources~~ ~~for additional information on the preliminary allocation of purchase price. For additional information on our environmental liabilities see~~ ~~Note 9 - Commitments~~year ended December 31, 2020 and ~~Note 12 - Environmental Liabilities~~.

~~The sections below provide a history of the~~comprehensive environmental ~~matters in Port Gamble, Washington:~~

~~Discovery~~ and ~~Initial Actions:~~

In Port Gamble, Washington, hazardous substances were previously discovered requiring environmental remediation under federal and state environmental laws. The real estate subject to environmental remediation requirements was the location of a sawmill operated by Pope & Talbot, Inc. (“P&T”) from 1853 to 1995. P&T continued to lease various portions of the site for its operations until 2002. During the time P&T operated in Port Gamble, it also conducted shipping, log storage, and log transfer operations in the tidal and subtidal waters of Port Gamble Bay, some of which were under a lease from the Washington State Department of Natural Resources (“DNR”) that lasted from 1974 to 2004. P&T’s operations resulted in the release of hazardous

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substances that impacted the upland and submerged portions of the site. These substances include various hydrocarbons, cadmium, and toxins associated with wood waste and the production of wood products.

~~Following the mill closure, the Washington State Department of Ecology (the “DOE”) began to examine the environmental conditions~~carbon reports located at Port Gamble. Under Washington law, both Pope Resources and P&T were considered by the DOE to be “potentially liable persons” (“PLPs”); Pope Resources because of its ownership of certain portions of the site, and P&T because of its historical ownership and operation of the site. P&T and Pope Resources entered into a settlement agreement in 2002 that allocated responsibility for environmental contamination at the townsite, millsite, a solid waste landfill, and adjacent water to Pope Resources, with P&T assuming responsibility for funding cleanup in the Port Gamble Bay and the other areas of the site that were impacted by its historical operations.

In 2005, both Pope Resources and P&T received Environmental Excellence Awards from DOE for their work in remediating the contamination that had existed at the Port Gamble townsite and landfill. DOE also issued letters to both parties in 2006 indicating that the agency expected to take no further action regarding conditions at those portions of the site. Pope Resources continued cleaning up the remaining contamination at the millsite. By late 2005, the millsite portion of the site had largely been cleaned and the remaining aspects of that project consisted of test well monitoring and modest additional remediation. The Port Gamble Bay area and related tidelands, for which P&T was responsible under the parties’ settlement agreement, had not yet been remediated. In 2007, P&T filed for bankruptcy protection and was eventually liquidated, leaving Pope Resources as the only remaining PLP. Because environmental liabilities are joint and several as between PLPs, the result of P&T’s bankruptcy was to leave the liability with Pope Resources as the only remaining solvent PLP.

~~In-water cleanup~~

Beginning in 2010, DOE began to reconsider its expectations regarding the level of cleanup that would be required for Port Gamble Bay, largely because of input from interested citizens and groups, one of the most prominent being the Port Gamble S’Klallam Tribe. In response to input from these groups, DOE adopted remediation levels that were far more stringent than either DOE or Pope Resources had contemplated previously. In December 2013, Pope Resources and DOE entered into a consent decree that included a cleanup action plan (“CAP”) requiring the removal of docks and pilings, excavation and backfilling of intertidal areas, subtidal dredging and monitoring, and other specific remediation steps. The construction phase of the cleanup of the Port Gamble Bay area and related tidelands began in September 2015 and the in-water portion of the cleanup was completed in January 2017.

~~Millsite Cleanup~~

With the in-water portion of the cleanup completed, there is expected to be relatively modest cleanup activity on the millsite and a monitoring period. In February 2018, Pope Resources and DOE entered into an agreed order with respect to the millsite under which Pope Resources performed a remedial investigation and feasibility study (“RI/FS”) which it submitted to DOE for review in January 2019. Following the finalization of the RI/FS, Pope Resources worked with DOE to develop a CAP. As with the in-water portion of the project, the CAP will define the scope of the remediation activity for the millsite. Once the CAP is approved by DOE, it will be codified in a consent decree.

~~Natural Resources Damages~~

In addition to the cleanup costs discussed previously, certain environmental laws allow state, federal, and tribal trustees (collectively, the “Trustees”) to bring suit against property owners to recover natural resource damages (“NRD”). Similar to cleanup responsibility, liability for NRD can attach to a property owner simply because an injury to natural resources resulted from releases of hazardous substances on the owner’s property, regardless of culpability for the release. Trustees have alleged that Pope Resources had NRD liability because of releases that occurred on its property. Prior to the merger with Rayonier, Pope Resources began negotiations with the Trustees for the purpose of identifying NRD restoration projects. Those negotiations are ongoing and will ultimately result in agreement as to requested mitigation activities.

our Responsible Stewardship webpage.

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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 and Timber Funds segments rely primarily on domestic customers but also export a significant volume of timber, particularly to China. The Southern, Pacific Northwest Timber and Timber Funds 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 markets in China, South Korea and India. 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.

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As the current novel coronavirus (“COVID-19”) pandemic continues to evolve, the expected duration and the extent of economic disruption it may ultimately cause remain uncertain. On March 19, 2020, the U.S. Department of Homeland Security issued a memorandum identifying the forest products industry as a “critical infrastructure industry,” which is expected to continue operating through the duration of the pandemic. In New Zealand, production has returned to pre-COVID-19 levels after a government-mandated shutdown of roughly one month that adversely affected our second quarter results. During the second quarter, strong pulpwood demand in the Southern Timber segment was primarily driven by a surge in demand for essential products such as toilet paper and packaging. In the Pacific Northwest and Timber Funds segments, weaker export demand has contributed to lower export and domestic pricing. New Zealand Timber experienced a short-lived surge in export prices following the government-mandated shutdown but has since returned to pre-COVID-19 levels. Local, state and ~~federal~~national governments continue to evaluate policies and restrictions in order to ~~reopen~~mitigate the ~~economy while keeping COVID-19 cases minimized and future government mandated~~spread of COVID-19. Government-mandated shutdowns or shelter-in-place orders in markets in which we operate ~~would~~could negatively ~~affect~~impact our ~~future~~ results. ~~Prolonged~~Further, prolonged periods of lower overall business activity as a result of COVID-19 could cause significant damage to the underlying economy, which would likely impact ~~the strength of~~ U.S. timber markets. We will continue to monitor COVID-19 and its impact on the markets in which we operate going forward.

We are also subject to the risk of price fluctuations in our major cost components. The primary components of our cost of sales are the cost basis of timber sold (depletion), the cost basis of real estate sold and logging and transportation costs (cut and haul). Depletion includes the amortization of capitalized costs (site preparation, planting and fertilization, real estate taxes, timberland lease payments and certain payroll costs). 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.

For additional information on market conditions impacting our business, see Results of Operations.

CRITICAL ACCOUNTING POLICIES AND USE OF 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 ~~the Company’s 2019~~our 2020 Form 10-K.

DISCUSSION OF TIMBER INVENTORY AND SUSTAINABLE YIELD

See Item 1 — Business — Discussion of Timber Inventory and Sustainable Yield in ~~the Company’s 2019~~our 2020 Form 10-K.

OUR TIMBERLANDS

Our timber operations are comprised of our core timberland holdings, which are disaggregated into three geographically distinct reporting segments: Southern Timber, Pacific Northwest Timber and New Zealand Timber in addition to our timber fund holdings, which represents our ownership in Timber Funds II, III and IV. The following tables provide a breakdown of our timberland holdings as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:


Core Timberland Holdings	Core Timberland Holdings															Core Timberland Holdings
(acres in 000s)	(acres in 000s)	As of June 30, 2020					As of December 31, 2019						(acres in 000s)	As of March 31, 2021				As of December 31, 2020
		Owned	Leased	Total	Owned	Leased	Total		Owned	Leased	Total	Owned			Leased		Total
Southern	Southern							Southern
Alabama	Alabama	226	14	240	226	14	240	Alabama	223	14	237	223			14		237
Arkansas	Arkansas	—	7	7	—	7	7	Arkansas	—	6	6	—			6		6
Florida	Florida	328	63	391	331	63	394	Florida	345	61	406	327			61		388
Georgia	Georgia	616	75	691	628	77	705	Georgia	611	64	675	602			71		673
Louisiana	Louisiana	140	—	140	128	—	128	Louisiana	140	—	140	140			—		140

Mississippi		—	—	—	67	—	67

Oklahoma	Oklahoma	92	—	92	92	—	92	Oklahoma	92	—	92	92			—		92
South Carolina	South Carolina	18	—	18	18	—	18	South Carolina	16	—	16	16			—		16

Texas	Texas	184	—	184	184	—	184	Texas	179	—	179	181			—		181
		1,604	159	1,763	1,674	161	1,835		1,606	145	1,751	1,581			152		1,733

Pacific Northwest	Pacific Northwest							Pacific Northwest
Oregon	Oregon	61	—	61	61	—	61	Oregon	61	—	61	61			—		61
Washington	Washington	442	4	446	318	—	318	Washington	442	4	446	442			4		446
		503	4	507	379	—	379		503	4	507	503			4		507

New Zealand (a)	New Zealand (a)	185	231	416	185	229	414	New Zealand (a)	185	232	417	185			232		417
Total	Total	2,292	394	2,686	2,238	390	2,628	Total	2,294	381	2,675	2,269			388		2,657

(a)Represents legal acres owned and leased by the New Zealand subsidiary, in which we own a 77% interest. As of ~~June 30, 2020,~~March 31, 2021, legal acres in New Zealand consisted of 296,000 plantable acres and ~~120,000~~121,000 non-productive acres.


Timber Fund Holdings	Timber Fund Holdings											Timber Fund Holdings
(acres in 000s)	(acres in 000s)	As of June 30, 2020			As of December 31, 2019				(acres in 000s)	As of March 31, 2021			As of December 31, 2020
		Total	Look-through	Total	Look-through		Total	Look-through		Total	Look-through
Timber Funds	Timber Funds					Timber Funds
Oregon	Oregon	51	7	—	—	Oregon	51	7		51	7
Washington	Washington	71	9	—	—	Washington	71	9		71	9
California	California	19	1	—	—	California	19	1		19	1
Total	Total	141	17	—	—	Total	141	17		141	17

5844


Total Timberland under Management	Total Timberland under Management								Total Timberland under Management
(acres in 000s)	(acres in 000s)	As of June 30, 2020		As of December 31, 2019			(acres in 000s)	As of March 31, 2021		As of December 31, 2020
		Total	Total			Total				Total
Southern	Southern	1,763	1,835		Southern	1,751				1,733
Pacific Northwest	Pacific Northwest	507	379		Pacific Northwest	507				507
New Zealand	New Zealand	416	414		New Zealand	417				417
Timber Funds	Timber Funds	141	—		Timber Funds	141				141
Total	Total	2,827	2,628		Total	2,816				2,798

The following tables detail activity for owned and leased acres in our core timberland holdings by state from December 31, ~~2019~~2020 to ~~June 30, 2020:~~March 31, 2021:


(acres in 000s)	(acres in 000s)	Acres Owned										(acres in 000s)	Acres Owned
		December 31, 2019	Acquisitions	Sales	Other	June 30, 2020		December 31, 2020	Acquisitions	Sales	Other		March 31, 2021
Southern	Southern						Southern
Alabama	Alabama	226	—	—	—	226	Alabama	223	—	—	—		223
Florida	Florida	331	—	(8)	5	328	Florida	327	18	—	—		345
Georgia	Georgia	628	—	(12)	—	616	Georgia	602	9	—	—		611
Louisiana	Louisiana	128	12	—	—	140	Louisiana	140	—	—	—		140
Mississippi		67	—	(67)	—	—

Oklahoma	Oklahoma	92	—	—	—	92	Oklahoma	92	—	—	—		92
South Carolina	South Carolina	18	—	—	—	18	South Carolina	16	—	—	—		16

Texas	Texas	184	—	—	—	184	Texas	181	—	(2)	—		179
		1,674	12	(87)	5	1,604		1,581	27	(2)	—		1,606

Pacific Northwest	Pacific Northwest						Pacific Northwest
Oregon	Oregon	61	—	—	—	61	Oregon	61	—	—	—		61
Washington	Washington	318	120	—	4	442	Washington	442	—	—	—		442
		379	120	—	4	503		503	—	—	—		503

New Zealand (a)	New Zealand (a)	185	—	—	—	185	New Zealand (a)	185	—	—	—		185
Total	Total	2,238	132	(87)	9	2,292	Total	2,269	27	(2)	—		2,294

(a)Represents legal acres owned by the New Zealand subsidiary, in which we have a 77% interest.


(acres in 000s)	(acres in 000s)	Acres Leased										(acres in 000s)	Acres Leased
		December 31, 2019	New Leases	Sold/Expired Leases (a)	Other	June 30, 2020		December 31, 2020	New Leases	Sold/Expired Leases (a)	Other (b)		March 31, 2021
Southern	Southern						Southern
Alabama	Alabama	14	—	—	—	14	Alabama	14	—	—	—		14
Arkansas	Arkansas	7	—	—	—	7	Arkansas	6	—	—	—		6
Florida	Florida	63	—	—	—	63	Florida	61	—	—	—		61
Georgia	Georgia	77	—	(2)	—	75	Georgia	71	—	(1)	(6)		64

		161	—	(2)	—	159		152	—	(1)	(6)		145

Pacific Northwest	Pacific Northwest						Pacific Northwest
Washington ~~(b)~~(c)	Washington ~~(b)~~(c)	—	4	—	—	4	Washington ~~(b)~~(c)	4	—	—	—		4

New Zealand ~~(c)~~(d)	New Zealand ~~(c)~~(d)	229	2	—	—	231	New Zealand ~~(c)~~(d)	232	—	—	—		232
Total	Total	390	6	(2)	—	394	Total	388	—	(1)	(6)		381

(a)Includes acres previously under lease that have been harvested and activity for the relinquishment of leased acres.

(b)Includes acres previously under lease that we have acquired as fee ownership.

(c)Primarily timber reservations acquired in the merger with Pope Resources.

~~(c)~~(d)Represents legal acres leased by the New Zealand subsidiary, in which we have a 77% interest.

5945

The following table details activity in our timber fund holdings by state from December 31, ~~2019~~2020 to ~~June 30, 2020:~~March 31, 2021:


(acres in 000s)	(acres in 000s)	Acres Owned										(acres in 000s)	Acres Owned
		December 31, 2019	Acquisitions	Sales	Other	June 30, 2020		December 31, 2020	Acquisitions	Sales	Other		March 31, 2021
Fund II	Fund II						Fund II
Oregon	Oregon	—	18	—	—	18	Oregon	18	—	—	—		18
Washington	Washington	—	13	—	—	13	Washington	13	—	—	—		13
Total Fund II	Total Fund II	—	31	—	—	31	Total Fund II	31	—	—	—		31
Look-through share of Fund II	Look-through share of Fund II	—	6	—	—	6	Look-through share of Fund II	6	—	—	—		6

Fund III	Fund III						Fund III
Oregon	Oregon	—	13	—	—	13	Oregon	13	—	—	—		13
Washington	Washington	—	25	—	—	25	Washington	25	—	—	—		25
California	California	—	19	—	—	19	California	19	—	—	—		19
Total Fund III	Total Fund III	—	57	—	—	57	Total Fund III	57	—	—	—		57
Look-through share of Fund III	Look-through share of Fund III	—	3	—	—	3	Look-through share of Fund III	3	—	—	—		3

Fund IV	Fund IV						Fund IV
Oregon	Oregon	—	20	—	—	20	Oregon	20	—	—	—		20
Washington	Washington	—	33	—	—	33	Washington	33	—	—	—		33
Total Fund IV	Total Fund IV	—	53	—	—	53	Total Fund IV	53	—	—	—		53
Look-through share of Fund IV	Look-through share of Fund IV	—	8	—	—	8	Look-through share of Fund IV	8	—	—	—		8

Total Timber Funds	Total Timber Funds	—	141	—	—	141	Total Timber Funds	141	—	—	—		141
Look-through share of Funds	Look-through share of Funds	—	17	—	—	17	Look-through share of Funds	17	—	—	—		17

6046

RESULTS OF OPERATIONS

CONSOLIDATED RESULTS

The following table provides key financial information by segment and on a consolidated basis:


		Three Months Ended June 30,			Six Months Ended June 30,			Three Months Ended March 31,
Financial Information (in millions)	Financial Information (in millions)	2020	2019	2020	2019	Financial Information (in millions)	2021	2020
Sales	Sales					Sales
Southern Timber	Southern Timber	$46.8	$46.2	$99.7	$107.0	Southern Timber	$51.7	$53.0
Pacific Northwest Timber	Pacific Northwest Timber	26.2	18.6	57.2	39.1	Pacific Northwest Timber	41.5	31.1
New Zealand Timber	New Zealand Timber	41.8	62.1	79.3	119.3	New Zealand Timber	57.6	37.5
Timber Funds	Timber Funds	7.5	—	7.5	—	Timber Funds	14.9	—
Real Estate	Real Estate					Real Estate
Improved Development	Improved Development	6.4	0.2	6.4	0.5	Improved Development	0.3	—
Unimproved Development		8.4	14.4	8.4	15.4

Rural ~~(a)~~	Rural ~~(a)~~	27.2	7.1	29.6	26.3	Rural ~~(a)~~	9.8	2.4
Timberlands & Non-Strategic (a)		9.6	0.8	9.6	1.2
Deferred Revenue/Other (b)		(1.7)	—	(1.5)	0.1

Deferred Revenue/Other (a)						Deferred Revenue/Other (a)	0.5	0.1
Large Dispositions	Large Dispositions	—	—	116.0	—	Large Dispositions	—	116.0
Total Real Estate	Total Real Estate	50.0	22.5	168.6	43.5	Total Real Estate	10.5	118.5
Trading	Trading	24.3	35.5	43.3	67.5	Trading	16.7	19.0
Intersegment Eliminations	Intersegment Eliminations	(1.0)	(0.1)	(0.9)	(0.1)	Intersegment Eliminations	(1.5)	—
Total Sales	Total Sales	$195.6	$184.8	$454.8	$376.3	Total Sales	$191.4	$259.1

Operating Income (Loss)	Operating Income (Loss)					Operating Income (Loss)
Southern Timber	Southern Timber	$11.2	$14.7	$26.3	$36.3	Southern Timber	$17.3	$15.1
Pacific Northwest Timber	Pacific Northwest Timber	(6.7)	(3.8)	(7.6)	(7.6)	Pacific Northwest Timber	1.3	(0.9)
New Zealand Timber	New Zealand Timber	5.0	12.8	10.4	28.5	New Zealand Timber	14.0	5.4
Timber Funds	Timber Funds	(1.9)	—	(1.9)	—	Timber Funds	1.5	—
Real Estate (b)(c)		24.8	15.5	51.6	25.5
Real Estate (b)						Real Estate (b)	1.7	26.8
Trading	Trading	0.1	(0.2)	0.1	0.3	Trading	0.2	—
Corporate and Other	Corporate and Other	(20.9)	(7.6)	(28.6)	(13.1)	Corporate and Other	(7.6)	(7.8)
Operating Income	Operating Income	11.7	31.4	50.2	69.9	Operating Income	28.5	38.6
Interest expense, interest income and other	Interest expense, interest income and other	(8.3)	(6.9)	(16.6)	(13.2)	Interest expense, interest income and other	(10.0)	(8.5)
Income tax expense	Income tax expense	(2.9)	(3.6)	(6.7)	(8.0)	Income tax expense	(3.5)	(3.7)
Net Income	Net Income	0.5	20.9	26.9	48.7	Net Income	15.0	26.4
Less: Net loss (income) attributable to noncontrolling interest in consolidated affiliates		1.4	(2.1)	0.9	(5.2)
Less: Net income attributable to noncontrolling interests in consolidated affiliates						Less: Net income attributable to noncontrolling interests in consolidated affiliates	(3.8)	(0.5)
Net Income Attributable to Rayonier, L.P.	Net Income Attributable to Rayonier, L.P.	$1.9	$18.8	$27.8	$43.5	Net Income Attributable to Rayonier, L.P.	$11.2	$25.9
Less: Net income attributable to noncontrolling interest in the Operating Partnership		(0.2)	—	(0.2)	—
Less: Net income attributable to noncontrolling interests in the Operating Partnership						Less: Net income attributable to noncontrolling interests in the Operating Partnership	(0.4)	—
Net Income Attributable to Rayonier Inc.	Net Income Attributable to Rayonier Inc.	$1.7	$18.8	$27.6	$43.5	Net Income Attributable to Rayonier Inc.	$10.8	$25.9

Adjusted EBITDA (d)
Adjusted EBITDA (c)						Adjusted EBITDA (c)
Southern Timber	Southern Timber	$26.4	$27.6	$59.7	$68.9	Southern Timber	$31.7	$33.3
Pacific Northwest Timber	Pacific Northwest Timber	3.9	2.2	13.7	5.3	Pacific Northwest Timber	17.6	9.8
New Zealand Timber	New Zealand Timber	9.9	20.0	20.1	42.0	New Zealand Timber	21.2	10.2
Timber Funds	Timber Funds	0.7	—	0.7	—	Timber Funds	1.0	—
Real Estate	Real Estate	44.6	18.3	43.5	35.7	Real Estate	5.1	(1.1)
Trading	Trading	0.1	(0.2)	0.1	0.3	Trading	0.2	—
Corporate and Other	Corporate and Other	(7.0)	(7.3)	(12.0)	(12.5)	Corporate and Other	(7.3)	(5.0)
Total Adjusted EBITDA	Total Adjusted EBITDA	$78.6	$60.6	$125.7	$139.7	Total Adjusted EBITDA	$69.5	$47.1

(a)The three and six months ended June 30, 2019 reflects the reclassification of certain real estate sales between the Rural and Timberlands & Non-Strategic sales categories to better align with the way management internally evaluates real estate sales. See ~~Note 3~~ —~~Revenue~~ ~~for additional information.~~

~~(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)~~(b)The ~~six~~three months ended ~~June 30,~~March 31, 2020 ~~include~~includes $28.7 million from a Large Disposition.

~~(d)~~(c)Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators.

6147


		Three Months Ended June 30,						Six Months Ended June 30,					Three Months Ended March 31,
Southern Timber Overview	Southern Timber Overview	2020		2019		2020		2019		Southern Timber Overview	2021		2020
Sales Volume (in thousands of tons)	Sales Volume (in thousands of tons)									Sales Volume (in thousands of tons)
Pine Pulpwood	Pine Pulpwood	1,003		755		2,136		1,877		Pine Pulpwood	843		1,133
Pine Sawtimber	Pine Sawtimber	497		462		1,177		1,206		Pine Sawtimber	638		680
Total Pine Volume	Total Pine Volume	1,500		1,217		3,313		3,083		Total Pine Volume	1,481		1,813
Hardwood	Hardwood	35		57		65		127		Hardwood	31		30
Total Volume	Total Volume	1,535		1,274		3,379		3,209		Total Volume	1,512		1,843

Percentage Delivered Sales	Percentage Delivered Sales	41	%	40	%	36	%	32	%	Percentage Delivered Sales	36	%	32	%
Percentage Stumpage Sales	Percentage Stumpage Sales	59	%	60	%	64	%	68	%	Percentage Stumpage Sales	64	%	68	%

Net Stumpage Pricing (dollars per ton)	Net Stumpage Pricing (dollars per ton)									Net Stumpage Pricing (dollars per ton)
Pine Pulpwood	Pine Pulpwood	$15.94		$17.16		$16.00		$17.63		Pine Pulpwood	$17.10		$16.05
Pine Sawtimber	Pine Sawtimber	25.48		25.82		26.16		26.16		Pine Sawtimber	27.51		26.67
Weighted Average Pine	Weighted Average Pine	$19.11		$20.45		$19.61		$20.97		Weighted Average Pine	$21.58		$20.03
Hardwood	Hardwood	10.80		16.86		11.68		15.17		Hardwood	10.51		12.74
Weighted Average Total	Weighted Average Total	$18.91		$20.29		$19.45		$20.74		Weighted Average Total	$21.35		$19.91

Summary Financial Data (in millions of dollars)	Summary Financial Data (in millions of dollars)									Summary Financial Data (in millions of dollars)
Timber Sales	Timber Sales	$41.6		$37.0		$89.0		$88.0		Timber Sales	$44.2		$47.5
Less: Cut, Haul & Freight	Less: Cut, Haul & Freight	(12.5)		(11.1)		(23.3)		(21.5)		Less: Cut, Haul & Freight	(11.9)		(10.8)

Net Stumpage Sales	Net Stumpage Sales	$29.0		$25.9		$65.7		$66.6		Net Stumpage Sales	$32.3		$36.7

Non-Timber Sales	Non-Timber Sales	5.2		9.2		10.7		19.0		Non-Timber Sales	7.5		5.5
Total Sales	Total Sales	$46.8		$46.2		$99.7		$107.0		Total Sales	$51.7		$53.0

Operating Income	Operating Income	$11.2		$14.7		$26.3		$36.3		Operating Income	$17.3		$15.1

(+) Depreciation, depletion and amortization	(+) Depreciation, depletion and amortization	15.2		12.9		33.4		32.6		(+) Depreciation, depletion and amortization	14.4		18.2
Adjusted EBITDA (a)	Adjusted EBITDA (a)	$26.4		$27.6		$59.7		$68.9		Adjusted EBITDA (a)	$31.7		$33.3

Other Data	Other Data									Other Data

Period-End Acres (in thousands)	Period-End Acres (in thousands)	1,763		1,808		1,763		1,808		Period-End Acres (in thousands)	1,751		1,780

(a)Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators.

6248


		Three Months Ended June 30,						Six Months Ended June 30,					Three Months Ended March 31,
Pacific Northwest Timber Overview	Pacific Northwest Timber Overview	2020		2019		2020		2019		Pacific Northwest Timber Overview	2021		2020
Sales Volume (in thousands of tons)	Sales Volume (in thousands of tons)									Sales Volume (in thousands of tons)
Pulpwood	Pulpwood	86		54		168		116		Pulpwood	79		82
Sawtimber	Sawtimber	299		197		693		417		Sawtimber	457		393

Total Volume	Total Volume	385		250		861		533		Total Volume	536		476

Sales Volume (converted to MBF)	Sales Volume (converted to MBF)									Sales Volume (converted to MBF)
Pulpwood	Pulpwood	8,152		5,076		15,941		11,009		Pulpwood	7,559		7,789
Sawtimber	Sawtimber	39,847		26,603		90,253		55,548		Sawtimber	57,905		50,406
Total Volume	Total Volume	47,999		31,679		106,193		66,557		Total Volume	65,464		58,194

Percentage Delivered Sales	Percentage Delivered Sales	98	%	100	%	87	%	100	%	Percentage Delivered Sales	78	%	78	%
Percentage Sawtimber Sales	Percentage Sawtimber Sales	78	%	79	%	81	%	78	%	Percentage Sawtimber Sales	85	%	83	%

Delivered Log Pricing (in dollars per ton)	Delivered Log Pricing (in dollars per ton)									Delivered Log Pricing (in dollars per ton)
Pulpwood	Pulpwood	$36.92		$42.26		$37.47		$43.81		Pulpwood	$29.36		$38.11
Sawtimber	Sawtimber	75.39		78.35		75.40		78.41		Sawtimber	90.98		75.40
Weighted Average Log Price	Weighted Average Log Price	$66.74		$70.61		$67.51		$70.88		Weighted Average Log Price	$81.64		$68.29

Summary Financial Data (in millions of dollars)	Summary Financial Data (in millions of dollars)									Summary Financial Data (in millions of dollars)
Timber Sales	Timber Sales	$25.5		$17.7		$56.0		$37.8		Timber Sales	$40.3		$30.6
Less: Cut and Haul	Less: Cut and Haul	(14.5)		(10.5)		(28.6)		(22.5)		Less: Cut and Haul	(16.0)		(14.2)
Net Stumpage Sales	Net Stumpage Sales	$11.0		$7.2		$27.4		$15.3		Net Stumpage Sales	$24.3		$16.4

Non-Timber Sales	Non-Timber Sales	0.7		0.9		1.2		1.3		Non-Timber Sales	1.3		0.5
Total Sales	Total Sales	$26.2		$18.6		$57.2		$39.1		Total Sales	$41.5		$31.1

Operating Loss		($6.7)		($3.8)		($7.6)		($7.6)
Operating Income (Loss)										Operating Income (Loss)	$1.3		($0.9)
(+) Depreciation, depletion and amortization	(+) Depreciation, depletion and amortization	10.6		6.0		21.3		12.9		(+) Depreciation, depletion and amortization	16.3		10.7
Adjusted EBITDA (a)	Adjusted EBITDA (a)	$3.9		$2.2		$13.7		$5.3		Adjusted EBITDA (a)	$17.6		$9.8

Other Data	Other Data									Other Data

Period-End Acres (in thousands)	Period-End Acres (in thousands)	507		379		507		379		Period-End Acres (in thousands)	507		384
Sawtimber (in dollars per MBF)	Sawtimber (in dollars per MBF)	$579		$587		$594		$599		Sawtimber (in dollars per MBF)	$730		$611
Estimated Percentage of Export Volume	Estimated Percentage of Export Volume	20	%	26	%	11	%	21	%	Estimated Percentage of Export Volume	10	%	2	%

(a)Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators.

6349


		Three Months Ended June 30,			Six Months Ended June 30,			Three Months Ended March 31,
New Zealand Timber Overview	New Zealand Timber Overview	2020	2019	2020	2019	New Zealand Timber Overview	2021	2020
Sales Volume (in thousands of tons)	Sales Volume (in thousands of tons)					Sales Volume (in thousands of tons)
Domestic Pulpwood (Delivered)	Domestic Pulpwood (Delivered)	106	125	207	238	Domestic Pulpwood (Delivered)	106	101
Domestic Sawtimber (Delivered)	Domestic Sawtimber (Delivered)	130	204	277	400	Domestic Sawtimber (Delivered)	159	147
Export Pulpwood (Delivered)	Export Pulpwood (Delivered)	27	37	44	77	Export Pulpwood (Delivered)	47	16
Export Sawtimber (Delivered)	Export Sawtimber (Delivered)	266	318	482	573	Export Sawtimber (Delivered)	287	216

Total Volume	Total Volume	529	684	1,010	1,288	Total Volume	599	481

Delivered Log Pricing (in dollars per ton)	Delivered Log Pricing (in dollars per ton)					Delivered Log Pricing (in dollars per ton)
Domestic Pulpwood	Domestic Pulpwood	$32.10	$39.10	$32.95	$39.16	Domestic Pulpwood	$40.15	$33.84
Domestic Sawtimber	Domestic Sawtimber	66.95	82.66	68.55	83.03	Domestic Sawtimber	80.95	69.97
Export Sawtimber	Export Sawtimber	98.75	111.81	97.00	113.78	Export Sawtimber	121.65	94.86
Weighted Average Log Price	Weighted Average Log Price	$76.92	$89.16	$75.60	$89.78	Weighted Average Log Price	$95.70	$74.16

Summary Financial Data (in millions of dollars)	Summary Financial Data (in millions of dollars)					Summary Financial Data (in millions of dollars)
Timber Sales	Timber Sales	$40.7	$61.0	$76.4	$115.6	Timber Sales	$57.3	$35.6
Less: Cut and Haul	Less: Cut and Haul	(15.6)	(22.9)	(30.8)	(43.1)	Less: Cut and Haul	(20.9)	(15.2)
Less: Port and Freight Costs	Less: Port and Freight Costs	(8.4)	(12.6)	(16.5)	(22.3)	Less: Port and Freight Costs	(12.0)	(8.0)
Net Stumpage Sales	Net Stumpage Sales	$16.7	$25.5	$29.1	$50.2	Net Stumpage Sales	$24.4	$12.4

Non-Timber Sales / Carbon Credits	Non-Timber Sales / Carbon Credits	1.0	1.1	2.9	3.6	Non-Timber Sales / Carbon Credits	0.2	1.9
Total Sales	Total Sales	$41.8	$62.1	$79.3	$119.3	Total Sales	$57.6	$37.5

Operating Income	Operating Income	$5.0	$12.8	$10.4	$28.5	Operating Income	$14.0	$5.4

(+) Depreciation, depletion and amortization	(+) Depreciation, depletion and amortization	4.9	7.2	9.7	13.5	(+) Depreciation, depletion and amortization	7.2	4.8

Adjusted EBITDA (a)	Adjusted EBITDA (a)	$9.9	$20.0	$20.1	$42.0	Adjusted EBITDA (a)	$21.2	$10.2

Other Data	Other Data					Other Data
New Zealand Dollar to U.S. Dollar Exchange Rate (b)	New Zealand Dollar to U.S. Dollar Exchange Rate (b)	0.6157	0.6659	0.6338	0.6745	New Zealand Dollar to U.S. Dollar Exchange Rate (b)	0.7217	0.6500
Net Plantable Period-End Acres (in thousands)	Net Plantable Period-End Acres (in thousands)	296	292	296	292	Net Plantable Period-End Acres (in thousands)	296	295
Export Sawtimber (in dollars per JAS m³)	Export Sawtimber (in dollars per JAS m³)	$114.82	$130.00	$112.79	$132.29	Export Sawtimber (in dollars per JAS m3)	$141.45	$110.29
Domestic Sawtimber (in $NZD per tonne)	Domestic Sawtimber (in $NZD per tonne)	$119.60	$136.55	$118.96	$135.47	Domestic Sawtimber (in $NZD per tonne)	$123.39	$118.41

(a)Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators.

(b)Represents the period-average rate.

6450


		Three Months Ended June 30,			Six Months Ended June 30,			Three Months Ended March 31,
Timber Funds Overview	Timber Funds Overview	2020	2019	2020	2019	Timber Funds Overview	2021	2020
Sales Volume (in thousands of tons)	Sales Volume (in thousands of tons)					Sales Volume (in thousands of tons)
Pulpwood	Pulpwood	10	—	10	—	Pulpwood	9	—
Sawtimber	Sawtimber	80	—	80	—	Sawtimber	136	—
Total Volume	Total Volume	90	—	90	—	Total Volume	145	—

Summary Financial Data (in millions of dollars)	Summary Financial Data (in millions of dollars)					Summary Financial Data (in millions of dollars)
Timber Sales	Timber Sales	$6.6	—	$6.6	—	Timber Sales	$13.6	—
Less: Cut and Haul	Less: Cut and Haul	(2.9)	—	(2.9)	—	Less: Cut and Haul	(5.5)	—
Net Stumpage Sales	Net Stumpage Sales	$3.7	—	$3.7	—	Net Stumpage Sales	$8.1	—


Timberland Management Fees	Timberland Management Fees	0.9	—	0.9	—	Timberland Management Fees	1.4	—
Total Sales	Total Sales	$7.5	—	$7.5	—	Total Sales	$14.9	—

Operating Loss		($1.9)	—	($1.9)	—
Operating loss attributable to NCI in Timber Funds		2.0	—	2.0	—

Operating Income						Operating Income	$1.5	—
Operating income attributable to NCI in Timber Funds						Operating income attributable to NCI in Timber Funds	(1.1)	—

(+) Depreciation, depletion and amortization (“Look-through”)	(+) Depreciation, depletion and amortization (“Look-through”)	0.5	—	0.5	—	(+) Depreciation, depletion and amortization (“Look-through”)	0.6	—
Adjusted EBITDA (a)	Adjusted EBITDA (a)	$0.7	—	$0.7	—	Adjusted EBITDA (a)	$1.0	—

Other Data	Other Data					Other Data
Period-End Acres (in thousands)	Period-End Acres (in thousands)	141	—	141	—	Period-End Acres (in thousands)	141	—
“Look-through” Period-End Acres (in thousands)	“Look-through” Period-End Acres (in thousands)	17	—	17	—	“Look-through” Period-End Acres (in thousands)	17	—

(a)Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators.


		Three Months Ended June 30,			Six Months Ended June 30,			Three Months Ended March 31,
Trading Overview	Trading Overview	2020	2019	2020	2019	Trading Overview	2021	2020
Sales Volume (in thousands of tons)	Sales Volume (in thousands of tons)					Sales Volume (in thousands of tons)

NZ Trading - Domestic	NZ Trading - Domestic	7	33	15	58	NZ Trading - Domestic	13	8
NZ Trading - Export	NZ Trading - Export	259	292	458	548	NZ Trading - Export	128	199
Total Volume	Total Volume	266	325	473	606	Total Volume	141	207

Summary Financial Data (in millions of dollars)	Summary Financial Data (in millions of dollars)					Summary Financial Data (in millions of dollars)
Trading Sales	Trading Sales	$24.3	$35.2	$42.9	$67.0	Trading Sales	$16.2	$18.6
Non-Timber Sales	Non-Timber Sales	0.1	0.3	0.4	0.5	Non-Timber Sales	0.4	0.3
Total Sales	Total Sales	$24.3	$35.5	$43.3	$67.5	Total Sales	$16.7	$19.0

Operating Income (Loss)		$0.1	($0.2)	$0.1	$0.3
(+) Depreciation, depletion and amortization		—	—	—	—
Operating Income						Operating Income	$0.2	—

Adjusted EBITDA (a)	Adjusted EBITDA (a)	$0.1	($0.2)	$0.1	$0.3	Adjusted EBITDA (a)	$0.2	—

(a)Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators.

6551


		Three Months Ended June 30,			Six Months Ended June 30,			Three Months Ended March 31,
Real Estate Overview	Real Estate Overview	2020	2019	2020	2019	Real Estate Overview	2021	2020
Sales (in millions of dollars)	Sales (in millions of dollars)					Sales (in millions of dollars)
Improved Development	Improved Development	$6.4	$0.2	$6.4	$0.5	Improved Development	$0.3	—
Unimproved Development		8.4	14.4	8.4	15.4

Rural ~~(a)~~	Rural ~~(a)~~	27.2	7.1	29.6	26.3	Rural ~~(a)~~	9.8	2.4
Timberlands & Non-Strategic - U.S. (a)		9.6	0.8	9.6	1.2

Deferred Revenue/Other (a)						Deferred Revenue/Other (a)	0.5	0.1
Large Dispositions (b)	Large Dispositions (b)	—	—	116.0	—	Large Dispositions (b)	—	116.0

Deferred Revenue/Other (c)		(1.7)	—	(1.5)	0.1
Total Sales	Total Sales	$50.0	$22.5	$168.6	$43.5	Total Sales	$10.5	$118.5

Acres Sold	Acres Sold					Acres Sold
Improved Development	Improved Development	122.0	0.9	122.0	2.0	Improved Development	0.6	—
Unimproved Development		570	784	570	791
Rural (a)		7,710	1,886	8,334	7,386
Timberlands & Non-Strategic - U.S. (a)		11,907	594	11,907	765

Rural						Rural	2,394	624

Large Dispositions (b)	Large Dispositions (b)	—	—	66,946	—	Large Dispositions (b)	—	66,946
Total Acres Sold	Total Acres Sold	20,310	3,265	87,879	8,944	Total Acres Sold	2,395	67,570

Gross Price per Acre (dollars per acre)	Gross Price per Acre (dollars per acre)					Gross Price per Acre (dollars per acre)
Improved Development	Improved Development	$52,672	$198,276	$52,672	$251,961	Improved Development	$406,452	—
Unimproved Development		14,780	18,402	14,780	19,507
Rural (a)		3,532	3,768	3,555	3,563
Timberlands & Non-Strategic - U.S. (a)		807	1,373	807	1,578

Rural						Rural	4,079	3,842

Large Dispositions (b)	Large Dispositions (b)	—	—	1,733	—	Large Dispositions (b)	—	1,733
Weighted Average (Total) ~~(d)~~(c)	Weighted Average (Total) ~~(d)~~(c)	$2,545	$6,899	$2,584	$4,860	Weighted Average (Total) ~~(d)~~(c)	$4,183	$3,842
Weighted Average (Adjusted) ~~(e)~~(d)	Weighted Average (Adjusted) ~~(e)~~(d)	$2,242	$6,848	$2,290	$4,803	Weighted Average (Adjusted) ~~(e)~~(d)	$4,079	$3,842

Sales (Excluding Large Dispositions)	Sales (Excluding Large Dispositions)	$50.0	$22.5	$52.5	$43.5	Sales (Excluding Large Dispositions)	$10.5	$2.5

Operating Income	Operating Income	$24.8	$15.5	$51.6	$25.5	Operating Income	$1.7	$26.8
(+) Depreciation, depletion and amortization - U.S.		6.7	1.2	7.1	4.5
(+) Depreciation, depletion and amortization						(+) Depreciation, depletion and amortization	1.6	0.4

(+) Non-cash cost of land and improved development - U.S.		13.0	1.6	13.4	5.6
(+) Non-cash cost of land and improved development						(+) Non-cash cost of land and improved development	1.8	0.4

(–) Large Dispositions (b)	(–) Large Dispositions (b)	—	—	(28.7)	—	(–) Large Dispositions (b)	—	(28.7)
Adjusted EBITDA (f)		$44.6	$18.3	$43.5	$35.7
Adjusted EBITDA (e)						Adjusted EBITDA (e)	$5.1	($1.1)

(a)~~The three~~Includes deferred revenue adjustments, revenue true-ups and ~~six months ended June 30, 2019 reflects the reclassification of certain real estate~~marketing fees related to Improved Development sales ~~between the Rural~~in addition to residential and ~~Timberlands & Non-Strategic sales categories to better align with the way management internally evaluates real estate sales. See~~ ~~Note 3 - Revenue~~ ~~for additional information.~~commercial lease revenue.

(b)Large Dispositions are defined as transactions involving the sale of timberland that exceed $20 million in size and do not have a demonstrable premium relative to timberland value. In March 2020, we completed the disposition of approximately 67,000 acres located in Mississippi for a sales price and gain of approximately $116.0 million and $28.7 million, respectively.

(c)~~Includes deferred revenue adjustments and marketing fees related to Improved Development sales in addition to residential and commercial lease revenue.~~

~~(d)~~Excludes Large Dispositions.

~~(e)~~(d)Excludes Improved Development and Large Dispositions.

~~(f)~~(e)Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators.

6652


		Three Months Ended June 30,			Six Months Ended June 30,			Three Months Ended March 31,
Capital Expenditures By Segment (in millions of dollars)	Capital Expenditures By Segment (in millions of dollars)	2020	2019	2020	2019	Capital Expenditures By Segment (in millions of dollars)	2021	2020
Timber Capital Expenditures	Timber Capital Expenditures					Timber Capital Expenditures
Southern Timber	Southern Timber					Southern Timber

Reforestation, silviculture and other capital expenditures	Reforestation, silviculture and other capital expenditures	$2.6	$5.7	$9.7	$8.5	Reforestation, silviculture and other capital expenditures	$3.3	$7.1
Property taxes	Property taxes	1.7	1.8	3.4	3.6	Property taxes	1.5	1.7
Lease payments	Lease payments	0.2	0.3	1.3	1.9	Lease payments	0.8	1.1
Allocated overhead	Allocated overhead	1.0	0.9	2.2	2.2	Allocated overhead	1.2	1.3
Subtotal Southern Timber	Subtotal Southern Timber	$5.5	$8.7	$16.7	$16.1	Subtotal Southern Timber	$6.7	$11.1
Pacific Northwest Timber	Pacific Northwest Timber					Pacific Northwest Timber

Reforestation, silviculture and other capital expenditures	Reforestation, silviculture and other capital expenditures	0.9	0.8	3.3	3.6	Reforestation, silviculture and other capital expenditures	2.7	2.3
Property taxes	Property taxes	0.2	0.2	0.4	0.4	Property taxes	0.3	0.2

Allocated overhead	Allocated overhead	1.0	0.8	1.8	1.6	Allocated overhead	1.2	0.8
Subtotal Pacific Northwest Timber	Subtotal Pacific Northwest Timber	$2.2	$1.8	$5.5	$5.6	Subtotal Pacific Northwest Timber	$4.1	$3.3

New Zealand Timber	New Zealand Timber					New Zealand Timber
Reforestation, silviculture and other capital expenditures	Reforestation, silviculture and other capital expenditures	2.0	2.3	3.5	4.0	Reforestation, silviculture and other capital expenditures	2.0	1.5
Property taxes	Property taxes	0.1	0.1	0.3	0.3	Property taxes	0.2	0.2
Lease payments	Lease payments	0.9	1.7	1.3	2.1	Lease payments	0.5	0.4
Allocated overhead	Allocated overhead	0.6	0.7	1.3	1.3	Allocated overhead	0.7	0.6
Subtotal New Zealand Timber	Subtotal New Zealand Timber	$3.7	$4.8	$6.3	$7.7	Subtotal New Zealand Timber	$3.4	$2.7
Total Timber Segments Capital Expenditures	Total Timber Segments Capital Expenditures	$11.4	$15.3	$28.5	$29.4	Total Timber Segments Capital Expenditures	$14.2	$17.1
Timber Funds (“Look-through”) (a)	Timber Funds (“Look-through”) (a)	0.1	—	0.1	—	Timber Funds (“Look-through”) (a)	0.2	—
Real Estate	Real Estate	0.1	0.1	0.2	0.1	Real Estate	0.1	0.1

Total Capital Expenditures	Total Capital Expenditures	$11.6	$15.4	$28.8	$29.5	Total Capital Expenditures	$14.5	$17.2

Timberland Acquisitions	Timberland Acquisitions					Timberland Acquisitions
Southern Timber	Southern Timber	$0.1	$14.0	$24.2	$15.9	Southern Timber	$29.9	$24.1
Pacific Northwest Timber		—	—	—	3.6

New Zealand Timber		—	—	—	6.9

Timberland Acquisitions	Timberland Acquisitions	$0.1	$14.0	$24.2	$26.4	Timberland Acquisitions	$29.9	$24.1

Real Estate Development Investments (b)	Real Estate Development Investments (b)	$1.9	($0.7)	$3.6	$1.0	Real Estate Development Investments (b)	$3.0	$1.7

(a)~~Excludes $0.6~~The three months ended March 31, 2021 excludes $1.3 million inof capital expenditures attributable to noncontrolling interests in Timber Funds.

(b)~~The three~~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 ~~six months ended June 30, 2019 includes $3.7 million~~included in Non-Cash Cost of ~~reimbursements from community development bonds.~~Land and Improved Development.

6753

The following tables summarize sales, operating income (loss) and Adjusted EBITDA variances for ~~June 30,~~March 31, 2021 versus March 31, 2020 ~~versus June 30, 2019~~ (millions of dollars):


Sales	Sales	Southern Timber		Pacific Northwest Timber		New Zealand Timber		Timber Funds		Real Estate		Trading	Intersegment Eliminations		Total	Sales	Southern Timber		Pacific Northwest Timber		New Zealand Timber		Timber Funds		Real Estate		Trading	Intersegment Eliminations		Total
Three Months Ended June 30, 2019		$46.2		$18.6		$62.1		—		$22.5		$35.5	($0.1)		$184.8
Three Months Ended March 31, 2020																Three Months Ended March 31, 2020	$53.0		$31.1		$37.5		—		$118.5		$19.0	—		$259.1
Volume	Volume	5.3		3.9		(13.4)		—		117.6		(6.4)	—		107.0	Volume	(6.6)		2.1		9.2		—		6.3		(5.9)	—		5.1
Price	Price	(2.1)		(0.1)		(3.4)		—		(88.4)		(4.6)	—		(98.6)	Price	2.2		5.8		9.5		—		1.1		3.5	—		22.1
Non-timber sales	Non-timber sales	(4.0)		(0.2)		—		—		—		(0.2)	—		(4.4)	Non-timber sales	2.0		0.8		(1.9)		—		—		0.1	—		1.0
Foreign exchange (a)	Foreign exchange (a)	—		—		(1.7)		—		—		—	—		(1.7)	Foreign exchange (a)	—		—		1.7		—		—		—	—		1.7
Other	Other	1.4	(b)	4.0	(b)	(1.8)	(c)	7.5	(d)	(1.7)	(e)	—	(0.9)	(f)	8.5	Other	1.1	(b)	1.7	(b)	1.6	(c)	14.9	(d)	(115.4)	(e)	—	(1.5)	(f)	(97.6)
Three Months Ended June 30, 2020		$46.8		$26.2		$41.8		$7.5		$50.0		$24.3	($1.0)		$195.6
Three Months Ended March 31, 2021																Three Months Ended March 31, 2021	$51.7		$41.5		$57.6		$14.9		$10.5		$16.7	($1.5)		$191.4

(a) Net of currency hedging impact.

(b) Includes variance due to stumpage versus delivered sales.

(d) Timber Funds iswas a new segment in Q2 2020. Includes ~~$5.8~~$11.9 million of sales attributable to noncontrolling interests in ~~the~~ Timber ~~Funds.~~Funds and $1.4 million ~~Also includes $0.9 million~~ of sales related to timberland investment management fees paid to us by the timber funds.

(e) Includes ~~$1.9~~$116.0 million of sales from a Large Disposition in Q1 2020, partially offset by deferred revenue adjustments ~~partially offset by a $0.2 million increase in~~and marketing ~~fees.~~fees related to Improved Development sales, as well as residential and commercial lease revenue.

(f) Includes ~~$0.9~~$1.4 million of Intersegment eliminations related to timberland management fees paid to us by the timber funds and reported as sales within the Timber Funds segment.

Sales Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Real Estate Trading Intersegment Eliminations Total
Six Months Ended
June 30, 2019 $107.0 $39.1 $119.3 — $43.5 $67.5 ($0.1) $376.3
Volume 3.5 9.4 (24.4) — 58.3 (14.6) — 32.2
Price (4.3) 2.7 (10.7) — (47.6) (9.5) — (69.4)
Non-timber sales (8.3) — (0.5) — — (0.1) — (8.9)
Foreign exchange (a) — — (2.8) — — — — (2.8)
Other 1.8 (b) 6.0 (b) (1.6) (c) 7.5 (d) 114.4 (e) — (0.8) (f) 127.4
Six Months Ended
June 30, 2020 $99.7 $57.2 $79.3 $7.5 $168.6 $43.3 ($0.9) $454.8

Sales

Southern Timber

Pacific Northwest Timber

New Zealand Timber

Timber Funds

Real Estate

Trading

Intersegment Eliminations

Total


Operating Income (Loss)	Southern Timber	Pacific Northwest Timber	New Zealand Timber	Timber Funds	Real Estate	Trading	Corporate and Other	Total
Three Months Ended March 31, 2020	$15.1	($0.9)	$5.4	—	$26.8	—	($7.8)	$38.6
Volume	(3.4)	0.3	1.8	—	4.5	—	—	3.2
Price	2.2	5.8	9.5	—	1.1	—	—	18.6
Cost	0.6	(0.4)	0.2	—	(1.5)	0.5	0.2	(0.4)
Non-timber income	2.2	0.8	(1.8)	—	—	(0.3)	—	0.9
Foreign exchange (a)	—	—	(0.4)	—	—	—	—	(0.4)
Depreciation, depletion & amortization	0.6	(4.3)	(0.7)	—	(0.3)	—	—	(4.7)
Non-cash cost of land and improved development	—	—	—	—	(0.4)	—	—	(0.4)
Other (b)	—	—	—	1.5	(28.5)	—	—	(27.0)
Three Months Ended March 31, 2021	$17.3	$1.3	$14.0	$1.5	$1.7	$0.2	($7.6)	$28.5

(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)~~ Timber Funds iswas a new segment in Q2 ~~2020.~~ ~~Includes $5.8~~2020 and consists of $1.1 million of ~~sales~~operating income attributable to noncontrolling interests in ~~the~~ Timber ~~Funds.~~ ~~Also includes $0.9~~Funds and $0.4 million of ~~sales related~~operating income attributable to ~~timberland investment management fees paid to us by the timber funds.~~

~~(e)~~Rayonier. Real Estate includes ~~$116.0~~$28.7 million of operating income from a Large Disposition in ~~Large Dispositions and a $0.1 million increase in marketing fees,~~ Q1 2020, partially offset by ~~$1.7 million of~~ deferred revenue ~~adjustments.~~

~~(f) Includes $0.9 million of Intersegment eliminations~~adjustments and marketing fees related to ~~timberland management fees paid to us by the timber funds~~Improved Development sales, as well as residential and ~~reported as sales within the Timber Funds segment.~~

commercial lease revenue.

Operating Income (Loss) Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Real Estate Trading Corporate and Other Total
Three Months Ended
June 30, 2019 $14.7 ($3.8) $12.8 — $15.5 ($0.2) ($7.6) $31.4
Volume 2.6 (0.2) (4.5) — 98.5 — — 96.4
Price (2.1) (0.1) (3.4) — (88.4) — — (94.0)
Cost (0.4) (1.1) 0.3 — 3.0 0.5 0.3 2.6
Non-timber income (3.9) (0.1) 0.1 — — (0.2) — (4.1)
Foreign exchange (a) — — (0.6) — — — — (0.6)
Depreciation, depletion & amortization 0.3 (1.4) 0.3 — 0.3 — (0.1) (0.6)
Non-cash cost of land and improved development — — — — (3.6) — — (3.6)
Other (b) — — — (1.9) (0.5) — (13.5) (15.9)
Three Months Ended
June 30, 2020 $11.2 ($6.7) $5.0 ($1.9) $24.8 $0.1 ($20.9) $11.7

Operating Income (Loss)

Southern Timber

Pacific Northwest Timber

New Zealand Timber

Timber Funds

Real Estate

Trading

Corporate and Other

Total

~~(a) Net of currency hedging impact.~~

(b) Timber Funds is a new segment in Q2 2020 and includes a $2.0 million operating loss attributable to noncontrolling interests in Timber Funds. Real Estate includes $0.5 million of deferred revenue adjustments for Improved Development sales. Corporate and Other includes $13.5 million in costs related to the merger with Pope Resources.

Operating Income (Loss) Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Real Estate Trading Corporate and Other Total
Six Months Ended
June 30, 2019 $36.3 ($7.6) $28.5 — $25.5 $0.3 ($13.1) $69.9
Volume 1.7 (0.6) (8.4) — 42.6 — — 35.3
Price (4.3) 2.7 (10.7) — (47.6) — — (59.9)
Cost — (1.5) (0.4) — 0.7 (0.1) 0.5 (0.8)
Non-timber income (8.3) — (0.3) — — (0.1) — (8.7)
Foreign exchange (a) — — 1.3 — — — — 1.3
Depreciation, depletion & amortization 0.9 (0.6) 0.4 — 3.3 — — 4.0
Non-cash cost of land and improved development — — — — (1.1) — — (1.1)
Other (b) — — — (1.9) 28.2 — (16.0) 10.2
Six Months Ended
June 30, 2020 $26.3 ($7.6) $10.4 ($1.9) $51.6 $0.1 ($28.6) $50.2

~~(a) Net of currency hedging impact.~~

(b) Timber Funds is a new segment in Q2 2020 and includes a $2.0 million operating loss attributable to noncontrolling interests in Timber Funds. Real Estate includes $28.7 million of operating income from a Large Disposition, offset by $0.5 million of deferred revenue adjustments for Improved Development sales. Corporate and Other includes $16.0 million in costs related to the merger with Pope Resources.

Adjusted EBITDA (a) Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Real Estate Trading Corporate and Other Total
Three Months Ended
June 30, 2019 $27.6 $2.2 $20.0 — $18.3 ($0.2) ($7.3) $60.6
Volume 5.2 3.0 (5.9) — 113.6 — — 115.9
Price (2.1) (0.1) (3.4) — (88.4) — — (94.0)
Cost (0.4) (1.1) 0.3 — 3.0 0.5 0.3 2.6
Non-timber income (3.9) (0.1) 0.1 — — (0.2) — (4.1)
Foreign exchange (b) — — (1.2) — — — — (1.2)
Other (c) — — — 0.7 (1.9) — (1.2)
Three Months Ended
June 30, 2020 $26.4 $3.9 $9.9 $0.7 $44.6 $0.1 ($7.0) $78.6


Adjusted EBITDA (a)	Southern Timber	Pacific Northwest Timber	New Zealand Timber	Timber Funds	Real Estate	Trading	Corporate and Other	Total
Three Months Ended March 31, 2020	$33.3	$9.8	$10.2	—	($1.1)	—	($5.0)	$47.1
Volume	(6.6)	1.6	2.9	—	6.3	—	—	4.2
Price	2.2	5.8	9.5	—	1.1	—	—	18.6
Cost	0.6	(0.4)	0.2	—	(1.5)	0.5	(2.3)	(2.9)
Non-timber income	2.2	0.8	(1.8)	—	—	(0.3)	—	0.9
Foreign exchange (b)	—	—	0.2	—	—	—	—	0.2
Other (c)	—	—	—	1.0	0.3	—	—	1.3
Three Months Ended March 31, 2021	$31.7	$17.6	$21.2	$1.0	$5.1	$0.2	($7.3)	$69.5

(a)Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators below.

(b)Net of currency hedging impact.

(c)Timber Funds iswas a new segment in Q2 2020. Real Estate includes ~~$1.9 million of~~ deferred revenue ~~adjustments.~~adjustments and marketing fees related to Improved Development sales, as well as residential and commercial lease revenue.

Adjusted EBITDA (a) Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Real Estate Trading Corporate and Other Total
Six Months Ended
June 30, 2019 $68.9 $5.3 $42.0 — $35.7 $0.3 ($12.5) $139.7
Volume 3.4 7.2 (11.0) — 56.6 — — 56.2
Price (4.3) 2.7 (10.7) — (47.6) — — (59.9)
Cost — (1.5) (0.4) — 0.7 (0.1) 0.5 (0.8)
Non-timber income (8.3) — (0.3) — — (0.1) — (8.7)
Foreign exchange (b) — — 0.5 — — — — 0.5
Other (c) — — — 0.7 (1.9) — (1.2)
Six Months Ended
June 30, 2020 $59.7 $13.7 $20.1 $0.7 $43.5 $0.1 ($12.0) $125.7

Adjusted EBITDA (a)

Southern Timber

Pacific Northwest Timber

New Zealand Timber

Timber Funds

Real Estate

Trading

Corporate and Other

Total

~~(a)Adjusted EBITDA is a non-GAAP measure defined and reconciled in~~ ~~Performance and Liquidity Indicatorsbelow.~~

~~(b)Net of currency hedging impact.~~

~~(c)Timber Funds is a new segment in Q2 2020. Real Estate includes $1.9 million of deferred revenue adjustments.~~

SOUTHERN TIMBER

~~Second~~ First quarter sales of ~~$46.8~~$51.7 million ~~increased $0.6~~decreased $1.3 million, or 1%2%, versus the prior year period primarily due to ~~higher~~lower harvest volumes, partially offset by ~~lower~~higher average net stumpage prices and higher pipeline easement revenue. Harvest volumes ~~increased 20%~~decreased 18% to ~~1.54~~1.51 million tons versus ~~1.27~~1.84 million tons in the prior year ~~period, primarily~~period. The decline in volume was largely due to ~~strong pulpwood demand.~~the timing of harvest operations as compared to the prior year, as well as operational disruptions attributable to wet ground conditions in Georgia and winter snowstorms in the Gulf region. Average pine sawtimber stumpage prices ~~decreased 1%~~increased 3% to ~~$25.48~~$27.51 per ton versus ~~$25.82~~$26.67 per ton in the prior year period. Robust demand from sawmills and growing demand from the export market coupled with constricted supply due to weather conditions translated into favorable sawtimber pricing across our markets. Average pine pulpwood stumpage prices increased 7% to $17.10 per ton versus $16.05 per ton in the prior year period ~~as lower chip-n-saw prices were partially offset by higher prices for larger diameter sawlogs~~ due to ~~the resurgence in southern yellow pine exports to China. Average pine pulpwood stumpage prices decreased 7% to $15.94 per ton versus $17.16 per ton in the prior year period primarily~~favorable geographic mix as well as tighter supply due to ~~an increase in available log supply resulting from drier ground conditions in the current quarter versus the prior year period.~~adverse weather conditions. Overall, weighted-average stumpage prices (including hardwood) ~~decreased~~increased 7% to ~~$18.91~~$21.35 per ton versus ~~$20.29 per ton in the prior year period~~, primarily driven by lower pulpwood prices coupled with a 5% increase in the pulpwood mix. Operating income of $11.2 million decreased $3.5 million versus the prior year period as lower non-timber income ($3.9 million), lower net stumpage prices ($2.1 million) and higher indirect and overhead expenses ($0.4 million) were partially offset by higher volumes ($2.6 million) and lower depletion rates ($0.3 million). Second quarter Adjusted EBITDA of $26.4 million was $1.2 million below the prior year period.

Year-to-date sales of $99.7 million decreased $7.3 million, or 7% versus the prior year period. Harvest volumes increased 5% to 3.38 million tons versus 3.21 million tons in the prior year period, primarily due to strong pulpwood demand. Average pine sawtimber stumpage prices were flat at $26.16 per ton. Average pine pulpwood stumpage prices decreased 9% to $16.00 per ton versus $17.63 per ton in the prior year period, primarily due to an increase in available log supply resulting from drier ground conditions versus the prior year period. Overall, weighted-average stumpage prices (including hardwood) decreased 6% to $19.45 per ton versus $20.74$19.91 per ton in the prior year period. Operating income of ~~$26.3~~$17.3 million ~~decreased $10.0~~increased $2.3 million versus the prior year period ~~as a result of lower non-timber income ($8.3 million) and lower~~due to higher net stumpage prices ($~~4.3~~2.2 million), ~~partially offset by~~ higher ~~volumes~~non-timber income ($~~1.7~~2.2 million), lower costs ($0.6 million) and lower depletion rates ($~~0.9~~0.6 million), partially offset by lower volumes ($3.4 million).

First quarter Adjusted EBITDA of $31.7 million was 5%, or $1.6 million, below the prior year period.

PACIFIC NORTHWEST TIMBER

~~Second~~First quarter sales of ~~$26.2~~$41.5 million increased ~~$7.6~~$10.4 million, or ~~41%~~34%, versus the prior year period. Harvest volumes increased ~~54%~~13% to ~~385,000~~536,000 tons versus ~~250,000~~476,000 tons in the prior year period, primarily due to ~~comparatively light harvest activity in the prior year quarter coupled with 55,000 tons of~~ incremental volume from the ~~acquired~~ Pope Resources ~~timberlands.~~acquisition. Average delivered sawtimber prices ~~decreased 4%~~increased 21% to ~~$75.39~~$90.98 per ton versus ~~$78.35~~$75.40 per ton in the prior year period, ~~due to a higher mix of chip-n-saw volume in the current quarter, partially offset by a higher percentage of Douglas-fir sawtimber.~~as exceptionally strong domestic lumber markets drove improved demand and pricing. Average delivered pulpwood prices decreased ~~13%~~23% to ~~$36.92~~$29.36 per ton versus ~~$42.26~~$38.11 per ton in the prior year period, ~~due to~~ ~~the deterioration of pulp export markets, which~~as higher lumber mill residuals resulted in ~~market related downtime at domestic pulp mills.~~an increased supply of competing wood chip residuals. Operating ~~loss~~income of ~~$6.7~~$1.3 million ~~increased $2.9~~improved $2.3 million versus the prior year period due to higher net stumpage prices ($5.8 million), higher non-timber income ($0.8 million) and volume/mix changes ($0.3 million), partially offset by higher depletion rates ($~~1.4~~4.3 million), and higher overhead and other costs ($~~1.1~~0.4 million)~~, lower net stumpage prices ($0.1 million), lower non-timber income ($0.1 million) and an increase in other variable costs ($0.2 million)~~. ~~Second~~

First quarter Adjusted EBITDA of ~~$3.9~~$17.6 million was ~~$1.7~~81%, or $7.9 million, above the prior year period.

Year-to-date sales of $57.2 million increased $18.2 million, or 46%, versus the prior year period. Harvest volumes increased 61% to 861,000 tons versus 533,000 tons in the the prior year period primarily due to an increase in lump-sum stumpage sales, higher delivered volumes and 55,000 tons of incremental volume from the acquired Pope Resources timberlands. Average delivered sawtimber prices decreased 4% to $75.40 per ton versus $78.41 per ton in the prior year period, primarily due to a higher mix of chip-n-saw volume and reduced demand resulting from the COVID-19 pandemic, partially offset by a higher percentage of Douglas fir sawtimber. Average delivered pulpwood decreased 14% to $37.47 per ton versus $43.81 per ton in the prior year period, primarily due to excess supply resulting from a weaker pulp export market and downtime at domestic pulp mills. ~~Operating loss of~~ $7.6 million was flat versus the prior year period due to higher overhead and other costs ($1.5 million), higher depletion rates ($0.6 million) and higher other variable costs ($0.6 million), partially offset by higher net stumpage prices ($2.7 million).

NEW ZEALAND TIMBER

~~Second~~First quarter sales of ~~$41.8~~$57.6 million ~~decreased $20.3~~increased $20.1 million, or ~~33%~~53%, versus ~~the prior year period. Harvest volumes decreased 23% to 529,000 tons versus 684,000 tons in~~ the prior year period, as higher harvest volumes and log prices were partially offset by deferred carbon credit sales. Harvest volumes increased 25% to 599,000 tons versus 481,000 tons in the prior year period. The increase in harvest volumes was driven primarily ~~due to the government-mandated shutdown~~by a normalized level of ~~all non-essential~~ activity in ~~New Zealand (including~~ the ~~harvesting and transport of logs) from late-March through late-April.~~first quarter versus a prior year period constrained by COVID-19 disruptions. Average delivered prices for export sawtimber ~~decreased 12%~~increased 28% to ~~$98.75~~$121.65 per ton versus ~~$111.81~~$94.86 per ton in the prior year period, while average delivered prices for domestic sawtimber ~~decreased 19%~~increased 16% to ~~$66.95~~$80.95 per ton versus ~~$82.66~~$69.97 per ton in the prior year period. The ~~decrease~~increase in export sawtimber prices was driven primarily by ~~lower~~stronger demand ~~and the buildup of log inventories in~~from China, as ~~a result of~~the prior year period was significantly impacted by the COVID-19 ~~lockdowns.~~outbreak.

Improved export pricing in the current year quarter was also due in part to the restriction on competing log imports to China from Australia. The ~~decrease~~increase in domestic sawtimber prices (in U.S. dollar terms) was driven ~~in part~~primarily by the ~~fall~~rise in the NZ$/US$ exchange rate (US$~~0.62~~0.72 per NZ$1.00 versus US$~~0.67~~0.65 per NZ$1.00). Excluding the impact of foreign exchange rates, domestic sawtimber prices ~~decreased 12%~~improved by a more modest 4% versus the prior year period ~~generally following the negative trend in the export market.~~due to improved demand. Operating income of ~~$5.0~~$14.0 million ~~decreased $7.8~~increased $8.5 million versus the prior year period as a result of ~~lower volumes ($4.5 million), lower~~higher net stumpage prices ($~~3.4~~9.5 million), higher volumes ($1.8 million) and lower costs ($0.2 million), partially offset by deferredcarbon credit sales ($1.8 million), higher depletion rates ($0.7 million) and unfavorable foreign exchange impacts ($~~0.6 million), partially offset by lower depletion rates ($0.3 million), lower roading costs ($0.2 million), lower overhead costs~~ ~~($0.1 million) and higher~~ ~~non-timber income ($0.1~~0.4 million). ~~Second~~First quarter Adjusted EBITDA of ~~$9.9~~$21.2 million was ~~$10.1~~107%, or $11.0 million ~~below~~above the prior year period.

Year-to-date sales of $79.3 million decreased $39.9 million, or 33% versus the prior year. Harvest volumes decreased 22% to 1.01 million tons versus 1.29 million tons in the prior year, primarily due to the government-mandated shutdown of all non-essential activity (including the harvesting and transport of logs) from late-March through late-April. Average delivered prices for export sawtimber decreased 15% to $97.00 per ton versus $113.78 per ton in the prior year period, while average delivered prices for domestic sawtimber decreased 17% to $68.55 per ton versus $83.03 per ton in the prior year. The decrease in export sawtimber prices was driven primarily by lower demand resulting from the COVID-19 lockdown in China. The decrease in domestic sawtimber prices (in US dollars terms) was driven in part by the fall in the NZ$/US$ exchange rate (US$0.63 per NZ$1.00 versus US$0.67 per NZ$1.00). Excluding the impact of foreign exchange rates, domestic sawtimber prices decreased 12% versus the prior year period, generally following the negative trend of the export market. Operating Income of $10.4 million decreased $18.1 million versus the prior year period as a result of lower net stumpage prices ($10.7 million), lower volumes ($8.4 million), higher costs ($0.4 million) and lower non-timber income ($0.3 million), partially offset by favorable foreign exchange impacts ($1.3 million) and lower depletion rates ($0.4 million). Year-to-date Adjusted EBITDA of $20.1 million was $21.9 million below the prior year period.

TIMBER FUNDS

The Timber Funds segment generated ~~second~~first quarter sales of $14.9 million on harvest volumes of ~~90,000~~145,000 tons, sales of $7.5 million and operating loss of $1.9 million. Adjusting for the portion of the Timber Funds segment attributable to noncontrolling interests and fee revenue to Rayonier, pro forma sales and pro formaresulting in operating income ~~were $1.7 million and $0.1 million, respectively. Second~~of $1.5 million. First quarter Adjusted EBITDA was ~~$0.7~~$1.0 million.

REAL ESTATE

~~Real Estate Sales Category Reclassification~~

Effective April 1, 2020, the Company changed the composition of its Rural and Timberland & Non-Strategic sales categories to better align with the way management internally evaluates real estate sales. The Rural category now includes all real estate sales (excluding development sales) representing a demonstrable premium above timberland value. The Timberland & Non-Strategic category now includes all real estate sales representing little to no premium to timberland value. This category consists primarily of sales of property that management views as non-strategic to our long-term portfolio as well as sales of property for capital allocation purposes that do not fit the definition of a Large Disposition. All prior period amounts have been reclassified to reflect the new composition of these two sales categories. The Improved Development, Unimproved Development and Large Disposition categories remain unchanged, and this reclassification had no impact on overall segment results.

~~Second~~First quarter sales of ~~$50.0~~$10.5 million ~~increased $27.5~~decreased $108.0 million versus the prior year period, while operating income of ~~$24.8~~$1.7 million ~~increased $9.4~~decreased $25.1 million versus the prior year period. The prior year first quarter sales and operating income included $116.0 million and $28.7 million, respectively, from a Large Disposition. Sales and operating income declined versus the prior year period due to ~~a higher number of~~lower acres sold ~~(20,310~~(2,395 acres sold versus ~~3,265~~67,570 acres sold in the prior year period), partially offset by ~~a decrease~~an increase in weighted-average prices ($~~2,545~~4,183 per acre versus ~~$6,899~~$1,753 per acre in the prior year period).

Improved Development sales of ~~$6.4~~$0.3 million included ~~a $5.4 million sale in the Belfast Commerce Park development project south of Savannah, Georgia consisting of 119 acres at a price of $45,000 per acre in addition to $1.1 million of sales~~three residential lots in the Wildlight development project north of Jacksonville, Florida ~~consisting~~(an average of ~~17 residential lots ($63,118~~$84,000 per lot or ~~$367,466~~$406,000 per acre). ~~This compares to~~There were no Improved Development sales in the prior year ~~period sales of $0.2 million in the Wildlight development project, which consisted of six residential townhome lots ($28,750 per lot or $198,000 per acre).~~period.

There were no Unimproved Development sales in the first quarter or the prior year period.

Rural sales of ~~$8.4~~$9.8 million consisted of ~~a 570 acre sale in St. Johns County, Florida for $14,780~~2,394 acres at an average price of $4,079 per acre. This compares to prior year period sales of ~~$14.4~~$2.4 million, which consisted of ~~a 784 acre sale in St. Johns County, Florida for $18,402 per acre.~~

~~Rural sales of $27.2 million consisted of 7,710~~624 acres at an average price of ~~$3,532 per acre. This compares to prior year period sales of $7.1 million, which consisted of 1,886 acres at an average price of $3,768~~$3,842 per acre.

There were no Timberland and Non-Strategic sales of $9.6 million consisted of 11,907 acres at an average price of $807 per acre. This compares to prior year period sales of $0.8 million, which consisted of 594 acres at an average price of $1,373 per acre. Timberland and& Non-Strategic sales in the first quarter ~~included several low-value, geographically-isolated parcels with limited plantability and long-term harvest potential.~~or the prior year period.

~~Second~~First quarter Adjusted EBITDA of ~~$44.6~~$5.1 million was ~~$26.3~~$6.2 million above the prior year period.

Year-to-date sales of $168.6 million increased $125.0 million versus the prior year period, while operating income of $51.6 million increased $26.1 million versus the prior year period. Year-to-date sales and operating income includes $116.0 million and $28.7 million, respectively, from Large Dispositions. Sales and operating income increased in the first six months primarily due to higher volumes (87,879 acres sold versus 8,944 acres sold in the prior year period), partially offset by lower weighted-average prices. Year-to-date Adjusted EBITDA of $43.5 million increased $7.8 million versus the prior year.

TRADING

~~Second~~First quarter sales of ~~$24.3~~$16.7 million decreased ~~$11.1~~$2.3 million versus the prior year period primarily due to lower volumes, ~~and prices resulting from the government-mandated shutdown in New Zealand and lower export demand as a result of the COVID-19 pandemic.~~partially offset by higher prices. Sales volumes decreased ~~18%~~32% to ~~267,000~~141,000 tons versus ~~325,000~~207,000 tons in the prior year period. The Trading segment generated operating income of ~~$0.1~~$0.2 million versus ~~operating loss of $0.2 million~~breakeven results in the prior year ~~period.~~

~~Year-to-date sales of $43.3 million decreased $24.2 million versus the prior year primarily~~period due to ~~lower volumes and prices~~improved trading margins resulting from the government-mandated shutdown in New Zealand and lower export demand as a result of the COVID-19 pandemic. Sales volumes decreased 22% to 474,000 versus 606,000 tons in the prior year period. Operating income and Adjusted EBITDA of $0.1 million decreased $0.2 million versus the prior year.higher prices.

OTHER ITEMS

CORPORATE AND OTHER EXPENSE / ELIMINATIONS

~~Second~~First quarter corporate and other operating expenses of ~~$20.9~~$7.6 million ~~increased $13.2~~decreased $0.2 million versus the prior year period, ~~primarily due to~~which included $2.5 million of costs related to the Pope Resources ~~merger ($13.5 million), partially~~merger. This positive variance was largely offset by ~~lower~~higher overhead ~~costs ($0.3 million).~~expenses.

~~Year-to-date corporate and other operating expenses~~INTEREST EXPENSE

First quarter interest expense of ~~$28.6~~$10.0 million increased ~~$15.5~~$1.8 million versus the prior year period ~~due to costs related to the Pope Resources merger ($16.0 million), partially offset by lower overhead costs ($0.5 million).~~

~~INTEREST EXPENSE~~

~~Second quarter and year-to-date interest expense of $9.8 million and $18.0 million, respectively, increased $1.9 million and $2.4 million, respectively, versus the prior year periods~~ due to higher outstanding debt following the closing of the Pope Resources ~~merger.~~acquisition.

INTEREST AND OTHER MISCELLANEOUS ~~INCOME,~~EXPENSE, NET

~~Second quarter and year-to date interest and~~There was negligible other miscellaneous ~~income, net~~expense in the first quarter versus $0.2 million of ~~$1.5 million and $1.4 million, respectively, includes favorable~~expense in the prior year period. The prior year period included unfavorable mark-to-market adjustments on marketable equity securities partially offset by favorable mark-to-market adjustments on carbon options and ~~carbon options.~~dividend income.

INCOME TAX EXPENSE

~~Second~~First quarter ~~and year-to-date~~ income tax expense of ~~$3.0 million and $6.7~~$3.5 million decreased ~~$0.6 million and $1.3~~$0.3 million versus the prior year ~~period as a result of lower taxable income.~~period. The New Zealand subsidiary is the primary driver of income tax expense.

~~COVID 19 RESPONSE & REVISED~~ OUTLOOK

As we continue to adapt to the impacts of the COVID-19 pandemic, our highest priority remains the health and safety of our employees and contractors, as well as their families and communities. Overall, we are very pleased with the level of productivity and engagement that our employees have sustained over the last several months as we’ve operated under a work-from-home model for office employees and under enhanced safety protocols for field employees. This allowed us to remain nimble and respond to ever evolving market conditions as the economy emerged from the shutdown. In the midst of the pandemic, we also had to focus our efforts on the critical task of closing the Pope Resources acquisition as well as integrating Pope Resources’ assets and people into Rayonier.

Overall, we have been encouraged by the resiliency of our business and industry amid this pandemic. Housing construction and repair and remodeling activity have rebounded sharply, driving record highs for wood products prices throughout the U.S. Longer-term, we expect that this will translate to improved log prices, which tend to lag wood products pricing trends.

In our Southern Timber segment, we anticipate that demand from lumber mills will remain strong and that select U.S. South markets will continue to benefit from improving export demand. Further, we continue to expect ~~increases~~a modest improvement in ~~export volume and strong sawtimber demand. We further expect that~~weighted average pricing ~~in Southern Timber will be relatively flat, as improved sawtimber demand~~relative to the prior year, with quarterly fluctuations largely driven by ~~strong lumber pricing is generally expected to offset lower pulpwood pricing due to anticipated mill downtime, an increased supply of wood chip residuals and~~ geographic mix.

In our Pacific Northwest Timber segment, we ~~expect higher full-year~~anticipate lower quarterly harvest volumes ~~due~~for the remainder of the year, as we pulled forward some volume in the first quarter to ~~incremental volume from the acquired Pope Resources timberlands.~~ capture favorable demand and pricing. We further expect that ~~Pacific Northwest sawtimber~~strong lumber demand will continue to hold pricing ~~will improve due to strengthening end markets and a higher-value species mix; however, we anticipate pulpwood pricing will be relatively flat and dependent on~~at or above first quarter average prices for the ~~duration~~balance of ~~domestic mill curtailments.~~the year.

In our New Zealand Timber segment, we expect ~~higher full-year harvest volumes primarily due to~~continued strong export and domestic demand, and we further expect that the ~~shorter-than-anticipated shutdown of economic activity~~restriction on Australian log imports into China will constrain log supplies. We anticipate that this positive operating momentum will translate into log prices remaining near or above levels realized in ~~New Zealand. We expect New Zealand pricing to remain relatively flat with higher seasonal demand~~the first quarter, which will be partially offset by ~~continued competition from alternative supply sources.~~ elevated shipping costs.

In our Real Estate segment, we expect ~~continued strong demand~~a significant pickup in transaction activity for ~~rural properties as well as an improved demand~~the balance of the year based on our current pipeline of opportunities. In particular, we are increasingly optimistic about our sales outlook for residential and commercial properties within our real estate development ~~properties.~~projects.

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.

AT-THE-MARKET (“ATM”) EQUITY OFFERING PROGRAM

On September 10, 2020, we entered into a 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. During the three months ended March 31, 2021, the Company sold 1.1 million shares under the ATM Program at an average price of $33.31 per share, generating aggregate gross proceeds of $36.9 million, excluding $0.4 million of commissions. As of March 31, 2021, $229.7 million remains available for issuance under the program.

The following table outlines the common stock issuance pursuant to our ATM program (dollars in millions):


	Three Months Ended March 31,
	2021	2020
Shares of common stock issued under the ATM program	1,107,814	—
Gross proceeds	$36.9	—

SUMMARY OF LIQUIDITY AND FINANCING COMMITMENTS


		June 30,		December 31,			March 31,		December 31,
(millions of dollars)	(millions of dollars)	2020		2019		(millions of dollars)	2021		2020
Cash and cash equivalents (excluding Timber Funds)	Cash and cash equivalents (excluding Timber Funds)	$87.8		$68.7		Cash and cash equivalents (excluding Timber Funds)	$77.9		$80.5

Total debt (excluding Timber Funds) (a)	Total debt (excluding Timber Funds) (a)	1,305.0		1,057.0		Total debt (excluding Timber Funds) (a)	1,294.1		1,294.9
Noncontrolling interest in Operating Partnership		110.2		—
Noncontrolling interests in the Operating Partnership						Noncontrolling interests in the Operating Partnership	138.0		130.1
Shareholders’ equity	Shareholders’ equity	1,914.0		1,537.6		Shareholders’ equity	1,909.9		1,862.6

Total capitalization (total debt plus permanent and temporary equity)	Total capitalization (total debt plus permanent and temporary equity)	3,329.2		2,594.6		Total capitalization (total debt plus permanent and temporary equity)	3,342.0		3,287.6
Debt to capital ratio	Debt to capital ratio	39	%	41	%	Debt to capital ratio	39	%	39	%
Net debt to enterprise value (b)(c)	Net debt to enterprise value (b)(c)	26	%	19	%	Net debt to enterprise value (b)(c)	21	%	23	%

(a)Total debt as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 reflects principal on long-term debt, net of fair value adjustments and gross of deferred financing ~~costs and net of fair market value adjustments.~~costs.

(b)Net debt is calculated as total debt less cash and cash equivalents.

(c)Enterprise value ~~is calculated as the number of shares outstanding multiplied by the Company’s share price~~based on market capitalization (including Rayonier, L.P. “OP” units) plus net debt based on Rayonier’s share price of $32.25 and $29.38 as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020, respectively.

SUMMARY OF GUARANTOR FINANCIAL INFORMATION

In March 2012, Rayonier Inc. issued $325 million of 3.75% Senior Notes due 2022 (the “2022 Notes”). On May 7, 2020, Rayonier Inc. contributed its 100% ownership interest in Rayonier Operating Company LLC (the “Contribution”) to Rayonier, L.P. As a result of the Contribution, Rayonier, L.P. expressly assumed all the obligations of Rayonier Inc. with respect to the outstanding 2022 Notes and Rayonier Inc. agreed to irrevocably, fully and unconditionally guarantee jointly and severally, the obligations of Rayonier, L.P. under the Indenture, including the ~~2020~~2022 Notes. Rayonier L.P. is the current issuer of the 2022 Notes.

The subsidiary guarantor, Rayonier TRS Holdings Inc., and parent guarantor, Rayonier Inc., have guaranteed the notes fully and unconditionally on a joint and several basis. 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 eliminated 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 ~~six~~the three months ended ~~June 30, 2020~~March 31, 2021 and year ended December 31, ~~2019~~2020 are provided in the table below:


(in millions)	(in millions)	June 30, 2020	December 31, 2019	(in millions)	March 31, 2021	December 31, 2020
Current assets	Current assets	$68.4	$51.7	Current assets	$70.0	$69.7
Non-current assets	Non-current assets	47.2	48.8	Non-current assets	75.3	48.3
Current liabilities	Current liabilities	19.2	100.2	Current liabilities	24.2	21.0
Non-current liabilities	Non-current liabilities	2,057.4	1,632.7	Non-current liabilities	1,861.0	1,942.4
Due to non-guarantors	Due to non-guarantors	652.1	587.0	Due to non-guarantors	551.6	596.7

The summarized results of operations information for the consolidated obligor group of debt issued by Rayonier, L.P. for ~~six~~the three months ended ~~June 30, 2020~~March 31, 2021 and year ended December 31, ~~2019~~2020 are provided in the table below:

(in millions) June 30, 2020 December 31, 2019
Cost and expenses ($28.1) ($22.0)
Operating loss (28.1) (22.0)
Net loss (47.0) (54.2)
Revenue from non-guarantors 454.8 711.6


(in millions)	March 31, 2021	December 31, 2020
Cost and expenses	($6.7)	($43.4)
Operating loss	(6.7)	(43.4)
Net loss	(18.1)	(81.3)
Revenue from non-guarantors	191.4	859.2

CASH FLOWS

The following table summarizes our cash flows from operating, investing and financing activities for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:


(millions of dollars)	(millions of dollars)	2020	2019	(millions of dollars)	2021	2020
Cash provided by (used for):	Cash provided by (used for):			Cash provided by (used for):
Operating activities	Operating activities	$82.6	$117.0	Operating activities	$53.9	$29.2
Investing activities	Investing activities	(170.8)	(60.8)	Investing activities	(44.4)	74.7
Financing activities	Financing activities	114.9	(78.0)	Financing activities	(13.8)	(38.7)

CASH PROVIDED BY OPERATING ACTIVITIES

Cash provided by operating activities ~~decreased $34.4~~increased $24.7 million primarily due to ~~lower operating results.~~higher Adjusted EBITDA.

CASH USED FOR INVESTING ACTIVITIES

Cash used for investing activities ~~increased $110.0~~of $44.4 million ~~versus~~compares to cash provided by investing activities of $74.7 million in the prior year period. This variance is primarily due to proceeds from a Large Disposition in the prior year period ~~primarily due to the net cash consideration transferred in our merger with Pope Resources~~ ($~~231.1~~115.7 million), higher timberland acquisitions ($5.8 million), and higher real estate development investments ($~~2.6~~1.2 million), partially offset by ~~proceeds from a Large Disposition~~other investing activities ($~~115.7~~2.3 million)~~, a decrease in timberland acquisitions ($2.2 million),~~ and lower capital expenditures ($~~0.1 million) and other investing activities ($5.8~~1.3 million).

CASH ~~PROVIDED BY~~USED FOR FINANCING ACTIVITIES

Cash ~~provided by~~used for financing activities ~~increased $192.9~~decreased $24.9 million from the prior year period primarily due to ~~an increase in~~ net ~~borrowings~~proceeds from the issuance of common shares under the ATM equity offering program ($~~203.0~~32.5 million), ~~partially offset by increases~~decreases in ~~debt issuance costs ($2.5 million),~~ share repurchases ($~~0.5~~3.2 million), ~~dividends paid on common stock ($1.1 million), distributions to consolidated affiliates ($4.0 million), distributions to noncontrolling interests in the Operating Partnership ($1.2 million)~~ and ~~decreases~~increases in proceeds from the issuance of common shares under the Company’s incentive stock plan ($~~0.8~~1.1 million), partially offset by increased distributions to consolidated affiliates ($8.1 million), dividends paid on common stock ($2.6 million) and distributions to noncontrolling interests in the Operating Partnership ($1.2 million).

EXPECTED ~~2020~~2021 EXPENDITURES

Capital expenditures in ~~2020~~2021 are expected to be between ~~$63~~$73 million and ~~$66~~$76 million,, excluding capital expenditures attributable to the Timber Funds and 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 ~~2020~~2021 to be between ~~$11~~$16 million and ~~$13~~$18 million,, net of reimbursements from community development bonds. Expected real estate development investments ~~include approximately $3.6 million of committed spending~~are primarily related to Wildlight, our mixed-use community development project located north of Jacksonville, ~~Florida and our~~Florida; Richmond Hill, our mixed-use development project located south of Savannah, ~~Georgia. Uncommitted real estate developments can be managed as market conditions change. We are continuing to monitor the impacts of the COVID-19 pandemic on our real estate~~Georgia; development ~~business and expect to periodically adjust our 2020 real estate development investments based on end market conditions and the anticipated timing of improved development sales.~~

~~Including shares issued~~properties in the ~~merger with Pope Resources, the Company’s 2020~~town of Port Gamble, Washington; and development projects in Gig Harbor, Kingston and Bremerton Washington.

Our 2021 dividend payments on Rayonier Inc. common shares and distributions to Rayonier, L.P. unitholders are expected to be approximately ~~$145~~ $150.0 million and $4.6 million, respectively, assuming no change in the

quarterly dividend rate of $0.27 per share or partnership unit, or material changes in the number of shares or partnership units outstanding. Additionally, distributions to noncontrolling interests in the Operating Partnership are expected to be approximately $3.6 million assuming no material changes in the number of Redeemable Common 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.

We have ~~paid $1.1 million of the approximately $3.6 million in current year~~no mandatory pension contribution ~~requirements.~~requirements in the current year.

Cash tax payments in ~~2020~~2021 are expected to be ~~approximately $1.1~~approximately $17.0 million, primarily related to the New Zealand subsidiary.

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 stock dividends, distributions to ~~noncontrolling interests in the~~ Operating Partnership unitholders, distributions to ~~the New Zealand minority shareholder,~~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), CAD attributable to noncontrolling ~~interest~~interests in Timber Funds, ~~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 removes the impact of specific items that management believes do not directly reflect the core business operations on an ongoing basis attributable to Rayonier. 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, operating ~~loss~~income (loss) attributable to noncontrolling ~~interest~~interests in Timber Funds, costs related to the merger with Pope Resources and Large Dispositions.

We reconcile Adjusted EBITDA to Net Income for the consolidated Company and to Operating Income (Loss) 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 June 30,			Six Months Ended June 30,			Three Months Ended March 31,
		2020	2019	2020	2019		2021	2020
Net Income to Adjusted EBITDA Reconciliation	Net Income to Adjusted EBITDA Reconciliation					Net Income to Adjusted EBITDA Reconciliation
Net income	Net income	$0.5	$20.9	$26.9	$48.7	Net income	$15.0	$26.4
Interest, net and miscellaneous income		9.7	7.1	17.8	13.8
Income tax expense		3.0	3.6	6.7	8.0
Depreciation, depletion and amortization		38.3	27.6	72.6	64.1
Operating income attributable to NCI in Timber Funds						Operating income attributable to NCI in Timber Funds	(1.1)	—
Interest, net attributable to NCI in Timber Funds						Interest, net attributable to NCI in Timber Funds	0.1	—

Net Income (Excluding NCI in Timber Funds)						Net Income (Excluding NCI in Timber Funds)	14.0	26.4
Interest, net and miscellaneous income attributable to Rayonier						Interest, net and miscellaneous income attributable to Rayonier	9.9	8.1
Income tax expense attributable to Rayonier						Income tax expense attributable to Rayonier	3.5	3.7
Depreciation, depletion and amortization attributable to Rayonier						Depreciation, depletion and amortization attributable to Rayonier	40.3	34.3
Non-cash cost of land and improved development	Non-cash cost of land and improved development	13.0	1.6	13.4	5.6	Non-cash cost of land and improved development	1.8	0.4
Operating loss attributable to NCI in Timber Funds		2.0	—	2.0	—
Non-operating income		(1.5)	(0.3)	(1.1)	(0.6)

Non-operating expense						Non-operating expense	—	0.3

Costs related to the merger with Pope Resources (a)	Costs related to the merger with Pope Resources (a)	13.5	—	16.0	—	Costs related to the merger with Pope Resources (a)	—	2.5

Large Dispositions (b)	Large Dispositions (b)	—	—	(28.7)	—	Large Dispositions (b)	—	(28.7)

Adjusted EBITDA	Adjusted EBITDA	$78.6	$60.6	$125.7	$139.7	Adjusted EBITDA	$69.5	$47.1

(a) Costs related to the merger with Pope Resources include legal, accounting, due diligence, consulting and other costs related to the merger with Pope Resources.

(b) Large Dispositions are defined as transactions involving the sale of timberland that exceed $20 million in size and do not have a demonstrable premium relative to timberland value. In March 2020, we completed the disposition of approximately ~~67,000~~67,000 acres located in Mississippi for a sales price and gain of approximately $116.0 million ~~$116.0 million~~ and $28.7 million, respectively.

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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 Timber Funds Real Estate Trading Corporate
and
Other Total
June 30, 2020
Operating income (loss) $11.2 ($6.7) $5.0 ($1.9) $24.8 $0.1 ($20.9) $11.7
Operating loss attributable to NCI in Timber Funds — — — 2.0 — — — 2.0
Depreciation, depletion and amortization 15.2 10.6 4.9 0.5 6.7 — 0.3 38.3
Non-cash cost of land and improved development — — — — 13.0 — — 13.0
Costs related to the merger with Pope Resources (a) — — — — — — 13.5 13.5
Adjusted EBITDA $26.4 $3.9 $9.9 $0.7 $44.6 $0.1 ($7.0) $78.6
June 30, 2019
Operating income (loss) $14.7 ($3.8) $12.8 — $15.5 ($0.2) ($7.6) $31.4
Depreciation, depletion and amortization 12.9 6.0 7.2 — 1.2 — 0.3 27.6
Non-cash cost of land and improved development — — — — 1.6 — — 1.6
Adjusted EBITDA $27.6 $2.2 $20.0 — $18.3 ($0.2) ($7.3) $60.6

~~(a) Costs related to the merger with Pope Resources include legal, accounting, due diligence, consulting and other costs related to the merger with Pope Resources.~~


Six Months Ended		Southern Timber	Pacific Northwest Timber	New Zealand Timber	Timber Funds	Real Estate	Trading	Corporate and Other	Total
June 30, 2020
Three Months Ended										Three Months Ended	Southern Timber	Pacific Northwest Timber	New Zealand Timber	Timber Funds	Real Estate	Trading	Corporate and Other	Total
March 31, 2021										March 31, 2021
Operating income (loss)	Operating income (loss)	$26.3	($7.6)	$10.4	($1.9)	$51.6	$0.1	($28.6)	$50.2	Operating income (loss)	$17.3	$1.3	$14.0	$1.5	$1.7	$0.2	($7.6)	$28.5

Operating loss attributable to NCI in Timber Funds		—	—	—	2.0	—	—	—	2.0
Depreciation, depletion and amortization		33.4	21.3	9.7	0.5	7.1	—	0.6	72.6
Non-cash cost of land and improved development		—	—	—	—	13.4	—	—	13.4

Costs related to merger with Pope Resources (a)		—	—	—	—	—	—	16.0	16.0
Large Dispositions (b)		—	—	—	—	(28.7)	—	—	(28.7)

Adjusted EBITDA		$59.7	$13.7	$20.1	$0.7	$43.5	$0.1	($12.0)	$125.7

June 30, 2019
Operating income (loss)		$36.3	($7.6)	$28.5	—	$25.5	$0.3	($13.1)	$69.9
Operating income attributable to NCI in Timber Funds										Operating income attributable to NCI in Timber Funds	—	—	—	(1.1)	—	—	—	(1.1)

Depreciation, depletion and amortization	Depreciation, depletion and amortization	32.6	12.9	13.5	—	4.5	—	0.6	64.1	Depreciation, depletion and amortization	14.4	16.3	7.2	0.6	1.6	—	0.3	40.3
Non-cash cost of land and improved development	Non-cash cost of land and improved development	—	—	—	—	5.6	—	—	5.6	Non-cash cost of land and improved development	—	—	—	—	1.8	—	—	1.8

Adjusted EBITDA	Adjusted EBITDA	$68.9	$5.3	$42.0	—	$35.7	$0.3	($12.5)	$139.7	Adjusted EBITDA	$31.7	$17.6	$21.2	$1.0	$5.1	$0.2	($7.3)	$69.5

March 31, 2020										March 31, 2020
Operating income (loss)										Operating income (loss)	$15.1	($0.9)	$5.4	—	$26.8	—	($7.8)	$38.6

Depreciation, depletion and amortization										Depreciation, depletion and amortization	18.2	10.7	4.8	—	0.4	—	0.3	34.3
Non-cash cost of land and improved development										Non-cash cost of land and improved development	—	—	—	—	0.4	—	—	0.4
Costs related to the merger with Pope Resources (a)										Costs related to the merger with Pope Resources (a)	—	—	—	—	—	—	2.5	2.5

Large Dispositions (b)										Large Dispositions (b)	—	—	—	—	(28.7)	—	—	(28.7)
Adjusted EBITDA										Adjusted EBITDA	$33.3	$9.8	$10.2	—	($1.1)	—	($5.0)	$47.1

(a) Costs related to the merger with Pope Resources include legal, accounting, due diligence, consulting and other costs related to the merger with Pope Resources.

(b) Large Dispositions are defined as transactions involving the sale of timberland that exceed $20 million in size and do not have a demonstrable premium relative to timberland value. In March 2020, we completed the disposition of approximately 67,000 acres located in Mississippi for a sales price and gain of approximately ~~$116.0~~$116.0 million and $28.7 million, respectively.

Nine Months Ended

Southern Timber

Pacific Northwest Timber

New Zealand Timber

Timber Funds

Real Estate

Trading

Corporate
and
Other

Total

The following table provides a reconciliation of Cash Provided by Operating Activities to Adjusted CAD (in millions of dollars):


		Six Months Ended June 30,				Three Months Ended March 31,
		2020	2019		2021	2020
Cash provided by operating activities	Cash provided by operating activities	$82.6	$117.0	Cash provided by operating activities	$53.9	$29.2
Capital expenditures (a)	Capital expenditures (a)	(29.4)	(29.5)	Capital expenditures (a)	(15.8)	(17.2)
Costs related to the merger with Pope Resources (b)		16.0	—

CAD attributable to NCI in Timber Funds	CAD attributable to NCI in Timber Funds	(0.9)	—	CAD attributable to NCI in Timber Funds	(4.6)	—
Working capital and other balance sheet changes	Working capital and other balance sheet changes	11.4	7.6	Working capital and other balance sheet changes	13.8	15.2
CAD	CAD	79.7	95.1	CAD	47.3	27.2
Mandatory debt repayments	Mandatory debt repayments	(25.0)	—	Mandatory debt repayments	—	—
CAD after mandatory debt repayments	CAD after mandatory debt repayments	54.7	95.1	CAD after mandatory debt repayments	47.3	27.2

Cash used for investing activities ($170.8) ($60.8)
Cash provided by (used for) financing activities $114.9 ($78.0)


Cash (used for) provided by investing activities	($44.4)	$74.7
Cash used for financing activities	($13.8)	($38.7)

(a) Capital expenditures exclude timberland acquisitions of $29.9 million and $24.1 million during the ~~six~~three months ended ~~June 30,~~March 31, 2021 and March 31, 2020, exclude timberland acquisitions. Excluding the Pope Resources acquisition, timberland acquisitions were $24.2 million and $26.4 million, respectively, during the six months ended June 30, 2020 and June 30, 2019.respectively.

~~(b) Costs related to the merger with Pope Resources include legal, accounting, due diligence, consulting and other costs related to the merger with Pope Resources.~~

The following table provides supplemental cash flow data (in millions):


		Six Months Ended June 30,				Three Months Ended March 31,
		2020	2019		2021	2020
Purchase of timberlands ~~(a)~~	Purchase of timberlands ~~(a)~~	($24.2)	($26.4)	Purchase of timberlands ~~(a)~~	($29.9)	($24.1)
Real Estate Development Investments	Real Estate Development Investments	(3.6)	(1.0)	Real Estate Development Investments	(3.0)	(1.7)
Distributions to noncontrolling interest in consolidated affiliates		(7.6)	(3.6)
Distributions to noncontrolling interests in consolidated affiliates				Distributions to noncontrolling interests in consolidated affiliates	(8.7)	(0.7)

~~(a) The six months ended June 30, 2020 excludes timberland acquired in the merger with Pope Resources. See~~ ~~Note 2 - Merger with Pope Resources~~ ~~for additional information.~~

LIQUIDITY FACILITIES

~~2020~~2021 DEBT ACTIVITY

See Note 79 — Debt for additional information.

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 1315 — Guarantees for details on the letters of credit and surety bonds as of ~~June 30, 2020.~~March 31, 2021.

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CONTRACTUAL FINANCIAL OBLIGATIONS

In addition to using cash flow from operations and proceeds from Large Dispositions, we finance our operations through the issuance of debt and by entering into leases. These financial obligations are recorded in accordance with accounting rules applicable to the underlying transaction, with the result that some are recorded as liabilities on the Consolidated Balance Sheets, while others are required to be disclosed in the Notes to Consolidated Financial Statements and Management’s Discussion and Analysis.

The following table aggregates our contractual financial obligations as of ~~June 30, 2020~~March 31, 2021 and anticipated cash spending by period:


Contractual Financial Obligations (in millions)	Contractual Financial Obligations (in millions)	Total	Payments Due by Period														Contractual Financial Obligations (in millions)	Total	Payments Due by Period
					Remaining 2020		2021-2022		2023-2024		Thereafter		Contractual Financial Obligations (in millions)	Total		Remaining 2021				2024-2025	Thereafter
Long-term debt, excluding Timber Funds (a)	Long-term debt, excluding Timber Funds (a)	td,305.0	—	$325.0		—		$980.0	Long-term debt, excluding Timber Funds (a)	td,294.1		—						284.1	$685.0
Long-term debt, Timber Funds (b)	Long-term debt, Timber Funds (b)	32.4	—	—		32.4		—	Long-term debt, Timber Funds (b)	57.4		—			43.0			14.4	—

Current maturities of long-term debt, Timber Funds		25.0	25.0	—		—		—

Interest payments on long-term debt, excluding Timber Funds (c)	Interest payments on long-term debt, excluding Timber Funds (c)	159.2	16.2	58.5		40.2		44.3	Interest payments on long-term debt, excluding Timber Funds (c)	136.8		27.2			46.0			35.7	27.9
Interest payments on long-term debt, Timber Funds	Interest payments on long-term debt, Timber Funds	6.1	1.0	3.1		2.0		—	Interest payments on long-term debt, Timber Funds	5.4		1.5			3.4			0.5	—
Operating leases — timberland (d)	Operating leases — timberland (d)	170.2	5.0	15.3		13.8		136.1	Operating leases — timberland (d)	189.1		6.3			15.7			14.5	152.6

Operating leases — PP&E, offices (d)	Operating leases — PP&E, offices (d)	7.0	0.8	2.3		1.7		2.2	Operating leases — PP&E, offices (d)	6.7		1.1			2.1			1.8	1.7

Commitments — derivatives (e)		110.5	7.7	30.3		32.6		39.9
Commitments — development projects (e)									Commitments — development projects (e)	25.3		17.4			3.5			0.5	3.9
Commitments — environmental remediation (f)	Commitments — environmental remediation (f)	11.9	0.7	4.4		4.0		2.8	Commitments — environmental remediation (f)	11.5		0.8			3.9			4.2	2.6
Commitments — other (g)	Commitments — other (g)	12.1	6.9	1.9		0.5		2.8	Commitments — other (g)	104.1		11.4			36.4			26.3	30.0
Total contractual cash obligations	Total contractual cash obligations	$1,839.4	$63.3	$440.8		$127.2		$1,208.1	Total contractual cash obligations	$1,830.4		$65.7			$479.0			$382.0	$903.7

(a)The book value of long-term debt, excluding Timber Funds, net of deferred financing costs and fair market value adjustments, is currently recorded at ~~$1,310.5~~$1,299.4 million onon our Consolidated Balance ~~Sheet,~~Sheets, but upon maturity the liability will be ~~$1,305.0~~$1,294.1 million. See Note 79 — Debt for additional information.

(b)The book value of long-term debt for the Timber Funds, net of fair market value adjustments, is currently recorded at ~~$35.6~~$60.0 million on our Consolidated Balance ~~Sheet,~~Sheets, but upon maturity the liability will be ~~$32.4~~$57.4 million. See Note 79 - Debt for additional ~~information~~information.

(c)Projected interest payments for variable rate debt were calculated based on outstanding principal amounts and interest rates as of ~~June 30, 2020.~~March 31, 2021.

(d)Excludes anticipated renewal options.

(e)Commitments — ~~derivatives represents~~developmental projects primarily consists of payments expected to be made on ~~derivative financial instruments (foreign exchange contracts, interest rate swaps, interest rate swap locks~~our Wildlight and ~~forward-starting interest rate swaps). See~~ ~~Note 15 — Derivative Financial Instruments and Hedging Activities~~.Richmond Hill developmental projects

(f)Commitments -— environmental remediation represents our estimate of potential liability associated with environmental contamination at Port Gamble. See Note 1214 - Environmental Liabilities.

(g)Commitments — other includes ~~pension contribution requirements based on actuarially determined estimates and IRS minimum funding requirements,~~ payments expected to be made on ~~the Wildlight~~financial instruments (foreign exchange contracts, interest rate swaps and ~~Richmond Hill development projects, payments made on timberland deeds~~forward-starting interest rate swaps) and other purchase obligations.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, including changes in interest rates, commodity prices and foreign exchange rates. Our objective is to minimize the economic impact of these market risks. We use derivatives in accordance with policies and procedures approved by the Audit Committee of the Board of Directors. Derivatives are managed by a senior executive committee whose responsibilities include initiating, managing and monitoring resulting exposures. We do not enter into financial instruments for trading or speculative purposes.

Interest Rate Risk

We are exposed to interest rate risk through our variable rate debt, primarily due to changes in LIBOR. However, we use interest rate swaps to manage our exposure to interest rate movements on our term credit agreements by swapping existing and anticipated future borrowings from floating rates to fixed rates. As of ~~June 30, 2020,~~March 31, 2021, excluding the Timber Funds, we had ~~$935~~$900 million of U.S. variable rate debt ~~including $35 million outstanding on our revolving credit facility and $900 million~~ outstanding on our term credit agreements. The Timber Funds had $25 million of U.S. variable rate debt outstanding on the Fund II Mortgages Payable.

The notional amount of outstanding interest rate swap contracts with respect to our term credit agreements at ~~June 30, 2020~~March 31, 2021 was $900 million. The maturity date of the Term Credit Agreement was extended from August 2024 to April 2028, with the associated interest rate swaps maturing in August 2024. We have entered into forward starting interest rate swaps to cover $150 million of the Term Credit Agreement through the extended maturity date. The Incremental Term Loan Agreement and associated interest rate swaps mature in May 2026, and the 2020 Incremental Term Loan Agreement matures in ~~June~~April 2025 ~~and~~with the associated interest rate swaps ~~mature~~maturing in June 2030. At this borrowing level, a hypothetical one-percentage point increase/decrease in interest rates would result in a corresponding increase/decrease in interest payments and expense of approximately ~~$0.4~~$0.3 million over a 12-month period.

The fair market value of our long-term fixed interest rate debt is also subject to interest rate risk. The estimated fair value of our long-term fixed rate debt excluding the Timber Funds at ~~June 30, 2020~~March 31, 2021 was ~~$363~~$404 million compared to the ~~$370~~$394 million principal amount. The estimated fair value of our Timber Funds’ long-term fixed rate debt at ~~June 30, 2020~~March 31, 2021 was ~~$60.8~~$35.2 million compared to the ~~$57.4~~$32.4 million principal amount. We use interest rates of debt with similar terms and maturities to estimate the fair value of our debt. Generally, the fair market value of fixed-rate debt will increase as interest rates fall and decrease as interest rates rise. A hypothetical one-percentage point increase/decrease in prevailing interest rates at ~~June 30, 2020~~March 31, 2021 would result in a corresponding decrease/increase in the fair value of our long-term fixed rate debt of approximately ~~$11 million.~~$9 million and $10 million, respectively.

We estimate the periodic effective interest rate on our U.S. long-term fixed and variable rate debt, excluding Timber Funds, to be approximately 3.1% after consideration of interest rate swaps and estimated patronage refunds, excluding unused commitment fees on the revolving credit facility. We estimate the periodic effective interest rate on our Timber Funds’ long-term fixed and variable rate debt to be approximately ~~3.9%~~2.9% after consideration of estimated patronage refunds.

8165

The following table summarizes our outstanding debt, interest rate swaps and average interest rates, by year of expected maturity and their fair values at ~~June 30, 2020:~~March 31, 2021:


(Dollars in thousands)	(Dollars in thousands)	2020		2021	2022		2023		2024		Thereafter		Total		Fair Value	(Dollars in thousands)	2021	2022		2023		2024		2025		Thereafter		Total		Fair Value
Variable rate debt:	Variable rate debt:															Variable rate debt:
Principal amounts	Principal amounts	—		—	—		—		—		$935,000		$935,000		$935,000	Principal amounts	—	—		—		—		$250,000		$650,000		$900,000		$900,000
Average interest rate (a)(b)	Average interest rate (a)(b)	—		—	—		—		—		1.94	%	1.94	%		Average interest rate (a)(b)	—	—		—		—		1.96	%	1.85	%	1.88	%
Fixed rate debt, excluding Timber Funds:	Fixed rate debt, excluding Timber Funds:															Fixed rate debt, excluding Timber Funds:
Principal amounts																Principal amounts	—	$325,000		—		—		$34,074		$35,000		$394,074		$404,371
Average interest rate (b)																Average interest rate (b)	—	3.75	%	—		—		3.86	%	4.98	%	3.87	%
Variable rate debt, Timber Funds:																Variable rate debt, Timber Funds:
Principal amounts	Principal amounts	—		—	$325,000		—		—		$45,000		$370,000		$362,698	Principal amounts	—	$25,000		—		—		—		—		$25,000		$25,055
Average interest rate (b)	Average interest rate (b)	—		—	3.75	%	—		—		5.22	%	3.93	%		Average interest rate (b)	—	1.95	%	—		—		—		—		1.95	%
Fixed rate debt, Timber Funds:	Fixed rate debt, Timber Funds:															Fixed rate debt, Timber Funds:
Principal amounts	Principal amounts	$25,000		—	—		$17,980		$14,400		—		$57,380		$60,824	Principal amounts	—	—		$17,980		$14,400		—		—		$32,380		$35,152
Average interest rate (b)	Average interest rate (b)	4.28	%	—	—		5.10	%	4.45	%	—		4.58	%		Average interest rate (b)	—	—		5.10	%	4.45	%	—		—		4.81	%
Interest rate swaps:	Interest rate swaps:															Interest rate swaps:
Notional amount	Notional amount	—		—	—		—		$350,000		$550,000		$900,000		($65,381)	Notional amount	—	—		—		$350,000		—		$550,000		$900,000		($19,356)
Average pay rate (b)	Average pay rate (b)	—		—	—		—		2.28	%	1.31	%	1.69	%		Average pay rate (b)	—	—		—		2.28	%	—		1.31	%	1.69	%
Average receive rate (b)	Average receive rate (b)	—		—	—		—		0.17	%	0.17	%	0.17	%		Average receive rate (b)	—	—		—		0.10	%	—		0.11	%	0.11	%

Forward-starting interest rate swaps	Forward-starting interest rate swaps															Forward-starting interest rate swaps
Notional amount	Notional amount	—		—	—		—		—		$475,000		$475,000		($22,832)	Notional amount	—	—		—		—		—		$475,000		$475,000		$18,690
Average pay rate (b)	Average pay rate (b)	—		—	—		—		—		1.22	%	1.22	%		Average pay rate (b)	—	—		—		—		—		1.22	%	1.22	%
Average receive rate (b)	Average receive rate (b)	—		—	—		—		—		0.16	%	0.16	%		Average receive rate (b)	—	—		—		—		—		0.11	%	0.11	%

(a) Excludes estimated patronage refunds.

(b) Interest rates as of ~~June 30, 2020.~~March 31, 2021.

Foreign Currency Exchange Rate Risk

The functional currency of our New Zealand-based operations and New Zealand subsidiary is the New Zealand dollar. Through these operations and our ownership in the New Zealand subsidiary, we are exposed to foreign currency risk on cash held in foreign currencies, shareholder distributions which are paid in U.S. dollars and on foreign export sales and ocean freight payments that are predominantly denominated in U.S. dollars. To mitigate these risks, the New Zealand subsidiary routinely enters into foreign currency exchange contracts and foreign currency option contracts to hedge a portion of the New Zealand subsidiary’s foreign exchange exposure.

Sales and Expense Exposure

At ~~June 30, 2020,~~March 31, 2021, the New Zealand subsidiary had foreign currency exchange contracts with a notional amount of ~~$62~~$64 million andand foreign currency option contracts with a notional amount of ~~$36~~ $16 million outstanding related to foreign export sales and ocean freight payments. The amount hedged represents a portion of ~~forecasted~~forecasted U.S. dollar denominated export timber and log trading sales proceeds over the next 2418 months and next 3 months, respectively.

8266

The following table summarizes our outstanding foreign currency exchange rate risk contracts at ~~June 30, 2020:~~March 31, 2021:


(Dollars in thousands)	(Dollars in thousands)	0-1 months	1-2 months	2-3 months	3-6 months	6-12 months	12-18 months	18-24 months	Total	Fair Value	(Dollars in thousands)	0-1 months	1-2 months	2-3 months	3-6 months	6-12 months	12-18 months		18-24 months	Total	Fair Value
Foreign exchange contracts to sell U.S. dollar for New Zealand dollar	Foreign exchange contracts to sell U.S. dollar for New Zealand dollar																	Foreign exchange contracts to sell U.S. dollar for New Zealand dollar
Notional amount	Notional amount	$8,500	$6,000	$4,000	$10,000	$15,000	$13,000	$5,000	$61,500	$502	Notional amount	$10,500	$8,500	$5,000	$11,000	$20,000	$9,000		—	$64,000	$3,166
Average contract rate	Average contract rate	1.5619	1.5619	1.5620	1.5624	1.5635	1.5651	1.5663	1.5634		Average contract rate	1.4338	1.4338	1.4339	1.4343	1.4351	1.4369		—	1.4347

Foreign currency option contracts to sell U.S. dollar for New Zealand dollar	Foreign currency option contracts to sell U.S. dollar for New Zealand dollar																	Foreign currency option contracts to sell U.S. dollar for New Zealand dollar
Notional amount	Notional amount	—	$2,000	$2,000	$4,000	$20,000	$8,000	—	$36,000	$30	Notional amount	$4,000	$2,000	$2,000	$8,000	—	—		—	$16,000	$585
Average strike price	Average strike price	—	1.5250	1.5243	1.5779	1.5726	1.6063	—	1.5753		Average strike price	1.5700	1.5567	1.5567	1.6063	—	—		—	1.5848

Item 4. CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

Rayonier Inc.

Rayonier management is responsible for establishing and maintaining adequate disclosure controls and procedures. Disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Securities Exchange Act of 1934 (the “Exchange Act”), are designed with the objective of ensuring information required to be disclosed by the Company in reports filed under the Exchange Act, such as this quarterly report on Form 10-Q, is (1) recorded, processed, summarized and reported or submitted within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Because of the inherent limitations in all control systems, no control evaluation can provide absolute assurance that all control exceptions and instances of fraud have been prevented or detected on a timely basis. Even systems determined to be effective can provide only reasonable assurance that their objectives are achieved.

Based on an evaluation of the Company’s disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q, our management, including the Chief Executive Officer and Chief Financial Officer, concluded the design and operation of the disclosure controls and procedures were effective as of ~~June 30, 2020.~~March 31, 2021.

In the quarter ended ~~June 30, 2020,~~March 31, 2021, based upon the evaluation required by Rule 13a-15(d) under the Exchange Act, there were no changes in our internal control over financial reporting that would materially affect or are reasonably likely to materially affect our internal control over financial reporting.

Rayonier, L.P.

The Operating Partnership is responsible for establishing and maintaining adequate disclosure controls and procedures. Disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Securities Exchange Act of 1934 (the “Exchange Act”), are designed with the objective of ensuring information required to be disclosed by Rayonier, L.P. in reports filed under the Exchange Act, such as this quarterly report on Form 10-Q, is (1) recorded, processed, summarized and reported or submitted within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including Rayonier’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Based on an evaluation of the Operating Partnership’s disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q, management, including Rayonier’s Chief Executive Officer and Chief Financial Officer, concluded the design and operation of the disclosure controls and procedures were effective as of ~~June 30, 2020.~~March 31, 2021.

In the quarter ended ~~June 30, 2020,~~March 31, 2021, based upon the evaluation required by Rule 13a-15(d) under the Exchange Act, there were no changes in internal controls over financial reporting that would materially affect or are reasonably likely to materially affect internal controls over financial reporting.

PART II. OTHER INFORMATION

~~Item 1A. RISK FACTORS~~

Our operations are subject to a number of risks. When considering an investment in our securities, you should carefully read and consider these risks, together with all other information in this Quarterly Report on Form 10-Q. If any of the events described in the following risk factors actually occur, our business, financial condition or operating results, as well as the market price of our securities, could be materially adversely affected. The information presented below updates the risk factors set forth in Part I, “Item 1A. Risk Factors,” of the Company’s 2019 Form 10-K.

~~Coronavirus (COVID-19) Pandemic~~

~~The recent novel coronavirus (COVID-19) outbreak could materially adversely affect our financial condition and results of operations.~~

Epidemics, pandemics or other such crises or public health concerns in regions of the world where we have operations or sell products, could result in the disruption of our business. Specifically, the ongoing COVID-19 outbreak has resulted in increased travel restrictions and extended shutdowns of certain businesses around the world, as well as a deterioration of general economic conditions. These or any governmental or other regulatory developments or health concerns in countries in which we operate or export to could result in operational restrictions or social and economic instability, or labor shortages. At this point in time, there is substantial uncertainty relating to the potential impact of COVID-19 on our business. Infections may continue to spread, which could limit our ability to timely harvest, sell and transport our timber, restrict our operations or cause supply chain disruptions for us and our customers. In addition, we also face risks and costs associated with implementation of business continuity plans and modified work conditions, including making required resources available to our workforce to enable them to continue essential work. Any of these developments could have a negative impact on our business, financial condition and operating results. In addition, the COVID-19 pandemic could continue to adversely affect the economies and markets of many countries, resulting in a further economic downturn that could impact the pricing or demand for timber, real estate, and especially housing, which could have an adverse effect on our business, operating results and financial condition, as well as market value of our securities. Further, our customers may be negatively impacted due to the general decline in business and operating conditions and constraints on their own liquidity and access to capital relating to COVID-19, which could increase our counterparty credit exposure. The continued spread of COVID-19 has also led to disruption and volatility in the global capital markets. This could lead to further volatility in interest and exchange rates, increase our cost of capital, and adversely impact our access to capital, credit ratings or overall liquidity.

~~Failure of Operating Partnership to maintain status as a partnership for U.S. federal income tax purposes~~

We believe our Operating Partnership qualifies as a partnership for U.S. federal income tax purposes. As a partnership, our Operating Partnership is not subject to U.S. federal income tax on its income. Instead, each of the partners is allocated its share of our Operating Partnership’s income. We cannot assure you, however, that the IRS will not challenge the status of our Operating Partnership as a partnership for U.S. federal income tax purposes. If the IRS were to successfully challenge the status of our Operating Partnership as a partnership, it would be taxable as a corporation. In such event, this would reduce the amount of distributions that our Operating Partnership could make, which could have further implications as to our ability to maintain our status as a REIT. This would substantially reduce our cash available to pay distributions and the return on a unitholder and/or shareholder’s investment.

Item 1. LEGAL PROCEEDINGS

The information set forth in Note 1113 — Contingencies in the “Notes to Consolidated Financial Statements” under Item 1 of Part I of this report is incorporated herein by reference.

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Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Rayonier Inc.

REGISTERED SALES OF EQUITY SECURITIES

From time to time, the Company may issue shares of common stock in exchange for units in the Operating Partnership. Such shares are issued based on an exchange ratio of one share for each unit in the Operating Partnership. During the quarter ended March 31, 2021, the Company issued 150,134 common shares in exchange for an equal number of units in the Operating Partnership pursuant to the agreement of the Operating Partnership.

ISSUER PURCHASES OF EQUITY SECURITIES

In February 2016, the Board of Directors approved the repurchase of up to $100 million of Rayonier’s common shares (the “share repurchase program”) to be made at management’s discretion. The program has no time limit and may be suspended or discontinued at any time. There were no shares repurchased under this program in the ~~second~~first quarter of ~~2020.~~2021. Based on the period-end closing stock price of ~~$24.79~~$32.25 at ~~June 30, 2020,~~March 31, 2021, there was $87.7 million, or approximately ~~3,538,864~~2,720,262 shares, remaining under this program.

The following table provides information regarding our purchases of Rayonier common shares during the quarter ended ~~June 30, 2020:~~March 31, 2021:

Period Total Number of Shares Purchased (a) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (c)
April 1 to April 30 64,379 23.72 — 3,650,788
May 1 to May 31 1,769 25.15 — 3,693,829
June 1 to June 30 20 23.96 — 3,538,864
Total 66,168 —


Period	Total Number of Shares Purchased (a)	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b)	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (c)
January 1 to January 31	5,020	$30.74	—	2,852,958
February 1 to February 28	—	—	—	2,687,759
March 1 to March 31	—	—	—	2,720,262
Total	5,020		—

(a)Includes ~~66,168~~5,020 shares of the Company’s common shares purchased in ~~April, May and June~~January from current and former employees in non-open market transactions. The shares were sold by current and former employees of the Company in exchange for cash that was used to pay withholding taxes associated with the vesting of share-based awards under the Company’s Incentive Stock Plan. The price per share surrendered is based on the closing price of the Company’s common shares on the respective vesting dates of the awards.

(b)Purchases made in open-market transactions under the $100 million share repurchase program announced on February 10, 2016.

(c)Maximum number of shares authorized to be purchased under the share repurchase program at the end of ~~April, May~~January, February and ~~June~~March are based on month-end closing stock prices of ~~$24.03, $23.75~~$30.75, $32.64 and ~~$24.79,~~$32.25, respectively.

Rayonier, L.P.

UNREGISTERED SALES OF EQUITY SECURITIES

~~During the second quarter~~There were no unregistered sales of ~~2020,~~equity securities made by the Operating Partnership ~~issued an aggregate of 4,446,153 Common Units as partial consideration~~during the quarter endedMarch 31, 2021.

ISSUER PURCHASES OF EQUITY SECURITIES

Pursuant to the Operating Partnership’s limited partnership agreement, limited partners have the right to redeem their units in the ~~merger with Pope Resources. The~~Operating Partnership for cash, or at our election, shares of Rayonier Common ~~Units~~Stock on a one-for-one basis. During the quarter ended March 31, 2021, 150,134 units in the Operating Partnership held by limited partners were ~~issued~~redeemed in ~~private offerings exempt from registration requirements pursuant to Section 4(a)(2)~~exchange for shares of ~~the Securities Act to accredited investors under Rule 501 of the Securities Act.~~Rayonier Common Stock.

8569

Item 6. EXHIBITS


~~2.1~~10.1	Amendment No. 1, dated as of April 1, 2020, to the Agreement and Plan of Merger, by and among Rayonier Inc., Rayonier, L.P., Rayonier Operating Company LLC, Rayonier Operating Holdings, LLC, Pacific GP Merger Sub I, LLC, Pacific GP Merger Sub II, LLC, Pacific LP Merger Sub III, LLC, Pope Resources, a Delaware limited partnership, Pope MGP, Inc. and Pope EGP, Inc.	~~Incorporated by reference to Exhibit 2.1 to the Registrant’s April 1, 2020 Form 8-K~~
~~3.1~~	~~Amended and Restated Agreement of Limited Partnership of Rayonier, L.P., dated as of May 8, 2020~~	~~Incorporated by reference to Exhibit 3.1 to the Registrant’s May 13, 2020 Form 8-K~~
~~4.1~~	Pope Resources 2005 Unit Incentive Plan*	~~Incorporated by reference to Exhibit 4.3 to the Registrant’s May 8, 2020 Form S-8~~
~~4.2~~	Third Supplemental Indenture relating to the 3.750% Senior Notes due 2022, dated as of May 7, 2020, by and among Rayonier Inc., the subsidiary guarantors party thereto, Rayonier, L.P. and The Bank of New York Mellon Trust Company, N.A., as trustee	~~Incorporated by reference to Exhibit 4.1 to the Registrant’s May 13, 2020 Form 8-K~~
~~10.1~~	~~2020~~2021 Performance Share Award Program*	~~Incorporated by reference to Exhibit 10.3 to the Registrant’s May 1, 2020 Form 10-Q~~
~~10.2~~	Second Amendment to Credit Agreement, dated as of April 1, 2020, by and among Rayonier Inc., Rayonier TRS Holdings Inc. and Rayonier Operating Company LLC, as borrowers, the several banks, financial institutions and other institutional lenders party thereto and CoBank, ACB as administrative agent, swing line lender and issuing bank	~~Incorporated by reference to Exhibit 10.4 to the Registrant’s May 1, 2020 Form 10-Q~~
~~10.3~~	~~Annex A to Second Amendment to Credit Agreement~~	~~Incorporated by reference to Exhibit 10.5 to the Registrant’s May 1, 2020 Form 10-Q~~
~~10.4~~	Accordion Increase Agreement, dated as of April 13, 2020, by and among Rayonier Inc., Rayonier TRS Holdings Inc., and Rayonier Operating Company LLC, as borrowers, the several banks, financial institutions and other institutional lenders party thereto and CoBank, ACB as administrative agent, swing line lender and issuing bank	~~Incorporated by reference to Exhibit 10.6 to the Registrant’s May 1, 2020 Form 10-Q~~
~~10.5~~	Third Amendment and Incremental Term Loan Agreement, dated as of April 16, 2020, by and among Rayonier Inc., Rayonier TRS Holdings Inc., and Rayonier Operating Company LLC, as borrowers, the several banks, financial institutions and other institutional lenders party thereto and CoBank, ACB as administrative agent	~~Incorporated by reference to Exhibit 10.7 to the Registrant’s May 1, 2020 Form 10-Q~~
~~10.6~~	~~Tax Protection Agreement, dated as of May 8, 2020, by and among Rayonier Inc., Rayonier, L.P. and Pope Resources, A Delaware Limited Partnership~~	~~Incorporated by reference to Exhibit 10.1 to the Registrant’s May 13, 2020 Form 8-K~~
~~10.7~~	Amendment to Rayonier Investment and Savings Plan for Salaried Employees effective as of April 1, 2020, executed March 23, 2020*	~~Filed herewith~~
~~10.8~~	Amendment to Rayonier Investment and Savings Plan for Salaried Employees effective as of May 8, 2020, executed May 4, 2020*	~~Filed herewith~~
~~10.9~~	Amendment to Rayonier Investment and Savings Plan for Salaried Employees effective as of May 8, 2020, executed May 8, 2020*	Filed herewith
22.1	List of Guarantor Subsidiaries	~~Filed herewith~~Incorporated by reference to Exhibit 22.1 to the Registrant’s June 30, 2020 Form 10-Q


31.1	Rayonier Inc. - Chief Executive Officer’s Certification Pursuant to Rule 13a-14(a)/15d-14(a) and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
31.2	Rayonier Inc. - Chief Financial Officer’s Certification Pursuant to Rule 13a-14(a)/15d-14(a) and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
31.3	Rayonier, L.P. - Chief Executive Officer’s Certification Pursuant to Rule 13a-14(a)/15d-14(a) and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
31.4	Rayonier, L.P. - Chief Financial Officer’s Certification Pursuant to Rule 13a-14(a)/15d-14(a) and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
32.1	Rayonier Inc. - Certification of Periodic Financial Reports Under Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith
32.2	Rayonier, L.P. - Certification of Periodic Financial Reports Under Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith
101	The following financial information from ~~our~~Rayonier Inc. and Rayonier, L.P.’s Quarterly Report on Form 10-Q for the fiscal quarter ended ~~June 30, 2020,~~March 31, 2021, formatted in Extensible Business Reporting Language (“XBRL”), includes: (i) the Consolidated Statements of Income and Comprehensive Income for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019;~~of Rayonier Inc.; (ii) the Consolidated Balance Sheets as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019;~~2020 of Rayonier Inc.; (iii) the Consolidated Statements of Changes in Shareholders’ Equity for the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019;~~of Rayonier Inc.; (iv) the Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2021 and 2020 of Rayonier Inc.; (v) the Consolidated Statements of Income and ~~2019;~~Comprehensive Income for the Three Months Ended March 31, 2021 and ~~(v)~~2020 of Rayonier, L.P.; (vi) the Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 of Rayonier, L.P.; (vii) the Consolidated Statements of Changes in Capital for the Three Months Ended March 31, 2021 and 2020 of Rayonier, L.P.; (viii) the Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 of Rayonier, L.P.; and (ix) the Notes to Consolidated Financial Statements of Rayonier Inc. and Rayonier, L.P.	Filed herewith
104	The cover page from the Company’s Quarterly Report on Form 10-Q from the quarter ended ~~June 30, 2020,~~March 31, 2021, formatted in Inline XBRL (included as Exhibit 101).

*Management contract or compensatory plan

8770

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each of the registrants has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


						RAYONIER INC.


			By:			/s/ APRIL TICE
						April Tice Vice President ~~Financial Services~~ and ~~Corporate Controller~~Chief Accounting Officer (Duly Authorized Officer, Principal Accounting Officer)

Date: ~~August 10, 2020~~May 6, 2021


						RAYONIER, L.P.

						By: RAYONIER INC., its sole general partner

			By:			/s/ APRIL TICE
						April Tice Vice President ~~Financial Services~~ and ~~Corporate Controller~~Chief Accounting Officer (Duly Authorized Officer, Principal Accounting Officer)

Date: ~~August 10, 2020~~May 6, 2021

8871


	Common Shares			Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Noncontrolling Interests in Consolidated Affiliates	Shareholders’ Equity
	Shares	Amount
Balance, January 1, 2019	129,488,675	$884,263	$672,371	$239	$97,677	$1,654,550

Net income	—	—	24,794	—	2,999	27,793
Dividends ($0.27 per share)	—	—	(35,049)	—	—	(35,049)
Issuance of shares under incentive stock plans	26,031	597	—	—	—	597
Stock-based compensation	—	1,477	—	—	—	1,477
Repurchase of common shares	(1,140)	(33)	—	—	—	(33)
Amortization of pension and postretirement plan liabilities	—	—	—	112	—	112
Foreign currency translation adjustment	—	—	—	4,680	1,353	6,033
Cash flow hedges	—	—	—	(10,884)	198	(10,686)

Distributions to noncontrolling interests in consolidated affiliates	—	—	—	—	(3,594)	(3,594)
Balance, March 31, 2019	129,513,566	$886,304	$662,116	($5,853)	$98,633	$1,641,200
Net income	—	—	18,752	—	2,168	20,920
Dividends ($0.27 per share)	—	—	(35,125)	—	—	(35,125)
Issuance of shares under incentive stock plans	250,344	177	—	—	—	177
Stock-based compensation	—	2,344	—	—	—	2,344
Repurchase of common shares	(134,194)	(4,207)	—	—	—	(4,207)
Amortization of pension and postretirement plan liabilities	—	—	—	112	—	112
Foreign currency translation adjustment	—	—	—	(4,305)	(1,299)	(5,604)
Cash flow hedges	—	—	—	(19,465)	(54)	(19,519)
Balance, June 30, 2019	129,629,716	$884,618	$645,743	($29,511)	$99,448	$1,600,298


	Three Months Ended June 30,			Six Months Ended June 30,
	2020	2019	2020	2019

Operating income	—	—	—	—
Net income attributable to Rayonier, L.P. (a)	($3,596)	($3,596)	($7,192)	($7,192)
Basic earnings per unit attributable to Rayonier, L.P.	($0.03)	($0.03)	($0.05)	($0.06)
Diluted earnings per unit attributable to Rayonier, L.P.	($0.03)	($0.03)	($0.05)	($0.06)


		Year of Expiration
Lease obligations	Total	Remaining 2020	2021	2022	2023	2024	Thereafter
Operating lease liabilities	$178,880	$5,675	$9,003	$8,119	$8,051	$7,946	$140,086

Total Undiscounted Cash Flows	$178,880	$5,675	$9,003	$8,119	$8,051	$7,946	$140,086
Imputed interest	(82,154)
Balance at June 30, 2020	96,726
Less: Current portion	(8,952)
Non-current portion at June 30, 2020	$87,774


	Three Months Ended June 30,			Six Months Ended June 30,
Lease Cost Components	2020	2019	2020	2019
Operating lease cost	$1,341	$2,396	$3,439	$4,833
Variable lease cost (a)	136	81	214	157
Total lease cost (b)	$1,477	$2,477	$3,653	$4,990


	Six Months Ended June 30,
Supplemental cash flow information related to leases:	2020		2019

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases	$1,138		$1,493
Investing cash flows from operating leases	2,301		3,340
Total cash flows from operating leases	$3,439		$4,833




Weighted-average remaining lease term in years - operating leases	28		28

Weighted-average discount rate - operating leases	5	%	5	%


		Year of Expiration
Lease assets	Total	Remaining 2020	2021	2022	2023	2024	Thereafter
Operating lease Income	$708	$165	$176	$173	$137	$57	—


Tranche	Stated Fixed Interest Rate		Effective Fixed Interest Rate (a)		Stated Principal Amount	Est. Fair Value at Merger Date (b)
Tranche 2 (Due 2025)	6.1	%	4.8	%	$10,000	$11,838
Tranche 4 (Due 2028)	4.1	%	3.1	%	11,000	12,108
Tranches 6 & 7 (Due 2033)	5.3	%	4.2	%	16,000	19,609
Tranche 8 (Due 2036)	5.4	%	4.3	%	8,000	9,947
Total NWFCS Credit Facility assumed					$45,000	$53,502


Maturity Date	Stated Fixed Interest Rate		Stated Principal Amount	Est. Fair Value at Merger Date (a)
September 2020	4.9	%	$11,000	$11,061
September 2020	3.8	%	14,000	14,023
			$25,000	$25,084


	Environmental Remediation (a)	Development Projects (b)	Pension Contributions (c)	Commitments (d)	Total
Remaining 2020	$710	$4,206	$2,476	$7,880	$15,272
2021	2,387	160	681	14,193	17,421
2022	2,023	220	—	16,992	19,235
2023	2,012	232	—	17,719	19,963
2024	2,012	232	—	14,987	17,231
Thereafter	2,784	2,770	—	39,877	45,431
	$11,928	$7,820	$3,157	$111,648	$134,553


	June 30, 2020							December 31, 2019
	Carrying Amount	Less than 12 Months	12 Months or Greater	Total	Carrying Amount	Less than 12 Months	12 Months or Greater	Total
Fair value of marketable equity securities	—	—	—	—	$10,582	10,582	—	10,582
Unrealized (losses) gains	—	—	—	—	—	3,043	—	3,043


Cash used for investing activities	($170.8)	($60.8)
Cash provided by (used for) financing activities	$114.9	($78.0)