During 1997, the company's consolidated net sales and revenues were $11.2 billion compared with $11.1 billion in the prior year. Sales were relatively even from year to year in all the operating segments, with increased volumes in most product lines offsetting unfavorable price variances. While the real estate and related assets segment included only four months of revenues from Weyerhaeuser Mortgage Company due to the sale of this business in May, the lost revenues were more than offset by increased revenues from real estate activity.

Net earnings for the year were $342 million, or $1.72 basic earnings per common share, compared with $463 million, or $2.34 basic earnings per common share, in 1996. The 1997 earnings included an after-tax of $9 million, or 4 cents per common share, related to the charges incurred for closures of operating facilities, offset in part by the gain on sale of businesses. Diluted earnings per share, which is based upon the weighted average number of shares outstanding plus shares the company may be obligated to issue to satisfy stock options, were $1.72 and $2.33 for 1997 and 1996, respectively.

1997 operating earnings in the timberlands segment were $535 million compared with $503 million in 1996. The wood products segment earned $212 million, before nonrecurring charges totaling $40 million for the closure of two plywood facilities and an export sawmill in 1997, compared with $302 million in 1996. The combined decrease from year to year in these two segments was the combination of weak export demand for logs and lumber and lower domestic structural panel prices, offset somewhat by a stronger domestic lumber market.

The pulp, paper and packaging segment had operating earnings of $192 million in 1997 before a net charge of $28 million compared with $307 million in the previous year. The net charge included a $49 million charge for the consolidation, closure or disposition of certain recycling facilities, the closure of a corrugated medium machine, and a gain of $21 million from the sale of a chemical facility in Saskatoon, Saskatchewan, Canada. Volume increases in all product lines were more than offset by weaker average prices when compared with 1996, although pulp, paper and packaging markets improved each quarter in 1997. The paper and packaging markets continued this improvement through the fourth quarter; however, pulp markets began to weaken during the quarter due to a decline in demand in Asia.

The real estate and related assets segment earned $66 million for the year before a $45 million gain on the sale of the company's wholly owned subsidiary, Weyerhaeuser Mortgage Company, reflecting stronger real estate markets, an increased focus on the home building and land development businesses, and improved operating efficiencies.

The increase in Weyerhaeuser's costs of products sold, as a percentage of sales, to 78 percent in 1997 compared with the prior year's 75 percent can be attributed to the price weaknesses described above. Charges of $89 million incurred for the closure of production facilities were a factor in the increase in costs and expenses for 1997 over the prior year. The product inventory turnover rate was 12.1 turns for the year compared with 10.3 turns in 1996.

The increase in costs and operating expenses in the real estate and related assets segment is consistent with the increased revenues from the strong real estate markets. Reduced selling, general and administrative expenses, compared with the prior year, are due primarily to the sale of the mortgage banking business.

Other income (expense) is an aggregation of both recurring and occasional income and expense items and, as a result, can fluctuate from year to year. Individual items significant in relation to net earnings in 1997 were: a gain of $45 million from the sale of the mortgage banking business, interest income of $18 million from the favorable federal income tax decision related to timber casualty losses incurred in the eruption of Mount St. Helens in 1980, a loss of $8 million from the sale of the wholesale nursery business, and a gain of $21 million from the sale of the Saskatoon chemical facility. There were no significant individual items in 1996. >