Consolidated net cash provided by operations was $1.1 billion in 1998, an increase of 8 percent over the prior year. $1 billion of this amount was provided by cash flow from operations before changes in working capital, while decreases in working capital accounted for $104 million. In 1997, cash flow from operations before changes in working capital provided $1.1 billion with working capital increases using $54 million.

Cash flow from operations before changes in working capital by segment was as follows:

Dollar amounts in millions 1998 1997 1996     Timberlands   $ 533 $ 606 $ 584     Wood products   373 384 462     Pulp, paper and packaging   528 566 660     Real estate and related assets   22 9 68     Corporate and other   (438) (473) (527)     $ 1,018 $ 1,092 $ 1,247

Consolidated cash flow from operations before changes in working capital in 1998 was provided by net earnings of $294 million along with noncash charges of $616 million from depreciation, amortization and fee stumpage, deferred taxes of $160 million, and noncash charges of $71 million for closure or disposition of facilities. This was offset in part by a noncash pension and other postretirement benefits net credit of $39 million and equity in income of affiliates, joint ventures and limited partnerships net credit of $42 million. In 1997, net earnings of $342 million and noncash charges from depreciation, amortization and fee stumpage of $628 million, deferred taxes of $75 million and noncash charges of $89 million for closure or disposition of facilities were the significant items in cash provided from operations before changes in working capital. Noncash credits came from the gain on disposition of businesses, principally $45 million from the sale of the mortgage banking business in the real estate and related assets segment.

Weyerhaeuser's 1998 working capital, net of the effects of the NORPAC equity restructuring from a fully consolidated subsidiary to an equity affiliate and the purchase of the Dryden paper mill and sawmills, decreased by $86 million. Cash was provided by decreases in receivables, inventories and prepaid expenses. In 1997, increases in receivables along with decreases in accounts payable and accrued liabilities were the principal items in a cash use of $44 million.

Net working capital in the real estate and related assets segment provided funds of $18 million in 1998 compared with a $10 million use of funds in 1997. The principal cause was the decrease in mortgage-related financial instruments in 1998 as a result of the company's exit from the mortgage banking business.

Capital expenditures in 1998, excluding acquisitions, were $615 million, down 6 percent from the $656 million spent in 1997. They are currently expected to approximate $785 million, excluding acquisitions, in 1999; however, these expenditures could be increased or decreased as a consequence of future economic conditions.

Capital spending by segment, excluding acquisitions, over the past three years was as follows:

Dollar amounts in millions 1998 1997 1996                   Timberlands   $ 87 $ 75 $ 72     Wood products   169 239 346     Pulp, paper and packaging   325 315 415     Corporate and other   34 27 46     $ 615 $ 656 $ 879

In 1998, the company acquired the Dryden, Ontario, Canada, paper mill and sawmills at a cost of $494 million for property and equipment and $49 million for working capital. Acquisitions of property in 1997 amounted to $13 million, with an additional $2 million for working capital. Also in 1997, the company expended $190 million to acquire a 51 percent interest in a forestry joint venture in New Zealand.

The cash needed to meet capital and other Weyerhaeuser needs in 1998 was generated by internal cash flow, proceeds from the NORPAC equity restructuring and dividends from subsidiaries, which are eliminated upon consolidation. In the real estate and related assets segment, proceeds from the sale of mortgage-related financial instruments, reduction of holdings in equity affiliates and sale of property accounted for the cash provided by investing activities.

In 1997, the sale of the wholesale nursery business and the Saskatoon chemical facility provided $76 million of cash to Weyerhaeuser, while the sale of the mortgage banking business provided $192 million of cash to the real estate and related assets segment. >