It is the company's policy to accrue for environmental remediation costs when it is determined that it is probable that such an obligation exists and the amount of the obligation can be reasonably estimated. Based on currently available information and analysis, the company believes that it is reasonably possible that costs associated with all identified sites may exceed current accruals by amounts that may prove insignificant or that could range, in the aggregate, up to approximately $90 million over several years. This estimate of the upper end of the range of reasonably possible additional costs is much less certain than the estimates upon which accruals are currently based, and utilizes assumptions less favorable to the company among the range of reasonably possible outcomes. In estimating both its current accruals for environmental remediation and the possible range of additional future costs, the company has assumed that it will not bear the entire cost of remediation of every site to the exclusion of other known potentially responsible parties who may be jointly and severally liable. The ability of other potentially responsible parties to participate has been taken into account, based generally on each party's financial condition and probable contribution on a per-site basis. No amounts have been recorded for potential recoveries from insurance carriers.

The company is a party to legal proceedings and environmental matters generally incidental to its business. Although the final outcome of any legal proceeding or environmental matter is subject to a great many variables and cannot be predicted with any degree of certainty, the company presently believes that the ultimate outcome resulting from these proceedings and matters, including those described in this note, would not have a material effect on the company's current financial position, liquidity or results of operations; however, in any given future reporting period, such proceedings or matters could have a material effect on results of operations.

OTHER ITEMS
The company's 1998 capital expenditures, excluding acquisitions, were $615 million and are expected to approximate $785 million in 1999; however, the 1999 expenditure level could be increased or decreased as a consequence of future economic conditions.

During the normal course of business, the company's subsidiaries included in its real estate and related assets segment have entered into certain financial commitments comprised primarily of guarantees made on $40 million of partnership borrowings and limited recourse obligations associated with $98 million of sold mortgage loans. The fair value of the recourse on these loans is estimated to be $4 million, which is based upon market spreads for sales of similar loans without recourse or estimates of the credit risk of the associated recourse obligation.

In 1998 and 1997, the company took pretax charges of $71 million and $89 million, respectively, for the closure or disposition of facilities. (See "Charge for Closure or Disposition of Facilities" in the company's Financial Review, page 44.)

In 1996, the company sold its Klamath Falls, Oregon, hardboard, particleboard and plywood manufacturing operations; 600,000 acres of predominantly pine timberlands; and its nursery and seed orchard facilities. Proceeds from the sale of the property and equipment in this transaction amounted to $33 million. The resulting gain on this transaction was not material to the company's pretax income. The timberlands portion of this transaction involved a like-kind exchange for other timberlands, primarily private commercial timberlands in southeastern Louisiana and southern Mississippi previously owned by Cavenham Forest Industries.

• 7,000,000 preferred shares having a par value of $1.00 per share, of which none were issued and outstanding at December 27, 1998, and December 28, 1997; and
• 40,000,000 preference shares having a par value of $1.00 per share, of which none were issued and outstanding at December 27, 1998, and December 28, 1997. The preferred and preference shares may be issued in one or more series with varying rights and preferences including dividend rates, redemption rights, conversion terms, sinking fund provisions, values in liquidation and voting rights. When issued, the outstanding preferred and preference shares rank senior to outstanding common shares as to dividends and assets available on liquidation. >