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Rayonier Reports First Quarter 2006 Results

April 25, 2006

JACKSONVILLE, Fla., Apr 25, 2006 (BUSINESS WIRE) -- Rayonier (NYSE:RYN) today reported first quarter net income of $23.3 million, or 30 cents per share. This compares to $56.4 million, or 73 cents per share, in fourth quarter 2005 and $34.4 million, or 45 cents per share, in first quarter 2005. There were no special items in the quarter, however, fourth quarter 2005 included a gain of $30.5 million, or 39 cents per share, on the sale of New Zealand timber assets to a consortium including Rayonier, while first quarter 2005 included a tax benefit of $9.5 million, or 12 cents per share, resulting from an IRS audit settlement.

Lee Nutter, Chairman, President and CEO, said: "We had a good quarter, in line with our expectations, with continued strong demand and prices for U.S. timber and cellulose specialties. Also, our real estate subsidiary, TerraPointe, continued to experience very strong interest in its Southeast coastal corridor properties. As expected, real estate operating income was below the comparable periods due, in part, to our strategy of moving up the real estate value chain and away from traditional bulk land sales, and also the timing of transactions."

First quarter net income was below fourth quarter, excluding the special item, primarily due to lower real estate sales, a higher tax rate and the impact of expensing stock options. These were partly offset by improved performance fibers results. On the same basis, earnings were also below first quarter 2005 primarily due to reduced real estate sales and higher performance fibers costs.

Sales for the first quarter of $277 million were $39 million below the fourth quarter but $2 million above first quarter 2005.

Cash provided by operating activities of $51 million was $25 million below first quarter 2005 primarily due to lower operating earnings and higher working capital. Cash Available for Distribution (CAD) of $24 million was $39 million below first quarter 2005 primarily due to reduced earnings and increased capital spending. (CAD is a non-GAAP measure defined and reconciled to GAAP in the attached exhibits.)

Debt of $558 million and the debt-to-capital ratio of 38.9 percent at quarter-end were comparable to year-end 2005. Cash at March 31, 2006, was $126 million.

Timber

Sales of $54 million were $1 million below fourth quarter 2005 while operating income of $24 million was essentially unchanged, as lower Northwest prices were offset by higher volumes in that region as well as increased Southeast prices. Compared to first quarter 2005, sales improved $3 million primarily due to higher Southeast prices while operating income was unchanged as the improved prices were offset by lower New Zealand earnings and increased costs in the Northwest.

Real Estate

Sales of $13 million and operating income of $10 million were $7 million and $6 million below fourth quarter 2005, respectively, primarily due to pricing for development properties that, while very strong, was below the exceptionally high prices received in the previous quarter. Sales volume and pricing for rural properties increased from the fourth quarter. Compared to first quarter 2005, sales and operating income decreased $11 million and $5 million, respectively, mainly due to fewer development and rural acres sold, partly offset by higher per acre prices for both development and rural properties.

Performance Fibers

Sales of $146 million were $27 million below fourth quarter, however, operating income of $10 million increased $4 million as higher cellulose specialties prices more than offset lower volume and absorbent materials prices. Compared to first quarter 2005, sales increased $3 million largely due to cellulose specialties prices partly offset by reduced volume and absorbent materials prices. Operating income, however, decreased $2 million mainly due to higher raw material and energy costs.

Wood Products

Sales of $32 million were $3 million below fourth quarter 2005 primarily due to lower volume while operating income of $3 million was essentially unchanged. Compared to first quarter 2005, sales improved $1 million while operating income declined $1 million due to increased manufacturing costs partially offset by higher volume and prices.

Other Operations

Sales of $32 million and essentially break even operating results were $2 million and $1 million below fourth quarter 2005, respectively, primarily due to lower coal royalties. Compared to first quarter 2005, sales improved $6 million while operating income declined $1 million mainly due to lower trading margins.

Other Items

Corporate expenses of $9.5 million were $0.9 million below fourth quarter 2005 as lower incentive compensation accruals were partially offset by $2.1 million of stock option expense. Compared to first quarter 2005, corporate expenses were $1.9 million higher, principally due to the impact of expensing stock options.

Intersegment eliminations and other income of $0.3 million was $3.2 million favorable to fourth quarter 2005, primarily due to a $3 million increase in disposition reserves in 2005, and comparable to last year's first quarter.

Interest expense of $12 million was in line with both fourth and first quarters of 2005.

Interest and other income of $2.2 million was $2 million below fourth quarter 2005 but $1.8 million above first quarter 2005. The unfavorable variance to the fourth quarter was primarily due to a gain on the sale of a manufacturing asset in that quarter, while the favorable variance to the first quarter was mainly due to higher interest income.

Excluding discrete items, the effective tax rate for the quarter was 16.4 percent compared to 17.2 percent in first quarter 2005. Including discrete items, the first quarter 2005 effective tax rate was substantially lower due to the favorable IRS audit settlement in that period (see Schedule J for details).

Outlook

The company said second quarter 2006 net income is expected to be somewhat above the first quarter with improved cellulose specialties volume and product mix as well as higher Northwest timber prices, partly offset by increased performance fibers manufacturing costs. However, earnings are expected to be somewhat below second quarter 2005, excluding special items, primarily due to higher performance fibers manufacturing costs partly offset by improved prices for cellulose specialties and Southeast timber.

Nutter said: "With strong demand and pricing for cellulose specialties, U.S. timber and Southeast real estate, we continue to believe that full-year earnings will be somewhat above 2005, excluding special items. The second half of the year should be much stronger than the first, particularly due to increased real estate transactions."

Rayonier owns, leases or manages 2.5 million acres of timberland in the U.S., New Zealand and Australia. Its real estate subsidiary, TerraPointe LLC, is focused on maximizing the value of its higher-and-better use properties, particularly in the fast growing counties along Interstate 95 between Savannah, Georgia, and Daytona Beach, Florida, where the company owns approximately 200,000 acres. Rayonier is also the world's leading producer of high performance cellulose specialty products. Approximately 40 percent of Rayonier'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 2006 Form 10-Q with the Securities and Exchange Commission and, therefore, remain subject to adjustment. Statements regarding anticipated earnings, demand and pricing for our products, manufacturing costs, and real estate transactions are "forward-looking statements" made pursuant to the safe harbor provisions of federal securities laws. 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 specialty products, 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 entry into or closing of real estate sale transactions; changes in law or policy that might condition, limit or restrict the development of real estate; the ability of the company to identify and complete timberland and higher-value real estate acquisitions; the company's ability to continue to qualify as a REIT; 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. Rayonier assumes no obligation to update these statements except as may be required by law.

A conference call will be held on Tuesday, April 25, at 2:00 p.m. EDT to discuss these results. Interested parties are invited to listen to the live webcast by logging onto http://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, 2006 (unaudited)

          (millions of dollars, except per share information)

                                            Three Months Ended
                                   -----------------------------------
                                    March 31,  December 31,  March 31,
                                      2006        2005         2005
                                   ---------- ------------- ----------
 Profitability
 Sales                                $277.2        $315.9     $275.0
 Operating income                      $37.3         $36.0      $47.3
 Income from continuing operations     $23.3         $56.4      $34.8
 Discontinued operations                  $-            $-      $(0.4)
 Net income                            $23.3         $56.4      $34.4
 Income per diluted common share
    Continuing operations              $0.30         $0.73      $0.45
    Net income                         $0.30         $0.73      $0.45
    Pro forma income from
     continuing
       operations (a)                  $0.30         $0.34      $0.33
 Operating income as a percent of
  sales                                 13.5%         11.4%      17.2%
 ROE (annualized) (b)                   10.0%         14.2%       9.6%


                                                 Three Months Ended
                                                       March 31,
                                              ------------- ----------
                                                   2006        2005
                                              ------------- ----------
 Capital Resources and Liquidity
 Continuing operations:
    Cash provided by operating
     activities                                      $50.8      $75.6
    Cash used for investing
     activities                                     $(40.4)    $(40.2)
    Cash used for financing
     activities                                     $(30.8)    $(23.3)
 Adjusted EBITDA (c) (e)                             $70.9      $87.2
 Cash Available for Distribution
  (CAD) (d) (e)                                      $23.7      $62.2
 (Repayment)/borrowing of debt, net                  $(0.8)      $4.2
 Debt                                               $557.7     $661.4
 Debt / capital                                       38.9%      45.0%
 Cash                                               $126.2      $96.2

(a), (b), (c), (d) and (e), see Schedule B.

                                 - A -

                               RAYONIER
                       FOOTNOTES FOR SCHEDULE A
                      MARCH 31, 2006 (unaudited)

(a) Pro forma income is a non-GAAP measure. See Schedule H for
    reconciliation to the nearest GAAP measure.

(b) Based on year-to-date percent; major land sales 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 I.

(d) Cash Available for Distribution (CAD) is defined as cash provided
    by operating activities of continuing operations less capital
    spending, adjusted for equity based compensation amounts, proceeds
    from matured energy forward contracts, the 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 H.

(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. In
    addition, analysts, investors and creditors use these measures
    when analyzing the financial condition and cash generating ability
    of the Company.

                                 - B -

                               RAYONIER
              CONDENSED STATEMENTS OF CONSOLIDATED INCOME
                      MARCH 31, 2006 (unaudited)

          (millions of dollars, except per share information)

                                           Three Months Ended
                                 -------------------------------------
                                  March 31,   December 31,  March 31,
                                    2006         2005         2005
                                 ----------- ------------- -----------

 Sales                               $277.2        $315.9      $275.0
                                 ----------- ------------- -----------
 Costs and expenses
    Cost of sales                     224.2         260.0       217.4
    Selling and general expenses       16.2          17.7        14.5
    Other operating
     (income)/expense, net             (0.5)          2.2        (4.2)
                                 ----------- ------------- -----------
 Operating income                      37.3          36.0        47.3
 Gain on sale of New Zealand
  timberlands (a)                         -          37.0           -
                                 ----------- ------------- -----------
 Income from continuing
  operations, including gain
  on sale of New Zealand
  timberlands                          37.3          73.0        47.3
 Interest expense                     (12.2)        (12.0)      (12.3)
 Interest and other
  income/(expense), net                 2.2           4.2         0.4
                                 ----------- ------------- -----------
 Income before taxes                   27.3          65.2        35.4
 Income tax expense                    (4.0)         (8.8)       (0.6)
                                 ----------- ------------- -----------
 Income from continuing
  operations                          $23.3         $56.4       $34.8
 Discontinued operations, net             -             -        (0.4)
                                 ----------- ------------- -----------
 Net income                           $23.3         $56.4       $34.4
                                 =========== ============= ===========

 Income per Common Share:
   Basic
    From continuing operations        $0.31         $0.75       $0.46
                                 =========== ============= ===========
    Net income                        $0.31         $0.75       $0.46
                                 =========== ============= ===========
   Diluted
    From continuing operations        $0.30         $0.73       $0.45
                                 =========== ============= ===========
    Net income                        $0.30         $0.73       $0.45
                                 =========== ============= ===========

   Pro forma income from
    continuing
    operations (b)
    Adjusted basic EPS                $0.31         $0.35       $0.34
                                 =========== ============= ===========
    Adjusted diluted EPS              $0.30         $0.34       $0.33
                                 =========== ============= ===========

 Weighted average Common
  Shares used for determining
    Basic EPS                    76,289,274    75,844,885  75,179,885
                                 =========== ============= ===========
    Diluted EPS (c)              78,006,773    78,002,090  77,145,668
                                 =========== ============= ===========


(a) Total gain was $73.7 million, which was reduced by $36.7 million
    of unrecognized gain based on our proportionate interest in the
    joint venture.

(b) See Schedule H for a reconciliation to the nearest GAAP measure.

(c) The Company adopted Statement of Financial Accounting Standard
    (SFAS) 123(R) Share-Based Payment on January 1, 2006. The adoption
    required the Company to update its diluted share calculation under
    the treasury stock method, which reduced the number of diluted
    shares in 2006.

                                 - C -

                               RAYONIER
          BUSINESS SEGMENT SALES AND OPERATING INCOME (LOSS)
                      MARCH 31, 2006 (unaudited)

                         (millions of dollars)

                                           Three Months Ended
                                  ------------------------------------
                                   March 31,   December 31,  March 31,
                                     2006         2005        2005
                                  ----------- ------------- ----------
 Sales
    Timber                             $54.4         $55.7      $51.9

    Real Estate                         13.1          19.9       23.6

    Performance Fibers
     Cellulose specialties             106.7         124.7      101.1
     Absorbent materials                39.3          48.0       41.9
                                  ----------- ------------- ----------
      Total Performance Fibers         146.0         172.7      143.0
                                  ----------- ------------- ----------

    Wood Products                       31.6          34.1       30.5

    Other Operations                    32.1          33.6       26.3

    Intersegment eliminations              -          (0.1)      (0.3)
                                  ----------- ------------- ----------

      Total sales                     $277.2        $315.9     $275.0
                                  =========== ============= ==========

 Operating income/(loss)
    Timber                             $23.8         $23.5      $23.7

    Real Estate                         10.2          15.9       15.3

    Performance Fibers                  10.3           6.6       12.4

    Wood Products                        2.6           2.8        3.2

    Other Operations                    (0.4)          0.5        0.2

    Corporate                           (9.5)        (10.4)      (7.6)

    Intersegment eliminations
     and other
     (Including Corporate FX)            0.3          (2.9)       0.1
                                  ----------- ------------- ----------

      Total operating income           $37.3         $36.0      $47.3
                                  =========== ============= ==========

                                 - D -

                               RAYONIER
  CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CASH FLOWS
                      MARCH 31, 2006 (unaudited)

                         (millions of dollars)

CONDENSED CONSOLIDATED BALANCE SHEETS
                                              March 31,   December 31,
                                                2006         2005
                                             ----------- ------------

   Current assets                                $348.5       $354.1
   Timber, timberlands and logging roads,
    net of depletion and amortization             925.5        927.0
   Property, plant and equipment                1,381.0      1,352.4
   Less - accumulated depreciation             (1,005.2)      (991.1)
                                             ----------- ------------
                                                  375.8        361.3
                                             ----------- ------------
   Investment in New Zealand JV                    72.5         81.6
   Other assets                                   112.2        115.1
                                             ----------- ------------
                                               $1,834.5     $1,839.1
                                             =========== ============
   Liabilities and Shareholders' Equity
   Current liabilities                           $179.8       $170.1
   Deferred income taxes                           32.2         32.2
   Long-term debt                                 555.2        555.2
   Non-current reserves for dispositions
    and discontinued operations                   124.0        128.0
   Other non-current liabilities                   67.4         68.7
   Shareholders' equity                           875.9        884.9
                                             ----------- ------------
                                               $1,834.5     $1,839.1
                                             =========== ============

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                Three Months Ended
                                             ------------------------
                                              March 31,    March 31,
                                                2006         2005
                                             ----------- ------------
   Cash provided by operating activities
    of continuing operations:
    Income from continuing operations             $23.3        $34.8
    Depreciation, depletion, amortization
     and non-cash cost basis of real estate
     sold                                          33.2         39.7
    Other non-cash items included in income         4.1         (0.2)
    Changes in working capital and other
     assets and liabilities                        (9.8)         1.3
                                             ----------- ------------
                                                   50.8         75.6
                                             ----------- ------------
   Cash used for investing activities of
    continuing operations:
    Capital expenditures, net of sales and
     retirements                                  (36.5)       (20.1)
    Purchase of timberlands                        (4.3)           -
    Decrease/(increase) in restricted cash          0.2        (20.1)
    Proceeds from matured energy forward
     contracts                                      0.2            -
                                             ----------- ------------
                                                  (40.4)       (40.2)
                                             ----------- ------------
   Cash used for financing activities:
    (Repayment)/borrowing of debt, net             (0.8)         4.2
    Dividends paid                                (35.9)       (31.1)
    Issuance of common shares                       4.1          3.6
    Excess tax benefits from equity-based
     compensation(1)                                1.8            -
                                             ----------- ------------
                                                  (30.8)       (23.3)
                                             ----------- ------------
   Effect of exchange rate changes on cash          0.4          0.1
                                             ----------- ------------
   Cash used for discontinued operations              -         (0.1)
                                             ----------- ------------
   Cash and cash equivalents:
    (Decrease)/Increase in cash and cash
     equivalents                                  (20.0)        12.1
    Balance, beginning of year                    146.2         84.1
                                             ----------- ------------
    Balance, end of period                       $126.2        $96.2
                                             =========== ============


(1) SFAS No. 123(R) requires the excess tax benefits on equity-based
    compensation to be included as a financing activity. Since the
    Company did not adopt SFAS No. 123(R) until January 1, 2006, no
    adjustment is required for the three months ended March 31, 2005.

                                 - E -

                               RAYONIER
                 SELECTED SUPPLEMENTAL FINANCIAL DATA
                      MARCH 31, 2006 (unaudited)

                         (millions of dollars)

                                          Three Months Ended
                                 ------------------------------------
                                  March 31,   December 31,  March 31,
                                    2006         2005        2005
                                 ----------- ------------- ----------

 Geographical Data (Non-U.S.)
   Sales
     New Zealand                       $5.5         $12.8       $8.9
     Other                              4.5           2.8        2.7
                                 ----------- ------------- ----------
       Total                          $10.0         $15.6      $11.6
                                 =========== ============= ==========

   Operating income (loss)
     New Zealand                      $(1.1)        $(1.8)      $0.5
     Other                             (0.4)          1.5       (0.2)
                                 ----------- ------------- ----------
       Total                          $(1.5)        $(0.3)      $0.3
                                 =========== ============= ==========

 Timber
   Sales
     Northwest U.S.                   $27.1         $27.4      $26.3
     Southeast U.S.                    25.0          24.6       20.9
     New Zealand                        2.3           3.7        4.7
                                 ----------- ------------- ----------
       Total                          $54.4         $55.7      $51.9
                                 =========== ============= ==========

   Operating income
     Northwest U.S.                   $16.0         $13.9      $16.4
     Southeast U.S.                     8.9          11.2        6.4
     New Zealand                       (1.1)         (1.6)       0.9
                                 ----------- ------------- ----------
       Total                          $23.8         $23.5      $23.7
                                 =========== ============= ==========

 Adjusted EBITDA by Segment(1)
   Timber                             $39.1         $39.4      $38.5
   Real Estate                         11.5          17.4       22.5
   Performance Fibers                  25.4          29.1       28.5
   Wood Products                        4.3           4.5        5.0
   Other Operations                    (0.1)          0.9        0.3
   Corporate and other                 (9.3)        (13.3)      (7.6)
                                 ----------- ------------- ----------
     Total                            $70.9         $78.0      $87.2
                                 =========== ============= ==========

(1) Adjusted EBITDA is a non-GAAP measure, see Schedule I for
    reconciliation to nearest GAAP measure.

                                 - F -

                               RAYONIER
                    SELECTED OPERATING INFORMATION
                      MARCH 31, 2006 (unaudited)

                                            Three Months Ended
                                   -----------------------------------
                                    March 31,  December 31,  March 31,
                                      2006        2005         2005
                                   ---------- ------------- ----------
 Timber

       Northwest U.S., in
         millions of board feet           75            70         76
       Southeast U.S., in
         thousands of short
         green tons                    1,247         1,325      1,221

   Timber sales volume -
   Intercompany
     Southeast U.S., in
       thousands of short
       green tons                          -             1         21

 Real Estate
   Acres sold
     TerraPointe - Development           744         1,099      1,520
     TerraPointe - Rural               2,660         1,480      9,148
     Northwest U.S.                        -           128         80
                                   ---------- ------------- ----------
     Total                             3,404         2,707     10,748

 Performance Fibers
   Sales Volume
     Cellulose specialties,
       in thousands of metric
       tons                              104           130        107
     Absorbent materials,
       in thousands of metric
       tons                               65            75         67
 Production as a percent of
  capacity                              98.9%        104.0%      98.0%

 Lumber
   Sales volume, in millions
     of board feet                        84            89         83

                                 - G -

                               RAYONIER
                  RECONCILIATION OF NON-GAAP MEASURES
                      MARCH 31, 2006 (unaudited)

          (millions of dollars, except per share information)


CASH AVAILABLE FOR DISTRIBUTION:
                                                   Three Months Ended
                                                 ---------------------
                                                  March 31,  March 31,
                                                    2006       2005
                                                 ---------- ----------

 Cash provided by operating activities               $50.8      $75.6
 Capital spending (a)                                (36.5)     (20.1)
 Like-kind exchange tax benefits on
   third party real estate sales (b)                  (0.9)         -
 Decrease in committed cash                            5.9        5.5
 Equity based compensation adjustments                 4.2        1.2
 Proceeds from matured forward energy contracts        0.2          -
                                                 ---------- ----------
 Cash Available for Distribution                     $23.7      $62.2
                                                 ========== ==========

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

(b) Represents taxes that would have been paid if the Company had not
    completed LKE transactions.

PRO FORMA INCOME:
                                           Three Months Ended
                                   -----------------------------------
                                    March 31,  December 31,  March 31,
                                      2006        2005         2005
                                   ---------- ------------- ----------
 Income from Continuing
   Operations per Common Share
     Basic EPS                         $0.31         $0.75      $0.46
                                   ========== ============= ==========
     Diluted EPS                       $0.30         $0.73      $0.45
                                   ========== ============= ==========

     New Zealand timberlands sale
     Basic EPS                             -         (0.40)         -
                                   ========== ============= ==========
     Diluted EPS                           -         (0.39)         -
                                   ========== ============= ==========

     IRS audit settlements
     Basic EPS                             -             -      (0.12)
                                   ========== ============= ==========
     Diluted EPS                           -             -      (0.12)
                                   ========== ============= ==========

 Pro forma income from
   Continuing Operations per
   Common Share
     Adjusted basic EPS                $0.31         $0.35      $0.34
                                   ========== ============= ==========
     Adjusted diluted EPS              $0.30         $0.34      $0.33
                                   ========== ============= ==========

                                 - H -

                               RAYONIER
                RECONCILIATION OF NON-GAAP MEASURES(1)
                      MARCH 31, 2006 (unaudited)

                         (millions of dollars)


 ADJUSTED EBITDA:

                              Perf-            Other  Corporate
                      Real  ormance    Wood    Oper-     and
             Timber  Estate  Fibers  Products  ations   other   Total
            ------- ------- ------- --------- ------ --------- -------

 Three
  Months
  Ended
 March 31,
  2006
 Cash
  provided
  by
  operating
  activities $44.1    $7.5   $29.6      $0.7   $0.6    $(31.7)  $50.8
 Income
  tax
  expense        -       -       -         -      -       4.0     4.0
 Interest,
  net            -       -       -         -      -      10.0    10.0
 Working
  capital
  increases
  (de-
  creases)     4.5     4.0    (4.2)      3.6   (0.9)      4.9    11.9
  Other
   balance
   sheet
   changes    (9.5)      -       -         -    0.2       3.5    (5.8)
            ------- ------- ------- --------- ------ --------- -------
  Adjusted
   EBITDA    $39.1   $11.5   $25.4      $4.3  $(0.1)    $(9.3)  $70.9
            ======= ======= ======= ========= ====== ========= =======

 December
  31, 2005
 Cash
  provided
  by
  operating
  activities $54.4   $15.8   $58.9      $5.2  $(5.5)    $(2.4) $126.4
  Income
   tax
   expense       -       -       -         -      -       8.8     8.8
  Interest,
   net           -       -       -         -      -       9.7     9.7
 Working
  capital
  increases
  (de-
  creases)   (10.8)    1.2   (29.7)     (0.7)   6.3      (6.6)  (40.3)
  Other
   balance
   sheet
   changes    (4.2)    0.4    (0.1)        -    0.1     (22.8)  (26.6)
            ------- ------- ------- --------- ------ --------- -------
  Adjusted
   EBITDA    $39.4   $17.4   $29.1      $4.5   $0.9    $(13.3)  $78.0
            ======= ======= ======= ========= ====== ========= =======

 March 31,
  2005
  Cash
   provided
   by
   operating
   acti-
   vities    $45.9   $26.5   $25.8      $1.6  $(3.7)   $(20.5)  $75.6
  Income
   tax
   expense       -       -       -         -      -       0.6     0.6
 Interest,
  net            -       -       -         -      -      11.7    11.7
 Working
  capital
  increases
  (de-
  creases)    (4.8)   (3.7)    2.7       3.4    2.1       0.3       -
  Other
   balance
   sheet
   changes    (2.6)   (0.3)      -         -    1.9       0.3    (0.7)
            ------- ------- ------- --------- ------ --------- -------
  Adjusted
   EBITDA    $38.5   $22.5   $28.5      $5.0   $0.3     $(7.6)  $87.2
            ======= ======= ======= ========= ====== ========= =======

(1) Unusual, non-trade intercompany items between the segments have
    been eliminated.

                                 - I -

                               RAYONIER
     RECONCILIATION OF STATUTORY INCOME TAX TO REPORTED INCOME TAX
                      MARCH 31, 2006 (unaudited)

               (millions of dollars, except percentages)

                                       Three Months Ended
                           -------------------------------------------
                             March 31,    December 31,     March 31,
                               2006          2005           2005
                           ------------- -------------- --------------
                              $      %      $       %      $       %
                           ------ ------ ------- ------ ------- ------

 Income tax provision at
  the U.S. statutory rate  $(9.6) (35.0) $(22.8) (35.0) $(12.4) (35.0)

 REIT income not subject to
  federal tax                8.0   29.3    11.1   17.0     8.4   23.7

 Lost deduction on REIT
  interest expense and
  overhead expenses
  associated with REIT
  activities                (3.2) (11.7)   (2.9)  (4.4)   (2.7)  (7.6)

 Foreign, state and local
  income taxes, foreign
  exchange rate changes and
  permanent differences      0.3    1.0     4.9    7.5     0.6    1.7
                           ------ ------ ------- ------ ------- ------

 Income tax (expense)
  benefit before discrete
  items                    $(4.5) (16.4)  $(9.7) (14.9)  $(6.1) (17.2)

 Favorable adjustment of
  employee related costs
  between non-taxable and
  taxable entities             -      -     1.5    2.3       -      -

 U.S. tax benefit on
  repatriation of foreign
  earnings                     -      -    (0.4)  (0.6)      -      -

 Return to accrual
  adjustments                  -      -    (0.2)  (0.3)      -      -

 Favorable IRS audit
  settlements                0.5    1.8       -      -     9.5   26.8

 Exchange rate changes on
  tax on undistributed
  foreign earnings             -      -       -      -    (1.1)  (3.1)

 Non-realizability of
  New Zealand tax credits
  on U.S. withholding tax
  for prior years'
  intercompany note
  interest                     -      -       -      -    (2.9)  (8.2)
                           ------ ------ ------- ------ ------- ------

 Income tax (expense)
  benefit                  $(4.0) (14.6)  $(8.8) (13.5)  $(0.6)  (1.7)
                           ====== ====== ======= ====== ======= ======

                                 - J -

SOURCE: Rayonier

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

Contact

Mark McHugh

Senior Vice President and Chief Financial Officer

Phone: (904) 357-9100

investorrelations@rayonier.com

Transfer Agent

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