MERGER WITH PLUM CREEK (Notes)

12 Months Ended

Dec. 31, 2016

Business Combinations [Abstract]

MERGER WITH PLUM CREEK

MERGER WITH PLUM CREEK

On February 19, 2016, we merged with Plum Creek Timber Company, Inc. (Plum Creek). Plum Creek was a REIT that primarily owned and managed timberlands in the United States. Plum Creek also produced wood products, developed opportunities for mineral and other natural resource extraction, and sold real estate properties. The merger combined two industry leaders. The breadth and diversity of our combined timberlands, real estate, energy and natural resources assets, and wood products operations position Weyerhaeuser to capitalize on the improving housing market and to continue to capture premium land values across the combined portfolio.

Under the merger agreement, each issued and outstanding share of Plum Creek common stock was exchanged for 1.60 Weyerhaeuser common shares, with cash paid in lieu of any fractional shares. Upon consummation of the merger, all outstanding Plum Creek stock options (all fully vested as of the merger date) and restricted stock units were converted into Weyerhaeuser stock options and restricted stock units, after giving effect to the 1.60 exchange ratio. Because the Plum Creek stock options were fully vested and relate to services rendered to Plum Creek prior to the merger, the replacement stock options were also fully vested and their fair value is included in the consideration transferred. Replacement restricted stock units relate to services to be performed post-merger and therefore were not included in consideration transferred. See additional details about replacement share-based payment awards in Note 16: Share-based Compensation.

The acquisition of total assets of $10.0 billion was a noncash investing and financing activity comprised of $6.4 billion in equity consideration transferred and $3.6 billion of liabilities assumed. See Note 12: Long-term Debt for additional details of indebtedness assumed.

The following table summarizes the equity consideration transferred in the merger:

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES
Number of Plum Creek common shares outstanding(1)	174,307,267
Exchange ratio per the merger agreement	1.60
Weyerhaeuser shares issued in exchange for Plum Creek equity(2)	278,886,704
Price per Weyerhaeuser common share(3)	$	22.87
Aggregate value of Weyerhaeuser common stock issued			$	6,378
Fair value of stock options(4)			5
Estimated equity consideration transferred			$	6,383
(1) The number of shares of Plum Creek common stock issued and outstanding as of February 19, 2016. (2) Total shares issued net of partial shares settled in cash. (3) The closing price of Weyerhaeuser common stock on the NYSE on February 19, 2016. (4) The estimated fair value of Plum Creek stock options for pre-merger services rendered.

We recognized $146 million of merger-related costs that were expensed during the year ended December 31, 2016. We also recognized $14 million of merger-related costs that were expensed during the fourth quarter 2015. See Note 17: Charges for Integration and Restructuring, Closures, and Asset Impairments for descriptions of the components of merger-related costs. These costs are included in "Charges for integration and restructuring, closures and asset impairments" in our Consolidated Statement of Operations.

As a result of progress made to integrate financial systems since the merger date, the amount of revenue and loss before income taxes from acquired Plum Creek operations is no longer practicable to disclose for the year-to-date period ended December 31, 2016.

Summarized Unaudited Pro Forma Information that Presents Combined Amounts as if this Merger Occurred at the Beginning of 2015

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES
	2016		2015
Net sales	$	6,525	$	6,664
Net earnings from continuing operations attributable to Weyerhaeuser common shareholders	$	519	$	487
Net earnings from continuing operations per share attributable to Weyerhaeuser common shareholders, basic	$	0.69	$	0.61
Net earnings from continuing operations per share attributable to Weyerhaeuser common shareholders, diluted	$	0.68	$	0.61

Pro forma net earnings attributable to Weyerhaeuser common shareholders exclude $155 million of non-recurring merger-related costs (net of tax) incurred in the year ended December 31, 2016. During the year ended December 31, 2015 we incurred $22 million of non-recurring merger-related costs. Pro forma data may not be indicative of the results that would have been obtained had these events occurred at the beginning of the periods presented, nor is it intended to be a projection of future results.

Weyerhaeuser has accounted for the merger transaction as the acquirer and has applied the acquisition method of accounting. Under the acquisition method, the assets acquired and liabilities assumed by Weyerhaeuser from Plum Creek were recorded as of the date of the acquisition at their respective estimated fair values.

The fair values of the assets acquired and liabilities assumed were determined using the income, cost or market approaches. The fair value measurements were generally based on significant inputs that are not observable in the market and thus represent Level 3 measurements as defined in ASC 820, Fair Value Measurement, with the exception of certain long-term debt instruments assumed in the acquisition that were valued using observable market inputs and are therefore Level 2 measurements. The income approach was primarily used to value acquired timberlands, minerals and mineral rights, equity investments in the Timberland Venture (as defined and described in Note 8: Related Parties) and Real Estate Development Ventures (as defined and described inNote 8: Related Parties), and the Note Payable to Timberland Venture (as defined and described inNote 12: Long-term Debt). The income approach estimates fair value for an asset based on the present value of cash flow projected to be generated by the asset. Projected cash flows are discounted at rates of return that reflect the relative risk of achieving the cash flows and the time value of money. The cost approach, which estimates value by determining the current cost of replacing an asset with another of equivalent economic utility, was used, as appropriate, for property and equipment. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the property, less an allowance for loss in value due to depreciation. The market approach was primarily used to value higher and better use real estate tracts included within acquired timberlands, certain land and building assets included within acquired property and equipment, and long-term debt instruments. The market approach estimates fair value for an asset based on values of recent comparable transactions.

Initial and Final Estimated Fair Value of Identifiable Assets Acquired and Liabilities Assumed as of the Merger Date

DOLLAR AMOUNTS IN MILLIONS
	PRELIMINARY ALLOCATION		MEASUREMENT PERIOD ADJUSTMENTS			FINAL ALLOCATION
Current assets	$	128	$	10		$	138
Timber and timberlands	8,124		2			8,126
Minerals and mineral rights	312		6			318
Property and equipment	272		5			277
Equity investment in Timberland Venture	876		(29		)	847
Equity investment in Real Estate Development Ventures	88		(3		)	85
Other assets	163		4			167
Total assets acquired	9,963		(5		)	9,958
Current liabilities	610		—			610
Long-term debt	2,056		—			2,056
Note payable to Timberland Venture	837		1			838
Other liabilities	77		(6		)	71
Total liabilities assumed	3,580		(5		)	3,575
Net assets acquired	$	6,383	$	—		$	6,383

The initial allocation of purchase price was recorded using preliminary estimated fair value of assets acquired and liabilities assumed based upon the best information available to management at the time. The purchase price allocation was finalized as of December 31, 2016. The measurement period adjustments reflect additional information obtained to record the fair value of certain assets acquired and liabilities assumed based on facts and circumstances existing as of the acquisition date. Measurement period adjustments reflected above did not have a material impact to earnings or cash flows for the year ended December 31, 2016.