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Rayonier Reports Fourth Quarter 2003 Earnings

January 28, 2004

JACKSONVILLE, Fla.--(BUSINESS WIRE)--Jan. 28, 2004--Rayonier (NYSE:RYN) today reported fourth quarter net income of $2.0 million, or 4 cents per share, compared to $8.1 million, or 19 cents per share, in third quarter 2003 and $12.9 million, or 31 cents per share, in fourth quarter 2002. Net income for full year 2003 was $50.0 million, or $1.16 per share, compared to $54.2 million, or $1.28 per share, in 2002.

Fourth quarter results were adversely affected by 3 cents per share for REIT conversion expenses and an estimated 6 cents per share due to a delay of some Northwest timber sales until 2004 to utilize the company's new REIT status. Net income also included a tax benefit of 9 cents per share associated with the settlement of a foreign currency-denominated inter-company loan.

Third quarter 2003 results were impacted by 8 cents per share for REIT conversion costs. Fourth quarter 2002 results included 4 cents per share for disposition reserves, 5 cents per share for tax deficiency interest for prior year tax audits and 12 cents per share due to foreign-exchange related tax benefits.

Lee Nutter, Chairman, President and CEO said: "The big news for us in 2003 was converting to a REIT. We continue to be enthusiastic about opportunities the new structure provides for growing the company and increasing shareholder value. While it was a challenging year operationally, our strong cash flow enabled us to pay our regular dividend of $44 million as well as the $61 million cash portion of the special REIT dividend, reduce debt by $34 million and end the year with a cash balance of $21 million. Although we experienced continued strong demand for our higher value land and cellulose specialties products, earnings were impacted by soft timber markets and unusually high costs in our performance fibers business, particularly due to weather-related hardwood shortages. Looking ahead, we are encouraged by strengthening timber markets, cost improvements in performance fibers and price increases for cellulose specialties."

Fourth quarter results were below third quarter largely due to lower land and performance fibers income, partially offset by increased timber, lumber and trading margins, and tax benefits. Results were below fourth quarter 2002 primarily due to REIT conversion costs, lower performance fibers, timber and land income, and higher stock price-based incentive compensation expense, partially offset by stronger lumber results.

Sales of $272 million for the quarter were $4 million above third quarter but $15 million below fourth quarter 2002. Sales for the year were $1.1 billion, essentially in line with 2002.

Cash flow provided by operating activities for the year was $208 million compared to $253 million in 2002 due to lower operating results and increased pension and tax deposits, offset by lower interest. Adjusted EBITDA in 2003 was $268 million compared to $312 million in 2002. Free cash flow increased to $78 million from $62 million in 2002 as a result of lower mandatory debt payments. (Adjusted EBITDA and free cash flow are non-GAAP measures defined and reconciled to GAAP in the attached exhibits.)

Debt at year-end was $618 million, resulting in a debt-to-capital ratio of 46.5 percent, 1.4 percentage points below year-end 2002 but, due to the effect of the special REIT dividend on shareholders' equity, 1.6 percentage points above third quarter 2003.

Performance Fibers

Sales of $142 million were $10 million above third quarter primarily due to higher cellulose specialties volume. However, an operating loss of $6 million compared unfavorably to third quarter income of $2 million, principally due to higher raw material and manufacturing costs, partially offset by the increased cellulose specialties volume. Compared to fourth quarter 2002, sales increased $8 million as a result of higher volumes and stronger absorbent materials prices. Operating income, however, was lower by $12 million due to higher wood, chemical and manufacturing costs, partially offset by stronger absorbent materials prices.

Timber and Land

Sales of $47 million and operating income of $22 million were below third quarter by $12 million and $11 million, respectively, primarily as a result of lower land sales, partially offset by higher Northwest timber volumes and Southeast timber prices. Compared to fourth quarter 2002, sales and operating income decreased $16 million and $8 million, respectively, mainly due to lower land sales, the delayed Northwest timber sales and a decline in New Zealand timber volumes, partly offset by stronger Southeast timber prices and the favorable impact of balance sheet foreign exchange translation.

Wood Products

Sales of $41 million and operating income of $2 million improved $6 million and $3 million, respectively, compared to the third quarter, primarily because of higher lumber prices and volume. Compared to fourth quarter 2002, sales and operating income improved $11 million and $5 million, respectively, mainly due to higher lumber prices and lower manufacturing costs, partly offset by increased MDF manufacturing costs on a U.S. dollar basis.

Other Operations

Sales of $42 million were in line with third quarter while operating income of $1 million compared to an essentially break-even result. The improvement was mainly due to higher coal royalty income and improved trading margins. Compared to fourth quarter 2002, sales declined $17 million while operating income improved $2 million.

Other Items

Corporate expenses of $10.9 million were in line with third quarter reflecting lower REIT conversion expenses offset by higher stock price-based incentive compensation expense. Compared to fourth quarter 2002, corporate expenses increased $4 million mainly as a result of higher stock price-based incentive compensation expense and REIT conversion costs.

Interest expense of $11.8 million was comparable to third quarter and $5.3 million below fourth quarter 2002 primarily due to tax deficiency interest of $3.5 million in that quarter and $37 million in lower average debt.

Tax benefits for the quarter included $4.4 million related to the appreciation of the New Zealand dollar. The unusually low annual effective tax rate of 10.4 percent compared to an estimated rate of 20.4 percent at the end of September 2003, and 21.3 percent for full year 2002.

REIT Conversion

On January 1, 2004, Rayonier began operating as a REIT. In anticipation of the conversion, the company paid a special taxable dividend to shareholders in December 2003 consisting of $61 million in cash and 6.35 million common shares. Total shares outstanding on a fully-diluted basis at year end were 50.2 million.

Additional REIT conversion costs, estimated at 10 cents per share, are expected in the first quarter. Also, the company will reverse deferred tax liabilities that will no longer be required as a result of the REIT conversion, estimated at $50-70 million ($0.99 to $1.38 per share).

Outlook

First quarter earnings, excluding the benefit from the deferred tax reversal, are expected to improve substantially compared to fourth and first quarter 2003, driven by higher land sales, improved cellulose specialties prices and lower performance fibers manufacturing costs. Cash provided by operating activities in the first quarter is expected to be $50-60 million, sufficient to fund discretionary capital expenditures and the anticipated $16 million increase in the quarterly dividend to $27.5 million (an estimated 56 cents per share). The company also expects to refinance $50 million of maturing medium-term notes in the first quarter with borrowings from the company's undrawn $250 million bank credit facility.

"While we face challenges in our key businesses," Nutter said, "continued strong demand for our cellulose specialty products and higher value properties, along with improving timber markets, should provide strong cash flow to fund our planned $110 million annual dividend."

Per GAAP, prior period results have been restated to reflect the company's 3 for 2 stock split in June 2003 and related increase in shares outstanding, but not for the special REIT dividend paid in December 2003.

Rayonier has more than 2 million acres of timber and land in the U.S. and New Zealand and is the world's premier supplier of high performance specialty cellulose fibers. 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 2003 Form 10-K with the Securities and Exchange Commission. Comments about anticipated demand, pricing, expenses, earnings and dividends 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 cellulose specialties, absorbent materials, timber or wood products; adverse weather conditions; 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 land sale transactions; the Company's ability to satisfy complex rules in order to qualify as a REIT; and implementation or revision of governmental policies and regulations affecting the environment, 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/A on file with the Securities and Exchange Commission.

A conference call will be held on Thursday, January 29 at 4:15 p.m. EST 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 on 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 913-981-5510.

For more information, visit the company's web site at 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 (1)
                    DECEMBER 31, 2003 (unaudited)

          (millions of dollars, except per share information)

                          Three Months Ended           Year Ended
                    ----------------------------- -------------------
                    Dec. 31,  Sept. 30,  Dec. 31,  Dec. 31,  Dec. 31,
                      2003      2003      2002      2003      2002
                    --------- --------- --------- --------- ---------
Profitability
  Sales             $  271.5  $  267.6  $  286.3  $1,100.9  $1,117.4
  Operating income  $    7.7  $   21.7  $   27.2  $  102.6  $  130.1
  Income from
   continuing
   operations       $    2.0  $    8.1  $   12.8  $   50.0  $   54.9
  Discontinued
   operations       $      -  $      -  $    0.1  $      -  $   (0.7)
  Net income (after
   disc. ops)       $    2.0  $    8.1  $   12.9  $   50.0  $   54.2
  Diluted earnings
   per share:
    Continuing
     operations     $   0.04  $   0.19  $   0.31  $   1.16  $   1.30
    Net income
     (after disc.
     ops)           $   0.04  $   0.19  $   0.31  $   1.16  $   1.28

  Operating income
   as a percent of
   sales                 2.8%      8.1%      9.5%      9.3%     11.6%
  ROE (annualized)
   (a)                   1.6%      0.6%      6.5%      7.0%      7.7%

Capital Resources
 and Liquidity
  Cash provided by
   operating
   activities       $   35.4  $   64.0  $   48.9  $  208.2  $  252.9
  Cash used for
   investing
   activities       $  (31.9) $  (26.0) $  (19.6) $  (90.6) $  (76.7)
  Cash from (used
   for) financing
   activities       $  (68.8) $    1.5  $  (98.2) $ (115.3) $ (241.9)
  Adjusted EBITDA
   (b)              $   46.1  $   62.0  $   76.5  $  268.3  $  311.6
  Free cash flow
   (c)              $   (5.4) $   26.4  $  (55.5) $   78.2  $   61.7
  Repayment of
   debt, net        $    0.8  $    1.2  $   88.3  $   33.5  $  213.2
  Debt              $  618.5  $  620.4  $  653.1  $  618.5  $  653.1
  Debt / capital        46.5%     44.9%     47.9%     46.5%     47.9%


(a) From continuing operations; major land sales and REIT conversion
    costs are not annualized.

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

(c) Free cash flow is defined as cash provided by operating activities
    less net custodial capital spending, dividends at prior year
    level, required debt repayments and the tax benefit on the
    exercise of stock options.  Free cash flow is a non-GAAP measure
    of cash generated during a period that was available for
    discretionary capital expenditures, increasing dividends above the
    prior year level, repurchasing the Company's common shares and/or
    reducing debt within the period.  Free cash flow is not
    necessarily indicative of the free cash flow that may be generated
    in future periods.  See reconciliation on Schedule H.

  (1) Per GAAP, prior year earnings per share data have been restated
      to reflect the June 12, 2003 three-for-two stock split, but not
      for the December 19, 2003 E&P stock dividend.

                                - A -


                               RAYONIER
           CONDENSED STATEMENTS OF CONSOLIDATED INCOME (1)
                    DECEMBER 31, 2003 (unaudited)

         (millions of dollars, except per share information)

                          Three Months Ended           Year Ended
                    ----------------------------- -------------------
                    Dec. 31, Sept. 30,  Dec. 31,  Dec. 31,  Dec. 31,
                      2003      2003      2002      2003      2002
                    --------- --------- --------- --------- ---------

Sales               $ 271.5   $  267.6  $  286.3  $1,100.9  $1,117.4
                    --------- --------- --------- --------- ---------
Costs and
 expenses
 Cost of sales        249.2      231.8     251.0     950.6     948.4
 Selling and
  general
  expenses             16.9       16.1      12.3      56.0      42.5
 Other operating
  expense (income)     (2.3)      (2.0)     (6.9)     (8.3)     (6.3)
 Provision for
  dispositions            -          -       2.7         -       2.7
                    --------- --------- --------- --------- ---------
Operating
 income                 7.7       21.7      27.2     102.6     130.1

Interest
 expense              (11.8)     (12.1)    (17.1)    (48.7)    (62.4)
Interest and
 miscellaneous
 income
 (expense),
 net                   (0.4)       0.8       0.9       1.9       2.1
                    --------- --------- --------- --------- ---------
Income from
 continuing
 operations
 before income
 taxes                 (4.5)      10.4      11.0      55.8      69.8
Income tax
 (expense)
 benefit                6.5       (2.3)      1.8      (5.8)    (14.9)
                    --------- --------- --------- --------- ---------
Income from
 continuing
 operations         $   2.0   $    8.1  $   12.8  $   50.0  $   54.9
Discontinued
 operations,
 net                      -          -       0.1         -      (0.7)
                    --------- --------- --------- --------- ---------
Net income          $   2.0   $    8.1  $   12.9  $   50.0  $   54.2
                    ========= ========= ========= ========= =========

Net income per
 Common Share
 Basic EPS
  From
   continuing
   operations       $  0.05   $   0.19  $   0.31  $   1.18  $   1.32
                    ========= ========= ========= ========= =========
  Net income
   (after disc.
   ops)             $  0.05   $   0.19  $   0.31  $   1.18  $   1.30
                    ========= ========= ========= ========= =========
Diluted EPS
  From
   continuing
   operations       $  0.04   $   0.19  $   0.31  $   1.16  $   1.30
                    ========= ========= ========= ========= =========
  Net income
   (after disc.
   ops)             $  0.04   $   0.19  $   0.31  $   1.16  $   1.28
                    ========= ========= ========= ========= =========

Weighted average
 Common
Shares used for
 determining
 Basic EPS     43,424,436 42,133,413 41,576,187 42,262,835 41,522,678
               ========== ========== ========== ========== ==========
 Diluted EPS   44,556,647 42,963,352 42,114,545 43,093,092 42,236,364
               ========== ========== ========== ========== ==========

   (1) Per GAAP, prior year earnings per share data have been restated
       to reflect the June 12, 2003 three-for-two stock split, but not
       for the December 19, 2003 E&P stock dividend.

                                - B -


                               RAYONIER
         BUSINESS SEGMENT SALES AND OPERATING INCOME (LOSS)
                    DECEMBER 31, 2003 (unaudited)

                        (millions of dollars)

                          Three Months Ended           Year Ended
                    ----------------------------- -------------------
                    Dec. 31,  Sept. 30, Dec. 31,  Dec. 31,  Dec. 31,
                      2003      2003      2002      2003      2002
                    --------- --------- --------- --------- ---------
Sales
 Performance Fibers
  Cellulose
   specialties      $  105.3  $   94.3  $  100.3  $  378.4  $  374.9
  Absorbent
   materials            36.5      37.6      33.3     155.9     151.2
                    --------- --------- --------- --------- ---------
    Total
     Performance
     Fibers            141.8     131.9     133.6     534.3     526.1
                    --------- --------- --------- --------- ---------

 Timber and Land
  Timber                38.5      32.5      48.3     153.1     171.8
  Land                   8.7      26.8      15.4     106.2      75.3
                    --------- --------- --------- --------- ---------
    Total Timber
     and Land           47.2      59.3      63.7     259.3     247.1
                    --------- --------- --------- --------- ---------

 Wood Products          41.3      35.6      30.5     138.3     137.5

 Other Operations       42.2      41.6      59.3     171.5     216.1

 Intersegment
  eliminations          (1.0)     (0.8)     (0.8)     (2.5)     (9.4)
                    --------- --------- --------- --------- ---------

    Total sales     $  271.5  $  267.6  $  286.3  $1,100.9  $1,117.4
                    ========= ========= ========= ========= =========

Operating income
 (loss)
 Performance Fibers $   (5.7) $    1.5  $    6.7  $   (2.6) $   35.6

 Timber and Land
  Timber                14.7       8.4      20.6      51.4      76.4
  Land                   6.8      23.7       9.4      87.2      47.3
                    --------- --------- --------- --------- ---------
    Total Timber
     and Land           21.5      32.1      30.0     138.6     123.7

 Wood Products           2.0      (1.2)     (3.4)     (4.8)     (9.1)

 Other Operations        0.8      (0.2)     (1.3)     (0.3)     (3.0)

 Provision for
  dispositions             -         -      (2.7)        -      (2.7)

 Corporate             (10.9)    (11.0)     (6.9)    (34.8)    (21.9)


 Intersegment
  eliminations and
  other (Including
   Corporate FX)           -       0.5       4.8       6.5       7.5
                    --------- --------- --------- --------- ---------

    Total operating
     income         $    7.7  $   21.7  $   27.2  $  102.6  $  130.1
                    ========= ========= ========= ========= =========

                               - C -


                               RAYONIER
 CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CASH FLOWS
                    DECEMBER 31, 2003 (unaudited)
                        (millions of dollars)

CONDENSED CONSOLIDATED BALANCE SHEETS
                                                 Dec. 31,   Dec. 31,
                                                   2003       2002
                                                ---------- ----------
Assets
Current assets                                  $   244.6  $   228.8
Timber, timberlands and logging roads,
 net of depletion and amortization                  994.8    1,023.2
Property, plant and equipment                     1,414.5    1,387.4
Less accumulated depreciation                       912.3      846.3
                                                ---------- ----------
                                                    502.2      541.1
                                                ---------- ----------
Other assets                                         97.1       94.1
                                                ---------- ----------
                                                $ 1,838.7  $ 1,887.2
                                                ========== ==========
Liabilities and Shareholders' Equity
Current liabilities                             $   147.3  $   172.9
Deferred income taxes                               121.8      110.2
Long-term debt                                      614.9      649.6
Non-current reserves for dispositions and
 discontinued operations                            140.2      146.3
Other non-current liabilities                       103.4       98.5
Shareholders' equity                                711.1      709.7
                                                ---------- ----------
                                                $ 1,838.7  $ 1,887.2
                                                ========== ==========

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                      Year Ended
                                                ---------------------
                                                   2003       2002
                                                ---------- ----------
Cash provided by operating activities:
 Income from continuing operations              $    50.0  $    54.9
 Depreciation, depletion, amortization and
  non-cash cost basis of land sold                  163.8      179.4
 Other non-cash items included in income              7.3        7.7
 Changes in working capital and other assets and
  liabilities                                       (12.9)      10.9
                                                ---------- ----------
                                                    208.2      252.9
                                                ---------- ----------
Cash used for investing activities:
 Capital expenditures, net of sales and
  retirements                                       (85.2)     (76.7)
 Purchase of assets previously leased                (5.4)         -
                                                ---------- ----------
                                                    (90.6)     (76.7)
                                                ---------- ----------
Cash used for financing activities:
 Repayment of debt, net                             (33.5)    (213.2)
 Dividends paid, shares issued, net                 (81.8)     (28.7)
                                                ---------- ----------
                                                   (115.3)    (241.9)
                                                ---------- ----------
Cash provided by discontinued operations                -       70.5
                                                ---------- ----------
Effect of exchange rate changes on cash               0.2          -
                                                ---------- ----------
Cash and cash equivalents:
 Increase in cash and cash equivalents                2.5        4.8
 Balance, beginning of year                          18.9       14.1
                                                ---------- ----------
 Balance, end of period                         $    21.4  $    18.9
                                                ========== ==========

                                - D -


                               RAYONIER
                 SELECTED SUPPLEMENTAL FINANCIAL DATA
                     DECEMBER 31, 2003 (unaudited)

                         (millions of dollars)

                          Three Months Ended           Year Ended
                    ----------------------------- -------------------
                      Dec. 31, Sept. 30,  Dec. 31, Dec. 31,  Dec. 31,
                       2003      2003      2002      2003     2002
                    --------- --------- --------- --------- ---------
Geographical Data
 (Non-U.S.)
  Sales
   New Zealand      $   22.6  $   23.0  $   29.2  $   86.1  $   86.7
   Other                 2.6       1.7       7.9      11.8      41.2
                    --------- --------- --------- --------- ---------
    Total           $   25.2  $   24.7  $   37.1  $   97.9  $  127.9
                    ========= ========= ========= ========= =========

 Operating income
  (loss)
   New Zealand      $   (0.3) $    0.6  $    5.4  $    3.5  $    9.3
   Other                 0.8      (0.6)      2.7      (0.7)      1.8
                    --------- --------- --------- --------- ---------
    Total           $    0.5  $      -  $    8.1  $    2.8  $   11.1
                    ========= ========= ========= ========= =========

Timber
 Sales
  Northwest U.S.    $   14.2  $    8.9  $   17.8  $   58.4  $   64.7
  Southeast U.S.        18.7      18.3      21.6      74.7      85.9
  New Zealand            5.6       5.3       8.9      20.0      21.2
                    --------- --------- --------- --------- ---------
    Total           $   38.5  $   32.5  $   48.3  $  153.1  $  171.8
                    ========= ========= ========= ========= =========

 Operating income
  (loss)
   Northwest U.S.   $    5.0  $    1.6  $   12.0  $   26.5  $   44.3
   Southeast U.S.        7.6       4.0       7.7      19.7      26.9
   New Zealand           2.1       2.8       0.9       5.2       5.2
                    --------- --------- --------- --------- ---------
    Total           $   14.7  $    8.4  $   20.6  $   51.4  $   76.4
                    ========= ========= ========= ========= =========

Adjusted EBITDA by
 Segment
 Performance Fibers $   14.4  $   21.9  $   28.7  $   76.1  $  114.1
 Timber and Land        35.8      48.1      51.7     210.0     209.6
 Wood Products           5.8       2.3      (0.1)      8.6       4.1
 Other Operations        1.1      (0.1)      0.3       0.5       0.2
 Corporate and other   (11.0)    (10.2)     (4.1)    (26.9)    (16.4)
                    --------- --------- --------- --------- ---------
    Total           $   46.1  $   62.0  $   76.5  $  268.3  $  311.6
                    ========= ========= ========= ========= =========

                                - E -


                               RAYONIER
                    SELECTED OPERATING INFORMATION
                     DECEMBER 31, 2003 (unaudited)

                          Three Months Ended           Year Ended
                    ----------------------------- -------------------
                      Dec. 31, Sept. 30,  Dec. 31,  Dec. 31, Dec. 31,
                       2003      2003      2002      2003     2002
                    --------- --------- --------- --------- ---------
Performance Fibers
 Sales Volume
  Cellulose
   specialties, in
   thousands of
    metric
   tons                   121       109       116       435      435

  Absorbent
   materials,
   in thousands of
   metric tons             64        62        59       273      267
Production as a
 percent of capacity     89.0%     97.6%     99.9%     96.6%    98.6%

Timber and Land
 Sales volume -
  Timber
  Northwest U.S., in
   millions of board
   feet                    47        34        66       225      252
  Southeast U.S., in
   thousands of short
   green tons           1,036     1,150     1,284     4,524    4,881
  New Zealand, in
   thousands of
    metric
   tons                   186       187       273       632      805

 Timber sales volume
  -
 Intercompany
  Northwest U.S., in
   millions of board
   feet                     -         -         2         -       38
  Southeast U.S., in
   thousands of short
   green tons              24        19        16        48       37
  New Zealand, in
   thousands of
    metric
   tons                    41        40        21       126       60

 Acres sold             2,728     5,744     6,704    40,595   44,256

Wood Products
 Lumber sales
  volume,
  in millions of
   board
  feet                     88        78        73       310      325
 Medium-density
  fiberboard sales
  volume, in
   thousands
  of cubic meters          46        49        46       177      163

                                - F -


                               RAYONIER
               RECONCILIATION OF NON-GAAP MEASURES (1)
                     DECEMBER 31, 2003 (unaudited)

                         (millions of dollars)

             Performance  Timber   Wood     Other    Corporate
               Fibers    & Land  Products Operations and other  Total
             ----------- ------- -------- ---------- --------- -------
Adjusted EBITDA

Three Months Ended
Dec. 31, 2003
 Cash
  provided by
  operating
  activities      $21.8   $37.2     $9.1      $(5.7)   $(27.0)  $35.4
 Income tax
  expense             -       -        -          -      (6.5)   (6.5)
 Interest
  expense             -       -        -          -      11.8    11.8
 Working
  capital
  increases
  (decreases)      (7.4)   (5.7)    (3.2)       8.6      19.2    11.5
 Other
  balance
  sheet
  changes             -     4.3     (0.1)      (1.8)     (8.5)   (6.1)
                 ------- -------  -------    -------   ------- -------
 Adjusted
  EBITDA          $14.4   $35.8     $5.8       $1.1    $(11.0)  $46.1
                 ======= =======  =======    =======   ======= =======

Sept. 30, 2003
 Cash
  provided by
  operating
  activities      $14.4   $63.7     $2.6      $(0.5)   $(16.2)  $64.0
 Income tax
  expense             -       -        -          -       2.3     2.3
 Interest
  expense             -       -        -          -      12.1    12.1
 Working
  capital
  increases
  (decreases)       7.9   (11.0)    (0.2)       0.4     (14.8)  (17.7)
 Other
  balance
  sheet
  changes          (0.4)   (4.6)    (0.1)         -       6.4     1.3
                 ------- -------  -------    -------   ------- -------
 Adjusted
  EBITDA          $21.9   $48.1     $2.3      $(0.1)   $(10.2)  $62.0
                 ======= =======  =======    =======   ======= =======

Dec. 31, 2002
 Cash
  provided by
  operating
  activities      $26.6   $45.7     $1.5       $4.8    $(29.7)  $48.9
 Income tax
  expense             -       -        -          -      (1.8)   (1.8)
 Interest
  expense             -       -        -          -      17.1    17.1
 Working
  capital
  increases
  (decreases)       2.2     4.3     (1.7)      (3.8)     (0.1)    0.9
 Other
  balance
  sheet
  changes          (0.1)    1.7      0.1       (0.7)     10.4    11.4
                 ------- -------  -------    -------   ------- -------
 Adjusted
  EBITDA          $28.7   $51.7    $(0.1)      $0.3     $(4.1)  $76.5
             =========== ======= ======== ========== ========= =======

Year Ended
Dec. 31, 2003
 Cash
  provided by
  operating
  activities      $73.3  $230.7     $8.7          -   $(104.5) $208.2
 Income tax
  expense             -       -        -          -       5.8     5.8
 Interest
  expense             -       -        -          -      48.7    48.7
 Working
  capital
  increases
  (decreases)       3.4   (18.1)     0.2        1.9      29.4    16.8
 Other
  balance
  sheet
  changes          (0.6)   (2.6)    (0.3)      (1.4)     (6.3)  (11.2)
                 ------- -------  -------    -------   ------- -------
 Adjusted
  EBITDA          $76.1  $210.0     $8.6       $0.5    $(26.9) $268.3
                 ======= =======  =======    =======   ======= =======

Dec. 31, 2002
 Cash
  provided by
  operating
  activities     $118.0  $210.2     $1.4      $11.1    $(87.8) $252.9
 Income tax
  expense             -       -        -          -      14.9    14.9
 Interest
  expense             -       -        -          -      62.4    62.4
 Working
  capital
  increases
  (decreases)     (12.7)    3.1      3.2       (7.8)      8.4    (5.8)
 Other
  balance
  sheet
  changes           8.8    (3.7)    (0.5)      (3.1)    (14.3)  (12.8)
                 ------- -------  -------    -------   ------- -------
 Adjusted
  EBITDA         $114.1  $209.6   $  4.1     $  0.2    $(16.4) $311.6
                 ======= =======  =======    =======   ======= =======

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

                                 - G -


                               RAYONIER
                 RECONCILIATION OF NON-GAAP MEASURES
                     DECEMBER 31, 2003 (unaudited)

                         (millions of dollars)

                          Three Months Ended           Year Ended
                    ----------------------------- --------------------
                    Dec. 31,  Sept. 30, Dec. 31,  Dec. 31,   Dec. 31,
                      2003      2003      2002      2003       2002
                    --------- --------- --------- --------- ---------
Free cash flow
Cash provided by
 operating
 activities         $   35.4  $   64.0  $   48.9  $  208.2  $   252.9
Custodial capital
 spending, net         (28.6)    (18.1)    (16.1)    (75.9)     (65.6)
Purchase of assets
 previously leased         -      (5.4)        -      (5.4)         -
Dividends at prior
 year level            (10.2)    (10.1)    (10.0)    (40.4)     (39.9)
Required debt
 repayments (1)         (0.8)     (1.2)    (78.3)     (3.5)     (83.2)
Tax benefit on
 exercise
 of stock options       (1.2)     (2.8)        -      (4.8)      (2.5)
                    --------- --------- --------- --------- ---------
Free cash flow      $   (5.4) $   26.4  $  (55.5) $   78.2  $    61.7
                    ========= ========= ========= ========= =========

   (1) The required repayments represent debt that matured and was
       paid during the period.  In addition to the required payments,
       the Company made discretionary debt repayments as indicated
       below:

Discretionary debt
 repayments         $      -  $      -  $   10.0  $   30.0  $   130.0
                    ========= ========= ========= ========= =========

Custodial capital
 spending, net

Capital
 expenditures,
 net of sales and
 retirements        $   31.9  $   20.6  $   19.6  $   85.2  $    76.7
Discretionary
 capital
 expenditures           (3.3)     (2.5)     (3.5)     (9.3)     (11.1)
                    --------- --------- --------- --------- ---------
Custodial capital
 spending, net (1)  $   28.6  $   18.1  $   16.1  $   75.9  $    65.6
                    ========= ========= ========= ========= =========

   (1) Custodial Capital Spending, net, a non-GAAP measure, is defined
       as capital expenditures, net of retirements, required to
       maintain the Company's current earnings level over the cycle
       and to keep facilities and equipment in safe and reliable
       condition as well as in compliance with regulatory
       requirements.

                                 - H -

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

Transfer Agent

For essential services such as change of address, lost certificates or dividend checks, or change in registered ownership, please write or call:

  • Regular Mail
  • Computershare
  • P.O. Box 43006
  • Providence, RI 02940-3006
  • United States
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  • 250 Royall Street
  • Canton, MA 02021
  • United States

Inside the U.S.: (800) 659-0158

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