-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Fvg2kSuhQkdRhkuaQvQ7ISAbdzQrdaRAIqL+ZIxxFQ6rmVT5xNFbpUVfKVaytDO2 jfMkARsfC0IGmDpM4/qfYw== 0000106535-94-000003.txt : 19940314 0000106535-94-000003.hdr.sgml : 19940314 ACCESSION NUMBER: 0000106535-94-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19931226 FILED AS OF DATE: 19940311 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEYERHAEUSER CO CENTRAL INDEX KEY: 0000106535 STANDARD INDUSTRIAL CLASSIFICATION: 2600 IRS NUMBER: 910470860 STATE OF INCORPORATION: WA FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-04825 FILM NUMBER: 94515554 BUSINESS ADDRESS: STREET 1: 33663 WEYERHAEUSER WAY SOUTH CITY: TACOMA STATE: WA ZIP: 98477 BUSINESS PHONE: 2069242345 10-K 1 1993 WEYERHAEUSER COMPANY FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 26, 1993 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission File Number 1-4825 WEYERHAEUSER COMPANY A Washington Corporation (IRS Employer Identification No. 91-0470860) Tacoma, Washington 98477 Telephone (206) 924-2345 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of Each Class Which Registered -------------------------------- ----------------------------- Common Shares ($1.25 par value) Midwest Stock Exchange New York Stock Exchange Pacific Stock Exchange Tokyo Stock Exchange Rights to Purchase Cumulative New York Stock Exchange Preference Shares, Fourth Series 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 . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of registrant's voting shares held by non-affiliates was $9,764,032,027 as of February 25, 1994. The number of shares outstanding of registrant's class of common stock, as of February 25, 1994, was 205,558,569 common shares ($1.25 par value). Weyerhaeuser Company and Subsidiaries Documents Incorporated by Reference - ------------------------------------------------------------------------ The following documents are incorporated in this Form 10-K Annual Report by reference: Part of Form 10-K Document Into Which Document Incorporated -------- -------------------------------- Weyerhaeuser Company Annual Report* Part I, Item 1 and Part II, Items 5-8 Notice of 1994 Annual Meeting Part III of Shareholders and Proxy Statement* *Such sections, identified by page numbers, as are referenced in the Cross Reference Sheet included with this Form 10-K Annual Report. 2 Weyerhaeuser Company and Subsidiaries Cross Reference Sheet - -----------------------------------------------------------------------
Location, by Page Number, in Document Incorporated by Reference ------------------------------------- 1993 Notice of 1994 Weyerhaeuser Annual Meeting Company of Shareholders Annual and Proxy Form 10-K Item Report Statement ---------------- ------------- ---------------- Part I Item 1. Business General Development of Business 34-40 - Financial Information About Industry Segments 73-75 - Narrative Description of Business 34-40 - Financial Information About Foreign and Domestic Operations and Export Sales 34, 55-56 - Item 2. Properties - - Item 3. Legal Proceedings - - Item 4. Submission of Matters to a Vote of Security Holders - - Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Market Information 75 - Holders 76-77 - Dividends 75 - Item 6. Selected Financial Data 76-77 - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 23-32, 34-44 - Item 8. Financial Statements and Supplementary Data Report of Independent Public Accountants 44 - Consolidated Statement of Earnings 45 - Consolidated Balance Sheet 46-47 - Consolidated Statement of Cash Flows 48-49 - Consolidated Statement of Shareholders' Interest 50-51 - Notes to Financial Statements (including business segments data required by Financial Accounting Standards Board Statement No. 14) 52-77 - Selected Quarterly Financial Data 75 -
3 Weyerhaeuser Company and Subsidiaries Cross Reference Sheet - Continued - -----------------------------------------------------------------------------
Location, by Page Number, in Document Incorporated by Reference ------------------------------------- 1993 Notice of 1994 Weyerhaeuser Annual Meeting Company of Shareholders Annual and Proxy Form 10-K Item Report Statement -------------- ----------- ---------------- Part II - Continued Item 9. Changes in and Disagreements on Accounting and Financial Disclosure** - - Part III Item 10. Directors and Executive Officers of the Registrant - 1-4 Item 11. Executive Compensation - 5-12 Item 12. Security Ownership of Certain Beneficial Owners and Management - 4-5 Item 13. Certain Relationships and Related Transactions - 15-16
**Item not applicable. 4 Weyerhaeuser Company and Subsidiaries PART I Item 1. Business - ----------------------------------------------------------------------------- DESCRIPTION OF THE BUSINESS OF THE COMPANY Weyerhaeuser Company (the company) was incorporated in the state of Washington in January 1900, as Weyerhaeuser Timber Company. It is principally engaged in growing and harvesting of timber and the manufacture, distribution and sale of forest products, real estate development and construction, and financial services. Its principal business segments include timberlands and wood products, pulp and paper products, real estate, and financial services. A description of each of these business segments follows. Timberlands and Wood Products The company owns approximately 5.5 million acres of commercial forestland in the United States (50% in the South and 50% in the Pacific Northwest), most of it highly productive and located extremely well to serve both domestic and international markets. The company has, additionally, long-term license arrangements in Canada covering approximately 17.8 million acres (of which 14 million acres are considered to be productive forestland). The combined total timber inventory on these U.S. and Canadian lands is approximately 245 million cunits (a cunit is 100 cubic feet of solid wood), of which approximately 75% is softwood species. The relationship between cubic measurement and the quantity of end products that may be produced from timber varies according to the species, size and quality of timber, and will change through time as the mix of these variables changes. To sustain the timber supply from its fee timberland, the company is engaged in extensive planting, suppression of nonmerchantable species, precommercial and commercial thinning and fertilization and operational pruning, all of which increase the yield from its fee timberland acreage.
Inventory Thousands of Acres at December 26, 1993 ---------- ------------------------------------------- Millions Fee Long-term License of Cunits Ownership Leases Arrangements Total ---------- --------- --------- ------------ ------ Geographic Area Washington Cascade 13 502 - - 502 Longview 10 439 - - 439 Twin Harbors 20 580 - - 580 ---------- --------- --------- ------------ ------ 43 1,521 - - 1,521 ---------- --------- --------- ------------ ------ Oregon Coos Bay 5 210 - - 210 Klamath Falls 4 598 - - 598 Willamette 9 403 - - 403 ---------- ---------- --------- ------------ ------ 18 1,211 - - 1,211 ---------- ---------- --------- ------------ ------ Southern Mississippi/ Alabama 4 383 101 - 484 North Carolina/ Georgia 9 717 48 - 765 Oklahoma/ Arkansas 13 1,680 9 - 1,689 ---------- --------- --------- ------------ ------- 26 2,780 158 - 2,938 ---------- --------- --------- ------------ ------- Total United States 87 5,512 158 - 5,670 ---------- --------- --------- ------------ ------- Canada Alberta 91 - - 5,793 5,793 British Columbia 10 12 - 3,595 3,607 Saskatchewan 57 - - 8,457 8,457 ---------- --------- --------- ----------- ------- Total Canada 158 12 - 17,845 17,857 ---------- --------- --------- ----------- ------- TOTAL 245 5,524 158 17,845 23,527 ========== ========= ========= =========== =======
5 Weyerhaeuser Company and Subsidiaries Part I Item 1. Business - Continued - -----------------------------------------------------------------------------
Thousand Acres Million Thousand Acres ------------------ Seedlings ------------------------------- Harvested Planted Planted Stocking Control Fertilization --------- ------- ------- ---------------- ------------- 1993 Activity Washington 27.0 30.0 14.9 10.4 53.6 Oregon 15.1 16.1 7.1 20.4 26.7 Southern 54.6 40.1 19.9 8.3 195.0 --------- ------- ------- ---------------- ------------- Total United States 96.7 86.2 41.9 39.1 275.3 ========= ======= ======= ================ ============= Cumulative Activity 4,142.1 3,500.6 2,496.2 1,494.3 3,584.1 ========= ======= ======= ================ =============
The company's wood products businesses produce and sell softwood lumber, plywood and veneer; composite panels; oriented strand board; hardboard; hardwood lumber and plywood; doors; treated products; logs; chips and timber. These products are sold primarily through the company's own sales organizations. Building materials are sold to wholesalers, retailers and industrial users. Sales by volumes by major product class are as follows (millions):
1993 1992 1991 1990 1989 ----- ----- ----- ----- ----- Raw materials - cubic ft. 547 545 538 540 587 Softwood lumber - board ft. 4,230 3,440 3,269 3,417 4,223 Softwood plywood and veneer - sq. ft. (3/8") 2,435 2,227 2,135 2,212 2,441 Composite panels - sq. ft. (3/4") 626 590 685 641 635 Oriented strand board - sq. ft. (3/8") 1,672 1,484 1,205 1,185 1,180 Hardboard - sq. ft. (7/16") 140 133 114 126 133 Hardwood lumber - board ft. 240 218 219 209 223 Hardwood doors (thousands) 556 514 525 697 1,146
Selected product prices:
1993 1992 1991 1990 1989 ------ ------ ------ ------ ------ Export logs (#2 sawlog-bark on) - $/MBF Cascade - Douglas fir $1,211 $ 930 $ 687 $ 641 $ 645 Coastal - Hemlock 828 562 531 558 520 Coastal - Douglas fir 1,104 858 633 588 525 Lumber (common) - $/MBF 2x4 Douglas fir (kiln dried) 418 295 250 241 263 2x4 Douglas fir (green) 383 261 224 223 247 2x4 southern yellow pine (kiln dried) 397 285 237 233 224 2x4 spruce-pine-fir (kiln dried) 334 231 187 186 184 Plywood (1/2" CDX) - $/MSF West 321 281 220 209 224 South 282 249 192 184 200 Oriented strand board (7/16"-24/16) North Central price - $/MSF 235 217 147 129 170
6 Weyerhaeuser Company and Subsidiaries Part I Item 1. Business - Continued - ----------------------------------------------------------------------------- Pulp and Paper Products The company's pulp and paper products businesses include: Pulp, which manufactures chemical wood pulp for world markets; Newsprint, which manufactures newsprint at the company's North Pacific Paper Corporation mill and markets it to West Coast and Japanese newspaper publishers; Paper, which manufactures and markets a range of both coated and uncoated fine papers through paper merchants and printers; Containerboard Packaging, which manufactures linerboard and corrugating medium, which is primarily used in the production of corrugated shipping containers and manufactures and markets corrugated shipping containers for industrial and agricultural packaging; Paperboard, which manufactures bleached paperboard that is used for production of liquid containers and is marketed to West Coast and Pacific Rim customers; Recycling, which operates an extensive wastepaper collection system and markets it to company mills and worldwide customers; Chemicals, which produces chlorine, caustic and tall oil, which are used principally by the company's pulp and paper operations; and Personal Care Products, which manufactures disposable diapers sold under the private-label brands of many of North America's largest retailers (this business was sold in February 1993 through an initial public offering of stock). Sales volumes by major product class are as follows (thousands):
1993 1992 1991 1990 1989 ------ ------ ------ ------ ------ Pulp - air-dry metric tons 1,886 1,238 1,433 1,194 1,116 Newsprint - metric tons 609 575 450 453 473 Paper - tons 990 966 869 893 849 Paperboard - tons 222 238 234 220 197 Containerboard - tons 290 318 418 444 497 Packaging - MSF 31,386 29,414 26,525 25,022 24,560 Recycling - tons 851 778 735 648 633 Personal care products - standard cases - 17,017 14,929 11,471 12,181
Selected product prices (per ton):
1993 1992 1991 1990 1989 ----- ----- ----- ----- ----- Pulp - NBKP-air-dry metric-U.S. $ 445 $ 551 $ 568 $ 800 $ 830 Paper - uncoated free sheet-U.S. 627 630 713 859 889 Linerboard - 42 lb.-Eastern U.S. 295 343 330 360 404 Newsprint - metric -West Coast U.S. 435 433 549 561 567
7 Weyerhaeuser Company and Subsidiaries Part I Item 1. Business - Continued - ----------------------------------------------------------------------------- Real Estate The company, through its real estate subsidiary, Weyerhaeuser Real Estate Company, is a builder/developer of for-sale housing and apartments, develops commercial and residential lots for sale to users and other builders, builds commercial buildings for sale to institutional investors, and is an investor in joint ventures and limited partnerships. Volumes sold:
1993 1992 1991 1990 1989 ----- ----- ----- ----- ----- Single-family units 1 3,879 3,917 4,410 5,113 5,858 Multi-family units 1 1,141 60 317 358 412 Lots 1 1,372 2,762 1,138 3,008 2,729 Commercial space (thousand sq. ft.) 88 142 269 235 945 1 Includes proportional share of joint venture sales.
Financial Services The company, through its financial services subsidiary, Weyerhaeuser Financial Services, Inc., is involved in a range of financial services. The principal operating unit is Weyerhaeuser Mortgage Company, which has origination offices in 12 states, with a servicing portfolio of $8.4 billion covering approximately 112,000 loans throughout the country. Mortgages are resold in the secondary market through mortgage-backed securities to financial institutions and investors. Through its insurance services organization, it also offers a broad line of property, life and disability insurance. GNA Corporation, a subsidiary that specialized in the sale of life insurance annuities and mutual funds to the customers of financial institutions, was sold in April 1993. Republic Federal Savings & Loan Association, a subsidiary that operated in Southern California through 1991, was dissolved in 1992. Volume information (millions):
1993 1992 1991 1990 1989 ------ ------ ------- ------- ------- Loan servicing portfolio $8,400 $9,800 $10,600 $11,600 $11,800 Single-family loan originations $4,405 $3,380 $2,496 $2,131 $3,251
8 Weyerhaeuser Company and Subsidiaries Part I Item 2. Properties - ----------------------------------------------------------------------------- Timberlands and Wood Products Facilities and annual production are summarized by major product class as follows (millions):
Number Production of Capacity Facilities 1993 1992 1991 1990 1989 ---------- ---------- ----- ----- ----- ----- ----- Logs - cubic ft. - - 673 749 782 817 839 Softwood lumber - board ft. 3,215 27 3,135 2,782 2,687 2,719 2,759 Softwood plywood and veneer - sq. ft. (3/8") 1,246 8 1,188 1,125 966 1,076 1,069 Composite panels - sq. ft. (3/4") 609 6 564 540 493 505 587 Oriented strand board - sq. ft. (3/8") 1,440 5 1,443 1,234 1,208 1,156 1,121 Hardboard - sq. ft. (7/16") 130 1 120 118 90 119 131 Hardwood lumber - board ft. 255 8 221 210 196 202 212 Hardwood doors (thousands) 561 1 522 469 448 556 833
Principal manufacturing facilities are located as follows: Softwood lumber and plywood Hardwood doors Alabama, Arkansas, Georgia, Idaho, Wisconsin Mississippi, North Carolina, Oklahoma, Oregon, Composite panels Washington, and Georgia, North Carolina, Alberta, British Columbia, and Oregon and Wisconsin Saskatchewan, Canada Oriented strand board Hardwood lumber Michigan, North Carolina, Arkansas, Oklahoma, Pennsylvania, and Alberta, Canada Washington, and Wisconsin Hardboard Oregon 9 Weyerhaeuser Company and Subsidiaries Part I Item 2. Properties - Continued - ------------------------------------------------------------------------------ Pulp and Paper Products Facilities and annual production are summarized by major product class as follows (thousands):
Number Production of Capacity Facilities 1993 1992 1991 1990 1989 ---------- ---------- ------ ------ ------ ------ ------ Pulp - air-dry metric tons 2,130 8 2,096 1,506 1,527 1,386 1,275 Newsprint - metric tons 675 1 618 588 461 459 486 Paper - tons 1,015 5 1,007 971 889 900 919 Paperboard - tons 220 1 217 229 238 217 221 Containerboard - tons 2,360 5 2,269 2,240 2,224 2,171 2,168 Packaging - MSF 36,800 36 32,795 31,040 27,583 26,146 25,764 Recycling - tons - 21 1,847 1,692 1,415 1,204 1,163 Personal care products - standard cases - - - 16,743 14,902 11,471 12,019
Principal manufacturing facilities are located as follows: Pulp Containerboard Georgia, Mississippi, North North Carolina, Oklahoma, Carolina, Washington, and Oregon, and Washington Alberta, British Columbia, and Saskatchewan, Canada Packaging Arizona, California, Florida, Newsprint Georgia, Hawaii, Illinois, Washington Indiana, Iowa, Kentucky, Maine, Michigan, Minnesota, Paper Mississippi, Missouri, Nebraska, Mississippi, North Carolina, New Jersey, New York, North Washington, Wisconsin, and Carolina, Ohio, Oregon, Saskatchewan, Canada Tennessee, Texas, Virginia, Washington, and Wisconsin Paperboard Washington Recycling California, Colorado, Iowa, Kansas, Maryland, North Carolina, Oklahoma, Oregon, Texas, Virginia, Washington, and British Columbia, Canada Chemicals Georgia, Mississippi, North Carolina, Oklahoma, Washington, and Saskatchewan, Canada 10 Weyerhaeuser Company and Subsidiaries Part I Item 2. Properties - Continued - ----------------------------------------------------------------------------- Real Estate Principal operations are located as follows:
Activity -------------------------------------------------------------- Com- Primary Resi- Com- mercial General Real Estate States of Single- Multi- dential mercial Acre- Pro- Con- Venture Companies Operations Family Family Lots Lots age jects tracting Capital - ----------- ---------- ------- ------ ------- ------- ----- ------- -------- ------- Centennial Texas x x x Homes, Inc. Land Management Alabama, x x x Arkansas, Georgia, Mississippi, North Carolina, Oregon, Washington Pardee California, x x x x x Construction Nevada Co. The Quadrant Washington x x x x x x Corp. Scarborough New Jersey x x x Corporation Scarborough Florida x x x x Constructors, Inc. Trendmaker, Inc. Texas x x Westminster Homes, Inc. North Carolina x x x x x Winchester Maryland, x x x x Homes, Inc. Virginia Weyerhaeuser Alaska, Arizona, x Venture Co. California, Colorado, Florida, Nevada, Oregon, Washington Weyerhaeuser Washington Real Estate Company (Parent Company)
11 Weyerhaeuser Company and Subsidiaries Part I Item 2. Properties - Continued - ----------------------------------------------------------------------------- Financial Services Principal operations are located as follows:
Activity ------------------------------------------ Mort- Invest- Mort- Financial Primary Mort- gage ment gage Services States of gage Ser- Insur- Sales & Sec- Companies Operations Lending vicing ance Service urities ---------------- ------- ------ ------ ------- ------- Weyerhaeuser Branches in 12 x x x x Mortgage states with major Company concentrations in California, Hawaii, and Nevada Mortgage California x Securities Corporations WFS (Republic) California x Inc. Weyerhaeuser Delaware Financial Services, Inc. (Parent Company)
12 Weyerhaeuser Company and Subsidiaries Part I Item 3. Legal Proceedings - ------------------------------------------------------------------------------ Trial began in May 1992 in a federal income tax refund case that the company filed in July 1989 in the United States Claims Court. The complaint seeks a refund of federal income taxes that the company contends it overpaid in 1977 through 1983. The alleged overpayments are the result of the disallowance of certain timber casualty losses and certain deductions claimed by the company arising from export transactions. The refund sought was approximately $29 million, plus statutory interest from the dates of the alleged overpayments. The company has reached an agreement with the United States Department of Justice to settle the portion of the case relating to export transactions. That settlement has been approved by the Joint Committee on Taxation of the U.S. Congress. The tax refund remaining in dispute is approximately $9 million plus statutory interest from the dates of the alleged overpayments. The court has not entered a decision on the remaining issue. On March 6, 1992, the company filed a complaint in the Superior Court for King County, Washington against a number of insurance companies. The complaint seeks a declaratory judgment that the insurance companies named as defendants are obligated under the terms and conditions of the policies sold by them to the company to defend the company and to pay, on the company's behalf, certain claims asserted against the company. The claims relate to alleged environmental damage to third-party sites and to some of the company's own property to which allegedly toxic material was delivered or on which allegedly toxic material was placed in the past. Since December 1992, the company has agreed to settlements with six of the defendants. In July 1993, the trial court dismissed fourteen of the thirty-five sites named in the complaint. Appeal of those dismissals was heard by the Washington State Supreme Court on February 22, 1994. Trial on two sites is scheduled for October 1994. In April 1991, the United States Environmental Protection Agency (EPA) issued an amended complaint adding the company as an additional defendant in an administrative proceeding under the Toxic Substances Control Act (TSCA). The proceeding seeks penalties of $171,000 from all defendants with respect to alleged improper storage and record keeping between 1980 and 1989 for certain transformers which contained polychlorinated biphenyls. The transformers, which the company sold in 1980, were located at the company's former hardboard siding mill in Doswell, Virginia. The company is currently negotiating with the EPA to settle the matter with no admission of liability or penalties. In April 1992, the Georgia Department of Natural Resources, Environmental Protection Division issued a Notice of Violation to the company's Adel, Georgia particleboard plant citing violations of particulate emission standards. A consent order was entered into on September 18, 1992 assessing a $35,000 penalty and a stipulated penalty of $100 per day until the facility is in full compliance with particulate emission requirements. The Consent Order sets a compliance deadline of January 31, 1994. The Consent Order also requires that the company demonstrate that the facility is in compliance with regulations under the Prevention of Significant Deterioration (PSD) regulations under the Clean Air Act. The company has submitted compliance data and is awaiting the State's concurrence that it satisfies the consent order requirements. The company has undertaken a review of all its wood products facilities for compliance with the PSD regulations and has disclosed PSD compliance issues to certain state agencies and the EPA. The company and the State of Mississippi Department of Environmental Quality (DEQ) have entered into a consent agreement concerning PSD regulations at two company facilities in Mississippi involving penalties of $170,000. The State of Alabama has issued a compliance order with penalties totaling $100,000 for noncompliance with PSD regulations at the company's Millport facility. The company and North Carolina's Division of Environmental Management have entered into a consent agreement for its Elkin, North Carolina facility involving penalties of $140,000 and are currently negotiating a separate consent agreement for its Moncure, North Carolina facility involving penalties of $140,000. The company has signed a consent agreement including penalties of $140,000 relating to PSD issues at the company's Wright City, Oklahoma facility with the State of Oklahoma Department of Environmental Quality. The company is negotiating a consent agreement with the State of Arkansas concerning PSD related issues for two facilities in that state involving $375,000 in total penalties for both facilities. Region V of the EPA has issued a Notice of Violation for permit violations at the company's Grayling, Michigan facility. The company is negotiating settlement of those alleged permit violations and other PSD related issues with the Michigan Department of Natural Resources and the EPA that may involve penalties of up to $416,000. In September 1992, the EPA issued a Section 114 Request for Information concerning PSD compliance at the company's oriented strand board and medium density fiberboard mills. In June 1993, the EPA issued a similar Section 114 request for the company's plywood and particleboard mills. The company is also undertaking a review of its pulp and paper facilities for PSD compliance. 13 Weyerhaeuser Company and Subsidiaries Part I Item 3. Legal Proceedings - Continued - ------------------------------------------------------------------------------ On April 9, 1993, the company entered into a Stipulated Final Order (SFO) with the Oregon Department of Environmental Quality for alleged air emissions in excess of permit levels and PSD noncompliance at the company's North Bend, Oregon containerboard facility. The SFO establishes a compliance schedule for installing control technology. A supplemental SFO assessed upfront penalties of $247,000 and penalties of $500 per day until compliance is demonstrated. The SFO requires demonstrated compliance by December 1993 and a historical evaluation of the facility's PSD status. The company has submitted a plant site PSD review to the state and is awaiting its review. In August 1992, the EPA issued an administrative complaint for the assessment of $215,000 in civil penalties against the company's Longview, Washington facility. The penalties are based upon alleged violations of the record keeping and storage provisions of the polychlorinated biphenyls rules contained in the TSCA. The company and the EPA settled the complaint for a maximum penalty of $118,150, 50% of which was paid when the settlement was signed. Payment of the remaining 50% was deferred and will be eliminated based on the expenditure of more than $118,150 by the company to dispose of PCB contaminated transformers at Longview during 1993. On November 2, 1992, an action was filed against the company in the Circuit Court for the First Judicial District of Hinds County, Mississippi on behalf of a purported class of riparian property owners in Mississippi and Alabama whose properties are located on the Tennessee Tombigbee Waterway, Aliceville Lake, Cedar Creek and the Magoway Creek. The complaint seeks $1 billion in compensatory and punitive damages for diminution in property value, personal injuries and mental anguish allegedly resulting from the discharge of purported hazardous substances, including dioxins and furans, by the company's pulp and paper mill in Columbus, Mississippi and the alleged fraudulent concealments of such discharge. The complaint also seeks an injunction prohibiting future releases and the removal of hazardous substances allegedly released in the past. On August 20, 1993, a companion action was filed in Green County, Alabama on behalf of a similar purported class of riparian owners with essentially the same claims as the Mississippi case. The action was removed to the Federal District Court for the Northern District of Alabama, which subsequently remanded the case to state court. Trial began in January 1994 in the United States District Court for the District of Alaska of claims filed against Weyerhaeuser by two corporations with which Weyerhaeuser had entered into financing arrangements, a marketing agreement, and a technical assistance agreement. The plaintiffs claim that Weyerhaeuser breached contractual and common law duties by allegedly failing to adequately market and ship the plaintiffs' products, misrepresenting its marketing and shipping capabilities, and acting to further its interests at the plaintiffs' expense. The plaintiffs in the First Amended Complaint, filed in May 1992, seek an unstated amount of damages described as more than $50 million in compensatory damages plus not less than $75 million in punitive damages. The claim for punitive damages has been dismissed by the trial court. The company is also a party to various proceedings relating to the clean up of hazardous waste sites under the Comprehensive Environmental Response Compensation and Liability Act, commonly known as "Superfund," and similar state laws. The Environmental Protection Agency and/or various state agencies have notified the company that it may be a potentially responsible party with respect to other hazardous waste sites as to which no proceedings have been instituted against the company. The company is also a party to other legal proceedings generally incidental to its business. Although the final outcome of any legal proceeding is subject to a great many variables and cannot be predicted with any degree of certainty, the company presently believes that any ultimate liability resulting from the legal proceedings discussed herein, or all of them combined, would not have a material effect on the company's financial position. 14 Weyerhaeuser Company and Subsidiaries Part III Item 10. Directors and Executive Officers of the Registrant - ----------------------------------------------------------------------------
Name Title Age ---- ----- --- Charles W. Bingham Executive Vice President 60 William R. Corbin Executive Vice President 52 John W. Creighton, Jr. President 61 Steven R. Hill Senior Vice President 46 Norman E. Johnson Senior Vice President 60 William C. Stivers Senior Vice President 55
Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K - ----------------------------------------------------------------------------- Financial Statements Weyerhaeuser Company and Subsidiaries 1 Financial Statement Schedules Schedule V - Property and Equipment Schedule VI - Allowance for Depreciation and Amortization of Property and Equipment Schedule VIII - Valuation and Qualifying Accounts Schedule IX - Short-term Borrowings Schedule X - Supplementary Income Statement Information Exhibits Exhibit 3 - Articles of Incorporation and Bylaws Exhibit 10 - Material Contracts (a) Agreement with N. E. Johnson (b) Agreement with W. R. Corbin Exhibit 11 - Statement Re: Computation of Per Share Earnings (incorporated by reference to page 52 of the 1993 Weyerhaeuser Company Annual Report) Exhibit 13 - Portions of the 1993 Weyerhaeuser Company Annual Report specifically incorporated by reference herein Exhibit 22 - Subsidiaries of the Registrant Exhibit 24 - Consents of Experts and Counsel Reports on Form 8-K The registrant has not filed a report on Form 8-K during the last fiscal quarter of the period for which this Form 10-K is filed. 1 Incorporated in Part II, Item 8 by reference. 15 Weyerhaeuser Company and Subsidiaries Report of Independent Public Accountants - ------------------------------------------------------------------------------ To Weyerhaeuser Company: We have audited in accordance with generally accepted auditing standards, the financial statements included in Weyerhaeuser Company's annual report to shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 8, 1994. Our report on the financial statements includes an explanatory paragraph with respect to the change in the method of accounting for income taxes and postretirement benefits other than pensions. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed on page 15 are the responsibility of the company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN & CO. Seattle, Washington, February 8, 1994 16 Weyerhaeuser Company and Subsidiaries Schedule V - Property and Equipment For the three years ended December 26, 1993 Dollar amounts in thousands - -------------------------------------------------------------------------------
Year ended December 26, 1993 Other Changes ------------------------ Balance at Other Balance at Beginning Additions Retirements Reclassifi- Debits End of Classification of Period at Cost or Sales cations or (Credits) Period - -------------- ---------- --------- ----------- ----------- ------------ ------------ Timber and timberlands $ 591,610 $ 40,582 $ 4,451 $ - $ (19,014)1 $ 604,773 292 2 (88)3 (2,275)4 (1,883)6 ---------- -------- ---------- ---------- ----------- ------------ $ 591,610 $ 40,582 $ 4,451 $ - $ (22,968) $ 604,773 ========== ======== ========== ========== =========== ============ Property and equipment: Land $ 152,632 $ 7,775 $ 2,153 $ 93 $ (195)2 $ 157,611 (940)3 399 6 Buildings and improvements 1,395,142 65,299 48,689 5,866 10,547 2 1,416,740 (11,598)3 173 6 Machinery and equipment 7,768,170 444,983 299,875 (5,751) (9,482)2 7,839,070 (58,911)3 (788)5 724 6 Rail and truck roads 561,043 13,150 3,975 (140) (30)2 569,842 (143)4 (63)6 Other 47,372 2,475 - (204) (51)2 49,676 84 6 Leased property under capital leases 618 - - - - 618 Construction in progress 322,376 373,473 22,220 136 (3,006)2 666,177 (3,813)3 (769)6 ----------- -------- ---------- --------- --------- ------------- $10,247,353 $907,155 $ 376,912 $ - $ (77,862) $ 10,699,734 =========== ======== ========== ========= ========== ============= Notes: 1 Fee stumpage charged to income and credited to the asset account. Reference should be made to Note 1 of Notes to Financial Statements contained in the 1993 Weyerhaeuser Company Annual Report for a statement of the practices of the company and subsidiaries in providing depreciation, amortization and fee stumpage. 2 Reclassification from (to) other balance sheet accounts. 3 Adjustments to reflect application of Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation." 4 Assets transferred from (to) Weyerhaeuser Real Estate Company. 5 Canadian investment tax credit adjustment. 6 Miscellaneous adjustments.
17 Weyerhaeuser Company and Subsidiaries Schedule V - Property and Equipment - Continued - -----------------------------------------------------------------------------
Year ended December 27, 1992 Other Changes ------------------------- Balance at Other Balance at Beginning Additions Retirements Reclassifi- Debits End of Classification of Period at Cost or Sales cations or (Credits) Period - -------------- ---------- --------- ----------- ----------- ------------ ------------- Timber and timberlands $ 550,820 $ 63,987 $ 7,828 $ - $ (15,980)1 $ 591,610 1,828 2 (147)3 (1,021)4 (49)6 ----------- --------- --------- ---------- ------------ ----------- $ 550,820 $ 63,987 $ 7,828 $ - $ (15,369) $ 591,610 =========== ========= ========= ========== ============ =========== Property and equipment: Land $ 136,177 $ 6,835 $ 4,298 $ 14,336 $ 486 2 $ 152,632 (894)3 (140)4 130 6 Buildings and improvements 1,312,880 88,281 25,147 30,583 (733)2 1,395,142 (14,348)3 (83)4 3,709 6 Machinery and equipment 7,119,019 928,789 205,026 (12,412) (523)2 7,768,170 (62,034)3 (145)4 (1,585)5 2,087 6 Rail and truck roads 558,961 15,128 12,394 299 (506)2 561,043 (52)4 (393)6 Other 79,522 2,731 1,414 (33,464) (2)2 47,372 (1)6 Leased property under capital leases 109,972 - 107,225 - (2,129)6 618 Construction in progress 261,592 68,476 1,041 658 (3,423)2 322,376 (2,715)3 (1,171)6 ---------- ---------- --------- ---------- ----------- ------------ $9,578,123 $1,110,240 $ 356,545 $ - $ (84,465) $ 10,247,353 ========== ========== ========= ========== =========== ============
See notes on page 17. 18 Weyerhaeuser Company and Subsidiaries Schedule V - Property and Equipment - Continued - ------------------------------------------------------------------------------
Year ended December 29, 1991 Other Changes ------------------------ Balance at Other Balance at Beginning Additions Retirements Reclassifi- Debits End of Classification of Period at Cost or Sales cations or (Credits) Period - -------------- ---------- --------- ----------- ----------- ------------ ------------ Timber and timberlands $ 570,800 $ 15,484 $ 16,812 $ - $ (20,171)1 $ 550,820 3 3 (953)4 2,469 6 ---------- --------- ---------- ---------- ------------ ------------ $ 570,800 $ 15,484 $ 16,812 $ - $ (18,652) $ 550,820 ========== ========= ========== ========== ============ ============ Property and equipment: Land $ 136,029 $ 3,728 $ 2,589 $ 1,762 $ 955 2 $ 136,177 (81)3 (4,047)4 420 6 Buildings and improvements 1,267,860 93,189 16,727 (31,536) (42)3 1,312,880 136 6 Machinery and equipment 6,649,370 770,505 304,182 441 2,172 2 7,119,019 252 3 118 4 (325)5 668 6 Rail and truck roads 554,916 15,545 11,357 - (20)2 558,961 (123)4 Other 92,552 2,467 23,655 8,158 - 79,522 Leased property under capital leases 109,724 248 - - - 109,972 Construction in progress 491,994 (248,798) 51 21,175 (2,383)2 261,592 89 3 (434)6 ---------- ---------- ----------- -------- ----------- ----------- $9,302,445 $ 636,884 $ 358,561 $ - $ (2,645) $ 9,578,123 ========== ========== =========== ======== =========== ===========
See notes on page 17. 19 Weyerhaeuser Company and Subsidiaries Schedule VI - Allowance for Depreciation and Amortization of Property and Equipment For the three years ended December 26, 1993 Dollar amounts in thousands - -----------------------------------------------------------------------------
Year ended December 26, 1993 Other Changes ----------------------- Balance at Additions Other Balance at Beginning Charged Retirements Reclassifi- (Debits) End of Classification of Period to Income 1 or Sales cations or Credits Period - -------------- ---------- ------------ ----------- ----------- ---------- ------------ Buildings and improvements $ 509,593 $ 46,354 $ 28,410 $ 705 $ 374 2 $ 537,043 11,956 3 (3,546)4 17 7 Machinery and equipment 3,341,313 357,413 239,457 (1,429) 1,035 2 3,438,433 563 3 (21,000)4 (5)7 Rail and truck roads 399,515 13,936 3,586 - (20)3 409,696 (89)5 (60)7 Other 16,636 7,078 - 724 25,726 3 50,580 416 7 Restructuring 45,247 - 32,368 - (28,900)3 (8,756) 7,265 7 Leased property under capital leases 453 36 - - - 489 ---------- --------- --------- --------- --------- ---------- $4,312,757 $ 424,817 $ 303,821 $ - $(6,268) $4,427,485 ========== ========= ========= ========= ========= ========== Notes: 1 Reference should be made to Note 1 of Notes to Financial Statements contained in the 1993 Weyerhaeuser Company Annual Report for a statement of the practices of the company and subsidiaries in providing depreciation and amortization. It is not practicable to present all the rates used in computing depreciation provisions; however, the range of the estimated useful lives and the weighted average depreciation rates for the two principal property and equipment classifications for the three years ended December 26, 1993 were as follows:
Estimated Useful Lives 1993 1992 1991 -------------- ---- ---- ---- Buildings and improvements 10 to 40 years 3.3% 3.3% 3.3% Machinery and equipment 3 to 40 years 4.6% 4.9% 5.2%
2 Depreciation charged to construction. 3 Depreciation allowance reclassified (to) from other balance sheet accounts. 4 Adjustments to reflect application of Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation." 5 Depreciation allowance on assets transferred to Weyerhaeuser Real Estate Company (see Schedule V, Note 4). 6 Adjustment to reflect plants and facilities identified for planned divestment or closure. 7 Miscellaneous adjustments. 20 Weyerhaeuser Company and Subsidiaries Schedule VI - Allowance for Depreciation and Amortization of Property and Equipment - Continued - ------------------------------------------------------------------------------
Year ended December 27, 1992 Other Changes ---------------------- Balance at Additions Other Balance at Beginning Charged Retirements Reclassifi- (Debits) End of Classification of Period to Income 1 or Sales cations or Credits Period - -------------- ---------- ----------- ----------- ----------- ----------- ------------ Buildings and improvements $ 464,377 $ 44,075 $ 17,868 $ 21,798 $ 411 2 $ 509,593 1,355 3 (4,520)4 (76)5 41 7 Machinery and equipment 3,179,552 366,322 171,914 5,263 1,770 2 3,341,313 (18,585)3 (22,542)4 (145)5 1,592 7 Rail and truck roads 390,529 16,823 7,494 2 (313)3 399,515 (32)5 Other 29,715 714 426 (16,075) 1,276 2 16,636 (358)3 1,790 7 Restructuring 158,385 - 13,390 (10,988) (88,760)3 45,247 Leased property under capital leases 106,845 2,837 109,230 - 1 7 453 ---------- ----------- -------- -------- ----------- ----------- $4,329,403 $ 430,771 $320,322 $ - $(127,095) $ 4,312,757 ========== =========== ======== ======== =========== ===========
See notes on page 20. 21 Weyerhaeuser Company and Subsidiaries Schedule VI - Allowance for Depreciation and Amortization of Property and Equipment - Continued - -----------------------------------------------------------------------------
Year ended December 29, 1991 Other Changes ------------------------- Balance at Additions Other Balance at Beginning Charged Retirements Reclassifi- (Debits) End of Classification of Period to Income 1 or Sales cations or Credits Period - -------------- ---------- ----------- ----------- ----------- ----------- ------------ Buildings and improvements $ 436,122 $ 44,801 $ 9,175 $ (7,694) $ 436 2 $ 464,377 (171)3 (58)4 116 7 Machinery and equipment 3,052,684 354,987 228,978 1,507 1,786 2 3,179,552 (1,841)3 (185)4 116 5 (524)7 Rail and truck roads 374,181 17,780 1,358 - (11)3 390,529 (74)5 11 7 Other 26,567 1,173 6,914 5,737 714 2 29,715 2,438 7 Restructuring 76,477 - 34,820 (1,272) 118,000 6 158,385 Leased property under capital leases 97,753 7,370 - 1,722 - 106,845 ---------- --------- --------- --------- --------- ----------- $4,063,784 $ 426,111 $ 281,245 $ - $120,753 $4,329,403 ========== ========= ========= ========= ========= ===========
See notes on page 20. 22 Weyerhaeuser Company and Subsidiaries Schedule VIII - Valuation and Qualifying Accounts For the three years ended December 26, 1993 Dollar amounts in thousands - ------------------------------------------------------------------------------
Balance at Charged Deductions Balance at Beginning to from End of Description of Period Income Reserve Period - ----------- --------- ------- ---------- ---------- Weyerhaeuser Reserve deducted from related assets: Doubtful accounts - Accounts receivable 1993 $ 9,614 $ 7,308 $ 7,124 $ 9,798 ======= ======= ======= ======= 1992 $10,274 $ 6,848 $ 7,508 $ 9,614 ======= ======= ======= ======= 1991 $ 9,422 $13,421 $12,569 $10,274 ======= ======= ======= ======= Real Estate and Financial Services Reserve deducted from related assets: Doubtful accounts - Receivables 1993 $ 3,528 $ 472 $ 1,741 $ 2,259 ======= ======= ======= ======= 1992 $11,033 $ 2,425 $ 9,930 $ 3,528 ======= ======= ======= ======= 1991 $ 9,601 $ 2,546 $ 1,114 $11,033 ======= ======= ======= ======= Unamortized discount - Receivables 1993 $ 2,340 $ 179 $(1,811) 1 $ 4,330 ======= ======= ======= ======= 1992 $ 2,621 $ 670 $ 951 $ 2,340 ======= ======= ======= ======= 1991 $ 3,322 $ 405 $ 1,106 $ 2,621 ======= ======= ======= ======= Real estate in process of development 1993 $76,920 $ 3,443 $50,580 $29,783 ======= ======= ======= ======= 1992 $93,390 $ 265 $16,735 $76,920 ======= ======= ======= ======= 1991 $48,300 $52,566 $ 7,476 $93,390 ======= ======= ======= ======= Land being processed for development 1993 $28,053 $ - $ 8,921 $19,132 ======= ======= ======= ======= 1992 $58,104 $ 5 $30,056 $28,053 ======= ======= ======= ======= 1991 $27,421 $43,727 $13,044 $58,104 ======= ======= ======= ======= Investments in and advances to joint ventures and limited partnerships 1993 $65,791 $ 8,723 $19,363 $55,151 ======= ======= ======= ======= 1992 $89,679 $ 874 $24,762 $65,791 ======= ======= ======= ======= 1991 $36,287 $74,153 $20,761 $89,679 ======= ======= ======= ======= Note: 1 Includes $2,114 of discount on a partnership note consolidated by Weyerhaeuser Venture Company.
23 Weyerhaeuser Company and Subsidiaries Schedule VIII - Valuation and Qualifying Accounts - Continued For the three years ended December 26, 1993 Dollar amounts in thousands - ------------------------------------------------------------------------------
Balance at Charged Deductions Balance at Beginning to from End of Description of Period Income Reserve Period - ----------- ---------- ------- ---------- ---------- Real Estate and Financial Services - Continued Allowance for loan losses - Mortgage loans receivable 1993 $19,591 $ 8,707 $ 7,262 $21,036 ======= ======= ======= ======= 1992 $26,640 $ 6,354 $13,403 $19,591 ======= ======= ======= ======= 1991 $18,541 $17,132 $ 9,033 $26,640 ======= ======= ======= ======= Reserve for valuation of investment in subsidiary 1991 $57,000 $ - $57,000 $ - ======== ======= ======= =======
24 Weyerhaeuser Company and Subsidiaries Schedule IX - Short-term Borrowings For the three years ended December 26, 1993 Dollar amounts in thousands - ------------------------------------------------------------------------------
End of Year For the Year ----------------- ---------------------------------- Maximum Weighted Amount Monthly Weighted Average Outstanding Average Average Interest During Amount Interest Description Balance Rate the Year Outstanding Rate - ----------- ------- -------- ----------- ----------- -------- Weyerhaeuser December 26, 1993 Commercial paper $378,727 3.3% $957,491 $509,477 3.2% Short-term note payable 115,000 3.2% 115,000 8,846 3.2% Reclassified to long-term debt (493,727) -------- $ - ======== December 27, 1992 Commercial paper $898,565 3.6% $898,565 $298,412 3.6% Reclassified to long-term debt (898,565) -------- $ - ======== December 29, 1991 Commercial paper $394,751 5.1% $993,760 $643,465 6.2% Reclassified to long-term debt (394,751) -------- $ - ========
25 Weyerhaeuser Company and Subsidiaries Schedule IX - Short-term Borrowings - Continued - -----------------------------------------------------------------------------
End of Year For the Year ---------------- ------------------------------- Maximum Weighted Amount Monthly Weighted Average Outstanding Average Average Interest During Amount Interest Description Balance Rate the Year Outstanding Rate - ----------- ------- -------- ----------- ----------- -------- Real Estate and Financial Services December 26, 1993 Commercial paper $647,406 3.3% $1,138,568 $873,583 3.2% Payable to banks and others 258,538 .8% 258,538 187,657 .9% Reclassified to long-term debt (616,906) -------- $289,038 ======== December 27, 1992 Commercial paper $771,580 3.5% $1,020,618 $850,413 3.8% Payable to banks and others 220,351 1.1% 220,351 188,402 1.1% Reclassified to long-term debt (771,580) -------- $220,351 ======== December 29, 1991 Commercial paper $948,340 5.1% $1,203,253 $1,054,294 6.1% Payable to banks and others 220,971 1.1% 220,971 116,314 2.0% Reclassified to long-term debt (948,340) -------- $220,971 ========
26 Weyerhaeuser Company and Subsidiaries Schedule X - Supplementary Income Statement Information For the three years ended December 26, 1993 Dollar amounts in thousands - -----------------------------------------------------------------------------
Weyerhaeuser 1993 1992 1991 --------- ---------- ---------- Charged directly to costs and expenses: Maintenance and repairs $ 664,463 $ 584,350 $ 605,639 ========== ========== ========== Taxes, other than payroll and income taxes: Real estate and personal property $ 100,244 $ 88,031 $ 86,349 Other 36,653 33,762 33,934 ---------- ---------- ---------- $ 136,897 $ 121,793 $ 120,283 ========== ========== ========== Real Estate and Financial Services 1993 1992 1991 ---------- ---------- ---------- Charged directly to costs and expenses: Maintenance and repairs $ 12,035 $ 12,260 $ 12,571 ========== ========== ========== Taxes, other than payroll and income taxes $ 9,191 $ 11,700 $ 9,838 ========== =========== ========== Advertising $ 16,988 $ 15,933 $ 16,463 ========== =========== ========== Amortization of intangible assets $ 27,057 $ 42,025 $ 42,562 ========== =========== ==========
27 Weyerhaeuser Company and Subsidiaries Signatures - ----------------------------------------------------------------------------- Pursuant to the requirements of Section 13 or 15(d) 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 on March 11, 1994. Weyerhaeuser Company /s/ John W. Creighton, Jr. -------------------------- John W. Creighton, Jr. President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities indicated on March 11, 1994. /s/ John W. Creighton, Jr. - ------------------------------ John W. Creighton, Jr. President, Principal Executive Officer and Director - ------------------------------ George H. Weyerhaeuser Chairman of the Board and Director /s/ William C. Stivers - ------------------------------ William C. Stivers Principal Financial Officer /s/ Kenneth J. Stancato - ------------------------------ Kenneth J. Stancato Principal Accounting Officer /s/ William Clapp - ------------------------------ William H. Clapp Director /s/ W. John Driscoll - ------------------------------ W. John Driscoll Director - ------------------------------ Don C. Frisbee Director /s/ P. M. Hawley - ------------------------------ Philip M. Hawley Director /s/ E. B. Ingram - ------------------------------ E. Bronson Ingram Director /s/ John Kieckhefer - ------------------------------ John I. Kieckhefer Director /s/ William D. Ruckelshaus - ------------------------------ William D. Ruckelshaus Director /s/ Richard H. Sinkfield - ------------------------------ Richard H. Sinkfield Director 28 Weyerhaeuser Company and Subsidiaries Exhibit 22 Subsidiaries of the Registrant - -----------------------------------------------------------------------------
Percentage State or Ownership of Country of Immediate Name Incorporation Parent ---- ------------- ------------ Columbia & Cowlitz Railway Company Washington 100% DeQueen and Eastern Railroad Company Arkansas 100 Energy Holding Company Delaware 100 Fisher Lumber Company California 100 Golden Triangle Railroad Mississippi 100 Green Arrow Motor Express Company Delaware 100 J.H. Hamlen & Son, Inc. Arkansas 100 Mississippi & Skuna Valley Railroad Company Mississippi 100 Mountain Tree Farm Company Washington 50 North Pacific Paper Corporation Delaware 80 Norpac Sales Corporation Guam 100 Pacific Veneer, Ltd. Washington 90 Shemin Nurseries, Inc. Delaware 100 Texas, Oklahoma & Eastern Railroad Company Oklahoma 100 Westwood Shipping Lines, Inc. Washington 100 Weycomp Claims Management Service, Inc. Texas 100 Weyerhaeuser Financial Services, Inc. Delaware 100 CMO Finance Corp. Nevada 100 Mortgage Securities II Corporation Nevada 100 Mortgage Securities III Corporation Nevada 100 R4 Participant Corporation Nevada 100 ver Bes' Insurance Co. Vermont 100 de Bes' Insurance Ltd. Bermuda 100 Weyerhaeuser Mortgage Company California 100 The Giddings Mortgage Investment Company California 100 Gudig Abfall, Inc. California 100 Trimark Development Company California 100 Westwood Associates California 100 Westwood Insurance Agency California 100 WMC Finance Corp. I California 100 Woodland Hills Properties-W., Inc Nevada 100 Placer Business Center, Inc. California 100 Terman Properties, Inc. California 100 R. J. Plaza II, Inc. Nevada 100 WFS (Republic), Inc. Nevada 100 Abfall Finance Corp. California 100 Brookview, Inc. Nevada 100 Kachura Finance Corp. California 100 McGNT Finance Corp. California 100 RFS Finance Corp. California 100
29 Weyerhaeuser Company and Subsidiaries Exhibit 22 Subsidiaries of the Registrant - Continued - ------------------------------------------------------------------------------
Percentage State or Ownership of Country of Immediate Name Incorporation Parent ---- ------------- ------------ Weyerhaeuser International, Inc. Washington 100% Sensor & Simulation Products International AB Sweden 100 Weyerhaeuser Canada Ltd. Canada 100 Big River Lumber Corporation Canada 100 Saskatoon Chemicals, Ltd. Canada 100 Weyerhaeuser China, Ltd. Washington 100 Weyerhaeuser (Far East) Limited Hong Kong 100 Weyerhaeuser Japan Ltd. Japan & Delaware 100 Weyerhaeuser Korea, Ltd. Korea 100 Weyerhaeuser, S.A. Panama 100 Weyerhaeuser International Sales Corporation Guam 100 Weyerhaeuser (Mexico) Inc. Washington 100 Weyerhaeuser Midwest, Inc. Washington 100 Weyerhaeuser Overseas Finance Company Delaware 100 Weyerhaeuser Real Estate Company Washington 100 The Babcock Company Florida 100 Centennial Homes, Inc. Texas 100 Pardee Construction Company California 100 Marmont Realty Company California 100 Pardee Construction Company of Nevada Nevada 100 Pardee Investment Company California 100 Parvada, Inc. Nevada 100 The Quadrant Corporation Washington 100 Quadrant Real Estate Services, Inc. Washington 100 Scarborough Corporation New Jersey 100 Scarborough Constructors, Inc. Florida 100 Trendmaker, Inc. Texas 100 Westminster Homes, Inc. North Carolina 100 Weyerhaeuser Real Estate Company of Nevada Nevada 100 Weyerhaeuser Capital Corp. N.V. Netherlands Antilles 100 Weyerhaeuser Venture Company Nevada 100 Las Positas Land Co. California 100 Weyerhaeuser Realty Investors, Inc. Washington 100 Winchester Homes, Inc. Delaware 100
30 Weyerhaeuser Company and Subsidiaries Exhibit 24 Consents of Experts and Counsel - ------------------------------------------------------------------------------ Consent of Independent Public Accountants As independent public accountants, we hereby consent to the incorporation of our reports included and incorporated by reference in this Form 10-K, into Weyerhaeuser Company's previously filed Registration Statement No. 33-59974 on Form S-3 and Nos. 2-61042, 2-81463, 33-25928, 33-24385, 33-24979, 33-31622, 33-32605, 33-34460, 33-41414, 33-47392 and 2-88109 on Form S-8. ARTHUR ANDERSEN & CO. Seattle, Washington, March 11, 1994 31 EX-13 2 PORTIONS OF THE 1993 WEYERHAEUSER COMPANY ANNUAL REPORT Timberlands and Wood Products Timberlands and Wood Products reported operating earnings of $891 million in 1993 as compared with $515 million in 1992, a 73 percent increase. Timber-supply restrictions in the public forests of the Pacific Northwest and improving single- family home-building markets bolstered prices in the domestic market during the year. U.S. single-family housing starts reached 1.12 million in 1993 and are expected to move to the 1.2-1.3 million range in 1994. > Prices for logs and building materials were also strong in the Japanese market. Wooden-housing starts in Japan were up in 1993 over 1992 and are expected to at least hold that level in 1994. Government support to upgrade the housing stock, declining interest rates, and a desire to improve living conditions have helped keep housing starts in Japan - especially wooden starts - at a high level despite the continuing recession. > Weyerhaeuser lumber operations experienced strong markets in 1993 with the slowly improving U.S. economy, but prices were volatile due to the tight supply situation and uncertainty around the strength and pace of the recovery. Record lumber prices were set in both the first and fourth quarters. Markets were strong and prices volatile for structural panels as well. > The Engineered Fiber Products business, producer of oriented strand board, particleboard and other panels, showed strong operating performance during most of the year including significant market
N E T S A L E S 1993 1992 1991 1990 1989 ------------------------------------ (Millions of dollars) Raw materials (logs, chips and timber) $1,021 $ 872 $ 843 $ 834 $ 893 Softwood lumber 1,669 1,097 938 1,016 1,229 Softwood plywood and veneer 567 498 412 411 490 Oriented strand board, composite and other panels 623 495 383 381 424 Hardwood lumber 154 127 118 117 119 Hardwood plywood and doors 141 116 117 135 236 Treated products 84 67 65 80 95 Miscellaneous products 209 145 72 99 180 ------------------------------------ $4,468 $3,417 $2,948 $3,073 $3,666 ------------------------------------ ------------------------------------
23 improvement in composite panels after 2 1/2 years of depressed prices. The Plywood business had a good year despite being hampered by delays in receiving air quality permits for newly installed and rebuilt dryers. > The Building Materials Distribution business had another excellent year, topping last year's record sales and earnings. Low interest rates, healthy markets in residential building and repair and remodel, and focus on customer satisfaction benefited business units throughout the system. The outlook is optimistic for 1994 to be even better than 1993 as interest rates are expected to remain low, and building products demand high in both new residential and repair and remodel markets. > WOOD PRODUCTS ACCOMPLISHMENTS Major accomplishments in 1993 included a better than 30 percent improvement
S A L E S V O L U M E S 1993 1992 1991 1990 1989 --------------------------------- (Millions) Raw materials - cubic feet 547 545 538 540 587 Softwood lumber - board feet 4,230 3,440 3,269 3,417 4,223 Softwood plywood and veneer - square feet (3/8") 2,435 2,227 2,135 2,212 2,441 Composite panels - square feet (3/4") 626 590 685 641 635 Oriented strand board - square feet (3/8") 1,672 1,484 1,205 1,185 1,180 Hardboard - square feet (7/16") 140 133 114 126 133 Hardwood lumber - board feet 240 218 219 209 223 Hardwood doors (thousands) 556 514 525 697 1,146
toward 1995 companywide safety targets; start-up of the Slave Lake, Alberta, oriented strand board (OSB) mill; achievement of 107 percent of the business improvement target for the Plywood business; record production in OSB, softwood and hardwood lumber; and successful completion of modernizations of lumber mills at Philadelphia, Miss.; Dierks, Ark.; Bruce, Miss.; Drayton Valley, Alberta; and Princeton, British Columbia. > FOREST MANAGEMENT FOCUS Public attention was again focused on forest management issues in 1993, including President Clinton's forest conference held in Portland, Ore., in April. Following the conference, a list of options was prepared by the administration, and in July, one was selected. The plan would reduce federal timber harvests from certain national forests in Oregon, 24 Washington and northern California to 1.2 billion board feet annually (down from the 4-5 billion board-foot level typical of the 1980s). In December, the Clinton administration proposed to develop a new rule, authorized under Section 4(d) of the Endangered Species Act, to ease restrictions for protection of the northern spotted owl on non-federal lands. The proposal identifies federal lands as those most important to the protection of the spotted owl and envisions that private and state lands provide supplemental support to the federal lands, where necessary. Weyerhaeuser is working with the U.S. Fish and Wildlife Service to develop a habitat-conservation plan for its timberlands near Coos Bay, Ore. > TIMBERLANDS ACCOMPLISHMENTS Accomplishments for the year included substantial improvements in all regions against safety-performance goals, further Total Quality education across the business relating to "customer value propositions," the expansion of a commercial thinning program in Oregon's Willamette operations, a major salvage operation in drought- and insect- damaged fir and pine in Oregon's Klamath Falls operation, and commencement of operational pruning on Western timberlands. Timberlands Forest Councils made further headway during 1993 to ensure alignment of Forest Council goals with the overall goals and objectives of the timberlands businesses. The councils were formed in
A N N U A L P R O D U C T I O N CAPACITY 1993 1992 1991 1990 1989 --------------------------------------- (Millions) Logs - cubic feet _ 673 749 782 817 839 Softwood lumber - board feet 3,215 3,135 2,782 2,687 2,719 2,759 Softwood plywood and veneer - square feet (3/8") 1,246 1,188 1,125 966 1,076 1,069 Composite panels - square feet (3/4") 609 564 540 493 505 587 Oriented strand board - square feet (3/8") 1,440 1,443 1,234 1,208 1,156 1,121 Hardboard - square feet (7/16") 130 120 118 90 119 131 Hardwood lumber - board feet 255 221 210 196 202 212 Hardwood doors (thousands) 561 522 469 448 556 833
25 1992 to guide Weyerhaeuser's efforts, and maintain our industry leadership, into the 21st century. They focus on adapting forest management practices to meet changing environmental goals and future public expectations related to forestry. The councils operate in all geographic regions and include employees from operations, research and engineering, communications and government affairs. > After Washington's Forest Practices Board adopted a watershed analysis process to address the cumulative effects of forest practices, Weyerhaeuser became the first landowner to launch a full-scale analysis on the Tolt River watershed basin, where Weyerhaeuser is the primary landowner. This process has been widely recognized as a potential model for resolving resource-management issues. In addition, Washington's
P R I N C I P A L M A N U F A C T U R I N G F A C I L I T I E S - ------------------------------------------------------------------- Softwood lumber, plywood and veneer 35 Composite panels 6 Oriented strand board 5 Hardboard 1 Hardwood lumber 8 Hardwood doors 1
Forest Council developed a process - including training in landscape architecture - to manage the aesthetics of harvesting. > 1994 PRIORITIES Safety improvement will top the list of priorities in all timberlands and wood products businesses in 1994 and beyond. Actions designed to eliminate both work- and non-work- related injuries of employees are being implemented in all businesses, and safe work standards are being reinforced with contractors and suppliers. > Customer satisfaction and continuous improvement in business basics also remain high on the list of goals in 1994 for timberlands and wood products businesses. One of our principal strategies is empowering people to use their skills and talents to meet customers' needs, financial goals and productivity- improvement targets. 26 Pulp, Paper and Packaging Worldwide oversupply in the pulp and paper industry kept product prices depressed in 1993 - some at their lowest levels in real dollars since World War II. For the year, operating earnings of the company's pulp and paper segment were $61 million as compared with operating earnings of $251 million in 1992, a 76 percent decrease. > Recovery in prices is expected to accelerate in the coming year as the U.S. economy improves even though some weakness will continue in the European and Japanese economies. Worldwide competition will continue as a result, affecting the rate of price improvement. Devaluations of Swedish and Finnish currencies in late 1992 dramatically improved the Scandinavian producers' export cost position and, therefore, their competitiveness in Europe and the United States. Given continuing oversupply in Europe, the devaluations have led to significant penetration of the U.S. market in some paper grades. > The world pulp market was oversupplied throughout 1993, with price pressure increased by excess inventory built in the second half of 1992. Decreased prices during the year led to significant downtime for the pulp industry, including some permanent mill shutdowns. There are many indications that the bottom of the cycle has been reached and that market balance may be achieved by mid-1994.
N E T S A L E S 1993 1992 1991 1990 1989 ------------------------------------------ (Millions of dollars) Pulp $ 823 $ 711 $ 803 $ 865 $ 917 Newsprint 322 326 288 293 321 Paper 648 673 655 751 733 Paperboard and containerboard 255 321 361 366 373 Container and packaging products 1,302 1,323 1,175 1,183 1,261 Recycling 77 93 90 88 85 Chemicals 32 31 34 28 31 Personal care products _ 514 450 338 347 Miscellaneous products 120 117 147 140 147 ------------------------------------------ $3,579 $4,109 $4,003 $4,052 $4,215 ------------------------------------------ ------------------------------------------
27 Modest growth in paper-grade pulp demand is expected during 1994. > At the same time, little new chemical pulp capacity is expected to start up in 1994. A large part of the capacity that will start up in the next few years will be hardwood from the Southern Hemisphere. Current weak earnings, environmental expenditures required on existing facilities, and increasing environmental regulation related to the construction of new mills should constrain future capacity growth. > Weyerhaeuser's major mill modernizations, announced last year, will put the company in a strong competitive position in terms of product and process quality and the environmental status of our mill system. Parts of the Plymouth, N.C., modernization are scheduled to start up during 1994, including the rebuilt No. 4
S A L E S V O L U M E S 1993 1992 1991 1990 1989 -------------------------------------- (Thousands) Pulp - air-dry metric tons 1,886 1,238 1,433 1,194 1,116 Newsprint - metric tons 609 575 450 453 473 Paper - tons 990 966 869 893 849 Paperboard - tons 222 238 234 220 197 Containerboard - tons 290 318 418 444 497 Packaging - MSF 31,386 29,414 26,525 25,022 24,560 Recycling - tons 851 778 735 648 633 Personal care products - standard cases _ 17,017 14,929 11,471 12,181
uncoated free-sheet paper machine. The rebuilt machine will increase capacity, product quality and mix capabilities, while lowering costs. Also part of the Plymouth project is a rebuild of the No. 1 linerboard machine, which will be the first Weyerhaeuser linerboard machine to use 100 percent recycled furnish. > Containerboard prices deteriorated during 1993, forcing many of our competitors to take market- related containerboard mill downtime. Board and box prices began to strengthen in the fourth quarter, continuing into early 1994. The outlook is for improved business conditions in 1994 as we continue to concentrate on the development of key customer partnerships. > Major factors affecting the Fine Paper business in 1993 were industry overcapacity in the uncoated free-sheet market and the slow pace of 28 U.S. economic growth. The inflow of European-made, particularly Scandinavian, lightweight coated into the U.S. market in the fourth quarter came just as this paper grade was beginning to show some price recovery. The outlook for the Fine Paper business is strengthening demand and slowly improving prices in 1994. > U.S. economic weakness and the Japanese recession resulted in no growth in U.S. newsprint consumption and declines in Japanese consumption during 1993. The decline in Japan was driven by lack of print advertising due to the poor economic climate. There was excess newsprint supply in both markets and newsprint prices continued to decline in North America. Scandinavian imports found their way into eastern U.S. newsprint markets as a result of the devaluations. The outlook is for continued difficult economic conditions and slow domestic recovery in 1994. > Weyerhaeuser's Recycling business experienced price erosion due to the general weakness in the pulp and paper industry during 1993. Market demand for high grades dropped dramatically as a result of pulp price declines. In addition, as a result of Germany's recycling subsidy program and the oversupply situation throughout Europe, European exports became a factor in Far East markets. The 1994 outlook for the business is for
A N N U A L P R O D U C T I O N CAPACITY 1993 1992 1991 1990 1989 ------------------------------------------- (Thousands) Pulp - air-dry metric tons 2,130 2,096 1,506 1,527 1,386 1,275 Newsprint - metric tons 675 618 588 461 459 486 Paper - tons 1,015 1,007 971 889 900 919 Paperboard - tons 220 217 229 238 217 221 Containerboard - tons 2,360 2,269 2,240 2,224 2,171 2,168 Packaging - MSF 36,800 32,795 31,040 27,583 26,146 25,764 Recycling - tons _ 1,847 1,692 1,415 1,204 1,163 Personal care products - standard cases _ _ 16,743 14,902 11,471 12,019
29 significant volume growth with three new facilities coming on line. New de-ink market pulp mills starting up in late 1994 and 1995 will strengthen markets for high-grade recyclable fiber. > The bleached paperboard industry experienced significant oversupply for most of 1993 and will continue to do so in 1994. However, the liquid packaging segment of the market has remained relatively firm. > ACCOMPLISHMENTS In spite of very difficult market challenges, the pulp and paper businesses continued on an improvement track aimed at positioning for the eventual recovery. > The Pulp business accomplished a smooth integration of the Oglethorpe, Ga., and Grande Prairie, Alberta, people and facilities into its system. Containerboard Packaging received major awards of new business from General Mills, Quaker Oats Company and Philip Morris Companies. > The Fine Paper business achieved safety
P R I N C I P A L M A N U F A C T U R I N G F A C I L I T I E S - -------------------------------------------------------------------- Pulp 8 Newsprint 1 Paper 5 Paperboard 1 Containerboard 5 Packaging 36 Recycling 21 Chemicals 7
performance above averages for the industry as well as Weyerhaeuser's major mill average. The business produced in excess of 1 million tons for the first time in 1993 and was one of only a few industry competitors taking no downtime for lack of orders. > The Newsprint business received "#1 North American Supplier" recognition by Gannett Supply Corporation and increased its western U.S. market share. The business also used Total Quality Management tools to improve facility production capability to expansion target levels. > The Recycling business continued its growth path, reaching a collection volume of 1.8 million tons of wastepaper. The business acquired CC&C Recycling in Des Moines, Iowa, and reduced fiber costs to Weyerhaeuser mills between 1992 and 1993 by over $5 million. 30 Real Estate and Financial Services Weyerhaeuser Real Estate Company (WRECO) earned $18.3 million in 1993, a 42 percent improvement over 1992 earnings of $12.9 million. The company benefited from improving housing market conditions in all regions except Southern California. Consumer confidence and mortgage rates improved during the year, driving a healthy increase in national starts of both single- and multi-family housing. With interest rates continuing at low levels, U.S. single-family housing starts are expected to strengthen further in 1994. > In 1993 WRECO's Winchester Homes subsidiary was awarded one of the first "National Housing Quality Awards," ever given by the National Association of Home Builders and Professional Builder magazine. > In 1994 WRECO will be emphasizing additional employee education and training in Total Quality principles and processes. Improved safety practices by employees and contractors, as in all other Weyerhaeuser businesses, are receiving special attention. > Weyerhaeuser Financial Services, Inc. (WFS), whose principal subsidiaries are Weyerhaeuser Mortgage Company and Mortgage Securities Corporations, earned $76.4 million in 1993 as compared with $67.6 million in 1992. Earnings for WFS in 1993 included the gain on the sale, completed in April 1993, of GNA Corporation to General Electric Capital Corporation. Propelled by continued low interest rates and business expansions, Weyerhaeuser
V O L U M E S S O L D 1993 1992 1991 1990 1989 --------------------------------- Single-family units(1) 3,879 3,917 4,410 5,113 5,858 Multi-family units(1) 1,141 60 317 358 412 Lots(1) 1,372 2,762 1,138 3,008 2,729 Commercial space (thousand square feet) 88 142 269 235 945 (1)Includes one-half of joint-venture sales.
31 Mortgage Company (WMC) set a new record for single-family loan originations in 1993 of $4.4 billion. Falling interest rates during the year spurred further refinance activity as the company's planned expansion came on line. Strong housing sales are forecast for 1994, which should help offset an expected slowdown in refinance activity. Stepped-up customer satisfaction measurement and response and continuous focus on productivity improvement are planned for the year.
N E T S A L E S A N D R E V E N U E S - WRECO 1993 1992 1991 1990 1989 -------------------------- (Millions of dollars) Single-family units $615 $569 $591 $644 $718 Multi-family units 30 4 16 15 12 Residential lots 43 39 25 35 44 Commercial lots 41 6 17 10 27 Commercial buildings 3 5 30 23 66 Acreage 27 20 16 31 55 Other 70 47 49 53 53 -------------------------- $829 $690 $744 $811 $975 -------------------------- --------------------------
N E T S A L E S A N D R E V E N U E S - WFS 1993 1992 1991 1990 1989 ---------------------------- (Millions of dollars) Interest $110 $144 $209 $278 $383 Investment income 116 452 454 369 314 Loan origination and servicing fees 127 103 98 89 92 Premiums 14 21 19 23 21 Other revenues 34 112 82 49 41 ---------------------------- $401 $832 $862 $808 $851 ---------------------------- ----------------------------
32 Description of the Business of the Company Weyerhaeuser Company (the company) was incorporated in the state of Washington in January 1900 as Weyerhaeuser Timber Company. It is principally engaged in the growing and harvesting of timber and the manufacture, distribution and sale of forest products, real estate development and construction, and financial services. The company has 37,000 employees, of which 34,200 are employed in its timber-based businesses, and of this number, approximately 17,000 are covered by collective bargaining agreements, which generally are negotiated on a multi-year basis. Approximately 2,800 of the company's employees are involved in the activities of its real estate and financial services subsidiaries. The major markets, both domestic and foreign, in which the company sells its products are highly competitive, with numerous strong sellers competing in each. Many of the company's products also compete with substitutes for wood and wood fiber products. The real estate and financial services subsidiaries also operate in highly competitive markets, competing with numerous regional and national firms in real estate development and construction and in financial services. In 1993 the company's sales to customers outside the United States totaled $2.2 billion (including $1.8 billion of exports from the United States and Canada), or 23 percent of total consolidated sales and revenues. The company believes these sales contributed a higher proportion of aggregate operating profits (see Note 3 of Notes to Financial Statements). All sales to customers outside the United States are subject to risks related to international trade and to political, economic and other factors that vary from country to country. Principal Business Segments Timberlands and Wood Products The company owns approximately 5.5 million acres of commercial forestland in the United States (50 percent in the South and 50 percent in the Pacific Northwest), most of it highly productive and located extremely well to serve both domestic and international markets. The company has, additionally, long-term license arrangements in Canada covering approximately 17.8 million acres (of which 14 million acres are considered to be productive forestland). The combined total timber inventory on these U.S. and Canadian lands is approximately 245 million cunits (a cunit is 100 cubic feet of solid wood), of which approximately 75 percent is softwood species. The relationship between cubic measurement and the quantity of end products that may be produced from timber varies according to the species, size and quality of timber, and will change through time as the mix of these variables changes. To sustain the timber supply from its fee timberland, the company is engaged in extensive planting, suppression of non-merchantable species, precommercial and commercial thinning, fertilization and operational pruning, all of which increase the yield from its fee timberland acreage. The company's wood products businesses produce and sell softwood lumber, plywood and veneer; composite panels; oriented strand board; hardboard; hardwood lumber and plywood; doors; treated products; logs; chips and timber. These products are sold primarily through the company's own sales organizations. Building materials are sold to whole salers, retailers and industrial users. 34 Net sales (millions):
1993 1992 1991 1990 1989 ---------------------------------- Raw materials (logs, chips and timber) $1,021 $ 872 $ 843 $ 834 $ 893 Softwood lumber 1,669 1,097 938 1,016 1,229 Softwood plywood and veneer 567 498 412 411 490 Oriented strand board, composite and other panels 623 495 383 381 424 Hardwood lumber 154 127 118 117 119 Hardwood plywood and doors 141 116 117 135 236 Treated products 84 67 65 80 95 Miscellaneous products 209 145 72 99 180 --------------------------------- $4,468 $3,417 $2,948 $3,073 $3,666 --------------------------------- ---------------------------------
1993 1992 1991 1990 1989 ----------------------------- Timberlands and wood products' approximate contributions to earnings (millions): $891 $515 $155 $300 $299 ----------------------------- ----------------------------- After net restructuring charges of $152 in 1991 and $96 in 1989.
Pulp and Paper Products The company's pulp and paper products businesses include: Pulp, which manufactures chemical wood pulp for world markets; Newsprint, which manufac- tures newsprint at the company's North Pacific Paper Corporation mill and markets it to West Coast and Japanese newspaper publishers; Paper, which manufactures and markets a range of both coated and uncoated fine papers through paper merchants and printers; Containerboard Packaging, which manufactures linerboard and corrugating medium, which is primarily used in the production of corrugated shipping containers, and manufactures and markets corrugated shipping containers for industrial and agricultural packaging; Paperboard, which manufactures bleached paperboard that is used for production of liquid containers and is marketed to West Coast and Pacific Rim customers; Recycling, which operates an extensive wastepaper collection system and mar- kets it to company mills and worldwide customers; Chemicals, which produces chlorine, caustic and tall oil, which are used principally by the company's pulp and paper operations; and Personal Care Products, which manufactures disposable diapers sold under the private-label brands of many of North America's largest retailers (this business was sold in February 1993 through an initial public offering of stock). 35
Net sales (millions): 1993 1992 1991 1990 1989 ----------------------------------- Pulp $ 823 $ 711 $ 803 $ 865 $ 917 Newsprint 322 326 288 293 321 Paper 648 673 655 751 733 Paperboard and containerboard 255 321 361 366 373 Container and packaging products 1,302 1,323 1,175 1,183 1,261 Recycling 77 93 90 88 85 Chemicals 32 31 34 28 31 Personal care products _ 514 450 338 347 Miscellaneous products 120 117 147 140 147 ----------------------------------- $3,579 $4,109 $4,003 $4,052 $4,215 ----------------------------------- -----------------------------------
1993 1992 1991 1990 1989 ----------------------------- Pulp and paper products' approximate contributions to earnings (millions): $61 $251 $108 $484 $588 ----------------------------- ----------------------------- After net restructuring charges of $129 in 1991 and $80 in 1989.
Real Estate The company, through its real estate subsidiary, Weyerhaeuser Real Estate Company, is a builder/developer of for-sale housing and apartments, de- velops commercial and residential lots for sale to users and other builders, builds commercial buildings for sale to institutional investors, and is an investor in joint ventures and limited partnerships.
Net sales and revenues (millions): 1993 1992 1991 1990 1989 ----------------------------------- Single-family units $615 $569 $591 $644 $718 Multi-family units 30 4 16 15 12 Residential lots 43 39 25 35 44 Commercial lots 41 6 17 10 27 Commercial buildings 3 5 30 23 66 Acreage 27 20 16 31 55 Other 70 47 49 53 53 ----------------------------------- $829 $690 $744 $811 $975 ----------------------------------- -----------------------------------
1993 1992 1991 1990 1989 ------------------------------ Real estate's approximate contributions to earnings (millions): $ 18 $ 13 $(175) $ 35 $ 26 ------------------------------ ------------------------------ After restructuring charges of $155 in 1991 and $89 in 1989.
36 Financial Services The company, through its financial services subsidiary, Weyerhaeuser Financial Services, Inc., is involved in a range of financial services. The principal operating unit is Weyerhaeuser Mortgage Company, which has origination offices in 12 states, with a servicing portfolio of $8.4 bil lion covering approximately 112,000 loans throughout the country. Mortgages are resold in the secondary market through mortgage-backed securities to financial institutions and investors. Through its insurance services organization, it also offers a broad line of property, life and disability insurances. GNA Corporation, a subsidiary that specialized in the sale of life insurance annuities and mutual funds to the customers of financial institutions, was sold in April 1993. Republic Federal Savings & Loan Association, a subsidiary that operated in Southern California through 1991, was dissolved in 1992.
Net sales and revenues (millions): 1993 1992 1991 1990 1989 ---------------------------- Premiums $ 14 $ 21 $ 19 $ 23 $ 21 Interest 110 144 209 278 383 Investment income 116 452 454 369 314 Loan origination and servicing fees 127 103 98 89 92 Other revenues 34 112 82 49 41 ---------------------------- $401 $832 $862 $808 $851 ---------------------------- ----------------------------
1993 1992 1991 1990 1989 ------------------------------- Financial services' approximate contributions to earnings (millions):$ 76 $ 68 $ 60 $ 47 $(67) ------------------------------- ------------------------------- After restructuring charges of $73 in 1989.
Corporate and Other Corporate and other includes nursery and garden supply products, which are sold primarily to retailers and landscapers by the company's sales force; health and beauty aids; marine transportation; and miscellaneous corporate activities. With one exception, all of the nursery and garden supply operations and the health and beauty aids business have been sold.
Net sales (millions): 1993 1992 1991 1990 1989 ----------------------------- Nursery and garden supply and health and beauty aids $ 60 $ 62 $ 74 $232 $316 Corporate and miscellaneous activities 209 158 142 91 159 ----------------------------- $269 $220 $216 $323 $475 ----------------------------- -----------------------------
Approximate contributions to earnings (millions): 1993 1992 1991 1990 1989 -------------------------------- Nursery and garden supply and health and beauty aids $ (1) $ (1) $ 1 $ _ $ (60) Corporate and miscellaneous activities (46) (106) (149) (115) (131) --------------------------------- $(47) $(107) $(148) $(115) $(191) --------------------------------- --------------------------------- After net restructuring charges of $9 in 1991 and $112 in 1989.
37 Environmental Matters In 1990 the northern spotted owl was listed as a threatened species under the Endangered Species Act (ESA). In 1992, the marbled murrelet was listed as a threatened species under the ESA. Certain Snake River salmon runs have been listed as threatened or endangered under the ESA. Petitions have been filed to list certain Pacific Northwest coastal salmon runs as threatened or endangered under the ESA. A consequence of these listings has been, and a possible consequence of future listings may be, reductions in the sale and harvest of timber on federal timberlands in the Pacific Northwest. Uncertainty regarding the provision of habitat for threatened and endangered species on non-federal timberlands has resulted, and may in the future result, in restrictions on timber harvest on some non-federal timberlands in the Pacific Northwest, including some timberlands of the company. The listing of the red-cockaded woodpecker as an endangered species under the ESA has had some impact on the harvest of public and private timber in the southeastern United States, but has had little impact on the company's timberlands. Forest practice acts in some of the states in which the company has timber increasingly impact present or future harvests and forest management activities. In addition, the statutory requirements with respect to the preservation of wetlands and threatened or endangered species may affect future harvest and forest management activities on some of the company's Southern timberlands. In July 1993, the Clinton administration announced its plan with respect to management of federal timberlands in the Pacific Northwest. If implemented, this plan will reduce timber sales from certain federal lands in western Washington, western Oregon and northern California by about 75 percent from harvest levels in the 1980s to approximately 1.2 billion board feet per year. If implemented, this reduction in federal timber harvest will seriously reduce log supplies to many independent sawmills that have been important suppliers of wood chips to the company's pulp and paper mills in Washington and Oregon. The company anticipates that there will be alternate sources of wood chips or other fiber to supply its operations. The administration also stated in its proposal that reduced timber harvest on federal lands will allow modifications to the current federal requirements for protection of northern spotted owls on private lands. On December 10, 1993, the administration announced that it was taking the first steps in the regulatory process to ease those harvest restrictions. The company believes that the regulatory changes might ultimately allow it to harvest fee timber in some areas where it has not been operating because of uncertainties regarding the provision of habitat for the northern spotted owl. Whether those regulatory changes will be implemented is uncertain. If those regulatory changes are not implemented, the company may not harvest some timber that it otherwise plans to harvest in 1994. Because those regulatory changes may not be implemented, and in order to avoid existing uncertainty under the ESA, the company is seeking approval from the United States Fish and Wildlife Service for a permit and associated Habitat Conservation Plan (HCP) with respect to northern spotted owls on a portion of its Oregon coastal timberlands. That HCP would establish a protocol for the harvest of timber and the protection of northern spotted owls on those timberlands. The company believes the most effective way to manage its timberlands for the growth and harvest of timber and the protection of wildlife and fish habitat is to develop a comprehensive plan for the management of all the resources on those timberlands. Accordingly, the company may attempt to develop HCPs for other parts of its Pacific Northwest timberlands that would address the protection of wildlife and fish habitat for both listed and non-listed species. 38 The combination of the forest management and harvest restrictions and impacts described in the preceding four paragraphs has increased operating costs, resulted in increases in the value of timber and logs from the company's Pacific Northwest timberlands, and contributed to an increase in prices for wood products. The company does not know whether these effects will continue. If wood products prices remain at their present levels, there may be an increase in substitution of other products for lumber and plywood. The company does not believe that the restrictions and impacts described in the above paragraphs have had, or in 1994 or 1995 will have, a significant effect on the company's total harvest of timber, although they may have such an effect in the future. In addition to the foregoing, the company is subject to federal, state or provincial, and local air, water and land pollution control, solid and hazardous waste management, disposal and remediation laws and regulations in all areas in which it has operations, and to market demands with respect to chemical content of some products and use of recycled fiber. Compliance with these laws, regulations and demands usually involves capital expenditures as well as operating costs. The company cannot easily quantify future amounts of capital expenditures required to comply with these laws, regulations and demands, or the impact on operating costs, because in some instances compliance standards have not been developed or have not become final or definitive. In addition, compliance with standards frequently serves other purposes such as extension of facility life, increase in capacity, changes in raw material requirements, or increase in economic value of assets or products. While it is difficult to isolate the environmental component of most manufacturing capital projects, the company estimates that capital expenditures for environmental compliance were approximately 8 percent of total capital expenditures in 1992 and 1993, and based on its understanding of current regulatory requirements, the company expects this percentage to increase to approximately 11 percent in 1994 and to range from 13 to 14 percent of total capital expenditures in 1995. The company is involved in the environmental remediation of numerous sites, including 37 Superfund sites where the company has been named as a potentially responsible party. Some of the sites are on property presently or formerly owned by the company where the company has the sole obligation to remediate the site or shares that obligation with one or more parties, and others are third-party sites involving several parties who have a joint and several obligation to remediate the site. The company's liability with respect to these sites ranges from insignificant at some to substantial at others, depending on the quantity, toxicity and nature of materials deposited by the company at the site and, with respect to some sites, the number and economic viability of the other responsible parties. The company spent $24 million in 1992 and $57 million in 1993, and expects to spend $45 million in 1994 on environmental remediation of these sites. It is the company's policy to accrue for environmental remediation costs when it is determined that it is probable that such an obligation exists and the amount of the obligation can be reasonably estimated. Based on currently available information and analysis, the company believes that it is reasonably possible that costs associated with all identified sites may exceed current accruals by amounts that may prove insignificant or that could range, in the aggregate, up to approximately $140 million over several years. This estimate of the upper end of the range of reasonably possible additional costs is much less certain than the estimates upon which accruals are currently based and is based on assumptions less favorable to the company among the range of reasonably possible outcomes. 39 The company has completed a review of all its wood products facilities for compliance with the Prevention of Significant Deterioration (PSD) regulations under the Clean Air Act and has disclosed PSD compliance issues to appropriate state agencies and the Environmental Protection Agency (EPA) and is negotiating compliance settlements with those agencies. Based on its understanding of the current status of discussions, the company expects to spend $30-40 million of capital for required installations of emission- control equipment at its wood products facilities during 1994-95. The company anticipates completing a similar review of all its pulp and paper facilities for PSD compliance in 1994. A new regulation under Title 5 of the Clean Air Act will require additional operating permits at many of the company's manufacturing operations. Although significant work is required to prepare the permit applications in 1994 and 1995, the company anticipates that it will be able to obtain the necessary permits. As a result of advances in measurement technology, minute amounts of dioxin have been detected in wastewater effluent, sludges and pulp from bleached kraft pulp mills, including certain of the company's mills. The company has changed operating procedures, allocated capital, and made very substantial progress in reducing dioxin in the mills' sludge, pulp, effluent and ultimate product. The EPA has published proposed regulations, known as the "cluster rules," which would establish maximum achievable control technology standards for non-combustion sources under the Clean Air Act, and the development of revised wastewater effluent limitations under the Clean Water Act. The company's operations are well positioned to meet the proposed limits for dioxin. However, if the cluster rules are adopted as proposed, they will require the company to commit additional capital to further reduce air emissions and wastewater discharges by 1999. Preliminary estimates of that additional capital range as high as $400 million, which may further increase the annual percentage of the company's total capital expenditures devoted to environmental compliance, although that is not anticipated prior to 1996. 40 Financial Review 1993 versus 1992 Sales and revenues in 1993 were $9.5 billion, an increase of 3 percent over 1992. Net earnings were $579 million, or $2.83 per common share, up from 1992 net earnings of $372 million, or $1.83 per common share. Included in 1993 net earnings are after-tax gains of: -$52 million, or $.25 per common share, from the extinguishment of debt, which is reported as an extraordinary item. -$44 million, or $.22 per common share, from the sale of the infant diaper business. -$36 million, or $.18 per common share, from the sale of GNA Corporation, a wholly owned subsidiary. And a charge of $20 million, or $.10 per common share, to reflect the new 1993 federal corporate tax rate in the company's deferred and current tax accounts. This charge consists of $.08 per common share due to the effect of the higher rate on the accumulated temporary differences at December 27, 1992, and $.02 per common share related to the current year. The net sales and revenues and related costs and expenses of real estate and financial services are substantially less in 1993 as compared with 1992 as a result of the sale of GNA Corporation. During 1993 the company refinanced a significant amount of debt, which resulted in a short-term increase in interest expense. The increase in capitalized interest over the prior year coincides with expanded activity in the company's major capital projects. The significant decrease in financial services interest expense is due to the liquidation of Republic Federal Savings & Loan Association during 1992 and the sale of GNA Corporation in early 1993. In addition, accelerated prepayments caused by mortgage refinancings significantly reduced collateralized mortgage obligation bonds. Significant items in relation to net earnings included in other income for 1993 were a $70 million pretax gain on the disposal of the company's investment in the infant diaper business through a public offering in a new company, Paragon Trade Brands, Inc., and the real estate and financial services pretax gain of $42 million on the sale of GNA Corporation. The timberlands and wood products operating earnings for 1993 were $891 million, an increase of 73 percent over the $515 million recorded in 1992. Prices for logs and lumber continue to exceed 1992 levels due to increasing demand for housing construction materials and raw material supply shortages resulting from reduced harvests in the Western public forests. The pulp and paper products segment had a $61 million operating profit in 1993, significantly below the $251 million posted in 1992. Prices for most of the products in this segment continue to be at levels well below the previous year. The personal care products business included in this segment was divested in the first quarter of 1993. The real estate and financial services segments had operating earnings of $94 million in 1993 compared with $81 million in 1992. As a part of the GNA Corporation sales transaction, the company assumed $225 million of GNA debt. 1992 versus 1991 Sales and revenues in 1992 were $9.3 billion, up 6 percent from 1991. Net earnings were $372 million, or $1.83 per common share, compared with a 1991 loss of $162 million, or $.80 per common share. 1991 results reflected an after-tax special-items charge to earnings of $344 million. 1992 research and development expenses decreased 24 percent from 1991 as a result of the implementation of certain of the company's restructuring and business improvement plans. Interest expense incurred for 1992 was down by $68 million, or 14 percent, primarily due to the dissolution of the company's savings and loan operations in Southern California during the year. Significant changes in other income in 1992, compared with 1991, included a $25 million partial settlement accrued in 1992 with respect to a lawsuit for the refund of federal income taxes, and earnings of $2 million in the company's real estate joint-venture and limited- partnership activities in 1992, after losses of $17 million in 1991, attributable to the restructuring or sale of a number of these investments. 41 In 1992 the company purchased two pulp mills, three sawmills, timberlands in Georgia, and a forest management license in Alberta, Canada, from Procter & Gamble. The 1992 timberlands and wood products operating earnings were $515 million, compared with $155 million in 1991, which included a restructuring charge of $152 million. This segment posted near-record earnings in the year with strong raw material and converted wood products prices. The curtailment of wood supply from public lands in the western United States, along with increased demand generated by the slowly improving U.S. economy, exerted upward pressure on the value of wood products in both the domestic and export markets. Pulp and paper products operating earnings were $251 million for 1992, compared with $108 million in the previous year, which included a restructuring charge of $129 million. While pulp pricing showed some temporary strength due to the mid-year strike in the company's Canadian pulp mills, the overall trend from a year ago was down. Newsprint and paper suffered continued weak prices throughout 1992. Real estate posted operating earnings of $13 million in 1992 after recording a loss of $175 million in 1991, which included a $155 million restructuring charge. Financial services operating earnings were $68 million in 1992, up 13 percent from the 1991 results of $60 million. While this segment benefited from lower interest rates for most of the year, earnings were affected as a result of reduced investment returns. The dissolution of the company's wholly owned subsidiary Republic Federal Savings & Loan Association, which operated primarily in Southern California, was completed during 1992. 1991 versus 1990 Sales and revenues in 1991 were $8.8 billion, down 3 percent from 1990. The net loss was $162 million, or $.80 per common share, down from 1990 earnings of $394 million, or $1.87 per common share. The 1991 net loss included an after- tax special-items charge of $344 million, or $1.70 per common share. (See Notes 1, 2 and 24 of Notes to Financial Statements.) The $344 million special-items charge included: -Implementation of two accounting pronouncements relating to postretirement benefits and income taxes. The net effect of the two pronouncements was a charge of $61 million, or $.30 per common share. -A special charge to operations of $283 million, or $1.40 per common share, related to the following:
Millions ------------------- Pretax After-tax ------------------- Weyerhaeuser: Sharper contractions in public timber supply in the Northwest, causing early closure of some manufacturing plants and contributing to losses from contractual obligations $ 95 $ 60 Modernization and/or closure of certain facilities with environmental and operational deficiencies to achieve updated business improvement plans 92 58 Severance and outplacement costs associated with closures and realignment of the company's support functions 21 13 Environmental remediation costs (including costs associated with "Superfund" solid waste disposal sites, company-owned facilities requiring remediation or removal of underground storage tanks, and sites previously owned by the company where it has retained an environ- mental cleanup liability) 82 52 ------------------- 290 183 ------------------- Real estate and financial services: Losses associated with real estate land values and partnerships that were affected by the U.S. recession, which was longer and deeper than expected 155 100 ------------------- $445 $283 ------------------- -------------------
42 Timberlands and wood products operating earnings for 1991 were $155 million compared with $300 million in 1990. The decrease from 1990 in operating earnings was due to charges of $152 million for special items. The improvement in operations, exclusive of special-item charges, was due primarily to improvement in manufacturing efficiency and strength in wood products prices reflecting concern about the impact, on raw materials supply, of the restrictions on the harvest of public timber in the Northwest and was accomplished in spite of an economic climate that included the lowest rate of U.S. housing starts since World War II and Japanese housing starts down 20 percent from 1990. Pulp and paper products operating earnings for 1991 were $108 million, down 78 percent from 1990. Earnings in all of the company's major pulp and paper products businesses were severely impacted by significant price erosion during the year and by a $129 million charge for special items. In pulp, paper and containerboard, real prices reached their lowest levels since the mid-'80s. Real prices for uncoated paper and newsprint were at their lowest points in 20 years. Real estate lost $175 million in 1991 including a $155 million charge for special items, down from the $35 million earned in 1990. In addition to the special items, 1991 results were heavily impacted by the low rate of U.S. housing starts and the capital-constrained banking industry, which made it very difficult for home builders to obtain project financing and to sell finished commercial projects. The company's continuing real estate operations are engaged primarily in single-family home construction. The operating profits from real estate's continuing operations were more than offset by losses and reserves relating to discontinued operations, joint ventures and limited partnerships. Financial services operating earnings for 1991 were $60 million, up 28 percent from 1990. Financial services businesses, consisted principally of GNA Corporation, which specialized in the sale of annuities and mutual funds to the customers of financial institutions, and Weyerhaeuser Mortgage Company, a multi-state residential mortgage originator and servicer, posted record profits for the year. Capital Resources and Liquidity The company's financial position in 1993 remained strong as it generated $982 million of cash flow from operations before changes in working capital. Cash was also generated from the sale of mortgage-backed securities. Capital expenditures amounted to $967 million during the year and are currently expected to approximate $1.1 billion in 1994; however, the expenditures could be increased or decreased as a consequence of future economic conditions. The company had approximately $600 million in capital expenditures com- mitted on major projects at year-end 1993, representing con- struction activities at its Longview, Wash., and Plymouth, N.C., pulp and paper facilities. Cash flow from operations before changes in working capital by business segment (millions):
Business Segment 1993 1992 1991 --------------------- Timberlands and wood products $1,052 $ 668 $ 473 Pulp and paper products 326 513 487 Real estate 29 42 28 Financial services 12 80 69 Corporate and other (437) (264) (221) -------------------- $ 982 $1,039 $ 836 -------------------- --------------------
Recent capital spending, including acquisitions, has been in the following areas (millions):
Business Segment 1993 1992 1991 ---------------------- Timberlands and wood products $241 $ 246 $162 Pulp and paper products 652 932 472 Corporate and other 74 28 29 ---------------------- $967 $1,206 $663 ---------------------- ----------------------
43 As a matter of policy, the company is committed to the maintenance of a sound, conservative capital structure. This commitment is based upon two considerations: the obligation to protect the under- lying interests of its shareholders and lenders, and the desire to have access, at all times, to major financial markets. The important elements of the policy governing the company's capital structure are as follows: -To view separately the capital structures of Weyerhaeuser Company, Weyerhaeuser Real Estate Company and Weyerhaeuser Financial Services, Inc., given the very different nature of their assets and business activities. The amount of debt and equity associated with the capital structure of each will reflect the basic earnings capacity, real value and unique liquidity characteristics of the assets dedicated to that business. -The combination of maturing short-term debt and the structure of long-term debt will be managed judiciously to minimize liquidity risk. Long-term debt maturities are shown in Notes 16 and 17 of Notes to Financial Statements. To ensure its ability to meet future commitments, Weyerhaeuser Company, Weyerhaeuser Real Estate Company and Weyerhaeuser Mortgage Company, a subsidiary of Weyerhaeuser Financial Services, Inc., have established at year-end 1993 unused bank lines of credit in the maximum aggregate sum of approximately $2.2 billion. None of the entities is a guarantor of the borrowings of the others under any of these credit facilities. Cash dividends paid on common shares amounted to $246 million in 1993. Although common share dividends have exceeded our target payout ratio in recent years, it is the company's intent, over time, to pay dividends to its common shareholders in a range of 35 to 45 percent of common share earnings. During the year, the Accounting and Reporting Standards Committee, comprised of four outside directors, reviewed with the company's management and with its independent public accountants the scope and results of the company's internal and external audit activities and the adequacy of the company's internal accounting controls. The committee also reviewed current and emerging accounting and reporting requirements and practices affecting the company. Report of Independent Public Accountants To the shareholders of Weyerhaeuser Company: We have audited the accompanying consolidated balance sheet of Weyerhaeuser Company (a Washington corporation) and subsidiaries as of December 26, 1993, and December 27, 1992, and the related consolidated statements of earnings, cash flows and shareholders' interest for each of the three years in the period ended December 26, 1993. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Weyerhaeuser Company and subsidiaries as of December 26, 1993, and December 27, 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 26, 1993, in conformity with generally accepted accounting principles. As explained in Note 1 of Notes to Financial Statements, effective December 31, 1990, the company changed its method of accounting for income taxes and postretirement benefits other than pensions. Seattle, Washington, February 8, 1994. ARTHUR ANDERSEN & CO. 44 Consolidated Statement of Earnings
For the three years in the period ended December 26, 1993 Dollar amounts in thousands except per-share figures 1993 1992 1991 -------------------------------------- Net sales and revenues: Weyerhaeuser $8,314,368 $7,743,738 $7,165,844 Real estate and financial services 1,230,424 1,522,731 1,606,769 -------------------------------------- Net sales and revenues 9,544,792 9,266,469 8,772,613 -------------------------------------- Costs and expenses: Weyerhaeuser: Costs of products sold 6,251,612 5,919,199 5,581,388 Depreciation, amortization and fee stumpage 443,832 446,751 446,282 Selling, general and administrative expenses 592,586 591,845 572,605 Research and development expenses 44,456 42,981 56,257 Taxes other than payroll and income taxes 136,897 121,793 120,283 Restructuring and other charges (Note 2) _ _ 290,000 -------------------------------------- 7,469,383 7,122,569 7,066,815 -------------------------------------- Real estate and financial services: Costs and operating expenses 835,400 979,478 1,026,546 Depreciation and amortization 43,099 55,995 55,040 Selling, general and administrative expenses 206,174 252,337 232,055 Taxes other than payroll and income taxes 9,191 11,700 9,838 Restructuring and other charges (Note 2) _ _ 155,000 -------------------------------------- 1,093,864 1,299,510 1,478,479 -------------------------------------- Total costs and expenses 8,563,247 8,422,079 8,545,294 -------------------------------------- Operating income 981,545 844,390 227,319 Interest expense and other: Weyerhaeuser: Interest expense incurred 214,813 189,648 197,337 Less interest capitalized 23,179 12,845 18,950 Other income (expense), net (Note 4) 60,339 35,050 9,977 Real estate and financial services: Interest expense incurred 172,955 220,677 280,889 Less interest capitalized (Note 17) 77,646 72,561 67,903 Other income (expense), net (Note 4) 53,512 8,828 (23,771) ------------------------------------- Earnings (loss) before income taxes, extraordinary item and effect of accounting changes 808,453 563,349 (177,848) Income taxes before extraordinary item and effect of accounting changes (Note 5 ) 281,168 191,300 (76,900) ------------------------------------- Earnings (loss) before extraordinary item and effect of accounting changes 527,285 372,049 (100,948) Extraordinary item, net of applicable taxes of $33,732 (Note 6) 52,052 _ _ Effect of accounting changes (Note 1) _ _ (61,000) ------------------------------------- Net earnings (loss) $ 579,337 $ 372,049 $(161,948) ------------------------------------- ------------------------------------- Per common share (Note 1): Earnings (loss) before extraordinary item and effect of accounting changes $ 2.58 $ 1.83 $ (.50) Extraordinary item (Note 6) .25 _ _ Effect of accounting changes _ _ (.30) -------------------------------------- Net earnings (loss) $ 2.83 $ 1.83 $ (.80) -------------------------------------- -------------------------------------- Dividends paid $ 1.20 $ 1.20 $ 1.20 -------------------------------------- -------------------------------------- See notes on pages 52 through 77.
45 Consolidated Balance Sheet
Dollar amounts in thousands December 26, 1993 December 27, 1992 ------------------------------------- Assets Weyerhaeuser Current assets: Cash and short-term investments, including restricted deposits of $14,351 and $23,706 $ 73,257 $ 40,985 Receivables, less allowances of $9,798 and $9,614 782,507 769,910 Inventories (Note 9) 762,471 723,904 Prepaid expenses 280,511 168,079 -------------------------- Total current assets 1,898,746 1,702,878 Property and equipment (Note 10) 5,606,072 5,612,220 Construction in progress 666,177 322,376 Timber and timberlands at cost, less fee stumpage charged to disposals 604,773 591,610 Other assets and deferred charges 191,946 208,948 -------------------------- Total assets 8,967,714 8,438,032 -------------------------- Real estate and financial services Cash and short-term investments, including restricted deposits of $34,042 and $38,432 86,598 483,340 Receivables, less discounts and allowances of $6,589 and $5,868 135,347 172,897 Mortgage and construction notes and mortgage loans receivable (Note 12) 830,569 857,963 Investments (Note 13) 60,355 5,232,428 Mortgage-backed certificates and restricted deposits (Note 14) 349,757 614,252 Real estate in process of development, less reserves of $29,783 and $76,920 (Note 11) 738,597 617,087 Land being processed for development, less reserves of $19,132 and $28,053 699,611 711,129 Deferred acquisition costs 39,751 295,314 Other assets 730,154 735,961 ------------------------- Total assets 3,670,739 9,720,371 ------------------------- $12,638,453 $18,158,403 ------------------------- ------------------------- See notes on pages 52 through 77.
46
Dollar amounts in thousands December 26, 1993 December 27, 1992 ------------------------------------ Liabilities and shareholders' interest Weyerhaeuser Current liabilities: Notes payable $ 4,624 $ 14,684 Current maturities of senior long-term debt 14,522 113,607 Accounts payable 492,040 386,561 Accrued liabilities (Note 15) 565,002 623,163 --------------------------- Total current liabilities 1,076,188 1,138,015 Senior long-term debt (Note 16) 2,997,890 2,658,867 Convertible subordinated debentures (Note 18) _ 193,035 Limited recourse income debenture (Note 18) _ 187,963 Deferred income taxes (Note 5) 904,332 760,876 Deferred pension and other liabilities (Notes 7 and 8) 535,162 511,839 Minority interest in subsidiaries 109,314 93,476 Commitments (Note 21) -------------------------- Total liabilities 5,622,886 5,544,071 -------------------------- Real estate and financial services Notes and commercial paper 289,038 280,351 Future annuity and contract reserves _ 5,529,700 Collateralized mortgage obligation bonds (Note 14) 307,416 543,157 Long-term debt (Note 17) 1,997,146 2,195,715 Other liabilities 455,871 419,420 Commitments (Note 21) -------------------------- Total liabilities 3,049,471 8,968,343 -------------------------- Shareholders' interest (Note 23): Common shares: authorized 400,000,000 shares, issued 206,072,890 shares, $1.25 par value 257,591 257,591 Other capital 411,096 404,250 Cumulative translation adjustment (73,363) (36,481) Retained earnings 3,391,217 3,057,702 Treasury common shares, at cost: 983,952 and 1,795,595 (20,445) (37,073) -------------------------- Total shareholders' interest 3,966,096 3,645,989 -------------------------- $12,638,453 $18,158,403 -------------------------- --------------------------
47 Consolidated Statement of Cash Flows
Consolidated ---------------------------------- For the three years in the period ended December 26, 1993 Dollar amounts in thousands 1993 1992 1991 ---------------------------------- Cash flows provided by operations: Net earnings (loss) $ 579,337 $ 372,049 $(161,948) Non-cash charges to income: Depreciation, amortization and fee stumpage 486,931 502,746 501,322 Deferred income taxes, net 93,033 125,300 (43,000) Contributions to employee investment plans 2,462 31,577 25,420 Extraordinary item, including current tax benefit (90,419) _ _ Deferred income taxes on extraordinary item 38,367 _ _ Effect of accounting change _ _ 198,000 Effect of accounting changes-deferred taxes _ _ (137,000) Restructuring and other charges _ _ 445,000 Changes in working capital: Receivables (93,196) (191,078) 20,060 Inventories, prepaid expenses, real estate and land (246,356) (174,519) 3,183 Mortgages held for sale 22,758 164,686 168,875 Other liabilities 177,629 289,041 372,262 (Gain) loss on disposition of assets (16,352) 9,868 7,776 Gain on sales of businesses (111,750) (2,742) _ Other 18,826 (17,222) (67,451) -------------------------------- Net cash provided by operations 861,270 1,109,706 1,332,499 -------------------------------- Cash flows from investing in the business: Property and equipment (926,899) (574,715) (647,887) Timber and timberlands (40,582) (41,436) (15,484) Mortgage and investment securities acquired (776,424) (4,556,619) (1,765,701) Acquisition of businesses _ (589,363) _ Proceeds from sale of: Property and equipment 53,710 55,362 51,259 Businesses 615,784 _ 22,668 Mortgage and investment securities 509,982 4,276,056 1,280,131 Other (25,393) (18,215) (50,227) --------------------------------- Net cash flows from investing in the business (589,822) (1,448,930) (1,125,241) --------------------------------- Cash flows from financing activities: Sale of debentures, notes and CMO bonds 1,290,889 782,116 847,002 Sale of industrial revenue bonds 135,400 151,840 40,900 Savings deposits, net _ (618,467) (142,465) Notes and commercial paper borrowings, net (659,939) 421,435 (445,004) Sales of receivables _ _ 64,417 Proceeds from issuance of investment contracts 60,943 430,566 566,469 Cash dividends on common shares (245,822) (243,965) (241,814) Intercompany cash dividends on common shares _ _ _ Payments on debentures, notes, bank credit agreements, income debenture, capital leases and CMO bonds (1,243,094) (692,725) (502,554) Exercise of stock options 20,571 27,060 4,438 Other 5,134 (10,231) 2,003 ---------------------------------- Net cash flows from financing activities (635,918) 247,629 193,392 ---------------------------------- Net increase (decrease) in cash and short-term investments (364,470) (91,595) 400,650 Cash and short-term investments at beginning of year 524,325 615,920 215,270 ---------------------------------- Cash and short-term investments at end of year $ 159,855 $ 524,325 $ 615,920 ---------------------------------- ---------------------------------- Cash paid (received) during the year for: Interest, net of amount capitalized $ 306,050 $ 331,832 $ 376,154 ---------------------------------- ---------------------------------- Income taxes $ 158,002 $ (17,900) $ 73,250 ---------------------------------- ---------------------------------- See notes on pages 52 through 77.
48
Real Estate and Weyerhaeuser Company Financial Services ------------------------------ ------------------------------ 1993 1992 1991 1993 1992 1991 --------------------------------------------------------------------------- $ 511,594 $ 332,043 $ (89,185) $ 67,743 $ 40,006 $ (72,763) 443,832 446,751 446,282 43,099 55,995 55,040 107,591 97,192 (6,530) (14,558) 28,108 (36,470) 2,462 31,577 25,420 _ _ _ (90,419) _ _ _ _ _ 38,367 _ _ _ _ _ _ _ 187,000 _ _ 11,000 _ _ (122,505) _ _ (14,495) _ _ 290,000 _ _ 155,000 (55,155) (120,186) 5,606 (38,041) (70,892) 14,454 (164,475) (31,551) (30,341) (81,881) (142,968) 33,524 _ _ _ 22,758 164,686 168,875 61,971 (78,407) 66,676 115,658 367,448 305,586 (2,741) 9,509 8,476 (13,611) 359 (700) (70,199) _ _ (41,551) (2,742) _ 34,325 7,789 27,514 (15,499) (25,011) (94,965) - ---------------------------------------------------------------------------- 817,153 694,717 808,413 44,117 414,989 524,086 - ---------------------------------------------------------------------------- (907,155) (564,200) (636,884) (19,744) (10,515) (11,003) (40,582) (41,436) (15,484) _ _ _ _ _ _ (776,424) (4,556,619) (1,765,701) _ (589,363) _ _ _ _ 26,954 52,034 47,703 26,756 3,328 3,556 204,100 _ 22,668 411,684 _ _ _ _ _ 509,982 4,276,056 1,280,131 (5,675) 58,942 (6,460) (19,718) (77,157) (43,767) - ----------------------------------------------------------------------------- (722,358) (1,084,023) (588,457) 132,536 (364,907) (536,784) - ----------------------------------------------------------------------------- 930,882 117,451 633,755 360,007 664,665 213,247 135,400 151,840 40,900 _ _ _ _ _ _ _ (618,467) (142,465) (519,837) 503,813 (585,773) (140,102) (82,378) 140,769 _ _ 64,417 _ _ _ _ _ _ 60,943 430,566 566,469 (245,822) (243,965) (241,814) _ _ _ 435,000 22,300 23,000 (435,000) (22,300) (23,000) (823,851) (222,783) (78,654) (419,243) (469,942) (423,900) 20,571 27,060 4,438 _ _ _ 5,134 (10,231) (675) _ _ 2,678 - ---------------------------------------------------------------------------- (62,523) 345,485 (140,406) (573,395) (97,856) 333,798 - ---------------------------------------------------------------------------- 32,272 (43,821) 79,550 (396,742) (47,774) 321,100 40,985 84,806 5,256 483,340 531,114 210,014 - ---------------------------------------------------------------------------- $ 73,257 $ 40,985 $ 84,806 $ 86,598 $ 483,340 $ 531,114 - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- $ 203,618 $ 181,630 $ 160,157 $ 102,432 $ 150,202 $ 215,997 - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- $ 161,236 $ (10,138) $ 26,056 $ (3,234) $ (7,762) $ 47,194 - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- 49
Consolidated Statement of Shareholders' Interest
Number of Common Shares Outstanding ---------------------- For the three years in the period ended December 26, 1993 Issued Treasury ---------------------- Balance at December 30, 1990 206,072,890 4,938,461 Net loss _ _ Cash dividends: Common - $1.20 a share _ _ Translation adjustment _ _ Stock options exercised _ (199,080) Contributions to employee investment plans _ (946,124) Purchases of treasury common shares _ 22,563 Other transactions, net _ (1,449) ---------------------- Balance at December 29, 1991 206,072,890 3,814,371 Net earnings _ _ Cash dividends: Common - $1.20 a share _ _ Translation adjustment _ _ Stock options exercised _ (1,096,140) Contributions to employee investment plans _ (919,535) Other transactions, net _ (3,101) ---------------------- Balance at December 27, 1992 206,072,890 1,795,595 Net earnings _ _ Cash dividends: Common - $1.20 a share _ _ Translation adjustment _ _ Stock options exercised _ (744,206) Contributions to employee investment plans _ (59,367) Other transactions, net _ (8,070) ---------------------- Balance at December 26, 1993 206,072,890 983,952 ---------------------- ---------------------- See notes on pages 52 through 77.
50
Dollar Amounts in Thousands - ----------------------------------------------------------------------------- Cumulative Treasury Total Common Other Capital Translation Retained Common Shareholders' Shares Common Adjustment Earnings Shares Interest - ----------------------------------------------------------------------------- $ 257,591 $ 380,975 $ (6,373) $3,333,380 $(101,769) $3,863,804 _ _ _ (161,948) _ (161,948) _ _ _ (241,814) _ (241,814) _ _ (80) _ _ (80) _ 334 _ _ 4,104 4,438 _ 5,914 _ _ 19,506 25,420 _ _ _ _ (511) (511) _ 29 _ _ 30 59 - ----------------------------------------------------------------------------- 257,591 387,252 (6,453) 2,929,618 (78,640) 3,489,368 _ _ _ 372,049 _ 372,049 _ _ _ (243,965) _ (243,965) _ _ (30,028) _ _ (30,028) _ 4,501 _ _ 22,559 27,060 _ 12,603 _ _ 18,974 31,577 _ (106) _ _ 34 (72) - ----------------------------------------------------------------------------- 257,591 404,250 (36,481) 3,057,702 (37,073) 3,645,989 _ _ _ 579,337 _ 579,337 _ _ _ (245,822) _ (245,822) _ _ (36,882) _ _ (36,882) _ 5,138 _ _ 15,433 20,571 _ 1,236 _ _ 1,226 2,462 _ 472 _ _ (31) 441 - ----------------------------------------------------------------------------- $ 257,591 $ 411,096 $ (73,363) $3,391,217 $(20,445) $3,966,096 - ----------------------------------------------------------------------------- - -----------------------------------------------------------------------------
51 Notes to Financial Statements For the three years in the period ended December 26, 1993. (Dollar amounts in thousands except per-share figures.) NOTE 1: Summary of Significant Accounting and Reporting Policies Consolidation The consolidated financial statements include the accounts of Weyerhaeuser Company and all of its majority-owned domestic and foreign subsidiaries. Significant intercompany transactions and accounts are eliminated. Certain of the consolidated financial state- ments and notes to financial statements are pre- sented in two groupings: (1) Weyerhaeuser Company (Weyerhaeuser, or the company), which is principally engaged in the growing and harvesting of timber and the manufacture, distribution and sale of forest products, and (2) Real estate and financial services, which includes Weyerhaeuser Real Estate Company (WRECO), which is involved in real estate development and construction, and Weyerhaeuser Financial Services, Inc. (WFS), whose principal subsidiaries are Weyerhaeuser Mortgage Company (WMC) and Mortgage Securities Corporations. Republic Federal Savings & Loan Association (RFS&LA), a sub sidiary of WFS, was dissolved in 1992, and GNA Corporation, a subsidiary of WFS, was sold in April 1993. Net Earnings (Loss) Per Common Share Net earnings (loss) per common share are based on the weighted average number of common shares outstanding during the respective periods. Average common equivalent shares (stock options) outstand- ing have not been included, as the computation would not be dilutive. Weighted average common shares outstanding were 204,866,000, 203,373,000 and 201,578,000 for the years ended December 26, 1993, December 27, 1992, and December 29, 1991, respectively. Fully diluted earnings-per-share amounts are not applicable because the effect of the conversion of the stock options is not dilutive. Accounting Changes During the fourth quarter of 1991, the company implemented, effective with the first quarter of 1991, Statements of Financial Accounting Standards (SFAS) No. 96, "Accounting for Income Taxes," and No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The effect of the implementation of SFAS No. 96 was an increase in net earnings of $64,000 ($.32 per common share). The effect of the implementation of SFAS No. 106 for the company's U.S. operations was a charge to net earnings of $198,000 less related tax effect of $73,000, or $125,000 ($.62 per common share). SFAS No. 106 is expected to be implemented for the company's wholly owned subsidiary Weyerhaeuser Canada Ltd. (WCL) in the first quarter of 1995. The company believes that the future implementation of this pronouncement will not have a significant impact on the company's results of operations or its financial position. In February 1992, the Financial Accounting Standards Board (FASB) issued SFAS No. 109, "Accounting for Income Taxes," superseding SFAS No. 96, but reaffirming the use of the liability method. The company reviewed the provisions of SFAS No. 109 and determined that it did not require any significant adjustments to the deferred tax accounts previously reported under SFAS No. 96. Effective with the beginning of the 1992 fiscal year, the company is determining its income tax accounts in accordance with SFAS No. 109. In November 1992, the FASB issued SFAS No. 112, "Employers' Accounting for Postemploy- ment Benefits," to be effective for fiscal years begin- ning after December 15, 1993. The company believes that the future implementation of this pronouncement will not have a significant impact on the company's results of operations or its financial position. Inventories Inventories are stated at the lower of cost or market. Cost includes labor, materials and production overhead. The last- in, first-out (LIFO) method is used to cost the majority of domestic raw materials, in process and finished goods inventories; either the first-in, first-out (FIFO) or average cost method is used to cost all other inventories. Had the FIFO method 52 been used to cost all inventories, the amounts at which product inventories are stated would have been $238,560 and $203,859 greater at December 26, 1993, and December 27, 1992, respectively. Property and Equipment The company's property accounts are maintained on an individual asset basis. Betterments and replacements of major units are capitalized. Maintenance, repairs and minor replacements are expensed. Depreciation is provided generally on the straight-line or unit-of-production methods at rates based on estimated service lives. Amortization of logging railroads and truck roads is provided generally as timber is harvested and is based upon rates determined with reference to the volume of timber estimated to be removed over such facilities. The cost and related depreciation of property sold or retired is removed from the property and allowance for depreciation accounts and the gain or loss is recorded. Timber and Timberlands Timber and timberlands are carried at cost less fee stumpage charged to disposals. Fee stumpage is the cost of standing timber and is charged to fee timber disposals as fee timber is harvested, lost as the result of casualty or sold. Stumpage rates are determined with reference to the cost of timber and the related volume of timber estimated to be recoverable. Timber carrying costs are expensed as incurred. Income Taxes Under SFAS Nos. 96 and 109, deferred income taxes are provided to reflect temporary differences between the financial and tax bases of assets and lia- bilities using presently enacted tax rates and laws. Pension Plans The company has pension plans covering most of its employees. The U.S. plan covering salaried employees provides pension benefits based on the employee's highest monthly earnings for five consecutive years during the final 10 years before retirement. Plans covering hourly employees generally provide benefits of stated amounts for each year of service. Contributions to U.S. plans are based on funding standards established by the Employee Retirement Income Security Act of 1974 (ERISA). Postretirement Benefits Other Than Pensions In addition to providing pension benefits, the company provides certain health care and life insurance benefits for some retired employees and accrues the expected future cost of these benefits for its current eligible retirees and some employees. All of the company's salaried employees and some hourly employees may become eligible for these benefits when they retire. Cash and Short-Term Investments For purposes of cash flow and fair value reporting (see Note 19), short-term investments with original maturities of 90 days or less are considered as cash equivalents. Short-term investments are stated at cost, which approximates market. Foreign Exchange Contracts The company enters into foreign exchange contracts as a hedge for foreign accounts receivable. Market value gains and losses are recognized and offset against foreign exchange gains or losses on the foreign receivables. Reclassifications Certain reclassifications have been made to conform prior years' data to the current format. Weyerhaeuser Real Estate Company WRECO recognizes income from the sales of single-family housing units when construction has been completed, required down payments received and title has passed to the customer. Income from the sales of multi-family, commercial properties, developed lots and undeveloped land is recognized when required down payments are received and other income recognition criteria are satisfied. Real estate is stated at the lower of cost or net realizable value. The determination of net realizable value is based on WRECO's plans for its property and its financial ability to carry out such plans. Changes in future market demand, interest rates and company plans may affect net realizable value. Land, land development and construction costs, including capitalized carrying costs, are accumulated and allocated to individual units in proportion to relative sales value. 53 Weyerhaeuser Financial Services Weyerhaeuser Mortgage Company and its subsidiaries are primarily engaged in the mortgage banking industry and also offer insurance services. -Mortgage notes held for sale are stated at the lower of cost or market, which is computed by the aggregate method (unrealized losses are offset by unrealized gains). Hedging transactions are entered into to protect the inventory value from increases in interest rates. Hedge positions are also used to protect the pipeline of loan applications in process from increases in interest rates. Hedging gains and losses realized during the commitment and warehousing period are deferred to the extent of unrealized gains on the related mortgage loans held for sale. -The costs associated with purchasing mortgage servicing rights are deferred. Excess service fees result from loan sales in which WMC retains the loan servicing rights and are based on the present value of future servicing revenue less a normal servicing fee, based upon the estimated remaining life of the loans sold. The Mortgage Securities Corporations were formed for the limited purpose of issuing collateralized mortgage obligation bonds (CMO bonds) secured by Government National Mortgage Association and Federal National Mortgage Association certificates. The CMO bonds are the sole obligation of the issuer, and neither the company nor any affiliated company has guaranteed or is otherwise obligated with respect to the CMO bonds. -The mortgage-backed certificates are carried at par value adjusted for any unamortized discount or premium. These discounts or premiums are amortized using a method that approximates the effective interest method over the estimated life of the underlying mortgage loans. -CMO bonds are carried at unamortized cost. Discounts and premiums are amortized using a method that approximates the effective interest method over their estimated life. In March 1992, Republic Federal Savings and Loan Association, which was a federally chartered savings and loan institution that operated primarily in Southern California, sold the remainder of its branches, ceased accepting deposits as a federally chartered savings and loan institution, and filed an application with the Office of Thrift Supervision to undergo a voluntary dissolution, which was approved in the fourth quarter of 1992. During its operation: -Interest income was recorded on the accrual method; however, interest was not accrued on loans that were more than 90 days contractually delinquent and on certain other loans that management felt may not be recoverable. -U.S. government and other securities were carried at amortized cost. Gains or losses were recognized upon realization. -Discounts on loans purchased were amortized into income over the expected average loan lives. In April 1993, WFS completed the sale of GNA Corporation. As a part of that transaction, Weyerhaeuser assumed $225 million of outstanding GNA debt. GNA Corporation and its life insurance subsidiaries provided annuities, insurance and securi- ties marketed through financial institutions. During its operation: -Payments received on investment and limited payment contracts were recorded directly as deposits. -Investment income was recorded when earned. -Investments in bonds were stated at amortized cost; mortgage loans and other investments were carried at cost. -The liability for future annuity and contract reserves on single premium deferred annuities and single premium whole life policies was the contract holder's account value. The reserve for single premium immediate annuity benefits was the present value of such benefits. 54 NOTE 2: Restructuring and Other Charges In the 1991 fourth quarter, the company recorded pretax restructuring and other charges against earnings of $445,000, which was necessitated by the following factors:
Millions ------------------- Pretax After-tax ------------------- Weyerhaeuser: Sharper contractions in public timber supply in the Northwest, causing early closure of some manufacturing plants and contributing to losses from contractual obligations $ 95 $ 60 Modernization and/or closure of certain facilities with environmental and operational deficiencies to achieve updated business improvement plans 92 58 Severance and outplacement costs associated with closures and realignment of the company's support functions 21 13 Environmental remediation costs (including costs associated with "Superfund" solid waste disposal sites, company-owned facilities requiring remediation or removal of underground storage tanks, and sites previously owned by the company where it has retained an environ- mental cleanup liability) 82 52 --------------- 290 183 --------------- Real estate and financial services: Losses associated with real estate land values and partnerships that were affected by the U.S. recession, which was longer and deeper than expected 155 100 --------------- $445 $283 --------------- ---------------
NOTE 3: Foreign Operations and Export Sales The following net assets, net sales and net earnings, related to operations outside the United States, principally Canada, are included in the company's consolidated financial statements:
December 26, 1993 December 27,1992 December 29, 1991 ---------------------------------------------------- Net assets: Working capital $100,419 $ 111,593 $105,484 Timber-cutting rights 1,551 2,296 2,494 Property and equipment, net 852,963 870,581 726,645 Other assets 36,419 36,076 46,930 ------------------------------------------- 991,352 1,020,546 881,553 Other liabilities (231,865) (417,197) (441,671) ------------------------------------------- Net assets $759,487 $ 603,349 $439,882 ------------------------------------------- -------------------------------------------
1993 1992 1991 ------------------------------------------- Net sales $971,937 $875,215 $830,569 Net earnings (loss) 115,793 16,727 (40,808)
55 The company is engaged in the sale of products for export from the United States. These sales consist principally of pulp, newsprint, paperboard, containerboard, logs, lumber and wood chips to Japan; pulp, containerboard, lumber and plywood to Europe; and logs to China and Korea. The fol- lowing table compares the company's export sales from the United States to customers in Japan and elsewhere with its total net sales and revenues.
1993 1992 1991 --------------------------------- Export sales: Customers in Japan $ 952,000 $ 912,000 $ 887,000 Customers outside Japan 493,000 589,000 663,000 ---------------------------------- Total export sales $1,445,000 $1,501,000 $1,550,000 ---------------------------------- ---------------------------------- Total net sales and revenues $9,545,000 $9,266,000 $8,773,000 ---------------------------------- ----------------------------------
NOTE 4: Other Income (Expense), Net Other income (expense), net, is an aggregation of non- operating income and expense items, both recurring and occasional, and as a result, fluctuates from period to period. No individual income or (expense) item is significant in relationship to net earnings (loss) other than:
1993 1992 1991 ---------------------------------- Weyerhaeuser: Interest income $ 7,248 $36,368 $ 18,553 Loss on abandonments (9,597) (9,867) (12,369) Gain on sale of capital assets 12,338 2,307 3,943 Gain on sale of business 70,199 _ _ Real estate and financial services: Interest income 4,647 4,870 4,603 Gain on sale of businesses 41,551 2,742 _ Joint venture and limited partnership earnings (losses) (1,379) 1,916 (17,170)
NOTE 5: Income Taxes Earnings (losses) before income taxes, extraordinary item and accounting changes are comprised of the following:
1993 1992 1991 ----------------------------------- Domestic earnings (losses) $738,508 $537,354 $(109,752) Foreign earnings (losses) 69,945 25,995 (68,096) ------------------------------------ $808,453 $563,349 $(177,848) ------------------------------------ ------------------------------------
56 Provisions for income taxes include the following:
1993 1992 1991 ------------------------------------ Federal: Current $144,935 $ 46,800 $ (23,100) Deferred 81,700 105,400 (29,700) ------------------------------------- 226,635 152,200 (52,800) ------------------------------------- State: Current 16,500 15,500 3,600 Deferred 10,500 9,500 (3,800) ------------------------------------- 27,000 25,000 (200) ------------------------------------- Foreign: Current 26,700 3,700 (14,400) Deferred 833 10,400 (9,500) ------------------------------------- 27,533 14,100 (23,900) ------------------------------------- Income taxes before extraordinary item and accounting changes 281,168 191,300 (76,900) ------------------------------------- Income taxes apportionable to extraordinary item: Current (4,635) _ _ Deferred 38,367 _ _ ------------------------------------- 33,732 _ _ ------------------------------------- Deferred income taxes applicable to the cumulative effect of accounting changes: SFAS No. 96 _ _ (64,000) SFAS No. 106 _ _ (73,000) ------------------------------------ _ _ (137,000) ------------------------------------ $314,900 $191,300 $(213,900) ------------------------------------ ------------------------------------
The corporate income tax rate was increased from 34 percent to 35 percent, retroactive to January 1, 1993, by legislation enacted during the third quarter of 1993. This change in tax law increased income taxes in 1993 by $15,400 due to the effect of the higher tax rate on the accumulated temporary differences at December 27, 1992, and $4,500 due to the effect of adjusting the annual effective tax rate used in prior quarters. A reconciliation between income (losses) taxed at the federal statutory tax rate and the company's tax provision before the extraordinary item and accounting changes follows:
1993 1992 1991 ------------------------------ Statutory tax on income (loss) before extraordinary item and accounting changes $282,959 $191,539 $(60,468) State income taxes, net of federal tax benefit 22,017 19,812 (1,300) Foreign sales corporations (18,550) (19,566) (17,834) Partial settlement - lawsuit _ (9,900) _ Tax rate change - SFAS No. 109 15,400 _ _ All other, net (20,658) 9,415 2,702 ------------------------------ Income taxes before extraordinary item and accounting changes $281,168 $191,300 $(76,900) ------------------------------ ------------------------------
57 The deferred tax (liabilities) assets are comprised of the following:
December 26, 1993 December 27, 1992 ------------------------------------- Depreciation $ (998,207) $ (878,415) Depletion (86,265) (79,153) Capitalized interest and taxes - real estate development (76,014) (73,111) Other (126,471) (140,442) ---------------------------------- Total deferred tax (liabilities) (1,286,957) (1,171,121) ---------------------------------- Pension and retiree health care 118,311 111,633 Restructure reserves 80,354 127,496 Alternative minimum tax credit carryforward 69,619 33,709 Other 209,318 213,112 ---------------------------------- Total deferred tax assets 477,602 485,950 ---------------------------------- $ (809,355) $ (685,171) ---------------------------------- ----------------------------------
As of December 26, 1993, the company has avail- able approximately $70 million of alternative minimum tax credit carryover, which does not expire, and $7 million of investment tax credit carryover in Canada, expiring as follows: $1 million in 1997, $4 million in 1998, and $2 million in 2003. The company intends to reinvest undistributed earnings of certain foreign subsidiaries; therefore, no U.S. taxes have been provided. These earnings totaled approximately $318 million at the end of 1993. While it is not practicable to determine the income tax liability that would result from re patriation, it is estimated that withholding taxes payable upon repatriation would approximate $32 million. NOTE 6: Extraordinary Item In 1993 the company realized a net gain of $52,052 ($85,784 less related tax effect of $33,732) as a result of extinguishing certain debt obligations. NOTE 7: Pension Plans Net annual pension cost includes the following components:
1993 1992 1991 ------------------------------ Service cost-benefits earned during the period $38,563 $ 33,745 $ 27,947 Interest cost on projected benefit obligation 92,688 86,295 78,457 Actual return on plan assets (279,563) (123,178) (236,943) Net amortization and deferrals 165,494 16,727 143,942 Pension expense due to sales, closures and SFAS No. 88 (1,302) _ _ ------------------------------ $ 15,880 $ 13,589 $ 13,403 ------------------------------ ------------------------------
58 The assumptions used were as follows:
1993 1992 1991 ---------------------------- Discount rate 7.5% 8.5% 8.75% Rate of increase in compensation levels 4.5% 6.0% 6.0% Expected long-term rate of return on plan assets 11.5% 11.5% 11.5%
The following table sets forth the plans' funded status and amounts recognized in the company's consolidated balance sheet for its U.S. and Canadian pension plans:
December 26, 1993 -------------------------------------- Assets Accumulated Exceed Benefits Accumulated Exceed Benefits Assets Total -------------------------------------- Accumulated benefit obligation: Vested $ 1,122,684 $ 20,672 $ 1,143,356 Non-vested 24,694 340 25,034 -------------------------------------- $ 1,147,378 $ 21,012 $ 1,168,390 -------------------------------------- -------------------------------------- Projected benefit obligation 1,270,151 21,542 1,291,693 Fair value of plan assets (1,292,344) (17,755) (1,310,099) Unrecognized prior service cost (39,271) (2,794) (42,065) Unrecognized net gain 105,695 2,643 108,338 Unrecognized net transition asset 42,272 (2,158) 40,114 Additional liability _ 276 276 -------------------------------------- Accrued pension cost $ 86,503 $ 1,754 $ 88,257 -------------------------------------- --------------------------------------
December 27, 1992 --------------------------------------- Assets Accumulated Exceed Benefits Accumulated Exceed Benefits Assets Total --------------------------------------- Accumulated benefit obligation: Vested $ 680,729 $ 258,839 $ 939,568 Non-vested 16,236 2,071 18,307 --------------------------------------- $ 696,965 $ 260,910 $ 957,875 --------------------------------------- --------------------------------------- Projected benefit obligation $ 834,204 $ 261,681 $1,095,885 Fair value of plan assets (848,599) (242,145) (1,090,744) Unrecognized prior service cost (10,640) (12,241) (22,881) Unrecognized net gain 42,191 12,336 54,527 Unrecognized net transition asset 50,189 (367) 49,822 Additional liability _ 2,859 2,859 --------------------------------------- Accrued pension cost $ 67,345 $ 22,123 $ 89,468 --------------------------------------- ---------------------------------------
December 29, 1991 -------------------------------------- Assets Accumulated Exceed Benefits Accumulated Exceed Benefits Assets Total -------------------------------------- Accumulated benefit obligation: Vested $ 638,462 $ 244,606 $ 883,068 Non-vested 17,668 940 18,608 ------------------------------------- $ 656,130 $ 245,546 $ 901,676 ------------------------------------- ------------------------------------- Projected benefit obligation $ 784,053 $ 245,546 $ 1,029,599 Fair value of plan assets (764,181) (217,911) (982,092) Unrecognized prior service cost (8,547) (13,689) (22,236) Unrecognized net gain 30,450 16,980 47,430 Unrecognized net transition asset 57,362 (1,247) 56,115 Additional liability _ 5,112 5,112 ------------------------------------- Accrued pension cost $ 99,137 $ 34,791 $ 133,928 ------------------------------------- -------------------------------------
59 The assets of the U.S. and Canadian pension plans, as of December 26, 1993, consist of a highly diversified mix of marketable securities, real estate and private equity securities. Approximately 1,700 employees are covered by union- administered multi-employer pension plans to which the company makes negotiated contributions based generally on fixed amounts per hour per employee. Contributions to these plans were $5,780 in 1993, $4,606 in 1992 and $4,372 in 1991. NOTE 8: Postretirement Benefits Other Than Pensions The company sponsors defined benefit postretirement plans that provide medical and life insurance coverage as follows: -Two salaried retiree medical plans that cover sub- stantially all salaried employees who retire under the company's retirement plan and their spouses. Plan I covers those retired or eligible to retire as of January 1, 1990, and provides full health coverage. Plan II includes those salaried employees not eligible for Plan I, under which the company provides a fixed dollar amount per year of service toward the premium, with the retiree paying the remainder. The company reserves the right to revise the fixed dollar amount. -An hourly retiree medical plan that covers approximately 3,700 active hourly employees and their spouses. For some, the coverage stops at age 65, while others have lifetime coverage. In some units the retiree must pay a portion of the premium, while in others the company pays the full cost. There are approximately 1,000 retired hourly employees and their spouses currently covered under these programs. -A salaried retiree life insurance plan that starts at 80 percent of salary at retirement and reduces to six thousand dollars in 20 percent increments. Approximately 5,200 per- sons who are retired or were eligible to retire as of December 31, 1991, are subject to a different schedule. -An hourly retiree life insurance plan in which approxi- mately 11,000 active hourly employees are eligible and approximately 2,000 hourly retirees have coverage. Most of these are covered by fixed dollar amount coverage that is graded down after retirement. Some units have pay-related insurance on which the company pays the full cost. The following table sets forth the plans' combined accrued postretirement benefit costs for its U.S. operations as of December 26, 1993, December 27, 1992, and December 29, 1991:
December 26, 1993 ------------------------------------ Health Other Total ------------------------------------ Accumulated postretirement benefit obligation: Retirees $ 127,791 $ 21,945 $ 149,736 Fully eligible and other active plan participants 96,219 11,661 107,880 ----------------------------------- 224,010 33,606 257,616 Unrecognized actuarial gain/(loss) (30,371) (951) (31,322) ----------------------------------- Accrued postretirement benefit cost $ 193,639 $ 32,655 $ 226,294 ----------------------------------- -----------------------------------
December 27, 1992 ----------------------------------- Health Other Total ----------------------------------- Accumulated postretirement benefit obligation: Retirees $ 136,808 $ 21,157 $ 157,965 Fully eligible and other active plan participants 82,970 10,472 93,442 ----------------------------------- 219,778 31,629 251,407 Unrecognized actuarial gain/(loss) (32,220) 8 (32,212) ----------------------------------- Accrued postretirement benefit cost $ 187,558 $ 31,637 $ 219,195 ----------------------------------- -----------------------------------
60
December 29, 1991 ----------------------------------- Health Other Total ----------------------------------- Accumulated postretirement benefit obligation: Retirees $ 119,109 $ 18,834 $ 137,943 Fully eligible and other active plan participants 66,393 13,054 79,447 ----------------------------------- 185,502 31,888 217,390 Unrecognized actuarial gain/(loss) (10,364) (1,526) (11,890) ----------------------------------- Accrued postretirement benefit cost $ 175,138 $ 30,362 $ 205,500 ----------------------------------- -----------------------------------
Net annual postretirement benefit costs included the following components:
1993 ------------------------------ Health Other Total ------------------------------ Service cost-benefits attributed to service during the period $ 3,547 $ 626 $ 4,173 Interest cost on accumulated post- retirement benefit obligation 16,466 2,538 19,004 Amortization of loss/(gain) _ 47 47 ------------------------------ Net postretirement benefit cost $ 20,013 $ 3,211 $ 23,224 ------------------------------ ------------------------------
1992 ------------------------------ Health Other Total ------------------------------ Service cost-benefits attributed to service during the period $ 3,513 $ 584 $ 4,097 Interest cost on accumulated post- retirement benefit obligation 17,700 2,574 20,274 Amortization of loss/(gain) 1,003 (49) 954 ------------------------------ Net postretirement benefit cost $ 22,216 $ 3,109 $ 25,325 ------------------------------ ------------------------------
1991 ----------------------------- Health Other Total ----------------------------- Service cost-benefits attributed to service during the period $ 2,478 $ 659 $ 3,137 Interest cost on accumulated post- retirement benefit obligation 15,169 2,635 17,804 Amortization of loss/(gain) _ _ _ ----------------------------- Net postretirement benefit cost $ 17,647 $ 3,294 $ 20,941 ----------------------------- -----------------------------
For measurement purposes, a 12.0, 11.5 and 11.0 percent annual rate of increase in the per capita cost of covered health care benefits was assumed for 1991, 1992 and 1993, respectively; the rate is assumed to decrease by 0.5 percent annually to a level of 6.0 percent for the year 2003 and all years thereafter. The effect of a one percent increase in the assumed health care cost trend rates would increase the accumulated postretirement benefit obligation as of December 26, 1993, by 11.8 percent, and the aggregate of the service and interest cost components of net annual postretirement benefit cost for 1993 by 14.0 percent. Other assumptions used were as follows:
1993 1992 1991 ------------------------- Discount rate 7.5% 8.5% 8.5% Rate of increase in compensation levels: Salaried 4.5% 6.0% 6.0% Hourly 3.0% 3.0% 3.0%
61 NOTE 9: Inventories Inventories consist of the following:
December 26, 1993 December 27, 1992 ------------------------------------ Logs and chips $ 103,195 $ 83,563 Lumber, plywood and panels 92,488 84,247 Pulp, newsprint and paper 124,131 111,664 Containerboard, paperboard and containers 70,915 80,528 Other products 121,949 95,705 Materials and supplies 249,793 268,197 ----------------------------- $ 762,471 $ 723,904 ----------------------------- -----------------------------
NOTE 10: Property and Equipment
December 26, 1993 December 27, 1992 ------------------------------------ Property and equipment, at cost: Land $ 157,611 $ 152,632 Buildings and improvements 1,416,740 1,395,142 Machinery and equipment 7,839,070 7,768,170 Rail and truck roads and other 620,136 609,033 ------------------------------- 10,033,557 9,924,977 Less allowance for depreciation and amortization 4,427,485 4,312,757 ------------------------------- $ 5,606,072 $ 5,612,220 ------------------------------- -------------------------------
NOTE 11: Real Estate in Process of Development Real estate in process of development includes the following:
December 26, 1993 December 27, 1992 ------------------------------------ Dwelling units: Completed $ 105,777 $ 108,801 Under construction 153,734 116,265 Residential lots: Developed 71,611 88,393 Under development 184,302 138,425 Commercial lots: Developed 66,620 73,063 Under development 77,050 49,391 Commercial projects: Completed 3,005 7,578 Under construction 14,533 47,480 Acreage listed for sale 88,912 62,996 Other inventories 2,836 1,615 ---------------------------- 768,380 694,007 Less reserves 29,783 76,920 ---------------------------- $ 738,597 $ 617,087 ---------------------------- ----------------------------
62 NOTE 12: Mortgage and Construction Notes and Mortgage Loans Receivable Mortgage and construction notes and mortgage loans receivable are summarized as follows:
December 26, 1993 December 27, 1992 -------------------------------------- Mortgage notes held for sale $ 520,634 $ 475,447 Construction mortgage notes 43,732 61,069 Mortgage loans receivable: First mortgages 44,318 52,613 Second trust deeds 3,100 1,880 FHA-VA insured loans 14,014 13,361 Income property loans 224,271 272,491 Other loans, net 1,536 693 ------------------------------- 851,605 877,554 Less allowance for loan losses 21,036 19,591 ------------------------------- $ 830,569 $ 857,963 ------------------------------- -------------------------------
NOTE 13: Investments Investments are as follows:
December 26, 1993 December 27, 1992 -------------------------------------- U.S. treasury securities and obligations of U.S. government corporations and agencies $ _ $ 68,054 State and political subdivision obligations _ 8,500 Foreign government debt securities _ 6,250 Corporate securities _ 2,425,421 Mortgage-backed securities 2,940 1,655,679 Mortgage loans 41,651 1,057,361 Other 15,764 11,163 ------------------------------ $ 60,355 $ 5,232,428 ------------------------------ ------------------------------
Debt securities held as assets are as follows:
Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value ---------------------------------------------- December 26, 1993: Mortgage-backed securities $ 290,540 $ 19,543 $ (870) $ 309,213 ---------------------------------------------- ---------------------------------------------- December 27, 1992: U.S. treasury securities and obligations of U.S. government corporations and agencies $ 68,054 $ 1,706 $ (1,465) $ 68,295 State and political subdivision obligations 8,500 475 _ 8,975 Foreign government debt securities 6,250 _ (101) 6,149 Corporate securities 2,425,421 63,700 (16,875) 2,472,246 Mortgage-backed securities 2,145,036 66,263 (43,971) 2,167,328 ----------------------------------------------- $4,653,261 $ 132,144 $ (62,412) $ 4,722,993 ----------------------------------------------- -----------------------------------------------
63 Debt securities held as assets include mortgage-backed certificates, net of unamortized discounts or premiums, pledged as collateral for the CMO bonds totaling $287,600 and $489,357 at December 26, 1993, and December 27, 1992, respectively. The amortized cost and estimated market value of debt securities by contractual maturity are shown in the following table. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.
December 26, 1993 December 27, 1992 --------------------- -------------------------- Amortized Amortized Cost Fair Value Cost Fair Value ------------------------------------------------- Due in one year or less $ _ $ _ $ 85,103 $ 86,898 Due after one year through five years _ _ 1,540,361 1,582,569 Due after five years through ten years _ _ 835,729 837,584 Due after ten years _ _ 47,032 48,614 ------------------------------------------------- _ _ 2,508,225 2,555,665 Mortgage-backed securities 290,540 309,213 2,145,036 2,167,328 ------------------------------------------------- $290,540 $ 309,213 $4,653,261 $ 4,722,993 ------------------------------------------------- -------------------------------------------------
Proceeds from sales of investments in debt securities were $15,052 in 1993, $31,917 in 1992 and $34,633 in 1991. Gross gains of $1,426 in 1993, $2,973 in 1992 and $1,491 in 1991 and gross losses of $122 in 1991 were realized on those sales. NOTE 14: Mortgage-Backed Certificates and Restricted Deposits, and Collateralized Mortgage Obligation Bonds Mortgage-backed certificates and restricted deposits are as follows:
December 26, 1993 December 27, 1992 -------------------------------------- Mortgage-backed certificates, including accrued interest $ 290,545 $ 495,117 Trust deeds, including accrued interest 19,155 63,526 Restricted deposits 40,658 57,791 Unamortized discount, net (601) (2,182) ------------------------------ $ 349,757 $ 614,252 ------------------------------ ------------------------------
The mortgage-backed certificates, trust deeds and the restricted deposits are pledged as collateral for the collateralized mortgage obligation bonds. These assets are held by banks as trustees. Principal and interest collections on the certificates are used to meet the interest payments and to reduce the outstanding principal balance of the bonds. 64 Collateralized mortgage obligation bonds are as follows:
December 26, 1993 December 27, 1992 ------------------------------------ CMO bonds with maturities ranging from 2003 to 2019, weighted average interest rates are approximately 9.2% $ 318,012 $ 563,405 Unamortized discount (10,596) (20,248) ----------------------------- $ 307,416 $ 543,157 ----------------------------- -----------------------------
Bond principal payments during the next five years are: 1994 $ 68,304 1995 49,812 1996 37,013 1997 27,705 1998 20,955
The above maturities are calculated based on anticipated prepayments on the certificates. The bonds are the obligation of the issuer, and neither the company nor any affiliated company has guar- anteed or is otherwise obligated with respect to the bonds. NOTE 15: Accrued Liabilities Accrued liabilities are as follows:
December 26, 1993 December 27, 1992 ----------------------------------- Payroll - wages and salaries, incentive awards, retirement, vacation pay and severance pay $ 239,434 $ 235,052 Taxes - social security and real and personal property 58,952 53,434 Interest 66,967 48,189 Other 199,649 286,488 ---------------------------- $ 565,002 $ 623,163 ---------------------------- ----------------------------
65 NOTE 16: Senior Long-Term Debt Senior long-term debt obligations, including the current portion, are as follows:
December 26, 1993 December 27, 1992 ------------------------------------- Sinking fund debentures: 8 5/8% issued 1970 $ _ $ 25,907 8.90% issued 1974 _ 82,399 7.95% issued 1976 _ 119,840 8 3/8% debentures due 2007 150,000 150,000 7.50% debentures due 2013 250,000 _ 7.25% debentures due 2013 250,000 _ 7 1/8% debentures due 2023 250,000 _ 9 3/8% notes due 1998 150,000 150,000 9 1/4% notes due 1995 200,000 200,000 9.05% notes due 2003 200,000 200,000 9.36% notes due 1995 100,000 _ 7.28% note due 1996 40,000 _ 8.50% notes _ 25,000 Industrial revenue bonds, rates from 2.7% (variable) to 10.0% (fixed), due 1994-2028 467,085 406,240 Medium-term notes, rates from 6.43% to 8.98%, due 1996-2005 427,850 387,850 Commercial paper/credit agreements 378,727 898,565 Other 148,750 126,673 ----------------------------- 3,012,412 2,772,474 Less portion due within one year 14,522 113,607 ----------------------------- $ 2,997,890 $ 2,658,867 ----------------------------- -----------------------------
Senior long-term debt maturities during the next five years are: 1994 $ 14,522 1995 804,224 1996 119,676 1997 69,685 1998 196,063
66 At December 26, 1993, and December 27, 1992, the company's lines of credit include: -A four-year competitive advance and revolving credit facility agreement entered into in 1990 with a group of banks, which provides for borrowings of up to the total amount of $1,650,000, all of which can be availed of by the company, and $1,000,000, which can be availed of by WMC, a subsidiary of WFS. Borrowings are at LIBOR or other such interest rates as mutually agreed to between the borrower and lending banks. This credit facility agreement has been extended through November 1995. -A one-year evergreen credit commitment entered into in 1990 with a group of banks, which provides for borrowings of up to the amounts, and by the entities, as follows:
December 26, 1993 December 27, 1992 ------------------------------------ The company and: WMC and WRECO $ 215,000 $ 215,000 WMC 70,000 70,000 WRECO 20,000 20,000 WMC (only) 35,000 35,000
At December 26, 1993, and December 27, 1992, respectively, WMC had $35,000 outstanding against this commitment. -Short-term bank credit lines, which provide for borrowings of up to the total amount of $200,000, all of which can be availed of by the company and WRECO, and $150,000, which can be availed of by WMC. To the extent that these credit commitments expire more than one year after the balance sheet date and are unused, an equal amount of commercial paper is classifiable as long- term debt. Amounts so classified are shown in the tables in this and the following note. No portion of these lines has been availed of by the company, WRECO, WMC or WFS at December 26, 1993, or December 27, 1992, except as noted. In 1993, WFS completed the sale of GNA Corporation. As a part of this transaction, the com- pany assumed $225,000 of outstanding GNA debt. NOTE 17: Real Estate and Financial Services Long-Term Debt Real estate and financial services long-term debt, including the current portion, consists of the following:
December 26, 1993 December 27, 1992 ------------------------------------ Notes payable secured principally by land and lots under development; weighted average interest rates are approximately 8.9% and 8.4% $ 18,107 $ 26,948 Notes payable secured principally by multi-family projects, on a non-recourse basis; weighted average interest rates are approximately 10.0% and 10.1% 41,716 61,331 Notes payable, unsecured; weighted average interest rates are approximately 7.4% and 8.2% 957,190 716,258 Notes payable secured by first trust deeds; weighted average interest rates are approximately 9.5% and 7.3% 3,227 17,876 Bank and other borrowings, unsecured; weighted average interest rates are approximately 3.3% and 5.5% 360,000 601,722 Commercial paper/credit agreements 616,906 771,580 ----------------------------- $1,997,146 $ 2,195,715 ----------------------------- ----------------------------- Portion due within one year $ 151,998 $ 225,261 ----------------------------- -----------------------------
67 Long-term debt maturities during the next five years are: 1994 $ 151,998 1995 1,043,685 1996 120,877 1997 98,552 1998 135,773
WMC has a revolving credit agreement with a bank to provide for: (1) borrowings of up to $35,000 for three years at prime rate, LIBOR or such other rate as may be agreed upon by WMC and the banks, (2) a commitment fee based on the unused credit, and (3) conversion of the notes as of July 1, 1995, to a five-year term loan payable in equal quarterly installments. At December 26, 1993, and December 27, 1992, $30,000 and $12,000, respectively, were outstanding under the revolving credit agreement. During 1992 WFS entered into a three-year term loan facility with a group of banks that provides for: (1) borrowings of up to $295,000 at December 26, 1993, and $330,000 at December 27, 1992, at LIBOR or other such rates as may be agreed upon by WFS and the banks, and (2) a commitment fee based on the unused credit. $295,000 and $330,000 were outstanding against this facility at December 26, 1993, and December 27, 1992, respectively. WMC has short-term special credit lines that provide for borrowings of up to $265,000 at December 26, 1993, and $205,000 at December 27, 1992. Borrowings against these lines were $254,000 and $204,500 as of December 26, 1993, and December 27, 1992, respectively. In 1985 WRECO entered into an interest rate swap agreement with a major bank. Payments between the parties are calculated by reference to fixed or floating per-annum rates. Under the agreement, the company makes semi-annual payments at a rate of 10.09 percent per annum and receives from the bank a monthly payment at a rate equivalent to the 30-day commercial paper rate. The interest payments are calculated on the notional amount of $25,000. The agreement expires in November 1995. The company is exposed to credit loss in the event of non-performance by the other party to the interest rate swap agreement. However, the company does not anticipate non-performance by the counterparty. Total interest costs incurred by WRECO during the three years ended December 26, 1993, have been capitalized and will ultimately be accounted for as an element of operating costs. The company's compensating balance agreements were not significant. NOTE 18: Subordinated Debentures The 5 1/4 percent convertible subordinated debentures were issued in 1990 in exchange for the company's outstanding $2.625 convertible exchangeable preference shares. In the first quarter of 1993, the company called this issue in full and paid principal plus premium and accrued interest to those debenture holders who had not previously exercised the option to convert their debentures into common shares. The limited recourse income debenture, which was repaid in January 1993, was the obligation of Weyerhaeuser Canada Ltd. and was issued as total consideration for the purchase of a pulp mill, chemical plant and sawmill in Saskatchewan. 68 NOTE 19: Disclosure About Fair Value of Financial Instruments The fair value of the company's financial instruments, and the methods and assumptions used to estimate fair value of each class of financial instruments for which it is practicable to estimate that value, are as follows: Weyerhaeuser -Long-term debt and other liabilities - the fair value of the company's long-term debt (including WRECO and WFS) is estimated based on quoted market prices for the same issues or on the discounted value of the future cash flows expected to be paid using incremental rates of borrowing for similar liabilities. -Foreign exchange contracts - the fair value of the company's $26,500 foreign exchange contracts (see Note 22) was estimated by obtaining quotes from its currency brokers. At December 26, 1993, the fair value of these contracts was approximately $28,000. -Notes and contracts receivable - the company and WRECO estimate that the carrying value of their notes and contracts receivable approximates their fair values as of December 26, 1993, and December 27, 1992. Real Estate and Financial Services -Joint venture and partnership guarantees - WRECO has guaranteed certain borrowings of joint ventures in which it is a participant in the aggregate amount of $116,954. During the year, WRECO reduced the maximum aggregate sum available through several bank credit arrangements from $100,000 at December 27, 1992, to $30,000 at December 26, 1993. These credit arrangements were established to guarantee certain borrow- ings made by subsidiary limited partnerships. At December 26, 1993, and December 27, 1992, the amount utilized under these arrangements is $22,558 and $54,319, respectively. In addition, WRECO has entered into various other contractual obligations to fund, if certain specified events occur, $11,774 to the capital of its real estate partnerships. If funded, these commitments would increase WRECO's equity investment in partnerships and, therefore, are not subject to fair value disclosure. -Interest rate swaps - WRECO has an interest rate swap agreement whereby the interest payments under the agreement are calculated on the notional amount of $25,000 (see Note 17). The liquidation cost (which has been estimated using rates currently available for an instrument with similar terms) to WRECO as of December 26, 1993, and December 27, 1992, if the agreement was canceled, would approximate $2,753 and $4,472, respectively. -Mortgage notes held for sale - are estimated using the quoted market prices for securities backed by similar loans adjusted for differences in loan characteristics. The estimated fair value is net of related hedge instruments, which were estimated based upon quoted market prices for securities. -Construction mortgage notes and mortgage loans receivable - - are based on the discounted value of estimated future cash flows using current rates for loans with similar terms and risks. -Investments - are estimated using quoted market prices for similar securities. The fair value of mortgage loans held as investments is based on the discounted value of estimated future cash flows using current rates. -Mortgage-backed certificates and restricted deposits - the fair value of mortgage-backed certificates is estimated using the quoted market prices for securities backed by similar loans; restricted deposits are a reasonable estimate of fair value. -Notes and commercial paper - WRECO and WFS estimate that the carrying value of their notes and commercial paper approximates their fair value as of December 26, 1993, and December 27, 1992. -Future annuity and contract reserves - were the cash surrender value payable on demand. -Collateralized mortgage obligation (CMO) bonds - fair value is estimated using analysis of projected cash flows discounted at market yields. -Loans sold with recourse - the fair value is estimated based upon market spreads for sales of similar loans without recourse or estimates of the credit risk of the associated recourse obligation. The fair value of the recourse on these loans (see Note 21) is estimated to be $14.8 million. 69 The carrying and fair values of significant financial instruments are:
December 26, 1993 December 27, 1992 -------------------- ---------------------- Carrying Fair Carrying Fair Value Value Value Value ---------------------------------------------- Weyerhaeuser: Long-term debt $3,012,412 $3,266,923 $3,153,472 $3,192,846 Other liabilities 99,624 92,756 13,538 12,445 ---------------------------------------------- Real estate and financial services: Mortgage notes held for sale 520,634 523,563 475,447 478,916 Construction mortgage notes 43,732 42,434 61,069 53,378 Mortgage loans receivable 266,203 252,902 321,447 309,348 Investments 60,355 56,360 5,232,428 5,274,274 Mortgage-backed certificates and restricted deposits 349,757 365,659 614,252 646,063 Future annuity and contract reserves _ _ 5,529,700 5,336,046 Collateralized mortgage obligation bonds 307,416 330,644 543,157 581,440 Long-term debt 1,997,146 2,042,540 2,195,715 2,250,032
NOTE 20: Legal Proceedings On November 2, 1992, an action was filed against the company in the Circuit Court for the First Judicial District of Hinds County, Miss., on behalf of a pur- ported class of riparian property owners in Mississippi and Alabama whose properties are located on the Tennessee Tombigbee Waterway, Aliceville Lake, Cedar Creek and the Magoway Creek. The complaint seeks $1 billion in compensatory and punitive damages for diminution in property value, personal injuries and mental anguish allegedly resulting from the discharge of purported hazardous substances, including dioxins and furans, by the company's pulp and paper mill in Columbus, Miss., and the alleged fraudulent concealments of such discharge. The complaint also seeks an injunction prohibiting future releases and the removal of hazardous substances allegedly released in the past. On August 20, 1993, a companion action was filed in Green County, Ala., on behalf of a similar purported class of riparian owners with essentially the same claims as the Mississippi case. The action was removed to the federal District Court for the Northern District of Alabama, which subsequently remanded the case to state court. The company is a party to other legal proceedings generally incidental to its business. Although the final outcome of any legal proceeding is subject to a great many variables and cannot be predicted with any degree of certainty, the company presently believes that any ultimate liability resulting from the legal proceedings discussed herein, or all of them combined, would not have a material adverse effect on the company's financial position. 70 NOTE 21: Commitments and Contingencies The company's capital expenditures, excluding acquisitions, have averaged about $823,000 in recent years but are expected to approximate $1,100,000 in 1994; however, the 1994 expenditure level could be increased or decreased as a consequence of future economic conditions. The company had approximately $600,000 in capital expenditures committed on major projects at year-end 1993. It is the company's policy to accrue for environmental remediation costs when it is determined that it is probable that such an obligation exists and the amount of the obligation can be reasonably estimated. Based on currently available information and analysis, the company believes that it is reasonably possible that costs associated with all identified sites may exceed current accruals by amounts that may prove insignificant or that could range, in the aggregate, up to approximately $140 million over several years. This estimate of the upper end of the range of rea- sonably possible additional costs is much less certain than the estimates upon which accruals are currently based, and is based on assumptions less favorable to the company among the range of reasonably possible outcomes. In estimating both its current reserves for environmental remediation and the possible range of additional future costs, the company has assumed that it will not bear the entire cost of remediation of every site to the exclusion of other known potentially responsible parties who may be jointly and severally liable. The ability of other potentially responsible parties to participate has been taken into account, based generally on each party's financial condition and probable contribution on a per-site basis. No amounts have been recorded for potential recoveries from insurance carriers. WRECO is exposed to contingent liabilities arising from joint-venture participations and real estate limited partnerships as described in Note 19. As of December 26, 1993, WFS was committed to fund approximately $397,812 in mortgage loans, of which $111,627 was with affiliates. Included in WFS's funding commitments were approximately $227,324 of commitments to fund mortgage loans at floating prices. WFS had firm agreements with in- vestors for the sale of loans in the aggregate amount of approximately $523,326 as of December 26, 1993. WFS's construction lending program, which was principally in California, was terminated during 1993. All construction loan investments relate to transactions that were originally committed prior to 1993. At December 26, 1993, WFS is com- mitted to fund an additional $13,831 of construction loan advances. Included therein is $9,358 committed to various joint ventures in which WFS is a partner. WFS recorded interest and fee income of $1,903, $2,165 and $3,723 on loans to these partnerships during 1993, 1992 and 1991, respectively. During the normal course of business, WFS has sold loans with limited recourse requirements. In accordance with generally accepted accounting principles, estimated probable loan losses and related costs are provided for at the time of such sales when deemed appropriate. At December 26, 1993, the outstanding balance of loans sold by WFS with recourse is approximately $1.1 billion. In the event of borrower non-performance, WFS would assume losses to the extent they exceed the value of the collateral and private mortgage insurance or Veterans Administration guarantees. WFS has not historically experienced material losses on these recourse obligations. 71 NOTE 22: Financial Instruments With Credit or Off-Balance Sheet Risk Receivables WRECO's accounts receivable and notes and contracts receivable by geographic region, less discounts and allowances, are as follows:
1993 1992 -------------------- West $ 53,411 $ 23,456 South 20,487 16,112 East 32,351 21,880 -------------------- $106,249 $ 61,448 -------------------- --------------------
WRECO's policy for requiring collateral is that a secured interest will be established on receivables generated from the sale of inventory and land and that the collateral will be subject to foreclosure in the event of the purchaser's default. Collateral is not required for short-term, general accounts receivable. WFS originates and holds loans in a number of states. The remaining gross principal balance of mortgage notes held for sale or investment, construction mortgage notes, mortgage loans receivable and other trust deeds receivable by geographic region are as follows:
1993 1992 ------------------------- West $757,353 $1,527,600 South 47,279 155,787 East 93,621 196,733 Other 16,233 124,209 ------------------------- $914,486 $2,004,329 ------------------------- -------------------------
Foreign Exchange Contracts At December 26, 1993, the company had foreign exchange contracts maturing from January 14, 1994, to September 1, 1994, worth $26,500 in foreign currency. NOTE 23: Shareholders' Interest Preferred and Preference Shares The company is authorized to issue: - 7,000,000 preferred shares having a par value of $1.00 per share, of which none were issued and outstanding at December 26, 1993, and December 27, 1992; and - 40,000,000 preference shares having a par value of $1.00 per share, of which none were issued and outstanding at December 26, 1993, and December 27, 1992. The preferred and preference shares may be issued in one or more series with varying rights and preferences including dividend rates, redemption rights, conversion terms, sinking fund provisions, values in liquidation and voting rights. When issued, the outstanding preferred and preference shares rank senior to outstanding common shares as to dividends and assets available on liquidation. The company has reserved but not issued 2,000,000 shares of cumulative preference shares, fourth series, for the exercise of the rights described under Common Shares. Common Shares Common shares reserved for stock option plans and for conversion of issued and outstanding convertible subordinated debentures were 5,178,000 shares at December 26, 1993, and 9,021,000 shares at December 27, 1992. As to the company's various stock option plans, the following information is provided:
1993 1992 1991 -------------------------------- At end of year: Options outstanding 5,177,401 4,999,874 5,414,948 Options exercisable 3,981,751 3,865,624 4,440,948 During the year: Options granted 1,195,650 1,134,250 974,000 Options exercised 878,755 1,261,212 297,519 Options forfeited 139,368 288,112 146,900 Average prices per share: Options outstanding $32.32 $28.85 $26.00 Options granted $42.31 $36.18 $25.22 Options exercised $26.72 $24.06 $22.70
In December 1986, the company adopted a Shareholder Rights Plan (the "Plan") and declared a dividend distribution of 0.6667 right on each outstanding 72 common share. Each right entitles its holder to purchase after the distribution date and until December 1996 one one- hundredth of a share of the company's cumulative preference shares, fourth series, at a price of $70, subject to adjustment. The distribution date is the earlier of 20 business days after the announcement that a person or group has acquired 20 percent or more of Weyerhaeuser's out standing common shares or 20 business days after a person or group commences a tender or exchange offer that could result in the person or group owning 30 percent or more of the company's outstanding common shares. Following the distribution date, if anyone owning 20 percent or more of the company's outstanding common shares merges with the company, with the company as the survivor, and the company's common shares are not changed or exchanged, or engages in certain self-dealing transactions with the company, or if an event occurs that results in such 20 percent owner's interest being increased by more than one percent (e.g., a reverse stock split), or if anyone acquires 40 percent or more of the company's outstanding common shares, each right holder, other than such person or group, will be able, upon payment of the right's exercise price, to acquire shares of the company's common stock or other securities or assets having an aggregate market value equal to twice the right's purchase price. If, after the company announces that someone owns 20 percent or more of the company's outstanding common shares, the company is acquired in a merger or other business combination, and the company is not the survivor, or the company engages in a merger or other business combination transaction in which the company is the surviving corporation but the company's common shares are changed or exchanged, or if 50 percent of the company's earning power or assets is sold in one or several related transactions, each right holder, other than any 20 percent shareholder, will receive shares of the acquiring company's common stock having a market value equal to twice the right's exercise price. Subject to certain time periods and conditions, the Plan may be amended and the rights may be redeemed at a price of $.05 per right, subject to adjustment. NOTE 24: Business Segments The company is principally engaged in the growing and harvesting of timber and the manufacture, distribution and sale of forest products. The four principal business segments are timberlands and wood products (including softwood lumber, plywood and veneer; composite panels; oriented strand board; hardboard; logs; chips; timber; doors; hardwood lumber and plywood; and treated products); pulp and paper products (including pulp, newsprint, paper, containerboard, paperboard and shipping containers, recycling and chemicals); real estate development and construction; and financial services. The timber-based businesses involve a high degree of integration among timber operations; building materials conversion facilities; and pulp, newsprint, paper, containerboard and paperboard primary manufacturing and secondary conversion facilities, including extensive transfers of raw materials, semi-finished materials and end products between and among these groups. Accounting for segment profitability involves allocations of joint raw materials and conversion costs and the use of transfer prices that attempt to approximate current market values. 73 The following table sets forth an analysis of the company's operations by the four principal business segments:
Sales to and Revenue from Intersegment Total Approximate Unaffiliated Sales and Sales and Contribution Business Segments Customers Revenue Revenue to Earnings ----------------------------------------------------- 1993: Timberlands and wood products $4,467,751 $ 352,314 $4,820,065 $ 891,431 Pulp and paper products 3,579,042 6,189 3,585,231 60,854 Real estate 828,713 _ 828,713 18,326 Financial services 401,711 _ 401,711 76,437 Corporate and other 269,181 28,409 297,590 (46,961) --------------------------------------------------- 9,546,398 386,912 9,933,310 1,000,087 Eliminations (1,606) (386,912) (388,518) _ Interest expense _ _ _ (292,459) Less: capitalized interest _ _ _ 100,825 ------- Income before income taxes and extraordinary item _ _ _ 808,453 Income taxes _ _ _ (281,168) Extraordinary item _ _ _ 52,052 ----------------------------------------------------- $9,544,792 $ _ $9,544,792 $ 579,337 ----------------------------------------------------- ----------------------------------------------------- 1992: Timberlands and wood products $3,416,832 $ 340,368 $3,757,200 $ 515,394 Pulp and paper products 4,109,080 28,822 4,137,902 251,091 Real estate 690,342 _ 690,342 12,897 Financial services 832,389 _ 832,389 67,633 Corporate and other 220,032 29,907 249,939 (106,863) --------------------------------------------------- 9,268,675 399,097 9,667,772 740,152 Eliminations (2,206) (399,097) (401,303) _ Interest expense _ _ _ (262,209) Less: capitalized interest _ _ _ 85,406 --------- Income before income taxes _ _ _ 563,349 Income taxes _ _ _ (191,300) --------------------------------------------------- $9,266,469 $ _ $9,266,469 $ 372,049 --------------------------------------------------- --------------------------------------------------- 1991: Timberlands and wood products $2,948,358 $ 366,988 $3,315,346 $ 155,386 Pulp and paper products 4,002,738 19,685 4,022,423 108,287 Real estate 744,366 _ 744,366 (175,331) Financial services 862,403 _ 862,403 60,409 Corporate and other 215,501 29,062 244,563 (148,212) --------------------------------------------------- 8,773,366 415,735 9,189,101 539 Eliminations (753) (415,735) (416,488) _ Interest expense _ _ _ (265,240) Less: capitalized interest _ _ _ 86,853 -------- Income (loss) before income taxes and effect of accounting changes _ _ _ (177,848) Income taxes _ _ _ 76,900 Effect of accounting changes _ _ _ (61,000) ---------------------------------------------------- $8,772,613 $ _ $8,772,613 $ (161,948) ---------------------------------------------------- ---------------------------------------------------- Interest expense of $95,309, $151,519 and $219,441 before the elimination of intercompany interest of $0, $3,403 and $6,455 in 1993, 1992 and 1991, respectively, is included in the determination of "approximate contribution to earnings" for financial services. Certain reclassifications have been made to conform prior years' data to the current format.
Depreciation, Amortization and Fee Capital Business Segments Stumpage Expenditures Assets --------------------------------------------- 1993: Timberlands and wood products $ 161,903 $ 240,760 $ 2,582,832 Pulp and paper products 263,961 652,092 5,731,965 Real estate 9,123 15,007 1,863,615 Financial services 33,976 4,737 1,892,180 Corporate and other 17,968 54,885 1,274,185 ------------------------------------------ 486,931 967,481 13,344,777 Eliminations _ _ (706,324) Interest expense _ _ _ Less: capitalized interest _ _ _ Income before income taxes and extraordinary item _ _ _ Income taxes _ _ _ Extraordinary item _ _ _ ------------------------------------------ $ 486,931 $ 967,481 $ 12,638,453 ------------------------------------------ ------------------------------------------ 1992: Timberlands and wood products $ 149,504 $ 246,096 $ 2,374,152 Pulp and paper products 254,956 931,913 5,614,490 Real estate 7,310 7,869 1,693,741 Financial services 48,685 2,646 8,148,285 Corporate and other 42,291 16,990 1,201,418 ------------------------------------------ 502,746 1,205,514 19,032,086 Eliminations _ _ (873,683) Interest expense _ _ _ Less: capitalized interest _ _ _ Income before income taxes _ _ _ Income taxes _ _ _ ------------------------------------------ $ 502,746 $ 1,205,514 $ 18,158,403 ------------------------------------------ ------------------------------------------ 1991: Timberlands and wood products $ 157,506 $ 161,589 $ 2,223,886 Pulp and paper products 245,533 472,412 4,928,239 Real estate 8,197 7,485 1,500,250 Financial services 46,843 3,518 7,956,631 Corporate and other 43,243 18,367 1,186,906 ------------------------------------------ 501,322 663,371 17,795,912 Eliminations _ _ (810,038) Interest expense _ _ _ Less: capitalized interest _ _ _ Income (loss) before income taxes and effect of accounting changes _ _ _ Income taxes _ _ _ Effect of accounting changes _ _ _ ------------------------------------------ $ 501,322 $ 663,371 $ 16,985,874 ------------------------------------------ ------------------------------------------
74 The following table sets forth an analysis of the company's 1991 approximate contribution to earnings by the four principal business segments before and after restructuring and other charges:
Approximate Contribution to Earnings Before Approximate Restructuring and Restructuring and Contribution Business Segments Other Charges Other Charges to Earnings ------------------------------------------------------ Timberlands and wood products $ 307,386 $ (152,000) $ 155,386 Pulp and paper products 237,287 (129,000) 108,287 Real estate (20,331) (155,000) (175,331) Financial services 60,409 _ 60,409 Corporate and other (139,212) (9,000) (148,212) ----------------------------------------------- $ 445,539 $ (445,000) $ 539 ----------------------------------------------- -----------------------------------------------
NOTE 25: Unaudited Financial Information Selected quarterly financial data:
First Quarter Second Quarter Third Quarter Fourth Quarter --------------------------------------------------------- Net sales: 1993 $ 2,341,016 $ 2,387,505 $ 2,224,928 $ 2,591,343 1992 2,204,904 2,352,356 2,349,107 2,360,102 Operating income: 1993 280,469 292,170 183,349 225,557 1992 216,484 227,011 214,134 186,761 Earnings before income taxes and extraordinary item: 1993 264,579 272,336 130,018 141,520 1992 133,293 142,904 164,917 122,235 Net earnings(1): 1993 229,463 181,536 66,618 101,720 1992 86,593 92,904 107,217 85,335 Net earnings per common share(1): 1993 1.12 .89 .32 .50 1992 .43 .45 .53 .42 Dividends per common share: 1993 .30 .30 .30 .30 1992 .30 .30 .30 .30 Market prices - high/low: 1993 45 1/2-36 1/4 46 1/2-38 3/4 44-38 1/4 45 5/8-36 7/8 1992 37 5/8-26 5/8 37 1/2-31 3/8 36-31 1/8 39 1/4-31 3/8 (1)First quarter 1993 results reflect an extraordinary item from the realization of a net gain as a result of extinguishing certain debt obligations of $52,052, or $.25 per common share.
75 NOTE 26: Historical Summary
Dollar amounts in thousands except per-share figures 1993 1992 1991 -------------------------------------- Per common share: Net earnings (loss) from continuing operations, before extraordinary item and effect of accounting changes: $ 2.58 1.83 (.50) Extraordinary item(1) $ .25 _ _ Effect of accounting changes $ _ _ (.30) -------------------------------------- Net earnings (loss) $ 2.83 1.83 (.80) -------------------------------------- -------------------------------------- Dividends paid $ 1.20 1.20 1.20 Shareholders'interest (end of year)$ 19.34 17.85 17.25 Financial position: Total assets: Weyerhaeuser $ 8,967,714 8,438,032 7,550,490 Real estate and financial services$ 3,670,739 9,720,371 9,435,384 -------------------------------------- $12,638,453 18,158,403 16,985,874 -------------------------------------- -------------------------------------- Long-term debt (net of current portion): Weyerhaeuser: Senior long-term debt $ 2,997,890 2,658,867 2,195,510 Capital lease obligations $ 160 222 249 Convertible subordinated debentures $ _ 193,035 193,035 Limited recourse income debenture $ _ 187,963 204,027 -------------------------------------- $ 2,998,050 3,040,087 2,592,821 -------------------------------------- -------------------------------------- Real estate and financial services: Collateralized mortgage obligation bonds $ 240,794 440,354 701,871 Long-term debt $ 1,845,148 1,970,454 1,718,812 -------------------------------------- $ 2,085,942 2,410,808 2,420,683 -------------------------------------- -------------------------------------- Redeemable preferred and preference shares: Weyerhaeuser $ _ _ _ Real estate and financial services$ _ _ _ Shareholders' interest $ 3,966,096 3,645,989 3,489,368 Percent earned on shareholders' interest 15.2% 10.4% (4.4)% Operating results: Net sales and revenues: Weyerhaeuser $ 8,314,368 7,743,738 7,165,844 Real estate and financial services$ 1,230,424 1,522,731 1,606,769 -------------------------------------- $ 9,544,792 9,266,469 8,772,613 -------------------------------------- -------------------------------------- Net earnings (loss) from continuing operations before extraordinary item and effect of accounting changes: Weyerhaeuser $ 459,542 332,043 (24,690) Real estate and financial services$ 67,743 40,006 (76,258) Less subsidiaries preferred share dividends $ _ _ _ -------------------------------------- $ 527,285 372,049 (100,948)(2) Extraordinary item(1) $ 52,052 _ _ Effect of accounting changes $ _ _ (61,000) -------------------------------------- Net earnings (loss) $ 579,337 372,049 (161,948) -------------------------------------- -------------------------------------- Statistics (unaudited): Number of employees 36,748 39,022 38,669 Salaries and wages $ 1,584,770 1,580,005 1,475,950 Employee benefits $ 346,528 323,316 321,174 Total taxes $ 577,165 442,715 172,758 Timberlands (thousands of acres): Fee ownership 5,524 5,604 5,517 Long-term license arrangements 17,845 18,828 13,491 Number of shareholder accounts at year-end: Common 25,282 26,334 26,937 Preferred _ _ _ Preference _ _ _ Average common and common equivalent shares outstanding (thousands) 204,866 203,373 201,578 (1)1993 results reflect an extraordinary item from the realization of a gain as a result of extinguishing certain debt obligations of $85,784 less related tax effect of $33,732, or $52,052. (2)1991 results reflect restructuring and other charges of $445,000 less related tax effect of $162,000, or $283,000.
Historical Summary
Dollar amounts in thousands except per-share figures 1990 1989 --------------------------- Per common share: Net earnings (loss) from continuing operations, before extraordinary item and effect of accounting changes: $ 1.87 1.56 Extraordinary item(1) $ _ _ Effect of accounting changes $ _ _ --------------------------- Net earnings (loss) $ 1.87 1.56 --------------------------- --------------------------- Dividends paid $ 1.20 1.20 Shareholders' interest (end of year) $ 19.21 18.55 Financial position: Total assets: Weyerhaeuser $ 7,556,078 7,371,069 Real estate and financial services $ 8,799,741 8,604,883 --------------------------- $ 16,355,819 15,975,952 --------------------------- --------------------------- Long-term debt (net of current portion): Weyerhaeuser: Senior long-term debt $ 2,168,125 1,501,523 Capital lease obligations $ 6,794 22,793 Convertible subordinate debentures $ 193,175 _ Limited recourse income debenture $ 203,861 204,217 --------------------------- $ 2,571,955 1,728,533 --------------------------- --------------------------- Real estate and financial services: Collateralized mortgage obligation bonds $ 837,796 931,019 Long-term debt $ 1,798,978 1,074,537 --------------------------- $ 2,636,774 2,005,556 --------------------------- --------------------------- Redeemable preferred and preference shares: Weyerhaeuser $ _ _ Real estate and financial services $ _ _ Shareholders' interest $ 3,863,804 4,147,566 Percent earned on shareholders' interest 9.8% 8.3% Operating results: Net sales and revenues: Weyerhaeuser $ 7,447,329 8,355,176 Real estate and financial services $ 1,618,502 1,826,123 --------------------------- $ 9,065,831 10,181,299 --------------------------- --------------------------- Net earnings (loss) from continuing operations before extraordinary item and effect of accounting changes: Weyerhaeuser $ 340,281 376,838 Real estate and financial services $ 53,417 (35,767) Less subsidiaries preferred share dividends $ _ _ --------------------------- $ 393,698 341,071(3) Extraordinary item(1) $ _ _ Effect of accounting changes $ _ _ --------------------------- Net earnings (loss) $ 393,698 341,071 --------------------------- --------------------------- Statistics (unaudited): Number of employees 40,621 45,214 Salaries and wages $ 1,531,220 1,563,194 Employee benefits $ 318,055 324,663 Total taxes $ 445,804 403,072 Timberlands (thousands of acres): Fee ownership 5,621 5,693 Long-term license arrangements 13,491 13,324 Number of shareholder accounts at year-end: Common 28,187 29,847 Preferred _ 12 Preference _ 443 Average common and common equivalent shares outstanding (thousands) 203,673 204,331 (3)1989 results reflect net special items charges of $401,010 less related tax effect of $140,674, or $260,336.
76
1988 1987 1986 1985 1984 1983 ------------------------------------------------------------------------- 2.68 2.12 1.27 .88 1.01 .90 _ _ _ _ _ _ _ _ _ _ _ _ - -------------------------------------------------------------------------- 2.68 2.12 1.27 .88 1.01 .90 - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- 1.15 .90 .87 .87 .87 .87 18.14 16.54 14.82 14.42 14.50 14.43 6,982,522 6,418,174 5,888,910 5,495,805 5,641,420 5,649,457 8,401,629 6,498,557 5,083,296 3,868,861 2,503,358 1,732,635 - -------------------------------------------------------------------------- 15,384,151 12,916,731 10,972,206 9,364,666 8,144,778 7,382,092 - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- 1,643,879 1,540,323 1,411,754 1,156,626 1,066,397 1,217,331 37,439 51,127 63,751 77,585 93,681 108,968 _ _ _ _ _ _ 197,734 180,984 171,781 _ _ _ - -------------------------------------------------------------------------- 1,879,052 1,772,434 1,647,286 1,234,211 1,160,078 1,326,299 - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- 1,045,611 840,321 597,723 292,478 98,861 _ 1,272,393 1,290,296 1,101,270 710,676 433,667 384,254 - -------------------------------------------------------------------------- 2,318,004 2,130,617 1,698,993 1,003,154 532,528 384,254 - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- _ _ 14,700 14,700 14,700 14,700 _ _ _ 72,000 223,000 223,000 4,043,550 3,713,750 3,250,866 3,324,051 3,188,352 3,223,347 14.6% 12.8% 8.4% 6.1% 7.1% 6.5% 7,860,727 6,988,213 5,650,391 5,205,579 5,549,738 4,882,629 1,467,157 1,396,726 1,241,038 1,069,928 892,217 631,374 - -------------------------------------------------------------------------- 9,327,884 8,384,939 6,891,429 6,275,507 6,441,955 5,514,003 - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- 515,796 379,015 179,645 131,678 174,502 167,572 49,794 67,417 97,040 81,491 74,500 59,885 _ _ _ 13,053 22,815 22,614 - ------------------------------------------------------------------------- 565,590 446,432 276,685 200,116 226,187 204,843 _ _ _ _ _ _ _ _ _ _ _ _ - ------------------------------------------------------------------------- 565,590 446,432 276,685 200,116 226,187 204,843 - ------------------------------------------------------------------------- - ------------------------------------------------------------------------- 46,976 45,123 41,757 38,922 40,919 42,751 1,422,767 1,277,009 1,143,028 1,134,049 1,167,413 1,139,065 291,938 250,293 224,864 259,233 274,155 250,717 511,143 466,846 309,547 266,051 269,028 258,823 5,833 5,871 5,962 5,979 5,915 5,918 13,324 12,064 12,064 3,590 3,595 4,438 30,379 32,535 31,682 37,135 40,361 40,586 25 26 1,825 2,192 2,317 2,290 351 106 7 2,242 2,213 1,818 207,785 202,544 195,456 194,828 196,518 196,065
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