Rayonier Reports Third Quarter 2012 Results

  Rayonier Reports Third Quarter 2012 Results

Business Wire

JACKSONVILLE, Fla. -- October 25, 2012

Rayonier (NYSE:RYN) today reported third quarter net income of $81 million, or
62 cents per share, compared to $105 million, or 84 cents per share, in the
prior year period. The 2011 results included a $16 million tax benefit from
the reversal of a reserve relating to the taxability of the 2009 alternative
fuel mixture credit (AFMC). Excluding this benefit, 2011 third quarter net
income was $89 million, or 71 cents per share.

Year-to-date 2012 net income totaled $203 million, or $1.58 per share,
compared to $220 million, or $1.75 per share, in 2011. Excluding the tax
benefit from the AFMC, net income for the first three quarters of 2011 was
$204 million, or $1.62 per share.

Cash provided by operating activities was $354 million for the first nine
months of 2012 compared to $326 million for the prior year period.
Year-to-date cash available for distribution (CAD)^1 was $261 million versus
$242 million in 2011. (See Schedule D for more details.)

“We are pleased to report continued strong operating results this quarter in
line with our expectations. In Performance Fibers, the cellulose specialties
market remains strong, and in Forest Resources, sales increased as we added
volume from our recent acquisitions,” said Paul G. Boynton, Chairman,
President and CEO.

Forest Resources

Third quarter sales of $60 million were $3 million above the prior year
period, while operating income of $11 million was comparable. Year-to-date
sales of $165 million increased $2 million over prior year, while operating
income of $27 million declined $7 million primarily due to lower prices in the
Pacific Northwest and New Zealand reflecting weaker Asian demand. Third
quarter and year-to-date sales improved over the prior year in the Gulf States
region due to higher volumes from the 2011 timberland acquisitions.

Real Estate

Third quarter sales of $13 million were $19 million lower than the prior year
period and operating income of $8 million decreased $20 million. Year-to-date
sales of $37 million were $21 million below 2011, and operating income of $21
million was $19 million below the prior year. The third quarter and
year-to-date periods of 2011 benefited from a 6,300 acre non-strategic sale at
$3,995 per acre and a $6 million property tax settlement covering several
prior years. The 2012 periods included improved margins on rural land sales
due to geographic mix.

Performance Fibers

Third quarter sales of $288 million were $33 million above the prior year
period, while operating income of $101 million improved $27 million.
Year-to-date sales of $794 million were $55 million above the comparable 2011
period, while operating income of $266 million increased $44 million. The 2012
results reflected higher cellulose specialties prices partially offset by a
decline in absorbent materials prices and higher production costs. Third
quarter 2012 also benefited from higher cellulose specialties volumes due to
timing of shipments.

Other Items

Wood Products operating income improved $2 million and $8 million for the
three and nine months ended September 30, 2012, respectively, compared to the
prior year periods as prices and volumes increased due to higher demand.

Corporate and other expenses were $3 million above third quarter 2011, which
benefited from a favorable insurance settlement. Year-to-date corporate and
other expenses were $4 million above the prior year due to higher stock-based
compensation and pension costs.

In the third quarter, the IRS released guidance stating that the repayment of
the AFMC in exchange for the Cellulosic Biofuel Producer Credit (CBPC) does
not require interest payments. As a result, the Company reversed a $3 million
interest accrual from last quarter, lowering third quarter interest expense.
The Company also recorded another $3 million of AFMC for CBPC exchange benefit
in the third quarter.

Effective tax rates for the quarter and year-to-date were 23.4 percent and
21.9 percent compared to a 9.0 percent benefit and a 7.5 percent expense in
2011, respectively. The increase in tax rates resulted largely from several
non-routine benefits recorded in 2011.

Outlook

“We are positioned for another strong year as our businesses continue to
execute well, creating strong operating cash flows” said Boynton. “In Forest
Resources, we will continue to capitalize on local market opportunities in the
Southeast. In Performance Fibers, we anticipate another record year driven by
strong cellulose specialties markets and we remain on track to complete our
cellulose specialties expansion project by mid-2013.”

“Overall, we expect operating income to increase approximately 10 percent over
2011. However, due to the non-routine tax benefits detailed above, we still
expect full year earnings to be comparable to 2011, excluding special items.
We anticipate CAD to range from $295 million to $310 million, substantially
above our recently increased dividend,” Boynton concluded.

Further Information

A conference call will be held on Thursday, October 25, 2012 at 2 p.m. EDT to
discuss these results. Presentation materials and access to the live webcast
will be available at www.rayonier.com. Investors may also choose to access the
conference call by dialing (888) 790-3052, password: Rayonier. A replay of
this webcast will be available on the Company’s website shortly after the
call. Complimentary copies of Rayonier press releases and other financial
documents are also available by calling 1-800-RYN-7611.

^1 CAD is a non-GAAP measure defined and reconciled to GAAP in the attached
exhibits.

Rayonier is a leading international forest products company with three core
businesses: Forest Resources, Real Estate and Performance Fibers. The company
owns, leases or manages 2.7 million acres of timber and land in the United
States and New Zealand. The company's holdings include approximately 200,000
acres with residential and commercial development potential along the
Interstate 95 corridor between Savannah, GA and Daytona Beach, FL. Its
Performance Fibers business is one of the world's leading producers of
high-value specialty cellulose fibers, which are used in products such as
filters, pharmaceuticals and LCD screens. Approximately 45 percent of the
company's sales are outside the U.S. to customers in approximately 40
countries. Rayonier is structured as a real estate investment trust. More
information is available atwww.rayonier.com.

Certain statements in this document regarding anticipated financial outcomes
including earnings guidance, if any, business and market conditions, outlook
and other similar statements relating to Rayonier's future financial and
operational performance, are "forward-looking statements" made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995
and other federal securities laws. These forward-looking statements are
identified by the use of words such as "may," "will," "should," "expect,"
"estimate," "believe," "anticipate" and other similar language.
Forward-looking statements are not guarantees of future performance and undue
reliance should not be placed on these statements.

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

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

Additional factors are described in the company's most recent Form 10-K and
10-Q reports on file with the Securities and Exchange Commission. Rayonier
assumes no obligation to update these statements except as is required by law.

RAYONIER INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED INCOME

September30, 2012 (unaudited)

(millions of dollars, except per share information)
                                                           
              Three Months Ended                              Nine Months Ended
              September 30,  June 30,       September 30,   September 30,  September 30,
              2012            2012            2011            2012            2011
Sales         $   409.0      $   371.9      $   385.1      $  1,136.7     $  1,100.2  
Costs and
expenses
Cost of       278.7           262.6           266.2           794.5           786.5
sales
Selling and
general       15.8            16.2            15.8            51.7            48.2
expenses
Other
operating
expense       1.3            (5.5        )   (5.2        )   (5.3        )   (9.5        )
(income),
net
Operating     113.2           98.6            108.3           295.8           275.0
income
Interest      (8.3        )   (16.1       )   (12.4       )   (36.1       )   (38.3       )
expense
Interest
and other     0.3            0.1            0.4            0.3            0.9         
income, net
Income
before        105.2           82.6            96.3            260.0           237.6
taxes
Income tax
(expense)     (24.6       )   (13.5       )   8.6            (56.9       )   (17.8       )
benefit
Net income    $   80.6       $   69.1       $   104.9      $  203.1       $  219.8    
Net Income
per Common
Share:
Basic
Net Income    $   0.66       $   0.56       $   0.86       $  1.66        $  1.81     
Diluted
Net Income    $   0.62       $   0.54       $   0.84       $  1.58        $  1.75     
Pro forma
Net Income    $   0.62       $   0.54       $   0.71       $  1.58        $  1.62     
(a)
                                                                              
Dividends     $   0.44       $   0.40       $   0.40       $  1.24        $  1.12     
per share
                                                                              
Weighted
Average
Common
Shares used
for
determining
Basic EPS     122,848,705    122,455,464    121,790,059    122,552,910    121,665,644 
Diluted EPS   129,959,666    127,411,127    125,599,609    128,548,552    125,530,100 
(b)
                                                                                          
(a) For the three and nine months ended September 30, 2011, pro forma net income excludes a
gain of $0.13 per share from the reversal of a reserve related to the taxability of the
AFMC. Pro forma net income is a non-GAAP measure. See Schedule D for a reconciliation to
the nearest GAAP measure.
(b) The increase in the dilutive shares for the three and nine months ended September 30,
2012, is primarily due to the potential dilutive impact of the Senior Exchangeable Notes
due 2012 and 2015.

A

RAYONIER INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CASH FLOWS

September30, 2012 (unaudited)

(millions of dollars)
                                                                  
CONDENSED CONSOLIDATED BALANCE SHEETS
                                              September 30,      December 31,
                                               2012               2011
Assets
Cash and cash equivalents                      $    215.5         $  78.6
Other current assets                           309.7              265.8
Timber and timberlands, net of depletion and   1,489.9            1,503.7
amortization
Property, plant and equipment                  1,803.5            1,619.2
Less - accumulated depreciation                (1,173.7       )   (1,157.6   )
Net property, plant and equipment              629.8              461.6
Investment in New Zealand JV                   70.2               69.2
Other assets                                   198.8             190.4      
                                               $    2,913.9      $  2,569.3 
Liabilities and Shareholders' Equity
Current maturities of long-term debt           $    41.3          $  28.1
Other current liabilities                      245.8              150.1
Long-term debt                                 967.8              819.2
Non-current liabilities for dispositions and   75.5               80.9
discontinued operations
Other non-current liabilities                  165.5              167.9
Shareholders' equity                           1,418.0           1,323.1    
                                               $    2,913.9      $  2,569.3 
                                                                  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                               Nine Months Ended September 30,
                                               2012               2011
Cash provided by operating activities:
Net income                                     $    203.1         $  219.8
Depreciation, depletion, amortization          102.5              101.8
Non-cash basis of real estate sold             3.0                3.1
Other items to reconcile net income to cash    11.5               0.4
provided by operating activities
Changes in working capital and other assets    33.5              1.2        
and liabilities
                                               353.6             326.3      
Cash used for investing activities:
Capital expenditures                           (112.0         )   (87.2      )
Purchase of timberlands                        (11.6          )   (94.2      )
Jesup mill cellulose specialties expansion
(gross purchases of $130.7 and $14.6, net of   (104.8         )   (8.1       )
purchases on account of $25.9 and $6.5)
Change in restricted cash                      (12.8          )   8.3
Other                                          4.3               0.7        
                                               (236.9         )   (180.5     )
Cash provided by (used for) financing
activities:
Changes in debt, net of issuance costs         152.7              (2.0       )
Dividends paid                                 (152.4         )   (136.6     )
Issuance of common shares                      20.7               8.2
Repurchase of common shares                    (7.8           )   (7.9       )
Excess tax benefits on stock-based             7.1               5.0        
compensation
                                               20.3              (133.3     )
Effect of exchange rate changes on cash        (0.1           )   0.3        
Cash and cash equivalents:
Change in cash and cash equivalents            136.9              12.8
Balance, beginning of year                     78.6              349.5      
Balance, end of period                         $    215.5        $  362.3   

B

RAYONIER INC. AND SUBSIDIARIES

BUSINESS SEGMENT SALES AND OPERATING INCOME (LOSS)

September30, 2012 (unaudited)

(millions of dollars)
                                                 
                 Three Months Ended                  Nine Months Ended
                 September  June 30,   September   September    September
                 30,                     30,         30,           30,
                 2012        2012        2011        2012          2011
Sales
Forest           $ 59.9      $ 52.7      $ 57.3      $ 164.7       $ 162.5
Resources
Real Estate      13.0        11.7        32.2        37.4          57.9
Performance
Fibers
Cellulose        247.2       220.2       207.5       679.5         593.8
specialties
Absorbent        41.0       34.3       48.0       114.1        145.6     
materials
Total
Performance      288.2      254.5      255.5      793.6        739.4     
Fibers
Wood Products    22.8        23.8        16.5        65.9          50.2
Other            26.3        29.3        25.9        76.7          94.9
Operations
Intersegment     (1.2    )   (0.1    )   (2.3    )   (1.6      )   (4.7      )
Eliminations
Total sales      $ 409.0    $ 371.9    $ 385.1    $ 1,136.7    $ 1,100.2 
                                                                   
Operating
income/(loss)
Forest           $ 11.2      $ 8.2       $ 10.8      $ 27.4        $ 33.7
Resources
Real Estate      8.4         6.0         28.1        20.9          40.5
Performance      101.5       83.7        74.9        265.8         221.7
Fibers
Wood Products    1.6         4.1         (0.7    )   6.7           (1.3      )
Other            (0.4    )   1.1         1.1         (0.2      )   1.0
Operations
Corporate and    (9.1    )   (4.5    )   (5.9    )   (24.8     )   (20.6     )
other
Operating        $ 113.2    $ 98.6     $ 108.3    $ 295.8      $ 275.0   
income

C

RAYONIER INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP MEASURES

September30, 2012 (unaudited)

(millions of dollars, except per share information)
                                                              
CASH AVAILABLE FOR DISTRIBUTION (a):
                                                 Nine Months Ended
                                                 September 30,   September 30,
                                                 2012            2011
Cash provided by operating activities            $   353.6       $   326.3
Capital expenditures (b)                         (112.0     )    (87.2      )
Change in committed cash                         6.2             (0.1       )
Excess tax benefits on stock-based               7.1             5.0
compensation
Other                                            6.0            (2.3       )
Cash Available for Distribution                  $   260.9      $   241.7  
                                                                            

(a) Cash Available for Distribution (CAD) is defined as cash provided by
operating activities adjusted for capital spending, the change in committed
cash, and other items which include cash provided by discontinued operations,
proceeds from matured energy forward contracts, excess tax benefits on
stock-based compensation and the change in capital expenditures purchased on
account. CAD is a non-GAAP measure of cash generated during a period that is
available for dividend distribution, repurchase of the Company's common
shares, debt reduction and strategic acquisitions. CAD is not necessarily
indicative of the CAD that may be generated in future periods.

(b) Capital expenditures exclude strategic capital. For the nine months ended
September 30, 2012, strategic capital totaled $130.7 million for the Jesup
mill cellulose specialties expansion and $11.6 million for timberland
acquisitions. For the nine months ended September 30, 2011, strategic capital
totaled $94.2 million for timberlands and $14.6 million for the Jesup mill
cellulose specialties expansion.

PRO FORMA OPERATING INCOME AND NET INCOME:
                                                                
                                                       Three Months Ended
                                                       September 30, 2011
                                                                  
                                                                   Per Diluted
                                                       $           Share
Net Income                                             $ 104.9     $  0.84
Reversal of tax reserve related to the taxability of   (16.0   )   (0.13    )
the AFMC
Pro forma Net Income                                   $ 88.9     $  0.71  
                                                                   
                                                                   
                                                       Nine Months Ended
                                                       September 30, 2011
                                                                  
                                                                   Per Diluted
                                                       $           Share
Net Income                                             $ 219.8     $  1.75
Reversal of tax reserve related to the taxability of   (16.0   )   (0.13    )
the AFMC
Pro forma Net Income                                   $ 203.8    $  1.62  
                                                                            
D

Contact:

Rayonier
Investors:
Carl Kraus, 904-357-9158
Ed Kiker, 904-357-9186
or
Media:
Ed Frazier, 904-357-9100