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Rayonier Reports First Quarter 2005 Results

April 26, 2005

JACKSONVILLE, Fla.--(BUSINESS WIRE)--April 26, 2005--Rayonier (NYSE:RYN) today reported first quarter net income of $34.4 million, or 67 cents per share. This compares to $13.5 million, or 26 cents per share, in fourth quarter 2004 and $75.5 million, or $1.49 per share, in first quarter 2004. First quarter 2005 results included a tax benefit of $9.5 million, or 19 cents per share, resulting from an IRS audit settlement relating to 1996 and 1997 tax years. First quarter 2004 results included a net tax benefit of $49.7 million, or 98 cents per share, and costs of $4.8 million, or 7 cents per share, relating to the company's REIT conversion.

Lee Nutter, Chairman, President and CEO said: "As expected, first quarter earnings improved significantly from the fourth quarter due to improved results in our two core businesses, Timber and Real Estate, and Performance Fibers, and we are continuing to experience strong pricing and demand across all product lines. Cash flow remains very good, further supporting our decision in February to increase the annual dividend 10.7 percent to $2.48 per share, while maintaining our flexibility to pursue growth opportunities."

First quarter earnings, excluding the tax benefit of 19 cents per share, were above fourth quarter primarily due to stronger results in Northwest U.S timber, performance fibers and real estate. Compared to first quarter 2004 excluding the net tax benefit of 98 cents per share, earnings declined slightly with strong results in performance fibers and lower corporate expenses offset by reduced real estate sales and higher taxes.

Cash provided by operating activities of $76 million was $6 million below first quarter 2004 and Cash Available for Distribution (CAD) of $60 million was $4 million below last year's first quarter. (CAD is a non-GAAP measure defined and reconciled to GAAP in the attached exhibits.) Cash flow, while lower mainly as a result of higher working capital requirements, remained robust due to continued strength in operations.

Sales of $286 million were $11 million below fourth quarter and $7 million below first quarter 2004.

Debt at quarter-end of $661 million was $3 million above year end 2004, however, debt less cash totaled $565 million, a $10 million decrease from year end. The debt-to-capital ratio of 45.0 percent compared to 45.3 percent at the end of 2004.

Timber and Real Estate

Sales of $76 million and operating income of $39 million were $17 million and $11 million above fourth quarter, respectively, primarily due to increased U.S. timber volume and prices as well as higher real estate sales. Compared to first quarter 2004, sales and operating income declined $11 million and $8 million, respectively, mainly due to reduced real estate sales.

Performance Fibers

Sales of $143 million were $11 million below fourth quarter, primarily due to reduced cellulose specialties volume partly offset by higher absorbent materials volume and stronger cellulose specialties prices. However, operating income of $12 million increased $7 million from fourth quarter, mainly as a result of lower wood, labor and maintenance costs. Compared to first quarter 2004, sales and operating income increased $10 million and $6 million, respectively, largely due to higher cellulose specialties prices and volume as well as stronger absorbent materials prices.

Wood Products

Sales of $42 million were $2 million below fourth quarter, as lower lumber and MDF volumes were partially offset by higher prices. Operating income of $2 million compared to an essentially breakeven result in the fourth quarter, due to improved lumber prices and manufacturing costs. Compared to first quarter 2004, sales and operating income improved $4 million and $2 million, respectively, with higher prices partially offset by increased manufacturing costs.

Other Operations

Sales of $26 million were $15 million and $11 million below fourth quarter and first quarter 2004, respectively. Essentially breakeven operating results compared to operating income of $1 million and $2 million in fourth quarter and first quarter 2004, respectively, primarily due to lower trading activity.

Other Items

Corporate expenses of $7.6 million were $1.8 million below fourth quarter, mainly due to lower stock price-based incentive compensation, and $5.6 million lower than first quarter 2004, largely because of the absence of REIT conversion costs.

The effective tax rate for the first quarter, excluding discrete items, was 16.5 percent compared to 19.4 percent in first quarter 2004 as a result of an increased percentage of non-taxable REIT income and additional tax credits. (See Schedule I for details.) First quarter 2005's effective rate, excluding discrete items, compares to the full year 2004 rate of 11.8 percent which included like-kind exchange (LKE) benefits of $11 million that reduced the effective rate by approximately nine percentage points. The company has $22 million of real estate proceeds, mostly from the first quarter, designated to pursue timberland purchases qualifying for tax-free LKE treatment which could reduce 2005 tax expense by approximately $7 million and the effective tax rate by five percentage points.

In addition to the previously noted tax benefit of 19 cents per share, first quarter's tax provision included two other discrete items: expenses of $2.9 million for unrealizable foreign tax credits and $1.1 million for the currency impact on the tax liability for un-repatriated foreign earnings.

Outlook

Nutter said: "We are off to an excellent start in 2005. In particular, demand is very strong in the Northwest for our timber and globally for our cellulose specialties products. While we are experiencing some increased energy and chemical costs at our performance fibers mills, given our strong start and the unique mix of our businesses, we are optimistic that full year 2005 earnings will compare favorably to 2004.

"Because of rapidly escalating demand for our higher value real estate, especially in Florida, we have made a strategic decision to hold some properties off the market in anticipation of significantly increased values over the next few years."

The company indicated second quarter 2005 earnings are expected to be somewhat above first quarter, excluding the previously noted tax benefit of 19 cents per share, but, due to reduced real estate sales, below second quarter 2004.

Rayonier has 2.2 million acres of prime timberland and real estate in the U.S. and New Zealand and is the world's leading producer of high performance specialty cellulose fibers. Approximately 40 percent of the company's sales are outside the U.S. to customers in more than 50 countries.

Reported results are preliminary and not final until filing of the first quarter 2005 Form 10-Q with the Securities and Exchange Commission and, therefore, remain subject to subsequent event adjustments. Comments about anticipated demand, pricing, earnings, real estate sales and expenses, including tax rates, are forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The following important factors, among others, could cause actual results to differ materially from those expressed in the forward-looking statements: changes in global market trends and world events; interest rate and currency movements; fluctuations in demand for or supply of cellulose specialties, absorbent materials, timber, wood products or real estate and entry of new competitors into these markets; adverse weather conditions affecting production, timber availability and sales, or distribution; changes in production costs for wood products or performance fibers, particularly for raw materials such as wood, energy and chemicals; unexpected delays in the closing of real estate sale transactions; changes in law or policy that might limit or restrict the development of real estate, particularly in the southeastern U.S.; the ability of the Company to identify and complete timberland acquisitions; the Company's ability to satisfy complex rules in order to qualify as a REIT; the availability of tax deductions and the ability of the Company to complete tax-efficient exchanges of real estate; and implementation or revision of governmental policies and regulations affecting the environment, endangered species, import and export controls or taxes, including changes in tax laws that could reduce the benefits associated with REIT status. For additional factors that could impact future results, please see the Company's most recent Form 10-K on file with the Securities and Exchange Commission.

A conference call will be held on Tuesday, April 26 at 4:15 p.m. EDT to discuss these results. Interested parties are invited to listen to the live webcast by logging onto www.rayonier.com and following the link. Supplemental materials will be available at the website. A replay will be available on the site shortly after the call where it will be archived for one month. Also, investors may access the "listen only" conference call by dialing 913-981-5584.

For further information, visit the company's web site at http://www.rayonier.com. Complimentary copies of Rayonier press releases and other financial documents are also available by mail or fax by calling 1-800-RYN-7611.

                               RAYONIER
                         FINANCIAL HIGHLIGHTS
                      MARCH 31, 2005 (unaudited)

          (millions of dollars, except per share information)

                                             Three Months Ended
                                     ---------------------------------
                                      March 31, December 31, March 31,
                                       2005        2004        2004
                                     ---------- ------------ ---------
 Profitability
     Sales                              $286.4       $297.5    $293.7
     Operating income                    $46.4        $25.8     $42.5
     Net income                          $34.4        $13.5     $75.5
     Net income per diluted common
      share                              $0.67        $0.26     $1.49
     Pro forma net income per
      diluted common share (a)           $0.48        $0.26     $0.51
     Operating income as a percent
      of sales                            16.2%         8.7%     14.5%
     ROE (annualized) (a) (b)              9.5%        14.2%     10.3%

                                                  Three Months Ended
                                                       March 31,
                                               -----------------------
                                                   2005        2004
                                                ------------ ---------
 Capital Resources and Liquidity
     Cash provided by operating
      activities                                      $75.8     $82.0
     Cash used for investing
      activities                                     $(40.4)   $(19.5)
     Cash used for financing
      activities                                     $(23.3)   $(21.0)
     Adjusted EBITDA (c) (e)                          $88.4     $88.2
     Cash Available for Distribution
      (CAD) (d) (e)                                   $60.0     $63.6
     Issuance (repayment) of debt,
      net                                              $4.2     $(0.8)
     Debt                                            $661.4    $618.3
     Debt / capital                                    45.0%     44.6%


(a) First quarter 2005 excludes tax benefit for prior years' IRS
    audit settlement of $9.5 million, or $0.19 per share. First
    quarter 2004 excludes reversal of deferred taxes not required
    after REIT conversion of $77.9 million, or $1.53 per share and
    additional taxes for repatriation of foreign earnings of ($28.2)
    million, or ($0.55) per share, for a net effect of $49.7 million,
    or $0.98 per share. See reconciliation on Schedule G.

(b) Based on year-to-date percent; major land sales and REIT
    conversion costs are not annualized.

(c) Adjusted EBITDA is defined as earnings from continuing operations
    before interest, taxes, depreciation, depletion, amortization and
    the non-cash cost basis of real estate sold. Adjusted EBITDA is a
    non-GAAP measure of operating cash generating capacity of the
    Company. See reconciliation on Schedule H.

(d) Cash Available for Distribution (CAD) is defined as cash provided
    by operating activities less capital spending, the tax benefit on
    the exercise of stock options, tax benefits associated with
    certain strategic acquisitions and the change in committed cash.
    CAD is a non-GAAP measure of cash generated during a period that
    is available for dividend distribution, repurchase of the
    Company's common shares, debt reduction and for strategic
    acquisitions net of associated financing. See reconciliation on
    Schedule G.

(e) Management considers these measures to be important to estimate
    the enterprise and shareholder values of the Company as a whole
    and of its core segments, and for allocating capital resources.

                                 - A -
                               RAYONIER
             CONDENSED STATEMENTS OF CONSOLIDATED INCOME
                      MARCH 31, 2005 (unaudited)

          (millions of dollars, except per share information)

                                           Three Months Ended
                                  ------------------------------------
                                   March 31,  December 31,  March 31,
                                     2005        2004         2004
                                  ----------- ------------ -----------

 Sales                                $286.4       $297.5      $293.7
                                  ----------- ------------ -----------
 Costs and expenses
    Cost of sales                      229.8        261.6       234.4
    Selling and general expenses        14.8         14.8        18.1
    Other operating income, net         (4.6)        (4.7)       (1.3)
                                  ----------- ------------ -----------
 Operating income                       46.4         25.8        42.5

 Interest expense                      (12.3)       (12.2)      (11.1)
 Interest and miscellaneous
  income (expense), net                  0.5         (1.3)        0.7
                                  ----------- ------------ -----------
 Income before taxes                    34.6         12.3        32.1
 Income tax (expense) benefit (a)       (0.2)         1.2        43.4
                                  ----------- ------------ -----------
 Net income (a)                        $34.4        $13.5       $75.5
                                  =========== ============ ===========

 Net income per Common Share
         Basic EPS                     $0.69        $0.27       $1.53
                                  =========== ============ ===========
         Diluted EPS                   $0.67        $0.26       $1.49
                                  =========== ============ ===========

 Pro forma net income per
  Common Share (b)
         Adjusted basic EPS            $0.50        $0.27       $0.52
                                  =========== ============ ===========
         Adjusted diluted EPS          $0.48        $0.26       $0.51
                                  =========== ============ ===========

 Weighted average Common
 Shares used for determining
         Basic EPS                50,119,923   49,901,206  49,340,565
                                  =========== ============ ===========
         Diluted EPS              51,430,445   51,289,861  50,776,436
                                  =========== ============ ===========

(a) First quarter 2005 includes tax benefit for prior years' IRS audit
    settlement of $9.5 million. First quarter 2004 includes reversal
    of deferred taxes not required after REIT conversion of $77.9
    million and additional taxes for repatriation of foreign earnings
    of ($28.2) million.

(b) First quarter 2005 excludes tax benefit for prior years' IRS audit
    settlement of $0.19 per share (basic and diluted). First quarter
    2004 excludes reversal of deferred taxes not required after REIT
    conversion of $1.58 per basic share and $1.53 per diluted share
    and additional taxes for repatriation of foreign earnings of
    ($0.57) per basic share and ($0.55) per diluted share, for a net
    of $1.01 per basic share and $0.98 per diluted share. See
    reconciliation on Schedule G.

                                 - B -
                               RAYONIER
          BUSINESS SEGMENT SALES AND OPERATING INCOME (LOSS)
                      MARCH 31, 2005 (unaudited)

                         (millions of dollars)

                                             Three Months Ended
                                     ---------------------------------
                                     March 31,  December 31, March 31,
                                       2005        2004        2004
                                     ---------- ------------ ---------
 Sales
    Timber and Real Estate
        Timber                           $51.9        $44.2     $53.1
        Real Estate                       23.6         14.6      33.3
                                     ---------- ------------ ---------
          Total Timber and Real
           Estate                         75.5         58.8      86.4
                                     ---------- ------------ ---------

    Performance Fibers
        Cellulose specialties            101.1        115.2      93.1
        Absorbent materials               41.9         39.1      39.8
                                     ---------- ------------ ---------
          Total Performance Fibers       143.0        154.3     132.9
                                     ---------- ------------ ---------

    Wood Products
        Lumber                            30.8         30.9      27.6
        MDF                               11.1         13.0       9.9
                                     ---------- ------------ ---------
          Total Wood Products             41.9         43.9      37.5
                                     ---------- ------------ ---------

    Other Operations                      26.3         40.9      36.9

    Intersegment eliminations             (0.3)        (0.4)        -
                                     ---------- ------------ ---------

          Total sales                   $286.4       $297.5    $293.7
                                     ========== ============ =========

 Operating income  (loss)
    Timber and Real Estate
        Timber                           $23.7        $16.4     $22.8
        Real Estate                       15.3         11.7      23.7
                                     ---------- ------------ ---------
             Total Timber and Real
              Estate                      39.0         28.1      46.5

    Performance Fibers                    12.4          5.4       6.1

    Wood Products
        Lumber                             3.6          1.4       1.5
        MDF                               (1.2)        (0.9)     (0.8)
                                     ---------- ------------ ---------
             Total Wood Products           2.4          0.5       0.7
                                     ---------- ------------ ---------

    Other Operations                       0.2          1.2       2.3

    Corporate                             (7.6)        (9.4)    (13.2)

    Intersegment eliminations and
     other
       (Including Corporate FX)              -            -       0.1
                                     ---------- ------------ ---------

             Total operating income      $46.4        $25.8     $42.5
                                     ========== ============ =========

                                 - C -
                                RAYONIER
  CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CASH FLOWS
                      MARCH 31, 2005 (unaudited)
                         (millions of dollars)

CONDENSED CONSOLIDATED BALANCE SHEETS
                                             March 31,   December 31,
                                               2005       2004
                                             ---------- ----------
    Assets
    Current assets                              $310.7     $300.7
    Timber, timberlands and logging roads,
     net of depletion and amortization         1,046.1    1,053.5
    Property, plant and equipment              1,457.1    1,447.4
    Less - accumulated depreciation           (1,002.1)    (984.1)
                                             ---------- ----------
                                                 455.0      463.3
                                             ---------- ----------
    Other assets                                 134.8      116.4
                                             ---------- ----------
                                              $1,946.6   $1,933.9
                                             ========== ==========
    Liabilities and Shareholders' Equity
    Current liabilities                         $241.0     $242.5
    Deferred income taxes                         55.3       50.7
    Long-term debt                               607.8      610.3
    Non-current reserves for dispositions and
     discontinued operations                     132.4      133.9
    Other non-current liabilities                101.3      100.1
    Shareholders' equity                         808.8      796.4
                                             ---------- ----------
                                              $1,946.6   $1,933.9
                                             ========== ==========

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                               Three Months Ended
                                             ---------------------
                                               March 31,   March 31,
                                                 2005       2004
                                             ---------- ----------
    Cash provided by operating activities:
       Net Income                                $34.4      $75.5
       Depreciation, depletion, amortization
        and non-cash cost basis of real
        estate sold                               41.5       45.0
       Other non-cash items included in
        income                                    (0.1)     (53.8) (a)
       Changes in working capital and other
        assets and liabilities                       -       15.3
                                             ---------- ----------
                                                  75.8       82.0
                                             ---------- ----------
    Cash used for investing activities:
       Capital expenditures, net of sales and
        retirements                              (20.3)     (19.5)
       Increase in restricted cash               (20.1)         -
                                             ---------- ----------
                                                 (40.4)     (19.5)
                                             ---------- ----------
    Cash used for financing activities:
       Issuance (repayment) of debt, net           4.2       (0.8)
       Dividends paid                            (31.1)     (27.7)
       Issuance of common shares                   3.6        7.5
                                             ---------- ----------
                                                 (23.3)     (21.0)
                                             ---------- ----------

    Cash and cash equivalents:
       Increase in cash and cash equivalents      12.1       41.5
       Balance, beginning of year                 84.1       21.4
                                             ---------- ----------
       Balance, end of period                    $96.2      $62.9
                                             ========== ==========



(a) Mainly reversal of deferred taxes not required after REIT
    conversion of ($77.9) million and additional taxes for
    repatriation of foreign earnings of $28.2 million.

                                 - D -
                               RAYONIER
                SELECTED SUPPLEMENTAL FINANCIAL DATA
                      MARCH 31, 2005 (unaudited)

                         (millions of dollars)

                                             Three Months Ended
                                     ---------------------------------
                                      March 31, December 31, March 31,
                                       2005        2004        2004
                                     ---------- ------------ ---------

Geographical Data (Non-U.S.)
     Sales
        New Zealand                      $20.3        $26.3     $19.8
        Other                              2.7          3.8       6.0
                                     ---------- ------------ ---------
           Total                         $23.0        $30.1     $25.8
                                     ========== ============ =========

     Operating income (loss)
        New Zealand                       $2.6         $1.0     $(1.0)
        Other                             (0.1)         1.8      (0.5)
                                     ---------- ------------ ---------
           Total                          $2.5         $2.8     $(1.5)
                                     ========== ============ =========

Timber
     Sales
        Northwest U.S.                   $26.3        $17.8     $24.2
        Southeast U.S.                    20.9         17.8      23.5
        New Zealand                        4.7          8.6       5.4
                                     ---------- ------------ ---------
           Total                         $51.9        $44.2     $53.1
                                     ========== ============ =========

     Operating income
        Northwest U.S.                   $16.4         $8.1     $13.9
        Southeast U.S.                     6.4          6.6       8.3
        New Zealand                        0.9          1.7       0.6
                                     ---------- ------------ ---------
           Total                         $23.7        $16.4     $22.8
                                     ========== ============ =========

 Adjusted EBITDA by Segment
     Timber and Real Estate              $60.9        $44.6     $69.9
     Performance Fibers                   28.4         23.6      24.5
     Wood Products                         5.9          5.2       4.1
     Other Operations                      0.3          1.4       2.3
     Corporate and other                  (7.1)       (11.2)    (12.6)
                                     ---------- ------------ ---------
        Total                            $88.4        $63.6     $88.2
                                     ========== ============ =========


                                 - E -
                               RAYONIER
                    SELECTED OPERATING INFORMATION
                      MARCH 31, 2005 (unaudited)

                                             Three Months Ended
                                     ---------------------------------
                                     March 31,  December 31, March 31,
                                       2005        2004        2004
                                     ---------- ------------ ---------
Timber and Real Estate
       Sales volume - Timber
          Northwest U.S.,
           in millions of board feet        76           55        88
          Southeast U.S.,
             in thousands of short
              green tons                 1,221        1,060     1,249
          New Zealand,
           in thousands of metric
           tons                             94          209       106

       Timber sales volume -
       Intercompany
          Southeast U.S.,
           in thousands of short
           green tons                       21           14         -
          New Zealand,
           in thousands of metric
           tons                              1            4         -

       Acres sold                       10,748        5,891    17,050

Performance Fibers
       Sales Volume
          Cellulose specialties,
           in thousands of metric
           tons                            107          125       101
          Absorbent materials,
           in thousands of metric
           tons                             67           62        68
      Production as a percent of
       capacity                           98.0%        96.1%     97.9%

Wood Products
       Lumber sales volume,
        in millions of board feet           83           86        83
       Medium-density fiberboard
        sales volume, in thousands
        of cubic meters                     39           46        39


                                 - F -
                               RAYONIER
                 RECONCILIATION OF NON-GAAP MEASURES
                      MARCH 31, 2005 (unaudited)

          (millions of dollars, except per share information)

                                                   Three Months Ended
                                                  --------------------
                                                   March 31, March 31,
                                                    2005       2004
                                                  ---------- ---------
 Cash Available for Distribution
 Cash provided by operating activities                $75.8     $82.0
 Capital spending (a)                                 (20.3)    (19.5)
 Change in committed cash                               5.5       2.2
 Tax benefit on exercise of stock options              (1.0)     (1.1)
                                                  ---------- ---------
 Cash Available for Distribution                      $60.0     $63.6
                                                  ========== =========


(a) Capital Spending is net of sales and retirements and excludes
    strategic acquisitions.




                                              Three Months Ended
                                     ---------------------------------
                                      March 31, December 31, March 31,
                                       2005        2004        2004
                                     ---------- ------------ ---------
 Net income per Common Share
    Basic EPS                            $0.69        $0.27     $1.53
                                     ========== ============ =========
    Diluted EPS                          $0.67        $0.26     $1.49
                                     ========== ============ =========

    Deferred taxes not required
     after REIT conversion
    Basic EPS                                -            -     (1.58)
                                     ========== ============ =========
    Diluted EPS                              -            -     (1.53)
                                     ========== ============ =========

    Additional taxes for
     repatriation of foreign
     earnings
    Basic EPS                                -            -      0.57
                                     ========== ============ =========
    Diluted EPS                              -            -      0.55
                                     ========== ============ =========

    Tax benefit from prior years'
     IRS audit settlement
    Basic EPS                            (0.19)           -         -
                                     ========== ============ =========
    Diluted EPS                          (0.19)           -         -
                                     ========== ============ =========

 Pro forma net income per Common
  Share
    Adjusted basic EPS                   $0.50        $0.27     $0.52
                                     ========== ============ =========
    Adjusted diluted EPS                 $0.48        $0.26     $0.51
                                     ========== ============ =========

                                 - G -
                               RAYONIER
                 RECONCILIATION OF NON-GAAP MEASURES
                      MARCH 31, 2005 (unaudited)

                        (millions of dollars)

               Timber
               and     Perfor-  Wood    Other
               Real    mance    Prod-   Oper-   Corporate
               Estate  Fibers   ucts    ations  and other   Total
              ------- -------- ------ -------- ----------   ------
Adjusted EBITDA

Three Months Ended
March 31, 2005
 Cash
  provided by
  operating
  activities   $72.4    $25.8   $1.5    $(3.7)    $(20.2)      $75.8
 Income tax
  expense          -        -      -        -        0.2         0.2
 Interest
  expense          -        -      -        -       12.3        12.3
 Working
  capital
  increases
  (decreases)   (8.5)     2.7    4.5      2.1        0.7         1.5
 Other
  balance
  sheet
  changes       (3.0)    (0.1)  (0.1)     1.9       (0.1)       (1.4)
              ------- -------- ------ -------- ----------      ------
 Adjusted
  EBITDA       $60.9    $28.4   $5.9     $0.3      $(7.1)      $88.4
              ======= ======== ====== ======== ==========      ======

December 31, 2004
 Cash
  provided by
  operating
  activities   $29.2    $32.5   $6.8     $5.6     $(12.8)      $61.3
 Income tax
  benefit          -        -      -        -       (1.2)       (1.2)
 Interest
  expense          -        -      -        -       12.2        12.2
 Working
  capital
  increases
  (decreases)    8.6     (9.0)  (1.5)    (4.1)      (2.4)       (8.4)
 Other
  balance
  sheet
  changes        6.8      0.1   (0.1)    (0.1)      (7.0)       (0.3)
              ------- -------- ------ -------- ----------      ------
 Adjusted
  EBITDA       $44.6    $23.6   $5.2     $1.4     $(11.2)      $63.6
              ======= ======== ====== ======== ==========      ======

March 31, 2004
 Cash
  provided by
  operating
  activities   $75.0    $15.7   $1.4     $5.6     $(15.7)      $82.0
 Income tax
  benefit          -        -      -        -      (43.4)      (43.4)
 Interest
  expense          -        -      -        -       11.1        11.1
 Working
  capital
  increases
  (decreases)   (8.8)     7.6    2.8     (2.8)     (17.4)      (18.6)
 Other
  balance
  sheet
  changes        3.7      1.2   (0.1)    (0.5)      52.8 (a)    57.1
              ------- -------- ------ -------- ----------      ------
 Adjusted
  EBITDA       $69.9    $24.5   $4.1     $2.3     $(12.6)      $88.2
              ======= ======== ====== ======== ==========      ======


(a) Includes reversal of deferred taxes not required after REIT
    conversion partly offset by additional taxes for repatriation of
    foreign earnings.


                                 - H -
                               RAYONIER
    RECONCILIATION OF STATUTORY INCOME TAX TO REPORTED INCOME TAX
                      MARCH 31, 2005  (unaudited)

               (millions of dollars, except percentages)

                                        Three Months Ended
                           -------------------------------------------
                              March 31,    December 31,    March 31,
                               2005           2004          2004
                           -------------- ------------- --------------
                              $      %      $      %       $      %
                           ------- ------ ------ ------ ------- ------

   Income tax provision at
    the U.S. statutory
    rate                   $(12.1) (35.0) $(4.3) (35.0) $(11.2) (35.0)

   REIT income not subject
    to federal tax            8.4   24.3    5.4   43.7     6.9   21.5

   Lost deduction on REIT
    interest expense and
    overhead expenses
    associated with REIT
    activities               (2.7)  (7.7)  (1.6) (12.9)   (1.8)  (5.7)

   State and local income
    taxes, foreign
    exchange rate changes
    and permanent
    differences               0.7    1.9    4.7   38.1    (0.2)  (0.2)
                           ------- ------ ------ ------ ------- ------

   Income tax (expense)
    benefit before
    discrete items (a)      $(5.7) (16.5)  $4.2   33.9   $(6.3) (19.4)

   Exchange rate changes
    on tax on
    undistributed
    foreign earnings         (1.1)  (3.2)  (3.0) (24.3)      -      -

   Non-realizability of
    New Zealand tax
    credits on U.S.
    withholding tax for
    prior years'
    intercompany note
    interest                 (2.9)  (8.4)     -      -       -      -

   Tax benefit from prior
    years' IRS audit
    settlement                9.5   27.6      -      -       -      -
                           ------- ------ ------ ------ ------- ------

   Income tax (expense)
    benefit (a)             $(0.2)  (0.5)  $1.2    9.6   $(6.3) (19.4)
                           ======= ====== ====== ====== ======= ======

(a) First quarter ended March 31, 2004 excludes reversal of deferred
    taxes not required after REIT conversion of $77.9 million and
    additional taxes for repatriation of foreign earnings of ($28.2)
    million.


                                 - I -

CONTACT:
Rayonier, Jacksonville
Media Contact:
Jay Fredericksen, 904-357-9106
or
Investor Contact:
Parag Bhansali, 904-357-9155

SOURCE: Rayonier

Contact

Mark McHugh

Senior Vice President and Chief Financial Officer

Phone: (904) 357-9100

investorrelations@rayonier.com

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