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Rayonier Reports Third Quarter 2003 Earnings

October 21, 2003

JACKSONVILLE, Fla.--(BUSINESS WIRE)--Oct. 21, 2003--Rayonier (NYSE:RYN) today reported third quarter 2003 net income of $8.1 million, or 19 cents per share, compared to $31.7 million, or 74 cents per share, in second quarter 2003 and $15.6 million, or 37 cents per share, in third quarter 2002. Third quarter 2003 results included 8 cents per share for REIT conversion costs and second quarter 2003 results included 59 cents per share from the Matanzas Marsh land sale.

Lee Nutter, Chairman, President and CEO said: "While we experienced solid results from our land sales business, improved lumber markets and steady U.S. timber prices, third quarter results reflected expenses associated with our planned REIT conversion and an extremely challenging cost environment for our performance fibers business. Nonetheless, we again demonstrated Rayonier's strong cash generating capability through the business cycle, increasing cash by nearly $40 million to $86 million at quarter-end. In addition, we remain on schedule for our January 1, 2004, conversion to a REIT and the payment of a special dividend of undistributed earnings and profits this December."

Sales of $268 million were $28 million below second quarter primarily due to the Matanzas sale and lower Northwest timber volume. Compared to third quarter 2002, sales declined $26 million, principally due to lower trading activity, performance fibers volume and timber prices.

Cash provided by operating activities of $64 million and free cash flow of $26 million were $6 million and $18 million, respectively, below second quarter primarily due to lower operating income. Cash provided by operating activities and free cash flow were $10 million and $14 million, respectively, below third quarter 2002 also due to lower operating income. Adjusted EBITDA was $62 million, a decrease of $33 million and $20 million from second quarter 2003 and third quarter 2002, respectively, mainly due to lower operating results. (Adjusted EBITDA and free cash flow are non-GAAP measures defined in Exhibit A.)

Debt at quarter-end of $620 million was $2 million and $33 million below second quarter and year-end 2002, respectively. The continuing improvement in our debt-to-capital ratio to 44.9 percent reflected a decline of 0.9 and 3.0 percentage points from second quarter and year-end 2002, respectively.

Performance Fibers

Sales of $132 million were comparable to second quarter with higher cellulose specialties volume offset by lower absorbent materials volume. Operating income of $2 million was $1 million below the second quarter primarily due to record high weather-related hardwood chip costs and slightly weaker cellulose specialties prices, partly offset by increased cellulose specialties volume and absorbent materials prices. Compared to third quarter 2002, sales and operating income declined $7 and $10 million, respectively, due to lower volume and higher hardwood chip, chemical and maintenance costs, partially offset by increased prices in both cellulose specialties and absorbent materials.

Timber and Land

Sales of $59 million and operating income of $32 million were below the second quarter by $32 million and $27 million, respectively, mainly due to the Matanzas sale as well as seasonally lower third quarter Northwest timber volume. Compared to third quarter 2002, sales decreased $5 million and operating income declined $1 million due to lower Northwest timber volume and prices, partly offset by improved land sales margins.

Wood Products

Sales of $36 million were $4 million above second quarter and the operating loss of $1 million reflected an improvement of $1 million principally due to higher lumber prices and volumes. Compared to third quarter 2002, sales were higher and the operating loss improved by $3 million due to increased lumber prices and lower lumber manufacturing costs.

Other Operations

Sales of $42 million were in line with second quarter, while the operating loss of $0.2 million reflected an improvement of $0.7 million. Compared to third quarter 2002, sales declined $15 million due to lower trading activity while the operating loss improved $0.3 million.

Other Items

Corporate expenses of $11.0 million were $3.1 million and $7.7 million above prior quarter and third quarter 2002, respectively, primarily due to REIT conversion costs of $4.2 million. The variance to third quarter 2002 also reflected an increase of $2.4 million in stock price-based incentive compensation accruals.

Intersegment eliminations and other included $0.5 million in balance sheet-related foreign exchange gains, compared to a $2.8 million benefit in the second quarter and a $1.1 million loss in third quarter 2002. Interest expense of $12.1 million was comparable to second quarter and $2.4 million below third quarter 2002 primarily due to lower debt.

The effective tax rate of 22.2 percent compared to 24.6 percent for the second quarter and 29.1 percent in third quarter 2002. The lower rate compared to prior year was primarily due to increased foreign and other tax credits.

Outlook

Although demand continues to be strong for cellulose specialties and Northwest timber earnings are forecasted to improve from the seasonally low third quarter, fourth quarter net income is likely to be near break-even. Earnings are expected to be adversely impacted by REIT project expenses (approximately 5 cents per share), delays in realizing Northwest timber earnings (approximately 6 cents per share) as contract terms of sale are revised to take advantage of REIT status in first quarter 2004, and continued exceptionally high hardwood chip costs at performance fibers. For 2003, REIT conversion costs and timber contract-related earnings deferrals are anticipated to reduce income by approximately 20 cents per share.

"We are very pleased with market reaction to our REIT plans and believe the tax-efficient structure will provide additional opportunities for growth and further increases in shareholder value," Nutter said. "In early November we will announce the schedule and election process for the special dividend of earnings and profits to be paid in December."

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 Rayonier'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 third quarter Form 10-Q with the Securities and Exchange Commission. Comments about anticipated demand, sales, expenses and earnings, and the Company's expected REIT conversion, 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 or wood products; 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 timing of the Company's election to be taxed as a REIT and its ability to satisfy complex rules in order to qualify as a REIT; 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/A on file with the Securities and Exchange Commission.

See Exhibit A for definitions of the non-GAAP financial measures "Adjusted EBITDA" and "free cash flow," and Exhibits G and H for reconciliations of each to cash provided by operating activities.

A conference call will be held on Wednesday, October 22 at 4:15 p.m. EDT 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. 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 719-457-2649.

For more 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, 2003  (unaudited)

          (millions of dollars, except per share information)


                           Three Months Ended      Nine Months Ended
                      --------------------------- -------------------
                       September  June   September September September
                          30,      30,      30,       30,       30,
                          2003    2003     2002      2003      2002
                      --------- ------- --------- --------  ---------
 Profitability
       Sales            $267.6  $295.9    $293.1   $829.4     $831.1
       Operating
        income           $21.7   $54.0     $35.5    $94.9     $102.9
       Income from
        continuing
        operations        $8.1   $31.7     $15.5    $48.0      $42.1
       Discontinued
        operations          $-      $-      $0.1       $-      $(0.8)
       Net income
        (after disc.
        ops)              $8.1   $31.7     $15.6    $48.0      $41.3
       Diluted
        earnings per
        share:
          Continuing
           operations    $0.19   $0.74     $0.37    $1.13      $0.99
          Net income
           (after
           disc. ops)    $0.19   $0.74     $0.37    $1.13      $0.97
       Operating
        income
         as a percent
          of sales         8.1%   18.2%     12.1%    11.4%      12.4%
       ROE
        (annualized)
        (a)                0.6%    6.2%      6.6%     6.8%       7.1%

 Capital Resources
  and Liquidity
       Cash provided
        by operating
        activities       $64.0   $69.5     $73.5   $172.8     $204.0
       Cash used for
        investing
        activities      $(26.0) $(14.5)   $(23.5)  $(58.7)    $(57.1)
       Cash from (used
        for) financing
        activities        $1.5  $(12.3)   $(52.5)  $(46.5)   $(143.7)
       Adjusted
        EBITDA (b)       $62.0   $95.4     $82.3   $222.2     $235.1
       Free cash flow
        (c)              $26.4   $44.7     $40.8    $83.6     $117.2
       Repayment of
        debt, net         $1.2    $5.7     $41.2    $32.7     $124.9
       Debt             $620.4  $622.2    $741.7   $620.4     $741.7
       Debt / capital     44.9%   45.8%     50.2%    44.9%      50.2%


 (a)  From continuing operations; major land sales and REIT conversion
      costs are not annualized.

 (b)  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 G.

 (c)  Free cash flow is defined as cash provided by operating
      activities less net custodial capital spending,
      dividends at prior year level, required debt repayments and
      the tax benefit on the exercise of stock options.
      Free cash flow is a non-GAAP measure of cash generated during
      a period that was available for discretionary capital
      expenditures, increasing dividends above the prior
      year level, repurchasing the Company's common shares and/or
      reducing debt within the period. Free cash flow is not
      necessarily indicative of the free cash flow that may be
      generated in future periods. See reconciliation on Schedule H.

 (1) Prior year earnings per share data have been restated to reflect
     the June 12, 2003 three-for-two stock split.

                                 - A -
 

                               RAYONIER
           CONDENSED STATEMENTS  OF  CONSOLIDATED  INCOME (2)
                    SEPTEMBER 30, 2003  (unaudited)

          (millions of dollars, except per share information)

                       Three Months Ended          Nine Months Ended
               -------------------------------------------------------
                 September     June    September  September  September
                 30, 2003    30, 2003   30, 2002   30, 2003   30, 2002
               -------------------------------------------------------

 Sales             $267.6     $295.9     $293.1     $829.4     $831.1
               -------------------------------------------------------
 Costs and
  expenses
    Cost of
     sales          231.8      231.3      247.8      701.4      697.4
    Selling and
     general
     expenses        16.1       13.0        8.4       39.1       30.2
    Other
     operating
     expense
     (income)        (2.0)      (2.4)       1.4       (6.0)       0.6
               -------------------------------------------------------
 Operating
  income             21.7       54.0       35.5       94.9      102.9

 Interest
  expense           (12.1)     (12.4)     (14.5)     (36.9)     (45.3)
 Interest and
  miscellaneous
 income
  (expense),
  net                 0.8        0.4        0.9        2.3        1.2
               -------------------------------------------------------
 Income from
  continuing
  operations
 before income
  taxes              10.4       42.0       21.9       60.3       58.8
 Income tax
  (expense)
  benefit            (2.3)     (10.3)      (6.4)     (12.3)     (16.7)
               -------------------------------------------------------
 Income from
 continuing
  operations         $8.1      $31.7      $15.5      $48.0      $42.1
 Discontinued
  operations,
  net                   -          -        0.1          -       (0.8)
               -------------------------------------------------------
 Net income          $8.1      $31.7      $15.6      $48.0      $41.3
               =======================================================

 Net income per
  Common Share
 Basic EPS
    From
     continuing
     operations     $0.19      $0.76      $0.37      $1.15      $1.01
               =======================================================
    Net income
     (after
     disc. ops)     $0.19      $0.76      $0.37      $1.15      $0.99
               =======================================================
 Diluted EPS
    From
     continuing
     operations     $0.19      $0.74      $0.37      $1.13      $0.99
               =======================================================
    Net income
     (after
     disc. ops)     $0.19      $0.74      $0.37      $1.13      $0.97
               =======================================================

 Weighted
  average
  Common
 Shares used
  for
  determining
 Basic EPS     42,133,413 41,796,776 41,630,142 41,867,879 41,504,580
               =======================================================
 Diluted EPS   42,963,352 42,516,508 42,301,929 42,557,905 42,304,847
               =======================================================




 (2)Prior year earnings per share and share data have been restated to
    reflect the June 12, 2003 three-for-two stock split.

                                 - B -
 

                               RAYONIER
           BUSINESS  SEGMENT  SALES  AND  OPERATING  INCOME
                    SEPTEMBER 30, 2003  (unaudited)

                         (millions of dollars)

                            Three Months Ended      Nine Months Ended
                       -----------------------------------------------
                       September  June   September September September
                          30,      30,     30,       30,       30,
                         2003     2003    2002      2003      2002
                       -----------------------------------------------
 Sales
  Performance Fibers
   Cellulose specialties  $94.3  $91.7     $97.4    $273.1    $274.6
   Absorbent materials     37.6   40.4      41.7     119.4     117.9
                       -----------------------------------------------
      Total Performance
       Fibers             131.9  132.1     139.1     392.5     392.5
                       -----------------------------------------------

  Timber and Land
   Timber                  32.5   38.5      35.8     114.6     123.5
   Land                    26.8   53.1      28.2      97.5      59.9
                       -----------------------------------------------
      Total Timber and
       Land                59.3   91.6      64.0     212.1     183.4
                       -----------------------------------------------

  Wood Products            35.6   31.4      34.7      97.0     107.0

  Other Operations         41.6   41.2      56.2     129.3     156.8

  Intersegment
   eliminations            (0.8)  (0.4)     (0.9)     (1.5)     (8.6)
                       -----------------------------------------------

      Total sales        $267.6 $295.9    $293.1    $829.4    $831.1
                       ===============================================

 Operating income (loss)
  Performance Fibers       $1.5   $2.8     $11.1      $3.1     $28.9

  Timber and Land
   Timber                   8.4   11.6      14.2      36.7      55.8
   Land                    23.7   47.6      18.5      80.4      37.9
                       -----------------------------------------------
      Total Timber and
       Land                32.1   59.2      32.7     117.1      93.7

  Wood Products            (1.2)  (2.4)     (4.4)     (6.8)     (5.7)

  Other Operations         (0.2)  (0.9)     (0.5)     (1.1)     (1.7)

  Corporate               (11.0)  (7.9)     (3.3)    (23.9)    (15.0)

  Intersegment
   eliminations and
   other (Including
   Corporate FX)            0.5    3.2      (0.1)      6.5       2.7
                       -----------------------------------------------

      Total operating
       income             $21.7  $54.0     $35.5     $94.9    $102.9
                       ===============================================

                                 - C -
 

                               RAYONIER
  CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CASH FLOWS
                    SEPTEMBER 30, 2003  (unaudited)
                         (millions of dollars)

 CONDENSED CONSOLIDATED BALANCE SHEETS
                                                    September December
                                                       30,       31,
                                                      2003      2002
                                                   -------------------
 Assets
 Current assets                                       $300.6   $228.8
 Timber, timberlands and logging roads,
    net of depletion and amortization                  999.1  1,023.2
 Property, plant and equipment                       1,416.4  1,387.4
 Less accumulated depreciation                         906.4    846.3
                                                   -------------------
                                                       510.0    541.1
                                                   -------------------
 Other assets                                           90.2     94.1
                                                   -------------------
                                                    $1,899.9 $1,887.2
                                                   ===================
 Liabilities and Shareholders' Equity
 Current liabilities                                  $160.4   $171.8
 Deferred income taxes                                 123.8    110.2
 Long-term debt                                        616.8    649.6
 Non-current reserves for dispositions and
  discontinued operations                              139.4    146.3
 Other non-current liabilities                          98.8     99.6
 Shareholders' equity                                  760.7    709.7
                                                   -------------------
                                                    $1,899.9 $1,887.2
                                                   ===================

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                    Nine Months Ended
                                                   -------------------
                                                        2003     2002
                                                   -------------------
 Cash provided by operating activities:
    Income from continuing operations                  $48.0    $42.1
    Depreciation, depletion, amortization and non-
     cash cost basis of land sold                      125.1    131.0
    Other non-cash items included in income              6.8      9.9
    Changes in working capital and other assets and
     liabilities                                        (7.1)    21.0
                                                   -------------------
                                                       172.8    204.0
                                                   -------------------
 Cash used for investing activities:
    Capital expenditures, net of sales and
     retirements                                       (53.3)   (57.1)
    Purchase of assets previously leased                (5.4)       -
                                                   -------------------
                                                       (58.7)   (57.1)
                                                   -------------------
 Cash used for financing activities:
    Repayment of debt, net                             (32.7)  (124.9)
    Dividends paid, shares issued, net                 (13.8)   (18.8)
                                                   -------------------
                                                       (46.5)  (143.7)
                                                   -------------------
 Cash provided by discontinued operations                  -     24.0
                                                   -------------------
 Effect of exchange rate changes on cash                (0.1)       -
                                                   -------------------
 Cash and cash equivalents:
    Increase in cash and cash equivalents               67.5     27.2
    Balance, beginning of year                          18.9     14.1
                                                   -------------------
    Balance, end of period                             $86.4    $41.3
                                                   ===================

                                 - D -
 

                               RAYONIER
                SELECTED  SUPPLEMENTAL FINANCIAL DATA
                    SEPTEMBER 30, 2003  (unaudited)

                         (millions of dollars)


                            Three Months Ended      Nine Months Ended
                        ----------------------------------------------
                         September June  September September September
                            30,     30,     30,       30,       30,
                           2003    2003    2002      2003      2002
                        ----------------------------------------------

 Geographical Data (Non- U.S.)
 Sales
    New Zealand             $23.0 $22.0     $20.2     $63.5     $57.5
    Other                     1.7   2.9       8.5       9.2      33.3
                        ----------------------------------------------
       Total                $24.7 $24.9     $28.7     $72.7     $90.8
                        ==============================================

 Operating income
  (loss)
    New Zealand              $0.6  $1.7      $2.0      $3.8      $3.9
    Other                    (0.6) (0.5)      0.1      (1.5)     (0.9)
                        ----------------------------------------------
       Total                   $-  $1.2      $2.1      $2.3      $3.0
                        ==============================================

 Timber
 Sales
    Northwest U.S.           $8.9 $15.0      $9.3     $44.2     $46.9
    Southeast U.S.           18.3  18.3      20.2      56.0      64.3
    New Zealand               5.3   5.2       6.3      14.4      12.3
                        ----------------------------------------------
       Total                $32.5 $38.5     $35.8    $114.6    $123.5
                        ==============================================

 Operating income
  (loss)
    Northwest U.S.           $1.6  $7.3      $4.5     $21.5     $32.3
    Southeast U.S.            4.0   3.9       5.3      12.1      19.2
    New Zealand               2.8   0.4       4.4       3.1       4.3
                        ----------------------------------------------
       Total                 $8.4 $11.6     $14.2     $36.7     $55.8
                        ==============================================

 Adjusted EBITDA by
  Segment
 Performance Fibers         $21.9 $22.3     $29.7     $61.7     $85.4
 Timber and Land             48.1  77.6      56.8     174.2     157.9
 Wood Products                2.3   0.8      (1.1)      2.8       4.2
 Other Operations            (0.1) (0.7)      0.1      (0.6)     (0.1)
 Corporate and other        (10.2) (4.6)     (3.2)    (15.9)    (12.3)
                        ----------------------------------------------
    Total                   $62.0 $95.4     $82.3    $222.2    $235.1
                        ==============================================


                                 - E -
 

                               RAYONIER
                   SELECTED  OPERATING  INFORMATION
                    SEPTEMBER 30, 2003  (unaudited)


                            Three Months Ended      Nine Months Ended
                       -----------------------------------------------
                       September  June   September September September
                          30,      30,      30,       30,       30,
                         2003     2003     2002      2003      2002
                       -----------------------------------------------
 Performance Fibers
 Sales Volume
    Cellulose
     specialties,
       in thousands of
        metric tons          109    106       114       314       319
    Absorbent materials,
       in thousands of
        metric tons           62     69        74       209       208
Production as a percent
 of capacity                97.6%  95.9%     98.3%     97.2%     98.2%

 Timber and Land
 Sales volume - Timber
    Northwest U.S.,
       in millions of
        board feet            34     67        36       178       186
    Southeast U.S.,
       in thousands of
        short green
        tons               1,150  1,144     1,165     3,488     3,597
    New Zealand,
       in thousands of
        metric tons          187    148       243       446       532

 Timber sales volume -
 Intercompany
    Northwest U.S.,
       in millions of
        board feet             -      -         2         -        36
    Southeast U.S.,
       in thousands of
        short green
        tons                  19      2        13        24        21
    New Zealand,
       in thousands of
        metric tons           40     26        16        85        39

 Acres sold                5,744 12,415    14,657    37,867    37,552

 Wood Products
 Lumber sales volume,
    in millions of
     board feet               78     73        87       222       252
 Medium-density
  fiberboard
    sales volume,
    in thousands of
     cubic meters             49     41        40       131       117


                                 - F -
 

                               RAYONIER
                RECONCILIATION OF NON-GAAP MEASURES (3)
                    SEPTEMBER 30, 2003  (unaudited)

                         (millions of dollars)

             Performance Timber   Wood     Other      Corporate
               Fibers   and Land Products Operations  and other Total
             ---------------------------------------------------------
Adjusted EBITDA

Three Months Ended
September 30, 2003
 Cash provided by
  operating
  activities     $14.4   $63.7     $2.6      $(0.5)     $(16.2) $64.0
 Income tax
  expense            -       -        -          -         2.3    2.3
 Interest
  expense            -       -        -          -        12.1   12.1
 Working
  capital
  increases
  (decreases)      7.9   (11.0)    (0.2)       0.4       (14.8) (17.7)
 Other balance
  sheet changes   (0.4)   (4.6)    (0.1)         -         6.4    1.3
             ---------------------------------------------------------
 Adjusted
  EBITDA         $21.9   $48.1     $2.3      $(0.1)     $(10.2) $62.0
             =========================================================

June 30, 2003
 Cash provided by
  operating
  activities     $25.7   $80.4    $(0.8)      $0.8      $(36.6) $69.5
 Income tax
  expense            -       -        -          -        10.3   10.3
 Interest
  expense            -       -        -          -        12.4   12.4
 Working
  capital
  increases
  (decreases)     (2.9)   (0.7)     1.6       (2.1)       21.5   17.4
 Other balance
  sheet changes   (0.5)   (2.1)       -        0.6       (12.2) (14.2)
             --------------------------------------  -----------------
 Adjusted
  EBITDA         $22.3   $77.6     $0.8      $(0.7)      $(4.6) $95.4
             ======================================  =================

September 30, 2002
 Cash provided by
  operating
  activities     $39.7   $61.2     $0.2      $(2.2)     $(25.4) $73.5
 Income tax
  expense            -       -        -          -         6.4    6.4
 Interest
  expense            -       -        -          -        14.5   14.5
 Working capital
  increases
  (decreases)     (9.5)   (0.4)    (1.1)       3.1        15.4    7.5
 Other balance
  sheet changes   (0.5)   (4.0)    (0.2)      (0.8)      (14.1) (19.6)
             ---------------------------------------------------------
 Adjusted
  EBITDA         $29.7   $56.8    $(1.1)      $0.1       $(3.2) $82.3
             =========================================================

Nine Months Ended
September 30, 2003
 Cash provided by
  operating
  activities     $51.5  $193.5    $(0.4)      $5.7      $(77.5)$172.8
 Income tax
  expense            -       -        -          -        12.3   12.3
 Interest
  expense            -       -        -          -        36.9   36.9
 Working
  capital
  increases
  (decreases)     10.8   (12.4)     3.4       (6.7)       10.2    5.3
 Other balance
  sheet changes   (0.6)   (6.9)    (0.2)       0.4         2.2   (5.1)
             ---------------------------------------------------------
 Adjusted
  EBITDA         $61.7  $174.2     $2.8      $(0.6)     $(15.9)$222.2
             =========================================================

September 30, 2002
 Cash provided by
  operating
  activities     $91.4  $164.5    $(0.1)      $6.3      $(58.1)$204.0
 Income tax
  expense            -       -        -          -        16.7   16.7
 Interest
  expense            -       -        -          -        45.3   45.3
 Working capital
  increases
  (decreases)    (14.9)   (1.2)     4.9       (4.0)        8.5   (6.7)
 Other balance
  sheet changes    8.9    (5.4)    (0.6)      (2.4)      (24.7) (24.2)
             ---------------------------------------------------------
 Adjusted
  EBITDA         $85.4  $157.9     $4.2      $(0.1)     $(12.3)$235.1
             =========================================================

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

                               RAYONIER
                 RECONCILIATION OF NON-GAAP MEASURES
                    SEPTEMBER 30, 2003  (unaudited)

                         (millions of dollars)

                            Three Months Ended      Nine Months Ended
                        ----------------------------------------------
                         September June  September September September
                            30,     30,     30,       30,       30,
                           2003    2003    2002      2003      2002
                        ----------------------------------------------
 Free cash flow
 Cash provided by
  operating activities     $64.0  $69.5    $73.5    $172.8    $204.0
 Custodial capital
  spending, net            (18.1) (13.2)   (21.4)    (47.3)    (49.5)
 Purchase of assets
  previously leased         (5.4)     -        -      (5.4)        -
 Dividends at prior year
  level                    (10.1) (10.1)   (10.0)    (30.2)    (29.9)
 Required debt
  repayments (4)            (1.2)  (0.7)    (1.2)     (2.7)     (4.9)
 Tax benefit on exercise
  of stock options          (2.8)  (0.8)    (0.1)     (3.6)     (2.5)
                        ----------------------------------------------
 Free cash flow            $26.4  $44.7    $40.8     $83.6    $117.2
                        ==============================================

 (4) The required repayments represent debt that matured and was paid
     during the period.  In addition to the required payments, the
     Company made discretionary debt repayments as indicated below:

 Discretionary debt
  repayments                  $-   $5.0     $40.0     $30.0    $120.0
                        ==============================================

 Custodial capital
  spending, net
 Capital expenditures,
    net of sales and
     retirements           $20.6  $14.5     $23.5     $53.3     $57.1
 Discretionary capital
  expenditures              (2.5)  (1.3)     (2.1)     (6.0)     (7.6)
                        ----------------------------------------------
 Custodial capital
  spending, net (5)        $18.1  $13.2     $21.4     $47.3     $49.5
                        ==============================================

 (5) Custodial Capital Spending, net, a non-GAAP measure, is defined
     as capital expenditures, net of retirements, required to maintain
     the Company's current earnings level over the cycle and to keep
     facilities and equipment in safe and reliable condition as well
     as in compliance with regulatory requirements.

                                - H -

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

SOURCE: Rayonier

Contact

Mark McHugh

Senior Vice President and Chief Financial Officer

Phone: (904) 357-9100

investorrelations@rayonier.com

Transfer Agent

For essential services such as change of address, lost certificates or dividend checks, or change in registered ownership, please write or call:

  • Regular Mail
  • Computershare
  • P.O. Box 43006
  • Providence, RI 02940-3006
  • United States
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  • 250 Royall Street
  • Canton, MA 02021
  • United States

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For online inquiries, please visit https://www-us.computershare.com.

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