Rayonier Reports Second Quarter Results

For the first six months, net income attributable to Rayonier was $62 million, or $.47 per share, compared to $235 million, or $1.80 per share in the prior period. Pro forma net income was $23 million, or $.17 per share, compared to $62 million, or $.47 per share, in the prior year period.

The following table summarizes the current quarter and comparable prior period results:

Cost related to the spin-off of the Performance Fibers business

The following table summarizes the year-to-date and comparable prior period results:

Cost related to the spin-off of the Performance Fibers business

Second quarter sales of $101 million were $8 million below the prior year period, while operating income of $22 million was slightly higher. Year-to-date sales of $206 million increased $40 million from 2013, while operating income of $49 million rose $15 million above prior year results.

In the Atlantic region, second quarter and year-to-date operating results improved compared to the respective 2013 periods, as higher pine prices continued due to strong pulpwood demand and restricted supply, partially offset by lower volumes. Second quarter and year-to-date operating results in the Gulf region also improved due to higher pine prices and non-timber income, partially offset by lower volumes. Unusually wet weather conditions in both regions hindered harvest efforts during the second quarter.

In the Pacific Northwest, second quarter results were comparable to the prior year period as lower costs offset reduced volumes due to high China inventories. Year-to-date results compared to 2013 increased significantly due to higher prices and volumes that benefited from the surge in China demand earlier in the year.

Second quarter operating results in New Zealand were slightly lower than 2013 as prices declined in the export market due to the high China inventories and were only partially offset by higher domestic prices and volumes. Year-to-date results were slightly higher compared to 2013, reflecting the lower 26 percent JV ownership in first quarter 2013, partially offset by lower export results.

Sales of $34 million and operating income of $28 million in the second quarter increased $21 million and $22 million, respectively, from the prior year period. On a year-to-date basis, sales increased $2 million, while operating results increased $6 million. These increases were largely due to the aforementioned sale of a 19,500-acre non-strategic timberland parcel in Florida. Second quarter 2014 operating income also included a $6 million settlement of a bankruptcy claim related to a 2006 sale.

Excluding the gain related to the consolidation of the New Zealand JV in the second quarter of 2013, corporate and other operating expenses of $10 million in the second quarter of 2014 improved $2 million due primarily to lower benefit costs. On a year-to-date basis, corporate and other expenses were comparable. Although all periods have been restated to present the Performance Fibers business as discontinued operations, general corporate expenses previously allocated to Performance Fibers are not permitted to be allocated to discontinued operations under generally accepted accounting principles. Going forward, the Company expects annual corporate expenses to approximate $20 million.

Interest and other expenses of $20 million in the second quarter were $11 million above the prior year period due to $5 million of interest related to early repayment of debt in connection with the spin-off and unfavorable mark-to-market valuations on New Zealand interest rate swaps. In addition, other expenses in the second quarter included a $4 million asset write-off related to the spin-off of the Performance Fibers business.

The second quarter income tax benefit from continuing operations before discrete items was $1 millioncompared to an income tax benefit of $10 million in 2013. The income tax benefit represents tax benefits from losses at Rayonier’s taxable operations and interest and general administrative expenses not allowed to be allocated to the discontinued operations of the Performance Fibers business. Including discrete items, the second quarter income tax expense from continuing operations was $14 million compared to an income tax benefit of $16 million in the second quarter of 2013. In the second quarter of 2014, a $16 million valuation allowance related to the cellulosic biofuel producer credit (CBPC) was recorded reflecting Rayonier’s limited potential use of the CBPC going forward.

The year-to-date income tax benefit from continuing operations before discrete items was $7 million compared to $16 million in 2013. Including discrete items, the income tax expense from continuing operations was $6 million compared to a $42 million tax benefit in 2013. Aside from the $16 million CBPC valuation allowance recorded in 2014, the prior year amount included a $19 million tax benefit from the exchange of the alternative fuel mixture credit for CBPC.

“With the successful completion of the spin-off, we have positioned Rayonier as an international pure-play timberland REIT,” commented Nunes. “We look to our portfolio of highly-productive timberlands to generate increasing cash flow as U.S. housing starts gradually improve. We anticipate 2014 results from our timberlands in the U.S. South will be well above the prior year as demand continues to improve. In the Pacific Northwest and New Zealand, we expect higher log inventories in China to result in lower prices in the second half of 2014. Accordingly, we anticipate Forest Resources’ full year results will be modestly below our earlier guidance, but well above 2013. In Real Estate, we expect 2014 results will be comparable to 2013.

“We are committed to creating shareholder value from an attractive, growing dividend funded by recurring, operational cash flow from our Forest Resources and Real Estate segments. Operational cash flows are expected to benefit from gradually improving U.S. housing starts, continued investments in advanced silviculture, and incremental harvest volumes from timberland acquisitions. Through the first half of 2014, we acquired 35,000 acres of highly productive timberlands for $75 million. We are pleased with the quality of these assets and look to further utilize our strong balance sheet while maintaining a disciplined approach to pursuing other timberland properties to add to our portfolio,” concluded Nunes.

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 events, developments or financial or operational performance or results, 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,” “intend,” “project,” “anticipate” and other similar language. However, the absence of these or similar words or expressions does not mean that a statement is not forward-looking. While management believes that these forward-looking statements are reasonable when made, forward-looking statements are not guarantees of future performance or events and undue reliance should not be placed on these statements.

Forward-looking statements are only as of the date they are made, and the Company undertakes no duty to update its forward- looking statements except as required by law. You are advised, however, to review any further disclosures we make on related subjects in our subsequent Forms 10-Q, 10-K, 8-K and other reports to the SEC.

The following important factors, among others, could cause actual results or events to differ materially from those expressed in forward-looking statements that may have been made in this document: the cyclical and competitive nature of the industries in which we operate; fluctuations in demand for, or supply of, our forest products and real estate offerings; entry of new competitors into our markets; changes in global economic conditions and world events, including political changes in particular regions or countries; fluctuations in demand for our products in Asia, and especially China; the uncertainties of potential impacts of climate-related initiatives; the cost and availability of third party logging and trucking services; 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, 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; 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; changes in key management and personnel; our ability to meet all necessary legal requirements to continue to qualify as a real estate investment trust (“REIT”) and changes in tax laws that could adversely affect tax treatment of our specific businesses or 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; a delayed or weak recovery 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 and other reports on file with the Securities and Exchange Commission. Rayonier assumes no obligation to update these statements except as is required by law.

(millions of dollars, except per share information)

(a) Pro forma Net Income per share is a non-GAAP measure. See Schedule E for a reconciliation to the nearest GAAP measure.

(b) The shares used for the assumed conversion of the Company’s exchangeable notes increased in the second quarter of 2014 due to a lower adjusted exchange price as a result of the spin-off.

A

(millions of dollars)

(a) Includes the Performance Fibers business that was spun-off on June 27, 2014.

B

(millions of dollars)

Proceeds from disposition of Wood Products business

Proceeds from spin-off of Rayonier Advanced Materials

C

(millions of dollars)

(a) The three and six months ended June30, 2013 exclude a $16.1 million gain related to the consolidation of the New Zealand joint venture. Pro forma operating income is a non-GAAP measure. See Schedule E for reconciliation.

D

(millions of dollars except per share information)

(a) Cash Available for Distribution (CAD) is defined as cash provided by operating activities adjusted for capital spending, strategic divestitures, the change in committed cash, and other items which include cash provided by discontinued operations, 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 of $74.8 million for timberland acquisitions during the six months ended June30, 2014. For the six months ended June30, 2013, strategic capital totaled $139.9 million for the additional interest in the New Zealand joint venture and $10.4 million for timberland acquisitions.

Cost related to the spin-off of the Performance Fibers business

$

0.47

Cost related to the spin-off of the Performance Fibers business

0.03

(0.33

E