RESULTS OF OPERATIONS
1999 Compared with 1998
Consolidated net sales and revenues for 1999 were a record $12.3 billion, an increase of 14 percent when compared with $10.8 billion in 1998. Increased volumes and higher prices over 1998 in essentially all product lines accounted for this increase. 1999 included two months' results from operations acquired in the MacMillan Bloedel business combination.
1999 net earnings were $527 million, or $2.56 basic earnings per share, an increase of 79 percent over 1998 results of $294 million, or $1.48 basic earnings per share. The company's fourth quarter results were negatively impacted by unanticipated effects of the lockout at some British Columbia ports, continued cleanup in North Carolina after Hurricane Floyd and higher than normal maintenance expenses.
1999 results were impacted by the following nonrecurring after-tax charges:
The year's results before these charges were $681 million, or $3.31 per share.
The 1998 results reflected an after-tax charge of $45 million, or 23 cents per share, primarily associated with streamlining pulp and paper operations, the closure of a chemical facility and changes in the British Columbia operations. Before these charges, the company earned $339 million, or $1.71 per share, in 1998.
During 1999, the company also incurred pretax charges of $32 million for Year 2000 remediation work compared with $42 million in the previous year.
Diluted earnings per share, which are based on the inclusion of outstanding stock options and convertible debentures in the weighted average number of shares outstanding, were $2.55 and $1.47 for 1999 and 1998, respectively.
The timberlands segment's operating earnings for 1999 were $535 million, a 10 percent increase over $487 million reported in 1998. Net sales for the year were $656 million, slightly higher than the $636 reported in the previous year. This increase was due to improvements in the Japanese economy, increased harvest levels in the U.S. South and overall demand for wood. The year ended with volumes and prices for both domestic and foreign log markets at levels higher than 1998.
The wood products segment produced record operating earnings of $569 million in 1999 before nonrecurring charges of $94 million incurred in the disposition of the Composite Products business and $5 million for the acquisition of MacMillan Bloedel facilities. This compares favorably with earnings of $208 million before nonrecurring pretax charges of $25 million in 1998. Sales were $5.4 billion, an increase of 20 percent over the $4.5 billion reported in the prior year. New home construction and remodeling created a very strong demand for lumber and panels in 1999. The demand reached its height in the second and third quarters, achieving record earnings for both periods. The market cooled in the fourth quarter as a result of the traditional seasonal slowdown; however, prices remained above 1998 fourth-quarter levels.
The year's operating earnings for the pulp, paper and packaging segment were $310 million compared with $192 million before nonrecurring pretax charges of $42 million in 1998, an increase of 61 percent. 1999 sales were $4.8 billion, up 12 percent over $4.3 billion recorded in 1998. Market conditions for pulp, containerboard and paper began improving during the second quarter due to the recovery of the global market for these products. This trend continued into the third and fourth quarters, which allowed the company to implement several price increases for pulp, containerboard and paper. At year-end, prices for all major product lines in this segment were at their highest levels of the year.
The real estate and related assets segment produced record earnings of $190 million for the year compared with $124 million in 1998. Sales and revenues were $1.2 billion, comparable to 1998. The strength of the housing markets in which the company operatesespecially Californiacontributed to this 53 percent increase in earnings over the prior year. As the year ended, the real estate market was weakening; however, the segment's performance was helped by improved margins.