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Rayonier Reports Strong Second Quarter 2004 Results

July 28, 2004

JACKSONVILLE, Fla.--(BUSINESS WIRE)--July 28, 2004--Rayonier (NYSE:RYN) today reported second quarter net income of $43.7 million, or 86 cents per share, compared to $75.5 million, or $1.49 per share, in first quarter 2004 and $31.7 million, or 74 cents per share, in second quarter 2003. First quarter 2004 results were $25.9 million, or 51 cents per share, excluding a net tax benefit of 98 cents per share relating to the company's January 1 conversion to a Real Estate Investment Trust (REIT).

Second quarter earnings were significantly above first quarter earnings (excluding the net tax benefit) in all three business segments -- Timber and Land, Performance Fibers, and Wood Products. Earnings were also above second quarter 2003 due to strong Performance Fibers and Wood Products results, offset somewhat by slightly lower Timber and Land earnings due to a large land sale last year. REIT conversion costs had no material impact on second quarter 2004 or 2003 results, but did affect first quarter 2004 by 7 cents per share.

Lee Nutter, Chairman, President and CEO said: "We had an excellent quarter as strong housing markets and the growing economy led to increased demand for all of our products. In addition, costs at our Performance Fibers segment continued to be significantly below the elevated levels experienced during most of 2003. Cash flow for the first half of 2004 was very strong. We ended the quarter with $66 million in cash and cash equivalents after paying $55 million in dividends during the first half of the year, and had an additional $30 million in restricted cash earmarked for the pending 83,000-acre Alabama timberland acquisition."

Cash provided by operating activities of $158 million in the first six months was $49 million above first half 2003. Cash Available for Distribution (CAD) for the same period was $121 million, $45 million above 2003. Cash flow was stronger primarily due to significantly improved operating earnings but also due to a $7 million income tax deferral on, and the monetization of, a land sales installment note. (Cash Available for Distribution is a non-GAAP measure defined and reconciled to GAAP in the attached exhibits.)

Sales of $337 million were $43 million above first quarter and $41 million above second quarter 2003.

Debt at quarter-end of $616 million was $3 million below both first quarter 2004 and year-end 2003. The debt-to-capital ratio declined to 44.1 percent from 44.6 percent and 46.5 percent at the end of first quarter 2004 and year-end 2003, respectively. The reduction from year-end 2003 was due to the positive impact on shareholders' equity of the aforementioned first quarter 2004 net tax benefit.

The company did not record in the second quarter 15 to 17 cents per share in tax benefits associated with like-kind exchange (LKE) transactions due to some uncertainty over the timing for closing the acquisition component of the transactions.

Timber and Land

Sales of $90 million and operating income of $55 million were $3 million and $9 million above first quarter, respectively. Compared to second quarter 2003, sales and operating income declined $2 million and $4 million, respectively. The improvement over first quarter was primarily due to higher land sales partially offset by lower U.S. timber sales volume. Compared to second quarter 2003, lower land sales were partly offset by stronger U.S. timber prices. Last year's results reflected an additional $16 million in operating income from major land sales.

Performance Fibers

Sales of $152 million were $20 million above first quarter primarily due to higher volumes and stronger absorbent materials prices. Operating income of $18 million improved $12 million over first quarter due to reduced manufacturing costs, increased volumes and higher absorbent material prices. Costs improved $9 million primarily due to lower hardwood, chemical and energy expenses and a $1.5 million reversal of a maintenance accrual. Compared to second quarter 2003, sales and operating income increased by $20 million and $16 million, respectively, primarily due to higher cellulose specialties prices, while operating income also benefited from lower manufacturing costs.

Wood Products

Sales of $45 million and operating income of $5 million were $7 million and $5 million above first quarter, and $13 million and $7 million above second quarter 2003, respectively, due to higher lumber prices and volume.

Other Operations

Sales of $50 million increased $13 million and $9 million from first quarter 2004 and second quarter 2003, respectively, while operating income of $2 million was unchanged from first quarter but $3 million above second quarter 2003. Operating income compared to first quarter reflected higher coal revenue offset by lower log and wood products trading margins, while the improvement over second quarter 2003 was due to increased coal revenue and higher trading margins.

Other Items

Corporate expenses of $9.7 million were $3.5 million below first quarter primarily due to lower REIT conversion costs partly offset by higher stock price-based incentive compensation expense. Compared to second quarter 2003, corporate expenses increased $1.8 million primarily due to higher stock price-based incentive compensation expense and legal costs.

Interest expense of $12.1 million was $1.0 million above first quarter primarily due to a greater number of interest-accruing days in the second quarter. Interest expense was essentially flat compared to second quarter 2003.

Through June 30, the annual effective tax rate, before discrete items, was 25.1 percent compared to 24.7 percent for the comparable period in 2003 (see Schedule I). While the tax benefits associated with the company's REIT structure continue to be significant, the effective tax rate was above the first quarter rate of 19.4 percent primarily due to a higher proportion of income generated in the company's taxable REIT subsidiaries and additional foreign taxes on intercompany debt caused by a 10 percent decline in the New Zealand dollar exchange rate. This exchange rate change also reduced the tax liability on un-repatriated foreign earnings which was recorded as a discrete second quarter item.

The company said it expects the current portion of cash taxes due for 2004 results to be 13 to 15 percent of pre-tax income, declining to 3 to 5 percent assuming completion of the LKE transactions. Also, the tax characteristics of the 2004 dividend are forecast to be 50 to 60 percent capital gains income and 40 to 50 percent return of capital.

Outlook

Third quarter 2004 earnings, excluding the impact of any like-kind exchange related tax benefits, are expected to be somewhat above pro forma third quarter 2003 (post E&P dividend), but below second quarter 2004 primarily due to reduced land sales and seasonally lower Northwest U.S. timber sales volumes. If the previously announced Alabama timberland acquisition closes in the third quarter, LKE-related tax benefits of approximately $11 million or 22 cents per share would be realized, with $10 million or 20 cents per share impacting third quarter results.

Nutter said: "First half 2004 markets improved in all of our product areas, especially for higher value cellulose specialties and absorbent materials products, and higher-and-better use properties. Although lumber prices are retreating somewhat, we continue to feel the positive impact of demand for housing and remodeling in our timber and wood products businesses. Cash flow for the year is expected to be very strong, enabling us to finance the anticipated $89 million timberland acquisition with internally generated funds and increase our 2004 dividend to $111 million."

Rayonier has more than 2 million acres of timber and land in the U.S. and New Zealand and is the world's premier supplier of high performance specialty cellulose fibers. Approximately 40 percent of the company's sales are outside the U.S. to customers in more than 50 countries.

Reported results are preliminary and not final until filing of the second quarter 2004 Form 10-Q with the Securities and Exchange Commission. Comments about anticipated demand, pricing, volumes, expenses, earnings, dividends, timberland acquisitions and taxes are forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The following important factors, among others, could cause actual results to differ materially from those expressed in the forward-looking statements: changes in global market trends and world events; interest rate and currency movements; fluctuations in demand for cellulose specialties, absorbent materials, timber, wood products or real estate; adverse weather conditions; changes in production costs for wood products or performance fibers, particularly for raw materials such as wood, energy and chemicals; unexpected delays in the closing of land sale transactions; the Company's ability to satisfy complex rules in order to qualify as a REIT; the availability of tax deductions and the ability of the company to complete tax-efficient exchanges of real estate; and implementation or revision of governmental policies and regulations affecting the environment, 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.

A conference call will be held on Thursday, July 29 at 4:15 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, 2004 (unaudited)

          (millions of dollars, except per share information)

                              Three Months Ended      Six Months Ended
                         --------------------------- -----------------
                         June 30, March 31, June 30, June 30, June 30,
                            2004      2004     2003     2004     2003
                         -------- --------- -------- -------- --------
Profitability
  Sales                   $336.9    $293.7   $295.9   $630.6   $561.8
  Operating income         $70.3     $42.5    $54.0   $112.8    $73.2
  Net income               $43.7     $75.5    $31.7   $119.2    $39.9
  Net income per diluted
   common share            $0.86     $1.49    $0.74    $2.35    $0.94
  Proforma net income
   per diluted common
   share (a) (b)           $0.86     $0.51    $0.65    $1.37    $0.82
  Operating income as a
   percent of sales         20.9%     14.5%    18.2%    17.9%    13.0%
  ROE (annualized)
   (a) (c)                  17.4%     10.7%     6.2%    15.6%     6.5%


                               Six Months Ended June 30,
                         ------------------------------------
                                      2004     2003
                                  --------- --------
Capital Resources and Liquidity
  Cash provided by
   operating activities             $157.7   $108.8
  Cash used for
   investing activities             $(66.0)  $(32.7)
  Cash used for
   financing activities             $(46.9)  $(48.0)
  Cash Available for
   Distribution (CAD)
   (d)                              $120.5    $75.3
  Adjusted EBITDA (e)               $202.0   $160.2
  Repayment of debt, net              $1.5    $31.5
  Debt                              $615.7   $622.2
  Debt / capital                      44.1%    45.8%


(a) First quarter and six months ended June 30, 2004 exclude first
    quarter reversal of deferred taxes not required after REIT
    conversion of $77.9 million, or $1.53 per share and additional
    taxes for repatriation of foreign earnings of ($28.2) million, or
    ($0.55) per share, for a net effect of $49.7 million, or $0.98 per
    share. See reconciliation on Schedule G.

(b) 2003 per share data has been restated for the December 19, 2003
    15.1% special dividend.

(c) Major land sales and REIT conversion costs are not annualized.

(d) Cash Available for Distribution (CAD) is defined as cash
    provided by operating activities less both custodial and
    discretionary capital spending and less the tax benefit on the
    exercise of stock options. Cash Available for Distribution 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 G.

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


                                 - A -
                               RAYONIER
              CONDENSED STATEMENTS OF CONSOLIDATED INCOME
                       JUNE 30, 2004 (unaudited)

          (millions of dollars, except per share information)

                    Three Months Ended             Six Months Ended
           ----------------------------------- -----------------------
            June 30,    March 31,    June 30,    June 30,    June 30,
              2004        2004        2003        2004        2003
           ----------- ----------- ----------- ----------- -----------

 Sales         $336.9      $293.7      $295.9      $630.6      $561.8
           ----------- ----------- ----------- ----------- -----------
 Costs and expenses
  Cost of
   sales        252.0       234.4       231.3       486.4       469.6
  Selling
   and
   general
   expenses      14.7        18.1        13.0        32.8        23.0
  Other
   oper-
   ating
   expense
   (income)      (0.1)       (1.3)       (2.4)       (1.4)       (4.0)
           ----------- ----------- ----------- ----------- -----------
 Operating
  income         70.3        42.5        54.0       112.8        73.2

 Interest
  expense       (12.1)      (11.1)      (12.4)      (23.2)      (24.8)

Interest
 and misc-
 ellaneous
 income
 (expense),
 net              0.4         0.7         0.4         1.1         1.5
           ----------- ----------- ----------- ----------- -----------
 Income
  before
  taxes          58.6        32.1        42.0        90.7        49.9
 Income tax
  (expense)
  benefit
  (a)           (14.9)       43.4       (10.3)       28.5       (10.0)
           ----------- ----------- ----------- ----------- -----------
 Net income
  (a)           $43.7       $75.5       $31.7      $119.2       $39.9
           =========== =========== =========== =========== ===========

 Net income
  per Common
  Share
 Basic EPS      $0.88       $1.53       $0.76       $2.41       $0.96
           =========== =========== =========== =========== ===========
 Diluted
  EPS           $0.86       $1.49       $0.74       $2.35       $0.94
           =========== =========== =========== =========== ===========

 Proforma net income
  per Common Share
  (b)(c)
 Adjusted
  basic EPS     $0.88       $0.52       $0.66       $1.40       $0.83
           =========== =========== =========== =========== ===========
 Adjusted
  diluted
  EPS           $0.86       $0.51       $0.65       $1.37       $0.82
           =========== =========== =========== =========== ===========

 Weighted average Common
 Shares used for determining

 Basic EPS 49,557,582  49,340,565  41,796,776  49,449,037  41,734,379
           =========== =========== =========== =========== ===========
 Diluted
  EPS      50,891,616  50,776,436  42,516,508  50,833,270  42,344,871
           =========== =========== =========== =========== ===========

(a) First quarter and six months ended June 30, 2004 includes
    reversal of deferred taxes not required after REIT conversion of
    $77.9 million and additional taxes for repatriation of foreign
    earnings of ($28.2) million.

(b) First quarter and six months ended June 30, 2004 excludes
    reversal of deferred taxes not required after REIT conversion of
    $1.58 per basic share and $1.53 per diluted share and additional
    taxes for repatriation of foreign earnings of ($0.57) per basic
    share and ($0.55) per diluted share, for a net of $1.01 per basic
    share and $0.98 per diluted share. See reconciliation on Schedule
    G.

(c) For the three and six months ended June 30, 2003 per share data
    has been restated for the December 19, 2003 15.1% special
    dividend.

                                 - B -
                               RAYONIER
          BUSINESS SEGMENT SALES AND OPERATING INCOME (LOSS)
                       JUNE 30, 2004 (unaudited)

                         (millions of dollars)

                             Three Months Ended      Six Months Ended
                        ---------------------------- -----------------
                         June 30, March 31, June 30, June 30, June 30,
                            2004      2004     2003     2004     2003
                        --------- --------- -------- -------- --------
Sales
  Timber and Land
   Timber                  $49.3     $53.1    $38.5   $102.4    $82.1
   Land                     40.4      33.3     53.1     73.7     70.7
                        --------- --------- -------- -------- --------
    Total Timber and
     Land                   89.7      86.4     91.6    176.1    152.8
                        --------- --------- -------- -------- --------

  Performance Fibers
   Cellulose
    specialties            107.2      93.1     91.7    200.3    178.8
   Absorbent materials      45.2      39.8     40.4     85.0     81.8
                        --------- --------- -------- -------- --------
    Total Performance
     Fibers                152.4     132.9    132.1    285.3    260.6
                        --------- --------- -------- -------- --------

  Wood Products             44.8      37.5     31.4     82.3     61.4

  Other Operations          50.3      36.9     41.2     87.2     87.7

  Intersegment
   eliminations             (0.3)        -     (0.4)    (0.3)    (0.7)
                        --------- --------- -------- -------- --------

        Total sales       $336.9    $293.7   $295.9   $630.6   $561.8
                        ========= ========= ======== ======== ========

Operating income (loss)
  Timber and Land
   Timber                  $20.1     $22.8    $11.6    $42.9    $28.3
   Land                     35.0      23.7     47.6     58.7     56.7
                        --------- --------- -------- -------- --------
    Total Timber and
     Land                   55.1      46.5     59.2    101.6     85.0

  Performance Fibers        18.4       6.1      2.7     24.5      1.5

  Wood Products              5.2       0.7     (1.7)     5.9     (4.3)

  Other Operations           1.9       2.3     (0.8)     4.2     (0.8)

  Corporate                 (9.7)    (13.2)    (7.9)   (22.9)   (12.9)

  Intersegment
   eliminations and
   other (Including
   Corporate FX)            (0.6)      0.1      2.5     (0.5)     4.7
                        --------- --------- -------- -------- --------

        Total operating
         income            $70.3     $42.5    $54.0   $112.8    $73.2
                        ========= ========= ======== ======== ========


                                 - C -
                               RAYONIER
 CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CASH FLOWS
                      JUNE 30, 2004  (unaudited)
                        (millions of dollars)

 CONDENSED CONSOLIDATED BALANCE SHEETS
                                            June 30,     December 31,
                                              2004           2003
                                           ----------   -------------
  Assets
  Current assets                             $293.3          $244.6
  Timber, timberlands and logging roads,
   net of depletion and amortization          972.4           994.8
  Property, plant and equipment             1,427.5         1,414.5
  Less accumulated depreciation               952.6           912.3
                                          ----------   -------------
                                              474.9           502.2
                                          ----------   -------------
  Other assets                                133.6            97.1
                                          ----------   -------------
                                           $1,874.2        $1,838.7
                                          ==========   =============
  Liabilities and Shareholders' Equity
  Current liabilities                        $162.7          $147.3
  Deferred income taxes                        79.6           121.8
  Long-term debt                              612.1           614.9
  Non-current reserves for dispositions
   and discontinued operations                134.1           140.2
  Other non-current liabilities               104.2           103.4
  Shareholders' Equity                        781.5           711.1
                                          ----------   -------------
                                           $1,874.2        $1,838.7
                                          ==========   =============

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                               Six Months Ended
                                          --------------------------
                                           June 30,       June 30,
                                            2004           2003
                                          ----------   -------------
  Cash provided by operating activities:
     Net Income                              $119.2           $39.9
     Depreciation, depletion, amortization
      and non-cash cost basis of land sold     88.1            85.5
     Other non-cash items included in
      income                                  (44.0)(a)         7.9
     Changes in working capital and other
      assets and liabilities                   (5.6)          (24.5)
                                          ----------   -------------
                                              157.7           108.8
                                          ----------   -------------
  Cash used for investing activities:
     Capital expenditures, net of sales
      and retirements                         (35.5)          (32.7)
     Increase in restricted cash              (30.5)              -
                                          ----------   -------------
                                              (66.0)          (32.7)
                                          ----------   -------------
  Cash used for financing activities:
     Repayment of debt, net                    (1.5)          (31.5)
     Dividends paid                           (55.4)          (21.5)
     Shares issued                             10.0             5.0
                                          ----------   -------------
                                              (46.9)          (48.0)
                                          ----------   -------------
  Effect of exchange rate changes on cash      (0.2)              -
                                          ----------   -------------

  Cash and cash equivalents:
     Increase in cash and cash equivalents     44.6            28.1
     Balance, beginning of year                21.4            18.9
                                          ----------   -------------
     Balance, end of period                   $66.0           $47.0
                                          ==========   =============

(a) Mainly reversal of deferred taxes not required after REIT
    conversion of ($77.9) million and additional taxes for
    repatriation of foreign earnings of $28.2 million.

                                 - D -
                               RAYONIER
                 SELECTED SUPPLEMENTAL FINANCIAL DATA
                       JUNE 30, 2004 (unaudited)

                         (millions of dollars)

                             Three Months Ended       Six Months Ended
                        ---------------------------- -----------------
                        June 30, March 31,  June 30, June 30, June 30,
                         2004      2004      2003     2004     2003
                        -------- ---------- -------- -------- --------
 Geographical Data
  (Non-U.S.)
  Sales
     New Zealand          $24.3      $19.8    $22.0    $44.1    $40.5
     Other                  9.4        6.0      2.9     15.4      7.5
                        -------- ---------- -------- -------- --------
        Total             $33.7      $25.8    $24.9    $59.5    $48.0
                        ======== ========== ======== ======== ========

  Operating income
   (loss)
     New Zealand           $0.2      $(1.0)    $1.7    $(0.8)    $3.2
     Other                 (0.5)      (0.5)    (0.5)    (1.0)    (0.9)
                        -------- ---------- -------- -------- --------
        Total             $(0.3)     $(1.5)    $1.2    $(1.8)    $2.3
                        ======== ========== ======== ======== ========

 Timber
  Sales
     Northwest U.S.       $22.0      $24.2    $15.0    $46.2    $35.3
     Southeast U.S.        20.6       23.5     18.3     44.1     37.7
     New Zealand            6.7        5.4      5.2     12.1      9.1
                        -------- ---------- -------- -------- --------
        Total             $49.3      $53.1    $38.5   $102.4    $82.1
                        ======== ========== ======== ======== ========

  Operating income
     Northwest U.S.       $11.9      $13.9     $7.3    $25.8    $19.9
     Southeast U.S.         6.2        8.3      3.9     14.5      8.1
     New Zealand            2.0        0.6      0.4      2.6      0.3
                        -------- ---------- -------- -------- --------
        Total             $20.1      $22.8    $11.6    $42.9    $28.3
                        ======== ========== ======== ======== ========

 Adjusted EBITDA by
  Segment
  Timber and Land         $73.6      $69.9    $77.6   $143.5   $126.1
  Performance Fibers       39.1       24.5     22.3     63.6     39.8
  Wood Products             9.2        4.1      1.3     13.3      1.7
  Other Operations          2.4        2.3     (0.7)     4.7     (0.5)
  Corporate and other     (10.5)     (12.6)    (5.1)   (23.1)    (6.9)
                        -------- ---------- -------- -------- --------
     Total               $113.8      $88.2    $95.4   $202.0   $160.2
                        ======== ========== ======== ======== ========


                                 - E -

                               RAYONIER
                    SELECTED OPERATING INFORMATION
                      JUNE 30, 2004  (unaudited)

                             Three Months Ended      Six Months Ended
                       ----------------------------- -----------------
                        June 30, March 31,  June 30, June 30, June 30,
                         2004      2004      2003     2004     2003
                        -------- ---------- -------- -------- --------
 Timber and Land
   Sales volume -
    Timber
      Northwest U.S.,
       in millions of
       board feet            81          88      67     169       144
      Southeast U.S.,
       in thousands of
       short green
       tons               1,140       1,249   1,144   2,389     2,338
      New Zealand,
       in thousands
       of metric
       tons                 158         106     148     264       259

   Timber sales
    volume -
   Intercompany
      Southeast U.S.,
       in thousands of
       short green
       tons                  21           -       2      21         5
      New Zealand,
       in thousands
       of metric
       tons                   -           -      26       -        45

   Acres sold             4,796 (a)  17,050  12,415  21,846 (a) 32,123

 Performance Fibers
   Sales Volume
    Cellulose
     specialties,
     in thousands of
     metric tons            115         101     106     216       205
   Absorbent
    materials,
    in thousands of
    metric tons              75          68      69     143       147
  Production as a
   percent of
   capacity                99.8%       97.9%   95.9%   98.9%     96.8%

 Wood Products
   Lumber sales
    volume,
    in millions of
    board feet               91          83      73     174       144
   Medium-density
    fiberboard
    sales volume,
    in thousands of
    cubic meters             40          39      41      79        82


(a) Excludes 5,487 acres associated with a Northeast Florida sale
    ($26 million) in which we had timber lease rights.


                                 - F -
                               RAYONIER
                 RECONCILIATION OF NON-GAAP MEASURES
                      JUNE 30, 2004  (unaudited)

          (millions of dollars, except per share information)

                                                Six Months Ended
                                          ----------------------------
                                             June 30,       June 30,
                                             2004 (a)        2003
                                          -------------- -------------
 Cash Available for Distribution (CAD)

 Cash provided by operating activities           $157.7        $108.8
 Capital spending (b)                             (35.5)        (32.7)
 Tax benefit on exercise of
  stock options                                    (1.7)         (0.8)
                                          -------------- -------------
 Cash Available for Distribution (CAD)           $120.5         $75.3
                                          ============== =============


(a) Includes $30.5 million of restricted cash to be used for the
    Alabama timberland purchase.

(b) Capital Spending is net of proceeds from retirements.



                            Three Months Ended        Six Months Ended
                      ------------------------------ -----------------
                       June 30,  March 31,  June 30, June 30, June 30,
                        2004       2004      2003     2004     2003
                      ---------- ---------- -------- -------- --------
 Net income per
  Common Share
    Basic EPS             $0.88      $1.53    $0.76    $2.41    $0.96
                      ========== ========== ======== ======== ========
    Diluted EPS           $0.86      $1.49    $0.74    $2.35    $0.94
                      ========== ========== ======== ======== ========

    Deferred taxes
     not required
     after REIT
     conversion
    Basic EPS                 -      (1.58)       -    (1.58)       -
                      ========== ========== ======== ======== ========
    Diluted EPS               -      (1.53)       -    (1.53)       -
                      ========== ========== ======== ======== ========

    Additional
     taxes for
     repatriation
     of foreign
     earnings
    Basic EPS                 -       0.57        -     0.57        -
                      ========== ========== ======== ======== ========
    Diluted EPS               -       0.55        -     0.55        -
                      ========== ========== ======== ======== ========

    Impact of
     December 19,
     2003 15.1%
     special
     dividend
    Basic EPS                 -          -    (0.10)       -    (0.13)
                      ========== ========== ======== ======== ========
    Diluted EPS               -          -    (0.09)       -    (0.12)
                      ========== ========== ======== ======== ========

 Proforma net
  income per Common
  Share
    Adjusted basic
     EPS                   0.88       0.52     0.66     1.40     0.83
                      ========== ========== ======== ======== ========
    Adjusted
     diluted EPS           0.86       0.51     0.65     1.37     0.82
                      ========== ========== ======== ======== ========


                                 - G -
                               RAYONIER
               RECONCILIATION OF NON-GAAP MEASURES (1)
                      JUNE 30, 2004  (unaudited)

                        (millions of dollars)

                 Timber Perfor-            Other
                   and   mance     Wood    Oper-  Corporate
                  Land   Fibers  Products ations  and other     Total
                ------- ------- --------- ------ ----------   -------
 Adjusted
  EBITDA

 Three Months Ended
 June 30, 2004
  Cash provided
   by operating
   activities    $80.0   $30.6      $8.0  $(0.7)    $(42.2)    $75.7
  Income tax
   expense           -       -         -      -       14.9      14.9
  Interest
   expense           -       -         -      -       12.1      12.1
  Working
   capital
   increases
   (decreases)    (3.6)    8.3       1.2    3.3        4.3      13.5
  Other balance
   sheet
   changes        (2.8)    0.2         -   (0.2)       0.4      (2.4)
                ------- ------- --------- ------ ----------   -------
  Adjusted
   EBITDA        $73.6   $39.1      $9.2   $2.4     $(10.5)   $113.8
                ======= ======= ========= ====== ==========   =======

 March 31, 2004
  Cash provided
   by operating
   activities    $74.0   $15.7      $1.4   $6.6     $(15.7)    $82.0
  Income tax
   benefit           -       -         -      -      (43.4)    (43.4)
  Interest
   expense           -       -         -      -       11.1      11.1
  Working
   capital
   increases
   (decreases)    (7.8)    7.6       2.8   (3.8)     (17.4)(a) (18.6)
  Other balance
   sheet
   changes         3.7     1.2      (0.1)  (0.5)      52.8 (b)  57.1
                ------- ------- --------- ------ ----------   -------
  Adjusted
   EBITDA        $69.9   $24.5      $4.1   $2.3     $(12.6)    $88.2
                ======= ======= ========= ====== ==========   =======

 June 30, 2003
  Cash provided
   by operating
   activities    $80.4   $25.7      $0.4   $0.8     $(37.8)    $69.5
  Income tax
   expense           -       -         -      -       10.3      10.3
  Interest
   expense           -       -         -      -       12.4      12.4
  Working
   capital
   increases
   (decreases)    (1.3)   (2.9)      1.6   (2.1)      21.5 (c)  16.8
  Other balance
   sheet
   changes        (1.5)   (0.5)     (0.7)   0.6      (11.5)(d) (13.6)
                ------- ------- --------- ------ ----------   -------
  Adjusted
   EBITDA        $77.6   $22.3      $1.3  $(0.7)     $(5.1)    $95.4
                ======= ======= ========= ====== ==========   =======

 Six Months Ended
 June 30, 2004
  Cash provided
   by operating
   activities   $154.0   $46.3      $9.4   $5.9     $(57.9)   $157.7
  Income tax
   benefit           -       -         -      -      (28.5)    (28.5)
  Interest
   expense           -       -         -      -       23.2      23.2
  Working
   capital
   increases
   (decreases)   (11.4)   15.9       4.0   (0.5)     (13.1)(a)  (5.1)
  Other balance
   sheet
   changes         0.9     1.4      (0.1)  (0.7)      53.2 (b)  54.7
                ------- ------- --------- ------ ----------   -------
  Adjusted
   EBITDA       $143.5   $63.6     $13.3   $4.7     $(23.1)   $202.0
                ======= ======= ========= ====== ==========   =======

 June 30, 2003
  Cash provided
   by operating
   activities   $129.8   $37.1     $(1.8)  $6.2     $(62.5)   $108.8
  Income tax
   expense           -       -         -      -       10.0      10.0
  Interest
   expense           -       -         -      -       24.8      24.8
  Working
   capital
   increases
   (decreases)    (1.4)    2.9       3.6   (7.1)      25.0 (c)  23.0
  Other balance
   sheet
   changes        (2.3)   (0.2)     (0.1)   0.4       (4.2)     (6.4)
                ------- ------- --------- ------ ----------   -------
  Adjusted
   EBITDA       $126.1   $39.8      $1.7  $(0.5)     $(6.9)   $160.2
                ======= ======= ========= ====== ==========   =======


(1) Unusual, non-trade intercompany items between the segments have
    been eliminated.
(a) Mainly higher taxes and interest payable.
(b) Includes reversal of deferred taxes not required after REIT
    conversion partly offset by additional taxes for repatriation of
    foreign earnings.
(c) Mainly lower accrued taxes and interest payable.
(d) Mainly higher incentive compensation accrual.

                                 - H -

                               RAYONIER
    RECONCILIATION OF STATUTORY INCOME TAX TO REPORTED INCOME TAX
                      JUNE 30, 2004 (unaudited)

               (millions of dollars, except percentages)


                             Three Months Ended
                 ------------------------------------------
                    June 30,      March 31,      June 30,
                     2004           2004          2003
                 -------------- ------------- -------------
                    $      %      $      %      $      %
                 ------- ------ ------ ------ ------ ------
  Income tax
   provision at
   the U.S.
   statutory
   rate           $20.6   35.0  $11.2   35.0  $14.7   35.0

  REIT income
   not subject
   to federal
   tax            (14.2) (24.2)  (6.9) (21.5)     -      -

  Lost deduction
   on REIT
   interest
   expense and
   overhead
   expenses
   associated
   with
   REIT
   activities       6.5   11.3    1.8    5.7      -      -

  State and
   local income
   taxes, foreign
   exchange rate
   changes and
   permanent
   differences      3.6    6.1    0.2    0.2   (4.4) (10.4)
                 ------- ------ ------ ------ ------ ------

  Income tax
   provision
   before
   discrete
   items (a)      $16.5   28.2   $6.3   19.4  $10.3   24.6

  Exchange rate
   changes on
   tax on
   undistributed
   foreign
   earnings        (1.6)  (2.8)     -      -      -      -

  Tax benefit
   from interim
   partial
   IRS audit
   settlement      -      -      -      -      -      -
                 ------- ------ ------ ------ ------ ------

  Income tax
   expense (a)    $14.9   25.4   $6.3   19.4  $10.3   24.6
                 ======= ====== ====== ====== ====== ======



                      Six Months Ended
                ----------------------------
                     June 30,       June 30,
                       2004          2003
                -------------- -------------
                      $      %      $      %
                ------- ------ ------ ------

  Income tax
   provision at
   the U.S.
   statutory
   rate          $31.8   35.0  $17.5   35.0

  REIT income
   not subject
   to federal
   tax           (21.1) (23.2)     -      -

  Lost deduction
   on REIT
   interest
   expense and
   overhead
   expenses
   associated
   with
   REIT
   activities      8.3    9.0      -      -

  State and
   local income
   taxes, foreign
   exchange rate
   changes and
   permanent
   differences     3.8    4.3   (5.2) (10.3)
                ------- ------ ------ ------

  Income tax
   provision
   before
   discrete
   items (a)     $22.8   25.1  $12.3   24.7

  Exchange rate
   changes on
   tax on
   undistributed
   foreign
   earnings       (1.6)  (1.8)     -      -

  Tax benefit
   from interim
   partial
   IRS audit
   settlement        -      -   (2.3)  (4.7)
                ------- ------ ------ ------

  Income tax
   expense (a)   $21.2   23.3  $10.0   20.0
                ======= ====== ====== ======


(a) First quarter and six months ended June 30, 2004 exclude first
    quarter reversal of deferred taxes not required after REIT
    conversion of ($77.9) million and additional taxes for
    repatriation of foreign earnings of $28.2 million.

                                 - I -

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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