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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the year ended December 31, 2003

OR

For the transition period from              to             

Commission File Number 1-6780

RAYONIER INC.

Incorporated in the State of North Carolina

I.R.S. Employer Identification No. 13-2607329

50 NORTH LAURA STREET,

JACKSONVILLE, FL 32202

(Principal Executive Office)

Telephone Number: (904) 357-9100

Securities registered pursuant to Section 12(b) of the Act,

all of which are registered on the New York Stock Exchange:

Common Shares

Medium-Term Notes, due 2004

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K.    ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    YES  x    NO  ¨

The aggregate market value of the Common Shares of the registrant held by non-affiliates of the Registrant at the close of business on June 30, 2003 was $1,337,228,607.

As of March 3, 2004, there were outstanding 49,403,539 Common Shares of the Registrant.

The registrant’s definitive proxy statement filed or to be filed with the Securities and Exchange Commission pursuant to Regulation 14A involving the election of directors at the annual meeting of the shareholders of the registrant scheduled to be held May 20, 2004, is incorporated by reference in Part III of the Form 10-K.

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INDEX TO FINANCIAL STATEMENTS

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PART I

Item 1. BUSINESS

General

Rayonier Inc. (Rayonier or the Company), including its subsidiaries, is a leading international forest products company primarily engaged in activities associated with timberland management, including the sale of timber and timberlands and in the production and sale of high value-added performance cellulose fibers. Rayonier owns or leases approximately 2.1 million acres of timberland located primarily in the United States and New Zealand and owns and operates two performance fibers mills in the United States. The Company also manufactures wood products through its lumber manufacturing facilities in the United States and a medium-density fiberboard (MDF) plant in New Zealand. In addition, the Company engages in the trading of logs and wood products. The Company’s corporate strategy is focused primarily on its two core reportable segments—Timber and Land and Performance Fibers.

Rayonier traces its origins to the Rainier Pulp & Paper Company founded in Shelton, WA, in 1926. In 1937, it became “Rayonier Incorporated,” a public company traded on the New York Stock Exchange (NYSE), until 1968, when it became a wholly owned subsidiary of ITT Corporation. On February 28, 1994, Rayonier again became an independent public company when ITT distributed all of Rayonier’s Common Shares to ITT stockholders. Rayonier shares are publicly traded on the NYSE under the symbol RYN. Rayonier is a North Carolina corporation with its executive offices located at 50 North Laura Street, Jacksonville, FL, 32202. Its telephone number is (904) 357-9100.

On August 18, 2003, the Company’s Board of Directors approved a plan to convert the Company into a REIT, effective January 1, 2004. The Company’s U.S. timber harvest operations qualify for REIT tax treatment and will not be required to pay federal income taxes if applicable distribution, income, asset and shareholder tests are met. However, the Company is subject to corporate taxes on built-in gains (the excess of fair market value over tax basis at January 1, 2004) on taxable sales of property within the REIT during the first ten years following the election to be taxed as a REIT. These operations are conducted by the Company’s wholly-owned subsidiary, Rayonier Forest Resources, L.P. (RFR), formerly known as Rayonier Timberlands Operating Company. Other non-REIT qualifying and foreign operations, which will continue to pay corporate-level tax on earnings, were transferred to TRS Holdings Inc., a wholly-owned taxable REIT subsidiary of Rayonier Inc. These operations include the Company’s Performance Fibers, New Zealand timber, and Wood Products businesses, as well as the Company’s marketing of high value timberland (known as higher and better use, “HBU”).

Rayonier operates in three reportable business segments as defined by Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures About Segments of an Enterprise and Related Information: Timber and Land, Performance Fibers, and Wood Products. The Timber and Land segment’s strategies include buying, selling and managing timberlands, selling timber, and selling HBU timberland to be used for conservation, real estate development and large tract preservation. For presentation purposes, the Company classifies its sales activities into Timber sales and Land sales. Timber sales include all activities that relate to the harvesting of timber, while Land sales include the sale of all timberland tracts, including those designated as HBU. The Performance Fibers segment includes two major product lines, Cellulose Specialties and Absorbent Materials. The Wood Products segment includes lumber and MDF. The Company’s remaining operations are combined and reported in an “Other” category as permitted by SFAS No. 131 and include purchasing, harvesting and selling timber acquired from third parties (log trading) and trading wood products. For information on sales, operating income and identifiable assets by reportable segment, see Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 3—Segment and Geographical Information.

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Sales

Rayonier’s sales (as reclassified for discontinued operations) for the three years ended December 31, 2003, were as follows (in millions):

Rayonier has customers in more than 50 countries and approximately 40 percent of the Company’s 2003 sales of $1.1 billion were made to customers outside the United States.

Timber and Land

Rayonier buys and manages timberlands, sells standing timber at auction to third parties, sells delivered logs, and also sells its timberland for large tract conservation and real estate development. The segment executes its strategies in two ways: Timber and Land sales.

Timber—Rayonier owned or leased approximately 2.1 million acres of timberlands as of December 31, 2003, as follows (in thousands of acres):

The Company’s Southeastern U.S. timberlands consist of approximately 1.6 million acres located primarily in Georgia, Florida and Alabama. These timberlands’ proximity to pulp, paper and lumber mills results in significant competition for the purchase of the timber. Approximately 50 percent of timber harvest represents high-value wood sold primarily to lumber mills. The balance is pulpwood used for making pulp and paper. Softwoods are the predominant species on the Southeastern U.S. timberlands and include loblolly and slash pine, while hardwoods, the minor species, include red oak, sweet gum, black gum, red maple, cypress and green ash.

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Through advanced silvicultural practices, the Company has increased volume per acre of timber available for harvest from its Southeastern U.S. timberlands by approximately 2 percent per year. This is a primary factor behind an increasing pine harvest trend over the past 15 years.

Northwestern U.S. timberlands consist of approximately 370,000 acres primarily on the Olympic Peninsula in Western Washington State. All are owned in fee and consist almost entirely of second growth trees. These timberlands are primarily softwood stands, with approximately 65 percent hemlock and the remainder Douglas fir, Western red cedar and spruce. Hardwood timber stands consist principally of alder and maple.

The Company’s New Zealand forest assets consist of 76,000 acres of fee-owned timberland, plus Crown Forest Licenses that provide the right to grow and harvest timber on approximately 42,000 acres of government owned timberland for a minimum period of 35 years. Approximately 87 percent of these timberlands consist of radiata pine, well suited for high-quality lumber and panel products. The balance is Douglas fir and other species. Timber is grown and sold for both domestic New Zealand uses and for export, primarily to the Pacific Rim markets. In addition, the Company manages timberlands for other parties in New Zealand and Australia.

Rayonier manages timberlands to scientifically develop forests to their maximum economic value. The average rotation age for timber from the Southeastern U.S. (primarily Southern pine) is 21 years. The average rotation age for timber destined for domestic and export markets from the Northwestern U.S. (primarily hemlock and Douglas fir) is 45 to 50 years. The average rotation age for timber grown in New Zealand (primarily radiata pine) is 25 to 28 years. Timber in the Southeast U.S. is saw-timber and pulpwood, while timber in the Northwest U.S. and New Zealand is primarily saw-timber.

Rayonier sells timber through a public auction process, predominantly to third parties, and also sells delivered logs. By requiring the Company’s other operating units to competitively bid for their timber and wood requirements, the Company believes it can maximize the true economic return on its investments. In 2003, approximately 98 percent of the Company’s standing timber sales were made to third parties. These sales were primarily made on either a lump-sum or pay-as-cut basis. On a lump-sum basis, a minimum of 20 percent initial payment is required, title and risk of loss are transferred and installment payments are made in advance for the volume to be cut. On a pay-as-cut basis, a minimum 10 percent deposit and a performance bond are required. Payments are made and title and risk of loss are transferred as the timber is cut.

During the fourth quarter of 2003, in anticipation of converting to a REIT, the Company discontinued offering lump-sum contracts in the Northwest U.S. and began utilizing pay-as-cut contracts which qualify for capital gains treatment under Section 631(b) of the Internal Revenue Code (IRC). These contracts require a minimum 15 percent initial payment and title and risk of loss are transferred when the timber is cut.

The Company manages its timberlands in conformity with best forest industry practices. A key to success is the extensive application of Rayonier’s silvicultural expertise to species selection for plantations, soil preparation, thinning of timber stands, pruning of selected species, fertilization and careful timing of the harvest, all of which are designed to maximize value while complying with environmental requirements. The following table sets forth timberland acres (in thousands) as of December 31, 2003, by region and by timber classification:

Softwood merchantable timber inventory is an estimate of the amount of standing timber at the earliest age that it could be economically harvested. Hardwood inventory is an estimate of the amount of standing timber available for harvest. Estimates are based on an inventory system that continually involves periodic statistical sampling of the timberlands. Adjustments are made on the basis of growth estimates, harvest information and market conditions which may impact the economical harvesting of timber located in wetlands, or other marginal geographic areas.

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The following table sets forth the estimated volumes of merchantable timber by location and type, as of December 31, 2003:

Land—Rayonier invests in timberlands seeking to maximize its total return from a full cycle of ownership. The end cycle includes selling portions of its timberland base to capture the appreciated value of its overall asset base. This program includes selling timberland for others to manage and harvest, as well as selling HBU timberlands.

In November 2000, the Company announced that it would routinely sell 2 percent to 4 percent of its timberland base each year to capture the appreciated value of its overall holdings on a more routine basis. The Company plans on periodically replenishing its timberland base through large scale, strategic acquisitions, although smaller acquisitions may be made from time to time on an opportunistic basis.

Timberland sales for the three years ended December 31, 2003, are summarized in the following table (thousands of dollars, except acres sold):

Performance Fibers

Rayonier is a leading manufacturer of high performance cellulose fibers with production facilities in Jesup, GA and Fernandina Beach, FL, that have a combined annual capacity of approximately 720,000 metric tons. To meet customers’ needs these facilities are capable of manufacturing more than 25 different grades of performance fibers. The Jesup facility can produce approximately 570,000 metric tons, or 79 percent of Rayonier’s total capacity. The Fernandina Beach facility can produce approximately 150,000 metric tons, or 21 percent of the Company’s total capacity.

Rayonier produces and sells these performance fibers primarily to meet specific customer orders and specifications throughout the world. The customers use these products to produce a wide variety of consumer and industrial products. Approximately two-thirds of Rayonier’s Performance Fibers sales are exported primarily to customers in Asia, Europe and Latin America. Approximately 85 percent of Performance Fibers sales are made directly by Rayonier personnel, with the remainder made through independent sales agents primarily to export locations.

This segment includes two major product lines – Cellulose Specialties and Absorbent Materials.

Cellulose Specialties—Rayonier is one of the world’s leading producers of specialty cellulose products, most of which are used in dissolving chemical applications that require a highly purified form of cellulose. Cellulose Specialties products are used in a wide variety of end uses such as: acetate textile fibers, rigid packaging, photographic film, impact-resistant plastics, cigarette filters, high-tenacity rayon yarn for tires and industrial hoses, pharmaceuticals, cosmetics, detergents, sausage casings, food products, thickeners for oil well drilling muds, lacquers, paints, printing inks, explosives and LCD screens. In addition, Cellulose Specialties include high value specialty paper applications used for decorative laminates for counter tops, automotive air and oil filters, shoe innersoles, battery separators, circuit boards and filter media for the food industry. Rayonier concentrates on and is a leading producer of the most highly valued, technologically demanding forms of Cellulose Specialty products, such as cellulose acetate and high-purity cellulose ethers.

Absorbent Materials—Rayonier is a supplier of performance fibers for absorbent hygiene products. These fibers are typically referred to as fluff fibers and are used as an absorbent medium in products such as disposable baby diapers, feminine hygiene products, incontinence pads, convalescent bed pads, industrial towels and wipes and non-woven fabrics.

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The Absorbent Materials product line also includes paper applications that are made as a secondary product to fluff fibers to help match inconsistencies in demand to capacity. These paper applications usually represent less than 5 percent of total Performance Fibers production and are used in the manufacture of bond, book and printing paper.

Rayonier also produces and markets an ultra-thin engineered absorbent core material that goes into super-absorbent sanitary napkins and diaper products as well as other applications. A 12,000 ton per-year manufacturing facility in Jesup, GA was completed in 2001 to bring manufacturing in-house and aid in the continued development of these products. This is a developing business that represented approximately 8 percent of the 2003 absorbent materials product line total sales.

Wood Products

The Wood Products business segment manufactures and sells dimension and specialty lumber and MDF.

Rayonier operates three lumber manufacturing facilities in the U.S. that produce Southern pine and specialty lumber for residential construction and industrial uses. The mills located at Baxley, Eatonton, and Swainsboro, GA, have a combined annual capacity of approximately 365 million board feet of lumber, while also producing approximately 750,000 tons of wood chips for pulp and paper manufacturing. Lumber sales are primarily to customers in the Southeastern U.S. Rayonier personnel sell most of the lumber; however sales to certain export locations are made through independent agents. Substantially all of the wood chip production is sold (at market prices) to Rayonier’s Jesup, GA, performance fibers facility, accounting for approximately 18 percent of that facility’s 2003 total wood consumption.

The Company operates a premium grade MDF facility in New Zealand with an annual capacity of 170,000 cubic meters. The Company’s MDF is marketed worldwide by Rayonier personnel, independent sales agents and a New Zealand distributor.

Other

Rayonier operates a log trading business in the Northwest U.S., New Zealand and Chile. It also exports logs from New Zealand and Russia. The Company purchases and harvests timber for sale in domestic and export markets. Timber is purchased from both internal and external sources. In 2003, no timber was sourced internally in the Northwest U.S. and approximately 26 percent of New Zealand log trading sales volume was sourced from Company timberlands. Logs were also purchased from independent dealers who in some cases had purchased cutting rights to Company timberlands. Additionally, Rayonier purchases lumber and wood panel products for sale in both domestic and export markets.

Discontinued Operations and Dispositions

Prior years’ dispositions and discontinued operations include Rayonier’s New Zealand East Coast timberland operations and associated assets sold for $64 million in 2002; its Port Angeles, WA performance fibers mill that was closed on February 28, 1997; its interest in the Grays Harbor, WA, performance fibers and paper complex, which was closed in 1992; its wholly-owned subsidiary, Southern Wood Piedmont Company (SWP), which ceased operations in 1989; its Eastern Research Division, which ceased operations in 1981; and other miscellaneous assets held for disposition. See also Note 14—Reserves for Dispositions and Discontinued Operations.

Foreign Sales and Operations

Rayonier’s sales for the three years ended December 31, 2003, by geographical destination are as follows (in millions):

The majority of sales to foreign countries are denominated in U.S. dollars.

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Overseas assets, primarily in New Zealand, were approximately 14 percent of total assets at the end of 2003, and Rayonier’s sales from non-U.S. operations were approximately 9 percent of total sales. See also Note 3—Segment and Geographical Information.

Patents

Rayonier has a number of patents and pending patent applications that relate to its proprietary products and processes. The Company intends to take such steps as are necessary to protect its patents and file applications for future inventions that are deemed important to its business operations.

Competition and Customers

The Company’s U.S. timberlands are located in two major timber-growing regions (the Northwest and the Southeast), where timber markets are fragmented and competitive. In the Northwest U.S., The Campbell Group, John Hancock Mutual Life Insurance Co., Simpson Timber Company, Weyerhaeuser, and Washington State (Department of Natural Resources) are significant competitors. Other competition in the Northwest U.S. arises from log imports from Canada by Timberwest, Interfor and Canfor. In the Southeast U.S., the Company competes with Plum Creek and International Paper, among others. Price is the principal method of competition. In the Northwest U.S., the majority of the Company’s customers are large, financially stable businesses, while in the Southeastern U.S., the majority of customers are smaller, family-owned businesses.

Performance Fibers are marketed worldwide against strong competition from domestic and foreign producers. Rayonier’s major competitors include International Paper, Weyerhaeuser, Georgia-Pacific and Buckeye Technologies. In June of 2003, International Paper closed its Natchez, Mississippi mill, which was a major competitor in the cellulose acetate market. It is believed that Rayonier, the leading supplier in this market, and its cellulose specialties competitors, together have sufficient capacity to assure continued adequate supply of cellulose acetate products to the market. The final impact of this closure may take a year to fully develop, but subsequent to the closure price increases of 6 to 8 percent have been announced. In the fluff pulp market, Koch Industries recently announced that it was purchasing two fluff pulp mills, in Brunswick, Georgia and Leaf River, Mississippi, from Georgia-Pacific. It is still too early to assess what impact, if any, this sale, which is scheduled to close in the second quarter of 2004, will have on the fluff market.

Rayonier continues to work towards development of new products and processes that could add additional value to the Performance Fibers business. Pricing, product performance and technical service are principal methods of competition.

Rayonier’s lumber and MDF wood products compete with construction and furniture materials manufactured by other companies. Incremental productivity improvements at the company’s MDF plant and improving demand in key U.S., Japanese and Chinese markets have been negatively impacted by the recent strength of the New Zealand currency.

Export log markets are highly competitive. Logs are available from several countries and numerous suppliers. In New Zealand, major competitors include Carter Holt Harvey and Fletcher Challenge. Price and customer relationships are important methods of competition.

The Company has no single customer that purchased an amount greater than or equal to 10 percent of its consolidated revenues during the years ended December 31, 2003, 2002 or 2001. On a segment basis, Performance Fibers 2003 sales included one customer that purchased an amount equal to 12 percent of the segment’s sales and four other customers that each purchased approximately 6 to 7 percent of the segment’s sales. The loss of any one of these customers could have a material adverse effect on this segment’s results of operations. In February 2004, a private equity firm made a tender offer to purchase a customer expected to account for approximately 12 percent of our 2004 cellulose specialties sales. It is too early to determine what impact, if any, this transaction will have on our Performance Fibers business.

Seasonality

The Company’s Timber and Land segment normally experiences lower timber harvest volumes in the third quarter of each year due to the greater seasonal availability of non-Rayonier timber during the drier summer harvesting period, particularly in the Northwestern U.S. The Wood Products segment may experience higher seasonal demand in the volume of lumber sold in the second quarter of each year primarily due to the relative strength of housing starts. The Performance Fibers segment results are normally not impacted by seasonal changes, although most contracts are renewed on January 1 each year.

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Environmental Matters

See “Environmental Regulation” in Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 16—Contingencies.

Raw Materials

In the U.S., timber harvesting continues to be restricted by legislation, litigation and pressure from various preservationist groups. The market supply of timber is also subject to cyclical price swings in wood products and in pulp and paper markets, as well as wet weather conditions which restrict the ability to harvest timber. In 2003, Performance Fibers results were negatively impacted by a shortage and resulting higher cost of hardwood, timber and chips for the Cellulose Specialties product line. Separately, Rayonier has pursued, and is continuing to pursue, reductions in usage and costs of other key raw materials, supplies and contract services at its Performance Fibers, MDF and lumber mills. Management foresees no material constraints from pricing or availability of its key raw materials.

Research and Development

Rayonier believes it maintains one of the preeminent Performance Fibers research facilities and staff in the forest products industry. Research and development efforts are directed primarily at developing new and improved cellulose fiber grades, absorbent materials and related products, improving manufacturing efficiency, reducing energy needs, improving product quality and developing improved environmental controls. In 2003, to better align itself with its customers’ priorities, the Company began focusing its efforts more on the development of existing core products and technologies versus new product research. As a result, the headcount at the research center was reduced by approximately 40 percent. The research center is adjacent to the Performance Fibers mill in Jesup, GA.

Research activities related to timber operations include genetic tree improvement programs as well as applied silvicultural programs to identify management practices that improve financial returns from timber assets.

Research and development annual expenditures were approximately $9 million in 2003, 2002 and 2001.

Employee Relations

Rayonier currently employs approximately 2,200 people. Of this number, approximately 2,000 are employees in the United States, of whom 43 percent are covered by labor contracts. Most hourly employees are represented by one of several labor unions. Labor relations are maintained in a normal and satisfactory manner.

In August 2001 and December 2001, Jesup’s labor agreements, covering approximately 700 employees, were extended through June 30, 2008. In April 2001, Fernandina’s labor contracts, covering approximately 250 employees, were extended through April 30, 2006. There were no changes to the Jesup and Fernandina labor contracts in 2003.

Rayonier has in effect various benefit plans for its employees and retirees, providing certain group medical, dental and life insurance coverage, pension and other benefits. The cost of these plans is borne primarily by Rayonier.

Item 2. PROPERTIES

Rayonier owns or leases approximately 2.0 million acres of timberlands in the United States. The Company manages these properties and sells timber to other Company operating units, as well as unaffiliated parties. Rayonier’s New Zealand subsidiary owns or manages the forest assets on approximately 0.2 million acres of plantation forests in New Zealand and Australia. Rayonier and its wholly owned subsidiaries own or lease various other properties used in their operations. These include two Performance Fibers mills, an Engineered Absorbent Materials (EAM) facility, three lumber manufacturing facilities, an MDF plant, a research facility and Rayonier’s corporate headquarters. These facilities are located in the Southeastern and Northwestern portions of the U.S. and in New Zealand. Additional information on mill volumes is disclosed in Item 6—Selected Financial Data.

Item 3. LEGAL PROCEEDINGS

Rayonier is engaged in various legal actions, including certain environmental proceedings that are discussed more fully in Note 14—Reserves for Dispositions and Discontinued Operations and Note 16—Contingencies.

On February 22, 2001, the Company received a notice of proposed disallowance from the Internal Revenue Service (IRS), arising from an issue in dispute regarding the Company’s 1996 and 1997 federal tax returns, which could have resulted in an additional tax liability of $28.3 million. The Company had been discussing this issue with the IRS since 1999 and in the first

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quarter of 2003 it accepted a proposal from the IRS (the “Settlement Initiative”) in order to expedite resolution of the matter. Under the Settlement Initiative the maximum disallowance was set at a 90 percent level. Accordingly, the Company adjusted its estimated first quarter 2003 tax provision to recognize a tax benefit of $2.3 million at a 10 percent minimum allowance threshold, to reflect the maximum 90 percent disallowance set forth in the Settlement Initiative. In April 2003, the Company deposited $6.4 million with the IRS, representing $3.7 million in tax and $2.7 million in interest, in anticipation of audit settlements pertaining to this issue. Final resolution of this matter is likely to occur in the next 12 to 24 months.

Between 1985 and 1995, Southern Wood Piedmont (SWP), a subsidiary of the Company, sent contaminated soil excavated in connection with the cleanup of various closed wood processing sites to a third-party processor for recycling. The processing facility closed in 1995 and is the subject of a variety of environmental related charges and a lawsuit brought by the U.S. Environmental Protection Agency (EPA) and the Louisiana Department of Environmental Quality (LDEQ) in June 1990, in United States District Court for the Western District of Louisiana against the owner of the processing facility. Also in dispute is disposal liability for approximately 150,000 tons of recycled material from sites operated by SWP that are still owned and retained by the processor. Currently there are no claims pending against the Company or SWP by the EPA or the LDEQ. However, both have indicated that they believe SWP may be liable for some portion of the costs of clean-up and disposal of the recycled material sent to the processing site by SWP. If no settlement is reached in this matter, trial is scheduled to begin in September, 2004. There are numerous possible outcomes that could determine the Company’s ultimate liability, if any. The Company believes that reserves at December 31, 2003 adequately reflect the probable costs to be incurred upon the ultimate resolution of the dispute. See also Note 14-Reserves for Dispositions and Discontinued Operations.

In December 2001, the United States commenced a lawsuit against the Company in the United States District Court for the Western District of Washington to recover approximately $3.2 million in costs allegedly incurred by the EPA in 1997 to conduct an Expanded Site Investigation at the Company’s Port Angeles mill site. Rayonier challenged the EPA’s authority to recover this type of cost, as well as the validity of the amount spent. Trial in this matter commenced February 2, 2004 and concluded on February 24. On February 25, the court ruled that the United States was entitled only to approximately $0.7 million of the approximately $3.2 million claimed, and denied a request by the United States for an order permitting it to recover future costs relating to the Port Angeles site. While the court’s ruling is favorable, the Company is evaluating its options as it is unclear whether the United States will appeal the decision. The Company believes that the ultimate outcome will not have a material adverse impact on the Company’s financial position, liquidity or results of operations and that its reserves at December 31, 2003 adequately include the probable costs to be incurred upon the ultimate resolution of the dispute.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security holders of Rayonier during the fourth quarter of 2003.

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EXECUTIVE OFFICERS OF RAYONIER

W. Lee Nutter, 60, Chairman, President and Chief Executive Officer—Mr. Nutter joined Rayonier in 1967 in the Northwest Forest Operations and was named Vice President, Timber and Wood in 1984, Vice President, Forest Products in 1985, Senior Vice President, Operations in 1986 and Executive Vice President in 1987. He was elected President and Chief Operating Officer and a director of Rayonier in 1996 and to his current position effective January 1999. Mr. Nutter serves on the Board of Directors of Republic Services, Inc. and on the Board of Directors of the National Council for Air and Stream Improvement. He is also a member of the North Florida Regional Board of SunTrust Bank. Mr. Nutter holds a B.A. degree in Business Administration from the University of Washington and graduated from the Harvard University Graduate School of Business Advanced Management Program.

Paul G. Boynton, 39, Senior Vice President, Performance Fibers—Mr. Boynton joined Rayonier in 1999 as Director, Specialty Pulp Marketing and Sales. He was elected Vice President, Performance Fibers Marketing and Sales in October 1999, Vice President, Performance Fibers in January 2002, and to his current position effective July 2002. Prior to joining Rayonier, he held positions with 3M Corporation from 1990 to 1999, most recently as Global Brand Manager, 3M Home Care Division (global manufacturer and marketer of cleaning tool products). He holds a B.S. degree in mechanical engineering from Iowa State University, an M.B.A. degree from the University of Iowa, and graduated from the Harvard University Graduate School of Business Advanced Management Program.

Timothy H. Brannon, 56, Senior Vice President, Forest Resources and Wood Products—Mr. Brannon joined Rayonier in 1972 at its Southern Wood Piedmont subsidiary (SWP). He was named Vice President and Chief Operating Officer of SWP in 1983 and President in 1992. Mr. Brannon was elected Rayonier’s Vice President and Director, Performance Fibers Marketing and Sales in 1994, Vice President, Asia Pacific and Managing Director, Rayonier New Zealand in 1998 and to his current position effective March 2002. He holds a B.A. degree in psychology from Tulane University and graduated from the Harvard University Graduate School of Business Advanced Management Program.

Michael R. Herman, 41, Vice President and General Counsel and Assistant Secretary —Mr. Herman joined Rayonier in 2003 as Vice President and General Counsel and was elected to his current position in October 2003. Prior to joining Rayonier, he served as Vice President and General Counsel of GenTek Inc. (a publicly-traded global manufacturing conglomerate) and in other positions in GenTek’s legal department from 1992 to August 2003. GenTek Inc. filed a voluntary petition for protection under Chapter 11 of the federal Bankruptcy Code in the Bankruptcy Court for the District of Delaware in October of 2002, and the Bankruptcy Court approved a plan of reorganization for GenTek in November 2003 which resulted in GenTek’s emergence from bankruptcy. Mr. Herman was previously counsel to IBM’s Integrated Systems Solutions Corporation and an Associate with the law firm of Shearman & Sterling. He holds a B.A. degree in Economics and English from Binghamton University and a J.D. degree from St. John’s University School of Law.

John P. O’Grady, 58, Senior Vice President, Administration—Mr. O’Grady joined Rayonier in 1991 as Vice President, Administration. He was elected Senior Vice President, Human Resources in 1994 and to his current position effective January 1996. Mr. O’Grady serves on the American Forest and Paper Association’s employee and labor relations committee and from 1993 to 2003 served as a Management Trustee for the Paper, Allied-Industrial, Chemical and Energy Workers International Union Health and Welfare Trust. Mr. O’Grady also served on the Board of Advisors of the Michael F. Price College of Business of the University of Oklahoma from 1997 through 1999. He holds a B.S. degree in Labor Economics from the University of Akron, an M.S. degree in Industrial Relations from Rutgers University and a Ph.D. in Management from California Western University.

Gerald J. Pollack, 62, Senior Vice President and Chief Financial Officer—Mr. Pollack joined Rayonier in 1982 as Vice President and Controller. He was elected to the position of Vice President and Chief Financial Officer in 1986 and to his current position in May 1992. He is a member of the Board of Directors and Chairman of the Finance Committee of the Jacksonville Symphony Association, and President of the Northern Florida Chapter of Financial Executives International. Mr. Pollack has a B.S. degree in Physics from Rensselaer Polytechnic Institute and an M.B.A. degree in Accounting and Finance from the Amos Tuck School at Dartmouth.

Hans E. Vanden Noort, 45, Vice President and Corporate Controller—Mr. Vanden Noort joined Rayonier as Corporate Controller in 2001, and was elected to his current position in December 2001. Prior to coming to Rayonier, he held a number of senior management positions with Baker Process, a division of Baker Hughes, Inc. (manufacturer of petroleum-related equipment and supplies), most recently as Vice President of Finance and Administration. Mr. Vanden Noort holds a B.B.A. in accounting from the University of Cincinnati, an M.B.A. from the University of Michigan and is a Certified Public Accountant.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Rayonier Common Shares—Market Prices, Volume and Dividends

The table below reflects the range of market prices of Rayonier Common Shares as reported in the consolidated transaction reporting system of the New York Stock Exchange, the only exchange on which this security is listed, under the trading symbol RYN.

On May 21, 2003 the Company’s Board of Directors approved a three-for-two stock split and a 12.5 percent increase in the post-split quarterly cash dividend from 24 cents to 27 cents per share. The stock split was effected in the form of a stock dividend and on June 12, 2003, the Company issued one additional share of common stock for every two shares held to shareholders of record on June 2, 2003. Amounts shown below prior to the stock split have been restated.

On November 3, 2003 the Company’s Board of Directors declared a special dividend payable on December 19, 2003 to shareholders of record on November 14, 2003. The dividend was designed to satisfy the requirement that the Company pay to shareholders its undistributed taxable earnings and profits through year-end 2003 as part of its previously announced intention to convert to a REIT effective January 1, 2004. On December 19, 2003 the Company issued 6.4 million common shares and distributed $61 million reflecting the special dividend of $314 million. Price and volume data shown below prior to the special dividend have been restated.

On February 20, 2004, Rayonier announced a first quarter dividend of 56 cents per share payable March 31, 2004, to shareholders of record on March 11, 2004.

There were approximately 13,280 shareholders of record of Rayonier Common Shares on March 1, 2004.

ITEM 6. SELECTED FINANCIAL DATA

The following profitability, financial condition and cash flow summary of historical financial data for each of the five years in the period ended December 31, 2003, is derived from the Consolidated Financial Statements of the Company. The data should be read in conjunction with the Consolidated Financial Statements.

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