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Rayonier Reports Third Quarter 2002 Earnings

October 21, 2002

JACKSONVILLE, Fla., Oct 21, 2002 (BUSINESS WIRE) -- Rayonier (NYSE:RYN) today reported third quarter 2002 income from continuing operations of $15.6 million, or 55 cents per share. This compared with $17.5 million, or 62 cents per share, in second quarter 2002 and $6.0 million, or 22 cents per share, in third quarter 2001. Net income of $15.7 million, or 56 cents per share, included post-closing adjustments of 1 cent per share related to the second quarter 2002 sale of the company's New Zealand East Coast timberland operations.

Earnings from continuing operations were lower compared with second quarter primarily due to a seasonal decline in Northwest U.S. timber sales volume and weaker lumber prices, partially offset by higher land sales. Results were stronger than third quarter 2001 primarily due to increased land sales and reduced performance fibers manufacturing costs and interest expense, partially offset by lower lumber and performance fibers prices.

Sales of $293 million were $24 million above second quarter and $29 million above third quarter 2001, primarily due to higher land sales.

Lee Nutter, Chairman, President and CEO said: "Despite a very challenging economic environment, we posted solid results due to steady demand in performance fibers and a significant contribution from our ongoing land sales program. Our cash flow remained strong enabling us to further reduce debt."

EBITDA (defined in Exhibit A) was $81 million, or $2.89 per share, compared with $78 million, or $2.74 per share, in the second quarter and $61 million, or $2.20 per share, in third quarter 2001. Free cash flow (defined in Exhibit A) was $39 million compared with $28 million in the second quarter and $23 million in third quarter 2001. Debt at quarter-end was $729 million. Net debt (debt less cash invested) was $694 million, $44 million lower than second quarter and $140 million below third quarter 2001. The net debt-to-capital ratio of 48.5 percent reflects a decline of 1.7 and 5.6 percentage points from second quarter 2002 and third quarter 2001, respectively.

Performance Fibers

Sales of $139 million were $15 million above second quarter primarily due to higher volumes while operating income of $11 million was essentially unchanged. The favorable impact of higher sales volumes was offset by slightly lower prices. Compared with third quarter 2001, sales increased by $2 million while operating income rose $6 million due to reduced manufacturing costs which were partially offset by lower prices.

Timber and Land

Sales of $64 million were $6 million above the second quarter and operating income of $33 million improved $1 million primarily due to higher land sales and the favorable impact of balance sheet related foreign exchange translation, partially offset by seasonally lower Northwest U.S. timber sales volume. Compared with third quarter 2001, sales and operating income increased by $18 million and $11 million, respectively, primarily due to higher land sales.

Wood Products and Trading

Sales of $91 million were essentially unchanged from the second quarter. However, substantially lower lumber prices resulted in an operating loss of $5 million compared to break-even results in the prior quarter. Compared with third quarter 2001, sales improved $8 million while operating income declined $3 million as higher trading activity was more than offset by lower lumber prices.

Other Items

Corporate and Other expense of $3.3 million was $0.5 million and $0.4 million above second quarter 2002 and third quarter 2001, respectively, primarily due to the unfavorable impact of balance sheet related foreign exchange translation.

Due to lower debt, interest expense of $14 million was $1 million and $2 million below second quarter 2002 and third quarter 2001, respectively.

The effective tax rate of 29.1 percent was slightly higher than the second quarter and significantly above third quarter 2001 which was unusually low primarily due to the positive catch-up effect of re-estimating the annual effective tax rate at that time.

Pension Liabilities

The severe decline in U.S. equity markets has reduced the value of the company's pension plan assets and lower interest rates have increased the net present value of accumulated benefit obligations. As a result, assuming plan asset values and interest rates remain at September 30, 2002 levels, the company would be required at year-end to record a non-cash, after-tax, charge to Shareholders' Equity of approximately $30 to $35 million. Under such circumstances, and taking into account expected changes in key pension assumptions, pension expense for 2003 would increase by approximately $3 to $4 million from 2002 levels.

Outlook

"While we expect continued strong demand for our market leading cellulose specialty products and Southeast U.S. development properties, fourth quarter earnings are expected to be lower than third quarter primarily due to the timing of land sales and higher chemical, fuel and other manufacturing costs in our performance fibers business," Nutter said.

Rayonier is the world's premier supplier of high performance specialty cellulose fibers and has 2.2 million acres of timberland in the U.S. and New Zealand. Approximately 45 percent of Rayonier's sales are outside the U.S. to customers in about 60 countries.

Comments about anticipated demand, expenses and earnings 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; changes in capital markets; fluctuations in demand for cellulose specialties, absorbent materials, timber, and wood products; adverse weather conditions; changes in production costs for wood products and performance fibers, particularly for raw materials such as wood, energy and chemicals; unexpected delays in the closing of land sale transactions or collection of proceeds from installment sales; and implementation or revision of governmental policies and regulations affecting the environment, import and export controls and taxes. 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 Tuesday, October 22 at 4:15 p.m. EDT to discuss these results. Interested parties are invited to listen to the live webcast by logging onto www.rayonier.com and following the link. Supplemental materials will be available at the website. A replay will also be available on the site shortly after the call. 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 (1)
                    SEPTEMBER 30, 2002  (unaudited)
          (millions of dollars, except per share information)
                              Three Months Ended    Nine Months Ended
                          ------------------------- -----------------
                             Sept.   June     Sept.    Sept.    Sept.
                             30,     30,      30,      30,      30,
                             2002    2002     2001     2002     2001
                          -------- ------- -------- -------- --------
 Profitability
     Sales                 $293.1  $269.3   $263.9   $831.1   $869.9
     Operating income       $35.3   $39.5    $21.8   $102.2   $123.7
     Income from
      continuing
      operations            $15.6   $17.5     $6.0    $42.1    $49.6
     Discontinued
      operations             $0.1   $(1.3)      $-    $(0.8)    $0.1
     Net income (after
      disc. ops)            $15.7   $16.2     $6.0    $41.3    $49.7
     Diluted earnings per
      share:
        Continuing
         operations         $0.55   $0.62    $0.22    $1.49    $1.79
        Net income (after
         disc. ops)         $0.56   $0.57    $0.22    $1.46    $1.80
     Operating income
       as a percent of
        sales                12.0%   14.7%     8.3%    12.3%    14.2%
     ROE (annualized) (a)     6.6%    8.2%     3.5%     7.1%     8.5%
 Capital Resources and
  Liquidity
     EBITDA (b)             $81.3   $77.8    $61.3   $232.0   $268.4
     Free cash flow (c)     $38.6   $27.9    $23.2    $92.5   $121.9
     Decrease in
      borrowings            $40.4   $47.2    $24.4   $122.6   $118.2
     Debt                  $728.8  $768.4   $854.8   $728.8   $854.8
     Net debt (d)          $693.7  $737.6   $833.8   $693.7   $833.8
     Net debt / capital      48.5%   50.2%    54.1%    48.5%    54.1%
    (a) From continuing operations; major land sales are not
annualized.
    (b) EBITDA is defined as earnings from continuing operations
before significant non-recurring items, provision for dispositions,
interest expense, income taxes, depreciation, depletion, amortization
and the non-cash cost of land sales.
    (c) Free cash flow is defined as EBITDA plus or minus significant
non-recurring items, changes in working capital and long-term assets
and liabilities (excluding the non-cash costs of land sales), less
income taxes, interest expense, custodial capital spending and
prior-year dividend levels.
    (d) Net debt is defined as debt less cash invested of $35.1, $30.8
and $21.0, at 9/30/02, 6/30/02, and 9/30/01, respectively.
    (1) Prior period amounts were reclassified to reflect the New
Zealand East Coast operations as discontinued operations.
                                - A -
                               RAYONIER
                 STATEMENTS OF CONSOLIDATED INCOME (2)
                    SEPTEMBER 30, 2002 (unaudited)
          (millions of dollars, except per share information)
                         Three Months Ended        Nine Months Ended
                ---------------------------------- -------------------
                 Sept. 30,   June 30,   Sept.30,    Sept.30, Sept. 30,
                ---------- ----------- ----------- --------- ---------
                    2002       2002       2001        2002     2001
                ---------- ----------- ----------- --------- ---------
 Sales              $293.1     $269.3     $263.9     $831.1   $869.9
                ---------- ----------- ----------- --------- ---------
 Costs and expenses
    Cost of
     sales           248.0      220.9      235.0      698.1      722.4
    Selling and
     general
     expenses          8.4       10.3        7.4       30.2       24.6
    Other
     operating
     expense
     (income)          1.4       (1.4)      (0.3)       0.6       (0.8)
                ---------- ----------- ----------- ----------- -------
Operating income      35.3       39.5       21.8      102.2      123.7
 Interest
  expense            (14.3)     (15.1)     (16.5)     (44.6)     (52.9)
 Interest and
  miscellaneous
  income (expense),
   net                 0.9          -        1.0        1.2        1.2
                ---------- ----------- ----------- ----------- -------
 Income from
  continuing
  operations
  before income
   taxes              21.9       24.4        6.3       58.8       72.0
 Income tax
  expense             (6.3)      (6.9)      (0.3)     (16.7)     (22.4)
                ---------- ----------- ----------- ----------- -------
 Income from
  continuing
   operations        $15.6      $17.5       $6.0      $42.1      $49.6
 Discontinued
  operations,
  net                  0.1       (1.3)         -       (0.8)       0.1
                ---------- ----------- ----------- ----------- -------
 Net income
  (after disc.
  ops)               $15.7      $16.2       $6.0      $41.3      $49.7
                ========== =========== =========== =========== =======
 Net income per
  Common Share
  Basic EPS
     From
      continuing
      operations     $0.55      $0.64      $0.22      $1.52      $1.83
                ========== =========== =========== =========== =======
     Net income
      (after
      disc. ops)     $0.56      $0.59      $0.22      $1.49      $1.83
                ========== =========== =========== =========== =======
  Diluted EPS
     From
      continuing
      operations     $0.55      $0.62      $0.22      $1.49      $1.79
                ========== =========== =========== =========== =======
     Net income
      (after
      disc. ops)    $0.56       $0.57      $0.22      $1.46      $1.80
                ========== =========== =========== =========== =======
 Weighted
  average Common
 Shares used for
  determining
  Basic EPS     27,753,428 27,728,798 27,266,368 27,669,720 27,186,767
                ========== ========== ========== ========== ==========
  Diluted EPS   28,201,286 28,324,784 27,690,303 28,203,231 27,599,697
                ========== ========== ========== ========== ==========
    (2) Prior period amounts were reclassified to reflect the New
Zealand East Coast operations as discontinued operations.
                                - B -
                               RAYONIER
            BUSINESS SEGMENT SALES AND OPERATING INCOME (3)
                    SEPTEMBER 30, 2002 (unaudited)
                         (millions of dollars)
                         Three Months Ended        Nine Months Ended
                    ----------------------------- --------------------
                    September  June  September   September  September
                        30,      30,     30,         30,        30,
                       2002    2002     2001        2002       2001
                    -------- ------- --------   ---------- ----------
 Sales
    Performance
     Fibers
  Cellulose
   specialties        $97.4   $86.6    $96.1      $274.6     $282.0
  Absorbent
   materials           41.7    37.5     40.6       117.9      139.5
                    -------- ------- --------   ---------- ----------
       Total
        Performance
        Fibers        139.1   124.1    136.7       392.5      421.5
                    -------- ------- --------   ---------- ----------
    Timber and Land
  Timber               35.8    45.4     38.9       123.5      146.9
  Land                 28.3    12.6      7.5        60.0       70.9
                    -------- ------- --------   ---------- ----------
       Total Timber
        and Land       64.1    58.0     46.4       183.5      217.8
                    -------- ------- --------   ---------- ----------
    Wood Products
     and Trading       90.8    91.3     82.6       263.7      241.8
    Intersegment
     eliminations      (0.9)   (4.1)    (1.8)       (8.6)     (11.2)
                    -------- ------- --------   ---------- ----------
       Total sales   $293.1  $269.3   $263.9      $831.1     $869.9
                    ======== ======= ========   ========== ==========
 Operating income
  (loss)
    Performance
     Fibers           $10.8   $10.7     $4.6       $28.1      $32.5
    Timber and Land
  Timber               14.2    20.9     16.1        55.8       72.8
  Land                 18.6    10.7      5.6        37.9       40.8
                    -------- ------- --------   ---------- ----------
       Total Timber
        and Land       32.8    31.6     21.7        93.7      113.6
    Wood Products
     and Trading       (5.0)      -     (1.6)       (7.4)      (8.6)
    Corporate and
     other             (3.3)   (2.8)    (2.9)      (12.2)     (13.8)
                    -------- ------- --------   ---------- ----------
       Total
        operating
        income        $35.3   $39.5    $21.8      $102.2     $123.7
                    ======== ======= ========   ========== ==========
    (3)Prior period amounts were reclassified to reflect the New
Zealand East Coast operations as discontinued operations.
                                 - C -
                               RAYONIER
                        FUNDS FLOW SUMMARY (4)
                    SEPTEMBER 30, 2002 (unaudited)
                         (millions of dollars)
                                                Nine Months Ended
                                               -------------------
                                              September  September
                                                    30,        30,
                                                   2002       2001
                                               --------- ---------
 Income from continuing operations               $42.1     $49.6
 Depreciation, depletion and amortization        120.4     134.8
 Non-cash cost of land sales                       8.2       8.7
                                              --------- ---------
 Subtotal                                        170.7     193.1
 Capital expenditures                            (57.4)    (56.7)
 Working capital changes                           9.8      13.0
 Cash balance increase                           (27.2)    (15.8)
 Dividends                                       (29.9)    (29.4)
 Proceeds from stock options exercised            14.2       6.9
 Share repurchases                                (3.1)     (2.0)
 All other                                        21.3       6.6
                                              --------- ---------
 Subtotal                                         98.4     115.7
 Cash provided by discontinued operations         24.2       2.5
                                              --------- ---------
 Decrease in borrowings                         $122.6    $118.2
                                              ========= =========
    (4) Prior period amounts were reclassified to reflect the New
Zealand East Coast operations as discontinued operations.
                                - D -
                               RAYONIER
               SELECTED  SUPPLEMENTAL FINANCIAL DATA (5)
                    SEPTEMBER 30, 2002  (unaudited)
          (millions of dollars, except per share information)
                           Three Months Ended      Nine Months Ended
                       -------------------------- -------------------
                        September June   September September September
                           30,     30,      30,       30,       30,
                           2002   2002      2001      2002      2001
                       --------- ------ --------- --------- ---------
 Geographical Data
  (Non-U.S.)
          Sales
             New
              Zealand     $20.2  $17.5     $17.5     $57.5     $50.9
             Other          8.5   11.5       5.0      33.3      30.2
                       --------- ------ --------- --------- ---------
                Total     $28.7  $29.0     $22.5     $90.8     $81.1
                       ========= ====== ========= ========= =========
          Operating
           income (loss)
             New
              Zealand      $2.0   $2.5      $1.3      $3.9      $1.4
             Other          0.1    0.4      (0.8)     (0.9)     (1.6)
                       --------- ------ --------- --------- ---------
                Total      $2.1   $2.9      $0.5      $3.0     $(0.2)
                       ========= ====== ========= ========= =========
 Timber and Land
          Sales
             Northwest
              U.S.         $9.7  $21.3     $11.3     $48.3     $49.5
             Southeast
              U.S.         48.1   33.0      28.4     116.7     152.3
             New
              Zealand       6.3    3.7       6.7      18.5      16.0
                       --------- ------ --------- --------- ---------
                Total     $64.1  $58.0     $46.4    $183.5    $217.8
                       ========= ====== ========= ========= =========
          Operating
           income (loss)
             Northwest
              U.S.         $4.8  $15.6      $6.7     $33.2     $35.5
             Southeast
              U.S.         23.7   16.0      12.4      56.9      72.3
             New
              Zealand       4.3      -       2.6       3.6       5.8
                       --------- ------ --------- --------- ---------
                Total     $32.8  $31.6     $21.7     $93.7    $113.6
                       ========= ====== ========= ========= =========
 EBITDA per Share
          Performance
           Fibers         $1.02  $1.04     $0.82     $2.92     $3.22
          Timber and
           Land            2.02   1.67      1.38      5.60      6.94
          Wood
           Products
           and Trading    (0.03)  0.14      0.08      0.15      0.08
          Corporate
           and other      (0.12) (0.11)    (0.08)    (0.44)    (0.52)
                       --------- ------ --------- --------- ---------
             Total        $2.89  $2.74     $2.20     $8.23     $9.72
                       ========= ====== ========= ========= =========
    (5) Prior period amounts were reclassified to reflect the New
Zealand East Coast operations as discontinued operations.
                                - E -
                            RAYONIER
                  SELECTED OPERATING INFORMATION (6)
                    SEPTEMBER 30, 2002 (unaudited)
                           Three Months Ended      Nine Months Ended
                       -------------------------- -------------------
                        September June  September  September September
                             30,    30,      30,        30,       30,
                           2002   2002     2001       2002      2001
                       --------- ------ --------  --------- ---------
Performance Fibers
 Sales Volume
  Cellulose specialties,
   in thousands of
   metric tons              114    101      110        319       323
  Absorbent materials,
   in thousands of
   metric  tons              75     66       69        211       216
 Production as a percent
  of capacity              98.3%  99.5%    88.2%      98.2%     96.4%
Timber and Land
 Sales volume - Timber
  Northwest U.S., in
   millions of board feet    36     80       48        186       185
  Southeast U.S., in
   thousands of short
   green tons             1,165  1,191    1,184      3,597     4,370
  New Zealand,in
  thousands of metric
  tons (7)                  243    168      213        532       551
Timber sales volume -
 Intercompany
  Northwest U.S., in
   millions of board feet     2     19        9         36        44
  Southeast U.S., in
   thousands of short
   green tons                13      3        2         21        32
  New Zealand, in
   thousands of metric
   tons (7)                  16     10        9         39        34
 Acres sold              14,657  3,995    2,678     37,552    60,951
Wood Products and Trading
 Lumber sales volume, in
  millions of board feet     87     86       79        252       199
 Medium-density fiberboard
  sales volume,in thousands
  of cubic meters            40     41       37        117       113
 Log trading sales volume
  North America, in
   millions of board feet    32     32       42         91       128
  New Zealand, in
   thousands of metric tons  91     85       55        251       217
  Other, in thousands
   of cubic meters           46     86       31        250       263
    (6) Prior period amounts were reclassified to reflect the New
Zealand East Coast operations as discontinued operations.
    (7) 2001 volume restated from cubic meters to metric tons
                                - F -

CONTACT:
Rayonier, Jacksonville
Media Contact:
Jay Fredericksen, 904/357-9106
or
Investor Contact:
Parag Bhansali, 904/357-9155

Contact

Mark McHugh

Senior Vice President and Chief Financial Officer

Phone: (904) 357-9100

investorrelations@rayonier.com

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