Plum Creek Timber Announces Earnings, Sale of Southern Operations, Merger Update

SEATTLE-Plum Creek Timber Co., a Seattle-based real estate investment trust, has agreed to sell its two Southern lumber manufacturing operations to Vancouver, BC-based West Fraser Timber Co. for $60 million plus working capital.

The two mills, located in Joyce, LA and Huttig, AK, have the capacity to produce 300 million board feet of lumber per year. As part of the transaction, Plum Creek will enter a 15-year renewable fiber supply agreement to provide logs from its surrounding timberlands to the facilities at market prices.

In July, Plum Creek, the fourth largest timberland owner in the nation, announced plans to merge with the Timber Co., a separate operating group of Georgia-Pacific Corp. The merger will create the second largest timberland owner in the US, with approximately 7.9 million acres. Negotiations are on schedule for closing the merger in the first quarter of 2001.

This morning, Plum Creek reported third quarter 2000 earnings of $9.5 million, or 14 cents a share. Third quarter 1999 earnings were $46.1 million, or 73 cents a share, which included a one-time tax benefit of $14.0 million or $0.22 per share.

Earnings for the first nine months of 2000 were $111.1 million, or $1.61 per share, while earnings for the same period in 1999 were $99.9 million, or $1.59 per share/unit, including the cumulative effect from an accounting change. Plum Creek’s quarterly dividend will be announced on Oct. 17, following the company’s board of directors meeting.

“Our third quarter financial results were below our own expectations for several reasons,” Plum Creek President and CEO Rick R. Holley said in a prepared statement. “Lumber and plywood markets declined significantly during the quarter due to excess production industry-wide and the impact of slowing housing starts. In addition, our operations in northwest Montana and Idaho were significantly curtailed due to the worst fire season in the region in 50 years. Although the fire damage to our resource base was immaterial, the combination of the oversupplied markets and unusual fire restrictions affected the results.”

To optimize performance in this environment, Holly says the company curtailed lumber and plywood capacity, took actions to minimize fire damage to our timberlands, and reduced costs and capital expenditures “where appropriate.”