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Rayonier Reports Fourth Quarter and Full Year 2005 Results

January 24, 2006

JACKSONVILLE, Fla., Jan 24, 2006 (BUSINESS WIRE) -- Rayonier (NYSE:RYN) today reported fourth quarter income from continuing operations of $56.4 million, or 73 cents per share. This compares to $74.9 million, or 96 cents per share, in the third quarter and $14 million, or 18 cents per share, in fourth quarter 2004. Full-year 2005 income from continuing operations was $207.8 million, or $2.68 per share, compared to $160.1 million, or $2.09 per share, in 2004.

Net income in the fourth quarter was also $56.4 million, or 73 cents per share, compared to $75 million, or 96 cents per share, in third quarter 2005, and $13.5 million, or 18 cents per share, in fourth quarter 2004. Full-year 2005 net income was $182.8 million, or $2.36 per share, compared to $156.9 million, or $2.05 per share, in 2004.

Lee Nutter, Chairman, President and CEO, said: "We had another very good year with strong performances from our core businesses as we continued to deliver on our strategies to create value for shareholders. We formed a real estate subsidiary, TerraPointe, to capture the growing value of our extensive higher-and-better-use properties, monetized our New Zealand timberlands and simultaneously expanded our presence there with a REIT-qualifying joint venture, increased production of our high-value cellulose specialties and sold non-core businesses. Our shareholders benefited from two dividend increases totaling 26 percent and a 22 percent increase in share price."

The fourth quarter included a special item gain of $30.5 million, or 39 cents per share, on the sale of New Zealand timber assets to the joint venture while third quarter items totaled $39.1 million, or 50 cents per share. Special items totaled $86.3 million, or $1.11 per share, in full-year 2005 and $49.7 million, or 65 cents per share, in 2004 (see Schedule H for details).

Excluding special items, fourth quarter income from continuing operations was below third quarter, primarily due to higher performance fibers manufacturing costs and reduced real estate sales partly offset by increased timber volume. On the same basis, earnings improved compared to fourth quarter 2004, primarily due to increased timber prices and real estate sales. Fourth quarter 2005 results included a $3 million charge, or 2 cents per share, to increase disposition reserves related to the closed Port Angeles, Washington, mill.

Sales for the fourth quarter increased to $316 million from $300 million in the third quarter and $285 million in fourth quarter 2004. Sales for the year of $1.2 billion were comparable to 2004.

Cash provided by operating activities for 2005 of $263 million was $30 million below 2004 due to working capital increases partly offset by higher operating earnings. Cash Available for Distribution (CAD) of $167 million for 2005 was comparable to 2004. (CAD is a non-GAAP measure defined and reconciled to GAAP in the attached exhibits.)

Debt at year-end of $559 million was $100 million below year-end 2004 primarily due to strong operating cash flow, net proceeds from the monetization of the New Zealand timber assets and sale of the medium-density-fiberboard business. The debt-to-capital ratio was 38.7 percent compared to 45.3 percent at prior year-end. Debt less cash was $412 million, a reduction of $163 million. Cash at December 31, 2005, was $146 million.

Timber

Sales of $56 million and operating income of $24 million were $10 million and $7 million above third quarter, respectively, primarily due to higher U.S. timber volume, increased Southeast prices and income from timberland-related activities partly offset by an operating loss incurred during startup of the New Zealand joint venture. Compared to fourth quarter 2004, sales and operating income increased $12 million and $7 million, respectively, mainly due to higher U.S. timber prices and volume partly offset by the joint venture's operating results.

Real Estate

Sales of $20 million and operating income of $16 million were $8 million and $6 million below third quarter, respectively, primarily due to reduced sales of development and rural properties partly offset by higher per acre prices for development properties. The company previously announced that a fourth quarter transaction had been terminated and that it now plans to develop the property. Compared to fourth quarter 2004, sales and operating income increased $5 million and $4 million, respectively, mainly due to higher per acre prices for development properties.

Performance Fibers

Sales of $173 million were $14 million above third quarter but operating income of $7 million declined $9 million due to increased raw material costs and lower absorbent materials selling prices. Compared to fourth quarter 2004, sales and operating income improved $18 million and $1 million, respectively, primarily due to higher volume and cellulose specialties prices mostly offset by increased raw material costs.

Wood Products

Sales and operating income of $34 million and $3 million, respectively, were both $2 million below third quarter, primarily due to lower prices. Compared to fourth quarter 2004, sales and operating income were up $3 million and $2 million, respectively, mainly due to higher prices.

Other Operations

Sales of $34 million were $2 million above third quarter while slightly positive operating results were essentially unchanged. Compared to fourth quarter 2004, sales and operating income declined $7 million and $1 million, respectively, mainly due to lower trading activity.

Other Items

Corporate expenses of $10.4 million were comparable to third quarter and $1 million above fourth quarter 2004.

Intersegment eliminations and other expense of $2.9 million was $5.1 million and $3 million more than third quarter 2005 and fourth quarter 2004, respectively, primarily due to the previously noted $3 million increase in disposition reserves. Third quarter also included $1.9 million in proceeds from an insurance settlement.

Interest expense of $12 million was $2.2 million above third quarter, primarily due to favorable tax audit related adjustments in that quarter, and was comparable to fourth quarter 2004.

Interest and other income of $4.2 million was $7.7 million below the third quarter, which included a $7.8 million arbitration award, but $5.5 million above fourth quarter 2004, primarily due to higher interest income and a gain on sale of a manufacturing asset.

The full-year effective tax rate, before discrete items, was 14.2 percent compared to 11.6 percent for 2004, primarily due to reduced like-kind-exchange and non-U.S. operations tax benefits. Fourth quarter 2005 income tax expense of $8.8 million included $6.5 million relating to the sale of the New Zealand timber assets and a $1.5 million discrete tax benefit from favorable adjustments of costs between taxable and non-taxable entities. Fourth quarter 2004 included a net tax benefit of $1.1 million, primarily due to a 9 percent appreciation in the New Zealand dollar and a favorable change in the mix of income between taxable and non-taxable entities (see Schedule J for details).

Outlook

"Entering 2006, we have well-positioned core businesses and continue to experience strong demand and pricing for most of our products, particularly real estate properties and our premium cellulose specialties," Nutter said. "As a result, excluding special items, we expect another very good year with full-year earnings somewhat above 2005, despite a first quarter that will be below fourth quarter 2005, primarily due to the timing of real estate transactions.

"In real estate, we continue to focus on moving up the value chain, while in performance fibers we recently implemented price increases for 2006 for cellulose specialties. In addition, contracts for most of our cellulose specialties volume, including all acetate sales, provide for a surcharge to help offset the sharp rise in energy costs."

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 extensive higher-and-better use properties, particularly in the fast growing counties along Interstate 95 between Savannah, Georgia, and Daytona Beach, Florida, where Rayonier owns approximately 200,000 acres. The company 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 2005 Form 10-K with the Securities and Exchange Commission and, therefore, remain subject to adjustment. Statements regarding earnings, anticipated 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 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. Rayonier assumes no obligation to update these statements except as may be required by law.

A conference call will be held on Tuesday, January 24, at 4:15 p.m. EST 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
                    DECEMBER 31, 2005 (unaudited)

          (millions of dollars, except per share information)

                           Three Months Ended           Year Ended
                     ----------------------------- -------------------
                     Dec. 31,  Sept. 30, Dec. 31,  Dec. 31,  Dec. 31,
                       2005      2005      2004      2005      2004
                     --------- --------- --------- --------- ---------
Profitability
  Sales              $  315.9  $  299.5  $  284.5  $1,180.7  $1,162.8
  Operating income   $   36.0  $   51.0  $   26.3  $  183.2  $  172.7
  Income from
   continuing
   operations        $   56.4  $   74.9  $   14.0  $  207.8  $  160.1
  Discontinued
   operations        $      -  $    0.1  $   (0.5) $  (25.0) $   (3.2)
  Net income         $   56.4  $   75.0  $   13.5  $  182.8  $  156.9
  Income per diluted
   common share
    Continuing
     operations      $   0.73  $   0.96  $   0.18  $   2.68  $   2.09
    Net income       $   0.73  $   0.96  $   0.18  $   2.36  $   2.05
    Pro forma income
     from continuing
     operations (see
     schedule H)     $   0.34  $   0.46  $   0.18  $   1.57  $   1.44
  Operating income
   as a percent of
   sales                 11.4%     17.0%      9.2%     15.5%     14.9%
  ROE (annualized)
   (a)                   14.2%     14.7%     15.1%     14.2%     15.1%


                               Year Ended Dec. 31,
                               -------------------
                                 2005      2004
                               --------- ---------
Capital Resources
 and Liquidity
  Continuing
   operations:
    Cash provided by
     operating
     activities                $  262.7  $  292.3
    Cash used for
     investing
     activities                $  (32.2) $ (179.2)
    Cash used for
     financing
     activities                $ (215.6) $  (52.0)
  Adjusted EBITDA
   (b) (d)                     $  360.1  $  330.6
  Cash Available for
   Distribution
   (CAD) (c) (d)               $  166.8  $  166.4
  (Repayment)/
   borrowing of
   debt, net                   $  (98.6) $   41.5
  Debt                         $  558.5  $  658.9
  Debt / capital                   38.7%     45.3%
  Cash                         $  146.2  $   84.1

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

                                 - A -
RAYONIER
                       FOOTNOTES FOR SCHEDULE A
                     DECEMBER 31, 2005 (unaudited)

Schedule A

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

 (b) 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.

 (c) 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 H.

 (d) 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
                     DECEMBER 31, 2005 (unaudited)

        (millions of dollars, except per share information)

                    Three Months Ended                Year Ended
           ----------------------------------- -----------------------
             Dec. 31,   Sept. 30,    Dec. 31,    Dec. 31,    Dec. 31,
              2005        2005        2004        2005        2004
           ----------- ----------- ----------- ----------- -----------

Sales      $    315.9  $    299.5  $    284.5  $  1,180.7  $  1,162.8
           ----------- ----------- ----------- ----------- -----------
Costs and
 expenses
 Cost of
  sales         260.0       237.7       247.9       942.1       937.0
 Selling
  and
  general
  expenses       17.7        16.9        14.4        64.4        59.3
 Other
  operating
  (income)/
  expense,
  net             2.2        (6.1)       (4.1)       (9.0)       (6.2)
           ----------- ----------- ----------- ----------- -----------
Operating
 income          36.0        51.0        26.3       183.2       172.7

Gain on
 sale of New
 Zealand
 timberlands
 (a)             37.0           -           -        37.0           -
Interest
 expense        (12.0)       (9.8)      (12.1)      (47.0)      (46.7)
Interest
 and other
 income/
 (expense),
 net              4.2        11.9        (1.3)       17.7         0.5
           ----------- ----------- ----------- ----------- -----------
 Income
  before
  taxes          65.2        53.1        12.9       190.9       126.5
 Income
  tax
  (expense)/
  benefit        (8.8)       21.8         1.1        16.9        33.6
           ----------- ----------- ----------- ----------- -----------
Income
 from
 continuing
 oper-
 ations    $     56.4  $     74.9  $     14.0  $    207.8  $    160.1
Discon-
 tinued
 operations,
 net                -         0.1        (0.5)      (25.0)       (3.2)
           ----------- ----------- ----------- ----------- -----------
Net
 income    $     56.4  $     75.0  $     13.5  $    182.8  $    156.9
           =========== =========== =========== =========== ===========

Income per
 Common
 Share (b):
  Basic
   From con-
   tinuing
   oper-
   ations  $     0.75  $     0.99  $     0.19  $     2.75  $     2.15
           =========== =========== =========== =========== ===========
   Net
    income $     0.75  $     0.99  $     0.18  $     2.42  $     2.11
           =========== =========== =========== =========== ===========
  Diluted
   From con-
   tinuing
   oper-
   ations  $     0.73  $     0.96  $     0.18  $     2.68  $     2.09
           =========== =========== =========== =========== ===========
   Net
    income $     0.73  $     0.96  $     0.18  $     2.36  $     2.05
           =========== =========== =========== =========== ===========

 Pro forma
  income
  from
  continuing
  oper-
  ations (c)
   Adjusted
    basic
    EPS    $     0.35  $     0.47  $     0.19  $     1.60  $     1.48
           =========== =========== =========== =========== ===========
   Adjusted
    diluted
    EPS    $     0.34  $     0.46  $     0.18  $     1.57  $     1.44
           =========== =========== =========== =========== ===========

Weighted
 average
 Common
 Shares
 used for
 deter-
 mining
   Basic
    EPS    75,844,885  75,658,512  74,851,809  75,504,800  74,445,864
           =========== =========== =========== =========== ===========
   Diluted
    EPS    78,002,090  77,753,165  76,934,792  77,644,252  76,533,263
           =========== =========== =========== =========== ===========

(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) All share and per share amounts reflect the three-for-two stock
    split on October 17, 2005.
(c) See Schedule H.

                               - C -
RAYONIER
          BUSINESS SEGMENT SALES AND OPERATING INCOME (LOSS)
                     DECEMBER 31, 2005 (unaudited)

                        (millions of dollars)

                           Three Months Ended           Year Ended
                     ----------------------------- -------------------
                      Dec. 31, Sept. 30,  Dec. 31,  Dec. 31,  Dec. 31,
                        2005     2005       2004      2005      2004
                     --------- --------- --------- --------- ---------
Sales
 Timber              $   55.7  $   45.5  $   44.2  $  207.6  $  185.8

 Real Estate             19.9      27.6      14.6      85.8      95.6

 Performance Fibers
  Cellulose
   specialties          124.7     114.8     115.2     448.6     418.8
  Absorbent
   materials             48.0      44.3      39.1     179.4     163.5
                     --------- --------- --------- --------- ---------
    Total
     Performance
     Fibers             172.7     159.1     154.3     628.0     582.3
                     --------- --------- --------- --------- ---------

  Wood Products          34.1      35.6      30.9     136.6     126.2

  Other Operations       33.6      32.1      40.9     123.5     173.9

  Intersegment
   eliminations          (0.1)     (0.4)     (0.4)     (0.8)     (1.0)
                     --------- --------- --------- --------- ---------

    Total sales      $  315.9  $  299.5  $  284.5  $1,180.7  $1,162.8
                     ========= ========= ========= ========= =========

Operating income (loss)
 Timber              $   23.5  $   16.4  $   16.4  $   86.7  $   71.9

 Real Estate             15.9      21.8      11.7      63.7      75.3

 Performance Fibers       6.6      15.6       5.4      53.1      46.6

 Wood Products            2.8       4.6       0.9      16.4      13.2

 Other Operations         0.5       0.6       1.3       0.9       6.2

 Corporate              (10.4)    (10.2)     (9.5)    (36.5)    (40.4)

 Intersegment
  eliminations
  and other
  (Including
  Corporate FX)          (2.9)      2.2       0.1      (1.1)     (0.1)
                     --------- --------- --------- --------- ---------

    Total operating
     income          $   36.0  $   51.0  $   26.3  $  183.2  $  172.7
                     ========= ========= ========= ========= =========

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

CONDENSED CONSOLIDATED BALANCE SHEETS
                                                   Dec. 31,   Dec. 31,
                                                     2005       2004
                                                   --------- ---------

 Current assets                                    $  354.1  $  369.4
 Timber, timberlands and logging roads,
  net of depletion and amortization                   927.0   1,053.5
 Property, plant and equipment                      1,352.4   1,333.3
 Less - accumulated depreciation                     (991.1)   (936.2)
                                                   --------- ---------
                                                      361.3     397.1
                                                   --------- ---------
 Investment in New Zealand JV                          81.6         -
 Other assets                                         110.9     113.9
                                                   --------- ---------
                                                   $1,834.9  $1,933.9
                                                   ========= =========
 Liabilities and Shareholders' Equity
 Current liabilities                               $  170.1  $  246.7
 Deferred income taxes                                 28.0      46.5
 Long-term debt                                       555.2     610.3
 Non-current reserves for dispositions and
  discontinued operations                             128.0     133.9
 Other non-current liabilities                         68.9     100.1
 Shareholders' equity                                 884.7     796.4
                                                   --------- ---------
                                                   $1,834.9  $1,933.9
                                                   ========= =========

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                       Year Ended
                                                   -------------------
                                                   Dec. 31,   Dec. 31,
                                                     2005       2004
                                                   --------- ---------
 Cash provided by operating activities of
  continuing operations:
    Income from continuing operations              $  207.8  $  160.1
    Depreciation, depletion, amortization and
     non-cash cost basis of real estate sold          159.2     157.5
    Other non-cash items included in income(1)        (68.1)    (52.4)
    Changes in working capital and other assets
     and liabilities                                  (36.2)     27.1
                                                   --------- ---------
                                                      262.7     292.3
                                                   --------- ---------
 Cash used for investing activities of continuing
  operations:
    Capital expenditures, net of sales and
     retirements                                      (89.9)    (87.7)
    Purchase of timberlands                           (23.5)    (89.3)
    Decrease/(increase) in restricted cash              3.3      (2.2)
    Proceeds from sale of New Zealand timberlands
     to JV                                            186.8         -
    Proceeds from sale of other assets                 13.0         -
    Investment in New Zealand JV                     (121.9)        -
                                                   --------- ---------
                                                      (32.2)   (179.2)
                                                   --------- ---------
 Cash used for financing activities:
    (Repayment)/borrowing of debt, net                (98.6)     41.5
    Dividends paid                                   (129.2)   (111.2)
    Cash in lieu of fractional shares                  (0.4)        -
    Issuance of common shares                          15.1      17.7
    Foreign exchange loss from forward contract        (2.5)        -
                                                   --------- ---------
                                                     (215.6)    (52.0)
                                                   --------- ---------
 Effect of exchange rate changes on cash               (0.2)      0.1
                                                   --------- ---------
 Cash provided by discontinued operations              47.4       1.5
                                                   --------- ---------
 Cash and cash equivalents:
    Increase in cash and cash equivalents              62.1      62.7
    Balance, beginning of year                         84.1      21.4
                                                   --------- ---------
    Balance, end of period                         $  146.2  $   84.1
                                                   ========= =========

(1) 2005 - Mainly the gain on sale of New Zealand timberlands ($30.5)
    million, the U.S. tax benefit on repatriation of foreign earnings
    of ($25.4) million and favorable tax settlements, including
    interest, of ($19.8) million.  2004 - 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, for a net effect of ($49.7) million.

                            - E -
RAYONIER
                 SELECTED SUPPLEMENTAL FINANCIAL DATA
                     DECEMBER 31, 2005 (unaudited)

                       (millions of dollars)

                           Three Months Ended           Year Ended
                     ----------------------------- -------------------
                      Dec. 31, Sept. 30,  Dec. 31,  Dec. 31,  Dec. 31,
                        2005     2005      2004      2005      2004
                     --------- --------- --------- --------- ---------
Geographical Data
 (Non-U.S.)
  Sales
    New Zealand      $   12.8  $   13.1  $   13.3  $   48.9  $   49.5
    Other                 2.8       1.6       3.8       9.9      26.3
                     --------- --------- --------- --------- ---------
        Total        $   15.6  $   14.7  $   17.1  $   58.8  $   75.8
                     ========= ========= ========= ========= =========

  Operating income
   (loss)
    New Zealand      $   (1.8) $    1.5  $    1.2  $    1.2  $    4.8
    Other                 1.5      (0.8)      1.8       0.1      (0.2)
                     --------- --------- --------- --------- ---------
        Total        $   (0.3) $    0.7  $    3.0  $    1.3  $    4.6
                     ========= ========= ========= ========= =========

Timber
  Sales
    Northwest U.S.   $   27.4  $   18.8  $   17.8  $   98.5  $   81.0
    Southeast U.S.       24.6      19.1      17.8      86.2      76.8
    New Zealand           3.7       7.6       8.6      22.9      28.0
                     --------- --------- --------- --------- ---------
        Total        $   55.7  $   45.5  $   44.2  $  207.6  $  185.8
                     ========= ========= ========= ========= =========

  Operating income
    Northwest U.S.   $   13.9  $    8.8  $    8.1  $   55.1  $   41.9
    Southeast U.S.       11.2       5.9       6.6      29.3      23.8
    New Zealand          (1.6)      1.7       1.7       2.3       6.2
                     --------- --------- --------- --------- ---------
        Total        $   23.5  $   16.4  $   16.4  $   86.7  $   71.9
                     ========= ========= ========= ========= =========

Adjusted EBITDA by
 Segment
  Timber             $   39.3  $   31.6  $   44.6  $  148.2  $  218.2
  Real Estate (1)        17.4      26.8         -      79.4         -
  Performance Fibers     29.0      35.3      23.6     129.9     124.4
  Wood Products           4.5       6.4       3.6      23.5      22.3
  Other Operations        0.9       1.1       1.4       2.4       7.3
  Corporate and
   other                (11.1)      3.3     (11.2)    (23.3)    (41.6)
                     --------- --------- --------- --------- ---------
     Total           $   80.0  $  104.5  $   62.0  $  360.1  $  330.6
                     ========= ========= ========= ========= =========

(1) Real Estate became a reportable segment in the third quarter of
    2005.  The Timber segment includes both Timber and Real Estate in
    2004.

                               - F -
RAYONIER
                    SELECTED OPERATING INFORMATION
                     DECEMBER 31, 2005 (unaudited)

                           Three Months Ended           Year Ended
                     ----------------------------- -------------------
                      Dec. 31, Sept. 30,  Dec. 31,  Dec. 31,  Dec. 31,
                        2005     2005      2004      2005      2004
                     --------- --------- --------- --------- ---------
Timber
   Northwest U.S.,
    in millions of
    board feet             70        48        55       263       285
   Southeast U.S.,
    in thousands of
    short green tons    1,325     1,080     1,060     4,832     4,291
   New Zealand,
    in thousands of
    metric tons            36       191       209       464       646

  Timber sales volume -
  Intercompany
   Southeast U.S.,
    in thousands of
    short green tons        1        18        14        42        43
   New Zealand,
    in thousands of
    metric tons             -         1         4         3        11

Real Estate
  Acres sold
   TerraPointe -
    Development         1,099     2,411     1,286     6,036     4,786
   TerraPointe -
    Rural               1,480     7,930     2,985    23,587    29,282
   Northwest U.S.         128        44     1,621       403     1,838
                     --------- --------- --------- --------- ---------
   Total                2,707    10,385     5,892    30,026  35,906(1)

Performance Fibers
  Sales Volume
   Cellulose
    specialties,
    in thousands of
    metric tons           130       120       125       470       453
   Absorbent materials,
    in thousands of
    metric tons            75        65        62       276       266
 Production as a
  percent of
  capacity             104.0%    103.8%     96.1%    103.3%     98.7%

Lumber
  Sales volume,
   in millions of
   board feet              89        89        86       351       347

(1) Includes 5,487 acres associated with a Northeast Florida sale
    ($26 million) of timber lease rights.

                                 - G -
RAYONIER
                  RECONCILIATION OF NON-GAAP MEASURES
                     DECEMBER 31, 2005 (unaudited)
          (millions of dollars, except per share information)

                                   Year Ended
                               -------------------
                                Dec. 31,  Dec. 31,
                                 2005      2004
                               --------- ---------
  Cash Available for
   Distribution
  Cash provided by
   operating activities        $  262.7  $  292.3
  Capital spending
   (a)                            (89.9)    (87.7)
  Like-kind exchange
   tax benefits on
   third party land
   sales (b)                       (3.2)    (11.3)
  Like-kind exchange
   tax benefits on
   intercompany land
   sales (b)                          -     (19.0)
  Decrease (increase)
   in committed cash                1.8      (3.5)
  Tax benefit on
   exercise of
   stock options                   (4.6)     (4.4)
                               --------- ---------
  Cash Available for
   Distribution                $  166.8  $  166.4
                               ========= =========

(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          Year Ended
                     ----------------------------- -------------------
                      Dec. 31, Sept. 30,  Dec. 31,  Dec. 31, Dec. 31,
                       2005      2005      2004       2005     2004
                     --------- --------- --------- --------- ---------
Income from
 Continuing
 Operations per
 Common Share
   Basic EPS         $   0.75  $   0.99  $   0.19  $   2.75  $   2.15
                     ========= ========= ========= ========= =========
   Diluted EPS       $   0.73  $   0.96  $   0.18  $   2.68  $   2.09
                     ========= ========= ========= ========= =========

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

   Taxes associated
    with repatriation
    of foreign
    earnings
   Basic EPS                -     (0.34)        -     (0.34)     0.38
                     ========= ========= ========= ========= =========
   Diluted EPS              -     (0.33)        -     (0.33)     0.37
                     ========= ========= ========= ========= =========

   IRS audit
    settlements
    including
    adjustment of
    accrued interest
   Basic EPS                -     (0.11)        -     (0.34)        -
                     ========= ========= ========= ========= =========
   Diluted EPS              -     (0.10)        -     (0.32)        -
                     ========= ========= ========= ========= =========

   Arbitration award
   Basic EPS                -     (0.07)        -     (0.07)        -
                     ========= ========= ========= ========= =========
   Diluted EPS              -     (0.07)        -     (0.07)        -
                     ========= ========= ========= ========= =========

   Deferred taxes not
    required after
    REIT conversion
   Basic EPS                -         -         -         -     (1.05)
                     ========= ========= ========= ========= =========
   Diluted EPS              -         -         -         -     (1.02)
                     ========= ========= ========= ========= =========

Pro forma income
 from Continuing
 Operations per
 Common Share
   Adjusted basic
    EPS              $   0.35  $   0.47  $   0.19  $   1.60  $   1.48
                     ========= ========= ========= ========= =========
   Adjusted diluted
    EPS              $   0.34  $   0.46  $   0.18  $   1.57  $   1.44
                     ========= ========= ========= ========= =========

                              - H -
RAYONIER
                RECONCILIATION OF NON-GAAP MEASURES (1)
                     DECEMBER 31, 2005 (unaudited)

                         (millions of dollars)

                             Per-            Other  Corporate
                  Real     formance   Wood   Oper-     and
          Timber Estate(2)  Fibers  Products ations   other      Total
          ------ -------   -------- -------- ------ --------   -------

Three Months
 Ended
Dec. 31,
 2005
 Cash
  provided
  by oper-
  ating
  activ-
  ities   $ 54.4  $ 15.8    $ 58.9  $   5.2  $ (5.5) $  (2.4)  $126.4
 Income
  tax
  expense      -       -         -        -       -      8.8      8.8
 Interest
  expense      -       -         -        -       -     12.0     12.0
 Working
  capital
  increases
  (de-
  creases) (10.8)    1.2     (29.7)    (0.7)    6.3     (6.6)   (40.3)
 Other
  balance
  sheet
  changes   (4.3)    0.4      (0.2)       -     0.1    (22.9)   (26.9)
          ------ -------   -------- -------- ------ --------   -------
 Adjusted
  EBITDA  $ 39.3  $ 17.4    $ 29.0  $   4.5  $  0.9  $ (11.1)  $ 80.0
          ====== =======   ======== ======== ====== ========   =======

Sept. 30,
 2005
 Cash
  provided
  by oper-
  ating
  activ-
  ities   $ 36.7  $ 25.1    $ 19.7  $   8.6  $ 2.8   $  (9.7)  $ 83.2
 Income
  tax
  benefit      -       -         -        -       -    (21.8)   (21.8)
 Interest
  expense      -       -         -        -       -      9.8      9.8
 Working
  capital
  increases
  (de-
  creases)  (0.8)    1.8      16.3     (2.2)   (1.7)    (3.6)     9.8
 Other
  balance
  sheet
  changes   (4.3)   (0.1)     (0.7)       -       -     28.6     23.5
          ------ -------   -------- -------- ------ --------   -------
 Adjusted
  EBITDA  $ 31.6  $ 26.8    $ 35.3  $   6.4  $  1.1  $   3.3   $104.5
          ====== =======   ======== ======== ====== ========   =======

Dec. 31,
 2004
 Cash
  provided
  by oper-
  ating
  activ-
  ities   $ 29.2  $    -    $ 32.5  $   5.6  $  5.6  $ (13.0)  $ 59.9
 Income
  tax
  benefit      -       -         -        -       -     (1.1)    (1.1)
 Interest
  expense      -       -         -        -       -     12.1     12.1
 Working
  capital
  increases
  (de-
  creases)   8.6       -      (9.0)    (2.0)   (4.1)    (2.4)    (8.9)
 Other
  balance
  sheet
  changes    6.8       -       0.1        -    (0.1)    (6.8)       -
          ------ -------   -------- -------- ------ --------   -------
 Adjusted
  EBITDA  $ 44.6  $    -    $ 23.6  $   3.6  $  1.4  $ (11.2)  $ 62.0
          ====== =======   ======== ======== ====== ========   =======

Year Ended
Dec. 31,
 2005
 Cash
  provided
  by oper-
  ating
  activ-
  ities   $160.0  $ 82.0    $132.4  $  22.3  $ (3.9) $(130.1)  $262.7
 Income
  tax
  benefit      -       -         -        -       -    (16.9)   (16.9)
 Interest
  expense      -       -         -        -       -     47.0     47.0
 Working
  capital
  increases
  (de-
  creases)  (4.8)   (2.9)     (2.4)     1.2     4.7     23.4(a)  19.2
 Other
  balance
  sheet
  changes   (7.0)    0.3      (0.1)       -     1.6     53.3(b)  48.1
          ------ -------   -------- -------- ------ --------   -------
 Adjusted
  EBITDA  $148.2  $ 79.4    $129.9  $  23.5  $  2.4  $ (23.3)  $360.1
          ====== =======   ======== ======== ====== ========   =======

Dec. 31,
 2004
 Cash
  provided
  by oper-
  ating
  activ-
  ities   $210.1  $    -    $125.8  $  22.6  $ 17.8  $ (84.0)  $292.3
 Income
  tax
  benefit      -       -         -        -       -    (33.6)   (33.6)
 Interest
  expense      -       -         -        -       -     46.7     46.7
 Working
  capital
  increases
  (de-
  creases)  (2.9)      -      (2.6)    (0.3)   (9.8)   (21.8)   (37.4)
 Other
  balance
  sheet
  changes   11.0       -       1.2        -    (0.7)    51.1(c)  62.6
          ------ -------   -------- -------- ------ --------   -------
 Adjusted
  EBITDA  $218.2  $    -    $124.4  $  22.3  $  7.3  $ (41.6)  $330.6
          ====== =======   ======== ======== ====== ========   =======

(1) Unusual, non-trade intercompany items between the segments have
    been eliminated.
(2) Real Estate became a reportable segment in third quarter 2005.
    The Timber segment includes Timber and Real Estate in 2004.

(a) Primarily due to higher tax payments in 2005.
(b) Includes U.S. tax benefit on repatriation of foreign earnings of
    ($25.4) million and favorable tax settlements, net of interest
    ($19.8) million.
(c) Includes reversal of deferred taxes not required after REIT
    conversion of ($77.9) million partly offset by additional taxes
    for repatriation of foreign earnings of $28.2 million.

                                 - I -
RAYONIER
     RECONCILIATION OF STATUTORY INCOME TAX TO REPORTED INCOME TAX
                     DECEMBER 31, 2005 (unaudited)

               (millions of dollars, except percentages)

                                   Three Months Ended
                  ----------------------------------------------------
                      Dec. 31,        Sept. 30,           Dec. 31,
                        2005             2005               2004
                  ---------------- -----------------  ----------------
                      $       %        $       %          $       %
                   ------- -------  ------- -------    ------- -------

Income tax
 provision at the
 U.S. statutory
 rate              $(22.8)  (35.0)  $(18.6)  (35.0)    $ (4.4)  (35.0)

REIT income not
 subject to
 federal tax         11.1    17.0     10.4    19.6        5.4    42.2

Lost deduction on
 REIT interest
 expense and
 overhead
 expenses
 associated with
 REIT activities     (2.9)   (4.4)    (3.2)   (6.0)      (1.6)  (12.5)

Discrete items
 included in
 pretax income          -       -      4.9     6.5 (2)      -       -

Foreign, state
 and local income
 taxes, foreign
 exchange rate
 changes and
 permanent
 differences          4.9     7.5      2.3     4.3        4.7    36.7
                   ------- -------  ------- -------    ------- -------

Income tax
 (expense)
 benefit before
 discrete items
 (1)               $ (9.7)  (14.9)  $ (4.2)  (10.6)    $  4.1    31.4

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)    25.8    48.6          -       -

Return to accrual
 adjustments         (0.2)   (0.3)    (0.1)   (0.2)         -       -

Favorable
 IRS audit
 settlements,
 including
 adjustment
 of accrued
 interest
 expense/
 income                 -       -      3.1     6.9 (2)      -       -

Tax on favorable
 arbitration
 award                  -       -     (3.0)   (3.9)(2)      -       -

Exchange rate
 changes on tax
 on undistributed
 foreign earnings       -       -      0.2     0.4       (3.0)  (23.4)

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

Income tax
 benefit
 (expense) (1)     $ (8.8)  (13.5)  $ 21.8    41.2     $  1.1     8.0
                   ======= =======  ======= =======    ======= =======


                                               Year Ended
                                   -----------------------------------
                                      Dec. 31,            Dec. 31,
                                        2005                2004
                                   ----------------    ---------------
                                       $       %          $       %
                                    ------- -------    ------- -------
Income tax
 provision at the
 U.S. statutory
 rate                               $(66.8)  (35.0)    $(44.2)  (35.0)

REIT income not
 subject to
 federal tax                          39.9    20.9       36.2    28.6

Lost deduction on
 REIT interest
 expense and
 overhead
 expenses
 associated with
 REIT activities                     (11.6)   (6.1)     (11.6)   (9.2)

Discrete items
 included in
 pretax income                         4.9     1.6 (2)      -       -

Foreign, state
 and local income
 taxes, foreign
 exchange rate
 changes and
 permanent
 differences                           8.4     4.4        5.1     4.0
                                    ------- -------    ------- -------

Income tax
 (expense)
 benefit  before
 discrete items
 (1)                                $(25.2)  (14.2)    $(14.5)  (11.6)

Favorable
 adjustment of
 employee related
 costs between
 non-taxable and
 taxable entities                      1.5     0.8          -       -

U.S. tax benefit
 on repatriation
 of foreign
 earnings                             25.4    13.3          -       -

Return to accrual
 adjustments                          (0.3)   (0.2)       1.4     1.1

Favorable IRS
 audit
 settlements,
 including
 adjustment of
 accrued interest
 expense/income                       19.8    11.0 (2)      -       -

Tax on favorable
 arbitration
 award                                (3.0)   (1.2)(2)      -       -

Exchange rate
 changes on tax
 on undistributed
 foreign earnings                      1.6     0.8       (3.0)   (2.4)

Non-realizability
 of New Zealand
 tax credits on
 U.S. withholding
 tax for prior
 years'
 intercompany
 note interest                        (2.9)   (1.5)         -       -
                                    ------- -------    ------- -------

Income tax
 benefit
 (expense) (1)                      $ 16.9     8.8     $(16.1)  (12.9)
                                    ======= =======    ======= =======

(1) Twelve months ended December 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, for a net effect of $49.7 million.

(2) Adjusted for change in pretax income due to discrete items.

                                 - 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

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

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  • Computershare
  • P.O. Box 43006
  • Providence, RI 02940-3006
  • United States
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  • Canton, MA 02021
  • United States

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