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Rayonier Reports Fourth Quarter and Full-Year 2006 Results

January 23, 2007

JACKSONVILLE, Fla.--(BUSINESS WIRE)--Jan. 23, 2007--Rayonier (NYSE:RYN) today reported fourth quarter income from continuing operations of $50.0 million, or 64 cents per share. This compares to $55.0 million, or 70 cents per share, in the third quarter and $56.4 million, or 73 cents per share, in fourth quarter 2005. Full-year 2006 income from continuing operations was $171.1 million, or $2.19 per share, compared to $207.8 million, or $2.68 per share, in 2005.

Fourth quarter 2006 included a special item gain of $3.7 million, or 5 cents per share, for a deferred tax adjustment. Third quarter included special item gains of $5.3 million, or 7 cents per share, and fourth quarter 2005 included special item gains of $30.1 million, or 39 cents per share. In 2006 special items totaled $15.5 million, or 20 cents per share, compared to $85.9 million, or $1.11 per share, in 2005. (See Schedule H for details.)

Lee Nutter, Chairman, President and CEO, said: "We had another very successful year with strong and improved results in each of our three core businesses. In Timber, we increased the geographic footprint of our holdings with the purchase of 228,000 acres in six states and are now the 5th largest private timberland owner in the U.S. Also, we monetized 20 percent of our equity interest in a 354,000 acre Rayonier-managed New Zealand joint venture and, with a 40 percent interest, we remain the largest investor. In Performance Fibers, we continued to see very strong demand for our high-value cellulose specialties and secured long-term contracts for 80 percent of that production into 2011 with the world's largest manufacturers of acetate-based products and other key customers. In Real Estate, despite a softening in residential markets, operating income for the year was 39 percent higher than 2005 due to continued interest in our extensive and diverse development and rural properties. Also, as part of our strategy to move up the real estate value chain we entered into our first 'participation' agreements with two premier developers."

Net income in the fourth quarter was $55.3 million, or 71 cents per share, compared to $55.0 million, or 70 cents per share, in third quarter 2006, and $56.4 million, or 73 cents per share, in fourth quarter 2005. Fourth quarter 2006 included income from discontinued operations of $5.3 million, or 7 cents per share, reflecting a reduction in environmental reserves. Full-year 2006 net income was $176.4 million, or $2.26 per share, compared to $182.8 million, or $2.36 per share, in 2005.

Excluding special items, fourth quarter income from continuing operations was below third quarter primarily due to lower Real Estate sales partly offset by improved Performance Fibers results. On the same basis, earnings improved compared to fourth quarter 2005 primarily due to stronger Performance Fibers results and increased Real Estate sales partly offset by lower Northwest timber volume and Southeast timber prices.

Sales for the fourth quarter increased to $329 million from $312 million in the third quarter and $316 million in fourth quarter 2005. Sales for the year of $1.2 billion were 4 percent higher than in 2005.

Cash provided by operating activities for 2006 of $307 million was $53 million above 2005 due to higher operating earnings and lower working capital requirements. Cash Available for Distribution (CAD) of $178 million for 2006 was $9 million above 2005 mainly due to higher operating earnings. (CAD is a non-GAAP measure defined and reconciled to GAAP in the attached exhibits.)

Debt at year-end of $659 million was $101 million above year-end 2005 largely due to timberland acquisitions. The debt-to-capital ratio was 42.1 percent compared to 38.7 percent at prior year-end. Cash was $40 million compared to $146 million at year-end 2005.

Timber

Sales of $47 million and operating income of $19 million were $3 million and $2 million above third quarter, respectively, primarily due to higher Southeast volume and hunting lease income partly offset by lower Southeast prices and Northwest volume. Compared to fourth quarter 2005, sales and operating income decreased $9 million and $5 million, respectively, mainly due to lower Northwest volume and Southeast prices.

Real Estate

Sales of $35 million and operating income of $30 million were $12 million and $8 million below third quarter, respectively, primarily due to fewer development acres sold, partially offset by an increase in the price and number of rural acres sold. Compared to fourth quarter 2005, sales and operating income increased $15 million and $14 million, respectively, mainly due to an increase in development and rural acres sold and improved rural prices.

Performance Fibers

Sales and operating income of $196 million and $33 million, respectively, were $33 million and $12 million above third quarter primarily due to increased volume. Operating income also benefited from lower manufacturing costs, including a favorable property tax settlement which resulted in the reversal of $4.9 million in accruals from prior years. Compared to fourth quarter 2005, sales and operating income improved $23 million and $26 million, respectively, largely due to higher cellulose specialties prices and volume, while operating income also benefited from the property tax settlement and lower manufacturing costs.

Wood Products

Sales of $21 million were $5 million below third quarter due to a decline in volume and prices, while an operating loss of $4 million was unfavorable to third quarter by $1 million due to reduced prices partly offset by lower manufacturing costs. Compared to fourth quarter 2005, sales and operating income declined $13 million and $7 million, respectively, also due to weaker prices partially offset by lower manufacturing costs.

Other Operations

Sales of $29 million were $3 million below third quarter and $4 million lower than fourth quarter 2005, however, operating income of $1 million was up from essentially break even results in both comparative periods primarily due to settlement of a coal royalty dispute.

Other Items

Corporate expenses of $11.3 million were $4.2 million above third quarter mainly due to higher stock-price based incentive compensation and business development expenses. Compared to fourth quarter 2005, expenses increased $0.9 million largely due to higher incentive compensation.

Intersegment eliminations and other of $0.5 million income was comparable to third quarter and $3.4 million favorable to fourth quarter 2005 primarily due to an increase in disposition reserves in that quarter.

Interest expense of $13.8 million was $2.8 million above third quarter due to a litigation-related accrual and higher debt. Compared to fourth quarter 2005, interest expense increased $1.8 million mainly due to the legal matter.

Interest and other income of $2.5 million was $0.5 million below third quarter. Compared to fourth quarter 2005, it was $1.7 lower largely due to a gain on sale of a manufacturing asset in that quarter.

Income from discontinued operations was $5.3 million in fourth quarter 2006 due to a more cost-effective remediation plan at a closed facility resulting in a reduction in environmental reserves.

The full-year and fourth quarter 2006 effective tax rates, before discrete items, were 16.3 and 20.7 percent, respectively, compared to 14.2 and 14.9 percent in the 2005 comparable periods. The increase was primarily due to lower tax benefits from foreign operations, partly offset by higher REIT income. The 2005 rates included a $6.5 million tax benefit from the sale of New Zealand timber assets. Including discrete items, the full year and fourth quarter 2006 rates were 10.0 and 11.4 percent, respectively. (See Schedule J for details.)

Outlook

"Our focus this year is on integrating the 2006 timberland acquisitions into our operations, continuing to move up the value chain in real estate through additional 'participation' agreements and on high-return cost improvement projects at our Performance Fibers mills," Nutter said.

"Our mix of core businesses gives Rayonier strength and balance. As a result, excluding special items, we expect another good year with earnings generally in line with 2006. While the housing slowdown will put pressure on timber and real estate markets in the near term, the impact should be mostly offset by the strength of our Performance Fibers business. First quarter results are expected to be slightly below first quarter 2006 primarily due to lower timber earnings."

Rayonier is a leading international forest products company with three core businesses: Timber, Real Estate and Performance Fibers. It owns, leases or manages 2.7 million acres of timber and land in the U.S., New Zealand and Australia. The company's holdings include approximately 200,000 acres with residential and commercial development potential along the fast-growing Interstate 95 corridor between Savannah, Georgia, and Daytona Beach, Florida. Its Performance Fibers business is the world's leading producer of high-value specialty cellulose fibers. Approximately 40 percent of the company's sales are outside the U.S. to customers in more than 50 countries. Rayonier is structured as a real estate investment trust.

Except for historical information, the statements made in this press release are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements, which include statements regarding anticipated earnings, revenues, volumes, pricing, costs and other statements relating to Rayonier's financial and operational performance, in some cases are identified by the use of words such as "may," "will," "should," "expect," "estimate," "believe," "anticipate" and other similar language. The following important factors, among others, could cause actual results to differ materially from those expressed in the forward-looking statements contained in this release: changes in global market trends and world events; interest rate and currency movements; changes in key management personnel; 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, policy or political environment 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, laws and regulations affecting the environment, endangered species, timber harvesting, 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 23, at 2:00 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 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 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, 2006 (unaudited)
         (millions of dollars, except per share information)

                          Three Months Ended            Year Ended
                    ------------------------------ -------------------
                     Dec. 31,  Sept. 30,  Dec. 31,  Dec. 31,  Dec. 31,
                      2006      2006       2005      2006      2005
                    --------- ---------  --------- --------- ---------
Profitability
 Sales                $328.5    $312.0     $315.9  $1,229.8  $1,180.7
 Operating income      $67.8     $65.7      $36.0    $221.8    $183.2
 Income from
  continuing
  operations           $50.0     $55.0      $56.4    $171.1    $207.8
 Discontinued
  operations            $5.3        $-         $-      $5.3    $(25.0)
 Net income            $55.3     $55.0      $56.4    $176.4    $182.8
 Income per
  diluted common
  share
   Continuing
    operations         $0.64     $0.70      $0.73     $2.19     $2.68
   Net income          $0.71     $0.70      $0.73     $2.26     $2.36

   Pro forma
    income from
    continuing
    operations
    (a)(d)             $0.59     $0.63      $0.34     $1.99     $1.57
 Operating income
 as a percent
 of sales               20.6%     21.1%      11.4%     18.0%     15.5%
 Adjusted ROE
  (a)(d)                 N/M       N/M        N/M      17.4%     14.5%


                                   Year Ended
                                  December 31,
                                2006       2005
                              ---------  ---------
Capital Resources and
 Liquidity
 Continuing operations:
    Cash provided by
     operating activities       $306.9     $254.1
    Cash used for
     investing
     activities                $(385.2)    $(23.7)
    Cash used for
     financing
     activities                 $(29.8)   $(215.6)
 Adjusted EBITDA
  (b) (d)                       $370.1     $352.8
 Cash Available for
  Distribution (CAD) (c) (d)    $177.8     $169.0
 Borrowing/(repayment)
 of debt, net                    $99.7     $(98.6)

                              12/31/06   12/31/05
                              ---------  ---------
 Debt                           $659.0     $558.5
 Debt / capital                   42.1%      38.7%
 Cash                            $40.2     $146.2
 Average diluted shares
  outstanding (millions)          78.2       77.6

 (a), (b), (c) and (d), see Schedule B.
 N/M - Not meaningful.

                                - A -

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


 (a)  Pro forma income from continuing operations and Adjusted ROE
      are non-GAAP measures. See Schedule H for reconciliation to
      the nearest GAAP measure.

 (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 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.

 (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, 2006 (unaudited)
         (millions of dollars, except per share information)


                     Three Months Ended               Year Ended
            ----------------------------------- ----------------------
              Dec. 31,   Sept. 30,    Dec. 31,    Dec. 31,   Dec. 31,
               2006        2006        2005        2006       2005
            ----------- ----------- ----------- ----------------------

Sales           $328.5      $312.0      $315.9    $1,229.8   $1,180.7
            ----------- ----------- ----------- ----------------------
Costs and
 expenses
 Cost of
  sales          249.6       231.5       260.0       952.7      942.1
 Selling and
  general
  expenses        18.4        14.5        17.7        63.5       64.4
 Other
  operating
  loss/
  (income),
  net             (7.3)        0.3         2.2        (8.2)      (9.0)
            ----------- ----------- ----------- ----------------------
Operating
 income           67.8        65.7        36.0       221.8      183.2
Gain on sale
 of portion
 of New
 Zealand JV          -           -        37.0         7.8       37.0
            ----------- ----------- ----------- ----------------------
Income from
 continuing
 operations,
 including
 gain on
 sale of
 portion of
 New Zealand
 joint
 venture          67.8        65.7        73.0       229.6      220.2
Interest
 expense         (13.8)      (11.0)      (12.0)      (48.9)     (47.0)
Interest and
 other
 income, net       2.5         3.0         4.2         9.5       17.7
            ----------- ----------- ----------- ----------------------
Income
 before
 taxes            56.5        57.7        65.2       190.2      190.9
Income tax
 (expense)/
 benefit          (6.5)       (2.7)       (8.8)      (19.1)      16.9
            ----------- ----------- ----------- ----------------------
Income from
 continuing
 operations      $50.0       $55.0       $56.4      $171.1     $207.8
Discontinued
 operations,
 net               5.3           -           -         5.3      (25.0)
            ----------- ----------- ----------- ----------------------
Net income       $55.3       $55.0       $56.4      $176.4     $182.8
            =========== =========== =========== ======================

Income per
 Common
 Share:
Basic
From
 continuing
 operations      $0.65       $0.71       $0.75       $2.23      $2.75
            =========== =========== =========== ======================
Net income       $0.72       $0.71       $0.75       $2.30      $2.42
            =========== =========== =========== ======================
Diluted
From
 continuing
 operations      $0.64       $0.70       $0.73       $2.19      $2.68
            =========== =========== =========== ======================
Net income       $0.71       $0.70       $0.73       $2.26      $2.36
            =========== =========== =========== ======================

Pro forma
 income from
 continuing
 operations
 (a) (d)
Adjusted
 diluted EPS     $0.59       $0.63       $0.34       $1.99      $1.57
            =========== =========== =========== ======================

Weighted
 average
 Common
Shares used
 for
 determining
Basic EPS   76,679,126  76,508,135  75,844,885  76,486,690 75,504,800
            =========== =========== =========== ======================
Diluted EPS 78,331,461  78,062,219  78,002,090  78,158,691 77,644,252
            =========== =========== =========== ======================


(a) See Schedule H for a reconciliation to the nearest GAAP measure.
(d) See Schedule B.
                                - C -
                               RAYONIER
          BUSINESS SEGMENT SALES AND OPERATING INCOME (LOSS)
                    DECEMBER 31, 2006 (unaudited)
                        (millions of dollars)

                          Three Months Ended            Year Ended
                    ------------------------------ -------------------
                     Dec. 31,  Sept. 30,  Dec. 31,  Dec. 31,  Dec. 31,
                      2006      2006       2005      2006      2005
                    --------- ---------- --------- --------- ---------
 Sales
    Timber             $47.2      $44.3     $55.7    $207.0    $207.6

    Real Estate         34.8       46.3      19.9     112.0      85.8

    Performance
     Fibers
     Cellulose
      specialties      146.0      120.3     124.7     499.4     448.6
     Absorbent
      materials         50.1       43.2      48.0     172.0     179.4
                    --------- ---------- --------- --------- ---------
       Total
        Performance
        Fibers         196.1      163.5     172.7     671.4     628.0
                    --------- ---------- --------- --------- ---------

    Wood Products       21.3       26.3      34.1     111.4     136.6

    Other
     Operations         29.2       31.7      33.6     128.3     123.5

    Intersegment
     eliminations       (0.1)      (0.1)     (0.1)     (0.3)     (0.8)
                    --------- ---------- --------- --------- ---------

       Total sales    $328.5     $312.0    $315.9  $1,229.8  $1,180.7
                    ========= ========== ========= ========= =========

 Operating
  income/(loss)
    Timber             $18.9      $17.1     $23.5     $89.6     $86.7

    Real Estate         29.9       37.6      15.9      88.6      63.7

    Performance
     Fibers             32.7       21.2       6.6      79.9      53.1

    Wood Products       (4.1)      (3.3)      2.8      (2.8)     16.4

    Other
     Operations          1.2        0.1       0.5       1.3       0.9

    Corporate          (11.3)      (7.1)    (10.4)    (35.0)    (36.5)

    Intersegment
     eliminations
     and other
     (Including
     Corporate FX)       0.5        0.1      (2.9)      0.2      (1.1)
                    --------- ---------- --------- --------- ---------

       Total
        operating
        income         $67.8      $65.7     $36.0    $221.8    $183.2
                    ========= ========== ========= ========= =========

                                - D -
                               RAYONIER
  CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CASH FLOWS
                    DECEMBER 31, 2006 (unaudited)
                        (millions of dollars)

 CONDENSED CONSOLIDATED BALANCE SHEETS
                                                    Dec. 31,  Dec. 31,
                                                     2006      2005
                                                   --------- ---------
 Assets
     Current assets                                  $299.9    $354.1
     Timber, timberlands and logging roads, net of
      depletion and amortization                    1,127.5     927.0
     Property, plant and equipment                  1,365.0   1,352.4
     Less - accumulated depreciation               (1,011.2)   (991.1)
                                                   --------- ---------
                                                      353.8     361.3
                                                   --------- ---------
     Investment in New Zealand JV                      61.2      81.7
     Other assets                                     116.0     115.0
                                                   --------- ---------
                                                   $1,958.4  $1,839.1
                                                   ========= =========
 Liabilities and Shareholders' Equity
     Current liabilities                             $193.3    $170.1
     Deferred income taxes                              5.2      32.2
     Long-term debt                                   655.4     555.2
     Non-current reserves for dispositions and
      discontinued operations                         111.8     128.0
     Other non-current liabilities                     86.3      68.7
     Shareholders' equity                             906.4     884.9
                                                   --------- ---------
                                                   $1,958.4  $1,839.1
                                                   ========= =========

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                        Year Ended
                                                   -------------------
                                                    Dec. 31,  Dec. 31,
                                                     2006      2005
                                                   --------- ---------
 Cash provided by operating activities of
  continuing operations:
     Income from continuing operations               $171.1    $207.8
     Depreciation, depletion, amortization and non-
      cash basis of real estate sold                  148.9     159.2
     Other non-cash items included in income          (13.2)    (85.9)
     Changes in working capital and other assets
      and liabilities                                   0.1     (27.0)
                                                   --------- ---------
                                                      306.9     254.1
                                                   --------- ---------
 Cash used for investing activities of continuing
  operations:
     Capital expenditures, net of sales and
      retirements                                    (105.5)    (85.3)
     Purchase of timberlands and real estate         (298.9)    (23.5)
     Proceeds from sale of New Zealand timberlands        -     186.8
     Investment in New Zealand joint venture              -    (121.9)
     Proceeds from sale of portion of New Zealand
      joint venture                                    21.8         -
     Proceeds from sale of other assets                   -      13.1
     Decrease in restricted cash                        1.3       3.3
     Other                                             (3.9)      3.8
                                                   --------- ---------
                                                     (385.2)    (23.7)
                                                   --------- ---------
 Cash used for financing activities:
     Borrowing/(repayment) of debt, net                99.7     (98.6)
     Dividends paid                                  (143.9)   (129.2)
     Issuance of common shares                         10.8      15.1
     Repurchase of common shares                       (0.5)        -
     Excess tax benefits from equity-based
      compensation(a)                                   4.1         -
     Cash in lieu of fractional shares                    -      (0.4)
     Payment on forward currency contract                 -      (2.5)
                                                   --------- ---------
                                                      (29.8)   (215.6)
                                                   --------- ---------
 Effect of exchange rate changes on cash                2.1      (0.1)
                                                   --------- ---------
 Cash provided by discontinued operations                 -      47.4
                                                   --------- ---------
 Cash and cash equivalents:
     (Decrease)/increase in cash and cash
      equivalents                                    (106.0)     62.1
     Balance, beginning of year                       146.2      84.1
                                                   --------- ---------
     Balance, end of year                             $40.2    $146.2
                                                   ========= =========

 (a) 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 year ended
 December 31, 2005.


                                 - E -
                               RAYONIER
                 SELECTED SUPPLEMENTAL FINANCIAL DATA
                    DECEMBER 31, 2006 (unaudited)
                        (millions of dollars)


                          Three Months Ended            Year Ended
                    ------------------------------ -------------------
                     Dec. 31,  Sept. 30,  Dec. 31,  Dec. 31,  Dec. 31,
                      2006      2006       2005      2006      2005
                    --------- ---------- --------- --------- ---------

Geographical Data
 (Non-U.S.)
  Sales
     New Zealand       $10.3       $8.5     $12.8     $32.5     $48.9
     Other               3.7        3.5       2.8      15.4       9.9
                    --------- ---------- --------- --------- ---------
        Total          $14.0      $12.0     $15.6     $47.9     $58.8
                    ========= ========== ========= ========= =========

  Operating income
   (loss)
     New Zealand        $0.3      $(0.1)    $(1.8)    $(1.2)     $1.2
     Other               1.0       (0.3)      1.5      (0.2)      0.1
                    --------- ---------- --------- --------- ---------
        Total           $1.3      $(0.4)    $(0.3)    $(1.4)     $1.3
                    ========= ========== ========= ========= =========

 Timber
  Sales
     Northwest U.S.    $21.9      $24.4     $27.4    $108.6     $98.5
     Southeast U.S.     22.2       17.2      24.6      87.9      86.2
     New Zealand         3.1        2.7       3.7      10.5      22.9
                    --------- ---------- --------- --------- ---------
        Total          $47.2      $44.3     $55.7    $207.0    $207.6
                    ========= ========== ========= ========= =========

  Operating income
     Northwest U.S.     $9.6      $12.6     $13.9     $59.6     $55.1
     Southeast U.S.      8.6        4.3      11.2      30.6      29.3
     New Zealand         0.7        0.2      (1.6)     (0.6)      2.3
                    --------- ---------- --------- --------- ---------
        Total          $18.9      $17.1     $23.5     $89.6     $86.7
                    ========= ========== ========= ========= =========

 Adjusted EBITDA by
  Segment(a)
  Timber               $33.4      $27.3     $39.2    $142.8    $146.9
  Real Estate           32.0       43.9      17.0     102.9      79.1
  Performance
   Fibers               53.3       40.9      29.0     152.7     129.9
  Wood Products         (2.6)      (1.4)      4.5       4.1      23.5
  Other Operations       1.4        0.3       0.9       2.0       2.4
  Corporate and
   other               (10.9)      (6.7)    (12.8)    (34.4)    (29.0)
                    --------- ---------- --------- --------- ---------
     Total            $106.6     $104.3     $77.8    $370.1    $352.8
                    ========= ========== ========= ========= =========


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

                                - F -
                               RAYONIER
                    SELECTED OPERATING INFORMATION
                    DECEMBER 31, 2006 (unaudited)

                            Three Months Ended          Year Ended
                       ---------------------------- ------------------
                        Dec. 31, Sept. 30,  Dec. 31, Dec. 31, Dec. 31,
                        2006      2006      2005     2006      2005
                       -------- ---------- -------- -------- ---------
Timber
  Northwest U.S., in
   millions of board
   feet                     51         59       70      274       263
  Southeast U.S., in
   thousands of short
   green tons            1,363        926    1,325    4,740     4,832

Real Estate
 Acres sold
   Development           4,020      4,606    1,099    9,377     6,036
   Rural                 2,400      1,426    1,480   16,099    23,587
   Northwest U.S.          713         58      128      775       403
                       -------- ---------- -------- -------- ---------
   Total                 7,133      6,090    2,707   26,251    30,026

Performance Fibers
 Sales Volume
  Cellulose
   specialties, in
   thousands of metric
   tons                    137        112      130      474       470
  Absorbent materials,
   in thousands of
   metric tons              76         68       75      272       276
 Production as a
  percent of capacity    103.9%     101.9%   101.2%   101.2%    100.5%

Lumber
 Sales volume, in
  millions of board
  feet                      83         91       89      350       351



                                - G -
                               RAYONIER
                 RECONCILIATION OF NON-GAAP MEASURES
                    DECEMBER 31, 2006 (unaudited)
         (millions of dollars, except per share information)

CASH AVAILABLE FOR DISTRIBUTION:
                                                        Year Ended
                                                    ------------------
                                                    Dec. 31, Dec. 31,
                                                     2006      2005
                                                    -------- ---------
     Cash provided by operating activities          $306.9     $254.1
     Capital spending (a)                           (105.5)     (85.3)
     Proceeds from matured forward energy contracts      -        3.9
     (Increase) decrease in committed cash           (19.1)       1.8
     Equity based compensation adjustments/other       0.3       (2.3)
     Like-kind exchange tax benefits on
     third party real estate sales (b)                (4.8)      (3.2)
                                                    -------- ---------
     Cash Available for Distribution                $177.8     $169.0
                                                    ======== =========

(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 FROM CONTINUING OPERATIONS AND ADJUSTED RETURN ON
EQUITY:
                  Three Months Ended               Year Ended
              -------------------------- -----------------------------
              Dec. 31, Sept.30, Dec. 31,    Dec. 31,       Dec. 31,
                2006     2006     2005        2006           2005
              -------------------------- -------------- --------------
                 per      per     per             per            per
               diluted  diluted diluted         diluted        diluted
                share    share   share      $    share     $    share
              -------------------------- -------------- --------------
Income from
 Continuing
 Operations      $0.64    $0.70   $0.73  $171.1  $2.19  $207.8  $2.68
 Sale of
  portion of
  New Zealand
  JV                 -        -       -    (6.5) (0.08)      -      -
 IRS audit
  settlements
  including
  adjustment
  of accrued
  interest           -    (0.07)      -    (5.3) (0.07)  (24.8) (0.32)
 Deferred tax
  adjustment     (0.05)       -       -    (3.7) (0.05)      -      -
 Tax
  associated
  with
  repatriation
  of foreign
  earnings           -        -       -       -      -   (25.4) (0.33)
Arbitration
 award               -        -       -       -      -    (5.2) (0.07)
New Zealand
 timberlands
 sale                -        -   (0.39)      -      -   (30.5) (0.39)
              -------------------------- -------------- --------------
Pro forma
 Income from
 Continuing
 Operations      $0.59    $0.63   $0.34  $155.6  $1.99  $121.9  $1.57
Divided by:
 Average
 Equity            N/M      N/M     N/M  $895.7    N/M  $840.7    N/M
              -------------------------- -------------- --------------
Adjusted ROE       N/M      N/M     N/M    17.4%   N/M    14.5%   N/M
              ========================== ============== ==============

N/M - Not meaningful.

                                - H -
                               RAYONIER
               RECONCILIATION OF NON-GAAP MEASURES (a)
                    DECEMBER 31, 2006 (unaudited)
                        (millions of dollars)

ADJUSTED EBITDA:


                                                        Corp-
                              Perfor-           Other  orate
                        Real   mance    Wood    Oper-   and
               Timber   Estate Fibers Products ations  other    Total
              ------- ------------------------ --------------- -------
Three Months Ended
December 31, 2006
  Cash
   provided by
   operating
   activities  $36.7   $37.4   $45.2    $(2.2)  $8.0   $(40.5)  $84.6
  Income
   tax
   expense         -       -       -        -      -      6.5     6.5
  Interest,
   net             -       -       -        -      -     11.1    11.1
  Working
   capital
   increases
   (decreases)  (8.2)   (1.4)    7.9     (0.4)  (5.3)     9.2     1.8
  Other
   balance
   sheet
   changes       4.9    (4.0)    0.2        -   (1.3)     2.8     2.6
              ------- ------- ------- -------- ------ -------- -------
  Adjusted
   EBITDA      $33.4   $32.0   $53.3    $(2.6)  $1.4   $(10.9) $106.6
              ======= ======= ======= ======== ====== ======== =======

September 30, 2006
  Cash
   provided by
   operating
   activities  $24.7   $39.8   $37.7     $0.8  $(2.0)  $(11.8)  $89.2
  Income
   tax
   expense         -       -       -        -      -      2.7     2.7
  Interest,
   net             -       -       -        -      -      8.1     8.1
  Working
   capital
   increases
   (decreases)  (1.3)    0.7     2.4     (2.2)   2.1    (14.8)  (13.1)
  Other
   balance
   sheet
   changes       3.9     3.4     0.8        -    0.2      9.1    17.4
              ------- ------- ------- -------- ------ -------- -------
  Adjusted
   EBITDA      $27.3   $43.9   $40.9    $(1.4)  $0.3    $(6.7) $104.3
              ======= ======= ======= ======== ====== ======== =======

December 31, 2005
  Cash
   provided by
   operating
   activities  $49.7   $15.4   $58.1     $5.2  $(5.6)  $(74.8)  $48.0
  Income
   tax
   expense         -       -       -        -      -      8.8     8.8
  Interest,
   net             -       -       -        -      -      9.8     9.8
  Working
   capital
   increases
   (decreases)   3.0     6.2   (29.7)    (0.7)   6.5      1.2   (13.5)
  Other
   balance
   sheet
   changes     (13.5)   (4.6)    0.6        -      -     42.2    24.7
              ------- ------- ------- -------- ------ -------- -------
  Adjusted
   EBITDA      $39.2   $17.0   $29.0     $4.5   $0.9   $(12.8)  $77.8
              ======= ======= ======= ======== ====== ======== =======

Year Ended
December 31, 2006
  Cash
   provided by
   operating
   activities $158.3  $103.0  $127.3     $5.6  $13.6  $(100.9) $306.9
  Income
   tax
   expense         -       -       -        -      -     19.1    19.1
  Interest,
   net             -       -       -        -      -     39.1    39.1
  Working
   capital
   increases
   (decreases) (11.8)    0.2    24.6     (1.5) (10.5)    (3.3)   (2.3)
  Other
   balance
   sheet
   changes      (3.7)   (0.3)    0.8        -   (1.1)    11.6     7.3
              ------- ------- ------- -------- ------ -------- -------
  Adjusted
   EBITDA     $142.8  $102.9  $152.7     $4.1   $2.0   $(34.4) $370.1
              ======= ======= ======= ======== ====== ======== =======

December 31, 2005
  Cash
   provided by
   operating
   activities $164.8   $80.8  $132.4    $22.3  $(4.6) $(141.6) $254.1
  Income
   tax
   benefit         -       -       -        -      -    (16.9)  (16.9)
  Interest,
   net             -       -       -        -      -     38.8    38.8
  Working
   capital
   increases
   (decreases)  (3.6)    4.9    (2.4)     1.2    5.5     10.8    16.4
  Other
   balance
   sheet
   changes     (14.3)   (6.6)   (0.1)       -    1.5     79.9    60.4
              ------- ------- ------- -------- ------ -------- -------
  Adjusted
   EBITDA     $146.9   $79.1  $129.9    $23.5   $2.4   $(29.0) $352.8
              ======= ======= ======= ======== ====== ======== =======

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


                                 - I -
                               RAYONIER
    RECONCILIATION OF STATUTORY INCOME TAX TO REPORTED INCOME TAX
                    DECEMBER 31, 2006 (unaudited)
              (millions of dollars, except percentages)

                                     Three Months Ended
                        --------------------------------------------
                           Dec. 31,       Sept. 30,      Dec. 31,
                            2006           2006           2005
                        -------------- -------------- --------------
                           $      %       $      %       $      %
                        ------- ------ ------- ------ ------- ------
 Income tax provision
  at the U.S. statutory
  rate                  $(19.7) (35.0) $(20.2) (35.0) $(22.8) (35.0)
 REIT income not
  subject to federal
  tax                     12.5   22.2    14.4   25.0    11.1   17.0
 Lost deduction on REIT
  interest expense and
  overhead expenses
  associated with REIT
  activities              (4.0)  (7.1)   (2.8)  (4.9)   (2.9)  (4.4)
 Discrete items
  included in pretax
  income                     -      -       -      -       -      -
 Foreign, state and
  local income taxes,
  foreign exchange rate
  changes and permanent
  differences             (0.5)  (0.8)    0.5    0.7     4.9    7.5
                        ------- ------ ------- ------ ------- ------
 Income tax (expense)
  benefit before
  discrete items        $(11.7) (20.7)  $(8.1) (14.2)  $(9.7) (14.9)
 Favorable IRS audit
  settlements                -      -     4.8    8.3       -      -
 Built-in gain
  adjustments              1.5    2.7     2.8    4.9       -      -
 Return to accrual
  adjustments                -      -    (1.2)  (2.1)   (0.2)  (0.3)
 Prior year foreign tax
  credit reserve             -      -    (1.0)  (1.7)      -      -
 Deferred tax
  adjustments              3.7    6.6       -      -     1.5    2.3
 U.S. tax
  (expense)/benefit on
  repatriation of
  foreign earnings           -      -       -      -    (0.4)  (0.6)
 Tax on favorable
  arbitration award          -      -       -      -       -      -
 Exchange rate changes
  on tax on
  undistributed foreign
  earnings                   -      -       -      -       -      -
 Non-realizability of
  New Zealand tax
  credits on U.S.
  withholding tax for
  prior years'
  intercompany note
  interest                   -      -       -      -       -      -
                        ------- ------ ------- ------ ------- ------
 Income tax (expense)
  benefit                $(6.5) (11.4)  $(2.7)  (4.8)  $(8.8) (13.5)
                        ======= ====== ======= ====== ======= ======
(a) Adjusted for change in pretax income due to discrete items.

                                - J -

                               RAYONIER
    RECONCILIATION OF STATUTORY INCOME TAX TO REPORTED INCOME TAX
                    DECEMBER 31, 2006 (unaudited)
              (millions of dollars, except percentages)

                                     -
                                                Year Ended
                                     ------------------------------
                                         Dec. 31,       Dec. 31,
                                          2006           2005
                                     --------------- --------------
                                         $      %       $      %
                                     -------- ------ ------- ------
 Income tax provision at the U.S.
  statutory rate                      $(66.5) (35.0) $(66.8) (35.0)
 REIT income not subject to federal
  tax                                   46.3   24.4    39.9   20.9
 Lost deduction on REIT interest
  expense and overhead expenses
  associated with REIT activities

                                       (12.7)  (6.7)  (11.6)  (6.1)
 Discrete items included in pretax
  income                                   -      -     4.9    1.6 (a)
 Foreign, state and local income
  taxes, foreign exchange rate
  changes and permanent differences
                                         1.8    1.0     8.4    4.4
                                     -------- ------ ------- ------
 Income tax (expense) benefit before
  discrete items                      $(31.1) (16.3) $(25.2) (14.2)
 Favorable IRS audit settlements
                                         5.3    2.8    19.8   11.0 (a)
 Built-in gain adjustments               4.3    2.2       -      -
 Return to accrual adjustments          (0.3)  (0.2)   (0.3)  (0.2)
 Prior year foreign tax credit
  reserve                               (1.0)  (0.5)      -      -
 Deferred tax adjustments                3.7    2.0     1.5    0.8
 U.S. tax (expense)/benefit on
  repatriation of foreign earnings         -      -    25.4   13.3
 Tax on favorable arbitration award
                                           -      -    (3.0)  (1.2)(a)
 Exchange rate changes on tax on
  undistributed foreign earnings
                                           -      -     1.6    0.8
 Non-realizability of New Zealand tax
  credits on U.S. withholding tax for
  prior years' intercompany note
  interest                                 -      -    (2.9)  (1.5)
                                     -------- ------ ------- ------
 Income tax (expense) benefit         $(19.1) (10.0)  $16.9    8.8
                                     ======== ====== ======= ======
(a) Adjusted for change in pretax income due to discrete items.

                                - J -

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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  • Computershare
  • 250 Royall Street
  • Canton, MA 02021
  • United States

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

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