-----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, V25trNdmDvBwQ2Jva2dxp8jgCZdnwT2nWoN+Sg3hgSrhcxXkh/w/QVinvJg2KIc7 TBXyiNvSx6RedO+aGo6WtQ== 0000106535-95-000005.txt : 19950509 0000106535-95-000005.hdr.sgml : 19950509 ACCESSION NUMBER: 0000106535-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950326 FILED AS OF DATE: 19950508 SROS: MSE SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEYERHAEUSER CO CENTRAL INDEX KEY: 0000106535 STANDARD INDUSTRIAL CLASSIFICATION: LUMBER & WOOD PRODUCTS (NO FURNITURE) [2400] IRS NUMBER: 910470860 STATE OF INCORPORATION: WA FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04825 FILM NUMBER: 95535226 BUSINESS ADDRESS: STREET 1: 33663 WEYERHAEUSER WAY SOUTH CITY: TACOMA STATE: WA ZIP: 98477 BUSINESS PHONE: 2069242345 MAIL ADDRESS: STREET 1: 33663 WEYERHAEUSER WAY SOUTH CITY: TACOMA STATE: WA ZIP: 98477 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the thirteen weeks ended March 26, 1995 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 Preference Shares, Fourth Series New York Stock Exchange Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___. The number of shares outstanding of the registrant's class of common stock, as of May 5, 1995 was 205,706,971 common shares ($1.25 par value). Weyerhaeuser Company - -2- This page intentionally left blank. Weyerhaeuser Company - -3-
WEYERHAEUSER COMPANY AND SUBSIDIARIES Index to Form 10-Q Filing For the Thirteen Weeks Ended March 26, 1995 Page No. -------- Part I. Financial Information Item 1. Financial Statements Consolidated Statement of Earnings 5 Consolidated Balance Sheet 6-7 Consolidated Statement of Cash Flows 8-9 Notes to Financial Statements 10-15 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16-18 Part II. Other Information Item 1. Legal Proceedings 19-20 Item 2. Changes in Securities (not applicable) Item 3. Defaults upon Senior Securities (not applicable) Item 4. Submission of Matters to a Vote of Security Holders (not applicable) Item 5. Other Information (not applicable) Item 6. Exhibits and Reports on Form 8-K 20
The financial information included in this report has been prepared in conformity with accounting practices and methods reflected in the financial statements included in the annual report (Form 10-K) filed with the Securities and Exchange Commission for the year ended December 25, 1994. Though not examined by independent public accountants, the financial information reflects, in the opinion of management, all adjustments necessary to present a fair statement of results for the interim periods indicated. The results of operations for the thirteen-week period ending March 26, 1995 should not be regarded as necessarily indicative of the results that may be expected for the full year. Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. WEYERHAEUSER COMPANY By /s/ K. J. Stancato ------------------ K. J. Stancato Duly Authorized Officer and Principal Accounting Officer May 8, 1995 Weyerhaeuser Company - -4- This page intentionally left blank. Weyerhaeuser Company - -5-
WEYERHAEUSER COMPANY AND SUBSIDIARIES ____________ CONSOLIDATED EARNINGS For the thirteen week periods ended March 26, 1995 and March 27, 1994 (Dollar amounts in millions except per share figures) (Unaudited) Thirteen weeks ended: March 26, March 27, 1995 1994 --------- --------- Net sales and revenues: Weyerhaeuser $ 2,563 $ 2,126 Real estate and financial services 182 260 -------- --------- 2,745 2,386 -------- --------- Costs and expenses: Weyerhaeuser: Costs of products sold 1,811 1,552 Depreciation, amortization and fee stumpage 129 116 Selling, general and administrative expenses 160 147 Research and development expenses 11 11 Taxes other than payroll and income taxes 43 39 -------- -------- 2,154 1,865 -------- -------- Real estate and financial services: Costs and operating expenses 130 186 Depreciation and amortization 9 8 Selling, general and administrative expenses 31 44 Taxes other than payroll and income taxes 2 2 -------- -------- 172 240 -------- -------- 2,326 2,105 -------- -------- Operating income 419 281 Interest expense and other: Weyerhaeuser: Interest expense incurred 64 57 Less interest capitalized 6 8 Other income (expense), net (22) (15) Real estate and financial services: Interest expense incurred 33 38 Less interest capitalized 18 20 Other income (expense), net 4 5 -------- -------- Earnings before income taxes 328 204 Income taxes (Note 2) 121 77 -------- -------- Net earnings $ 207 $ 127 ======== ======== Per common share (Note 1): Net earnings $ 1.00 $ .62 ======== ======== Dividends paid $ .30 $ .30 ======== ======== See Accompanying Notes to Financial Statements
Weyerhaeuser Company - -6-
WEYERHAEUSER COMPANY AND SUBSIDIARIES ____________ CONSOLIDATED BALANCE SHEET March 26, 1995 and December 25, 1994 (Dollar amounts in millions) March 26, Dec. 25, 1995 1994 ----------- --------- (Unaudited) Assets - ------ Weyerhaeuser Current assets: Cash and short-term investments $ 331 $ 39 Receivables, less allowances 964 909 Inventories (Note 3) 870 746 Prepaid expenses 314 284 ------- ------- Total current assets 2,479 1,978 Property and equipment (Note 4) 6,134 6,196 Construction in progress 698 603 Timber and timberlands at cost, less fee stumpage charged to disposals 604 610 Other assets and deferred charges 206 212 ------- ------- Total assets 10,121 9,599 ------- ------- Real estate and financial services Cash and short-term investments, including restricted deposits 59 73 Receivables, less discounts and allowances 89 116 Mortgage and construction notes and mortgage loans receivable 425 472 Investments 269 247 Mortgage-backed certificates and other pledged financial instruments 205 211 Real estate in process of development, less reserves 688 668 Land being processed for development, less reserves 747 738 Deferred acquisition costs 96 92 Investments in and advances to joint ventures and limited partnerships, less reserves 438 430 Other assets 341 361 ------- ------- Total assets 3,357 3,408 ------- ------- $13,478 $13,007 ======= ======= See Accompanying Notes to Financial Statements
Weyerhaeuser Company - -7-
March 26, Dec. 25, 1995 1994 ----------- --------- (Unaudited) Liabilities and shareholders' interest - -------------------------------------- Weyerhaeuser Current liabilities: Notes payable $ 4 $ 6 Current maturities of long-term debt 315 321 Accounts payable 681 645 Accrued liabilities (Note 5) 677 695 -------- -------- Total current liabilities 1,677 1,667 Long-term debt (Note 7) 3,001 2,713 Deferred income taxes 1,036 986 Deferred pension and other liabilities 524 525 Minority interest in subsidiaries 103 103 Commitments and contingencies (Note 9) -- -- -------- -------- Total liabilities 6,341 5,994 -------- -------- Real estate and financial services Notes payable and commercial paper 686 416 Collateralized mortgage obligation bonds 178 183 Long-term debt (Note 7) 1,491 1,770 Other liabilities 349 354 Commitments and contingencies (Note 9) -- -- -------- -------- Total liabilities 2,704 2,723 -------- -------- Shareholders' interest (Note 8) Common shares: authorized 400,000,000 shares, issued 206,072,890 shares, $1.25 par value 258 258 Other capital 416 416 Cumulative translation adjustment (110) (107) Retained earnings 3,878 3,733 Treasury common shares, at cost: 435,013 and 455,387 (9) (10) -------- -------- Total shareholders' interest 4,433 4,290 -------- -------- $13,478 $13,007 ======== ========
Weyerhaeuser Company - -8-
WEYERHAEUSER COMPANY AND SUBSIDIARIES ____________ CONSOLIDATED STATEMENT OF CASH FLOWS For the thirteen-week periods ended March 26, 1995 and March 27, 1994 (Dollar amounts in millions) (Unaudited) Consolidated --------------------- March 26, March 27, 1995 1994 ---------- --------- Cash flows provided by operations: Net earnings $ 207 $ 127 Non-cash charges to income: Depreciation, amortization and fee stumpage 138 124 Deferred income taxes, net 51 31 Changes in working capital: Receivables (28) (30) Inventories, prepaid expenses, real estate and land (183) (130) Mortgages held for sale 38 46 Other liabilities 17 2 (Gain) loss on disposition of assets 2 (2) Other 20 21 --------- --------- Net cash provided by operations 262 189 --------- --------- Cash flows from investing in the business: Property and equipment (172) (261) Timber and timberlands (11) (7) Mortgage and investment securities acquired (23) (2) Proceeds from sale of: Property and equipment 9 22 Mortgage and investment securities 7 52 Other 1 (3) --------- --------- Net cash flows from investing in the business (189) (199) --------- --------- Cash flows from financing activities: Sale of debentures, notes and CMO bonds 554 122 Sale of industrial revenue bonds -- 50 Notes and commercial paper borrowings, net 90 60 Cash dividends on common shares (62) (62) Payments on debentures, notes, bank credit agreements, capital leases, industrial revenue bonds and CMO bonds (378) (235) Exercise of stock options 1 14 Other -- 8 --------- --------- Net cash flows from financing activities 205 (43) --------- --------- Net increase (decrease) in cash and short-term investments 278 (53) Cash and short-term investments at beginning of year 112 160 --------- --------- Cash and short-term investments at end of period $ 390 $ 107 ========= ========= Cash paid (received) during the year for: Interest, net of amount capitalized $ 97 $ 96 ========= ========= Income taxes $ (2) $ 25 ========= ========= See Accompanying Notes to Financial Statements
Weyerhaeuser Company - -9-
Real Estate and Weyerhaeuser Financial Services --------------------- --------------------- March 26, March 27, March 26, March 27, 1995 1994 1995 1994 --------- --------- --------- --------- $ 205 $ 121 $ 2 $ 6 129 116 9 8 50 31 1 -- (55) (38) 27 8 (154) (98) (29) (32) -- -- 38 46 21 74 (4) (72) 2 2 -- (4) 11 2 9 19 --------- --------- --------- --------- 209 210 53 (21) --------- --------- --------- --------- (170) (259) (2) (2) (11) (7) -- -- -- -- (23) (2) 9 2 -- 20 -- -- 7 52 36 (15) (35) 12 --------- --------- --------- --------- (136) (279) (53) 80 --------- --------- --------- --------- 554 116 -- 6 -- 50 -- -- (107) 31 197 29 (62) (62) -- -- (167) (125) (211) (110) 1 14 -- -- -- 8 -- -- --------- --------- --------- --------- 219 32 (14) (75) --------- --------- --------- --------- 292 (37) (14) (16) 39 73 73 87 --------- --------- --------- --------- $ 331 $ 36 $ 59 $ 71 ========= ========= ========= ========= $ 81 $ 76 $ 16 $ 20 ========= ========= ========= ========= $ 13 $ (43) $ (15) $ 68 ========= ========= ========= =========
Weyerhaeuser Company - -10- WEYERHAEUSER COMPANY AND SUBSIDIARIES ____________ NOTES TO FINANCIAL STATEMENTS For the thirteen-week periods ended March 26, 1995 and March 27, 1994 Note 1: Summary of Significant Accounting 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 statements and notes to financial statements are presented 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 subsidiary is Weyerhaeuser Mortgage Company (WMC). Changes in Accounting Principles In November 1992, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits," which requires accrual accounting be used for the cost of benefits provided to former or inactive employees who have not yet retired. The company adopted this pronouncement in the first quarter of 1994, by recording a cumulative catch-up charge to earnings. The adoption of this pronouncement did not have a significant impact on the company's results of operations or its financial position. In 1994, the company implemented SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which addresses accounting and reporting for investments in equity securities that have readily determinable fair values, and for all investments in debt securities. The adoption of this pronouncement did not have a significant impact on the company's results of operations or its financial position. Also in 1994, the company adopted SFAS No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments," which requires more complete disclosures on derivative financial instruments. In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," which requires creditors to measure impairment based on the present value of expected future cash flows discounted at the loan's effective interest rate. In October 1994, the FASB issued SFAS No. 118, "Accounting by Creditors for Impairment of a Loan--Income Recognition and Disclosures," which amended SFAS No. 114 to allow creditors to use existing methods for recognizing interest on impaired loans and also requires creditors to disclose certain information about how interest income was recognized on impaired loans. Both of these pronouncements were implemented by the company in the first quarter of 1995. The adoption of these pronouncements did not have a significant impact on results of operations or financial position. In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which is effective for financial statements for fiscal years beginning after December 15, 1995. Due to the recent release of this pronouncement, the company has not determined the impact of the implementation of the pronouncement on its results of operations or financial position. Weyerhaeuser Company - -11- Net Earnings Per Common Share Net earnings per common share are based on the weighted average number of common shares outstanding during the respective periods. Average common equivalent shares (stock options) outstanding have not been included, as the computation would not be dilutive. Weighted average common shares outstanding were 205,628,338 and 205,429,534 at March 26, 1995 and March 27, 1994 respectively. Fully diluted earnings-per-share amounts are not applicable because the effect of the conversion of the stock options is not dilutive. Derivatives The company has only limited involvement with derivative financial instruments and does not use them for trading purposes. They are used to manage well-defined interest rate and foreign exchange risks. These include: . Foreign exchange contracts, which are hedges for foreign denominated accounts receivable and payable, have gains or losses recognized at settlement date. . Interest rate swaps entered into with major banks or financial institutions in which the company pays a fixed rate and receives a floating rate with the interest payments being calculated on a notional amount. The premiums received by the company on the sale of these swaps are treated as deferred income and amortized against interest expense over the term of the agreements. . Hedging transactions entered into by the company's mortgage banking subsidiary to protect both the completed loan inventory and loans in process against changes in interest rates. The financial instruments used to manage interest rate risk are forward sales commitments, interest rate futures and options. The company's use of derivatives does not have a significant effect on the company's results of operations or its financial position. Cash and Short-Term Investments For purposes of cash flow and fair value reporting, 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. 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. 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 rail 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 gain or loss is recorded. Weyerhaeuser Company - -12- 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 Deferred income taxes are provided to reflect temporary differences between the financial and tax bases of assets and liabilities 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 ten 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. Reclassifications Certain reclassifications have been made to conform prior years' data to the current format. WRECO 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. Weyerhaeuser Financial Services WMC 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. Weyerhaeuser Company - -13- 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. Note 2: Income Taxes Provisions for income taxes include the following:
Thirteen Weeks Ended --------------------- March 26, March 27, Dollar amounts in millions 1995 1994 --------- --------- Federal: Current $ 36 $ 31 Deferred 47 26 --------- --------- 83 57 --------- --------- State: Current 6 5 Deferred 3 2 --------- --------- 9 7 --------- --------- Foreign: Current 28 10 Deferred 1 3 --------- --------- 29 13 --------- --------- Total $ 121 $ 77 ========= ========
Income tax provisions for interim periods are based on the current best estimate of the effective tax rate expected to be applicable for the full year. The effective tax rate reflects anticipated tax credits, foreign taxes and other tax planning alternatives. For the periods ended March 26, 1995 and March 27, 1994, the company's provision for income taxes as a percent of earnings before income taxes is greater than the 35% federal statutory rate due principally to the effect of state income taxes. The effective tax rates for the thirteen week periods ended March 26, 1995 and March 27, 1994 are 37% and 38% respectively. Deferred taxes are provided for the temporary differences between the financial and tax bases of assets and liabilities, applying presently enacted tax rates and laws. The major sources of these temporary differences include depreciable and depletable assets, real estate, restructuring reserves, and pension and retiree health care liabilities. Weyerhaeuser Company - -14- Note 3: Inventories
Inventories consist of the following: March 26, Dec. 25, Dollar amounts in millions 1995 1994 --------- --------- Logs and chips $ 145 $ 108 Lumber, plywood and panels 145 115 Pulp, newsprint and paper 99 88 Containerboard, paperboard and containers 76 56 Other products 132 112 Materials and supplies 273 267 --------- --------- $ 870 $ 746 ========= =========
Note 4: Property and Equipment
March 26, Dec. 25, Dollar amounts in millions 1995 1994 --------- --------- Property and equipment, at cost: Land $ 159 $ 159 Buildings and improvements 1,512 1,509 Machinery and equipment 8,577 8,557 Rail and truck roads and other 624 628 --------- --------- 10,872 10,853 Less allowance for depreciation and amortization 4,738 4,657 --------- --------- $ 6,134 $ 6,196 ========= =========
Note 5: Accrued Liabilities
Accrued liabilities are as follows: March 26, Dec. 25, Dollar amounts in millions 1995 1994 --------- --------- Payroll - wages and salaries, incentive awards, retirement and vacation pay $ 215 $ 217 Taxes - social security and real and personal property 63 63 Interest 44 67 Income taxes 101 105 Other 254 243 --------- --------- $ 677 $ 695 ========= =========
Note 6: Short-Term Debt The company has short-term bank credit lines that provide for borrowings of up to the total amount of $725 million, all of which could be availed by the company, WRECO and WMC at March 26, 1995 and December 25, 1994. No portion of these lines has been availed of by the company, WRECO or WMC at March 26, 1995 or December 25, 1994. None of the entities referred to herein is a guarantor of the borrowings of the others. WMC has short-term special credit lines that provide for borrowings of up to $235 million at March 26, 1995 and December 25, 1994. Borrowings against these lines were $114 million and $85 million as of March 26, 1995 and December 25, 1994, respectively. Weyerhaeuser Company - -15- Note 7: Long-Term Debt At March 26, 1995 and December 25, 1994, the company's lines of credit include a five-year competitive advance and revolving credit facility agreement entered into in July 1994 with a group of banks that provides for borrowings of up to the total amount of $1.55 billion, all of which can be availed of by the company, and $1 billion, which can be availed by WMC. Borrowings are at LIBOR or other such interest rates as mutually agreed to between the borrower and lending banks. No portion of this line has been availed of by the company or WMC at March 26, 1995 or December 25, 1994. At March 26, 1995 and December 25, 1994, WMC had $35 million outstanding against a one-year evergreen credit commitment entered into in 1990. WMC has a revolving credit agreement with a bank to provide for: (1) borrowings of up to $35 million for two 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, 1997, to a five-year term loan payable in equal quarterly installments. At March 26, 1995 and December 25, 1994, $20 million was outstanding under this agreement. During 1994, WFS amended a three-year term loan facility that was entered into in 1992 which provides for: (1) borrowings of up to $555 million and $405 million at March 26, 1995 and December 25, 1994, respectively, at LIBOR or other such rates as may be agreed upon by WFS and the banks; and (2) a commitment fee on the unused portion of the credit. $555 million and $405 million were outstanding under this facility at March 26, 1995 and December 25, 1994, respectively. 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:
March 26, Dec. 25, Dollar amounts in millions 1995 1994 --------- --------- Weyerhaeuser $ 304 $ 411 Real estate and financial services 357 429
Total interest costs incurred by WRECO are capitalized and will ultimately be accounted for as an element of operating costs. The company's compensating balance agreements were not significant. Note 8: Shareholders' Interest Common shares reserved for stock option plans and for conversion of issued and outstanding convertible subordinated debentures were 6,765,000 shares at March 26, 1995 and 5,688,000 shares at December 25, 1994. Note 9: Commitments and Contingencies The company's capital expenditures have averaged about $855 million in recent years but are expected to be approximately $1.2 billion in 1995; however, the 1995 expenditure level could be increased or decreased as a consequence of future economic conditions. The company is a party to legal proceedings and environmental matters generally incidental to its business. Although the final outcome of any legal proceeding or environmental matter is subject to a great many variables and cannot be predicted with any degree of certainty, the company presently believes that the ultimate outcome resulting from these proceedings and matters would not have a material effect on the company's current financial position, liquidity or results of operations; however, in any given future reporting period such proceedings or matters could have a material effect on results of operations. Weyerhaeuser Company - -16- WEYERHAEUSER COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations Net sales and revenues and earnings before interest expense and income taxes by segment are:
Thirteen Weeks Ended --------------------- March 26, March 27, Dollar amounts in millions 1995 1994 --------- --------- Net sales and revenues: Timberlands and wood products $ 1,187 $ 1,182 Pulp, paper and packaging 1,328 903 Real estate 140 200 Financial services 42 60 Corporate and other 48 41 --------- --------- $ 2,745 $ 2,386 ========= ========= Earnings before interest expense and income taxes: Timberlands and wood products $ 239 $ 283 Pulp, paper and packaging 210 5 Real estate 1 1 Financial services(1) 3 6 Corporate and other (62) (42) --------- --------- $ 391 $ 253 ========= ========= (1) Includes net interest expense of $10 million and $18 million related to the financial services businesses.
Results of Operations Net sales for the first quarter of 1995 were a record $2.75 billion, up 15 percent from the $2.39 billion reported in the same quarter of 1994. Net earnings from operations in the current quarter, also a record, were $207 million or $1.00 per common share, up from the $127 million or 62 cents per common share in the 1994 first quarter. The timberlands and wood products segment's operating earnings in the 1995 first quarter were $239 million compared with $283 million in the same quarter a year ago. Although lower domestic wood product prices had an unfavorable impact on segment earnings when compared to the 1994 first quarter, overall performance remained strong due to continued strength in the export markets. Third party sales and total production volumes for the major products in this segment for the thirteen weeks ended March 26, 1995 and March 27, 1994 were as follows: Third Party Sales Total Production --------------------- --------------------- Thirteen Weeks Ended Thirteen Weeks Ended --------------------- --------------------- March 26, March 27, March 26, March 27, Products (in millions) 1995 1994 1995 1994 - ------------------------------ --------- --------- --------- --------- Raw materials-cubic feet 136 149 -- -- Logs-cubic feet -- -- 238 182 Softwood lumber-board feet 1,042 974 841 803 Softwood plywood and veneer- square feet (3/8") 611 547 313 309 Composite panels-square feet (3/4") 159 159 146 141 Oriented strand board-square feet (3/8") 430 410 402 384 Hardboard-square feet (7/16") 39 39 29 32 Hardwood lumber-board feet 66 58 60 55 Hardwood doors (thousands) 154 145 156 141
Weyerhaeuser Company - -17- The pulp, paper and packaging segment's operating earnings were $210 million for the quarter compared with $5 million reported in the same quarter of 1994. Significant price improvement in the pulp, newsprint, paper and packaging markets was the key factor in this continued strong recovery in this segment. Third party sales and total production volumes for the major products in this segment for the thirteen weeks ended March 26, 1995 and March 27, 1994 were as follows: Third Party Sales Total Production --------------------- --------------------- Thirteen Weeks Ended Thirteen Weeks Ended --------------------- --------------------- March 26, March 27, March 26, March 27, Products (in thousands) 1995 1994 1995 1994 - ------------------------------ --------- --------- --------- --------- Pulp--air-dry metric tons 589 498 542 527 Newsprint-metric tons 160 165 167 161 Paper-tons 267 247 263 257 Paperboard-tons 56 50 57 50 Containerboard-tons 62 67 613 566 Packaging-MSF 8,188 8,162 8,650 8,639 Recycling-tons 265 229 577 479
The company's real estate and financial services segments earned $4 million in the quarter compared with $7 million in the year ago quarter. Higher interest rates have had an impact on the real estate segment as new home sales nationally are at the slowest rate in almost three years. The higher interest rates, as well as the seasonality of home sales, contributed to the lower earnings performance of the financial services segment as both residential loan funding and loan application volume were down from the prior year's first quarter. The increase in the company's cost of products sold from year to year is consistent with the increases in sales activity for the timberlands and wood products and pulp, paper and packaging segments, while the decrease in costs and operating expenses of the real estate and financial services segments are in alignment with the lower sales activities in those segments. Other income (expense) is an aggregation of both recurring and occasional non-operating income and expense items and, as a result, fluctuates from period to period. No individual income or (expense) item for the thirteen week periods ended March 26, 1995 and March 27, 1994 was significant in relation to net earnings. Liquidity and Capital Resources During the quarter, the company called the $150 million 9-3/8% debentures which were due in 1998 and sold two new issues, $300 million 8.5% debentures and $250 million 7.95% debentures, both due in 2025. The proceeds from the latter issue were received at month-end and were invested in marketable securities, accounting for the majority of the $292 million increase in cash and short-term investments at the end of the quarter. Other items included in the total working capital increase of $491 million from year-end 1994 were increases in receivables and inventories partially offset by an increase in accounts payable. The change in cash provided by operations in the real estate and financial services segments from 1994 to 1995 was primarily a result of: (1) loan sales continuing to exceed originations in the company's mortgage banking business; and (2) the cash payment of accrued taxes in 1994 related to higher 1993 income. Debt reductions for this segment were $25 million on the medium term notes in 1995 and a $50 million 9.42% note in 1994. During the first quarter of both 1995 and 1994, the company paid $62 million in cash dividends. Capital expenditures for 1995 first quarter amounted to $183 million compared to $268 million in the first quarter of 1994. The cash required to meet these and other company needs was generated principally from internal cash flow. The company currently anticipates capital expenditures in 1995 to approximate $1.2 billion. Earnings before interest expense and income taxes plus non-cash charges for the thirteen week periods ended March 26, 1995 and March 27, 1994 were $284 million and $327 million, respectively, for the timberlands and wood products segment, and $290 million and $74 million, respectively, for the pulp, paper and packaging segment. Capital expenditures during this period were $55 million by timberlands and wood products, $115 million for pulp, paper and packaging and $13 million by other segments. Expenditures in the pulp, paper and packaging segment were significantly lower than the $215 million spent in the 1994 first quarter as the company's modernization projects at its Longview, Washington and Plymouth, North Carolina complexes are nearing completion. Weyerhaeuser Company - -18- 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 underlying interests of its shareholders and lenders and the desire to have access, at all times, to all 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. Other Items In April, the company announced that it is in private discussions with potential financial investors about the possibility of forming a joint- venture partnership that would make investments in timberlands and related assets around the world. The size of the venture, of which the company would be a 50 percent owner, would depend upon the specific investments made, but could ultimately reach $1.5 billion over time. The company's contribution to the joint venture would be U.S. timberlands with a market value of approximately $260 million and cash, while the investors group would provide cash contributions of an equal amount. At the 1995 annual meeting in April, the company announced that the board of directors had approved: . Raising the company's quarter dividend rate from 30 cents to 40 cents a share effective with the second quarter of 1995. This will result in an annualized rate of $1.60 per common share. . Authorizing the repurchase of up to 10 million shares of the company's common stock, which is about 5 percent of the current shares outstanding. The company plans to complete the repurchase within a year. Contingencies The company is a party to legal proceedings and environmental matters generally incidental to its business. Although the final outcome of any legal proceeding or environmental matter is subject to a great many variables and cannot be predicted with any degree of certainty, the company presently believes that the ultimate outcome resulting from these proceedings and matters would not have a material effect on the company's current financial position, liquidity or results of operations; however, in any given future reporting period such proceedings or matters could have a material effect on results of operations. Weyerhaeuser Company - -19- Part II. Other Information Item 1. 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 settled the portion of the case relating to export transactions and received a tax refund of approximately $10 million, plus statutory interest. In September 1994, the United States Court of Federal Claims issued an opinion on the casualty loss issues which will result in the allowance of additional tax refunds of approximately $2 million, plus statutory interest. The company has appealed the decision. 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 all but one of the defendants. In July 1993, the trial court dismissed fourteen of the thirty-five sites named in the complaint. In May 1994, the Washington State Supreme Court reversed the trial court's dismissal of those sites. Trial on two sites against the sole remaining defendant began in October 1994 and resulted in a jury verdict which awarded damages to the company with respect to one of the sites. Trial on several additional sites is set for February 1996. The company has undertaken a review of all its wood products facilities for compliance with the Prevention of Significant Deterioration (PSD) regulations and has disclosed PSD compliance issues to certain state agencies and the Environmental Protection Agency (EPA). The company and the State of Mississippi Department of Environmental Quality have entered into a consent agreement concerning PSD regulations at company facilities in Philadelphia and Bruce, Mississippi, involving penalties of $170 thousand. The State of Alabama has issued a compliance order with penalties totaling $100 thousand 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 thousand and concluded a separate consent agreement for its Moncure, North Carolina facility involving penalties of $140 thousand. The company has signed a consent agreement including penalties of $140 thousand relating to PSD issues at the company's Wright City, Oklahoma facility with the State of Oklahoma Department of Environmental Quality. The company has signed consent agreements with the State of Arkansas concerning PSD related issues for facilities in Dierks and Mountain Pine, involving $375 thousand 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 has negotiated a settlement of those alleged permit violations and other PSD related issues with the Michigan Department of Natural Resources that involves penalties of approximately $499 thousand. The company has entered into negotiations with the Lane County, Oregon Regional Air Pollution Control Authority concerning a draft Notice of Violation which would seek penalties for alleged PSD violations at the company's Springfield, Oregon particleboard operations. 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 EPA issued a Notice of Violation in August 1994 for nine company facilities (including the Plymouth, North Carolina and Adel, Georgia wood products facilities and all of the facilities mentioned above except the Grayling, Michigan, Springfield, Oregon and Bruce, Mississippi wood products facilities) as part of its national PSD enforcement action against the company and other forest product companies. The company has also undertaken a review of its ten major pulp and paper facilities to evaluate the facilities' compliance with PSD regulations, and has disclosed the potential of PSD compliance issues to seven state agencies and the EPA. The company is currently working with the states to negotiate settlements for the alleged violations. In April 1995, EPA Region X issued a Notice of Violation to the company and to North Pacific Paper Corporation (NORPAC), a joint venture in which the company has an 80 percent ownership interest. The Notice of Violation addresses alleged PSD violations at NORPAC's Longview, Washington, newsprint manufacturing facility. The Washington State Department of Ecology has investigated the accidental release of chlorine, chlorine dioxide and non-condensable gasses at the company's pulp mill in Longview, in July 1994 and has issued a $10 thousand penalty for the chlorine release and a $5 thousand penalty for the non-condensable gasses release. The EPA is also investigating the accidental chlorine release and has indicated that it will seek penalties against the company. Weyerhaeuser Company - -20- Part II. Other Information Item 1. 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 thousand and penalties of 500 dollars per day until compliance is demonstrated. The SFO required 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 thousand 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 biphenyl (PCB) rules contained in the Toxic Substances Control Act. The company and the EPA settled the complaint for a maximum penalty of $118 thousand, 50% of which was paid when the consent agreement was signed. Payment of the remaining 50% was eliminated based on the company's expenditure of $118 thousand to dispose of PCB contaminated transformers at the Longview facility. On October 27, 1994, the EPA issued a Notice of Case Closure, acknowledging that the company had satisfied all of the terms and conditions of the consent agreement. 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 Greene County, Alabama, on behalf of a similar purported class of riparian owners with essentially the same claims as the Mississippi case. By order dated April 5, 1995, venue of the Alabama action was transferred to Sumter County, Alabama. On January 20, 1995, the court in the Alabama action certified a class of all persons who, as of the date the action commenced, were riparian owners, lessees and licensees of properties located on the Tennessee Tombigbee Waterway in Greene, Sumter, Pickens and Marengo counties, Alabama, and Lowndes and Noxubee counties, Mississippi, to determine whether the company is liable to the members of the class for compensatory and/or punitive damages and to determine the amount of punitive damages, if any, to be awarded to the class as a whole. By order dated April 12, 1995, the geographical boundaries of the class were amended to run from below the Columbus mill's wastewater discharge pipe to the point where the Black Warrior River joins the Tennessee Tombigbee Waterway. The class is estimated to range from approximately 1,000 to 1,500 members. Neither the Mississippi action nor the Alabama action is presently scheduled for trial. The company was sued in the United States District Court for the District of Alaska by two corporations with which the company had entered into financing arrangements, a marketing agreement, and a technical assistance agreement. The plaintiffs claimed the company 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, sought 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 was dismissed by the trial court. In March 1994, a jury returned a verdict against the company awarding damages of $1.2 million. Both the company and the plaintiffs have appealed. 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 EPA 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 outcome resulting from the legal proceedings discussed herein, or all of them combined, would not have a material effect on the company's current financial position, liquidity or results of operations; however, in any given future reporting period, such legal proceedings could have a material effect on results of operations. Item 6. Exhibits and Reports on Form 8-K (a) Not applicable. (b) The registrant has not filed a report on Form 8-K during the fiscal quarter for which this report on Form 10-Q is filed. EX-27 2
5 1000000 3-MOS DEC-31-1995 MAR-26-1995 390 0 1053 0 870 2479 6134 0 13478 1677 4670 258 0 0 4175 13478 2745 2745 1941 1941 183 1 73 328 121 207 0 0 0 207 1.00 1.00
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