RAYONIER INC

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OBJECTIVE

The objective of the Management’s Discussion and Analysis is to detail material information, events, uncertainties and other factors impacting the Company and the Operating Partnership and to provide investors an understanding of “Management’s perspective.” Item 7, Management’s Discussion and Analysis (MD&A) highlights the critical areas for evaluating our performance which includes a discussion on the reportable segments, liquidity and capital, and critical accounting estimates. The MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and notes.

EXECUTIVE SUMMARY

In June 2025, we completed the sale of our 77% interest in a New Zealand joint venture. Consequently, these operations are classified as discontinued operations for all periods presented. See Note 2 — Discontinued Operations for additional information.

Effective with the third quarter of 2025, we realigned our reporting segments to reflect how our CODM, the Chief Executive Officer, evaluates performance and allocates capital. As part of the realignment, the previously reported Trading segment’s log trading activities conducted in the U.S. South and Pacific Northwest are now reported in the respective Southern Timber or Pacific Northwest Timber segments based on geographical location for all periods presented. See Note 3 — Segment and Geographical Information for further discussion of our reportable segments.

On January 30, 2026, Rayonier completed its merger with PotlatchDeltic Corporation (“PotlatchDeltic”) in a merger-of-equals transaction. Under the terms of the merger agreement, PotlatchDeltic stockholders received 1.8185 Rayonier common shares and $0.61 in cash for each PotlatchDeltic share held. In connection with the closing, we issued approximately 140.9 million Rayonier common shares.

This transaction significantly expands our timberland portfolio and introduces wood products manufacturing capabilities, enhancing our scale, geographic diversity, and long-term growth prospects. The merger is expected to be accounted for as a business combination with Rayonier as the acquirer. Additional details regarding the transaction are provided in Note 1— Summary of Significant Accounting Policies.

The following MD&A reflects our continuing operations as of December 31, 2025. Consequently, these disclosures do not include the impact of the PotlatchDeltic merger, which was completed as a subsequent event on January 30, 2026. Where applicable, we have specifically noted the anticipated effects of the merger or references to the combined company. For details regarding the divestiture of our New Zealand joint venture, see Note 2 — Discontinued Operations.

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. Our revenues, operating income and cash flows are primarily derived from the following core business segments: Southern Timber, Pacific Northwest Timber, and Real Estate. We own or lease under long-term agreements approximately 2.0 million acres of timberland and real estate in Alabama, Arkansas, Florida, Georgia, Louisiana, Oregon, South Carolina, Texas and Washington.

Across our timberland management segments, we sell standing timber (primarily at auction to third parties) and delivered logs. Sales from our timber segments include all activities related to the harvesting of timber and other value-added activities such as the licensing of properties for hunting, the leasing of properties for mineral extraction and cell towers, and revenue from land-based solutions such as carbon capture and storage and solar. We believe we are the second largest publicly-traded timberland REIT and one of the largest private timberland owners in the United States. Our Real Estate business manages all property sales and seeks to maximize the value of our properties that are more valuable for development, recreational or residential uses than for growing timber, and opportunistically sells non-strategic timberlands.

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 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, lumber, and to a lesser extent wood pellets. Our Pacific Northwest Timber segment relies primarily on domestic lumber customers, though log exports to Asia-Pacific countries also contribute to regional demand.

The Southern Timber and Pacific Northwest Timber segments are sensitive to the strength of U.S. lumber markets, which are closely tied to housing starts. These markets are currently impacted by a 10% ad valorem duty on softwood timber and lumber imports that took effect on October 14, 2025. This duty followed a Section 232 investigation under the Trade Expansion Act of 1962, which was authorized by Executive Order 14223, Addressing the Threat to National Security from Imports of Timber, Lumber, and Their Derivative Products (March 1, 2025). These tariffs, along with higher duties on Canadian lumber from the sixth administrative review of the anti-dumping and countervailing order on softwood lumber from Canada, and a weaker U.S. dollar, could increase domestic lumber prices and production of wood products to meet domestic demand, which could likewise increase domestic log demand and pricing. However, these gains may be partially offset by anticipated easing in Canadian duties in the second half of 2026 following the seventh administrative review of anti-dumping and countervailing duties, softer end-market demand due to increased construction costs and/or weaker overall market conditions stemming from changes in trade policy and/or broader economic uncertainty.

Pricing within our timber segments is subject to broad macroeconomic influences and local market conditions. Residential construction activity is a key macroeconomic factor. Locally, prices can fluctuate based on weather patterns, available log inventories, mill demand, and access to export markets. Currently, in our Southern Timber segment, pine stumpage realizations continue to be constrained by overall softer demand for pulpwood and sawtimber, due in part to recent mill closures. Meanwhile, the Pacific Northwest Timber segment has seen generally stable weighted-average delivered log prices due to balanced supply and demand. While Executive Order 14225, Immediate Expansion of American Timber Production (March 1, 2025) could increase the supply of available timber from federal lands, any potential impacts would likely be most prevalent in the Pacific Northwest. Further, despite the potential long-term increase in the supply of federal harvest volumes, significant logistical, legal and infrastructure-related challenges will likely limit near-term market impacts.

We are also subject to the risk of price fluctuations in key operational costs, which primarily include logging and transportation (cut and haul). Additionally, our cost of sales is significantly influenced by the cost basis of timber sold (depletion) and real estate sold. Depletion represents the amortization of capitalized site preparation, planting and fertilization, real estate taxes, timberland lease payments, and certain payroll costs. The cost basis of real estate sold includes land costs and direct development and construction expenses for specific projects, including infrastructure, roadways, utilities, amenities and other improvements. While our timber and real estate sales are not directly subject to tariffs, to the extent that goods and/or services that we purchase in our operations are impacted by tariffs, this could lead to higher costs in our operations if vendors look to pass through any such increased costs resulting from tariffs. Other costs include amortization of capitalized road and bridge construction and software, depreciation of fixed assets and equipment, road maintenance, severance and excise taxes, fire prevention, and real estate commissions and closing costs.

Our Real Estate segment is exposed to changes in interest and mortgage rates, which could negatively impact buyer demand. However, our improved development projects, Wildlight, north of Jacksonville, Florida, and Heartwood, south of Savannah, Georgia, continue to benefit from favorable migration and demographic trends, which have so far outweighed the impacts of higher interest rates.

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

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements requires us to establish accounting policies and make estimates, assumptions, and judgments that affect our assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities in our Annual Report on Form 10-K. We base these estimates and assumptions on historical data, market trends, current fact patterns, and other information we believe are reasonable under the circumstances. Actual results may differ from these estimates.

MERCHANTABLE INVENTORY AND DEPLETION COSTS AS DETERMINED BY TIMBER HARVEST MODELS

An annual depletion rate is established for each particular region by dividing the cost of merchantable inventory (including costs described above) by standing merchantable inventory volume. Pre-merchantable records are maintained for each planted year age class, including acres planted, stems per acre and costs of planting and tending. For more information, see Discussion of Timber Inventory and Sustainable Yield in Item 1 — Business.

Significant assumptions and estimates are used in the recording of timber inventory and depletion costs. Factors that can impact timber volume include weather changes, losses due to natural causes, differences in actual versus estimated growth rates, and changes in the age when timber is considered merchantable. A 3% company-wide change in estimated standing merchantable inventory would have caused an estimated change of approximately $2.9 million to 2025 depletion expense.

Merchantable standing timber inventory is estimated annually by our land information services group using industry-standard software. This calculation accounts for growth, in-growth (the annual transfer of oldest pre-merchantable age class into merchantable inventory), timberland sales and the annual harvest specific to each business unit. The age at which timber is considered merchantable is reviewed periodically and updated for changing harvest practices, future harvest age profiles and biological growth factors.

Acquisitions of timberland can also affect the depletion rate. Upon the acquisition of timberland, we make a determination whether to combine the newly-acquired merchantable timber with an existing depletion pool or to create a new pool. The determination is based on the geographic location of the new timber, the customers/markets that will be served and species mix. There were no acquisitions of timberland during 2025. As such, there was no impact on 2025 depletion rates.

REAL ESTATE COST OF SALES

Real estate cost of sales includes the cost basis of land and any timber conveyed to the buyer, real estate development costs, and closing costs. For developed residential or commercial land sales, cost of sales includes both development costs incurred and estimates of future development costs required to complete the project.

Allocating common development costs—such as infrastructure, roadways, and utilities—requires significant management judgment. Costs are allocated to each acre or lot based on its relative sales value compared to the estimated total sales value of the entire project. We reevaluate these estimates at least annually, or more frequently if warranted by changes in market conditions or project scope. Any adjustments to these estimates are allocated prospectively to the remaining units available for sale. Significant changes in our assumptions regarding total project costs or future selling prices could impact the timing and amount of cost of sales recognized in our Consolidated Statements of Income and Comprehensive Income (Loss). See Note 1 — Summary of Significant Accounting Policies for additional information.

IMPAIRMENT OF LONG-LIVED ASSETS

We review the carrying amount of long-lived assets whenever an event or a change in circumstances indicates that the carrying value of the asset or asset group may not be recoverable through future operations. If we evaluate recoverability, we are required to estimate future cash flows and residual value of the asset or asset group. The evaluation of future cash flows requires the use of assumptions regarding future economic conditions such as construction costs and sales values that may differ from actual results. An impairment loss is recognized if the carrying amount of an asset is not recoverable and exceeds its fair value. See Note 1 — Summary of Significant Accounting Policies for additional information.

DEFERRED TAX ITEMS

Timber and Real Estate operations conducted within our REIT are generally not subject to U.S. income taxation. We expect variability in our effective tax rate and cash taxes to be driven primarily by operations conducted through our Taxable REIT Subsidiaries (TRS). Given the existence of Net Operating Loss (NOL) carryforwards within the TRS, the most critical element of our deferred tax reporting is the assessment of the valuation allowance against the Deferred Tax Asset (DTA) created by these NOLs. Deferred tax expense or benefit is recognized in the financial statements according to the changes in deferred tax assets and liabilities between years. Valuation allowances are established to reduce deferred tax assets when it is more likely than not that such assets will not be realized. See Note 21 — Income Taxes for additional information about our unrecognized tax benefits and Note 2 — Discontinued Operations for additional information about our New Zealand operations.

ENVIRONMENTAL AND NATURAL RESOURCE DAMAGE LIABILITIES

We determine the costs of environmental remediation for areas where we have been named a potentially liable party based on evaluations of current law and existing technologies. Inherent uncertainties exist in these evaluations due to unknown environmental conditions, changing governmental regulations, evolving legal standards regarding liability, and emerging remediation technologies. At December 31, 2025, the total liability recorded on our Consolidated Balance Sheets for environmental contamination and Natural Resource Damages was $9.3 million. This represents management’s best estimate of remediation and restoration costs; however, we continue to monitor the cleanup process and adjust the liability as necessary. For more information, see Governmental Regulations and Environmental Matters in Item 1 — Business, Note 1 — Summary of Significant Accounting Policies, and Note 13 — Environmental and Natural Resource Damage Liabilities.

ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED

See Note 1 — Summary of Significant Accounting Policies for a summary of recently issued accounting standards.