Plum Creek Legacy News Releases

Plum Creek Reports Results for Fourth Quarter and Full Year 2006

Jan 29, 2007

SEATTLE--(BUSINESS WIRE)--Jan. 29, 2007--Plum Creek TimberCompany, Inc. (NYSE:PCL) today announced fourth quarter earnings of$69 million, or $0.39 per diluted share, on revenues of $379 million.Earnings for the fourth quarter of 2005 were $67 million, or $0.36 perdiluted share, on revenues of $391 million.

During the fourth quarter the company received a $14 millionpayment from the settlement of the softwood lumber trade disputebetween the United States and Canada. The after-tax gain from thesettlement was $13 million, or $0.07 per share.

Earnings for the fourth quarter of 2005 included a $3 millionafter-tax gain on the sale of industrial mineral assets. As a result,income from continuing operations for the fourth quarter of 2005 was$64 million, or $0.34 per diluted share.

Earnings for the full year of 2006 were $317 million, or $1.75 perdiluted share, on revenues of $1.627 billion. Earnings for 2005 were$354 million, or $1.92 per diluted share, on revenues of $1.576billion.

Results for 2006 include a $2 million after-tax cumulative benefitfrom accounting changes recorded during the first quarter of the year.As a result, income from continuing operations for 2006 was $315million, or $1.74 per fully diluted share. Full year 2005 resultsincluded after-tax gains from the sale of coal and mineral assetstotaling $23 million. As a result, income from continuing operationsfor 2005 was $331 million, or $1.79 per diluted share.

Cash provided by operating activities for 2006 totaled $556million including $29 million of cash provided by reductions inworking capital. Cash provided by operating activities during 2005totaled $516 million and included approximately $31 million from thesale of large, non-strategic timberlands and a $36 million reductionin cash flow from an increase in working capital. The company ended2006 with $273 million in cash and cash equivalents.

"We are pleased with the strategic progress and financialperformance of the company during the past year. The company continuedto generate significant cash flow from our operations during 2006 andwe are well-positioned to produce similar levels of cash flow duringthe coming year," said Rick Holley, president and chief executiveofficer.

"The growing contribution from our Real Estate segment offsetsofter results from our timber resource and manufacturing segments aslumber and panel markets weakened during the second half of the yearand high fuel prices reduced operating margins," continued Holley."During 2006 we captured higher per acre prices for the lands that wesold. We increased revenues, cash flow and profits from the realestate segment while selling less acreage than we have in past years."

"We maintained our historic capital discipline during the year aswell. We are constantly reviewing our capital allocation alternativesand seeking the best long-term return for our shareholders. As aresult, we increased our dividend by 5 percent early in 2006 andthrough our share repurchase program effectively bought our owntimberlands at a significant discount to their intrinsic value.Through these repurchases we increased our shareholders' proportionateownership in the company by more than 4 percent."

"While we evaluated a number of potential timberland acquisitions,we found only one acquisition that provided attractive returns for ourshareholders. During the fourth quarter we completed the acquisitionof approximately 88,000 acres of central Oregon timberlands for $92million."

Review of Quarterly Operations

The Northern Resources segment reported fourth quarter operatingprofit of $24 million; $2 million lower than the $26 million reportedin the fourth quarter of 2005. Softwood sawlog demand decreased aslumber mills curtailed production in the face of weaker demand and lowlumber prices. Average sawlog prices during the fourth quarter wereapproximately 4 percent lower than those in the same period of 2005.Higher harvest volumes offset some of the profit impact of the lowersawlog prices. Harvests from the Michigan timberlands acquired duringthe fourth quarter of 2005 resulted in an 8 percent increase in sawlogvolume when compared to the fourth quarter of 2005. Average pulpwoodprices were unchanged compared to the prior year while pulpwoodharvest volumes were 37 percent higher than the same period of 2005.The Michigan timberlands contributed a majority of the additionalpulpwood volume.

The Southern Resources segment reported fourth quarter operatingprofit of $42 million compared to $48 million in the fourth quarter of2005. The decline in segment profits is primarily the result of lowersawlog prices. Sawlog demand decreased as regional lumber productionslowed from the record pace it set in 2005. At the same time, demandfor pulpwood increased as pulp and paper customers sought wood toreplace residual wood chips typically purchased from lumber mills.During the second half of 2006, the company responded to thisincreased pulpwood demand by increasing thinning harvests in theSouth. As a result, pulpwood harvests were 37 percent higher duringthe fourth quarter of 2006 when compared to the same period in 2005.The timber produced by these thinnings consists of both pulpwood andsmall diameter sawlogs. The proportion of small sawlogs sold by thecompany increased in part due to the increase in thinning, resultingin a lower-valued sawlog harvest compared to the same period in 2005.Average sawlog stumpage prices were approximately 11 percent lowerthan those in the fourth quarter of 2005 due to a combination of thelower-valued mix and reduced sawlog demand.

The Real Estate segment reported revenue of $66 million in thefourth quarter of 2006 compared to $72 million in the fourth quarterof 2005. The segment operating profit was $35 million for the fourthquarter of 2006, up from $24 million for the same period in 2005. The2005 results included $30 million of revenue and $1 million ofoperating income from a large, non-strategic sale of 39,000 acres ofIdaho timberlands. During the fourth quarter of 2006, the company soldapproximately 14,000 acres of small, non-strategic timberlands ataverage prices exceeding $1,700 per acre. These lands are generallysmall tracts of lower productivity timberlands. The sale of more than15,000 acres of conservation properties captured approximately $1,000per acre, while nearly 4,600 acres of recreation property were sold atan average price of approximately $3,600 per acre. The company alsosold approximately 600 acres of development lands for approximately$15,000 per acre.

The Manufacturing segment reported a $2 million loss for thefourth quarter of 2006, compared with a $4 million profit in thefourth quarter of 2005. Segment profitability was impacted by lowerprices and lower sales volumes for lumber and plywood products whencompared to those in the same period of 2005. MDF profitability wassimilar to the same period of 2005 as higher product prices offset thenegative effects of lower sales volumes and higher raw material costs.

Outlook

"Our strategies for long-term shareholder value creation are basedon the positive long-term demographic trends that fundamentally drivedemand for timber and land," continued Holley. "These assets have ahistory of long-term value appreciation. Our operating plans for 2007are shaped by our long-term view of these fundamentals and an intimateunderstanding of the market dynamics of more than 40 local timbermarkets throughout the nation."

Lumber, plywood and oriented strand board (OSB) producers areentering 2007 cautiously. With residential construction activity offas much as 25 percent from the highs reached in late 2005 and early2006 and commodity lumber and structural panel prices near multi-yearlows, customers have reduced production in response to poor cashreturns. During 2007, the company anticipates that residentialconstruction markets will stabilize with the potential for gradualimprovement as the year progresses, ultimately leading to improvedsawlog demand and pricing.

Pulp and paper customers, on the other hand, are enjoying gooddemand and attractive pricing for many of their products. Lower lumberproduction has reduced the supply of wood residuals, an important rawmaterial source for many pulp and paper mills. As a result, pulpwooddemand has increased in many regions placing upward pressure onpulpwood prices, particularly in the South and Pacific Northwest.

The company plans to reduce harvesting activity between 5 and 7percent for both sawlogs and pulpwood in the Northern Resourcessegment during 2007. During 2006, the company increased harvests inOregon to capture attractive log prices in the region and respondedsimilarly to strong pulpwood markets in the Northeast. In the South,improving pulpwood markets will be served by continuing the pace ofpulpwood harvests established during 2006. The 2006 Southern sawlogharvest was the lowest recorded by the company since 2001, as harvestswere adjusted in response to lower prices. Southern sawlog demand isexpected to remain relatively soft during the first half of the yearwith the potential for price improvement as the year progresses.Southern sawlog harvests should approximate 2006 levels. The companywill continue to adjust harvest decisions on a market-by-market basisacross its ownership. Overall harvests should be between 19.5 and 20.5million tons of timber during 2007.

Interest in rural real estate continues to be very strong. As aresult, the company expects Real Estate segment sales for the year toincrease to between $330 and $350 million. Of this, between $30 and$40 million is projected to come from the sale of entitled propertieson a small portion of the company's high-value real estate properties.First quarter Real Estate segment sales are expected to approach $45million. Entitled property sales are expected to contributeapproximately $7 million to the segment's first quarter results.

"This is a management team that is committed to long-term valuecreation for our shareholders," said Holley. "We are deliberatelytaking actions that will temporarily reduce the financial contributionof our timber operations because we are confident that these timberassets can produce better returns for our shareholders in the future.We will continue our efforts to capture exceptional values for selectproperties with high conservation, recreation and developmentpotential and continue to grow the revenues, earnings and cash flowfrom these valuable assets. With our exceptional asset base andcontinued strong cash flow, the company has excellent financialflexibility and we remain on-track to execute our strategies forshareholder value creation in all our business segments."

Reflecting all of these factors, the company expects 2007 earningsto be between $1.40 and $1.60 per share. The company anticipates firstquarter earnings will be between $0.18 and $0.23 per share.

"Disciplined capital allocation remains our highest priority. Weare constantly reviewing our capital allocation alternatives includinghigh-return investments in forest productivity, continuedopportunistic acquisition of our stock, and the acquisition offinancially attractive timberlands that add to our standing inventoryof merchantable timber and grow our current and future harvests. Wewill pursue our strategies with discipline and patience with theultimate goal of growing our sustainable cash flows, our dividend, andthe per share value of the company," concluded Holley.

Earnings Conference Call and Supplemental Information

Plum Creek will hold a conference call today, January 29, at 5:00p.m. EST (2:00 p.m. PST). A live webcast of the conference call may beaccessed through Plum Creek's Internet site at www.plumcreek.com byclicking on the "Investors" link.

Investors without Internet access should dial 1-800-572-9852 atleast 10 minutes prior to the start of the call, referencing PlumCreek's fourth quarter 2006 earnings conference call. Those wishing toaccess the call from outside the United States and Canada should dial1-706-645-9676, also referencing Plum Creek's conference call. Replayof the call will be available for 48 hours after completion of thelive call and can be accessed at 1-800-642-1687 or 1-706-645-9291(international calls), using the code 7913636.

Supplemental financial information for Plum Creek operations,including statistical data, is available in the Investors section ofPlum Creek's website at www.plumcreek.com.

Plum Creek is the largest and most geographically diverse privatelandowner in the nation with more than 8 million acres of timberlandsin major timber producing regions of the United States and 10 woodproducts manufacturing facilities in the Northwest.

Forward-Looking Statements

This press release contains forward-looking statements within themeaning of the Private Litigation Reform Act of 1995 as amended. Someof these forward-looking statements can be identified by the use offorward-looking words such as "believes," "expects," "may," "will,""should," "seek," "approximately," "intends," "plans," "estimates," or"anticipates," or the negative of those words or other comparableterminology. The accuracy of such statements is subject to a number ofrisks, uncertainties and assumptions including, but not limited to,the cyclical nature of the forest products industry, our ability toharvest our timber, our ability to execute our acquisition strategy,the market for and our ability to sell or exchange non-strategictimberlands and timberland properties that have higher and betteruses, and various regulatory constraints. These and other risks,uncertainties and assumptions are detailed from time to time in ourfilings with the Securities and Exchange Commission under theSecurities Exchange Act of 1934, as amended, and the Securities Act of1933, as amended. It is likely that if one or more of the risksmaterializes, or if one or more assumptions prove to be incorrect, thecurrent expectations of Plum Creek and its management will not berealized. Forward-looking statements are not guarantees ofperformance, and speak only as of the date made, and neither PlumCreek nor its management undertakes any obligation to update or reviseany forward-looking statements.

                   PLUM CREEK TIMBER COMPANY, INC.                  CONSOLIDATED STATEMENTS OF INCOME                             (UNAUDITED)                                                   Year Ended                                           ---------------------------                                           December 31,   December 31,                                              2006           2005                                           ------------   ------------                                            (In Millions, Except Per                                                  Share Amounts)Revenues: Timber                                   $        807   $        764 Real Estate                                       308            292 Manufacturing                                     493            504 Other                                              19             16                                           ------------   ------------   Total Revenues                                1,627          1,576                                           ------------   ------------Costs and Expenses: Cost of Goods Sold:   Timber                                          487            418   Real Estate                                     126            152   Manufacturing                                   455            463   Other                                             3              3                                           ------------   ------------      Total Cost of Goods Sold                   1,071          1,036 Selling, General and Administrative               113             97                                           ------------   ------------         Total Costs and Expenses                1,184          1,133                                           ------------   ------------Gain from Canadian Lumber Settlement                14              -Other Operating Income (Expense), net                4              5                                           ------------   ------------Operating Income                                   461            448Interest Expense, net                              133            109                                           ------------   ------------Income before Income Taxes                         328            339Provision for Income Taxes                          13              8                                           ------------   ------------Income from Continuing Operations                  315            331Gain on Sale of Properties, net of tax               -             23                                           ------------   ------------Income Before Cumulative Effect of Accounting Change                                 315            354Cumulative Effect of Accounting Change, net of tax                                          2              -                                           ------------   ------------Net Income                                $        317   $        354                                           ============   ============Income from Continuing Operations per Share - Basic                                  $       1.75   $       1.80 - Diluted                                $       1.74   $       1.79Net Income per Share - Basic                                  $       1.76   $       1.92 - Diluted                                $       1.75   $       1.92Weighted Average Number of Shares Outstanding - Basic                                         180.5          184.0 - Diluted                                       180.9          184.6
                   PLUM CREEK TIMBER COMPANY, INC.                  CONSOLIDATED STATEMENTS OF INCOME                             (UNAUDITED)                                                  Quarter Ended                                            --------------------------                                            December 31,  December 31,                                               2006          2005                                            ------------  ------------                                            (In Millions, Except Per                                                  Share Amounts)Revenues: Timber                                    $        204  $        192 Real Estate                                         66            72 Manufacturing                                      105           121 Other                                                4             6                                            ------------  ------------   Total Revenues                                   379           391                                            ------------  ------------Costs and Expenses: Cost of Goods Sold:   Timber                                           126           110   Real Estate                                       30            47   Manufacturing                                    102           114   Other                                              1             1                                            ------------  ------------      Total Cost of Goods Sold                      259           272 Selling, General and Administrative                 35            25                                            ------------  ------------         Total Costs and Expenses                   294           297                                            ------------  ------------Gain from Canadian Lumber Settlement                 14             -Other Operating Income (Expense), net                 2             1                                            ------------  ------------Operating Income                                    101            95Interest Expense, net                                35            29                                            ------------  ------------Income before Income Taxes                           66            66Provision (Benefit) for Income Taxes                 (3)            2                                            ------------  ------------Income from Continuing Operations                    69            64Gain on Sale of Properties, net of tax                -             3                                            ------------  ------------Net Income                                 $         69  $         67                                            ============  ============Income from Continuing Operations per Share - Basic                                   $       0.39  $       0.34 - Diluted                                 $       0.39  $       0.34Net Income per Share - Basic                                   $       0.39  $       0.36 - Diluted                                 $       0.39  $       0.36Weighted Average Number of Shares Outstanding - Basic                                          177.0         184.0 - Diluted                                        177.4         184.6
                   PLUM CREEK TIMBER COMPANY, INC.                     CONSOLIDATED BALANCE SHEETS                             (UNAUDITED)                                             December 31, December 31,                                                2006         2005                                             ------------ ------------                                             (In Millions, Except Per                                                   Share Amounts)                   ASSETSCurrent Assets: Cash and Cash Equivalents                  $        273 $        369 Restricted Advance from Customer                      4           23 Accounts Receivable                                  40           44 Like-Kind Exchange Funds Held in Escrow               -           30 Inventories                                          83           75 Deferred Tax Asset                                    7           17 Real Estate Development Properties                    3           26 Assets Held for Sale                                 82           43 Other Current Assets                                 21           16                                             ------------ ------------                                                     513          643Timber and Timberlands - Net                       3,876        3,887Property, Plant and Equipment - Net                  216          234Investment in Grantor Trusts                          28           26Other Assets                                          28           22                                             ------------ ------------ Total Assets                               $      4,661 $      4,812                                             ============ ============                LIABILITIESCurrent Liabilities: Current Portion of Long-Term Debt          $        125 $        161 Short-Term Debt                                       -           50 Accounts Payable                                     42           45 Interest Payable                                     30           30 Wages Payable                                        27           25 Taxes Payable                                        24           18 Deferred Revenue                                     17           35 Other Current Liabilities                            16           11                                             ------------ ------------                                                     281          375Long-Term Debt                                     1,617        1,524Lines of Credit                                      581          495Deferred Tax Liability                                25           39Other Liabilities                                     68           54                                             ------------ ------------ Total Liabilities                                 2,572        2,487                                             ------------ ------------Commitments and Contingencies            STOCKHOLDERS' EQUITYPreferred Stock, $0.01 par value, authorized shares - 75.0, outstanding - none                                    -            -Common Stock, $0.01 par value, authorized shares - 300.6, outstanding (net of Treasury Stock) - 177.1 at  December 31, 2006, and 184.2 at December 31, 2005                        2            2Additional Paid-In Capital                         2,190        2,179Retained Earnings                                    214          186Treasury Stock, at cost, Common Shares - 9.5 at December 31, 2006,                          (307)         (44) and 2.0 at December 31, 2005Accumulated Other Comprehensive Income (Loss)                                              (10)           2                                             ------------ ------------ Total Stockholders' Equity                        2,089        2,325                                             ------------ ------------ Total Liabilities and Stockholders' Equity $      4,661 $      4,812                                             ============ ============                   PLUM CREEK TIMBER COMPANY, INC.                CONSOLIDATED STATEMENTS OF CASH FLOWS                             (UNAUDITED)                                                    Year Ended                                            --------------------------                                            December 31,  December 31,                                                2006         2005                                            ------------- ------------                                                  (In Millions)Cash Flows From Operating Activities:Net Income                                 $         317 $        354Adjustments to Reconcile Net Income toNet Cash Provided By Operating Activities: Depreciation, Depletion and Amortization            128          113 Basis of Real Estate Sold                            85          124 Deferred Income Taxes                                 1          (13) Gain on Sales of Properties and Other  Assets                                              (1)         (24) Working Capital Changes Impacting Cash  Flow:     Like-Kind Exchange Funds                         30          (21)     Other Working Capital Changes                    (1)         (15) Other                                                (3)          (2)                                            ------------- ------------Net Cash Provided By Operating Activities            556          516                                            ------------- ------------Cash Flows From Investing Activities: Capital Expenditures (Excluding  Timberland Acquisitions)                           (86)         (89) Timberlands Acquired                               (111)        (501) Proceeds from Sales of Properties and  Other Assets                                         2           29 Other                                                (4)          (2)                                            ------------- ------------Net Cash Used In Investing Activities               (199)        (563)                                            ------------- ------------Cash Flows From Financing Activities: Dividends                                          (290)        (279) Borrowings on Lines of Credit                     3,483        2,468 Repayments on Lines of Credit                    (3,397)      (2,421) Proceeds from Issuance of Short-Term Debt             -           50 Repayment of Short-Term Debt                        (50)           - Proceeds from Issuance of Long-Term Debt            216          297 Principal Payments and Retirement of  Long-Term Debt                                    (159)         (53) Proceeds from Stock Option Exercises                  7            9 Acquisition of Treasury Stock                      (263)          (1) Other                                                 -           (1)                                            ------------- ------------Net Cash Provided By (Used In) Financing Activities                                         (453)          69                                            ------------- ------------Increase (Decrease) In Cash and Cash Equivalents                                         (96)          22 Cash and Cash Equivalents:   Beginning of Year                                 369          347                                            ------------- ------------   End of Year                             $         273 $        369                                            ============= ============                   PLUM CREEK TIMBER COMPANY, INC.                CONSOLIDATED STATEMENTS OF CASH FLOWS                             (UNAUDITED)                                                 Quarter Ended                                         -----------------------------                                          December 31,   December 31,                                              2006           2005                                         --------------- -------------                                                 (In Millions)Cash Flows From Operating Activities:Net Income                              $            69 $          67Adjustments to Reconcile Net Income toNet Cash Provided By Operating Activities: Depreciation, Depletion and  Amortization                                       34            28 Basis of Real Estate Sold                           19            42 Deferred Income Taxes                               (7)           (8) Gain on Sale of Properties                          (1)           (2) Working Capital Changes Impacting Cash  Flow:     Like-Kind Exchange Funds                        40            47     Other Working Capital Changes                  (19)          (17) Other                                                1            (3)                                         --------------- -------------Net Cash Provided By Operating Activities                                         136           154                                         --------------- -------------Cash Flows From Investing Activities: Capital Expenditures (Excluding  Timberland Acquisitions)                          (26)          (36) Timberlands Acquired                               (89)         (383) Proceeds from Sales of Properties and  Other Assets                                        1             2 Other                                                -            (1)                                         --------------- -------------Net Cash Used In Investing Activities              (114)         (418)                                         --------------- -------------Cash Flows From Financing Activities: Dividends                                          (71)          (70) Borrowings on Line of Credit                     1,316           662 Repayments on Line of Credit                    (1,253)         (668) Proceeds from Issuance of Long-Term  Debt                                                -           297 Principal Payments and Retirement of  Long-Term Debt                                   (130)           (2) Proceeds from Stock Option Exercises                 1             5 Acquisition of Treasury Stock                       (1)            -                                         --------------- -------------Net Cash Provided By (Used In) Financing Activities                              (138)          224                                         --------------- -------------Decrease In Cash and Cash Equivalents              (116)          (40) Cash and Cash Equivalents:   Beginning of Period                              389           409                                         --------------- -------------   End of Period                        $           273 $         369                                         =============== =============

Click Here for 4th Quarter 2006 Financial Supplements (in PDF)

CONTACT: Plum Creek Timber Company, Inc.
Investors: John Hobbs, 1-800-858-5347
Media: Kathy Budinick, 1-888-467-3751

SOURCE: Plum Creek Timber Company, Inc.

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