-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EWYT4eTGmU+BIcm+1GItHcWV101Lh0pgjoLC1oM0tA5tgg0Oy9LtVH0IL+gyvPx6 DwuKl0RWk4olxnJ7WYxqCQ== 0000849213-99-000025.txt : 19991117 0000849213-99-000025.hdr.sgml : 19991117 ACCESSION NUMBER: 0000849213-99-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLUM CREEK TIMBER CO INC CENTRAL INDEX KEY: 0000849213 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 911912863 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10239 FILM NUMBER: 99752237 BUSINESS ADDRESS: STREET 1: 999 THIRD AVE STREET 2: SUITE 2300 CITY: SEATTLE STATE: WA ZIP: 98104-4096 BUSINESS PHONE: 2064673600 MAIL ADDRESS: STREET 1: 999 THIRD AVENUE STREET 2: SUITE 2300 CITY: SEATTLE STATE: WA ZIP: 98104-4096 FORMER COMPANY: FORMER CONFORMED NAME: PLUM CREEK TIMBER CO L P DATE OF NAME CHANGE: 19920703 10-Q 1 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) Quarter Ended September 30, --------------------------- 1999 1998 (REIT) (MLP) ------ ----- (In Thousands, Except Per Share / Unit) 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 ============ ============
See accompanying Notes to Consolidated / Combined Financial Statements 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) 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 ============ ============
See accompanying Notes to Consolidated / Combined Financial Statements PLUM CREEK TIMBER COMPANY, INC. CONSOLIDATED / COMBINED BALANCE SHEET (UNAUDITED) September 30, December 31, 1999 1998 (REIT) (MLP) ------ ----- (In Thousands) 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 ============ ============
See accompanying Notes to Consolidated / Combined Financial Statements PLUM CREEK TIMBER COMPANY, INC. CONSOLIDATED / COMBINED STATEMENT OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30, ------------------------------- 1999 1998 (REIT/MLP) (MLP) ---------- ----- (In Thousands) 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
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 EX-3.1 2 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. EX-27 3
5 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. 1,000 9-MOS DEC-31-1999 SEP-30-1999 127,014 0 826 0 0 142,161 1,004,587 647 1,252,936 75,873 784,995 0 0 629 390,998 1,252,936 414,569 414,569 273,691 298,183 633 0 50,714 61,096 (13,045) 86,045 0 0 0 86,045 1.32 0
-----END PRIVACY-ENHANCED MESSAGE-----