CHARGE FOR CLOSURE OR DISPOSITION OF FACILITIES

In 1998 and 1997, the company took pretax charges of $71 million and $89 million, respectively, for closure or disposition of facilities. The operating results of these facilities prior to these exit activities were not material to the company's results of operations. For those exit activities not completed in 1998, the company expects completion by 1999 year-end. These charges were related to the following facilities or activities:

1998:

• $25 million for changes in the British Columbia lumber operations -- Due to increased costs, the market impact of U.S. lumber quotas and the effect of the size and location of the mills on the business' competitiveness, the company is repositioning its British Columbia lumber operations. This includes permanently closing a sawmill in Lumby, converting the Merritt mill to a planer-only operation, and reconfiguring the company's remaining four sawmills in the province to achieve improved production capacity. Approximately 200 jobs are affected by these changes.
  
  

• $22 million for closure of the Longview, Washington, chlor-alkali facility -- The company is closing this facility by the end of the first quarter of 1999 because of current market conditions and the need to invest significant capital to ensure continued safe operation of the plant. This closure completes the company's exit from chemical manufacturing. Approximately 100 jobs will be eliminated by this closure.
  
  

• $20 million for pulp and paper operations reorganization -- Streamlining efforts in these businesses will affect approximately 460 employees.
  
  

• $4 million for corporate operations streamlining -- The outsourcing of the company's employee benefits administration and the closure of the urban waste recovery business will result in the elimination of approximately
  80 positions.

These costs are categorized in the aggregate as follows:     Dollar amounts in millions   1998     Termination and other employee-related costs   $ 39     Dispositions of property and equipment at net book value   16     Write-off of inventories   1     Environmental cleanup   9     Other exit activities   6                         $ 71

1997:

• $34 million for the closure, consolidation or disposition of recycling facilities -- The company is making adjustments to the nationwide system to meet the needs of internal and external customers in an increasingly competitive marketplace. Approximately 330 jobs are affected by these changes.
  
  

• $15 million for the permanent closure of the corrugated medium machine and administrative reorganization at the Longview, Washington, plant site The company determined that the machine was not large enough to be a cost-competitive operation and after examining the limited options available decided to permanently close the operation. No employees were affected in 1997 by the machine closure; however, the administrative reorganization displaced 29 employees.
  
  

• $25 million for the closures of the Plymouth, North Carolina, and Philadelphia, Mississippi, plywood facilities -- These closures were a part of the company's long-term strategy to align its wood products manufacturing facilities with the changing future sources of raw materials.

The company closed the Plymouth facility rather than modernize it due to market conditions and high raw material values. In addition, this facility lacked an independent energy source, a problem that would have required a substantial investment. Approximately 240 jobs were eliminated by this closure.

The closure of the Philadelphia facility allowed the company to strengthen the production capability of a sawmill that operates on the same site. This was the company's oldest and smallest plywood operation and was located in a very competitive woodbasket in which raw material costs have risen significantly in recent years. The closure resulted in the elimination of approximately 165 plywood related jobs.

• $15 million for the closure of the Coos Bay, Oregon, export sawmill and scaling back of related logging operations -- Changing customer requirements, including declining demand for post-and-beam style housing and increased customer acceptance of substitute products in the Japanese market, eroded demand for products from this mill. Japanese homebuilders are using more dimension lumber, laminated beams and prefabricated panels, a trend that will further erode demand for post-and-beam lumber. This closure resulted in the loss of an estimated 200 positions at the mill. >

 

These costs are categorized in the aggregate as follows:           Dollar amounts in millions   1997     Termination and other employee-related costs $ 20     Dispositions of property and equipment at net book value 45     Write-off of goodwill at net book value 14     Write-off of inventories 4     Environmental cleanup 2     Leasehold termination costs 1       Other exit activities 3                   $ 89

NEXT PAGE >