0000106535-95-000021.txt : 19950810
0000106535-95-000021.hdr.sgml : 19950810
ACCESSION NUMBER: 0000106535-95-000021
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 2
CONFORMED PERIOD OF REPORT: 19950625
FILED AS OF DATE: 19950809
SROS: CSX
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: 95559933
BUSINESS ADDRESS:
STREET 1: CORPORATE CONTROLLERS DEPARTMENT
STREET 2: CH 2C26
CITY: TACOMA
STATE: WA
ZIP: 98477
BUSINESS PHONE: 2069242345
MAIL ADDRESS:
STREET 1: CORPORATE CONTROLLERS DEPARTMENT
STREET 2: CH 2C26
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 twenty-six weeks ended June 25, 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) Chicago Stock Exchange
New York Stock Exchange
Pacific Stock Exchange
Tokyo Stock Exchange
Rights to Purchase Cumulative Preference New York Stock Exchange
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 ___.
The number of shares outstanding of the registrant's class of common
stock, as of July 28, 1995 was 203,284,436 common shares ($1.25 par
value).
Weyerhaeuser Company
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Weyerhaeuser Company
-3-
WEYERHAEUSER COMPANY AND SUBSIDIARIES
Index to Form 10-Q Filing
For the Twenty-six Weeks Ended June 25, 1995
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statement of Earnings 4-5
Consolidated Balance Sheet 6-7
Consolidated Statement of Cash Flows 8-9
Notes to Financial Statements 11-16
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 17-20
Part II. Other Information
Item 1. Legal Proceedings 21-23
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 23
Item 5. Other Information (not applicable)
Item 6. Exhibits and Reports on Form 8-K 23
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 twenty-six week period ending June 25, 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
August 9, 1995
Weyerhaeuser Company
-4-
WEYERHAEUSER COMPANY AND SUBSIDIARIES
____________
CONSOLIDATED EARNINGS
For the twenty-six week periods ended
June 25, 1995 and June 26, 1994
(Dollar amounts in millions except per share figures)
(Unaudited)
Thirteen weeks ended: June 25, June 26,
1995 1994
-------- --------
Net sales and revenues:
Weyerhaeuser $ 2,848 $ 2,312
Real estate and financial services 226 286
------- -------
3,074 2,598
------- -------
Costs and expenses:
Weyerhaeuser:
Costs of products sold 2,015 1,727
Depreciation, amortization and fee stumpage 139 129
Selling, general and administrative expenses 181 145
Research and development expenses 12 12
Taxes other than payroll and income taxes 41 37
------- -------
2,388 2,050
------- -------
Real estate and financial services:
Costs and operating expenses 171 218
Depreciation and amortization 9 7
Selling, general and administrative expenses 32 39
Taxes other than payroll and income taxes 2 2
------- -------
214 266
------- -------
2,602 2,316
------- -------
Operating income 472 282
Interest expense and other:
Weyerhaeuser:
Interest expense incurred 66 59
Less interest capitalized 6 10
Other income (expense), net (19) (15)
Real estate and financial services:
Interest expense incurred 36 40
Less interest capitalized 19 20
Other income, net 10 4
------- -------
Earnings before income taxes 386 202
Income taxes (Note 2) 140 73
------- -------
Net earnings $ 246 $ 129
======= =======
Per common share (Note 1):
Net earnings $ 1.21 $ .62
======= =======
Dividends paid $ .40 $ .30
======= =======
See Accompanying Notes to Financial Statements
Weyerhaeuser Company
-5-
Twenty-six weeks ended: June 25, June 26,
1995 1994
-------- --------
Net sales and revenues:
Weyerhaeuser $ 5,411 $ 4,438
Real estate and financial services 408 546
-------- --------
5,819 4,984
-------- --------
Costs and expenses:
Weyerhaeuser:
Costs of products sold 3,826 3,279
Depreciation, amortization and fee stumpage 268 245
Selling, general and administrative expenses 341 292
Research and development expenses 23 23
Taxes other than payroll and income taxes 84 76
-------- --------
4,542 3,915
-------- --------
Real estate and financial services:
Costs and operating expenses 301 404
Depreciation and amortization 18 15
Selling, general and administrative expenses 63 83
Taxes other than payroll and income taxes 4 4
-------- --------
386 506
-------- --------
4,928 4,421
-------- --------
Operating income 891 563
Interest expense and other:
Weyerhaeuser:
Interest expense incurred 130 116
Less interest capitalized 12 18
Other income (expense), net (41) (30)
Real estate and financial services:
Interest expense incurred 69 78
Less interest capitalized 37 40
Other income, net 14 9
-------- --------
Earnings before income taxes 714 406
Income taxes (Note 2) 261 150
-------- --------
Net earnings $ 453 $ 256
======== ========
Per common share (Note 1):
Net earnings $ 2.21 $ 1.24
======== ========
Dividends paid $ .70 $ .60
======== ========
See Accompanying Notes to Financial Statements
Weyerhaeuser Company
-6-
WEYERHAEUSER COMPANY AND SUBSIDIARIES
____________
CONSOLIDATED BALANCE SHEET
June 25, 1995 and December 25, 1994
(Dollar amounts in millions)
June 25, Dec. 25,
1995 1994
------------ ---------
(Unaudited)
Assets
------
Weyerhaeuser
Current assets:
Cash and short-term investments $ 107 $ 39
Receivables, less allowances 1,054 909
Inventories (Note 3) 830 746
Prepaid expenses 283 284
-------- --------
Total current assets 2,274 1,978
Property and equipment (Note 4) 6,209 6,196
Construction in progress 697 603
Timber and timberlands at cost, less fee
stumpage charged to disposals 625 610
Other assets and deferred charges 216 212
-------- --------
Total assets 10,021 9,599
-------- --------
Real estate and financial services
Cash and short-term investments,
including restricted deposits 50 73
Receivables, less discounts and allowances 98 116
Mortgage and construction notes and
mortgage loans receivable 534 472
Investments 256 247
Mortgage-backed certificates and
other pledged financial instruments 200 211
Real estate in process of development,
less reserves 679 668
Land being processed for development,
less reserves 756 738
Deferred acquisition costs 92 92
Investments in and advances to joint ventures
and limited partnerships, less reserves 440 430
Other assets 327 361
-------- --------
Total assets 3,432 3,408
-------- --------
$ 13,453 $ 13,007
======== ========
See Accompanying Notes to Financial Statements
Weyerhaeuser Company
-7-
June 25, Dec. 25,
1995 1994
--------- ---------
(Unaudited)
Liabilities and shareholders' interest
--------------------------------------
Weyerhaeuser
Current liabilities:
Notes payable $ 5 $ 6
Current maturities of long-term debt 393 321
Accounts payable 679 645
Accrued liabilities (Note 5) 667 695
-------- --------
Total current liabilities 1,744 1,667
Long-term debt (Note 7) 2,721 2,713
Deferred income taxes 1,087 986
Deferred pension and other liabilities 498 525
Minority interest in subsidiaries 106 103
Commitments and contingencies (Note 9) -- --
-------- --------
Total liabilities 6,156 5,994
-------- --------
Real estate and financial services
Notes payable and commercial paper 728 416
Collateralized mortgage obligation bonds 173 183
Long-term debt (Note 7) 1,549 1,770
Other liabilities 333 354
Commitments and contingencies (Note 9) -- --
-------- --------
Total liabilities 2,783 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 (93) (107)
Retained earnings 4,042 3,733
Treasury common shares, at cost:
2,595,652 and 455,387 (109) (10)
-------- --------
Total shareholders' interest 4,514 4,290
-------- --------
$ 13,453 $ 13,007
======== ========
Weyerhaeuser Company
-8-
WEYERHAEUSER COMPANY AND SUBSIDIARIES
____________
CONSOLIDATED STATEMENT OF CASH FLOWS
For the twenty-six week periods ended June 25, 1995 and June 26, 1994
(Dollar amounts in millions)
(Unaudited)
Consolidated
-------------------
June 25, June 26,
1995 1994
--------- --------
Cash flows provided by operations:
Net earnings $ 453 $ 256
Non-cash charges to income:
Depreciation, amortization and fee stumpage 286 260
Deferred income taxes, net 102 52
Changes in working capital:
Receivables (126) (125)
Inventories, prepaid expenses, real estate and land (95) (44)
Mortgages held for sale (68) 208
Other liabilities (33) 65
(Gain) loss on disposition of assets 8 3
Other 23 --
-------- --------
Net cash provided by operations 550 675
-------- --------
Cash flows from investing in the business:
Property and equipment (375) (532)
Timber and timberlands (41) (15)
Mortgage and investment securities acquired (25) (4)
Proceeds from sale of:
Property and equipment 12 28
Business -- 14
Mortgage and investment securities 18 87
Other (11) (4)
-------- --------
Net cash flows from investing in the business (422) (426)
-------- --------
Cash flows from financing activities:
Sale of debentures, notes and CMO bonds 574 240
Sale of industrial revenue bonds 100 100
Notes and commercial paper borrowings, net (88) (239)
Cash dividends on common shares (144) (123)
Payments on debentures, notes, bank credit
agreements, capital leases, industrial
revenue bonds and CMO bonds (425) (305)
Purchase of treasury common shares (109) --
Exercise of stock options 10 15
Other (1) 2
-------- --------
Net cash flows from financing activities (83) (310)
-------- --------
Net increase (decrease) in cash and short-term investments 45 (61)
Cash and short-term investments at beginning of year 112 160
-------- --------
Cash and short-term investments at end of period $ 157 $ 99
======== ========
Cash paid (received) during the period for:
Interest, net of amount capitalized $ 138 $ 137
======== ========
Income taxes $ 88 $ 92
======== ========
See Accompanying Notes to Financial Statements
Weyerhaeuser Company
-9-
Real Estate and
Weyerhaeuser Financial Services
--------------------- --------------------
June 25, June 26, June 25, June 26,
1995 1994 1995 1994
--------- --------- --------- ---------
$ 452 $ 247 $ 1 $ 9
268 245 18 15
101 41 1 11
(144) (130) 18 5
(82) (22) (13) (22)
-- -- (68) 208
(12) 138 (21) (73)
8 7 -- (4)
5 (17) 18 17
--------- --------- --------- ---------
596 509 (46) 166
--------- --------- --------- ---------
(368) (522) (7) (10)
(41) (15) -- --
-- -- (25) (4)
12 6 -- 22
-- -- -- 14
-- -- 18 87
34 (14) (45) 10
--------- --------- --------- ---------
(363) (545) (59) 119
--------- --------- --------- ---------
559 123 15 117
100 100 -- --
(411) 15 323 (254)
(144) (123) -- --
(169) (130) (256) (175)
(109) -- -- --
10 15 -- --
(1) 2 -- --
--------- --------- --------- ---------
(165) 2 82 (312)
--------- --------- --------- ---------
68 (34) (23) (27)
39 73 73 87
--------- --------- --------- ---------
$ 107 $ 39 $ 50 $ 60
========= ========= ========= =========
$ 108 $ 99 $ 30 $ 38
========= ========= ========= =========
$ 103 $ 24 $ (15) $ 68
========= ========= ========= =========
Weyerhaeuser Company
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Weyerhaeuser Company
-11-
WEYERHAEUSER COMPANY AND SUBSIDIARIES
____________
NOTES TO FINANCIAL STATEMENTS
For the twenty-six week periods ended June 25, 1995 and June 26, 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.
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. The company has not
completed its analysis of the impact of this pronouncement on its long-
lived assets. However, the implementation of SFAS No. 121 will result
in a revaluation of some of the real estate holdings of the
company's subsidiaries, Weyerhaeuser Real Estate Company and
Weyerhaeuser Financial Services, Inc. Based on the company's analysis
to date, it is expected this revaluation will have a material
adverse effect on the company's results of operations for the year in
which this accounting change is implemented; however, it will not
have a material impact on the company's current financial position
or liquidity.
Weyerhaeuser Company
-12-
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 205,243,409 and 205,491,304 at June 25,
1995 and June 26, 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
-13-
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.
WFS
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
-14-
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
Twenty-six Weeks Ended
------------------------
June 25, June 26,
Dollar amounts in millions 1995 1994
---------- ----------
Federal:
Current $ 82 $ 55
Deferred 92 41
-------- --------
174 96
-------- --------
State:
Current 15 11
Deferred 6 3
-------- --------
21 14
-------- --------
Foreign:
Current 62 32
Deferred 4 8
-------- --------
66 40
-------- --------
Total $ 261 $ 150
======== ========
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 June 25, 1995 and June 26, 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 rate for the
twenty-six week periods ended June 25, 1995 and June 26, 1994 were
36.5% and 37% 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,
and pension and retiree health care liabilities.
Weyerhaeuser Company
-15-
Note 3: Inventories
June 25, Dec. 25,
Dollar amounts in millions 1995 1994
-------- -------
Logs and chips $ 113 $ 108
Lumber, plywood and panels 131 115
Pulp, newsprint and paper 93 88
Containerboard, paperboard and containers 92 56
Other products 126 112
Materials and supplies 275 267
-------- -------
$ 830 $ 746
======== =======
Note 4: Property and Equipment
June 25, Dec. 25,
Dollar amounts in millions 1995 1994
-------- --------
Property and equipment, at cost:
Land $ 161 $ 159
Buildings and improvements 1,521 1,509
Machinery and equipment 8,743 8,557
Rail and truck roads and other 628 628
-------- --------
11,053 10,853
Less allowance for depreciation
and amortization 4,844 4,657
-------- --------
$ 6,209 $ 6,196
======== ========
Note 5: Accrued Liabilities
June 25, Dec. 25,
Dollar amounts in millions 1995 1994
-------- --------
Payroll - wages and salaries, incentive awards,
retirement and vacation pay $ 211 $ 217
Taxes - social security and real
and personal property 58 63
Interest 78 67
Income taxes 100 105
Other 220 243
-------- --------
$ 667 $ 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 June 25, 1995 and
December 25, 1994.
No portion of these lines has been availed of by the company, WRECO or
WMC at June 25, 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 $245 million at June 25, 1995 and $235 million at December 25,
1994. Borrowings against these lines were $125 million and
$85 million as of June 25, 1995 and December 25, 1994, respectively.
Weyerhaeuser Company
-16-
Note 7: Long-Term Debt
At June 25, 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
June 25, 1995 or December 25, 1994.
At June 25, 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 June 25, 1995 and December 25, 1994,
$15 million and $20 million, respectively, were 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 June 25, 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 June 25, 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:
June 25, Dec. 25,
Dollar amounts in millions 1995 1994
-------- --------
Weyerhaeuser $ -- $ 411
Real estate and financial services 440 429
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
6,454,000 shares at June 25, 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 $1.1 billion in
1995; however, the 1995 expenditure level could be increased or
decreased as a consequence of changes in 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
-17-
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 Twenty-six Weeks Ended
-------------------- ----------------------
June 25, June 26, June 25, June 26,
Dollar amounts in millions 1995 1994 1995 1994
-------- -------- -------- --------
Net sales and revenues:
Timberlands and wood products $ 1,271 $ 1,249 $ 2,458 $ 2,431
Pulp, paper and packaging 1,496 995 2,824 1,898
Real estate 179 239 319 439
Financial services 47 47 89 107
Corporate and other 81 68 129 109
-------- -------- -------- --------
$ 3,074 $ 2,598 $ 5,819 $ 4,984
======== ======== ======== ========
Earnings before interest expense
and income taxes:
Timberlands and wood products $ 188 $ 243 $ 429 $ 526
Pulp, paper and packaging 305 30 513 35
Real estate (4) 3 (3) 4
Financial services(1) 4 1 7 7
Corporate and other (47) (26) (114) (68)
-------- -------- -------- --------
$ 446 $ 251 $ 832 $ 504
======== ======== ======== ========
(1) Includes interest expense of $17 million and $19 million for thirteen
weeks and $32 million and $37 million for twenty-six weeks related to
the financial services businesses.
Results of Operations
Second quarter net sales were a record $3.1 billion, which exceeded
the 1994 same quarter sales of $2.6 billion by 18 percent. Net
earnings from operations in the current quarter, also a record, were
$246 million or $1.21 per common share, up 91 percent over the
$129 million or 62 cents per common share reported in the 1994 second
quarter.
1995 first half sales were $5.8 billion, accounting for a 17 percent
increase when compared to $5.0 billion in the first half of last year.
Net earnings from operations came in at $453 million, which is a
77 percent increase over the $256 million earned in the same period
last year.
The timberlands and wood products segment's operating earnings in the
1995 second quarter were $188 million compared with $243 million in
the same quarter a year ago. Year-to-date, this segment earned
$429 million in 1995, down from last year's $526 million. The lower
domestic wood products prices, which were a factor in the first
quarter of 1995, continued to have an unfavorable impact on segment
earnings in the current quarter when compared to both the 1994 second
quarter and first half results. Continued strength in the export
markets contributed positively to the segment's overall performance.
Weyerhaeuser Company
-18-
Third party sales and total production volumes for the major products
in this segment were as follows:
Thirteen Weeks Ended Year-to-date
-------------------- ------------------
June 25, June 26, June 25, June 26,
1995 1994 1995 1994
--------- -------- -------- --------
Third party sales volumes
(millions):
Raw materials--cubic feet 132 138 268 287
Softwood lumber--board feet 1,148 1,125 2,190 2,099
Softwood plywood and veneer--
square feet (3/8") 687 718 1,298 1,265
Composite panels--square feet (3/4") 146 173 305 332
Oriented strand board--
square feet (3/8") 452 484 882 894
Hardboard--square feet (7/16") 49 44 88 83
Hardwood lumber--board feet 68 65 134 123
Hardwood doors (thousands) 176 153 330 298
Total production volumes
(millions):
Logs--cubic feet 213 150 451 332
Softwood lumber--board feet 910 825 1,751 1,628
Softwood plywood and veneer--
square feet (3/8") 316 316 629 625
Composite panels--square feet (3/4") 134 158 280 299
Oriented strand board--
square feet (3/8") 411 398 813 782
Hardboard--square feet (7/16") 32 31 61 63
Hardwood lumber--board feet 64 58 124 113
Hardwood doors (thousands) 168 146 324 287
Earnings performance in the pulp, paper and packaging segment
continued to be very strong as operating earnings were $305 million
for the quarter compared with $30 million reported in the same quarter
of 1994. This performance, combined with a good first quarter,
resulted in 1995 year-to-date earnings of $513 million in contrast to
the $35 million earned in the same period last year. Continued price
improvement in the pulp, newsprint, paper and packaging markets along
with ongoing improvement in operations were the key factors in the
sustained recovery in this segment.
Third party sales and total production volumes for the major products
in this segment were as follows:
Thirteen Weeks Ended Year-to-date
-------------------- ------------------
June 25, June 26, June 25, June 26,
1995 1994 1995 1994
-------- -------- -------- --------
Third party sales volumes
(thousands):
Pulp--air-dry metric tons 610 549 1,199 1,047
Newsprint--metric tons 170 153 330 318
Paper--tons 252 254 519 501
Paperboard--tons 60 51 116 101
Containerboard--tons 72 63 134 130
Packaging--MSF 8,498 8,858 16,686 17,020
Recycling--tons 354 234 619 463
Total production volumes
(thousands):
Pulp--air-dry metric tons 590 501 1,132 1,028
Newsprint--metric tons 167 157 334 318
Paper--tons 262 246 525 503
Paperboard--tons 60 53 117 103
Containerboard--tons 583 596 1,196 1,162
Packaging--MSF 8,887 9,131 17,537 17,770
Recycling--tons 661 509 1,238 988
Weyerhaeuser Company
-19-
The company's real estate and financial services segments were
slightly better than break-even for the quarter compared with earnings
of $4 million in the year ago quarter. The real estate segment
results have been impacted by decreased single family closings.
Falling interest rates during the quarter have increased loan
financing in the mortgage banking business and contributed to positive
earnings; however, the seasonality of home sales and higher interest
rates in the first quarter have resulted in year-to-date earnings
equaling the 1994 first half results.
The increase in the company's cost of products sold in both the
thirteen and twenty-six week periods compared to last year is
consistent with the increase in sales activity principally for the
pulp, paper and packaging segment. The increase in depreciation
expense is a result of the completion and start-up of several mill
modernization projects in the pulp, paper and packaging segment.
The decreases in costs and operating expenses of real estate and
financial services are in line 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 and twenty-six week periods ended June 25, 1995
and June 26, 1994 was significant in relation to net earnings.
Liquidity and Capital Resources
During the first half of 1995, the company sold $100 million of
industrial revenue bonds, $300 million of 8.5% debentures and
$250 million of 7.95% debentures, called $150 million of 9-3/8%
debentures and retired $411 million of commercial paper. The 1995
year-to-date increase in net working capital of $219 million consists
primarily of increases in receivables and inventories due to increased
business activity and an increase in cash, partially offset by an
increase in the current maturities of long-term debt.
The year-to-date change in cash provided by operations in the real
estate and financial services segments from 1994 to 1995 was due
primarily to origination activity exceeding sales of mortgage loans in
the company's mortgage banking business. Commercial paper borrowings
increased during the year to finance construction activity in the real
estate segment and to fund mortgage loan originations and pay down
higher cost long-term debt in the financial services segment.
The company paid $144 million in cash dividends in the first half of
1995 compared to $123 million in the same period of 1994. This
increase reflects raising the company's quarterly dividend from
30 cents to 40 cents effective with the current quarter.
Capital expenditures for 1995 year-to-date amounted to $416 million
compared to $547 million in the first half of 1994. The 1995
expenditures by segment were $153 million by timberlands and wood
products, $236 million for pulp, paper and packaging and $27 million
by other segments. Expenditures in the pulp, paper and packaging
segment were significantly lower than the $424 million spent during
the same period in 1994, reflecting the completion of the company's
modernization projects at Longview, Washington and Plymouth, North
Carolina. The company currently anticipates capital expenditures in
1995 to approximate $1.1 billion.
The cash needed to meet these and other company needs was generated
principally from internal cash flow.
Earnings before interest expense and income taxes plus non-cash
charges for the twenty-six week periods ended June 25, 1995 and
June 26, 1994 were $526 million and $613 million, respectively, for
the timberlands and wood products segment, and $675 million and
$178 million, respectively, for the pulp, paper and packaging segment.
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.
Weyerhaeuser Company
-20-
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.
Accounting Pronouncement
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. The company has not
completed its analysis of the impact of this pronouncement on its
long-lived assets. However, the implementation of SFAS No. 121 will
result in a revaluation of some of the real estate holdings of the
company's subsidiaries, Weyerhaeuser Real Estate Company and
Weyerhaeuser Financial Services, Inc. Based on the company's
analysis to date, it is expected this revaluation will have a
material adverse effect on the company's results of operations
for the year in which this accounting change is implemented;
however, it will not have a material impact on the company's current
financial position or liquidity.
Other Items
. The company has embarked on a new series of business improvement
plans during the quarter which targets $650 million in pre-tax
operating improvements measured in 1994 prices and costs by year-
end 1997. This exceeds, by $250 million, the original goal of
$400 million.
. 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.
. The ten million share repurchase program announced at the
company's annual meeting has been implemented and 2.6 million
shares were purchased in the second quarter.
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
-21-
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 reviewed all its wood products facilities for compliance
with the Prevention of Significant Deterioration (PSD) regulations and
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 received from the Lane
County, Oregon Regional Air Pollution Control Authority (LRAPA) a
draft Notice of Violation which seeks penalties for alleged PSD
violations at the company's Springfield, Oregon particleboard
operations. LRAPA informed the company in July 1995 that it will
withdraw its draft Notice of Violation and will not seek fines or
penalties. 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. On July 5, 1995, the EPA notified the company that
it would not seek fines or penalties for the company's wood product
facilities in addition to those imposed by the states.
Weyerhaeuser Company
-22-
Part II. Other Information
Item 1. Legal Proceedings - continued
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. In accordance
with instructions from EPA, the company and the Washington State
Department of Ecology are working to resolve the issues raised in the
Notice of Violation. The company is also negotiating with the State
of Oklahoma regarding the resolution of alleged PSD violations at the
company's Valliant, Oklahoma containerboard 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. In June
1994, EPA issued an Administrative Complaint against the company,
seeking penalties of $225 thousand and alleging a failure to timely
report the chlorine release.
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
submitted an initial PSD review to the state in December 1993. A
revised report was delivered to the state in March 1995.
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.
Weyerhaeuser Company
-23-
Part II. Other Information
Item 1. Legal Proceedings - continued
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 4. Submission of Matters to a Vote of Security Holders
Reference is hereby made to the 1995 Weyerhaeuser Company First
Quarter and Annual Meeting Report to Shareholders for information
about the matters voted upon and the votes cast with respect thereto
at the annual meeting of the Shareholders of Weyerhaeuser Company on
April 20, 1995.
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
6-MOS
DEC-31-1995
JUN-25-1995
157
0
1152
0
830
2274
6209
0
13453
1744
4443
258
0
0
4256
13453
5819
5819
4127
4127
374
3
150
714
261
453
0
0
0
453
2.21
2.21
Receivables are stated net of allowances and Property, Plant and Equipment is
stated net of accumulated depreciation.