Lower costs and increase output from existing facilities. We’ve significantly improved the efficiency of our operations by engaging employees in the design and implementation of improved work systems. This approach has increased the reliability and performance of our mills while allowing us to maintain stringent control on overhead costs. In the future, our goal is to use process improvements to increase output from existing facilities by 1.5 to 2 percent annually.

Maintain tight controls on capital spending. Capital spending in 1998 was $325 million compared with $315 million last year. This is the second year we’ve kept spending at, or below, depreciation levels. It also marks the third consecutive year of positive net cash flows in difficult market conditions. Such results reflect our strategy of investing capital to improve operating efficiencies at existing facilities rather than adding new capacity. Grow Fine Paper.

In September, we acquired the Dryden, Ontario, fine paper facility and related assets. The acquisition adds 380,000 short tons of fine paper a year to our system, gives us additional geographic range and increases our ability to serve the fast-growing retail paper market. Our Fine Paper business has a sustained record of performance improvements that we will extend to the Dryden operations. >