UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-10239
PLUM CREEK TIMBER COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 91-1443693
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
999 Third Avenue, Seattle, Washington 98104-4096
Telephone: (206) 467-3600
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The number of outstanding shares of the registrant's Common Stock
as of November 10, 1999 was 69,206,575.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
PLUM CREEK TIMBER COMPANY, INC.
CONSOLIDATED / COMBINED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
Quarter Ended September 30,
---------------------------
1999 1998
(REIT) (MLP)
------ -----
(In Thousands, Except Per Share / Unit)
<S> <C> <C>
Revenues...........................$ 51,999 $ 174,476
------------ ------------
Costs and Expenses:
Cost of Goods Sold............... 15,784 131,851
Selling, General and
Administrative............. 2,945 10,524
------------ ------------
Total Costs and................. 18,729 142,375
------------ ------------
Operating Income................... 33,270 32,101
Interest Expense................... (13,665) (14,859)
Interest Income.................... 500 433
Reorganization Costs............... 0 (1,222)
Other Expense-Net.................. (391) (37)
------------ ------------
Income before Income Taxes and
Equity in Earnings of
Unconsolidated Subsidiaries
and Preferred Stock Dividends.... 19,714 16,416
(Provision) Benefit for Income
Taxes............................ 14,030 (374)
Equity in Earnings of
Unconsolidated Subsidiaries
and Preferred Stock Dividends.... 11,904
------------ ------------
Net Income.........................$ 45,648 $ 16,042
General Partner Interest........... 0 8,498
------------ ------------
Net Income Allocable to Common
Shareholders/Unitholders.........$ 45,648 $ 7,544
============ ============
Net Income per Share/Unit..........$ 0.72 $ 0.16
============ ============
Dividends Declared Per Share/Unit..$ 0.57 $ 0.57
============ ============
Weighted average number of
Shares/Units outstanding-Basic
and Diluted...................... 63,456,575 46,323,300
============ ============
</TABLE>
See accompanying Notes to Consolidated / Combined Financial Statements
<TABLE>
PLUM CREEK TIMBER COMPANY, INC.
CONSOLIDATED / COMBINED STATEMENT OF INCOME
(UNAUDITED)
Nine Months Ended September 30,
1999 1998
(REIT/MLP) (MLP)
---------- -----
(In Thousands, Except Per Share / Unit)
<S> <C> <C>
Revenues.............................$ 414,569 $ 510,600
------------ ------------
Costs and Expenses:
Cost of Goods Sold................. 273,691 371,619
Selling, General and Administrative 24,492 37,954
------------ ------------
Total Costs and Expenses......... 298,183 409,573
------------ ------------
Operating Income..................... 116,386 101,027
Interest Expense..................... (50,714) (44,435)
Interest Income...................... 1,110 900
Reorganization Costs................. (5,053) (2,970)
Other Expense-Net.................... (633) (548)
------------ ------------
Income before Income Taxes and
Equity in Earnings of
Unconsolidated Subsidiaries
and Preferred Stock Dividends...... 61,096 53,974
(Provision) Benefit for Income Taxes. 13,045 (521)
Equity in Earnings of Unconsolidated
Subsidiaries and Preferred Stock
Dividends.......................... 11,904
------------ ------------
Net Income...........................$ 86,045 $ 53,453
General Partner Interest............. 17,162 25,097
------------ ------------
Net Income Allocable to Common
Shareholders/Unitholders...........$ 68,883 $ 28,356
============ ============
Net Income per Share / Unit..........$ 1.32 $ 0.61
============ ============
Dividends Declared Per Share/Unit....$ 1.71 $ 1.71
============ ============
Weighted average number of
Shares/Units outstanding - Basic
and Diluted........................ 52,034,392 46,323,300
============ ============
</TABLE>
See accompanying Notes to Consolidated / Combined Financial Statements
<TABLE>
PLUM CREEK TIMBER COMPANY, INC.
CONSOLIDATED / COMBINED BALANCE SHEET
(UNAUDITED)
September 30, December 31,
1999 1998
(REIT) (MLP)
------ -----
(In Thousands)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents............$ 127,014 $ 113,793
Accounts Receivable.................. 826 32,007
Inventories.......................... 0 55,963
Timber Contract Deposits............. 0 2,647
Investments in Grantor Trusts........ 12,915 -
Other Current Assets................. 1,406 6,053
------------ ------------
142,161 210,463
Timber and Timberlands-Net............. 1,002,704 1,030,484
Property, Plant and Equipment-Net...... 1,236 186,179
Investment in Unconsolidated
Subsidiaries......................... 99,983 -
Other Assets........................... 6,852 11,117
------------ ------------
Total Assets.........................$ 1,252,936 $ 1,438,243
============ ============
LIABILITIES
Current Liabilities:
Current Portion of Long-Term Debt....$ 5,685 $ 18,400
Accounts Payable..................... 1,777 15,320
Related Party Payables............... 28,735 -
Interest Payable..................... 11,672 10,964
Wages Payable........................ 948 14,795
Taxes Payable........................ 3,842 4,081
Workers' Compensation Liabilities.... 26 1,550
Liabilities Associated with Grantor
Trust.............................. 12,209 -
Deferred Income...................... 5,641 -
Other Current Liabilities............ 5,338 15,766
------------ ------------
75,873 80,876
Long-Term Debt......................... 566,495 742,608
Line of Credit......................... 218,500 200,000
Workers' Compensation Liabilities...... 225 7,495
Other Liabilities...................... 216 1,849
------------ ------------
Total Liabilities.................... 861,309 1,032,828
------------ ------------
Commitments and Contingencies
STOCKHOLDERS' EQUITY / PARTNERS' CAPITAL
Preferred Stock, $0.01 par value,
authorized shares-75 million,
outstanding-none.....................
Common Stock, $0.01 par value,
authorized shares-300 million,
outstanding-62,822,009............... 629
Special Voting Stock, $0.01 par
value, convertible to common stock,
authorized and outstanding-634,566... 6
Additional Paid-In Capital............. 380,594
Retained Earnings...................... 9,478
Other Equity........................... 920
Limited Partners' Units................ 406,857
General Partner........................ (1,442)
------------ ------------
Total Stockholders' Equity/Partners'
Capital............................ 391,627 405,415
------------ ------------
Total Liabilities and
Stockholders'/Partners' Capital....$ 1,252,936 $ 1,438,243
============ ============
</TABLE>
See accompanying Notes to Consolidated / Combined Financial Statements
<TABLE>
PLUM CREEK TIMBER COMPANY, INC.
CONSOLIDATED / COMBINED STATEMENT OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September 30,
-------------------------------
1999 1998
(REIT/MLP) (MLP)
---------- -----
(In Thousands)
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income..............................$ 86,045 $ 53,453
Adjustments to Reconcile Net Income to
Net Cash Provided By Operating
Activities:
Depreciation, Depletion and
Amortization........................ 47,003 50,304
Deferred Income Taxes................. (14,030)
(Gain) Loss on Asset Dispositions-Net. (120) 444
Equity in Earnings of Unconsolidated
Subsidiaries and Preferred Stock
Dividends........................... (11,904)
Preferred Stock Dividends............. 3,919
Working Capital Changes, net of
effect of business acquisition
and contribution to Unconsolidated
Subsidiaries:
Accounts Receivable................. (12,369) (4,863)
Inventories......................... 9,987 9,312
Timber Contract Deposits and
Other Current Assets.............. (1,896) (890)
Accounts Payable.................... (3,323) 6,750
Deferred Income..................... 5,641
Other Accrued Liabilities........... (6,115) 8,796
Other................................. 658 3,361
------------ ------------
Net Cash Provided By Operating
Activities............................$ 103,496 $ 126,667
------------ ------------
Cash Flows From Investing Activities:
Additions to Properties...............$ (16,644) $ (50,916)
Proceeds from Asset Dispositions...... 833 800
Investment in Unconsolidated
Subsidiaries........................ (24,821)
Advances from Unconsolidated
Subsidiaries........................ 36,768
Distributions from Unconsolidated
Subsidiaries........................ 22,251
Other................................. (1,371)
------------ ------------
Net Cash Provided By (Used In) Investing
Activities............................$ 17,016 $ (50,116)
------------ ------------
Cash Flows From Financing Activities:
Cash Distributions....................$ (107,086) $ (104,903)
Retirement of Long-Term Debt.......... (18,705) (18,400)
Borrowings on Line of Credit.......... 464,400 550,000
Repayments on Line of Credit.......... (445,900) (511,000)
------------ ------------
Net Cash Used In Financing Activities...$ (107,291) $ (84,303)
------------ ------------
Increase (Decrease) In Cash and Cash
Equivalents........................... 13,221 (7,752)
Cash and Cash Equivalents:
Beginning of Period.................. 113,793 135,381
------------ ------------
End of Period.........................$ 127,014 $ 127,629
============ ============
Supplementary Cash Flow
Information-Noncash Activities
- ------------------------------
Assets contributed to Unconsolidated
Subsidiaries........................$ 291,513
Liabilities contributed to
Unconsolidated Subsidiaries.........$ 221,755
Assets received related to the PCMC
Merger..............................$ 13,726
Liabilities received related to the
PCMC Merger.........................$ 12,134
Purchase accounting related basis
step-up of assets...................$ 3,939
Timber and timberlands received in
an exchange.........................$ 3,330
</TABLE>
See accompanying Notes to Consolidated/Combined Financial Statements
PLUM CREEK TIMBER COMPANY, INC.
NOTES TO CONSOLIDATED/COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. Organization and Basis of Presentation
On July 1, 1999, Plum Creek Timber Company, L.P. completed its
conversion from a master limited partnership to a corporation.
Plum Creek Timber Company, Inc., the new corporation and
successor registrant, will elect to be treated for Federal income
tax purposes as a real estate investment trust or "REIT." As of
the REIT conversion, Plum Creek Timber Company, L.P. ceased to
exist.
As a part of the REIT conversion, the partnership's outstanding
units were converted on a one-for-one basis into 46,323,300 shares
of common stock of the corporation. Additionally, the equity
interests of the partnership's general partner were converted into
16,498,709 shares of common stock and 634,566 shares of special
voting stock. The special voting stock is convertible into common
stock at the option of the holder on a one-for-one basis and is
entitled to receive the same dividends as the common stock. The
special voting stock is included in the denominator in computing
basic and diluted earnings per share.
The REIT conversion is being accounted for as a reorganization of
affiliated entities, with assets and liabilities recorded at
their historical costs. However, in order to qualify as a REIT,
substantially all assets and associated liabilities related to
manufacturing operations and harvesting activities and some
higher and better use lands were transferred to several
unconsolidated corporate subsidiaries. Following the transfers,
the corporation is entitled to approximately 99% of the economic
value of the unconsolidated subsidiaries through a combination of
preferred stock and nonvoting common stock. The remaining 1% of
the economic value and 100% of the voting control of the
manufacturing and harvesting subsidiaries are owned by four
individuals who are also officers of the corporation (See Note 7
of Notes to the Financial Statements for summarized combined
financial information of the unconsolidated subsidiaries.)
As a result of these structural changes, financial reporting
for the corporation will be different than the historical
financial reporting by the partnership, as summarized below:
REVENUES. The corporation owns and manages timberlands and sells
timber pursuant to timber cutting contracts. In order to meet
REIT income qualification tests under the Internal Revenue Code,
the corporation has entered into timber cutting contracts with
the unconsolidated subsidiaries, and, unlike the partnership, the
corporation does not recognize revenue from the harvesting and
delivery of logs. Therefore, the corporation's revenue will
consist primarily of proceeds from timber cutting contracts, some
qualified land sales and other miscellaneous real estate related
income. The corporation's revenue and associated expenses
related to the timber cutting contracts are deferred until the
timber (in the form of either whole logs, lumber, plywood or
other wood products) is sold outside the unconsolidated
subsidiaries. In addition, the consolidated financial
statements of the corporation do not include the revenues
associated with the manufacturing operations, primarily lumber,
plywood and medium density fiberboard "MDF" sales, and some
higher and better use land sales.
COSTS AND EXPENSES. The corporation's cost of goods sold and
selling, general and administrative expenses do not include the
expenses associated with the manufacturing operations, harvesting
activities and some higher and better use land sales.
INTEREST ESPENSE. The corporation's interest expense does not
include the interest expense associated with the approximately
$170 million of debt that was transferred to the unconsolidated
subsidiaries.
EQUITY IN EARNINGS (LOSS) of Unconsolidated Subsidiaries and
Preferred Stock Dividends. Approximately 99% of the net earnings
or loss from the manufacturing operations, harvesting activities
and some higher and better use land sales are reflected in the
corporation's net income through a single line item titled
"Equity in Earnings (Loss) of Unconsolidated Subsidiaries and
Preferred Stock Dividends." (See Note 7 of Notes to the
Financial Statements.)
NET INCOME. The corporation's net income is computed similarly
to the partnership's historical net income with one exception.
The exception relates to the ongoing income tax impact associated
with operations transferred to the unconsolidated subsidiaries.
Since our manufacturing operations, harvesting activities and
some higher and better use land sales are now conducted through
taxable unconsolidated corporate subsidiaries, the corporation's
share of the unconsolidated subsidiaries' earnings are net of the
related income tax expense or benefit. For example, generally in
a year in which the unconsolidated subsidiaries report a
consolidated loss, the corporation's net income will be favorably
impacted by its share of the unconsolidated subsidiaries' income
tax benefit. Similarly, in a year in which the unconsolidated
subsidiaries report consolidated income, the corporation's net
income will be reduced by its share of the unconsolidated
subsidiaries' income tax expense.
EARNINGS PER SHARE. In general, the corporation computes
its earnings per share by dividing its net income by the
weighted-average number of shares outstanding, which include the
17,133,275 shares issued to the partnership's general partner in
the conversion. The partnership historically computed net income
per unit by dividing the partnership's net income available to
unitholders by the weighted-average number of limited partner
units outstanding. Net income available to unitholders was equal
to the partnership's net income less the income allocated to the
general partner, which consisted of an incentive distribution
allocation and 2% of earnings. For example, in 1998 the general
partner was allocated 45% of net income and received 25.5% of
distributions made by the partnership. Therefore, for any given
level of net income, earnings per share reported by the
corporation may be different than the per unit amounts
historically reported by the partnership.
ASSETS AND LIABILITIES. The corporation's balance sheet will not
separately reflect the assets and liabilities associated with the
manufacturing and harvesting operations and some higher and
better use lands. Instead, the book value of these assets, net
of related liabilities, is reflected in the corporation's
nonvoting common stock and preferred stock investments in the
unconsolidated subsidiaries.
The corporation's financial statements reflect the
deconsolidation of the manufacturing and harvesting operations
along with some higher and better use land sales effective July
1, 1999. Therefore, the statements of income and cash flows for
the nine months ended September 30, 1999 were prepared based on
the partnership's basis of accounting for the first two quarters
of 1999 and the corporation's basis of accounting for the third
quarter of 1999. However, in accordance with Statement of
Financial Accounting Standard No. 131, "Disclosure about Segments
of an Enterprise and Related Information," the corporation has
the same five reportable business segments as did the
partnership. Furthermore, the segment disclosure has been
prepared on a basis consistent with that of the partnership.
(See Note 11 of the Notes to the Financial Statements.)
The financial statements included in this Form 10-Q are unaudited
and do not contain all of the information required by generally
accepted accounting principles to be included in a full set of
financial statements. The financial statements in the
partnership's 1998 annual report on Form 10-K include a summary
of significant accounting policies of the corporation and should
be read in conjunction with this Form 10-Q. In the opinion of
management, all material adjustments necessary to present fairly
the results of operations for such periods have been included.
All such adjustments are of a normal and recurring nature. The
results of operations for any interim period are not necessarily
indicative of the results of operations for the entire year.
2. Reorganization
The REIT conversion became effective on July 1, 1999.
Reorganization costs have been expensed in the period incurred
and are reflected as a separate line item in the financial
statements.
On April 9, 1999, the partnership announced that it and its
general partner had entered into an agreement settling previously
disclosed unitholder litigation relating to the REIT conversion.
The settlement obligates the partnership's former general partner
to pay up to $30 million into a fund for distribution to eligible
unitholders if specified five-year financial targets of the
corporation are not met. Payments by the general partner, if
any, would generally be made following the end of the five-year
period, on or about April 15, 2004, and may be accelerated upon
the occurrence of an extraordinary transaction.
Pursuant to the Securities and Exchange Commission's Staff
Accounting Bulletin No. 79, any payment made by the former
general partner under the settlement will be accounted for as a
deemed capital contribution by the former general partner to the
corporation, followed by a non-cash expense of the corporation.
The Staff Accounting Bulletin requires that payments made by a
principal shareholder of a corporation or a general partner of a
partnership be expensed by the corporation or partnership if the
entity receives any benefit as a result of such payment.
Therefore, in accordance with Staff Accounting Bulletin No. 79,
the corporation will record a non-cash expense in the period(s)
in which, and to the extent that, it appears probable that a
payment is required. Payments by the former general partner, if
any, will have no impact on the corporation's cash flow.
3. Earnings Per Share
Earnings per share is computed by dividing net income allocable to
common stockholders (unitholders) by the weighted average number
of common shares (units) outstanding for the period. The weighted
average number of shares (units) outstanding was 63,456,575 for
the three months ended September 30, 1999 and 46,323,300 for the
three months ended September 30, 1998. The weighted average number
of shares (units) outstanding was 52,034,392 for the nine months
ended September 30, 1999 and 46,323,300 for the nine months ended
September 30, 1998. The weighted average number of shares
includes shares held by a grantor trust to fund deferred
compensation award plans.
4. Inventories
All inventories were contributed to the unconsolidated
subsidiaries as part of the REIT conversion. After July 1, 1999,
the corporation does not have any raw material or manufacturing
related inventories. Inventories at December 31, 1998 consisted
of the following (in thousands):
Raw materials (logs) $ 25,129
Work-in-process 6,554
Finished goods 15,831
Export logs 53
------
47,567
Supplies 8,396
------
Total $ 55,963
======
Excluding supplies, which are valued at average cost, the
cost of LIFO inventories valued at the lower of average cost or
market (which approximates current cost) at December 31, 1998 was
$46.9 million.
5. Timber and Timberlands and Property, Plant and Equipment
Timber and timberlands consisted of the following (in
thousands):
September 30, December 31,
1999 1998
------------ -----------
Timber and logging roads-net $ 879,538 $ 907,830
Timberlands 123,166 122,654
------------ ------------
Timber and Timberlands-net $ 1,002,704 $ 1,030,484
============ ============
Substantially all of the property, plant and equipment was
contributed to the unconsolidated subsidiaries as part of the
REIT conversion. Property, plant and equipment consisted of the
following (in thousands):
September 30, December 31,
1999 1998
------------ -----------
Land, buildings and improvements $ 1,159 $ 66,714
Machinery and equipment 724 275,149
----- -------
1,883 341,863
Accumulated depreciation (647) (155,684)
----- -------
Property, Plant and Equipment-net $ 1,236 $ 186,179
===== =======
6. Financing Activities
As of September 30, 1999, we had $218.5 million of borrowings
under our revolving line of credit. Subject to customary
covenants, the line of credit allows us to borrow from time to
time up to $225 million, including up to $20 million of standby
letters of credit, through December 13, 2001. As of September 30,
1999, $6.5 million remained available for borrowing under the
line of credit and we had no outstanding standby letters of
credit. As of October 12, 1999, we repaid $125.0 million of
borrowings on the line of credit.
During the third quarter of 1999, the corporation entered into the
following non-cash transactions:
1. UNCONSOLIDATED SUBSIDIARIES - In connection with the REIT
conversion, substantially all of the partnership's assets
and associated liabilities related to manufacturing
operations, harvesting activities and some higher and
better use lands were transferred to unconsolidated
corporate subsidiaries. Excluding cash, the book value of
assets transferred to the unconsolidated subsidiaries was
$291.5 million. The book value of liabilities transferred
to the unconsolidated subsidiaries was $221.8 million.
2. MERGER - In connection with the REIT conversion, Plum
Creek Management Company L.P., the general partner of the
partnership, was merged with the corporation. As a result
of the merger, the corporation received assets of $13.8
million and liabilities of $12.1 million. The assets and
liabilities are primarily associated with deferred
compensation and long-term incentive compensation awards.
The assets are primarily held in a grantor trust and
consist of mutual and money market funds. The investments
are recorded at fair value. Also included in a grantor
trust are 358,767 shares of common stock of the corporation
to fund several compensation plans. The shares and a
corresponding amount of deferred compensation are recorded
at cost in Stockholders' Equity.
3. PURCHASE OF MINORITY INTEREST - In connection with the
REIT conversion, the corporation acquired the general
partner's 2% interest in Plum Creek Manufacturing, L.P.,
and 4% interest in Plum Creek Marketing, Inc., both
subsidiaries of the former partnership. The corporation
issued common stock valued at $4.5 million in exchange for
these interests. In accordance with APB No. 16, "Business
Combinations," these acquisitions were accounted for as a
purchase, and as a result, the corporation's investment in
unconsolidated subsidiaries was increased by $3.9 million.
4. LAND EXCHANGE - In September 1999, the corporation
exchanged some higher and better use lands for timberlands
with an estimated value of $3.3 million.
We will distribute $0.57 per share on November 24, 1999 to
shareholders of record on November 12, 1999.
7. Investment in Equity of Unconsolidated Subsidiaries and
Preferred Stock
In connection with the REIT conversion, substantially all of
the partnership's assets and associated liabilities related to
the manufacturing operations and harvesting activities and some
higher and better use lands were transferred to several
unconsolidated subsidiaries in exchange for preferred stock and
nonvoting common stock. The corporation is entitled to
approximately 99% of the economic value of the unconsolidated
subsidiaries through its preferred and nonvoting common stock
ownership. The corporation accounts for its preferred stock
investment in the unconsolidated subsidiaries using the cost
method of accounting and uses the equity method of accounting
for its nonvoting common stock investment. The basis for using
the equity method of accounting for the nonvoting common stock is
that the corporation is entitled to substantially all of the
economic benefits of the unconsolidated subsidiaries.
The difference between the corporation's carrying amount in
its nonvoting common stock of the unconsolidated subsidiaries and
the corporation's share of the underlying equity in the net
assets of the unconsolidated subsidiaries at July 1, 1999 in the
amount of $34.9 million has been assigned to a deferred tax
asset. This difference of $34.9 million arose as a result of
certain timber and timberlands being sold to the unconsolidated
subsidiaries just prior to the REIT conversion. For financial
reporting purposes, this sale was recorded as a capital
contribution. The difference will be amortized as the related
timber is harvested or the timberlands are sold. The
corporation's equity earnings and preferred stock dividends from
the unconsolidated subsidiaries for the three months ended
September 30, 1999 is comprised of the following:
Share of Equity Earnings $ 6,060
Preferred Stock Dividends 3,919
Amortization of difference between carrying
amount and share of underlying equity 1,925
-----
Total $ 11,904
Summarized combined financial data for the unconsolidated
subsidiaries' operations as of September 30, 1999 are as follows
(in thousands):
Current Assets $ 166,332
Noncurrent Assets 232,216
Current Liabilities 103,997
Noncurrent Liabilities 157,716
Current and noncurrent liabilities include $170.1 million of
indebtedness. The $170.1 million indebtedness consists of the
11.125% First Mortgage Notes due 2007 (collateralized by the
manufacturing facilities), and $68.2 million face value of the
11.125% Senior Notes due 2007. The First Mortgage Notes and the
Senior Notes are guaranteed by the corporation's operating
partnership.
Three months ended
September 30, 1999
------------------
Revenues $ 203,484
Gross Profit 20,954
Interest Expense 4,798
Income Tax Expense 5,583
Net Income 10,232
Gross profit includes depreciation and amortization expense
of $7,669. The Income Tax Expense includes a benefit of $743
related to interest expense that is allowed for tax purposes but
not for financial reporting purposes. The tax deduction for
interest expense is from an installment note exchanged for
certain timberlands as a part of the REIT conversion. The
related interest expense of $1,858 and the installment note are
eliminated for accounting purposes.
In accordance with APB No. 18, "The Equity Method of Accounting
for Investments in Common Stock," the revenue of the corporation
related to the sale of timber to the unconsolidated subsidiaries
is deferred until the logs or finished goods are sold outside the
group of unconsolidated subsidiaries. Therefore, all sales by the
corporation to the unconsolidated subsidiaries will also be
included in the revenue of the unconsolidated subsidiaries in the
period in which the timber (in the form of either whole logs,
lumber, plywood or other wood products) is sold outside the
unconsolidated subsidiaries. Sales and investments between the
unconsolidated subsidiaries are eliminated in preparing the
summarized combined financial information of the unconsolidated
subsidiaries. Revenues reported by the corporation that were also
included in the revenues of the unconsolidated subsidiaries
amounted to $45.2 million for the three month period ended
September 30, 1999.
8. Stockholders' Equity
The corporation has authorized 525,634,567 shares of capital
stock, consisting of:
- 300,000,000 shares of common stock, par value $.01
per share;
- 634,566 shares of special voting stock, par value
$.01 per share;
- 150,000,001 shares of excess stock, par value $.01
per share; and
- 75,000,000 shares of preferred stock, par value
$.01 per share.
In connection with the REIT conversion, 46,323,300 limited
partnership units were converted into common stock of the
corporation on a one-for-one basis. Also in connection with the
REIT conversion, the general partnership interest was converted
into 16,498,709 shares of common stock and 634,566 shares of
special voting stock. The special voting stock is convertible
into common stock at the option of the holder on a one-for-one
basis and has the same dividend and liquidation rights as the
common stock. The special voting stock entitles the holders to
vote as a separate class on matters submitted for stockholder
approval such as mergers, dissolution and amendments to the
certificate of incorporation.
At September 30, 1999, there were 358,767 shares of common
stock held in a grantor trust to fund deferred compensation
plans. At September 30, 1999, these shares were recorded at $9.5
million and the related liability was $10.4 million.
9. Income Taxes
In accordance with Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes," a one-time tax benefit of
$14.0 million was recorded by the corporation for the net
temporary differences associated with the assets and liabilities
transferred to the unconsolidated subsidiaries in the REIT
conversion. No additional tax provision was recorded by the
corporation during the third quarter because, as a REIT, the
corporation does not anticipate being subject to any corporate-
level tax.
10. Related-Party Transactions
In order to meet REIT income qualification tests under the
Internal Revenue Code, the corporation has entered into timber
cutting contracts with the unconsolidated subsidiaries. The
corporation's revenue will consist primarily of proceeds from
these timber cutting contracts. Revenue and associated expenses
related to the timber cutting contracts with our unconsolidated
subsidiaries are deferred until the timber (in the form of either
whole logs, lumber, plywood or other wood products) is sold
outside the unconsolidated subsidiaries.
The corporation and the unconsolidated subsidiaries have entered
into a cost sharing and administrative services agreement. The
cost sharing and administrative services agreement covers
accounting, transaction processing, human resources, information
technology, legal, environmental, treasury, corporate affairs,
and other day-to-day operational activities. As a result, there
are receivables and payables between the corporation and the
unconsolidated subsidiaries which are settled in the ordinary
course of business. The unconsolidated subsidiaries earn
interest at market rates for any cash advances to the corporation
that are in excess of any distributions to the corporation.
Non-current assets include $1.9 million of notes receivable from
four officers, representing loans to these officers to fund their
purchases of the voting common stock of the corporate
subsidiaries. The notes are due in 10 years, payable on demand,
with an interest rate of 9%.
11. Segment Information
The table below presents information about reported segments
for the quarters ended September 30 (in thousands):
Northern Southern Land
Resources Resources Lumber Panel Sales Other Total
--------- --------- ------ ----- ----- ----- -----
1999
- ----
External
revenues $ 43,843 $ 12,035 $ 89,592 $ 47,262 $ 8,023 $ 0 $200,755
Intersegment
revenues 46,229 16,109 62,338
Operating
income 26,199 12,030 9,812 10,472 6,955 0 65,468
1998
- ----
External
revenues $ 38,896 $ 14,592 $ 74,318 $ 39,340 $ 2,891 $ 4,439 $174,476
Intersegment
revenues 37,146 14,066 51,212
Operating
income 22,481 12,984 1,046 5,300 2,389 (1,847) 42,353
The table below presents information about reported segments
for the nine months ended September 30 (in thousands):
Northern Southern Land
Resources Resources Lumber Panel Sales Other Total
--------- --------- ------ ----- ----- ----- -----
1999
- ----
External
revenues $120,764 $ 37,915 $257,638 $131,905 $ 15,103 $ 0 $563,325
Intersegment
Revenues 97,520 36,717 134,237
Operating
income 66,412 27,047 20,093 23,490 13,114 0 150,156
1998
- ----
External
revenues $ 95,866 $ 45,321 $211,450 $117,511 $ 11,301 $ 29,151 $510,600
Intersegment
revenues 80,425 41,434 121,859
Operating
income 51,595 40,759 5,397 10,502 9,496 (1,652) 116,097
A reconciliation of total operating income to income before
income taxes and equity in earnings of unconsolidated
subsidiaries and preferred stock dividends is as follows (in
thousands):
Three months ended September 30, 1999 1998
------------------------------- ---- ----
Total segment operating income $ 65,468 $ 42,353
Operating income recognized by
unconsolidated subsidiaries (20,954)
Interest expense-net (13,165) (14,426)
Corporate and other unallocated
expenses (11,635) (11,511)
------- -------
Income before income taxes and
equity in earnings of
unconsolidated subsidiaries &
preferred stock dividends $ 19,714 $ 16,416
======= =======
Nine months ended September 30, 1999 1998
------------------------------ ---- ----
Total segment operating income $150,156 $116,097
Operating income recognized by
unconsolidated subsidiaries (20,954)
Interest expense-net (49,604) (43,535)
Corporate and other unallocated
expenses (18,502) (18,588)
------- -------
Income before income taxes and
equity in earnings of
unconsolidated subsidiaries &
preferred stock dividends $ 61,096 $ 53,974
======= =======
12. Subsequent Events
In November of 1999 the corporation issued 5,750,000
shares of common stock for net proceeds of $141.4 million.
Approximately $80 million of the proceeds were used to repay
borrowings on our revolving line of credit. The remainder will
be used for general business purposes.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-------------------------------------------------
FORWARD-LOOKING STATEMENTS
This Report contains forward-looking statements within the
meaning of the Private Litigation Reform Act of 1995, which are
generally identified by words such as "may," "should," "seeks,"
"believes," "expects," "intends," "estimates," "projects,"
"strategy" and similar expressions or the negative of those
words. Forward looking statements are subject to a number of
known and unknown risks and uncertainties that could cause actual
results to differ materially from those projected, expressed or
implied in the statements. These risks and uncertainties, many
of which are not within the company's control, include, but are
not limited to, the cyclical nature of the forest products
industry, our ability to harvest our timber, our ability to
execute our acquisition strategy, and regulatory constraints.
These risks are detailed from time to time in our filings with
the Securities and Exchange Commission. Forward-looking
statements speak only as of the date made, and neither the
company nor its management undertakes any obligation to update or
revise any forward-looking statements. It is likely that if one
or more of the risks and uncertainties materializes, the current
expectations of the Company and its management will not be
realized.
REIT CONVERSION
On July 1, 1999, Plum Creek Timber Company, L.P., the former
partnership and registrant, completed its conversion from a
master limited partnership to a corporation. In order to
qualify as a REIT, substantially all assets and associated
liabilities related to manufacturing operations and harvesting
activities and some higher and better use lands were transferred
to several unconsolidated corporate subsidiaries. Following the
transfers, Plum Creek Timber Company, Inc., the new corporation
and successor registrant, is entitled to approximately 99% of the
economic value of the unconsolidated subsidiaries through a
combination of preferred stock and nonvoting common stock. The
remaining 1% of the economic value and 100% of the voting control
of the manufacturing and harvesting subsidiaries are owned by
four individuals who are also officers of the corporation.
The corporation's financial statements reflect the
deconsolidation of the manufacturing and harvesting operations
along with some higher and better use timber sales effective July
1, 1999. Therefore, the financial statements for the period
ending September 30, 1999 are not comparable to prior period
financial statements. However, in accordance with Statement of
Financial Accounting Standard No. 131, "Disclosure about Segments
of an Enterprise and Related Information," the corporation has
the same five reportable business segments as did the
partnership. Furthermore, the segment disclosure has been
prepared on a basis consistent with that of the partnership. See
Notes 1 to 10 of Notes to the Financial Statements for further
discussion of how the financial statements have been impacted by
the conversion.
RESULTS OF OPERATIONS
Third Quarter 1999 Compared to Third Quarter 1998
The following table compares operating income by segment for the
quarters ended September 30:
Operating Income by Segment
(In Thousands)
1999 1998
------------ ------------
Northern Resources............... $ 26,199 $ 22,481
Southern Resources............... 12,030 12,984
Lumber........................... 9,812 1,046
Panel............................ 10,472 5,300
Land Sales....................... 6,955 2,389
Other............................ 0 (1,847)
-------- ---------
Total Segment Operating Income... 65,468 42,353
Other Costs and Eliminations..... (11,244) (10,252)
-------- --------
Total Combined Operating Income.. 54,224 32,101
Less Operating Income recognized
by unconsolidated subsidiaries. (20,954)
-------- --------
Operating Income................. $ 33,270 $ 32,101
======== ========
The accounting policies of the segments are substantially the
same as those described in Note 1 of Notes to Combined
Financial Statements in the 1998 annual report on Form 10-K and
Note 1 of Notes to the Financial Statements in Part I of this
report on Form 10-Q. For segment purposes, however, inventories
are stated at the lower of average cost or market on the first-in,
first-out ("FIFO") method. The difference in computing cost of
goods sold under the LIFO and FIFO methods is included in "Other
Costs & Eliminations."
NORTHERN RESOURCES SEGMENT. Revenues increased by $14.1
million, or 18%, to $90.1 million in the third quarter 1999,
compared to $76.0 million in the third quarter of 1998.
Excluding the increase in revenues of $16.0 million related to
the November 1998 acquisition of 905,000 acres of timberlands in
Maine, revenues decreased by $1.9 million. This decline was
primarily due to lower export log sales to Japan, offset in part
by higher domestic log prices in both the Cascade and Rocky
Mountain Regions. Export log sales volume decreased by
approximately 45% primarily due to the weak Japanese economy,
increased availability of substitute products (e.g., Russian logs
and European lumber) and the diversion of export quality logs to
the stronger domestic market. Domestic log prices in the Cascade
Region increased by 19%, primarily due to continued strong
building activity in the United States and the selling of export
quality logs to domestic mills. Domestic log prices in the Rocky
Mountain Region increased by 3%, primarily due to the limited
supply of logs in the region as a result of declining Federal
timber sales and strong building activity.
Northern Resources Segment operating income was 29% as a
percentage of its revenues for the quarters ended September 30,
1999 and 30% for the same period in 1998. Northern Resources
Segment costs and expenses increased by $10.3 million, or 19%, to
$63.9 million in 1999, compared to $53.6 million in 1998.
Excluding the increase in expenses of $12.5 million related to
the November 1998 acquisition of 905,000 acres of timberlands in
Maine, expenses decreased by $2.2 million This decrease was
primarily due to lower export log sales volume and slightly lower
log sales volume in the Rocky Mountain Region.
SOUTHERN RESOURCES SEGMENT. Revenues decreased by $0.6
million, or 2%, to $28.1 million in the third quarter of 1999,
compared to $28.7 million in the same quarter of 1998. This
decrease was primarily due to lower sawlog prices and lower pulp
log sales volume, offset in part by higher sawlog sales volume.
Sawlog prices decreased by 9%, primarily due to an abundant
supply of logs throughout the region and a higher percentage of
smaller logs. Log sizes have declined in 1999 due to the near
completion by the end of 1998 of the conversion of our mature
second growth pine timberlands into intensively managed pine
plantations. Pulp log sales volume decreased by 14% primarily
due to an abundant supply of wood fiber, weak paper markets and
planned reductions in harvest levels. Sawlog sales volume
increased by 16% primarily due to increased internal log sales as
a result of improved lumber production at our new Joyce sawmill.
Southern Resources Segment operating income was 43% as a
percentage of its revenues for the quarter ended September 30,
1999, and 45% for the same period in 1998. This decline is
primarily due to lower sawlog prices. Southern Resources Segment
costs and expenses increased by $0.4 million, or 3%, to $16.1
million in 1999, compared to $15.7 million in 1998. This increase
was primarily due to higher sawlog sales volume and slightly
higher log and haul costs, offset in part by lower pulp log sales
volume.
LUMBER SEGMENT. Revenues increased by $15.3 million, or
21%, to $89.6 million in the third quarter of 1999, compared to
$74.3 million in the prior year third quarter. This increase was
primarily due to a 13% increase in Northwest lumber prices, an 8%
increase in Southern lumber prices, a 21% increase in Southern
lumber sales volume and a 5% increase in Northwest lumber sales
volume. Lumber prices increased primarily due to the robust U.S.
economy and continued strong housing starts. Lumber prices
peaked in July, with many prices reaching new record highs.
Northwest board prices were also favorably impacted by the
temporary reduction of European board imports into the United
States. Southern lumber sales volume increased primarily due to
a greater than 50% increase in production volume at our newly
reconfigured sawmill at Joyce, Louisiana.
Lumber Segment operating income was 11% as a percentage of
its revenues for the quarter ended September 30, 1999, and 1% for
the quarter ended September 30, 1998. This increase was
primarily due to higher lumber prices and lower Southern lumber
log costs. Lumber Segment costs and expenses increased by $6.5
million, or 9%, to $79.8 million in the third quarter of 1999,
compared to $73.3 million in same quarter of 1998. This increase
was primarily due to an increase in lumber sales volume, offset in
part by lower log costs in our Southern Region.
PANEL SEGMENT. Revenues increased by $8.0 million, or 20%,
to $47.3 million in the third quarter of 1999, compared to $39.3
million in the third quarter of 1998. This increase was
primarily due to a 20% increase in plywood prices and a 7%
increase in plywood sales volume. Plywood prices increased
primarily due to favorable commodity plywood prices and strong
industrial markets. Commodity plywood prices reached record
highs during the third quarter of 1999, primarily due to strong
U.S. building activity, rising oriented strand board prices and
several plywood mill closures. Industrial markets have remained
strong due to the healthy U.S. economy, low interest rates and
favorable demographics. Commodity plywood prices peaked in July
and have now retreated to levels comparable with the prior year.
Panel Segment operating income was 22% as a percentage of
its revenues for the quarter ended September 30, 1999, and 13%
for the same period in 1998. This increase in operating income
was primarily due to higher plywood prices. Panel Segment costs
and expenses increased by $2.8 million, or 8%, to $36.8 million
in the third quarter 1999, compared to $34.0 million in the third
quarter of 1998. This increase was primarily due to an increase
in plywood sales volume.
LAND SALES SEGMENT. Revenues increased by $5.1 million, or
176%, to $8.0 million for the quarter ended September 30, 1999,
compared to $2.9 million for the quarter ended September 30,
1998. Land Sales Segment operating income was 87% as a
percentage of its revenues for the quarter ended September 30,
1999 and 83% for the same period in 1998. Land Sales Segment
costs and expenses increased by $0.6 million to $1.1 million for
the quarter ended September 30, 1999, compared to $0.5 million
for the quarter ended September 30, 1998.
Other Costs and Eliminations (which consists of corporate
overhead, intercompany log profit elimination and the change in
the LIFO reserve) decreased combined operating income by $11.2
million in the third quarter of 1999, compared to a decrease of
$10.3 million in the third quarter of 1998. The change in Other
Costs and Eliminations of $0.9 million is primarily due to an
increase in the amount of intercompany log profit eliminated as a
result of the closure of the Joyce, Louisiana plywood plant
during the third quarter of 1998.
Interest expense decreased by $1.2 million, or 8%, to $13.7
million, for the quarter ended September 30, 1999, compared to
$14.9 million for the quarter ended September 30, 1998. The
decrease was due to the transfer of $170.1 million of debt to the
unconsolidated subsidiaries in the REIT conversion, offset in
part by the issuance of $177 million of senior notes in the
fourth quarter of 1998 to finance our Maine timberland
acquisition.
Reorganization Costs are costs associated with the REIT
conversion. See Note 2 of Notes to Financial Statements.
Reorganization costs include fees for legal, investment banking
and tax consultants, as well as solicitation, printing, consent
fees for lender waivers, and other related costs.
Nine Months 1999 Compared to Nine Months 1998
The following table compares operating income by segment for the
nine months ended September 30:
Operating Income by Segment
(In Thousands)
1999 1998
------------ ------------
Northern Resources............... $ 66,412 $ 51,595
Southern Resources............... 27,047 40,759
Lumber........................... 20,093 5,397
Panel............................ 23,490 10,502
Land Sales....................... 13,114 9,496
Other............................ 0 (1,652)
-------- --------
Total Segment Operating Income... 150,156 116,097
Other Costs and Eliminations..... (12,816) (15,070)
-------- --------
Total Combined Operating Income.. 137,340 101,027
Less Operating Income recognized
by unconsolidated subsidiaries. (20,954)
-------- --------
Operating Income................. $116,386 $101,027
======== ========
NORTHERN RESOURCE SEGMENT. Revenues increased by $42.0
million, or 24%, to $218.3 million in the first nine months of
1999, compared to $176.3 million in 1998. This increase was
primarily due to $36.6 million of additional revenues as a
result of our Maine timberland acquisition and higher harvest
levels in the Rocky Mountain Region, offset in part by
decreased harvest levels in the Cascade Region and lower export
log sales to Japan. Harvest levels in the Rocky Mountain
Region during the first nine months of 1999 increased by 7%,
primarily due to favorable weather conditions, which allowed us
to harvest some volume planned for the fourth quarter. Harvest
levels (both export and domestic logs) in the Cascade Region
decreased by 10%, primarily due to planned reductions.
Furthermore, export log sales volume decreased by approximately
12%, primarily due to the weak Japanese economy, increased
availability of substitute products (e.g., Russian logs and
European lumber) and the diversion of export quality logs to
the stronger domestic market.
Northern Resources Segment operating income was 30% of its
revenues for the nine months ended September 30, 1999, and 29% of
its revenues for the nine months ended 1998. Northern Resources
Segment costs and expenses increased by $27.2 million, or 22%, to
$151.9 million in 1999, compared to $124.7 million in 1998.
Excluding the increase in expenses of $28.1 million related to
the November 1998 acquisition of 905,000 acres of timberlands in
Maine, expenses decreased by $0.9 million. This decrease was
primarily due to lower harvest levels and log and haul costs in
the Cascade Region, offset in part by higher harvest levels in the
Rocky Mountain Region.
SOUTHERN RESOURCES SEGMENT. Revenues decreased by $12.2
million, or 14%, to $74.6 million in the first nine months of
1999, compared to $86.8 million in the same period of 1998. This
decrease was primarily due to a 16% decline in sawlog prices, a
7% decline in pulpwood prices and a 5% decline in pulpwood sales
volume. Sawlog prices decreased primarily due to an abundant
supply of logs throughout the region and a higher percentage of
smaller logs. Weather conditions during the first nine months of
1999 were unusually dry, which resulted in exceptionally
favorable harvesting conditions. Log sizes declined in 1999 due
to the near completion by the end of 1998 of the conversion of
our mature second growth pine timberlands into intensively
managed pine plantations. Pulp log prices decreased primarily
due to an abundant supply of wood fiber and weak paper markets.
Pulp log sales volume decreased primarily due to planned
reductions in harvest levels.
Southern Resources Segment operating income was 36% as a
percentage of its revenues for the nine months ended September 30,
1999, and 47% for the same period in 1998. This decline was
primarily due to lower sawlog and pulpwood prices and higher log
and haul costs. Southern Resources Segment costs and expenses
increased by $1.6 million, or 3%, to $47.6 million in 1999,
compared to $46.0 million in 1998, primarily due to a 7% increase
in log and haul costs, offset in part by low pulp log sales
volume.
LUMBER SEGMENT. Revenues increased by $46.1 million, or
22%, to $257.6 million for the nine months ended September 30,
1999, compared to $211.5 million for the same period in the prior
year. Excluding the incremental increase in revenues of $14.7
million related to the May 1998 acquisition of the Meridian,
Idaho remanufacturing facility, revenues increased by $31.4
million. This increase was primarily due to a 12% increase in
lumber sales volume and a 6% increase in Northwest lumber prices.
Lumber sales volume increased primarily due to the 47% increase
in production volume at our Joyce, Louisiana sawmill and the 13%
increase in production volume at our Pablo, Montana sawmill as a
result of mill reconfiguration projects. Northwest lumber prices
increased primarily due to the robust U.S. economy and continued
strong housing starts. Housing starts for the first nine months
of 1999 were 5% above the total starts for the same period in
1998. Lumber prices peaked in July, with many prices reaching
new record highs. Northwest board prices were also favorably
impacted by the temporary reduction of European board imports
into the United States.
Lumber Segment operating income was approximately 8% as a
percentage of its revenues for the nine months ended September
30, 1999, and 3% for the same period in 1998. The increase was
primarily due to higher Northwest lumber prices, higher lumber
sales volume and lower log costs. Lumber Segment costs and
expenses increased by $31.4 million, or 15%, to $237.5 million in
the first nine months of 1999, compared to $206.1 million in same
period of 1998. Excluding the incremental increase in expense of
$13.8 million related to the May 1998 acquisition of the
Meridian, Idaho remanufacturing facility, expenses increased by
$17.6 million. This increase of $17.6 million was primarily due
to an increase in lumber sales volume, offset in part by lower
log costs in our Southern Region.
PANEL SEGMENT. Revenues for the nine months ended September
30, 1999 increased by $14.4 million, or 12%, to $131.9 million
compared to $117.5 million for the same period in 1998. This
increase was primarily due to a 14% increase in plywood prices.
Plywood prices rose steadily during the first seven months of
1999 before peaking in July. The industry composite indices for
commodity plywood prices during the first nine months of 1999
were 27% above the indices for the first nine months of 1998.
The price improvement was primarily due to strong U.S. building
activity, rising oriented strand board prices and several
plywood mill closures. Industrial and specialty grade plywood
prices also were higher during the first nine months of 1999
compared to the first nine months of 1998, primarily due to
overall strong commodity plywood prices and strong industrial
sales activity.
Panel Segment operating income was 18% as a percentage of its
revenues for the first nine months of 1999 and 9% for the same
period in 1998. The increase in operating income was primarily
due to higher plywood prices. Panel Segment costs and expenses
increased by $1.4 million, or 1%, to $108.4 million in the third
quarter of 1999 compared to $107.0 million in the third quarter
of 1998.
LAND SALES SEGMENT. Revenues increased by $3.8 million, or
34%, to $15.1 million for the first nine months of 1999, compared
to $11.3 million for the same period in 1998. Land Sales Segment
operating income was 87% as a percentage of its revenues for the
nine months of 1999 and 84% for the same period in 1998. Land
Sales Segment costs and expenses increased by $0.2 million to
$2.0 million for the first nine months of 1999, compared to $1.8
million for the same period in 1998.
Other Costs and Eliminations (which consists of corporate
overhead, intercompany log profit elimination and the change in
the LIFO reserve) decreased combined operating income by $12.8
million in the first nine months of 1999, compared to a
decrease of $15.1 million in the first nine months of 1998. The
change of $2.3 million was primarily due to lower corporate
overhead, offset in part by a decline in the amount of
intercompany log profit recognized. Corporate overhead
decreased by $8.4 million during the first nine months of 1999,
primarily due to a second quarter 1998 long-term incentive plan
expense of $8.8 million. Deferred intercompany log profit of
$2.9 million was recognized during the first nine months of
1999 compared to $7.6 million during the first nine months of
1998. This decrease of $4.7 million was primarily due to the
build-up of log inventories in the Southern Resources Segment
in the fourth quarter of 1997 and the subsequent processing of
these logs in the first quarter of 1998. Similar log
inventories were not built-up during the fourth quarter of
1998. The profit on intercompany log sales is deferred until
the lumber and plywood manufacturing facilities convert
existing log inventories into finished products and sell them
to third parties, at which time intercompany profit is
recognized.
Interest expense increased by $6.3 million, or 14%, to $50.7
million, for the nine months ended September 30, 1999, compared
to $44.4 million for the nine months ended September 30, 1998.
This increase was primarily due to the issuance of $177 million
of senior notes in the fourth quarter of 1998 to finance our
Maine timberland acquisition, offset in part by the $170.1
million of debt transferred on July 1, 1999 to the unconsolidated
subsidiaries in the REIT conversion.
Reorganization Costs of $5.1 million are costs associated
with the conversion. See Note 2 of Notes to the Financial
Statements. Reorganization costs include fees for legal,
investment banking and tax consultants, as well as solicitation,
printing, consent fees for lender waivers, and other related
costs. Reorganization costs have been expensed as incurred.
The income allocated to the general partner decreased by $7.9
million to $17.2 million for the nine months ended September 30,
1999, compared to $25.1 million for the nine months ended
September 30, 1998. This decrease was primarily due to the
elimination of the general partner interest on July 1, 1999 as a
result of the conversion of the general partner interest to stock
in the corporation. See Note 1 of Notes to the Financial
Statements. Prior to July 1, 1999, net income was allocated to
the general partner based on 2 percent of the partnership's net
income (after adjusting for the incentive distribution), plus the
incentive distribution.
FINANCIAL CONDITION AND LIQUIDITY
During the first nine months of 1999, net cash provided by
operating activities totaled $103.5 million, compared to $126.7
million for the same period in 1998. As a result of the REIT
conversion, net cash provided by operating activities for the
nine months ended September 30, 1999 is not comparable with net
cash provided by operating activities for the same period in 1998
because of the following:
- Substantially all of the working capital changes after the
REIT conversion are reflected on the books of the
unconsolidated subsidiaries. However, working capital changes
will indirectly impact the corporation through its advances
from the unconsolidated subsidiaries.
- The corporation's share of equity earnings from the
unconsolidated subsidiaries is not reflected in its net cash
provided by operating activity until the earnings are
distributed as either a preferred or common stock dividend.
However, to the extent the unconsolidated subsidiaries have
excess undistributed cash, these funds are reflected on the
corporation's cash flow statement as interest-bearing advances
from unconsolidated subsidiaries.
Net cash provided by operating activities for the first nine
months of 1999 was $23.2 below the net cash provided by operating
activities for the same period in 1998. This decrease of $23.2
million was primarily due to unfavorable working capital
variances of $27.2 million prior to the REIT conversion, $14.0
million of deferred income tax benefit and $8.0 million of equity
earnings from the unconsolidated subsidiaries in excess of
dividend distributions, offset in part by higher net income of
$32.6 million. The unfavorable working capital variance was
primarily due to the timing of accounts receivable and accounts
payable payments and collections and the delayed funding of the
1998 long-term incentive compensation expense of $8.8 million.
We have an unsecured line of credit with a group of banks.
Subject to customary covenants, the line of credit allows for
borrowings from time to time of up to $225 million for general
corporate purposes, including up to $20 million of standby
letters of credit. The line of credit matures on December 13,
2001, and bears a floating rate of interest. As of September 30,
1999, $218.5 million was outstanding with $6.5 million remaining
available. As of October 12, 1999, $125.0 million of the
borrowings on the line of credit were repaid.
In November of 1999 the corporation issued 5,750,000 shares
of common stock for net proceeds of $141.4 million. Approximately
$80 million of the proceeds were used to repay borrowings on our
revolving line of credit. The remainder will be used for general
business purposes. Following the issuance of these additional
shares and the application of the proceeds to reduce the amount
outstanding under our line of credit, the corporation had $225
million available under its line of credit as of November 10,
1999.
On October 5, 1999, we signed a letter of intent to sell
91,000 acres of our timberlands near St. Maries, Idaho to Crown
Pacific Limited Partnership for approximately $73 million. On
November 5, 1999, the parties signed a definitive Purchase and
Sale Agreement. This transaction is expected to close on or
about January 15, 2000 and is subject to customary federal
regulator review. The net proceeds would be available for
reinvestment in timberlands or the repayment of debt.
Our borrowing agreements contain certain restrictive
covenants, including limitations on harvest levels, sales of
assets, cash distributions and the incurrence of indebtedness. In
addition, the line of credit requires the maintenance of an
interest coverage ratio. We were in compliance with these debt
covenants as of September 30, 1999.
We will distribute $0.57 per share with respect to the third
quarter of 1999, payable on November 24, 1999 to shareholders of
record on November 12, 1999. Future distributions will be
determined by our board of directors, in its sole discretion,
based on our results of operations, cash flow and capital
requirements, economic conditions, tax considerations, debt
covenant restrictions and other factors, including harvest levels
and future acquisitions.
Cash required to meet our quarterly cash distributions,
capital expenditures and principal and interest payments will be
significant. Management believes that cash on hand, cash flows
from continuing operations and borrowings under our line of
credit will be sufficient to fund planned capital expenditures,
distributions, and interest and principal payments for the next
twelve months.
CAPITAL EXPENDITURES
The corporation's capital expenditures for the first nine
months of 1999, excluding the $3.3 million non-cash purchase of
timberlands, totaled $16.6 million, compared to $50.9 million for
the same period in 1998. Of the $16.6 million expended in 1999,
$7.0 million related to expenditures on manufacturing facilities
prior to the REIT conversion. Total 1999 capital expenditures of
the corporation are expected to be approximately $20 million,
compared to $64.3 million for 1998. Excluding $7.0 million of
expenditures related to the manufacturing facilities of the
unconsolidated subsidiaries, planned capital expenditures for the
corporation are primarily for logging roads, reforestation and
other expenditures related to our timberlands.
The unconsolidated subsidiaries' capital expenditures for
the three months ended September 30, 1999 totaled $2.2 million.
Total capital expenditures for the unconsolidated subsidiaries
for the six months ended December 31, 1999 are expected to be
approximately $4 million and are primarily for replacement and
upgrades of mill equipment.
IMPACT OF THE YEAR 2000 ISSUE
Many currently installed computer systems and software
products are coded to accept only two digit entries in the date
code field. These date code fields will need to accept four
digit entries to distinguish 21st century dates from 20th century
dates. Any programs that have time-sensitive software may
recognize a date using "00" as the year 1900 rather than the year
2000. This could result in the computer shutting down or
performing incorrect computations. As a result, before December
31, 1999, computer systems and software used by many companies
may need to be upgraded to comply with "Year 2000" requirements.
During the first quarter of 1997, we adopted a Year 2000
plan to identify and address both internal and external Year 2000
issues. Our Year 2000 plan addresses the following:
-- information technology systems,
-- process control systems and embedded chips used in our
manufacturing operations, and
-- key business relationships.
Pursuant to our plan, we completed a company-wide assessment
of our information technology systems in 1997 to determine the
impact of the Year 2000 issue. We completed most of the
necessary revisions to our systems and processes by year-end
1998. Testing and verification of our systems and processes for
Year 2000 compliance will be completed prior to January 1, 2000.
OUR STATE OF READINESS
Over the last five years, we have replaced many of our
business computer systems in order to realize cost savings and
process improvements. A majority of these replacements, all of
which are Year 2000 compliant, were completed prior to the
company-wide Year 2000 issue assessment. The related costs have
been capitalized. In 1999, we completed the replacement of our
payroll and human resources systems. To replace these systems,
we spent approximately $300,000 in 1998 and approximately
$110,000 in 1999. These costs have been capitalized.
Our log accounting systems have required program
modifications to achieve Year 2000 readiness. The program
modifications and testing were completed in June 1999 at an
approximate cost of $28,000 for 1998 and an approximate cost of
$7,000 for 1999. Our information systems personnel performed all
remediation efforts, and the related costs were expensed as
incurred.
During 1998, we completed an inventory of the process
control systems and embedded chips used in our manufacturing
operations and we identified the systems that could be subject to
Year 2000 problems. The systems used in the lumber and plywood
operations require minimal changes, while the medium density
fiberboard systems will require the replacement of some process
control software. The modifications and testing of the
manufacturing control systems will be completed in 1999, at an
approximate cost of $33,000 for 1998 and an approximate cost of
$132,000 for 1999. These costs will be expensed as incurred.
Currently, the modifications and testing of the manufacturing
process control systems are 98% complete.
As part of our Year 2000 plan, service providers, vendors,
suppliers and customers that are critical to our operations have
been notified and steps are being undertaken to determine their
Year 2000 readiness through questionnaires, interviews, and other
available means. We will continue our efforts to determine the
readiness of our key business partners and the potential impacts
on our operations if key business partners are not Year 2000
compliant by year-end 1999.
RISKS ASSOCIATED WITH YEAR 2000 ISSUES
We rely on our key business partners for materials and
services. If our business partners fail to achieve Year 2000
compliance, our ability to operate could be temporarily impacted.
However, the impact would be limited to the extent that
sufficient alternate supplies of materials or services are
available.
We are also dependent upon our customers for sales and cash
flow. Year 2000 interruptions in our customers' operations could
result in reduced sales, increased inventory or receivable
levels, and cash flow reductions. While these events are
possible, our customer base is broad enough to minimize the
effects of individual occurrences.
CONTINGENCY PLAN
Part of our Year 2000 project includes the development of
contingency plans for business critical systems, as well as for
strategic suppliers and customers to attempt to minimize
disruption to our operations in the event of a Year 2000 failure.
We have formulated plans to address a variety of failure
scenarios, including failures of our in-house applications, as
well as failures of strategic suppliers and customers.
SUMMARY CONCLUSION
Based on our assessments, we do not expect Year 2000 issues
relating to our information technology systems, process control
systems or embedded chips used in the manufacturing operations of
the unconsolidated subsidiaries to have a material impact on the
corporation's financial position, results of operations or
liquidity. Furthermore, we will continue to monitor the progress
of our key business partners in achieving Year 2000 compliance,
and, to the extent practicable, will develop contingency plans.
However, we can give no assurance that our key business partners
will achieve Year 2000 compliance on a timely basis, or the
extent to which operations may be impacted in the event that our
key business partners fail to achieve Year 2000 compliance.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Approximately $742 million of the long-term debt of the
corporation and the unconsolidated subsidiaries bears interest at
fixed rates, and therefore the fair value of these instruments is
affected by changes in market interest rates. Approximately
$170.1 million of the long-term debt is recorded on the books of
the unconsolidated subsidiaries. The corporation's operating
partnership guarantees the long-term debt of the unconsolidated
subsidiaries. The following table presents principal cash flows
(in thousands) based upon maturity dates of the debt obligations
and the related weighted-average interest rates by expected
maturity dates for the fixed rate debt. The interest rate on the
variable rate debt as of September 30, 1999 was LIBOR plus 0.65%
(6.09%), however, this rate could range from LIBOR plus 0.35% to
LIBOR plus 0.875% depending on our financial results.
September 30, 1999:
Long-
term
debt,
including
current Fair
portion 1999 2000 2001 2002 2003 Thereafter Total Value
- ---------------------------------------------------------------------------
Fixed
Rate $104 $27,392 $27,423 $27,458 $27,494 $632,429 $742,300 $753,000
Avg.
Interest
Rate 9.0% 8.9% 8.8% 8.7% 8.6% 8.3%
Variable
Rate $218,500 $218,500 $218,500
As of October 12, 1999, $125 million of variable rate debt was repaid.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In October 1998, Congress passed legislation directing the
United States Forest Service to exchange specific Federal lands
in Washington State for some of our Washington State lands of
equal value. Prior to consummating the exchange, we discovered
marbled murrelets, a species listed as threatened under the
Endangered Species Act, on a portion of the Federal lands to be
exchanged, impacting the value of this land. In August 1999, an
administrative appeal was filed against the United States Forest
Service alleging, among other things, deficiencies in the United
States Forest Service's environmental analysis of the land
exchange. On October 14, 1999, the date on which the
administrative appeal was dismissed, we filed a Complaint for
Declaratory Judgement in the Federal District Court for the
Eastern District of Washington. Through this lawsuit, we sought
to establish the legality of the land exchange and the United
States Forest Service's actions in implementing the land
exchange. In November, we reached a settlement agreement with
the other parties to the lawsuit. Congress is currently
considering new legislation to reconfigure the land exchange
according to the terms of the settlement. Under the pending
legislation, Plum Creek would exchange 31,700 acres of its lands
for 11,500 acres of Federal timberlands of equal value. As a
part of the settlement agreement, Plum Creek would also grant the
Federal government and certain conservation groups options to
purchase our lands that dropped from the exchange. In
consideration for these options, the conservation groups have
agreed not to challenge the land exchange or forest practices
applications relating to lands exchanged to Plum Creek. The land
exchange is expected to close in early 2000. In connection with
the land exchange, we are seeking an amendment to our Cascades
habitat conservation plan to add to the plan lands we receive in
the land exchange that are within the Planning Area.
There is no pending or threatened litigation that we believe
would have a material adverse effect on our financial position,
results of operations or liquidity.
Items 2, 3 and 4 of Part II are not applicable and have been omitted.
ITEM 5. OTHER INFORMATION
To be considered for inclusion in the proxy materials for the
company's year 2000 annual meeting, stockholder proposals must be
received in writing at the company's principal executive offices
before March 10, 2000. The proxies for our year 2000 annual
meeting will confer discretionary voting authority to vote on any
proposal submitted prior to February 9, 2000 or after March 10,
2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
Each exhibit set forth below in the Index to Exhibits is filed as
a part of this report. Exhibits not incorporated by reference to
a prior filing are designated by an asterisk ("*"); all exhibits
not so designated are incorporated herein by reference to a prior
filing as indicated.
INDEX TO EXHIBITS
Exhibit
Designation Nature of Exhibit
- ----------- -----------------
2.6 Amended and Restated Agreement and Plan of Conversion, dated
as of July 17, 1998, by and among Plum Creek Timber
Company, Inc., Plum Creek Timber Company, L.P. and Plum
Creek Management Company, L.P. (Form S-4, Regis. No.
333-71371, filed January 28, 1999).
2.7 Agreement and Plan of Merger, dated as of July 17, 1998, by
and among Plum Creek Timber Company, L.P., Plum Creek
Acquisitions Partners, L.P. and Plum Creek Timber
Company, Inc. (Form S-4, Regis. No. 333-71371, filed
January 28, 1999).
2.8 Agreement and Plan of Merger, dated as of July 17, 1998, by
and among Plum Creek Timber Company, Inc. and Plum
Creek Management Company, L.P. (Form S-4, Regis. No.
333-71371, filed January 28, 1999).
3.1* Certificate of Incorporation of Plum Creek Timber Company,
Inc.
3.2 Amended and Restated By-laws of Plum Creek Timber Company,
Inc. (Form S-4, Regis. No. 333-71371, filed January
28, 1999).
4.3 Senior Note Agreement, dated May 31, 1989, 11 1/8 percent
Senior Notes due June 8, 2007, Plum Creek Timber
Company, L. P. (Form 10-Q, No. 1-10239, for the quarter
ended June 30, 1989). Amendment No. 1, consent and
waiver dated January 1, 1991 to Senior Note Agreement,
dated May 31, 1989, 11 1/8 percent Senior Notes due
June 8, 2007, Plum Creek Timber Company, L.P. (Form 8
Amendment No. 1, for the year ended December 31, 1990).
Amendment No. 2, consent and waiver dated September 1,
1993 to the Senior Note Agreement (Form 10-K/A,
Amendment No. 1, for the year ended December 31, 1993).
Amendment No. 3, Senior Note Agreement Amendment dated
May 20, 1994 (Form 10-K/A, Amendment No. 1, for the
year ended December 31, 1994). Senior Note Agreement
Amendment dated May 31, 1996 (Form 10-Q, No. 1-10239,
for the quarter ended June 30, 1996). Senior Note
Agreement Amendment dated April 15, 1997 (Form 10-Q,
No. 1-10239, for the quarter ended September 30, 1997).
Senior Note Agreement Amendment effective July 1, 1999
(Form 10-Q, No. 1-10239, for the quarter ended June 30, 1999).
4.4 Mortgage Note Agreement, dated May 31, 1989, 11 1/8
percent First Mortgage Notes due June 8, 2007, Plum
Creek Manufacturing, Inc. (Form 10-Q, No. 1-10239, for
the quarter ended June 30, 1989). Amendment No. 1,
consent and waiver dated January 1, 1991 to Mortgage
Note Agreement, dated May 31, 1989, 11 1/8 percent
First Mortgage Notes due June 8, 2007, Plum Creek
Manufacturing, Inc., now Plum Creek Manufacturing, L.P.
(Form 8 Amendment No. 1, for the year ended December
31, 1990). Amendment No. 2, consent and waiver dated
September 1, 1993 to the Mortgage Note Agreement (Form
10-K/A, Amendment No. 1, for the year ended December
31, 1993). Amendment No. 3, Mortgage Note Agreement
Amendment dated May 20, 1994 (Form 10-K/A, Amendment
No. 1, for the year ended December 31, 1994).
Amendment to Mortgage Note Agreement dated June 15,
1995 (Form 10-Q, No. 1-10239, for the quarter ended
September 30, 1995). Mortgage Note Agreement
Amendment dated May 31, 1996 (Form 10-Q, No. 1-10239,
for the quarter ended June 30, 1996). Mortgage Note
Agreement Amendment dated April 15, 1997 (Form 10-Q,
No. 1-10239, for the quarter ended September 30, 1997).
Mortgage Note Agreement Amendment effective July 1,
1999 (Form 10-Q, No. 1-10239, for the quarter ended
June 30, 1999).
4.5 Senior Note Agreement, dated August 1, 1994, 8.73% Senior
Notes due August 1, 2009, Plum Creek Timber Company,
L.P. (Form 10-K/A, Amendment No. 1, for the year ended
December 31, 1994). Senior Note Agreement Amendment
dated as of October 15, 1995 (Form 10-K, No. 1-10239,
for the year ended December 31, 1995). Senior Note
Agreement Amendment dated May 31, 1996 (Form 10-Q, No.
1-10239, for the quarter ended June 30, 1996). Senior
Note Agreement Amendment dated April 15, 1997 (Form 10-
Q, No. 1-10239, for the quarter ended September 30,
1997). Senior Note Agreement Amendment effective July
1, 1999 (Form 10-Q, No. 1-10239, for the quarter ended
June 30, 1999).
4.6 Senior Note Agreement, dated as of November 13, 1996, $75
million Series A due November 13, 2006, $25 million
Series B due November 13, 2008, $75 million Series C
due November 13, 2011, $25 million Series D due
November 13, 2016 (Form 10-K, No. 1-10239, for the year
ended December 31, 1996). Senior Note Agreement
Amendment effective July 1, 1999 (Form 10-Q, No. 1-
10239, for the quarter ended June 30, 1999).
4.7 Senior Note Agreement, dated as of November 12, 1998, Series
E due February 12, 2007, Series F due February 12,
2009, Series G due February 12, 2011 (Form 8-K and 8
K/A, File No. 1-10239, dated November 12, 1998).
Senior Note Agreement Amendment effective July 1, 1999
(Form 10-Q, No. 1-10239, for the quarter ended June 30,
1999).
10.1 Amended and Restated Revolving Credit Agreement dated as of
December 13, 1996 among Plum Creek Timber Company,
L.P., Bank of America National Trust and Savings
Association, as Agent, NationsBank of North Carolina,
N.A., as senior co-agent and the Other Financial
Institutions Party Hereto (Form 10-K, No. 1-10239, for
the year ended December 31, 1996). Amendment effective
July 1, 1999 (Form 10-Q, No. 1-10239, for the quarter
ended June 30, 1999).
27* Financial Data Schedule for the quarter ended September
30, 1999. See attached exhibit.
(b) Reports on Form 8-K
Plum Creek Timber Company, Inc. filed a current report on Form 8-K
dated July 1, 1999, reporting that it had completed the conversion
from a master limited partnership to a corporation.
Plum Creek Timber Company, Inc. filed a current report on Form 8-K
dated July 1, 1999, in which it filed pro forma financial
information relating to its conversion from a master limited
partnership to a corporation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
PLUM CREEK TIMBER COMPANY, INC.
(Registrant)
By: /s/ William R. Brown
------------------------
WILLIAM R. BROWN
Executive Vice President and
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial and
Accounting Officer)
Date: November 12, 1999
CORRECTED
CERTIFICATE OF MERGER
-----------------------------------------
Pursuant to Section 103(f) of the General
Corporation Law of the State of Delaware
-----------------------------------------
FIRST: On June 30, 1999, a Certificate of Merger was filed in which
Plum Creek Management Company, L.P., a Delaware limited partnership, merged
with and into Plum Creek Timber Company, Inc., a Delaware corporation.
SECOND: Exhibit A to the Certificate of Merger contained errors in
section C.3(c) of Article FOURTH and section C.6(g) of Article FOURTH
thereby creating an inaccurate record of corporate action. The Certificate
of Merger attaching Exhibit A is hereby corrected to read in its entirety
as attached hereto.
THIRD: This foregoing correction was prepared in accordance with the
provisions of Section 103(f) of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, this Corrected Certificate of Merger has been
duly executed as of this 21st day of October, 1999.
PLUM CREEK TIMBER COMPANY, INC.
By: /s/ James A. Kraft
----------------------
Name: James A. Kraft
Title: Vice President, General
Counsel and Secretary
CERTIFICATE OF MERGER
OF
PLUM CREEK MANAGEMENT COMPANY, L.P.
WITH AND INTO
PLUM CREEK TIMBER COMPANY, INC.
Pursuant to Section 263 of the General Corporation Law of the State of
Delaware
PLUM CREEK TIMBER COMPANY, INC., a Delaware corporation, hereby
certifies as follows:
1. The name and jurisdiction of formation or
organization of the constituent limited partnership to this
merger is as follows:
Name Jurisdiction
---- ------------
PLUM CREEK MANAGEMENT COMPANY, L.P. Delaware
The name and state of incorporation of the constituent corporation to
this merger is as follows:
Name Jurisdiction
---- ------------
PLUM CREEK TIMBER COMPANY, INC. Delaware
2. An agreement of merger has been approved,
adopted, certified, executed and acknowledged by the
constituent limited partnership and corporation in
accordance with Section 263(c) of the General Corporation
Law of the State of Delaware.
3. The name of the surviving entity of the
merger is: PLUM CREEK TIMBER COMPANY, INC. (the "Surviving
Corporation").
4. The Certificate of Incorporation of the
Surviving Corporation shall be amended in its entirety to
read as set forth in Exhibit A hereto.
5. The agreement of merger is on file at an
office of PLUM CREEK TIMBER COMPANY, INC. at 999 Third
Avenue, Suite 2300, Seattle, Washington 98104-4096.
6. A copy of the agreement of merger will be
furnished by PLUM CREEK TIMBER COMPANY, INC., on request and
without cost, to any stockholder of the constituent
corporation or any partner of the constituent limited
partnership which is to merge.
7. This Certificate of Merger shall become
effective at 8:00 a.m., Wilmington, Delaware time, on July
1, 1999.
(The remainder of this page is intentionally blank)
IN WITNESS WHEREOF, this Certificate of Merger has
been duly executed by the Surviving Corporation as of the
30th day of June, 1999.
PLUM CREEK TIMBER COMPANY, INC.,
a Delaware Corporation
By: /s/ James A. Kraft
----------------------
Name: James A. Kraft
Title: Vice President, General
Counsel and Secretary
EXHIBIT A
- ---------
CERTIFICATE OF INCORPORATION
OF
PLUM CREEK TIMBER COMPANY, INC.
I. FIRST: The name of the corporation is: Plum Creek Timber
Company, Inc. (hereinafter, the "Corporation").
II. SECOND: The address of the registered office of the
Corporation in the State of Delaware is The Corporation Trust
Company, 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at
such address is The Corporation Trust Company.
III. THIRD: The nature of the business or purposes to be
conducted or promoted is to engage in any lawful act or
activity for which corporations may be organized under the
General Corporation Law of the State of Delaware (the "GCL").
IV. FOURTH: A. The total number of shares of all classes of
capital stock that the Corporation shall have authority to
issue is 525,634,567 shares of which (i) 300,000,000 shares
shall be shares of Common Stock, par value $.01 per share
(the "Common Stock"), and 634,566 shares shall be shares of
Special Voting Common Stock, par value $.01 per share (the
"Special Voting Stock") (the Common Stock and the Special
Voting Stock being collectively referred to herein as the
"Common Equity"), (ii) 150,000,001 shares shall be shares of
Excess Stock, par value $.01 per share (the "Excess Stock"),
and (iii) 75,000,000 shares shall be shares of Preferred
Stock, par value $.01 per share (the "Preferred Stock").
B. The number of authorized shares of any class or classes
of capital stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by
the affirmative vote of the holders of a majority of the
total voting power of the shares of capital stock entitled
to vote thereon, voting together as a single class, and
without the vote of the holders of such class or each such
class.
C. The following is a statement of the powers,
preferences, and relative participating, optional or other
special rights and qualifications, limitations and
restrictions of the Common Stock and Special Voting Stock
of the Corporation:
1. Except as otherwise set forth below in this
Article FOURTH, the powers, preferences and relative
participating, optional or other special rights and
qualifications, limitations or restrictions of the Common Stock
and Special Voting Stock shall be identical in all respects.
2. Subject to the rights of the holders of Preferred
Stock, and subject to any other provisions of this Certificate of
Incorporation, holders of Common Stock shall be entitled to
receive such dividends and other distributions in cash, stock or
property of the Corporation as may be declared thereon by the
Board of Directors of the Corporation from time to time out of
assets or funds of the Corporation legally available therefor.
If any dividend or other distribution in cash or other property
is paid with respect to the Common Stock a like dividend or other
distribution shall be paid with respect to each share of Special
Voting Stock. Upon any reclassification, subdivision or
combination of Common Stock or upon payment of any in-kind
dividend of additional shares of Common Stock with respect to the
Common Stock, the Special Voting Stock shall be similarly
reclassified, subdivided or combined or the Special Voting Stock
will receive the same in-kind dividend, provided, however, that
such in-kind divided shall consist of additional shares of
Special Voting Stock.
3. (a) At every meeting of the stockholders of the
Corporation, every holder of Common Equity (voting together as a
single class, except as set forth below) shall be entitled to one
vote in person or by proxy for each share of Common Stock or
Special Voting Stock standing in such holder's name on the
transfer books of the Corporation, provided, however, that should
any Change in Law (as defined in Article ELEVENTH) require a
reduction in the number of votes represented by the Special
Voting Stock, the number of votes to which a holder of Special
Voting Stock shall, without any further action on the part of the
Corporation or the stockholders, be reduced to the extent
reasonably necessary or appropriate to maintain the Corporation's
status as a REIT (as defined in Article ELEVENTH), such reduction
to be deemed to have been made as of the effective date of such
Change in Law. Except as may be otherwise required by this
Article FOURTH or applicable law, the holders of Common Stock and
Special Voting Stock shall vote together as a single class,
subject to any voting rights which may be granted to holders of
Preferred Stock or Special Voting Stock, on all matters submitted
to a vote of the holders of Common Equity.
(b) Subject to any rights of the holders of
Preferred Stock and or Special Voting Stock set forth in clause
(c) hereof, the provisions of this Certificate of Incorporation
shall not be modified, revised, altered or amended, repealed or
rescinded in whole or in part, without the approval of a majority
(or such greater percentage as is required by Article TENTH of
this Certificate of Incorporation) of the votes entitled to be
cast by the holders of the Common Stock and the Special Voting
Stock, voting together as a single class or, in the case of
amendments or changes to this Certificate of Incorporation to be
effected by a merger, without the approval of the agreement of
merger by a majority of the votes entitled to be cast by the
holders of the Common Stock and the Special Voting Stock, voting
together as a single class; provided, however, that with respect
to any proposed amendment of this Certificate of Incorporation
(including, without limitation, an amendment to be effected by a
merger) which would increase or decrease the par value of the
shares of Common Stock or Special Voting Stock or alter or change
the powers, preferences or special rights of the shares of Common
Stock or Special Voting Stock so as to affect them adversely, the
approval of a majority of the votes entitled to be cast by the
holders of the shares affected by the proposed amendment, voting
separately as a class, shall be obtained in addition to the
approval of a majority of the votes entitled to be cast by the
holders of the Common Stock and the Special Voting Stock voting
together as a single class as hereinbefore provided. Any
increase in the authorized number of shares of any class or
classes of stock of the Corporation or creation, authorization or
issuance of any additional class or series of stock or any
securities convertible into, or warrants, options or similar
rights to purchase, acquire or receive, shares of any such class
or classes of stock shall be deemed not to affect adversely the
powers, preferences or special rights of the shares of Common
Stock or Special Voting Stock.
(c) So long as the Principals (as defined in
Article ELEVENTH) Beneficially Own (as defined in Article
ELEVENTH) at least five million shares of Common Stock and/or
Special Voting Stock, in the aggregate, subject to adjustment for
any stock split, stock dividend, reverse stock split,
combination, recapitalization, reclassification or like transac-
tion, the Corporation shall not enter into any Extraordinary
Transaction (as defined in Article ELEVENTH), without (in
addition to any vote of the holders of Common Equity required
under this Certificate of Incorporation, the GCL or any other
applicable law) the approval of the holders of a majority of the
outstanding shares of Special Voting Stock, voting together as a
separate class, provided, however, that the Board of Directors
of the Corporation, in connection with the issuance of units of
limited partnership of Plum Creek Acquisition Partners, L.P.,
may issue shares of Preferred Stock with the right to vote
together with the Special Voting Stock, as a single class, with
respect to any or all Extraordinary Transactions.
4. In the event of any dissolution, liquidation or
winding up of the affairs of the Corporation, whether voluntary
or involuntary, after payment in full of the amounts required to
be paid to the holders of Preferred Stock, the remaining assets
and funds of the Corporation shall be distributed pro rata to the
holders of Common Equity based on the aggregate number of shares
of Common Equity outstanding. For the purposes of this section
C.4, the voluntary sale, conveyance, lease, exchange or transfer
(for cash, shares of stock, securities or other consideration) of
all or substantially all of the assets of the Corporation or a
consolidation or merger of the Corporation with one or more other
corporations (whether or not the Corporation is the corporation
surviving such consolidation or merger) shall not be deemed to be
a liquidation, dissolution or winding up, voluntary or
involuntary.
5. In the event that any shares of Common Equity are
converted into or exchanged for cash, securities or other
property in connection with any consolidation of the Corporation
with one or more other Persons (as hereinafter defined) or a
merger of the Corporation with another Person, unless immediately
following such event, and resulting solely from the ownership of
the securities issued in connection therewith, a majority of the
total voting power of the surviving Person in such consolidation
or merger is held by Persons that were stockholders of the
Corporation immediately prior to such event, or unless the
holders of Common Equity unanimously vote otherwise, each holder
of a share of Common Stock shall be entitled to receive with
respect to such share at least the same kind and amount of shares
of stock and other securities and property (including cash)
receivable upon such consolidation or merger by each holder of a
share of Special Voting Stock, and each holder of a share of
Special Voting Stock shall be entitled to receive with respect to
such share the same kind and amount of shares of stock and other
securities and property (including cash) receivable upon such
consolidation or merger by a holder of a share of Common Stock.
6. (a) Any record holder of a share of Special
Voting Stock may at any time convert such share into one share of
Common Stock by surrendering the certificate for such share,
accompanied by any required tax transfer stamps and by a written
notice by such record holder to the Corporation stating that such
record holder desires to convert such share of Special Voting
Stock into a share of Common Stock and requesting that the
Corporation issue such Common Stock to the Person named therein.
To the extent permitted by law, such voluntary conversion shall
be deemed to have been effected at the close of business on the
date of such surrender.
(b) (i) Except as provided in paragraph (ii)
below, shares of Special Voting Stock shall automatically convert
into shares of Common Stock immediately prior to the Transfer (as
hereinafter defined) of such shares of Special Voting Stock.
(ii) Shares of Special Voting Stock
shall not automatically convert to Common Stock if
transferred to a Permitted Transferee.
(iii) Immediately upon any such automatic
conversion of the Special Voting Stock, the rights of
the holder of such share(s) of Special Voting Stock
shall cease and such holder shall be treated for all
purposes as having become the record owner of the
Common Stock issuable upon such conversion; provided,
however, that such holder shall be entitled to receive
when paid any dividends declared on the Special Voting
Stock as of a record date preceding the time of such
conversion and unpaid as of the time of such
conversion.
(c) A holder of Special Voting Stock may (i)
Transfer such Special Voting Stock without automatic conversion
into Common Stock only in connection with a Transfer that meets
the qualifications of section C.6(b)(ii) above and section C.6(d)
below, and under no other circumstances, or (ii) convert such
share into shares of Common Stock as provided in section C.6(a)
above. No one other than that Person in whose name the Special
Voting Stock is originally registered on the stock ledger of the
Corporation, or transferees or successive transferees who receive
the Special Voting Stock in connection with a Transfer that meets
the qualifications set forth in section C.6(b)(ii) above and
section C.6(d) below, shall by virtue of the acquisition of the
certificate for the Special Voting Stock have the status of an
owner or holder of such Special Voting Stock or be recognized as
such by the Corporation or be otherwise entitled to enjoy for
its, his or her own benefit the special rights and powers of a
holder of the Special Voting Stock.
A holder of Special Voting Stock may at any and all
times Transfer to any Person the Common Stock issuable upon
conversion of such Special Voting Stock, except where such
Transfer is restricted by applicable law.
(d) The shares of Special Voting Stock shall be transferred on
the books of the Corporation and a new certificate issued
therefor, upon presentation at the office of the Secretary of the
Corporation (or at such additional place or places as may from
time to time be designated by the Secretary of the Corporation)
of the certificate for such share, in proper form for transfer
and accompanied by all requisite stock transfer tax stamps.
(e) The certificates for the shares of Special
Voting Stock shall bear a legend on the face thereof reading as
follows:
"The Special Voting Stock of Plum Creek Timber Company, Inc.
(the "Corporation") represented by this certificate may not be
Transferred (as defined in the Certificate of Incorporation of
this Corporation) to any person or entity unless such Transfer
meets the qualifications set forth in section C.6(b)(ii) and (d)
of Article FOURTH of the Certificate of Incorporation of this
Corporation and no person who receives this share in connection
with a Transfer that does not meet the qualifications prescribed
by sections C.6(b)(ii) and (d) of said Article FOURTH is entitled
to own or to be registered as the record holder of these shares
of Special Voting Stock and such Special Voting Stock will be
automatically converted into Common Stock upon any such purported
transfer. The record holder of this certificate may at any time
convert these shares of Special Voting Stock into Common Stock,
subject to compliance with Section C.6(a) of Article FOURTH of
the Certificate of Incorporation of this Corporation. Each
holder of this certificate, by accepting the same, accepts and
agrees to all of the foregoing. The Corporation will furnish
without charge, to each stockholder who so requests, a copy of
the Certificate of Incorporation of the Corporation, containing,
among other things, a statement of the powers, designations,
preferences and relative, participating, optional or other
special rights of each class of stock or series thereof that the
Corporation is authorized to issue and the qualifications,
limitations or restrictions of such preferences and/or rights.
Any such request shall be addressed to the Secretary of the
Corporation."
(f) For so long as shares of Special Voting Stock
are outstanding, the Corporation shall at all times reserve and
keep available, out of its authorized but unissued Common Stock,
the number of shares of Common Stock into which the Special
Voting Stock shall then be convertible.
(g) In the event that the Principals cease to
Beneficially Own at least 5 million shares of Common Stock and/or
Special Voting Stock, in the aggregate, subject to adjustment for
any stock split, stock dividend, reverse stock split,
combination, recapitalization, reclassification or like
transaction, all of the outstanding shares of Special Voting
Stock, without any further action on the part of the Corporation
or the stockholders, shall convert into an equal number of shares
of Common Stock, and each outstanding certificate representing
Special Voting Stock shall thereafter represent the right to
receive an equal number of shares of Common Stock.
7. All rights to vote and all voting power
(including, without limitation thereto, the right to elect
directors) shall be vested exclusively in the holders of Common
Equity, voting together as a single class, except as otherwise
expressly provided in this Certificate of Incorporation, in a
Preferred Stock Designation (as defined in section D of this
Article FOURTH) or as otherwise expressly required by applicable
law.
D. The Board of Directors is hereby authorized to provide
by resolution or resolutions from time to time for the
issuance of shares of Preferred Stock in one or more
series and, by filing a certificate pursuant to the GCL
(hereinafter, along with any similar designation
relating to any other series of Preferred Stock which
may hereafter be authorized, referred to as a
"Preferred Stock Designation," each of which shall be
part of this Certificate of Incorporation), to
establish from time to time the number of shares to be
included in each such series, and to fix the desig-
nation, powers (including voting powers), preferences
and rights of the shares of each such series and the
qualifications, limitations and restrictions thereof.
E. Restrictions on Ownership and Transfer of Equity Stock.
1. (a) Limitation on Beneficial Ownership.
(i) Except as provided in section E.3 of
this Article FOURTH, no person shall Beneficially Own (as
hereinafter defined) shares of Equity Stock (as hereinafter
defined) in excess of the Ownership Limit (as hereinafter
defined).
(ii) Except as provided in section E.3
of this Article FOURTH, any purported Transfer that, if
effective, would result in any Person Beneficially
Owning shares of Equity Stock in excess of the
Ownership Limit shall be void ab initio as to the
Transfer of that number of shares of Equity Stock which
would cause the transferee to Beneficially Own Equity
Stock in excess of the Ownership Limit, and the
intended transferee shall acquire no rights in such
shares of Equity Stock.
(b) Transfers Resulting in "Closely Held" Status.
Any purported Transfer of shares of Equity Stock that, if
effective, would result in the Corporation being "closely held"
within the meaning of section 856(h) of the Code (as hereinafter
defined) shall be void ab initio as to the Transfer of that
number of shares of Equity Stock that would cause the Corporation
to be "closely held" within the meaning of Section 856(h) of the
Code, and the intended transferee shall acquire no rights in such
shares of Equity Stock.
(c) Transfers Resulting in Ownership by fewer
than 100 Persons. Any purported Transfer of shares of Equity
Stock that, if effective, would result in shares of Equity Stock
being beneficially owned by fewer than 100 persons within the
meaning of Section 856(a)(5) of the Code shall be void ab initio
and the intended transferee shall acquire no rights in such
shares of Equity Stock.
(d) Transfers Resulting in Corporation Failing to
Qualify as a "Domestically Controlled REIT". Any purported
Transfer of shares of Equity Stock that, if effective, would
result in the failure of the Corporation to qualify as a
"domestically controlled REIT" within the meaning of Section
897(h)(4)(B) of the Code shall be void ab initio and the intended
transferee shall acquire no rights in the shares of Equity Stock
which are the subject of such purported Transfer.
(e) Transfers Resulting in Corporation Failing to
Qualify as a REIT. Any purported Transfer of shares of Equity
Stock that, if effective, would cause the Corporation to fail to
qualify as a REIT (as hereinafter defined) shall be void ab
initio and the intended transferee shall acquire no rights in the
shares of Equity Stock which are the subject of such purported
Transfer.
2. Beneficial Owners Required to Provide Information.
(a) Annual Disclosure. Every Beneficial Owner
of more than 3%, or such lower percentages as are then required
pursuant to regulations under the Code, of the outstanding shares
of any class or series of Equity Stock of the Corporation shall,
within 30 days after January 1 of each year, provide to the
Corporation a written statement or affidavit stating the name and
address of such Beneficial Owner, the number of shares of Equity
Stock Beneficially Owned by such Beneficial Owner and a
description of how such shares are held. Each such Beneficial
Owner shall provide to the Corporation such additional
information as the Corporation may request in order to determine
the effect, if any, of such Beneficial Ownership on the
Corporation's status as a REIT and to ensure compliance with the
Ownership Limit.
(b) Disclosure at the Request of the Corporation.
Each Person who is a Beneficial Owner of shares of Equity Stock
and each Person (including the stockholder of record) who is
holding shares of Equity Stock for a Beneficial Owner shall
provide to the Corporation a written statement or affidavit
stating such information as the Corporation may request in order
to determine the Corporation's status as a REIT and to ensure
compliance with the Ownership Limit. In addition, the Excluded
Holder shall promptly notify the Corporation upon any transfer of
Equity Stock.
3. Waiver of the Ownership Limit. The Board of
Directors, upon receipt of a ruling from the Internal Revenue
Service or an opinion of counsel or other evidence or undertak-
ings acceptable to it, may, in its sole discretion, waive the
application of the Ownership Limit to a Person subject to such
limit, provided that (A) the Board of Directors obtains such
representations and undertakings from such Person as are
reasonably necessary to ascertain that such Person's Beneficial
Ownership or Constructive Ownership of shares of Equity Stock
will now and in the future (i) not result in the Corporation
being "closely held" within the meaning of Section 856(h) of the
Code, (ii) not result in the shares of Equity Stock of the
Corporation being Beneficially Owned by fewer than 100 persons
within the meaning of Section 856(a)(5) of the Code, (iii) not
result in the Corporation failing to qualify as a "domestically
controlled REIT" within the meaning of Section 897(h)(4)(B) of
the Code and (iv) will not otherwise result in the Corporation
failing to qualify as a REIT, and (B) such Person agrees in
writing that any violation or attempted violation of any other
limitations, restrictions and conditions that the Board of
Directors may in its sole discretion impose at the time of such
waiver with respect to such Person will result, as of the time of
such violation even if discovered after such violation, in the
conversion of such shares in excess of the original limit
applicable to such Person into shares of Excess Stock pursuant to
section F.1 of this Article FOURTH.
4. Settlement. Notwithstanding any provision
contained herein to the contrary, nothing in this Certificate of
Incorporation shall preclude the settlement of any transaction
entered into through the facilities of the New York Stock
Exchange or any other national securities exchange or the NASDAQ
Stock Market, Inc. or any other automated quotation system. In
no event shall the existence or application of the preceding
sentence have the effect of deterring or preventing the
conversion of Equity Stock into Excess Stock as contemplated
herein.
F. Excess Stock
1. (a) Transfers in Excess of Ownership Limit. If,
notwithstanding the other provisions contained in this Article
FOURTH, there is a purported Transfer or Non-Transfer Event (as
hereinafter defined) such that any Person would Beneficially Own
shares of Equity Stock in excess of the Ownership Limit, then,
(i) except as otherwise provided in section E.3 of this Article
FOURTH, the Purported Record Transferee (as hereinafter defined)
(and the Purported Beneficial Transferee (as hereinafter
defined), if different) shall acquire no right or interest (or,
in the case of a Non-Transfer Event, the Person holding record
title to the shares of Equity Stock Beneficially Owned by such
Beneficial Owner shall cease to own any right or interest) in
such number of shares of Equity Stock which would cause such
Beneficial Owner to Beneficially Own shares of Equity Stock in
excess of the Ownership Limit, (ii) such number of shares
(rounded up to the nearest whole share) of Equity Stock in excess
of the Ownership Limit shall be automatically converted into an
equal number of shares of Excess Stock and transferred to a Trust
(as hereinafter defined) in accordance with section F.4 of this
Article FOURTH and (iii) such Purported Record Transferee (and
such Purported Beneficial Transferee, if different) or, in the
case of a Non-Transfer Event, the Person who, immediately prior
to such automatic conversion, was the holder of record title to
the shares of Equity Stock automatically converted, shall submit
the certificates representing such number of shares of Equity
Stock to the Corporation, accompanied by all requisite and duly
executed assignments of Transfer thereof, for registration in the
name of the Trustee (as hereinafter defined) of the Trust. Such
conversion into Excess Stock and Transfer to a Trust shall be
effective as of the close of trading on the Trading Day (as
hereinafter defined) prior to the date of the purported Transfer
or Non-Transfer Event, as the case may be, even though the
certificates representing the shares of Equity Stock so converted
may be submitted to the Corporation at a later date.
(b) Other Prohibited Transfers. If,
notwithstanding the other provisions contained in this Article
FOURTH, there is a purported Transfer or Non-Transfer Event that,
if effective, would (i) result in the Corporation being "closely
held" within the meaning of Section 856(h) of the Code, (ii)
result in the shares of Equity Stock being beneficially owned by
fewer than 100 persons within the meaning of Section 856(a)(5) of
the Code, (iii) result in the Corporation failing to qualify as a
"domestically controlled REIT" within the meaning of Section
897(h)(4)(B) of the Code, or (iv) otherwise cause the Corporation
to fail to qualify as a REIT, then (x) the Purported Record
Transferee (and the Purported Beneficial Transferee, if
different) shall acquire no right or interest, and, in the case
of a Non-Transfer Event, the Person holding record title to the
shares of Equity Stock Beneficially Owned by the Person whose
Beneficial Ownership of Equity Stock would result in any of the
events referred to in clauses (i) - (v) above shall cease to own
any right or interest, in such number of shares of Equity Stock
the ownership of which would (A) result in the Corporation being
"closely held" within the meaning of Section 856(h) of the Code,
(B) result in the shares of Equity Stock being beneficially owned
by fewer than 100 persons within the meaning of Section 856(a)(5)
of the Code, (C) result in the Corporation failing to qualify as
a "domestically controlled REIT" within the meaning of Section
897(h)(4)(B) of the Code, or (D) otherwise cause the Corporation
to fail to qualify as a REIT, (y) such number of shares of Equity
Stock (rounded up to the nearest whole share) shall be automati-
cally converted into an equal number of shares of Excess Stock
and transferred to a Trust in accordance with section F.4 of this
Article FOURTH and (z) the Purported Record Transferee (and the
Purported Beneficial Transferee, if different) or, in the case of
a Non-Transfer Event, the Person who, immediately prior to such
automatic conversion, was the holder of record title to the
shares of Equity Stock automatically converted, shall submit such
number of shares of Equity Stock to the Corporation, accompanied
by all requisite and duly executed assignments of Transfer
thereof, for registration in the name of the Trustee of the
Trust. Such conversion into Excess Stock and Transfer to a Trust
shall be effective as of the close of trading on the Trading Day
prior to the date of the purported Transfer or Non-Transfer
Event, as the case may be, even though the certificates
representing the shares of Equity Stock so converted may be
submitted to the Corporation at a later date.
(c) Conversion to Excess Stock. Upon the
occurrence of such a conversion of shares of Equity Stock into an
equal number of shares of Excess Stock, such shares of Equity
Stock shall be automatically retired and canceled, without any
action required by the Board of Directors of the Corporation, and
shall thereupon be restored to the status of authorized but
unissued shares of the particular class or series of Equity Stock
from which such Excess Stock was converted and may be reissued by
the Corporation as that particular class or series of Equity
Stock.
2. Remedies for Breach. If the Corporation, or its
designees, shall at any time determine in good faith that a
Transfer has taken place in violation of section E.1 of this
Article FOURTH or that a Person intends to acquire or has
attempted to acquire Beneficial Ownership or Constructive
Ownership of any shares of Equity Stock in violation of section
E.1 of this Article FOURTH, the Corporation shall take such
action as it deems advisable to refuse to give effect to or to
prevent such Transfer or acquisition, including, but not limited
to, refusing to give effect to such Transfer on the stock
transfer books of the Corporation or instituting proceedings to
enjoin such Transfer or acquisition, but the failure to take any
such action shall not affect the automatic conversion of shares
of Equity Stock into Excess Stock and their Transfer to a Trust
in accordance with section F.4.
3. Notice of Restricted Transfer. Any Person who
acquires or attempts to acquire shares of Equity Stock in
violation of section E.1 of this Article FOURTH, or any Person
who owns shares of Equity Stock that were converted into shares
of Excess Stock and transferred to a Trust pursuant to section
F.4 of this Article FOURTH, shall immediately give written notice
to the Corporation of such event and shall provide to the
Corporation such other information as the Corporation may request
in order to determine the effect, if any, of such Transfer or
Non-Transfer Event, as the case may be, on the Corporation's
status as a REIT.
4. Transfer in Trust. Upon any purported Transfer or
Non-Transfer Event that results in Excess Stock pursuant to
section F.1 of this Article FOURTH, (i) the Corporation shall
create, or cause to be created, a Trust, and shall designate a
Trustee and name a Beneficiary (as hereinafter defined) thereof
and (ii) such Excess Stock shall be automatically transferred to
such Trust to be held for the exclusive benefit of the
Beneficiary. Any conversion of shares of Equity Stock into
shares of Excess Stock and transfer to a Trust shall be effective
as of the close of trading on the Trading Day prior to the date
of the purported Transfer or Non-Transfer Event that results in
the conversion. Shares of Excess Stock so held in trust shall be
issued and outstanding shares of stock of the Corporation.
5. Dividend Rights. Each share of Excess Stock shall
be entitled to the same dividends and distributions (as to both
timing and amount) as may be declared by the Board of Directors
of the Corporation with respect to each share of Equity Stock
which was converted into such Excess Stock. The Trustee, as
record holder of the shares of Excess Stock, shall be entitled to
receive all dividends and distributions and shall hold all such
dividends or distributions in trust for the benefit of the
Beneficiary. The Prohibited Owner (as hereinafter defined) with
respect to such shares of Excess Stock shall repay to the Trust
the amount of any dividends or distributions received by it (i)
that are attributable to any shares of Equity Stock that have
been converted into shares of Excess Stock and (ii) the record
date of which was on or after the date that such shares were
converted into shares of Excess Stock. The Corporation shall
take all measures that it determines are reasonably necessary to
recover the amount of any such dividend or distribution paid to a
Prohibited Owner, including, if necessary, withholding any
portion of future dividends or distributions payable on shares of
Equity Stock Beneficially Owned by the Person who, but for the
provisions of this Article FOURTH, would Constructively Own or
Beneficially Own the shares of Equity Stock that were converted
into shares of Excess Stock; and, as soon as reasonably
practicable following the Corporation's receipt or withholding
thereof, shall pay over to the Trust for the benefit of the
Beneficiary the dividends so received or withheld, as the case
may be.
6. Liquidation of the Corporation. In the event of
any voluntary or involuntary liquidation of, or winding up of, or
any distribution of the assets of, the Corporation, each holder
of shares of Excess Stock shall be entitled to receive, ratably
with each other holder of shares of the same class and series of
Equity Stock which was converted into such Excess Stock, that
portion of the assets of the Corporation that is available for
distribution to the holders of the same class and series of
Equity Stock which was converted into such Excess Stock. The
Trust shall distribute to the Prohibited Owner the amounts
received upon such liquidation, dissolution, or winding up, or
distribution; provided, however, that the Prohibited Owner shall
not be entitled to receive amounts in excess of, in the case of a
purported Transfer in which the Prohibited Owner gave value for
shares of Equity Stock and which Transfer resulted in the
conversion of such shares of Equity Stock into shares of Excess
Stock, the product of (x) the price per share, if any, such
Prohibited Owner paid for the shares of Equity Stock and (y) the
number of shares of Equity Stock which were so converted into
Excess Stock, and, in the case of a Non-Transfer Event or
purported Transfer in which the Prohibited Owner did not give
value for such shares (e.g., if the shares were received through
a gift or devise) and which Non-Transfer Event or purported
Transfer, as the case may be, resulted in the conversion of the
shares into shares of Excess Stock, the product of (x) the price
per share equal to the Market Price (as hereinafter defined) on
the date of such Non-Transfer Event or purported Transfer and (y)
the number of shares of Equity Stock which were so converted into
Excess Stock. Any remaining amount in such Trust shall be
distributed to the Beneficiary.
7. Voting Rights. Each share of Excess Stock shall
entitle the holder to no voting rights other than those voting
rights which accompany a class of capital stock under Delaware
law. The Trustee, as record holder of the Excess Stock, shall be
entitled to vote all shares of Excess Stock. Any vote by a
Prohibited Owner as a purported holder of shares of Equity Stock
prior to the discovery by the Corporation that such shares of
Equity Stock have been converted into shares of Excess Stock
shall, subject to applicable law, be rescinded and shall be void
ab initio with respect to such shares of Excess Stock.
8. Restrictions on Transfer. (a) As soon as
practicable after the Trustee acquires Excess Stock and complies
with the last sentence of this Section 8(a), but in an orderly
fashion so as not to materially adversely affect the trading
price of the same class and series of Equity Stock from which
such Excess Stock was converted, the Trustee shall designate one
or more Persons as Permitted Transferees (as hereinafter defined)
and sell to such Permitted Transferees any shares of Excess Stock
held by the Trustee; provided, however, that (i) any Permitted
Transferee so designated purchases for valuable consideration
(whether in a public or private sale) the shares of Excess Stock
and (ii) any Permitted Transferee so designated may acquire the
shares of the same class and series of Equity Stock from which
such Excess Stock was converted without violating any of the
restrictions set forth in section E.1 of this Article FOURTH and
without such acquisition resulting in the conversion of such
shares of Equity Stock into shares of Excess Stock and the
Transfer of such shares to a Trust pursuant to sections F.1 and
F.4 of this Article FOURTH. The Trustee shall have the exclusive
and absolute right to designate Permitted Transferees of any and
all shares of Excess Stock. Prior to any Transfer by the Trustee
of shares of Excess Stock to a Permitted Transferee, the Trustee
shall give not less than five Trading Days prior written notice
to the Corporation of such intended Transfer and the Corporation
must have waived in writing its purchase rights under section
F.10 of this Article FOURTH if such intended Transfer would occur
during the 90-day period referred to therein.
(b) Upon the designation by the Trustee of a
Permitted Transferee in accordance with the provisions of this
section F.8, the Trustee shall cause to be Transferred to the
Permitted Transferee shares of Excess Stock acquired by the
Trustee pursuant to section F.4 of this Article FOURTH. Upon
such Transfer of shares of Excess Stock to the Permitted
Transferee, such shares of Excess Stock shall be automatically
converted into an equal number of shares of Equity Stock of the
same class and series from which such Excess Stock was converted.
Upon the occurrence of such a conversion of shares of Excess
Stock into an equal number of shares of Equity Stock, such shares
of Excess Stock shall be automatically retired and canceled,
without any action required by the Board of Directors of the
Corporation, and shall thereupon be restored to the status of
authorized but unissued shares of Excess Stock and may be
reissued by the Corporation as Excess Stock. The Trustee shall
(i) cause to be recorded on the stock transfer books of the
Corporation that the Permitted Transferee is the holder of record
of such number of shares of Equity Stock, and (ii) distribute to
the Beneficiary any and all amounts held with respect to such
shares of Excess Stock after making payment to the Prohibited
Owner pursuant to section F.9 of this Article FOURTH.
(c) If the Transfer of shares of Excess Stock to
a purported Permitted Transferee would or does violate any of the
transfer restrictions set forth in Section E.1 of this Article
FOURTH, such Transfer shall be void ab initio as to that number
of shares of Excess Stock that cause the violation of any such
restriction when such shares are converted into shares of Equity
Stock (as described in section 8(b) above) and the purported
Permitted Transferee shall be deemed to be a Prohibited Owner and
shall acquire no rights in such shares of Excess Stock or Equity
Stock. Such shares of Equity Stock shall be automatically
converted into Excess Stock and transferred to the Trust from
which they were originally Transferred. Such conversion and
transfer to the Trust shall be effective as of the close of
trading on the Trading Day prior to the date of the Transfer to
the purported Permitted Transferee and the provisions of this
Article FOURTH shall apply to such shares, including, without
limitation, the provisions of sections F.8 through F.10 with
respect to any future transfer of such shares by the Trust.
9. Any Prohibited Owner shall be entitled (following
acquisition of the shares of Excess Stock and subsequent
designation of and sale of Excess Stock to a Permitted Transferee
in accordance with section F.8 of this Article FOURTH or
following the acceptance of the offer to purchase such shares in
accordance with section F.10 of this Article FOURTH) to receive
from the Trustee following the sale or other disposition of such
shares of Excess Stock the lesser of (a)(i) in the case of a
purported Transfer in which the Prohibited Owner gave value for
shares of Equity Stock and which Transfer resulted in the
conversion of such shares into shares of Excess Stock, the
product of (x) the price per share, if any, such Prohibited Owner
paid for the shares of Equity Stock and (y) the number of shares
of Equity Stock which were so converted into Excess Stock and
(ii) in the case of a Non-Transfer Event or purported Transfer in
which the Prohibited Owner did not give value for such shares
(e.g., if the shares were received through a gift or devise) and
which Non-Transfer Event or purported Transfer, as the case may
be, resulted in the conversion of such shares into shares of
Excess Stock, the product of (x) the price per share equal to the
Market Price on the date of such Non-Transfer Event or purported
Transfer and (y) the number of shares of Equity Stock which were
so converted into Excess Stock or (b) the proceeds received by
the Trustee from the sale or other disposition of such shares of
Excess Stock in accordance with section F.8 or section F.10 of
this Article FOURTH. Any amounts received by the Trustee in
respect of such shares of Excess Stock which are in excess of
such amounts to be paid to the Prohibited Owner pursuant to this
section F.9 shall be distributed to the Beneficiary in accordance
with the provisions of section F.8 of this Article FOURTH. The
Trustee and the Trust shall not be liable for, and each
Beneficiary and Prohibited Owner shall be deemed to have
irrevocably waived, any claim by a Beneficiary or Prohibited
Owner arising out of the disposition of shares of Excess Stock,
except for claims arising out of the gross negligence or willful
misconduct of, or any failure to make payments in accordance with
this section F of this Article FOURTH by, such Trustee.
10. Purchase Right in Stock Transferred to Trustee.
Shares of Excess Stock shall be deemed to have been offered for
sale to the Corporation, or its designee, at a price per share
equal to the lesser of (a) the price per share in the transaction
that created such shares of Excess Stock (or, in the case of a
Non-Transfer Event or Transfer in which the Prohibited Owner did
not give value for the shares (e.g., if the shares were received
through a gift or devise), the Market Price on the date of such
Non Transfer Event or Transfer in which the Prohibited Owner did
not give value for the shares) or (b) the Market Price on the
date the Corporation, or its designee, accepts such offer. The
Corporation shall have the right to accept such offer for a
period of 90 days following the later of (x) the date of the Non-
Transfer Event or purported Transfer which results in such shares
of Excess Stock or (y) the date the Board of Directors of the
Corporation first determined that a Transfer or Non-Transfer
Event resulting in shares of Excess Stock has occurred, if the
Corporation does not receive a notice of such Transfer or Non-
Transfer Event pursuant to section F.3 of this Article FOURTH.
G. Remedies Not Limited. Except as set forth in section
E.4 of this Article FOURTH, nothing contained in this
Article FOURTH shall limit the authority of the
Corporation to take such other action as it deems
necessary or advisable to protect the Corporation and
the interests of its stockholders by preservation of
the Corporation's status as a REIT and to ensure
compliance with the Ownership Limit.
H. Ambiguity. In the case of an ambiguity in the
application of any of the provisions of this Article
FOURTH, including any definition contained in Article
ELEVENTH hereof, the Board of Directors shall have the
power to determine the application of the provisions of
this Article FOURTH with respect to any situation based
on the facts known to it and any such determination
made in good faith shall be binding on all stockholders
of the Corporation.
I. Legend. Each certificate for shares of Equity Stock
shall bear the following legend:
"The shares of Plum Creek Timber Company, Inc. (the
"Corporation") represented by this certificate are
subject to restrictions set forth in the Corporation's
Certificate of Incorporation which prohibit in general
(a) any Person from Beneficially Owning shares of
Equity Stock in excess of the Ownership Limit and (b)
any Person from acquiring or maintaining any ownership
interest in the capital stock of the Corporation that
is inconsistent with (i) the requirements of the Code
pertaining to real estate investment trusts or (ii) the
Certificate of Incorporation of the Corporation, and
the holder of this certificate by his acceptance hereof
consents to be bound by such restrictions. Any
purported transfer of Equity Stock in violation of such
restrictions shall be void ab initio and the Equity
Stock in violation of such restrictions, whether as a
result of a Transfer or the Non- Transfer Event, shall
be automatically converted into shares of Excess Stock
and transferred to a Trust for disposition as provided
in the Certificate of Incorporation. Capitalized terms
used in this paragraph and not defined herein are
defined in the Corporation's Certificate of
Incorporation. The Corporation will furnish without
charge, to each stockholder who so requests, a copy of
the Certificate of Incorporation of the Corporation,
containing, among other things, a statement of the
powers, designations, preferences and relative,
participating, optional or other special rights of each
class of stock or series thereof that the Corporation
is authorized to issue and the qualifications,
limitations or restrictions of such preferences and/or
rights. Any such request shall be addressed to the
Secretary of the Corporation.
J. Each provision of this Article FOURTH shall be
severable and any such provision determined to be
invalid by a court having jurisdiction shall in no way
affect the validity of any other provision.
V. FIFTH: A. At all times subsequent to the date of filing of
this Certificate of Incorporation with the Secretary of
State for the State of Delaware, the directors shall be
classified, with respect to the term for which they
severally hold office, into three classes, designated "Class
I," "Class II" and "Class III," respectively. The initial
Class I Directors shall serve for a term expiring at the
first annual meeting of stockholders; the initial Class II
Directors shall serve for a term expiring at the second
annual meeting of stockholders; and the initial Class III
Directors shall serve for a term expiring at the third
annual meeting of stockholders. At each annual meeting of
stockholders, the successor or successors of the class of
directors whose term expires at that meeting shall be
elected by a plurality of the votes of the shares present in
person or represented by proxy at such meeting and entitled
to vote on the election of directors, and shall hold office
for a term expiring at the annual meeting of stockholders
held in the third year following the year of their election.
The directors elected to each class shall hold office until
their successors are duly elected and qualified or until
their earlier resignation or removal. The Board of Directors
shall have the authority, upon the approval and at the
direction of a majority of its members, to designate a
Nominating Committee and one or more committees, each
committee to consist of one or more of the directors of the
Corporation as selected by a majority of the members of the
Board of Directors. To the extent permitted by law and
provided in the resolution authorizing such committee, any
such committee shall have and may exercise all the powers
and authority of the Board of Directors in the management of
the business and affairs of the Corporation.
Notwithstanding the foregoing, whenever, pursuant to the
provisions of Article FOURTH of this Certificate, the holders of
any one or more series of Preferred Stock shall have the right,
voting separately as a series or together with holders of other
such series, to elect directors at an annual or special meeting
of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be
governed by the terms of this Certificate of Incorporation,
including any Preferred Stock Designation applicable thereto.
A. During any period when the holders of any series of
Preferred Stock have the right to elect additional directors
as provided for or fixed pursuant to the provisions of
Article FOURTH of this Certificate of Incorporation, then
upon commencement and for the duration of the period during
which such right continues: (a) the then otherwise total
authorized number of directors of the Corporation shall
automatically be increased by such specified number of
directors, and the holders of such Preferred Stock shall be
entitled to elect the additional directors so provided for
or fixed pursuant to said provisions and (b) each such
additional director shall serve until such director's
successor shall have been duly elected and qualified, or
until such director's right to hold such office terminates
pursuant to said provisions, whichever occurs earlier,
subject to such director's earlier death, disqualification,
resignation or removal. Except as otherwise provided by the
Board of Directors in the resolution or resolutions
establishing such series, whenever the holders of any series
of Preferred Stock having such right to elect additional
directors are divested of such right pursuant to the
provisions of such stock, the terms of office of all such
additional directors elected by the holders of such stock,
or elected to fill any vacancies resulting from the death,
resignation, disqualification or removal of such additional
directors, shall forthwith terminate and the total
authorized number of directors of the Corporation shall be
reduced accordingly.
B. Subject to the rights, if any, of the holders of any
series of Preferred Stock to elect directors and to
remove any director whom such holders have the right to
elect, any director (including persons elected by
directors to fill vacancies in the Board of Directors)
may be removed from office (a) only with cause and (b)
only by the affirmative vote of the holders of at least
66_% of the total voting power of the shares of capital
stock of the Corporation then entitled to vote at a
meeting of the stockholders called for that purpose.
At least 30 days prior to any meeting of stockholders
at which it is proposed that any director be removed
from office, written notice of such proposed removal
shall be sent to the director whose removal will be
considered at the meeting. For purposes of this
Certificate of Incorporation, "cause," with respect to
the removal of any director, shall mean only (i)
conviction of a felony, (ii) declaration of unsound
mind by order of a court, (iii) gross dereliction of
duty, (iv) commission of any act involving moral
turpitude or (v) commission of an act that constitutes
intentional misconduct or a knowing violation of law if
such action in either event results both in an improper
substantial personal benefit to such director and a
material injury to the Corporation.
C. Subject to the rights, if any, of the holders of any
series of Preferred Stock to elect directors and to
fill vacancies in the Board of Directors relating
thereto, any and all vacancies in the Board of
Directors, however occurring, including, without
limitation, through death, resignation, removal, an
increase in the number of directors or otherwise may be
filled only by a majority of the directors then in
office, though less than a quorum, or by a sole
remaining director, and the directors so chosen shall
hold office until the end of the term of the class to
which they are appointed and until their successors are
duly elected and qualified, or until their earlier
death, resignation or removal. Any director appointed
in accordance with the preceding sentence shall hold
office for the remainder of the full term of the class
of directors in which such director was appointed or
until such director's earlier resignation or removal.
If such director was designated by the Principals,
pursuant to the Conversion Agreement or such increase
in the number of directors would result in the
Principals no longer having designated a majority of
the Board of Directors at a time when the Principals
are entitled under the Conversion Agreement to
designate a majority of the Board of Directors, such
vacancy shall be filled by a designee of the
Principals. Subject to the rights, if any, of the
holders of any series of Preferred Stock, when the
number of directors is increased or decreased, the
Board of Directors shall determine the class or classes
to which the increased or decreased number of directors
shall be apportioned; provided, however, that no
decrease in the number of directors shall shorten the
term of any incumbent director. In the event of a
vacancy in the Board of Directors, the remaining
directors, except as otherwise provided by law, may
exercise the powers of the full Board of Directors
until such vacancy is filled.
VI. SIXTH: Any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any
action which may be taken at any annual or special meeting
of the stockholders, may be taken only at a duly called
annual or special meeting of stockholders and may not be
taken by written consent of the stockholders in lieu of such
meeting.
VII. SEVENTH: The Board of Directors is expressly authorized to
make, amend or repeal the bylaws of the Corporation, without
any action on the part of the stockholders, solely by the
affirmative vote of at least 66_% of the directors of the
Corporation then in office. In addition to any other vote
required by law, the bylaws may be amended or repealed by
the stockholders by the affirmative vote of the holders of
shares representing at least 66_% of the combined voting
power of the outstanding shares of capital stock of the
corporation entitled to vote.
VIII. EIGHTH: No director of the Corporation shall be liable to
the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the
GCL, or (iv) for any transaction from which the director
derived an improper personal benefit.
If the GCL hereafter is amended to further eliminate or
limit the liability of directors, then the liability of a
director of the Corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the
fullest extent permitted by the amended GCL. Any repeal or
modification of this Article EIGHTH by the stockholders of the
Corporation shall be prospective only, and shall not adversely
affect any limitation on the liability of a director of the
Corporation existing at the time of such repeal or modification.
IX. NINTH. The Corporation shall seek to satisfy the
requirements for qualification as a REIT under the Code
until such time as the Board of Directors shall determine
otherwise, such determination being approved by the
affirmative vote of at least 66_% of the directors of the
Corporation then in office.
X. TENTH. In addition to any other vote required by law, the
amendment or repeal of, or adoption of any provisions
inconsistent with, Articles FIFTH, SIXTH, SEVENTH, EIGHTH,
NINTH or this Article TENTH or any term defined in Article
ELEVENTH to the extent such term is used in any such Article
shall require the approval of the holders of at least 66_%
of the total voting power of the shares of capital stock
entitled to vote thereon, voting as a single class.
XI. ELEVENTH. For purposes of this Certificate of
Incorporation, the following terms shall have the meanings
set forth below:
"Affiliate" shall mean, with respect to any Person or
Persons, (i) any natural person who is related by blood or
marriage to any such Person, (ii) any trust of which there are no
principal beneficiaries other than any such Person or Permitted
Transferees of such Person, (iii) any charitable foundation over
which any such Person has discretionary authority, (iv) any heirs
or executors of any such Person and (v) if such Person is either
of the PCMC Partners, any entity of which a majority of the total
outstanding voting equity or a majority of the value of the
outstanding ownership interests is owned by the PCMC Partners.
"Beneficial Ownership," shall be calculated as follows:
(i) when used in Section C of Article
FOURTH or any defined term used therein, shares of
Common Equity received by the PCMC Partners pursuant to
the terms of the Conversion Agreement shall be deemed
to be 100% Beneficially Owned by the Principals so long
as (i) the PCMC Partners shall maintain their,
respective, Beneficial Ownership of such securities and
the Principals and their Permitted Transferees maintain
their collective voting and dispositive power with
respect to such securities or (ii) if such securities
are distributed by the PCMC Partners, the Principals
and their Permitted Transferees Beneficially Own and
maintain substantially all of their collective
opportunity for gain and risk of loss with respect to
such securities; provided however, that for purposes of
subsection (i) above, in the event that the Principals
Transfer voting interests or the opportunity for gain
and risk of loss in the PCMC Partners, other than
Transfers of voting interests and the opportunity for
gain and risk of loss to any Person that holds an
ownership interest in the PCMC Partners as of the
Closing Date (as defined in the Conversion Agreement),
such 100% deemed Beneficial Ownership by the Principals
shall be reduced by such Transferred amount, and
provided further, that if the PCMC Partners Transfer
any such securities to a Person in which it owns a
majority of the voting power and economic value, the
PCMC Partners will be deemed to Beneficially Own that
same percentage of the total number of shares of Common
Equity held by such Person;
(ii) when used in sections E and F of
Article FOURTH or in any defined term used therein,
shall mean ownership of Equity Stock by a Person who
would be treated as an owner of Equity Stock either
directly or indirectly under Section 542(a)(2) of the
Code, taking into account, for this purpose,
constructive ownership determined under Section 544 of
the Code, as modified by Section 856(h) of the Code
(except where expressly provided otherwise); and
(iii) when used elsewhere in this
Certificate of Incorporation, shall mean beneficial
ownership determined under Rule 13d-3 under the
Exchange Act (as hereinafter defined).
The terms "Beneficial Owner," "Beneficially Owns" and
"Beneficially Owned" shall have the correlative meanings.
"Beneficiary" shall mean, with respect to any Trust, one or
more organizations described in each of Section 170(b)(1)(A)
(other than clauses (vii) and (viii) thereof) and Section
170(c)(2) of the Code that are named by the Corporation as the
beneficiary or beneficiaries of such Trust, in accordance with
the provisions of section F.4 of Article FOURTH.
"Change in Law" shall mean any change in the Code or the
regulations promulgated thereunder that would require a reduction
in the number of votes represented by the Special Voting Stock in
order to maintain the Corporation's status as a REIT.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Constructive Ownership" shall mean ownership of shares of
Equity Stock by a Person who is or would be treated as a direct
or indirect owner of such shares of Equity Stock through the
application of Section 318 of the Code. The terms "Constructive
Owner," "Constructively Owns" and "Constructively Owned" shall
have correlative meanings.
"Conversion Agreement" shall mean the Agreement and Plan of
Conversion, dated as of June 5, 1998, by and among Plum Creek
Timber Company, L.P., the Corporation and PCMC, as amended by the
Amended and Restated Agreement and Plan of Conversion, dated as
of July 17, 1998.
"Equity Stock" shall mean the Common Stock, the Special
Voting Stock and the Preferred Stock of the Corporation.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Excluded Holder" shall mean Mr. John H. Scully, Mr. William
J. Patterson and Mr. William E. Oberndorf and their respective
Affiliates, collectively.
"Extraordinary Transaction" shall mean any transaction (i)
which requires the vote of all stockholders of the Corporation
(other than the election of directors) under the GCL, (ii) which
requires stockholder approval pursuant to Rule 312.03(c) or (d)
of the New York Stock Exchange Listed Company manual (or the
equivalent rule, if any, of any stock exchange or automated
quotation system on which the Corporation may be listed), or
(iii) pursuant to which an amendment to the bylaws of the
Corporation would be effected by vote of its stockholders.
"Market Price" of Equity Stock on any date shall mean the
average of the closing price for shares of such Equity Stock for
the five consecutive Trading Days ending on the Trading Day
immediately prior to such date. The "Closing Price" on any date
shall mean the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the
principal consolidated transactions reporting system with respect
to securities listed or admitted to trading on the New York Stock
Exchange or, if the shares of Equity Stock are not listed or
admitted to trading on the New York Stock Exchange, as reported
in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities
exchange on which the shares of Equity Stock are listed or
admitted to trading or, if the shares of Equity Stock are not
listed on admitted to trading on any national securities
exchange, the last quoted price, or if not so quoted, the average
of the high bid and low asked prices in the over-the-counter
market, as reported by the Nasdaq Stock Market, Inc. or, if such
system is no longer in use, the principal other automated
quotation system that may be in use or, if the shares of Equity
Stock are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional
market maker selected by the Board of Directors making a market
in the shares of Equity Stock.
"Non-Transfer Event" shall mean an event other than a
purported Transfer that would cause or result in an increase in
the percentage of any Person's Beneficial Ownership of the
outstanding shares of Equity Stock.
"Ownership Limit" shall mean (i) with respect to Persons
other than the Excluded Holder (a) with respect to the Common
Equity, 5% of the lesser of (1) the total number of shares of
Common Stock outstanding (assuming all shares of Special Voting
Stock have been converted into Common Stock), or (2) the value of
the outstanding shares of Common Stock (assuming all shares of
Special Voting Stock have been converted into Common Stock), or
(b) with respect to Preferred Stock, 5% of the lesser of (1) the
total number of shares of Preferred Stock outstanding, or (2) the
value of the outstanding shares of Preferred Stock (or such other
number or value of Preferred Stock as the Board of Directors may
determine in fixing the terms of the Preferred Stock); and (ii)
with respect to the Excluded Holder, the Ownership Limit shall be
the lesser of 27% of the outstanding Common Stock and the lowest
percentage of the outstanding Common Stock either Beneficially
Owned or Constructively Owned by the Excluded Holder at any time
(assuming all shares of Special Voting Stock are converted into
Common Stock in accordance with the terms hereof).
"PCMC Partners" shall mean PC Advisory Partners I, L.P., a
Delaware limited partnership, and PC Intermediate Holdings, L.P.,
a Delaware limited partnership.
"Permitted Transferee" shall mean
(i) when used in section C of Article
FOURTH or any defined term used therein, with respect
to any Person or Persons, (a) any natural person who is
related by blood or marriage to any such Person, (b)
any trust or partnership of which there are no
principal beneficiaries or partners, as the case maybe,
other than any such Person or Permitted Transferees of
such Person, (c) any charitable foundation over which
any such Person has discretionary authority, and (d)
any heirs or executors of any such Person; and
(ii) when used elsewhere in this
Certificate of Incorporation, any Person designated as
a Permitted Transferee in accordance with the
provisions of section F.8 of Article FOURTH.
"Person" shall mean (a) an individual or any corporation,
partnership, estate, trust, association, private foundation,
joint stock company or any other entity and (b) a "group" as the
term is used for purposes of Section 13(d)(3) of the Exchange
Act; but shall not include an underwriter that participates in a
public offering of Equity Stock for a period of 90 days following
purchase by such underwriter of such Equity Stock.
"Principals" shall mean Mr. John H. Scully, Mr. William J.
Patterson and Mr. William E. Oberndorf, collectively.
"Prohibited Owner" shall mean, with respect to any purported
Transfer or Non-Transfer Event, any Person who is prevented from
becoming or remaining the owner of record title to shares of
Equity Stock by the provisions of section F.1 of Article FOURTH.
"Purported Beneficial Transferee" shall mean, with respect
to any purported Transfer of Beneficial Ownership of shares of
Equity Stock that results in the automatic conversion of such
shares into Excess Stock, the purported transferee of Beneficial
Ownership of such shares if such purported Transfer had been
valid under Section E.1 of Article FOURTH.
"Purported Record Transferee" shall mean, with respect to
any purported Transfer of Beneficial Ownership of shares of
Equity Stock that results in the automatic conversion of such
shares into Excess Stock, the purported record transferee of such
shares if such purported Transfer had been valid under Section
E.1 of Article FOURTH.
"REIT" shall mean a real estate investment trust under
Section 856 et seq. of the Code.
"Subsidiary" shall mean any Person in which the Corporation
beneficially owns, directly or indirectly, more than 50% of the
voting power of the outstanding voting equity securities.
"Trading Day" shall mean a day on which the principal
national securities exchange on which any of the shares of Equity
Stock are listed or admitted to trading is open for the transac-
tion of business or, if none of the shares of Equity Stock are
listed or admitted to trading on any national securities
exchange, any day other than a Saturday, a Sunday or a day on
which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Transfer" (as a noun) shall mean any sale, transfer, gift,
assignment, devise or other disposition of Beneficial Ownership
of Equity Stock, whether voluntary or involuntary and whether by
operation of law or otherwise. "Transfer" (as a verb) shall have
the correlative meaning.
"Trust" shall mean any separate trust created and
administered in accordance with the terms of section F of Article
FOURTH, for the exclusive benefit of any Beneficiary.
"Trustee" shall mean any Person, unaffiliated with both the
Corporation and any Prohibited Owner (and, if different than the
Prohibited Owner, the Person who would have had Beneficial
Ownership of the Shares that would have been owned of record by
the Prohibited Owner), designated by the Corporation to act as
trustee of any Trust, or any successor trustee thereof.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Consolidated
Financial Statements of Plum Creek Timber Company, Inc. for the nine months
ended September 30, 1999 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 127,014
<SECURITIES> 0
<RECEIVABLES> 826
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 142,161
<PP&E> 1,004,587
<DEPRECIATION> 647
<TOTAL-ASSETS> 1,252,936
<CURRENT-LIABILITIES> 75,873
<BONDS> 784,995
0
0
<COMMON> 629
<OTHER-SE> 390,998
<TOTAL-LIABILITY-AND-EQUITY> 1,252,936
<SALES> 414,569
<TOTAL-REVENUES> 414,569
<CGS> 273,691
<TOTAL-COSTS> 298,183
<OTHER-EXPENSES> 633
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,714
<INCOME-PRETAX> 61,096
<INCOME-TAX> (13,045)
<INCOME-CONTINUING> 86,045
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 86,045
<EPS-BASIC> 1.32
<EPS-DILUTED> 0
</TABLE>
