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Rayonier Reports Second Quarter 2006 Results

July 25, 2006

JACKSONVILLE, Fla.--(BUSINESS WIRE)--July 25, 2006--Rayonier (NYSE:RYN) today reported second quarter income from continuing operations of $42.8 million, or 55 cents per share. This compares to $23.3 million, or 30 cents per share, in the first quarter and $41.6 million, or 54 cents per share, in second quarter 2005. Second quarter 2006 included a special item gain of $6.5 million, or 8 cents per share, on the sale of a portion of the company's investment in a New Zealand timberland consortium. There were no special items in the first quarter, while second quarter 2005 included a tax benefit of $7.2 million, or 10 cents per share, resulting from an IRS audit settlement.

Net income equaled income from continuing operations for both the second and first quarters of 2006. Net income for second quarter 2005 was $16.9 million, or 22 cents per share, which included a discontinued operation loss of $24.7 million, or 32 cents per share, almost entirely due to a write-down of the company's medium-density-fiberboard business.

Lee Nutter, Chairman, President and CEO, said: "Second quarter results reflect the strength and balance of our three core businesses as demand and prices remained strong, particularly for cellulose specialties and U.S. timber."

Second quarter results, excluding special items, were above the first quarter primarily due to increased volumes and prices for Northwest timber and cellulose specialties. Compared to second quarter 2005, earnings were up due to higher prices and Northwest timber volumes, partly offset by increased performance fibers manufacturing costs and lower lumber prices.

Sales for the second quarter of $312 million were $35 million and $22 million above first quarter 2006 and second quarter 2005, respectively.

Cash provided by operating activities of $133 million for the six months ended June 30 was $10 million above the 2005 comparable period primarily due to lower working capital requirements partly offset by reduced earnings. For the same period, Cash Available for Distribution (CAD) of $82 million was $14 million below 2005 principally due to capital spending for a major energy cost reduction project partly offset by increased cash provided by operating activities. (CAD is a non-GAAP measure defined and reconciled to GAAP in the attached exhibits.)

Debt of $557 million and the debt-to-capital ratio of 38.6 percent at quarter-end were comparable to year-end 2005. Cash at June 30 was $165 million.

Timber

Sales of $61 million and operating income of $30 million were $7 million and $6 million above first quarter, respectively, primarily due to higher Northwest volume and prices. Compared to second quarter 2005, both sales and operating income increased $7 million principally due to higher prices and Northwest volume.

Real Estate

Sales of $18 million and operating income of $11 million were $5 million and $1 million above first quarter, respectively, due to a significant increase in the number of rural acres sold. Compared to second quarter 2005, sales were up $3 million while operating income was essentially unchanged due to a higher proportion of rural versus development acres sold.

Performance Fibers

Sales of $166 million and operating income of $16 million were $20 million and $5 million above first quarter, respectively. The results reflect higher prices and volumes partly offset by increased costs. Compared to second quarter 2005, sales increased $13 million mainly due to higher cellulose specialties volume and prices. However, operating income decreased $3 million as higher raw material and energy costs more than offset increased sales.

The company recently announced that it has secured long term contracts into 2011 with its key customers for nearly 80 percent of its high-value cellulose specialties production, representing almost 2 million metric tons and more than $2 billion in revenue at current pricing.

Wood Products

Sales of $32 million were $1 million above first quarter while operating income of $2 million decreased $1 million. The improvement in sales was mostly due to higher volume partly offset by lower prices. Operating income declined principally due to lower prices partially offset by reduced manufacturing costs. Compared to second quarter 2005, sales and operating income were both down $4 million primarily due to lower prices.

Other Operations

Sales of $35 million were $3 million above first quarter while essentially break even operating income improved by $1 million due to stronger trading activity and coal royalties. Compared to second quarter 2005, sales and operating income improved $4 million and $1 million, respectively, mainly due to stronger trading activity.

Other Items

Corporate expenses of $7.1 million were $2.4 million below first quarter and $1.2 million below second quarter 2005, primarily due to lower stock-based incentive compensation.

Intersegment eliminations and other expense of $0.7 million was $1 million unfavorable to first quarter largely due to an increase in disposition reserves, but comparable to second quarter 2005.

Interest expense of $11.9 million was comparable to first quarter and $0.9 million below second quarter 2005 mainly due to lower debt.

Interest and other income of $1.8 million was comparable to first quarter, but $0.8 million above second quarter 2005 primarily due to higher interest income.

Excluding discrete items, the effective tax rate for the quarter was 14.0 percent compared to 16.4 percent in the first quarter largely due to foreign earnings taxed below the U.S. statutory rate. The second quarter 2005 rate was 14.1 percent. Through June 30, the effective tax rate, before discrete items, was 14.9 percent compared to 15.7 percent for the comparable period last year mainly due to U.S. taxes recorded on undistributed foreign earnings in 2005 (see Schedule J for details).

Outlook

The company said third quarter 2006 results are expected to be above the second quarter (excluding special items), due to higher real estate sales partly offset by seasonally lower Northwest timber volume. Also, earnings are anticipated to be above third quarter 2005 primarily due to increased real estate sales and higher cellulose specialties prices partly offset by lower lumber prices and higher performance fibers manufacturing costs.

Nutter said: "As we previously indicated, the second half of the year should be much stronger than the first due to increased real estate revenues - particularly from transactions involving our high-value development properties - and stronger performance fibers operating income. As a result, we still expect full-year earnings to be above 2005, excluding special items."

About Rayonier

Rayonier is a leading international forest products company with three core businesses: Timber, Real Estate and Performance Fibers. It owns, leases or manages 2.5 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.

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; fluctuations in demand for, or supply of, cellulose specialty products, absorbent materials, timber, wood products or real estate and entry of new competitors into these markets; adverse weather conditions affecting production, timber availability and sales, or distribution; changes in production costs for wood products or performance fibers, particularly for raw materials such as wood, energy and chemicals; unexpected delays in the entry into or closing of real estate sale transactions; changes in law or policy that might condition, limit or restrict the development of real estate; the ability of the company to identify and complete timberland and higher-value real estate acquisitions; the company's ability to continue to qualify as a REIT; the ability of the company to complete tax-efficient exchanges of real estate; and implementation or revision of governmental policies and regulations affecting the environment, endangered species, import and export controls or taxes, including changes in tax laws that could reduce the benefits associated with REIT status. For additional factors that could impact future results, please see the company's most recent Form 10-K on file with the Securities and Exchange Commission. Rayonier assumes no obligation to update these statements except as may be required by law.

A conference call will be held on Tuesday, July 25, at 2:00 p.m. EDT to discuss these results. Interested parties are invited to listen to the live webcast by logging onto http://www.rayonier.com and following the link. Supplemental materials will be available at the website. A replay will be available on the site shortly after the call where it will be archived for one month. Also, investors may access the "listen only" conference call by dialing 913-981-5584.

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


                               RAYONIER
                         FINANCIAL HIGHLIGHTS
                       JUNE 30, 2006 (unaudited)
          (millions of dollars, except per share information)

                          Three Months Ended        Six Months Ended
                    ------------------------------ -------------------
                     June 30,  March 31,  June 30,  June 30,  June 30,
                       2006      2006       2005      2006      2005
                    --------- ---------- --------- --------- ---------
Profitability
 Sales                $312.1     $277.2    $290.3    $589.3    $565.3
 Operating income     $ 51.0     $ 37.3    $ 48.9    $ 88.3    $ 96.2
 Income from
  continuing
  operations          $ 42.8     $ 23.3    $ 41.6    $ 66.1    $ 76.4
 Discontinued
  operations          $    -     $    -    $(24.7)   $    -    $(25.1)
 Net income           $ 42.8     $ 23.3    $ 16.9    $ 66.1    $ 51.3
 Income per diluted
  common share
   Continuing
    operations        $ 0.55     $ 0.30    $ 0.54    $ 0.85    $ 0.99
   Net income         $ 0.55     $ 0.30    $ 0.22    $ 0.85    $ 0.67
   Pro forma income
    from continuing
    operations (a)    $ 0.47     $ 0.30    $ 0.44    $ 0.77    $ 0.77
 Operating income
  as a percent of
  sales                 16.3%      13.5%     16.8%     15.0%     17.0%
 ROE (annualized) (b)   12.9%      10.0%     15.0%     12.9%     15.0%


                             Six Months Ended June 30,
                            --------------------------
                                 2006      2005
                                ------    ------
Capital Resources and Liquidity
 Continuing operations:
  Cash provided by operating
   activities                    $133.1    $122.9
  Cash used for investing
   activities                    $(47.7)   $(45.7)
  Cash used for financing
   activities                    $(66.3)   $(25.8)
 Adjusted EBITDA (c) (e)         $159.2    $174.4
 Cash Available for
  Distribution (CAD) (d) (e)     $ 81.7    $ 95.8
 (Repayment)/borrowing of
  debt, net                      $ (1.5)   $ 28.4
 Debt                            $556.5    $686.8
 Debt / capital                    38.6%     46.3%
 Cash                            $165.0    $136.3

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

                                 - A -


                               RAYONIER
                       FOOTNOTES FOR SCHEDULE A
                       JUNE 30, 2006 (unaudited)

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

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

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

(d) Cash Available for Distribution (CAD) is defined as cash provided
by operating activities of continuing operations less capital
spending, adjusted for equity based compensation amounts, proceeds
from matured energy forward contracts, the tax benefits associated
with certain strategic acquisitions and the change in committed cash.
CAD is a non-GAAP measure of cash generated during a period that is
available for dividend distribution, repurchase of the Company's
common shares, debt reduction and for strategic acquisitions net of
associated financing. See reconciliation on Schedule H.

(e) Management considers these measures to be important to estimate
the enterprise and shareholder values of the Company as a whole and of
its core segments, and for allocating capital resources. In addition,
analysts, investors and creditors use these measures when analyzing
the financial condition and cash generating ability of the Company.

                                 - B -


                               RAYONIER
              CONDENSED STATEMENTS OF CONSOLIDATED INCOME
                       JUNE 30, 2006 (unaudited)
          (millions of dollars, except per share information)

                     Three Months Ended             Six Months Ended
            ----------------------------------- ----------------------
              June 30,   March 31,    June 30,    June 30,    June 30,
               2006        2006        2005        2006         2005
            ----------- ----------- ----------- ----------- ----------

 Sales          $312.1      $277.2      $290.3      $589.3     $565.3
            ----------- ----------- ----------- ----------- ----------
Costs and
 expenses
 Cost of
  sales          247.4       224.2       227.0       471.6      444.4
 Selling and
  general
  expenses        14.4        16.2        15.3        30.6       29.8
 Other
  operating
  income,
  net             (0.7)       (0.5)       (0.9)       (1.2)      (5.1)
            ----------- ----------- ----------- ----------- ----------
Operating
 income           51.0        37.3        48.9        88.3       96.2
Gain on
 sale of
 portion
 of New
 Zealand
 JV                7.8           -           -         7.8          -
            ----------- ----------- ----------- ----------- ----------
Income from
 continuing
 operations,
 including
 gain on
 sale of
 portion
 of New
 Zealand
 joint
 venture          58.8        37.3        48.9        96.1       96.2
Interest
 expense         (11.9)      (12.2)      (12.8)      (24.1)     (25.1)
Interest
 and other
 income, net       1.8         2.2         1.0         4.0        1.5
            ----------- ----------- ----------- ----------- ----------
Income
 before
 taxes            48.7        27.3        37.1        76.0       72.6
Income tax
 (expense)/
 benefit          (5.9)       (4.0)        4.5        (9.9)       3.8
            ----------- ----------- ----------- ----------- ----------
Income from
 continuing
 operations     $ 42.8      $ 23.3      $ 41.6      $ 66.1     $ 76.4
Discontinued
 operations,
 net                 -           -       (24.7)          -      (25.1)
            ----------- ----------- ----------- ----------- ----------
Net income      $ 42.8      $ 23.3      $ 16.9      $ 66.1     $ 51.3
            =========== =========== =========== =========== ==========

Income per
 Common Share:
 Basic
  From
   continuing
   operations   $ 0.56      $ 0.31      $ 0.55      $ 0.87     $ 1.01
            =========== =========== =========== =========== ==========
  Net income    $ 0.56      $ 0.31      $ 0.22      $ 0.87     $ 0.68
            =========== =========== =========== =========== ==========
 Diluted
  From
   continuing
   operations   $ 0.55      $ 0.30      $ 0.54      $ 0.85     $ 0.99
            =========== =========== =========== =========== ==========
  Net income    $ 0.55      $ 0.30      $ 0.22      $ 0.85     $ 0.67
            =========== =========== =========== =========== ==========

 Pro forma
  income
  from
  continuing
  operations (a)
   Adjusted
    basic EPS   $ 0.48      $ 0.31      $ 0.45      $ 0.79     $ 0.79
            =========== =========== =========== =========== ==========
  Adjusted
   diluted
   EPS          $ 0.47      $ 0.30      $ 0.44      $ 0.77     $ 0.77
            =========== =========== =========== =========== ==========

Weighted
 average
 Common Shares
 used for
 determining
  Basic EPS 76,465,269  76,289,274  75,326,922  76,377,976  75,253,811
           =========== =========== =========== =========== ===========
  Diluted
   EPS      77,969,132  78,006,773  77,412,110  77,989,798  77,278,596
           =========== =========== =========== =========== ===========

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

                                 - C -


                               RAYONIER
          BUSINESS SEGMENT SALES AND OPERATING INCOME (LOSS)
                       JUNE 30, 2006 (unaudited)
                         (millions of dollars)


                        Three Months Ended         Six Months Ended
                  ------------------------------  ------------------
                   June 30,  March 31,  June 30,  June 30,  June 30,
                     2006      2006       2005      2006      2005
                  --------- ---------- ---------  -------- ---------
Sales
 Timber             $ 61.1     $ 54.4    $ 54.5    $115.5    $106.4

 Real Estate          17.8       13.1      14.7      30.9      38.3

 Performance Fibers
  Cellulose
   specialties       126.4      106.7     108.0     233.1     209.1
  Absorbent
   materials          39.4       39.3      45.2      78.7      87.1
                  --------- ---------- --------- --------- ---------
    Total
     Performance
     Fibers          165.8      146.0     153.2     311.8     296.2
                  --------- ---------- --------- --------- ---------

 Wood Products        32.2       31.6      36.4      63.8      66.9

 Other Operations     35.3       32.1      31.5      67.4      57.8

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

    Total sales     $312.1     $277.2    $290.3    $589.3    $565.3
                  ========= ========== ========= ========= =========

Operating
 income/(loss)
 Timber             $ 29.8     $ 23.8    $ 23.1    $ 53.6    $ 46.8

 Real Estate          10.9       10.2      10.7      21.1      26.0

 Performance Fibers   15.7       10.3      18.5      26.0      30.9

 Wood Products         2.0        2.6       5.8       4.6       9.0

 Other Operations      0.4       (0.4)     (0.4)        -      (0.2)

 Corporate            (7.1)      (9.5)     (8.3)    (16.6)    (15.9)

 Intersegment
  eliminations and
  other (Including
  Corporate FX)       (0.7)       0.3      (0.5)     (0.4)     (0.4)
                  --------- ---------- --------- --------- ---------

    Total
     operating
     income         $ 51.0     $ 37.3    $ 48.9    $ 88.3    $ 96.2
                  ========= ========== ========= ========= =========

                                 - D -


                               RAYONIER
  CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CASH FLOWS
                       JUNE 30, 2006 (unaudited)
                         (millions of dollars)

 CONDENSED CONSOLIDATED BALANCE SHEETS
                                                June 30,  December 31,
                                                  2006        2005
                                               ---------  ------------
 Assets
 Current assets                                $  403.3     $  354.1
 Timber, timberlands and logging roads,
  net of depletion and amortization               917.3        927.0
 Property, plant and equipment                  1,387.5      1,352.4
 Less - accumulated depreciation               (1,018.7)      (991.1)
                                               ---------   ----------
                                                  368.8        361.3
                                               ---------   ----------
 Investment in New Zealand JV                      55.9         81.7
 Other assets                                     114.3        115.0
                                               ---------   ----------
                                               $1,859.6     $1,839.1
                                               =========   ==========
 Liabilities and Shareholders' Equity
 Current liabilities                           $  192.1     $  170.1
 Deferred income taxes                             34.8         32.2
 Long-term debt                                   554.7        555.2
 Non-current reserves for dispositions and
  discontinued operations                         124.0        128.0
 Other non-current liabilities                     69.0         68.7
 Shareholders' equity                             885.0        884.9
                                               ---------   ----------
                                               $1,859.6     $1,839.1
                                               =========   ==========

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  Six Months Ended
                                               ----------------------
                                                June 30,   June 30,
                                                  2006       2005
                                               --------- ------------
Cash provided by operating activities of
  continuing operations:
 Income from continuing operations             $   66.1     $   76.4
 Depreciation, depletion, amortization and
  non-cash cost basis of real estate sold          71.1         78.0
 Other non-cash items included in income           (4.0)       (12.6)
 Changes in working capital and other assets
  and liabilities                                  (0.1)       (18.9)
                                               ---------   ----------
                                                  133.1        122.9
                                               ---------   ----------
Cash used for investing activities of
  continuing operations:
 Capital expenditures, net of sales and
  retirements                                     (61.6)       (43.7)
 Purchase of timberlands                           (4.3)           -
 Proceeds from sale of portion of New Zealand JV   21.7            -
 Increase in restricted cash                       (4.2)        (2.0)
 Proceeds from matured energy forward contracts     0.7            -
                                               ---------   ----------
                                                  (47.7)       (45.7)
                                               ---------   ----------
Cash used for financing activities:
 (Repayment)/borrowing of debt, net                (1.5)        28.4
 Dividends paid                                   (71.8)       (62.2)
 Issuance of common shares                          5.3          8.0
 Repurchase of common shares                       (0.5)           -
 Excess tax benefits from equity-based
  compensation(1)                                   2.2            -
                                               ---------   ----------
                                                  (66.3)       (25.8)
                                               ---------   ----------
Effect of exchange rate changes on cash            (0.3)         0.1
                                               ---------   ----------
Cash provided by discontinued operations              -          0.7
                                               ---------   ----------
Cash and cash equivalents:
 Increase in cash and cash equivalents             18.8         52.2
 Balance, beginning of year                       146.2         84.1
                                               ---------   ----------
 Balance, end of period                        $  165.0     $  136.3
                                               =========   ==========

(1) SFAS No. 123R requires the excess tax benefits on equity-based
compensation to be included as a financing activity. Since the Company
did not adopt SFAS No. 123R until January 1, 2006, no adjustment is
required for the six months ended June 30, 2005.

                                 - E -


                               RAYONIER
                 SELECTED SUPPLEMENTAL FINANCIAL DATA
                       JUNE 30, 2006 (unaudited)
                         (millions of dollars)

                                 Three Months Ended   Six Months Ended
                               ---------------------- ----------------
                                 June    March   June    June    June
                                  30,      31,    30,     30,     30,
                                 2006     2006   2005    2006    2005
                                -------- ------ ------ ------- -------
Geographical Data (Non-U.S.)
  Sales
   New Zealand                    $ 8.2  $ 5.5  $14.1   $13.7   $23.0
   Other                            3.7    4.5    2.8     8.2     5.5
                                -------- ------ ------ ------- -------
    Total                         $11.9  $10.0  $16.9   $21.9   $28.5
                                ======== ====== ====== ======= =======

  Operating income  (loss)
   New Zealand                    $(0.3) $(1.1)  $1.0   $(1.4)   $1.5
   Other                           (0.5)  (0.4)  (0.4)   (0.9)   (0.6)
                                -------- ------ ------ ------- -------
    Total                         $(0.8) $(1.5)  $0.6   $(2.3)   $0.9
                                ======== ====== ====== ======= =======

Timber
  Sales
   Northwest U.S.                 $35.2  $27.1  $26.0   $62.3   $52.3
   Southeast U.S.                  23.5   25.0   21.6    48.5    42.5
   New Zealand                      2.4    2.3    6.9     4.7    11.6
                                -------- ------ ------ ------- -------
    Total                         $61.1  $54.4  $54.5  $115.5  $106.4
                                ======== ====== ====== ======= =======

  Operating income
   Northwest U.S.                 $21.4  $16.0  $16.0   $37.4   $32.4
   Southeast U.S.                   8.8    8.9    5.8    17.7    12.2
   New Zealand                     (0.4)  (1.1)   1.3    (1.5)    2.2
                                -------- ------ ------ ------- -------
    Total                         $29.8  $23.8  $23.1   $53.6   $46.8
                                ======== ====== ====== ======= =======

Adjusted EBITDA by Segment(1)
  Timber                          $43.3  $38.8  $38.4   $82.1   $76.7
  Real Estate                      15.5   11.5   12.6    27.0    35.1
  Performance Fibers               33.1   25.4   37.3    58.5    65.7
  Wood Products                     3.8    4.3    7.6     8.1    12.6
  Other Operations                  0.5   (0.2)   0.1     0.3     0.4
  Corporate and other              (7.9)  (8.9)  (8.8)  (16.8)  (16.1)
                                -------- ------ ------ ------- -------
    Total                         $88.3  $70.9  $87.2  $159.2  $174.4
                                ======== ====== ====== ======= =======

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

                                 - F -

                               RAYONIER
                    SELECTED OPERATING INFORMATION
                       JUNE 30, 2006 (unaudited)

                         Three Months Ended          Six Months Ended
                    ------------------------------ -------------------
                     June 30,  March 31,  June 30,  June 30,  June 30,
                       2006      2006      2005       2006      2005
                    --------- ---------- --------- --------- ---------
Timber

 Northwest U.S.,
  in millions of
  board feet              89         75        69       164       145
 Southeast U.S.,
  in thousands of
  short green tons     1,204      1,247     1,206     2,451     2,427

Real Estate
 Acres sold
  Development              7        744     1,006       751     2,526
  Rural                9,613      2,660     5,031    12,273    14,179
  Northwest U.S.           4          -       149         4       229
                    --------- ---------- --------- --------- ---------
  Total                9,624      3,404     6,186    13,028    16,934

Performance Fibers
 Sales Volume
  Cellulose
   specialties,
   in thousands of
   metric tons           121        104       113       225       220
  Absorbent
   materials,
   in thousands of
   metric tons            63         65        69       128       136
 Production as a
  percent of
  capacity              99.2%      98.9%    100.1%     99.0%     99.8%

Lumber
 Sales volume,
  in millions of
  board feet              92         84        90       176       173


                                 - G -


                               RAYONIER
                  RECONCILIATION OF NON-GAAP MEASURES
                       JUNE 30, 2006 (unaudited)
          (millions of dollars, except per share information)


CASH AVAILABLE FOR DISTRIBUTION:
                                                   Six Months Ended
                                                ----------------------
                                                 June 30,    June 30,
                                                   2006        2005
                                                 ---------   ---------

  Cash provided by operating activities         $   133.1   $   122.9
  Capital spending (a)                              (61.6)      (43.7)
  Like-kind exchange tax benefits on
   third party real estate sales (b)                 (2.6)       (0.9)
  Decrease in committed cash                          7.9         5.5
  Equity based compensation adjustments               4.2           -
  Release of restricted cash (c)                        -        12.0
  Proceeds from matured forward energy contracts      0.7           -
                                                 ---------   ---------
  Cash Available for Distribution               $    81.7   $    95.8
                                                 =========   =========

(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.

(c) Released on July 19, 2005.


PRO FORMA INCOME:

                          Three Months Ended         Six Months Ended
                    ------------------------------ -------------------
                     June 30,  March 31,  June 30,  June 30,  June 30,
                       2006      2006      2005       2006      2005
                    --------- ---------- --------- --------- ---------
Income from
 Continuing
 Operations per
 Common Share
   Basic EPS           $0.56      $0.31     $0.55     $0.87     $1.01
                    ========= ========== ========= ========= =========
   Diluted EPS         $0.55      $0.30     $0.54     $0.85     $0.99
                    ========= ========== ========= ========= =========

   Sale of portion
    of New Zealand JV
   Basic EPS           (0.08)         -         -     (0.08)        -
                    ========= ========== ========= ========= =========
   Diluted EPS         (0.08)         -         -     (0.08)        -
                    ========= ========== ========= ========= =========

   IRS audit
    settlements
   Basic EPS               -          -     (0.10)        -     (0.22)
                    ========= ========== ========= ========= =========
   Diluted EPS             -          -     (0.10)        -     (0.22)
                    ========= ========== ========= ========= =========

Pro forma income
 from Continuing
 Operations per
 Common Share
   Adjusted basic
    EPS                $0.48      $0.31     $0.45     $0.79     $0.79
                    ========= ========== ========= ========= =========
   Adjusted diluted
    EPS                $0.47      $0.30     $0.44     $0.77     $0.77
                    ========= ========== ========= ========= =========

                                 - H -


                               RAYONIER
                 RECONCILIATION OF NON-GAAP MEASURES *
                       JUNE 30, 2006 (unaudited)
                         (millions of dollars)

 ADJUSTED EBITDA:


                                  Perf-          Other  Corporate
                           Real  ormance  Wood   Opera-   and
                  Timber  Estate Fibers Products tions   other   Total
                  ------  ------ ------ -------- -----  -------  -----
Three Months Ended
June 30, 2006
Cash provided by
 operating
 activities        $ 53.1  $18.7  $14.8  $ 6.3  $ 7.1  $(17.7) $ 82.3
Income tax expense      -      -      -      -      -     5.9     5.9
Interest, net           -      -      -      -      -     9.9     9.9
Working capital
 increases
 (decreases)         (6.8)  (3.1)  18.2   (2.5)  (6.4)  (0.9)** (1.5)**
Other balance sheet
 changes             (3.0)  (0.1)   0.1      -   (0.2)  (5.1)** (8.3)**
                    ------  -----  -----  -----  -----  ------  ------
Adjusted EBITDA    $ 43.3  $15.5  $33.1  $ 3.8  $ 0.5  $ (7.9) $ 88.3
                    ======  =====  =====  =====  =====  ======  ======

March 31, 2006
Cash provided by
 operating
 activities        $ 43.8  $ 7.5  $29.6  $ 0.7  $ 0.5  $(31.3) $ 50.8
Income tax expense      -      -      -      -      -     4.0     4.0
Interest, net           -      -      -      -      -    10.0    10.0
Working capital
 increases
 (decreases)          4.5    4.0   (4.2)   3.6   (0.9)    3.5    10.5
Other balance sheet
 changes             (9.5)     -      -      -    0.2     4.9    (4.4)
                    ------  -----  -----  -----  -----  ------  ------
Adjusted EBITDA    $ 38.8  $11.5  $25.4  $ 4.3  $(0.2) $ (8.9) $ 70.9
                    ======  =====  =====  =====  =====  ======  ======

June 30, 2005
Cash provided by
 operating
 activities        $ 37.4  $(0.4) $29.0  $ 6.9  $ 2.5  $(28.0) $ 47.4
Income tax benefit      -      -      -      -      -    (4.5)   (4.5)
Interest, net           -      -      -      -      -    11.6    11.6
Working capital
 increases
 (decreases)         (1.4)  10.9    8.3    0.7   (2.0)    3.6    20.1
Other balance sheet
 changes              2.4    2.1      -      -   (0.4)    8.5    12.6
                    ------  -----  -----  -----  -----  ------  ------
Adjusted EBITDA    $ 38.4  $12.6  $37.3  $ 7.6  $ 0.1  $ (8.8) $ 87.2
                    ======  =====  =====  =====  =====  ======  ======

Six Months Ended
June 30, 2006
Cash provided by
 operating
 activities        $ 96.9  $26.2  $44.4  $ 7.0  $ 7.6  $(49.0) $133.1
Income tax expense      -      -      -      -      -     9.9     9.9
Interest, net           -      -      -      -      -    19.9    19.9
Working capital
 increases
 (decreases)         (2.3)   0.9   14.0    1.1   (7.3)  2.6**    9.0**
Other balance sheet
 changes            (12.5)  (0.1)   0.1      -      -  (0.2)**  (12.7)**
                    ------  -----  -----  -----  -----  ------  ------
Adjusted EBITDA    $ 82.1  $27.0  $58.5  $ 8.1  $ 0.3  $(16.8) $159.2
                    ======  =====  =====  =====  =====  ======  ======

June 30, 2005
Cash provided by
 operating
 activities        $ 83.1  $26.1  $54.7  $ 8.5  $(1.2) $(48.3) $122.9
Income tax benefit      -      -      -      -      -    (3.8)   (3.8)
Interest, net           -      -      -      -      -    23.3    23.3
Working capital
 increases
 (decreases)         (6.2)   7.2   11.0    4.1    0.1     3.9    20.1
Other balance sheet
 changes             (0.2)   1.8      -      -    1.5     8.8    11.9
                    ------  -----  -----  -----  -----  ------  ------
Adjusted EBITDA    $ 76.7  $35.1  $65.7  $12.6  $ 0.4  $(16.1) $174.4
                    ======  =====  =====  =====  =====  ======  ======

* Unusual, non-trade intercompany items between the segments
have been eliminated.
** Revised subsequent to earnings release on July 25, 2006 at 8:00 a.m. 

- I -

                               RAYONIER
     RECONCILIATION OF STATUTORY INCOME TAX TO REPORTED INCOME TAX
                       JUNE 30, 2006 (unaudited)
               (millions of dollars, except percentages)

                                        Three Months Ended
                           -------------------------------------------
                              June 30,       March 31,      June 30,
                                2006           2006           2005
                            -------------  ------------  -------------
                              $      %       $      %       $      %
                            ------ ------  ----- ------  ------ ------

 Income tax provision at
  the U.S. statutory rate  $(17.0) (35.0) $(9.6) (35.0) $(13.0) (35.0)

 REIT income not subject
  to federal tax             11.4   23.4    8.0   29.3     9.9   26.7

 Lost deduction on REIT
  interest expense and
  overhead expenses
  associated with REIT
  activities                 (2.7)  (5.6)  (3.2) (11.7)   (2.6)  (7.0)

 Foreign, state and local
  income taxes, foreign
  exchange rate changes and
  permanent differences       1.5    3.2    0.3    1.0     0.5    1.2
                            ------ ------  ----- ------  ------ ------

 Income tax (expense)
  benefit before discrete
  items                    $ (6.8) (14.0) $(4.5) (16.4) $ (5.2) (14.1)

 Return to accrual
  adjustments                 0.9    1.9      -      -       -      -

 Favorable IRS audit
  settlements                   -      -    0.5    1.8     7.2   19.4

 Exchange rate changes on
  tax on undistributed
  foreign earnings              -      -      -      -     2.5    6.7

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

 Income tax (expense)
  benefit                  $ (5.9) (12.1) $(4.0) (14.6) $  4.5   12.0
                            ====== ======  ===== ======  ====== ======



                                                Six Months Ended
                                         -----------------------------
                                            June 30,       June 30,
                                              2006           2005
                                          -------------  -------------
                                            $      %       $      %
                                          ------ ------  ------ ------

 Income tax provision at the
  U.S. statutory rate                    $(26.6) (35.0) $(25.4) (35.0)

 REIT income not subject to
  federal tax                              19.4   25.5    18.3   25.2

 Lost deduction on REIT
  interest expense and
  overhead expenses
  associated with REIT
  activities                               (5.9)  (7.8)   (5.3)  (7.3)

 Foreign, state and local income
  taxes, foreign exchange rate
  changes and permanent
  differences                               1.8    2.4     1.0    1.4
                                          ------ ------  ------ ------

 Income tax (expense) benefit
  before discrete items                  $(11.3) (14.9) $(11.4) (15.7)

 Return to accrual adjustments              0.9    1.2       -      -

 Favorable IRS audit
  settlements                               0.5    0.7    16.7   23.1

 Exchange rate changes on
  tax on undistributed foreign
  earnings                                    -      -     1.4    1.9

 Non-realizability of New
  Zealand tax credits on U.S.
  withholding tax for prior years'
  intercompany note interest                  -      -    (2.9)  (4.0)
                                          ------ ------  ------ ------

 Income tax (expense) benefit            $ (9.9) (13.0) $  3.8    5.3
                                          ====== ======  ====== ======

                                 - 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

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