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DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
 3 Months Ended
Mar. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
        The Company is exposed to market risk related to potential fluctuations in foreign currency exchange rates and interest rates. The Company uses 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, the Company records its 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) income (“AOCI”) and reclassified into earnings when the hedged transaction materializes. Gains and losses on derivatives that are designated and qualify for net investment hedge accounting are recorded as a component of AOCI and will not be reclassified into earnings until the Company’s investment in its New Zealand operations 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’s wholly-owned subsidiary, 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. 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, 2020, foreign currency exchange contracts and foreign currency option contracts had maturity dates through September 2021 and August 2021, respectively.
        Foreign currency exchange and option contracts hedging foreign currency risk on export sales and ocean freight payments qualify for cash flow hedge accounting. The Company 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) income for de-designated hedges remains in accumulated other comprehensive (loss) income until the forecasted transaction affects earnings. Changes in the value of derivative instruments after de-designation are recorded in earnings.

INTEREST RATE SWAPS
        The Company is exposed to cash flow interest rate risk on its variable-rate Term Credit Agreement and Incremental Term Loan Agreement and uses variable-to-fixed interest rate swaps to hedge this exposure. For these derivative instruments, the Company reports the gains/losses from the fluctuations in the fair market value of the hedges in AOCI and reclassifies 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, 2020:
Outstanding Interest Rate Swaps (a)
Date Entered IntoTermNotional AmountRelated Debt FacilityFixed Rate of SwapBank Margin on DebtTotal Effective Interest Rate (b)
August 20159 years$170,000  Term Credit Agreement2.20 %1.63 %3.83 %
August 20159 years180,000  Term Credit Agreement2.35 %1.63 %3.98 %
April 201610 years100,000  Incremental Term Loan1.60 %1.90 %3.50 %
April 201610 years100,000  Incremental Term Loan1.60 %1.90 %3.50 %
July 201610 years100,000  Incremental Term Loan1.26 %1.90 %3.16 %

(a)  All interest rate swaps have been designated as interest rate cash flow hedges and qualify for hedge accounting.
(b) Rate is before estimated patronage payments.
TREASURY LOCKS
During the first quarter, the Company entered into 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, the Company de-designated and settled the treasury locks by converting them into interest rate swap lock agreements (discussed below). To the extent the Company de-designates or terminates 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) income and is amortized using the straight-line method through interest expense over the remaining life of the hedged item. Amounts recorded in accumulated other comprehensive (loss) income 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 information on the expired treasury lock agreements entered into during the period ending March 31, 2020:
Converted Treasury Rate Locks (a)
Date Entered IntoTermNotional AmountRateRelated Debt Facility (b)Expiration Date
January 202010 years$100,000  1.53%2020 Incremental Term Loan FacilityMarch 31, 2020
January 202010 years100,000  1.53%2020 Incremental Term Loan FacilityMarch 31, 2020
February 202010 years50,000  1.35%2020 Incremental Term Loan FacilityMarch 31, 2020

(a)  At inception, all treasury locks were designated as interest rate cash flow hedges and qualified for hedge accounting.
(b) On April 16, 2020, the Company 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 6 — Debt for information regarding subsequent events. The Company anticipates 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, the Company 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 were designated and qualified as cash flow hedges. The Company reports the gains/losses from the fluctuations in the fair market value of the hedges in AOCI and reclassifies 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 swap lock agreements as of March 31, 2020:
Outstanding Interest Rate Swap Locks (a)
Date Entered IntoTermNotional AmountFixed Rate of Swap Lock (b)Related Debt Facility (c)Effective Date
March 202010 years$100,000  1.56%2020 Incremental Term Loan FacilityJuly 31, 2020
March 202010 years100,000  1.59%2020 Incremental Term Loan FacilityJune 30, 2020
March 202010 years50,000  1.41%2020 Incremental Term Loan FacilityJune 30, 2020

(a)  All interest rate swap locks have been designated as interest rate cash flow hedges 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 in the fixed rate over what would have been charged for an at-market swap lock.
(c) On April 16, 2020, the Company 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 6 — Debt for information regarding subsequent events. The Company anticipates extending the term of the 2020 Incremental Term Loan facility for an additional five-year term upon maturity.
FORWARD-STARTING INTEREST RATE SWAPS
The Company is exposed to cash flow interest rate risk on anticipated debt issuances and uses 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, the Company reports the gains/losses from the fluctuations in the fair market value of the hedges in AOCI and reclassifies 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, 2020:
Outstanding Forward-Starting Interest Rate Swaps (a)
Date Entered IntoTermNotional AmountFixed Rate of SwapRelated Debt FacilityForward DateMaximum Period Ending for Forecasted Issuance Date
February 202010 years$325,000  1.40 %Anticipated refinancing of Senior Notes due 2022April 2022April 2022
March 20204 years100,000  0.88 %Anticipated extension of Term Credit AgreementAugust 2024
April 2020 (b)

(a)  All forward-starting interest rate swaps have been designated as interest rate cash flow hedges and qualify for hedge accounting.
(b) On April 1, 2020, the maturity date of the Term Credit Agreement was extended from August 5, 2024 to April 1, 2028. See Note 6 — Debt for information regarding subsequent events. On April 8, 2020, the terms of this forward-starting swap were modified to match the maturity date of the Term Credit Agreement.
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) income, net” as the contracts did not qualify for hedge accounting treatment. As of March 31, 2020, carbon option contracts had maturity dates through June 2020.
        
The following tables demonstrate the impact, gross of tax, of the Company’s derivatives on the Consolidated Statements of Income and Comprehensive Income for three months ended March 31, 2020 and 2019:

Three Months Ended
March 31,
Income Statement Location20202019
Derivatives designated as cash flow hedges:
Foreign currency exchange contracts
Other comprehensive (loss) ($5,480) $1,119  
Foreign currency option contracts
Other comprehensive (loss) (1,149) 77  
Interest rate swaps
Other comprehensive (loss) (38,998) (11,548) 
Treasury locksOther comprehensive (loss)(20,846) —  
Interest rate swap locksOther comprehensive (loss) 854  —  
Forward-starting interest rate swapsOther comprehensive (loss)(19,710) —  
Derivatives not designated as hedging instruments:
Foreign currency exchange contractsInterest and other miscellaneous (expense) income, net —  (16) 
Carbon option contractsInterest and other miscellaneous (expense) income, net 549  402  
        During the next 12 months, the amount of the March 31, 2020 AOCI balance, net of tax, expected to be reclassified into earnings as a result of the maturation of the Company’s derivative instruments is a loss of approximately $3.4 million.
        The following table contains the notional amounts of the derivative financial instruments recorded in the Consolidated Balance Sheets:
Notional Amount
March 31, 2020December 31, 2019
Derivatives designated as cash flow hedges:
Foreign currency exchange contracts$60,350  $56,350  
Foreign currency option contracts36,000  22,000  
Interest rate swaps650,000  650,000  
Interest rate swap locks250,000  —  
Forward-starting interest rate swaps425,000  —  
Derivative not designated as a hedging instrument:
Foreign currency exchange contracts—  —  
Carbon options (a)5,070  9,592  

(a) Notional amount for carbon options is calculated as the number of units outstanding multiplied by the spot price as of March 31, 2020.
        The following table contains the fair values of the derivative financial instruments recorded in the Consolidated Balance Sheets:
Location on Balance SheetFair Value Assets / (Liabilities) (a)
March 31, 2020December 31, 2019
Derivatives designated as cash flow hedges:
Foreign currency exchange contractsOther current assets$79  $424  
Other assets —  390  
Other current liabilities(4,319) (172) 
Other non-current liabilities(599) —  
Foreign currency option contractsOther current assets68  151  
Other assets129  209  
Other current liabilities(546) (27) 
Other non-current liabilities(497) (30) 
Interest rate swapsOther assets—  2,614  
Other non-current liabilities(47,452) (11,068) 
Interest rate swap locksOther non-current liabilities(19,992) —  
Forward-starting interest rate swapsOther non-current liabilities(19,710) —  
Derivative not designated as a hedging instrument:
Carbon optionsOther current liabilities(14) (607) 
Total derivative contracts:
Other current assets$147  $575  
Other assets129  3,213  
Total derivative assets$276  $3,788  
Other current liabilities(4,879) (806) 
Other non-current liabilities(88,250) (11,098) 
Total derivative liabilities($93,129) ($11,904) 

(a) See Note 14 — Fair Value Measurements for further information on the fair value of the Company’s 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. The Company’s derivative financial instruments are not subject to master netting arrangements, which would allow the right of offset.