The company's wood products businesses produce and sell softwood lumber, plywood and veneer; oriented strand board, composite and other panels; hardwood lumber; doors and treated products. These products are sold primarily through the company's own sales organizations. Building materials are sold to wholesalers, retailers and industrial users. The raw materials required to produce these products are purchased from third parties, transferred at market price from the company's timberlands, or obtained from long-term licensing arrangements covering approximately 27 million acres in Canada (of which 18.9 million acres are considered to be productive forestland).

During the 1998 fourth quarter, the company changed its British Columbia lumber operations by permanently closing the Lumby sawmill, converting the Merritt mill to a planer--only operation and reconfiguring its remaining four sawmills to achieve improved production.

PULP, PAPER AND PACKAGING

The company's pulp, paper and packaging businesses include: Pulp, which manufactures chemical wood pulp for world markets; Paper, which manufactures and markets a range of both coated and uncoated fine papers through paper merchants and printers; Containerboard Packaging, which manufactures linerboard and corrugating medium, primarily used in the production of corrugated packaging, and manufactures and markets industrial and agricultural packaging; Paperboard, which manufactures and markets liquid packaging board, used for production of liquid containers, to West Coast and Pacific Rim customers; and Recycling, which operates an extensive wastepaper collection system and markets it to company mills and worldwide customers.

During the first quarter of 1998, the company completed the ownership restructure of its newsprint joint venture, North Pacific Paper Corporation (NORPAC). Through this restructuring, the ownership changed from 80 percent company ownership and 20 percent Nippon Paper Industries Co., Ltd., to 50 percent for each shareholder. The company provides raw materials, management, marketing and support services to this joint venture.

The company took a charge of $22 million for the closure of the Longview, Washington, chlor-alkali facility in the 1998 fourth quarter.

In the fourth quarter of 1998, the company completed the purchase of the Dryden, Ontario, Canada, uncoated freesheet mill and related assets from Bowater Inc. This facility has the capacity to produce 380,000 short tons of fine paper per year and a small amount of bleached softwood market pulp. Two lumber mills, with 200 million board feet of capacity, and timber licenses comprising 4.35 million acres were also part of this purchase.

In 1998, the company's 50 percent owned joint venture, SCA Weyerhaeuser Packaging Holding Company Asia Ltd., opened a newly constructed containerboard packaging facility in Shanghai, China. Construction continues on another facility in Wuhan, China, which is expected to open in 1999.

In the 1998 fourth quarter, the company and Wilton Connor Packaging, Inc., formed a joint venture, Wilton Connor LLC, based in Charlotte, North Carolina. This joint venture, in which the company has a 50 percent owner ship interest, supplies full-service, value-added turnkey packaging solutions that assist product manufacturers in the areas of retail marketing and distribution. >