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Rayonier Reports Solid 2008 Results

January 27, 2009

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JACKSONVILLE, Fla.--(BUSINESS WIRE)--Jan. 27, 2009--Rayonier (NYSE:RYN) today reported fourth quarter income from continuing operations of $42 million, or 53 cents per share, compared to $35 million, or 44 cents per share, in the prior year period. Full year 2008 income from continuing operations was $160 million, or $2.01 per share, compared to $173 million, or $2.19 per share, in 2007. Full year 2008 results include $2 million of fuel oil mark-to-market losses and $6 million of additional depletion related to our second quarter timberland acquisition. The 2007 results include a special item charge for timber damaged by forest fires of $1 million, or 1 cent per share, during the fourth quarter and $11 million, or 14 cents per share, for the full year.

For the full year, cash provided by operating activities was $340 million compared to $324 million in 2007. Cash available for distribution1 was $210 million compared to $236 million in 2007. (See Schedule I for further details.) In 2008, cash dividends on common stock totaled $157 million, or $2.00 per share.

Lee M. Thomas, Chairman, President and CEO said, "We performed well in 2008 despite the challenging economic conditions facing our timber and real estate segments due to weakness in the housing market. Our Performance Fibers business delivered solid results in meeting strong market demand. We also executed our strategy to upgrade our timberland portfolio by acquiring 110,000 acres in Washington and New York while selling approximately 50,000 acres of non-strategic timberlands at favorable prices."

Fourth quarter net income was $44 million, or 55 cents per share compared to $34 million, or 44 cents per share, in 2007. Full year net income was $152 million, or $1.91 per share compared to $174 million, or $2.21 per share, in 2007. Full year net income includes a loss from discontinued operations of $8 million, or 10 cents per share, compared to a $1 million gain, or 2 cents per share, in 2007. The 2008 loss from discontinued operations includes a one-time tax charge of $10 million, or 13 cents per share, related to the planned sale of our New Zealand holdings.

Timber

Fourth quarter 2008 sales of $52 million increased $6 million from the prior year period, while operating income of $10 million decreased $1 million. Full year 2008 sales and operating income of $190 million and $31 million declined $19 million and $37 million, respectively from 2007. For comparative purposes, the 2007 fourth quarter and full year results exclude the loss for timber damaged by forest fires discussed above.

In the Western region, sales and operating income were down for the quarter and year primarily due to lower prices resulting from the weak housing market and an oversupply of salvaged timber from a December 2007 storm. Additionally, compared to prior year periods, operating income included $3 million and $6 million for the quarter and year, respectively, of higher depletion expense resulting from a second quarter timberland acquisition.

In the Eastern region, sales and operating income were higher for the quarter and year compared to prior year periods. The results in both 2008 periods reflect higher volumes and a sales mix shift from sawtimber to lower-margin pulpwood in response to the weak housing market and strong pulpwood demand. Additionally, operating income for the quarter and year benefited from an increase in recreational license income.

Real Estate

For the quarter, sales of $48 million and operating income of $30 million were $38 million and $24 million above 2007, respectively, primarily due to 28,000 acres of non-strategic timberland sales slightly offset by lower average prices for rural properties.

Full year sales of $127 million were $11 million above prior year while operating income of $80 million declined $13 million reflecting a mix shift from development and rural properties to non-strategic timberlands.

Performance Fibers

For the quarter, sales of $225 million increased $26 million, while operating income of $32 million decreased $8 million from the prior year period. Significantly higher input and transportation costs more than offset the benefits of increased prices, a cost-based surcharge and lower depreciation expense. The quarter was also negatively impacted by $4 million of mark-to-market losses on fuel oil hedges.

Full year sales and operating income of $798 million and $149 million increased $75 million and $8 million from the prior year, respectively. Higher prices, improved cellulose specialty volumes and lower depreciation expense more than offset increased input and transportation costs and mark-to-market losses on fuel oil hedges.

Other Items

For the quarter and year, corporate expenses were down $2 million and $6 million from prior year periods, respectively, due to lower incentive compensation expense and cost reduction measures.

Interest expense, for the quarter and year, declined $2 million and $11 million from prior year periods, respectively. The quarter benefited from reduced rates and lower average debt balances. For the year, lower interest rates more than offset higher average debt balances from the strategic timberland acquisitions. In addition, full year interest expense benefited from a favorable IRS settlement.

Fourth quarter effective tax rates from continuing operations before discrete items were 12.9 percent and 7.9 percent in 2008 and 2007, respectively. Full year comparable rates were 15.2 percent and 13.3 percent in 2008 and 2007, respectively. The increased rates in 2008 were due to proportionately higher earnings from the Company's taxable REIT subsidiary.

Including discrete items, the effective tax rates from continuing operations for the quarter and year were 13.6 percent and 11.3 percent compared to a benefit of 3.9 percent and expense of 11.8 percent in 2007, respectively. (See Schedule K for further details.)

Outlook

"Despite uncertain economic times, we expect our diverse mix of businesses to generate strong cash flows well in excess of our $2.00 per share dividend. With conservative debt levels, manageable debt maturities and a solid balance sheet, we should have significant operating flexibility," said Thomas.

"Due to the weak economy, we anticipate 2009 results will be below 2008 across our three major business units," said Thomas. "We expect that the weakened housing market will negatively impact our timber and real estate businesses, but anticipate continued interest in our non-strategic timberlands. In Performance Fibers, earnings are expected to be solid although below 2008 as strong demand for our cellulose specialties products is more than offset by higher costs and weakening fluff prices."

Further Information

A conference call will be held on Tuesday, January 27, 2009 at 2:00 p.m. EST to discuss these results. Interested parties are invited to listen to the live webcast by logging on to www.rayonier.com and following the link. Investors may also choose to access the conference call by dialing (888) 790-3052, password: Rayonier. Supplemental materials are available at the website. A replay will be available on the site shortly after the call.

For further information, visit the company's website 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.

1 Cash available for distribution (CAD) is a non-GAAP measure defined and reconciled to GAAP in the attached exhibits.

Rayonier is a leading international forest products company with three core businesses: Timber, Real Estate and Performance Fibers. The company owns, leases or manages 2.6 million acres of timber and land in the United States and New Zealand. 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 one of the world's leading producers of high-value specialty cellulose fibers. Approximately 40 percent of the company's sales are outside the U.S. to customers in approximately 40 countries. Rayonier is structured as a real estate investment trust. More information is available at www.rayonier.com.

Certain statements in this document regarding anticipated financial outcomes including earnings guidance, if any, business and market conditions, outlook and other similar statements relating to Rayonier's future financial and operational performance, 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 are identified by the use of words such as "may," "will," "should," "expect," "estimate," "believe," "anticipate" and other similar language. Forward-looking statements are not guarantees of future performance and undue reliance should not be placed on these statements.

The following important factors, among others, could cause actual results to differ materially from those expressed in forward-looking statements that may have been made in this document: the effect of the current financial crisis, which is impacting many areas of our economy, including the availability and cost of credit, pricing of raw materials and energy and demand for our products and real estate; the cyclical and competitive nature of the industries in which we operate; fluctuations in demand for, or supply of, our forest products and real estate offerings; entry of new competitors into our markets; changes in global economic conditions and world events, including political changes in particular regions or countries; changes in energy and raw material prices, particularly for our performance fibers and wood products businesses; impacts of the rising cost of fuel, including the cost and availability of transportation for our products, both domestically and internationally, and the cost and availability of third party logging and trucking services; unanticipated equipment maintenance and repair requirements at our manufacturing facilities; the geographic concentration of a significant portion of our timberland; our ability to identify, finance and complete timberland acquisitions; changes in environmental laws and regulations, including laws regarding air emissions and water discharges, remediation of contaminated sites, timber harvesting, delineation of wetlands, and endangered species, that may restrict or adversely impact our ability to conduct our business, or increase the cost of doing so; adverse weather conditions, natural disasters and other catastrophic events such as hurricanes, wind storms and wildfires, which can adversely affect our timberlands and the production, distribution and availability of our products and raw materials such as wood, energy and chemicals; interest rate and currency movements; our capacity to incur additional debt, and any decision we may make to do so; changes in tariffs, taxes or treaties relating to the import and export of our products or those of our competitors; the ability to complete like-kind-exchanges of property; changes in key management and personnel; our ability to continue to qualify as a REIT and to fund distributions using cash generated through our taxable REIT subsidiaries; and changes in tax laws that could reduce the benefits associated with REIT status.

In addition, specifically with respect to our Real Estate business, the following important factors, among others, could cause actual results to differ materially from those expressed in forward-looking statements that may have been made in this document: the cyclical nature of the real estate business generally, including fluctuations in demand for both entitled and unentitled property; the lengthy, uncertain and costly process associated with the ownership, entitlement and development of real estate, especially in Florida, which also may be affected by changes in law, policy and political factors beyond our control; the potential for legal challenges to entitlements and permits in connection with our properties; unexpected delays in the entry into or closing of real estate transactions; the existence of competing developers and communities in the markets in which we own property; the pace of development and the rate and timing of absorption of existing entitled property in the markets in which we own property; changes in the demographics affecting projected population growth and migration to the Southeastern U.S.; changes in environmental laws and regulations, including laws regarding water withdrawal and management and delineation of wetlands, that may restrict or adversely impact our ability to sell or develop properties; the cost of the development of property generally, including the cost of property taxes, labor and construction materials; the timing of construction and availability of public infrastructure; and the availability of financing for real estate development and mortgage loans.

Additional factors are described in 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 is required by law.


RAYONIER

FINANCIAL HIGHLIGHTS

DECEMBER 31, 2008 (unaudited)

(millions of dollars, except per share information)

               Three Months Ended                   Year Ended

               December   September   December 31,  December 31,  December 31,
               31,        30,

               2008       2008        2007          2008          2007

Profitability

 Sales         $ 353.9    $ 308.1     $ 281.5       $ 1,232.1     $ 1,171.5

 Operating     $ 60.8     $ 49.0      $ 43.6        $ 223.1       $ 245.3
 income

 Pro forma
 operating     $ 60.8     $ 49.0      $ 44.4        $ 223.1       $ 256.2
 income (a)

 Income from
 continuing    $ 42.1     $ 39.7      $ 34.9        $ 159.6       $ 173.2
 operations

 Income/
 (loss) from   $ 2.2      $ (9.9   )  $ (0.5   )    $ (7.6    )   $ 1.1
 discontinued
 operations

 Net income    $ 44.3     $ 29.8      $ 34.4        $ 152.0       $ 174.3

 Income per
 diluted
 common share

 Continuing    $ 0.53     $ 0.50      $ 0.44        $ 2.01        $ 2.19
 operations

 Pro forma
 income from
 continuing    $ 0.53     $ 0.50      $ 0.45        $ 2.01        $ 2.33
 operations
 (a)

 Net income    $ 0.55     $ 0.37      $ 0.44        $ 1.91        $ 2.21

 Pro forma
 operating
 income as a     17.2  %    15.9   %    15.8   %      18.1    %     21.9    %
 percent of
 sales (a)

 Adjusted ROE    N/M        N/M         N/M           16.8    %     19.4    %
 (a)

 Average
 diluted         79.4       79.6        79.3          79.4          78.9
 shares
 (millions)

                          Year Ended December 31,

                          2008        2007

Capital
Resources and
Liquidity

 Cash
 provided by              $ 340.2     $ 324.0
 operating
 activities

 Cash used
 for                      $ (330.4 )  $ (126.0 )
 investing
 activities

 Cash used
 for                      $ (128.3 )  $ (57.8  )
 financing
 activities

 Adjusted
 EBITDA (b)               $ 405.5     $ 418.5
 (d)

 Cash
 Available
 for                      $ 210.4     $ 235.5
 Distribution
 (CAD) (c)
 (d)

 Dividends                $ 2.00      $ 1.94
 per share

                          12/31/08    12/31/07

 Debt                     $ 771.0     $ 749.8

 Debt /                     45.5   %    43.3   %
 capital

 Cash                     $ 61.7      $ 181.1

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

- A -




RAYONIER

FOOTNOTES FOR SCHEDULE A

DECEMBER 31, 2008 (unaudited)

(a)
     Pro forma operating income, pro forma income from continuing operations and
     adjusted ROE are non-GAAP measures. See Schedule I for reconciliation to
     the nearest GAAP measure.


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


(c)
     Cash Available for Distribution (CAD) is defined as cash provided by
     operating activities less capital spending, adjusted for the tax benefits
     associated with certain strategic acquisitions, the change in committed
     cash, less cash provided by discontinued operations and other items which
     include the proceeds from matured energy forward contracts and the change
     in capital expenditures purchased on account. 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 I.


(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, 2008 (unaudited)

(millions of dollars, except per share information)

                   Three Months Ended                              Year Ended

                   December 31,    September 30,   December 31,    December 31,    December 31,

                   2008            2008            2007            2008            2007

Sales              $ 353.9         $ 308.1         $ 281.5         $ 1,232.1       $ 1,171.5

Costs and
expenses

Cost of sales (a)    280.6           243.6           224.0           953.9           870.1

Selling and          16.6            16.1            18.0            64.3            66.6
general expenses

Other operating      (4.1       )    (0.6       )    (4.1       )    (9.2       )    (10.5      )
income, net

Operating income     60.8            49.0            43.6            223.1           245.3
(a)

Interest expense     (11.9      )    (10.5      )    (14.1      )    (45.3      )    (56.3      )

Interest and
other                (0.2       )    0.3             4.1             2.1             7.3
(expense)/income,
net

Income before        48.7            38.8            33.6            179.9           196.3
taxes

Income tax           (6.6       )    0.9             1.3             (20.3      )    (23.1      )
(expense)/benefit

Income from
continuing           42.1            39.7            34.9            159.6           173.2
operations

Income/(loss)
from discontinued    2.2             (9.9       )    (0.5       )    (7.6       )    1.1
operations, net

Net income         $ 44.3          $ 29.8          $ 34.4          $ 152.0         $ 174.3

Income per Common
Share:

    Basic

    Continuing     $ 0.53          $ 0.51          $ 0.45          $ 2.03          $ 2.23
    operations

    Net income     $ 0.56          $ 0.38          $ 0.44          $ 1.94          $ 2.25

    Diluted

    Continuing     $ 0.53          $ 0.50          $ 0.44          $ 2.01          $ 2.19
    operations

    Net income     $ 0.55          $ 0.37          $ 0.44          $ 1.91          $ 2.21

    Pro forma
    income from
    continuing     $ 0.53          $ 0.50          $ 0.45          $ 2.01          $ 2.33
    operations
    (b)

Weighted average
Common

Shares used for
determining

    Basic EPS        78,690,532      78,580,895      77,969,013      78,476,635      77,571,684

    Diluted EPS      79,406,271      79,571,363      79,264,982      79,429,233      78,920,284

(a)
    Cost of sales and operating income for the three months and year ended December 31, 2007
    included a $0.8 million and $10.9 million charge, respectively, for timber destroyed by
    forest fires. Cost of sales and operating income for the three months and year ended December
    31, 2007, excluding the fire losses were $223.2 million and $44.4 million and $859.2 million
    and $256.2 million, respectively.


(b) Non-GAAP measure, see Schedule I for a reconciliation to the nearest GAAP measure.

- C -




RAYONIER

BUSINESS SEGMENT SALES, OPERATING INCOME (LOSS), AND ADJUSTED EBITDA

DECEMBER 31, 2008 (unaudited)

(millions of dollars)

                 Three Months Ended                  Year Ended

                 December   September  December 31,  December 31,  December 31,
                 31,        30,

                 2008       2008       2007          2008          2007

Sales

Timber           $ 51.8     $ 40.5     $ 45.7        $ 189.7       $ 208.8

Real Estate        48.0       26.0       10.2          126.8         116.3

Performance
Fibers

    Cellulose      163.0      156.8      143.3         599.5         539.4
    specialties

    Absorbent      62.5       53.3       56.0          198.1         182.9
    materials

    Total
    Performance    225.5      210.1      199.3         797.6         722.3
    Fibers

Wood Products      19.0       24.1       20.3          86.5          88.1

Other              9.6        7.4        6.0           31.5          36.0
Operations

    Total sales  $ 353.9    $ 308.1    $ 281.5       $ 1,232.1     $ 1,171.5

Pro forma
operating
income/(loss)
(a)

Timber           $ 10.3     $ (0.6  )  $ 11.3        $ 30.7        $ 68.0

Real Estate        29.9       14.0       6.0           80.3          92.8

Performance        31.8       43.0       39.8          148.6         141.0
Fibers

Wood Products      (3.8  )    0.3        (2.9  )       (6.4    )     (8.4    )

Other              (0.1  )    (0.3  )    (0.1  )       (0.2    )     (1.2    )
Operations

Corporate and      (7.3  )    (7.4  )    (9.7  )       (29.9   )     (36.0   )
other

    Pro forma
    operating    $ 60.8     $ 49.0     $ 44.4        $ 223.1       $ 256.2
    income (a)

Adjusted EBITDA
by Segment (b)

    Timber       $ 36.1     $ 18.3     $ 30.6        $ 115.5       $ 143.9

    Real Estate    44.0       22.2       7.7           112.5         106.2

    Performance    49.9       57.1       58.5          204.8         209.4
    Fibers

    Wood           (2.1  )    1.5        (1.5  )       (0.7    )     (2.3    )
    Products

    Other          2.0        0.4        (1.6  )       3.0           (3.0    )
    Operations

    Corporate      (7.3  )    (7.3  )    (9.4  )       (29.6   )     (35.7   )
    and other

    Total        $ 122.6    $ 92.2     $ 84.3        $ 405.5       $ 418.5

    Timber segment pro forma operating income excludes the $0.8 million and
(a) $10.9 million fire loss for the three months and year ended December 31,
    2007, respectively. Pro forma operating income is a non-GAAP measure, see
    Schedule I for a reconciliation to the nearest GAAP measure.

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

- D -




RAYONIER

CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CASH FLOWS

DECEMBER 31, 2008 (unaudited)

(millions of dollars)

CONDENSED CONSOLIDATED BALANCE SHEETS

                                                     December 31,  December 31,

                                                     2008          2007

 Assets

 Current assets                                      $ 326.9       $ 396.2

 Timber and timberlands, net of depletion and          1,255.0       1,117.2
 amortization

 Property, plant and equipment                         1,392.5       1,340.2

 Less - accumulated depreciation                       (1,041.8 )    (994.4  )

                                                       350.7         345.8

 Investment in New Zealand JV                          -             62.8

 Other assets                                          157.9         157.0

                                                     $ 2,090.5     $ 2,079.0

 Liabilities and Shareholders' Equity

 Current liabilities                                 $ 162.9       $ 218.4

 Long-term debt                                        770.3         694.3

 Non-current liabilities for dispositions and          96.4          103.6
 discontinued operations

 Other non-current liabilities                         137.0         81.6

 Shareholders' equity                                  923.9         981.1

                                                     $ 2,090.5     $ 2,079.0

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                     Year Ended

                                                     December 31,  December 31,

                                                     2008          2007

 Cash provided by operating activities:

 Net Income                                          $ 152.0       $ 174.3

 Depreciation, depletion, amortization and non-cash    179.4         163.3
 basis of real estate sold

 Non-cash charge for forest fire losses                -             10.4

 Other non-cash items included in income               31.8          4.2

 Changes in working capital and other assets and       (23.0    )    (28.2   )
 liabilities

                                                       340.2         324.0

 Cash used for investing activities:

 Capital expenditures                                  (104.8   )    (97.0   )

 Purchase of timberlands, real estate and wood         (234.0   )    (27.2   )
 chipping facilities

 Decrease / (increase) in restricted cash              8.5           (8.8    )

 Other                                                 (0.1     )    7.0

                                                       (330.4   )    (126.0  )

 Cash used for financing activities:

 Borrowings, net of repayments and issuance costs      21.1          69.2

 Dividends paid                                        (157.0   )    (150.6  )

 Issuance of common shares                             8.3           18.9

 Repurchase of common shares                           (3.9     )    (3.2    )

 Excess tax benefits from equity-based compensation    3.2           7.9

                                                       (128.3   )    (57.8   )

 Effect of exchange rate changes on cash               (0.9     )    0.7

 Cash and cash equivalents:

 (Decrease) / increase in cash and cash equivalents    (119.4   )    140.9

 Balance, beginning of year                            181.1         40.2

 Balance, end of year                                $ 61.7        $ 181.1

- E -





RAYONIER

SELECTED SUPPLEMENTAL FINANCIAL DATA

DECEMBER 31, 2008 (unaudited)

(millions of dollars)

Debt Maturity Schedule at December 31, 2008

Instrument &  Total    2009        2010   2011     2012     2013   2014     Thereafter
Rates

Installment
Notes

(8.39% -      $ 327.6  $ 122.0 (a) $ -    $ 93.1   $ -      $ -    $ 112.5  $ -
8.64%)

Senior
Exchangeable
Notes

(3.75%)         300.0    -           -      -        300.0    -      -        -

Revolving
Credit
Facility (b)

(Libor + 40)    100.0    -           -      100.0    -        -      -        -

Tax Exempt
Debt

Nassau
County (c)

(1.30%)         23.1     -           -      -        23.1     -      -        -

(6.20%)         5.3      0.6         0.7    0.7      0.7      0.8    0.9      0.9

Wayne County
(c)

(1.725%)        15.0     -           -      -        -        -      -        15.0

              $ 771.0  $ 122.6     $ 0.7  $ 193.8  $ 323.8  $ 0.8  $ 113.4  $ 15.9

(a) Due December 31, 2009.

(b) $250 million total; $144 million available ($6 million is unavailable due to
standby letters of credit outstanding as of December 31, 2008).

(c) Rate set weekly (as of December 31, 2008).

- F -




RAYONIER

SELECTED SUPPLEMENTAL SHAREHOLDERS' EQUITY DATA

DECEMBER 31, 2008 (unaudited)

(in millions, except per share information)

SHAREHOLDERS' EQUITY:

                  Common Shares
                                                    Accumulated    Shareholders'
                                        Retained    Other
                  Shares     Amount     Earnings    Comprehensive  Equity
                                                    (Loss)/Income


Balance, December   76.9     $ 450.6    $ 496.0     $ (28.6 )      $ 918.0
31, 2006

Net Income          -          -          174.3       -              174.3

Dividends ($1.94    -          -          (151.0 )    -              (151.0 )
per share)

Issuance of         1.4        18.9       -           -              18.9
shares

Stock-based
compensation        -          13.5       -           -              13.5
expense

Net loss from
pension and         -          -          -           (4.0  )        (4.0   )
postretirement
plans

Foreign currency
translation         -          -          -           7.0            7.0
adjustment

Other               (0.1  )    4.4        -           -              4.4

Balance, December   78.2     $ 487.4    $ 519.3     $ (25.6 )      $ 981.1
31, 2007

Net Income          -          -          152.0       -              152.0

Dividends ($2.00    -          -          (157.3 )    -              (157.3 )
per share)

Issuance of         0.7        8.3        -           -              8.3
shares

Stock-based
compensation        -          13.3       -           -              13.3
expense

Net loss from
pension and         -          -          -           (65.5 )        (65.5  )
postretirement
plans

Benefit plan        -          -          -           16.4           16.4
amendment

Foreign currency
translation         -          -          -           (23.5 )        (23.5  )
adjustment

Other               (0.1  )    (0.9  )    -           -              (0.9   )

Balance, December   78.8     $ 508.1    $ 514.0     $ (98.2 )      $ 923.9
31, 2008

MARKET PRICES OF OUR COMMON SHARES; DIVIDENDS:

                  High       Low        Dividends

2008

Fourth Quarter    $ 47.09    $ 26.58    $ 0.50

Third Quarter     $ 49.54    $ 40.60    $ 0.50

Second Quarter    $ 48.00    $ 41.88    $ 0.50

First Quarter     $ 47.37    $ 35.36    $ 0.50

2007

Fourth Quarter    $ 49.16    $ 42.46    $ 0.50

Third Quarter     $ 49.55    $ 38.17    $ 0.50

Second Quarter    $ 45.77    $ 42.35    $ 0.47

First Quarter     $ 46.31    $ 39.83    $ 0.47

-G-




RAYONIER

SELECTED SUPPLEMENTAL FINANCIAL DATA AND OPERATING INFORMATION

DECEMBER 31, 2008 (unaudited)

                   Three Months Ended                 Year Ended

                   December    September   December   December 31,  December 31,
                   31,         30,         31,

                   2008        2008        2007       2008          2007

Timber

    Sales

    Western U.S.   $ 16.4      $ 16.6      $ 20.1     $ 77.7        $ 104.4

    Eastern U.S.     35.4        23.9        25.6       112.0         104.4

    Total          $ 51.8      $ 40.5      $ 45.7     $ 189.7       $ 208.8

    Pro forma
    operating
    (loss) /
    income (a)

    Western U.S.   $ (2.1   )  $ (2.0   )  $ 5.7      $ 11.8        $ 49.7
    (b)

    Eastern U.S.     13.4        1.5         6.0        20.6          19.9
    (a)

    Other Timber     (1.0   )    (0.1   )    (0.4  )    (1.7   )      (1.6   )

    Total          $ 10.3      $ (0.6   )  $ 11.3     $ 30.7        $ 68.0

(a)
    Timber segment pro forma operating income excludes the $0.8 million and
    $10.9 million fire loss for the three months and year ended December 31,
    2007, respectively. Pro forma operating income is a non-GAAP measure, see
    Schedule I for a reconciliation to the nearest GAAP measure.


(b)
    The three months and year ended December 31, 2008 include $3 million and $6
    million of additional timber depletion expense resulting from a second
    quarter 2008 timberland acquisition in the Western U.S.


                   Three Months Ended                 Year Ended

                   December    September   December   December 31,  December 31,
                   31,         30,         31,

                   2008        2008        2007       2008          2007

Timber

    Sales Volume

    Western U.S.

    in millions      48          48          47         232           254
    of board feet

    Eastern U.S.

    in thousands
    of short         2,140       1,508       1,615      6,824         6,168
    green tons

Real Estate

    Acres sold

    HBU              160         294         351        501           4,356
    Development

    HBU Rural        1,064       2,849       860        15,845        12,817

    Non-Strategic    28,584      10,917      -          49,801        -
    Timberlands

    Total            29,808      14,060      1,211      66,147        17,173

Performance
Fibers

    Sales Volume

    Cellulose
    specialties,

    in thousands
    of metric        122         124         123        471           467
    tons

    Absorbent
    materials,

    in thousands
    of metric        79          67          75         253           259
    tons

    Production as
    a percent of     102.8  %    102.1  %    99.4  %    100.0  %      99.1   %
    capacity

Lumber

    Sales volume,

    in millions      76          84          81         321           329
    of board feet

-H-




RAYONIER

RECONCILIATION OF NON-GAAP MEASURES

DECEMBER 31, 2008 (unaudited)

(millions of dollars, except per share information)

CASH AVAILABLE FOR DISTRIBUTION:

              Year Ended

              December 31,  December 31,

              2008          2007

 Cash
 provided by  $ 340.2       $ 324.0
 operating
 activities

 Capital
 expenditures   (104.8 )      (97.0 )
 (a)

 Change in
 committed      (10.0  )      16.9       (b)
 cash

 Like-kind
 exchange tax
 benefits on    (12.1  )      (3.9  )
 real estate
 sales (c)

 Other          (2.9   )      (4.5  )

 Cash
 Available    $ 210.4       $ 235.5
 for
 Distribution

(a) Capital spending excludes strategic acquisitions.

(b) Primarily 2006 interest paid in 2007 and previously reflected as a reduction
in 2006 CAD.

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

PRO FORMA OPERATING INCOME AND INCOME FROM CONTINUING OPERATIONS:

              Three Months Ended

              December 31,                   September 30,       December 31,

              2008                           2008                2007

                            Per Diluted                 Per              Per
              $             Share            $          Diluted  $       Diluted
                                                        Share            Share

Operating     $ 60.8                         $ 49.0              $ 43.6
Income

 Forest fire    -                              -                   0.8
 loss

Pro Forma
Operating     $ 60.8                         $ 49.0              $ 44.4
Income

Income from
Continuing    $ 42.1        $ 0.53           $ 39.7     $ 0.50   $ 34.9  $ 0.44
Operations

 Forest fire    -             -                -          -        0.8     0.01
 loss

Pro Forma
Income from   $ 42.1        $ 0.53           $ 39.7     $ 0.50   $ 35.7  $ 0.45
Continuing
Operations

              Year Ended

              December 31,                   December 31,

              2008                           2007

                            Per Diluted                 Per
              $             Share            $          Diluted
                                                        Share

Operating     $ 223.1                        $ 245.3
Income

 Forest fire    -                              10.9
 loss

Pro Forma
Operating     $ 223.1                        $ 256.2
Income

Income from
Continuing    $ 159.6       $ 2.01           $ 173.2    $ 2.19
Operations

 Forest fire    -             -                10.9       0.14
 loss

Pro Forma
Income from   $ 159.6       $ 2.01           $ 184.1    $ 2.33
Continuing
Operations

Pro forma
income From   $ 159.6                        $ 184.1
Continuing
Operations

Divided by:
average       $ 952.5                        $ 949.5
equity

Adjusted ROE    16.8   %                       19.4  %

- I -





RAYONIER

RECONCILIATION OF NON-GAAP MEASURES

DECEMBER 31, 2008 (unaudited)

(millions of dollars)

ADJUSTED
EBITDA:

             Timber     Real       Performance  Wood      Other       Corporate   Total
                        Estate     Fibers       Products  Operations  and other

Three
Months
Ended

December
31, 2008

 Cash
 provided
 by          $ 22.8     $ 44.1     $ 63.7       $ 0.6     $ 2.6       $ (42.6  )  $ 91.2
 operating
 activities

 Income tax    -          -          -            -         -           6.9         6.9
 expense

 Interest,     -          -          -            -         -           11.4        11.4
 net

 Working
 capital       13.3       (0.1  )    (13.8 )      (2.7 )    (0.6 )      17.0        13.1
 and other

 Adjusted    $ 36.1     $ 44.0     $ 49.9       $ (2.1 )  $ 2.0       $ (7.3   )  $ 122.6
 EBITDA

September
30, 2008

 Cash
 provided
 by          $ 25.2     $ 24.4     $ 47.3       $ (0.3 )  $ 8.4       $ (11.6  )  $ 93.4
 operating
 activities

 Income tax    -          -          -            -         -           9.1         9.1
 expense

 Interest,     -          -          -            -         -           10.2        10.2
 net

 Working
 capital       (6.9  )    (2.2  )    9.8          1.8       (8.0 )      (15.0  )    (20.5 )
 and other

 Adjusted    $ 18.3     $ 22.2     $ 57.1       $ 1.5     $ 0.4       $ (7.3   )  $ 92.2
 EBITDA

December
31, 2007

 Cash
 provided
 by          $ 20.0     $ 6.5      $ 81.9       $ 0.3     $ (4.3 )    $ (44.1  )  $ 60.3
 operating
 activities

 Income tax    -          -          -            -         -           (1.3   )    (1.3  )
 benefit

 Interest,     -          -          -            -         -           10.2        10.2
 net

 Working
 capital       10.6       1.2        (23.4 )      (1.8 )    2.7         25.8        15.1
 and other

 Adjusted    $ 30.6     $ 7.7      $ 58.5       $ (1.5 )  $ (1.6 )    $ (9.4   )  $ 84.3
 EBITDA

Year Ended

December
31, 2008

 Cash
 provided
 by          $ 114.4    $ 115.2    $ 190.9      $ (2.0 )  $ 10.3      $ (88.6  )  $ 340.2
 operating
 activities

 Income tax    -          -          -            -         -           31.4        31.4
 expense

 Interest,     -          -          -            -         -           42.5        42.5
 net

 Working
 capital       1.1        (2.7  )    13.9         1.3       (7.3 )      (14.9  )    (8.6  )
 and other

 Adjusted    $ 115.5    $ 112.5    $ 204.8      $ (0.7 )  $ 3.0       $ (29.6  )  $ 405.5
 EBITDA

December
31, 2007

 Cash
 provided
 by          $ 136.7    $ 101.2    $ 228.2      $ (0.1 )  $ (9.1 )    $ (132.9 )  $ 324.0
 operating
 activities

 Income tax    -          -          -            -         -           23.7        23.7
 expense

 Interest,     -          -          -            -         -           48.6        48.6
 net

 Working
 capital       7.2        5.0        (18.8 )      (2.2 )    6.1         24.9        22.2
 and other

 Adjusted    $ 143.9    $ 106.2    $ 209.4      $ (2.3 )  $ (3.0 )    $ (35.7  )  $ 418.5
 EBITDA

- J -





RAYONIER

RECONCILIATION OF STATUTORY INCOME TAX TO REPORTED INCOME TAX

DECEMBER 31, 2008 (unaudited)

(millions of dollars, except percentages)

                 Continuing Operations

                 Three Months Ended                                          Year Ended

                 December 31,        September 30,       December 31,        December 31,        December 31,

                 2008                2008                2007                2008                2007

                 $          %        $          %        $          %        $          %        $          %

    Income tax
    provision
    at the U.S.  $ (17.1 )  (35.0 )  $ (13.6 )  (35.0 )  $ (11.8 )  (35.0 )  $ (63.0 )  (35.0 )  $ (68.7 )  (35.0 )
    statutory
    rate

    REIT income
    not subject    12.7     24.3       8.1      20.9       11.5     34.1       40.6     22.1       55.1     28.1
    to federal
    tax

    Lost
    deduction
    on REIT
    interest
    expense and    (2.5  )  (3.5  )    (0.8  )  (2.1  )    (3.0  )  (8.8  )    (5.3  )  (2.5  )    (12.8 )  (6.5  )
    overhead
    expenses
    associated
    with REIT
    activities

    Foreign,
    state and
    local
    income
    taxes,
    foreign        0.7      1.3        0.2      0.6        0.6      1.8        0.4      0.2        0.3      0.1
    exchange
    rate
    changes and
    permanent
    differences

    Income tax
    expense
    before       $ (6.2  )  (12.9 )  $ (6.1  )  (15.6 )  $ (2.7  )  (7.9  )  $ (27.3 )  (15.2 )  $ (26.1 )  (13.3 )
    discrete
    items

    Taxing
    authority
    settlements    0.4      0.8        3.8      9.7        1.1      3.2        4.1      2.3        (4.4  )  (2.2  )
    and FIN 48
    adjustments

    Return to
    accrual        (0.8  )  (1.5  )    3.2      8.2        2.9      8.6        2.9      1.6        7.4      3.7
    adjustment
    / other

    Income tax
    (expense) /  $ (6.6  )  (13.6 )  $ 0.9      2.3      $ 1.3      3.9      $ (20.3 )  (11.3 )  $ (23.1 )  (11.8 )
    benefit

                                                         Discontinued Operations

                                                         Three Months Ended  Year Ended

                                                         December 31, 2008   December 31, 2008

                                                         $          %        $          %

    Income tax provision from discontinued operations    $ (0.8  )  (35.0 )  $ (1.2  )  (35.0 )
    at U.S. statutory rate

    NOL valuation allowance (a)                            0.4      n/m        (5.4  )  n/m

    Reversal of APB 23 election (a)                        0.1      n/m        (4.3  )  n/m

    Other                                                  -        n/m        (0.2  )  n/m

    Income tax expense from discontinued operations      $ (0.3  )  n/m      $ (11.1 )  n/m

    The Company's decision to offer its New Zealand operations for sale in the third quarter of 2008 resulted in
(a) (1) the establishment of a $5.4 million valuation allowance on a New Zealand net operating loss carryforward,
    and (2) the reversal of the Company's Accounting Principles Board Opinion 23 election and recognition of a $4.3
    million liability for U.S. taxes on unremitted foreign earnings.

n/m = not meaningful

- K -



CONTACT: Rayonier, Jacksonville
Investors: Carl Kraus, 904-357-9158
Media: Helen Rowan, 904-357-9806

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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  • Canton, MA 02021
  • United States

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