-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E5/rpbSFPjECdK1oboY7WjlhtFInULLSBQowURQqO0rA6aVXTDsw/4UViAA1aWx2 QbqU8xrf6/tJ9r0UkTA2Lg== 0000106535-96-000039.txt : 19961106 0000106535-96-000039.hdr.sgml : 19961106 ACCESSION NUMBER: 0000106535-96-000039 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19960929 FILED AS OF DATE: 19961104 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: 96653288 BUSINESS ADDRESS: STREET 1: 33663 WEYERHAEUSER WAY SOUTH CITY: FEDERAL WAY STATE: WA ZIP: 98003 BUSINESS PHONE: 2069242345 MAIL ADDRESS: STREET 1: 33663 WEYERHAEUSER WAY SOUTH CITY: FEDERAL WAY STATE: WA ZIP: 98003 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 thirty-nine weeks ended September 29, 1996 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 Rights to Purchase Cumulative New York Stock Exchange Preference Shares, Fourth Series Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___. The number of shares outstanding of the registrant's class of common stock, as of October 28, 1996 was 198,310,951 common shares ($1.25 par value). Weyerhaeuser Company - -2- WEYERHAEUSER COMPANY AND SUBSIDIARIES Index to Form 10-Q Filing For the Thirty-nine Weeks Ended September 29, 1996
Page No. ---------------- Part I. Financial Information Item 1. Financial Statements Consolidated Statement of Earnings 3 Consolidated Balance Sheet 4-5 Consolidated Statement of Cash Flows 6-7 Notes to Financial Statements 9-15 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16-20 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 (not applicable) 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 31, 1995. 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 thirty-nine week period ending September 29, 1996 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 November 4, 1996 Weyerhaeuser Company - -3- WEYERHAEUSER COMPANY AND SUBSIDIARIES ____________ CONSOLIDATED EARNINGS For the periods ended September 29, 1996 and September 24, 1995 (Dollar amounts in millions except per share figures) (Unaudited)
Thirteen weeks Thirty-nine ended weeks ended ------------------- ------------------- Sept. 29, Sept. 24, Sept. 29, Sept. 24, 1996 1995 1996 1995 --------- --------- --------- --------- Net sales and revenues: Weyerhaeuser $ 2,619 $ 2,820 $ 7,635 $ 8,107 Real estate and financial services 233 217 708 625 --------- --------- --------- --------- Total net sales and revenues 2,852 3,037 8,343 8,732 --------- --------- --------- --------- Costs and expenses: Weyerhaeuser: Costs of products sold 1,982 1,943 5,745 5,657 Depreciation, amortization and fee stumpage 149 127 437 395 Selling, general and administrative expenses 175 186 522 515 Research and development expenses 12 12 39 35 Taxes other than payroll and income taxes 36 29 113 113 --------- --------- --------- --------- 2,354 2,297 6,856 6,715 --------- --------- --------- --------- Real estate and financial services: Costs and operating expenses 161 161 509 462 Depreciation and amortization 3 9 12 26 Selling, general and administrative expenses 45 31 121 85 Taxes other than payroll and income taxes 3 2 7 6 Charges for impairment of long- lived assets (Note 1) -- 290 -- 290 --------- --------- --------- --------- 212 493 649 869 --------- --------- --------- --------- Total costs and expenses 2,566 2,790 7,505 7,584 --------- --------- --------- --------- Operating income 286 247 838 1,148 Interest expense and other: Weyerhaeuser: Interest expense incurred 69 71 206 201 Less interest capitalized 3 4 17 16 Other income (expense), net (17) (14) (41) (55) Real estate and financial services: Interest expense incurred 32 38 101 107 Less interest capitalized 15 20 49 57 Other income (expense), net 1 1 14 5 --------- --------- --------- --------- Earnings before income taxes 187 149 570 863 Income taxes (Note 2) 67 54 205 315 --------- --------- --------- --------- Net earnings $ 120 $ 95 $ 365 $ 548 ========= ========= ========= ========= Per common share (Note 1): Net earnings $ .60 $ .47 $ 1.84 $ 2.68 ========= ========= ========= ========= Dividends paid $ .40 $ .40 $ 1.20 $ 1.10 ========= ========= ========= =========
See Accompanying Notes to Financial Statements Weyerhaeuser Company - -4- WEYERHAEUSER COMPANY AND SUBSIDIARIES ____________ CONSOLIDATED BALANCE SHEET September 29, 1996 and December 31, 1995 (Dollar amounts in millions)
Sept. 29 Dec. 31, 1996 1995 ----------- --------- (Unaudited) Assets - ------ Weyerhaeuser Current assets: Cash and short-term investments (Note 1) $ 45 $ 34 Receivables, less allowances 981 976 Inventories (Note 3) 947 960 Prepaid expenses 290 265 --------- --------- Total current assets 2,263 2,235 Property and equipment (Note 4) 6,585 6,717 Construction in progress 727 509 Timber and timberlands at cost, less fee stumpage charged to disposals 1,102 666 Other assets and deferred charges 245 232 --------- --------- 10,922 10,359 --------- --------- Real estate and financial services Cash and short-term investments, including restricted deposits 38 50 Receivables, less discounts and allowances 93 92 Mortgage notes held for sale 438 332 Mortgage loans receivable 161 155 Investments 52 70 Mortgage-backed certificates and other pledged financial instruments 172 185 Real estate in process of development and for sale, less reserves 711 776 Land being processed for development, less reserves 680 688 Deferred acquisition costs 10 84 Investments in and advances to joint ventures and limited partnerships, less reserves 115 113 Rental properties, less accumulated depreciation 166 184 Other assets 121 165 --------- --------- 2,757 2,894 --------- --------- Total assets $ 13,679 $ 13,253 ========= =========
See Accompanying Notes to Financial Statements Weyerhaeuser Company - -5-
Sept. 29, Dec. 31, 1996 1995 ----------- --------- (Unaudited) Liabilities and shareholders' interest - -------------------------------------- Weyerhaeuser Current liabilities: Notes payable $ 9 $ 24 Current maturities of long-term debt 80 125 Accounts payable (Note 1) 685 747 Accrued liabilities (Note 5) 607 707 --------- --------- Total current liabilities 1,381 1,603 Long-term debt (Note 7) 3,661 2,983 Deferred income taxes 1,285 1,196 Deferred pension and other liabilities 467 509 Minority interest in subsidiaries 112 111 Commitments and contingencies (Note 9) -- -- --------- --------- 6,906 6,402 --------- --------- Real estate and financial services Notes payable and commercial paper 229 338 Collateralized mortgage obligation bonds 140 159 Long-term debt (Note 7) 1,558 1,594 Other liabilities 258 274 Commitments and contingencies (Note 9) -- -- --------- --------- 2,185 2,365 --------- --------- Total liabilities 9,091 8,767 Shareholders' interest (Note 8) Common shares: authorized 400,000,000 shares, issued 206,072,890 shares, $1.25 par value 258 258 Other capital 408 415 Cumulative translation adjustment (89) (90) Retained earnings 4,353 4,226 Treasury common shares, at cost: 7,783,876 and 7,302,878 (342) (323) --------- --------- Total shareholders' interest 4,588 4,486 --------- --------- Total liabilities and shareholders' interest $ 13,679 $ 13,253 ========= =========
Weyerhaeuser Company - -6- WEYERHAEUSER COMPANY AND SUBSIDIARIES ____________ CONSOLIDATED STATEMENT OF CASH FLOWS For the thirty-nine week periods ended September 29, 1996 and September 24, 1995 (Dollar amounts in millions) (Unaudited)
Consolidated ------------------- Sept. 29, Sept. 24, 1996 1995 --------- --------- Cash flows provided by operations: Net earnings $ 365 $ 548 Non-cash charges to income: Depreciation, amortization and fee stumpage 449 421 Deferred income taxes, net 125 90 Changes in working capital: Accounts receivable (6) (150) Inventories, prepaid expenses, real estate and land 95 (170) Mortgage notes held for sale and mortgage loans receivable (107) (145) Other liabilities (206) (79) (Gain) loss on disposition of assets 7 17 Charges for impairment of long-lived assets -- 290 Other (21) 24 --------- --------- Net cash provided by operations 701 846 --------- --------- Cash flows from investing in the business: Property and equipment (548) (588) Timber and timberlands (34) (49) Property and equipment and timber and timberlands from acquisitions (448) -- Mortgage and investment securities acquired (5) (20) Proceeds from sale of: Property and equipment (Note 10) 64 15 Mortgage and investment securities 111 197 Other (34) (4) --------- --------- Net cash flows from investing in the business (894) (449) --------- --------- Cash flows from financing activities: Sale of debentures, notes and CMO bonds 8 611 Sale of industrial revenue bonds 33 100 Notes and commercial paper borrowings, net 765 (210) Cash dividends on common shares (238) (225) Payments on debentures, notes, bank credit agreements, income debenture, capital leases, industrial revenue bonds and CMO bonds (350) (535) Purchase of treasury common shares (45) (188) Exercise of stock options 19 17 Other -- (3) --------- --------- Net cash flows from financing activities 192 (433) --------- --------- Net increase (decrease) in cash and short-term investments (1) (36) Cash and short-term investments at beginning of year 84 263 --------- --------- Cash and short-term investments at end of period $ 83 $ 227 ========= ========= Cash paid (received) during the period for: Interest, net of amount capitalized $ 279 $ 252 ========= ========= Income taxes $ 137 $ 171 ========= =========
See Accompanying Notes to Financial Statements Weyerhaeuser Company - -7-
Real Estate and Weyerhaeuser Financial Services - -------------------- -------------------- Sept. 29, Sept. 24, Sept. 29, Sept. 24, 1996 1995 1996 1995 - --------- --------- --------- --------- $ 353 $ 740 $ 12 $ (192) 437 395 12 26 89 187 36 (97) (4) (167) (2) 17 14 (134) 81 (36) -- -- (107) (145) (209) (95) 3 16 10 17 (3) -- -- -- -- 290 (8) 21 (13) 3 - --------- --------- --------- --------- 682 964 19 (118) - --------- --------- --------- --------- (541) (577) (7) (11) (34) (49) -- -- (448) -- -- -- -- -- (5) (20) 53 15 11 -- -- -- 111 197 (53) (41) 19 37 - --------- --------- --------- --------- (1,023) (652) 129 203 - --------- --------- --------- --------- 8 566 -- 45 33 100 -- -- 753 (411) 12 201 (238) (225) -- -- (178) (176) (172) (359) (45) (188) -- -- 19 17 -- -- -- (3) -- -- - --------- --------- --------- --------- 352 (320) (160) (113) - --------- --------- --------- --------- 11 (8) (12) (28) 34 190 50 73 - --------- --------- --------- --------- $ 45 $ 182 $ 38 $ 45 ========= ========= ========= ========= $ 229 $ 204 $ 50 $ 48 ========= ========= ========= ========= $ 154 $ 186 $ (17) $ (15) ========= ========= ========= =========
Weyerhaeuser Company - -8- This page intentionally left blank. Weyerhaeuser Company - -9- WEYERHAEUSER COMPANY AND SUBSIDIARIES ____________ NOTES TO FINANCIAL STATEMENTS For the thirty-nine week periods ended September 29, 1996 and September 24, 1995 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). Nature of Operations The company's principal business segments, which account for the majority of sales, earnings and the asset base, are: . Timberlands and wood products, which is engaged in the management of 5.5 million acres of company-owned forestland in the United States and 18.9 million acres of forestland in Canada under long- term licensing arrangements and the production of a full line of solid wood products that are sold primarily through the company's own sales organizations to wholesalers, retailers and industrial users in North America, the Pacific Rim and Europe. . Pulp, paper and packaging, which manufactures and sells pulp, newsprint, paper, paperboard and containerboard in North American, Pacific Rim and European markets, and packaging products for the domestic markets, and which operates an extensive wastepaper recycling system that serves company mills and worldwide markets. Accounting Pronouncements Implemented In 1995 first quarter, the company implemented Statement of Financial Accounting Standards (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, and 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. The adoption of these pronouncements did not have a significant impact on results of operations or financial position. In 1995 third quarter, the company implemented SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which requires companies to change their method of valuing long-lived assets. The company's decision to accelerate the disposition of certain real estate assets previously held for development and use along with the implementation of this pronouncement resulted in a $290 million charge to operations in the third quarter of 1995. The majority of the charge was a direct result of the company's decision to accelerate the disposition of those assets. The remainder of the charge resulted from the application of those provisions of SFAS No. 121 relating to the valuation of assets held for future use where estimated undiscounted future cash flows from those assets did not exceed the carrying value of those assets. The company's evaluation of each asset first considered the availability of appraisal information, then comparable sales information, and finally discounted estimated cash flows. Because appraisal information was very limited for the assets evaluated, the majority of the assets were valued based upon comparable sales data or discounted estimated cash flows. The discount rate considered applicable market conditions and risks associated with each asset. In those cases where a discount rate was used, it was 20%. Subsequent sales have demonstrated that the valuation assumptions used were reasonable. The company is continuing with its original plans to dispose of most of the affected assets over a two-year period. The carrying value of the affected assets at September 29, 1996 and December 31, 1995 was approximately $158 million and $291 million, respectively. Weyerhaeuser Company - -10- Prospective Accounting Pronouncements In October 1995, the Financial Accounting Standards Board (FASB) issued SFAS No. 123, "Accounting for Stock-Based Compensation," which requires companies to change what they disclose about their employee stock-based compensation plans, recommends that they change the accounting for these plans to a fair-value based method and requires those companies that do not change their accounting to disclose what their earnings and earnings per share would have been if they had changed. This disclosure is applicable for financial statements for fiscal years beginning after December 15, 1995. The company will continue to account for these plans using the method of accounting prescribed by Accounting Principles Board Opinion No. 25 and will conform to the disclosure requirements of SFAS No. 123 for the fiscal year 1996. In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," to provide accounting and reporting guidance for transfers and servicing of financial assets and extinguishments of liabilities. The statement uses the "financial-components approach" in which, after a transfer of financial assets, an entity would recognize all financial assets and services it controls and all liabilities it has incurred and remove financial assets and liabilities from the balance sheet when control is surrendered or when they are extinguished, respectively. It is to be applied to transfers and servicing of financial assets and extinguishment of liabilities occurring after December 31, 1996. This statement supersedes several previous statements, including No. 122, "Accounting for Mortgage Servicing Rights--an Amendment of FASB Statement No. 65," which the company had implemented in 1995. The company believes that the future adoption of this statement will not have a significant impact on results of operations or financial position. 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 198,319,551 and 204,508,087 at September 29, 1996 and September 24, 1995, respectively. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 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. 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 company is exposed to credit-related losses in the event of nonperformance by counterparties to financial instruments but does not expect any counterparties to fail to meet their obligations. The company deals only with highly rated counterparties. Weyerhaeuser Company - -11- The notional amounts of these derivative financial instruments are $1.0 billion and $.9 billion at September 29, 1996 and December 31, 1995, respectively. These notional amounts do not represent amounts exchanged by the parties and thus are not a measure of exposure to the company through its use of derivatives. The exposure in a derivative contract is the net difference between what each party is required to pay based on the contractual terms against the notional amount of the contract, such as interest rates or exchange rates. The 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. LIFO inventories were $284 million and $305 million at September 29, 1996 and December 31, 1995, respectively. The balance of domestic raw material and product inventories, all materials and supplies inventories, and all foreign inventories are costed at either the first-in, first-out (FIFO) or moving average cost methods. 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 method at rates based on estimated service lives. Amortization of logging railroads and truck roads is provided generally as timber is harvested and is based upon rates determined with reference to the volume of timber estimated to be removed over such facilities. The cost and related depreciation of property sold or retired is removed from the property and allowance for depreciation accounts and the gain or loss is included in earnings. 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. Depletion rates used to relieve timber inventory are determined with reference to the net carrying value of timber and the related volume of timber estimated to be recoverable. Timber carrying costs are expensed as incurred. The cost of timber harvested is included in the carrying values of raw material and product inventories, and in the cost of products sold as these inventories are disposed of. Accounts Payable The company's banking system provides for the daily replenishment of major bank accounts as checks are presented. Accordingly, there were negative book cash balances of $161 million and $149 million at September 29, 1996 and December 31, 1995, respectively. Such balances result from outstanding checks that had not yet been paid by the bank and are reflected in accounts payable in the consolidated balance sheets. 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 Weyerhaeuser Company - -12- 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. Weyerhaeuser Real Estate Company Real estate held for sale is stated at the lower of cost or fair fair value. The determination of fair value is based on appraisals and market pricing of comparable assets when available, or the discounted value of estimated future cash flows from these assets. Real estate held for development is stated at cost to the extent it does not exceed the estimated undiscounted future net cash flows. Prior to its implementation of SFAS No. 121, the company recorded its inventory, assets held for development and for sale, at the lower of cost or net realizable value. Net realizable value was determined based upon the estimated selling price in the ordinary course of business less estimated costs of completion to include holding costs during construction and costs of disposal. If carrying cost exceeded net realizable value, a valuation allowance was provided. Weyerhaeuser Financial Services The company's financial services businesses are engaged in the mortgage banking industry, hold mortgage-backed certificates and other financial instruments pledged as collateral for collateralized mortgage obligation (CMO) bonds, and also offer insurance services. The company's mortgage banking business was servicing mortgage loans which had an aggregate principal balance of approximately $4.5 billion at September 29, 1996. 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). Mortgage-backed certificates are carried at par value adjusted for any unamortized discount or premium. Management's intent is to hold these certificates until maturity. CMO bonds are carried at unamortized cost. Discounts and premiums are amortized using a method that approximates the effective interest method over their estimated lives. Weyerhaeuser Company - -13- Note 2: Income Taxes
Provisions for income taxes include the following: Thirty-nine Weeks Ended ----------------------- Sept. 29, Sept. 24, Dollar amounts in millions 1996 1995 --------- --------- Federal: Current $ 42 $ 114 Deferred 124 74 --------- --------- 166 188 --------- --------- State: Current 6 21 Deferred 7 6 --------- --------- 13 27 --------- --------- Foreign: Current 32 90 Deferred (6) 10 --------- --------- 26 100 --------- --------- Total $ 205 $ 315 ========= =========
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 September 29, 1996 and September 24, 1995, 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 thirty-nine week periods ended September 29, 1996 and September 24, 1995 are 36.0% and 36.5%, 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. Note 3: Inventories
Sept. 29, Dec. 31, Dollar amounts in millions 1996 1995 --------- --------- Logs and chips $ 92 $ 173 Lumber, plywood and panels 138 135 Pulp, newsprint and paper 210 158 Containerboard, paperboard and packaging 101 107 Other products 122 117 Materials and supplies 284 270 --------- --------- $ 947 $ 960 ========= =========
Weyerhaeuser Company - -14- Note 4: Property and Equipment
Sept. 29, Dec. 31, Dollar amounts in millions 1996 1995 --------- --------- Property and equipment, at cost: Land $ 163 $ 167 Buildings and improvements 1,604 1,582 Machinery and equipment 9,325 9,253 Rail and truck roads and other 602 615 --------- --------- 11,694 11,617 Less allowance for depreciation and amortization 5,109 4,900 --------- --------- $ 6,585 $ 6,717 ========= =========
Note 5: Accrued Liabilities
Sept. 29, Dec. 31, Dollar amounts in millions 1996 1995 --------- --------- Payroll - wages and salaries, incentive awards, retirement and vacation pay $ 232 $ 265 Taxes - social security and real and personal property 68 50 Interest 42 82 Accrued income taxes 79 117 Other 186 193 --------- --------- $ 607 $ 707 ========= =========
Note 6: Short-Term Debt The company has short-term bank credit lines that provide for borrowings of up to the total amount of $375 million and $725 million, all of which could be availed of by the company, WRECO and WMC at at September 29, 1996 and December 31, 1995, respectively. No portion of these lines has been availed of by the company, WRECO or WMC at September 29, 1996 and December 31, 1995. 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 $230 million at September 29, 1996 and December 31, 1995. Borrowings against these lines were $61 million and $115 million as of September 29, 1996 and December 31, 1995, respectively. Note 7: Long-Term Debt At September 29, 1996 and December 31, 1995, 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 of 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 September 29, 1996 or December 31, 1995. WMC entered into an evergreen credit commitment in 1990. At September 29, 1996, no portion of this commitment was availed of by WMC, while at December 31, 1995, WMC had $35 million outstanding. 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 note as of July 1, 1998, to a five-year term loan payable in equal quarterly Weyerhaeuser Company - -15- installments. At September 29, 1996, no funds were drawn by WMC under this agreement, while at December 31, 1995, WMC had $20 million outstanding. WFS entered into a credit facility agreement in 1992, which was subsequently amended in May 1994 and provides for: (1) borrowings of up to $450 million and $525 million at September 29, 1996 and at December 31, 1995 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 facility. $375 million and $450 million were outstanding under this facility at September 29, 1996 and December 31, 1995, 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: Sept. 29, Dec. 31, Dollar amounts in millions 1996 1995 --------- --------- Weyerhaeuser $ 1,006 $ 252 Real estate and financial services 378 263
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 were 6,302,177 shares at September 29, 1996 and 5,972,195 shares at December 31, 1995. Note 9: Commitments and Contingencies The company's capital expenditures, excluding acquisitions, have averaged $869 million in recent years, but are expected to be approximately $900 million in 1996; however, the 1996 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. Note 10: Proceeds From Sale of Property and Equipment During the quarter, the company sold its Klamath Falls, Oregon hardboard, particleboard, and plywood manufacturing operations; 600,000 acres of predominantly pine timberlands; and its nursery and seed orchard facilities. The gain on this transaction was not material to the company's pre-tax income. Proceeds from the sale of the property and equipment in this transaction amounted to $33 million. The timberlands portion of this transaction involved a like-kind exchange for other timberlands, primarily the remaining 50 percent of private commercial timberlands in southeastern Louisiana and southern Mississippi previously owned by Cavenham Forest Industries. The first phase of that transaction took place in the second quarter. Weyerhaeuser Company - -16- WEYERHAEUSER COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Net sales and revenues and earnings before interest expense and income taxes by segment are: Thirteen Weeks Ended Thirty-nine Weeks Ended --------------------- ----------------------- Sept. 29, Sept. 24, Sept. 29, Sept. 24, Dollar amounts in millions 1996 1995 1996 1995 --------- --------- --------- --------- Net sales and revenues: Timberlands and wood products $ 1,437 $ 1,263 $ 3,921 $ 3,721 Pulp, paper and packaging 1,130 1,497 3,548 4,197 Real estate 177 169 555 488 Financial services 56 48 153 137 Corporate and other 52 60 166 189 --------- --------- --------- --------- $ 2,852 $ 3,037 $ 8,343 $ 8,732 ========= ========= ========= ========= Earnings before interest expense and income taxes: Timberlands and wood products $ 210 $ 196 $ 579 $ 625 Pulp, paper and packaging 79 364 276 877 Real estate (1) 4 (236) 13 (239) Financial services (1) (2) 1 (57) 8 (50) Corporate and other (41) (51) (117) (165) --------- --------- --------- --------- $ 253 $ 216 $ 759 $ 1,048 ========= ========= ========= =========
(1) 1995 third quarter and year-to-date results include pre-tax charges of $232 million and $58 million for real estate and financial services, respectively, to dispose of certain real estate assets. (2) Includes net interest expense of $17 million and $18 millions for for thirteen weeks and $52 million and $50 million for thirty-nine weeks related to the financial services businesses. Consolidated Results Net earnings for the 1996 third quarter were $120 million, or 60 cents per common share compared with $95 million, or 47 cents per common share in the 1995 third quarter. The third quarter results reflected strong lumber prices in both domestic and Japanese markets and improving pulp prices. The higher volumes and lower operating costs helped offset continuing weak pricing in paper and packaging products. The previous year's earnings were impacted by an after-tax charge of $184 million, or 90 cents per common share. The company's decision to accelerate the disposition of certain real estate assets previously held for development and use, along with the implementation of Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," resulted in the charge to operations. The majority of the charge was a direct result of the company's decision to accelerate disposition of those assets in the 1995 third quarter. The remainder of the charge resulted from the application of those provisions of SFAS No. 121 relating to the valuation of assets held for future use where estimated undiscounted future cash flows from those assets did not exceed the carrying value of those assets. Weyerhaeuser Company - -17- Consolidated net sales and revenues in the current quarter were $2.9 billion, down 6 percent from the $3 billion recorded for the comparable quarter of 1995. This variance is the net of: (1) a sales decrease of $370 million in the pulp, paper and packaging segment, with material unfavorable price variances in pulp, corrugated shipping containers, paper and recycled products offset by favorable volume variances in the packaging business due to the acquisition of nine facilities in late 1995, and in the recycling business which added nine centers in 1995; (2) a sales increase of $200 million in the timberlands and wood products segment where lumber registered favorable price variances along with some volume increases in lumber, plywood, and composite panels. Net income through thirty-nine weeks was $365 million, or $1.84 per common share compared to $548 million, or $2.68 per common share in the same period of 1995. Net sales and revenues year-to-date were $8.3 billion, which is down 4 percent from the $8.7 billion recorded in 1995. Timberlands and Wood Products Operating earnings for the quarter in the timberlands and wood products segment were $210 million, an increase of 7 percent over the $196 million reported in the 1995 third quarter. Principal drivers in this increase were improved operating efficiencies, higher lumber prices, and increased shipment volumes in lumber and oriented strand board. Third party sales and total production volumes for the major products in this segment for the thirteen weeks and thirty-nine weeks ended September 29, 1996 and September 24, 1995, respectively, are as follows:
Thirteen Weeks Thirty-nine Weeks Ended Ended ------------------- ------------------- Sept. 29, Sept. 24, Sept. 29, Sept. 24, 1996 1995 1996 1995 --------- --------- --------- --------- Third party sales volumes (millions): Raw materials--cubic feet 145 129 423 397 Softwood lumber--board feet 1,327 1,238 3,574 3,394 Softwood plywood and veneer--square feet (3/8") 590 606 1,664 1,734 Composite panels--square feet (3/4") 147 173 471 478 Oriented strand board-- square feet (3/8") 549 511 1,544 1,458 Hardboard--square feet (7/16") 48 55 155 144 Hardwood lumber--board feet 83 69 264 203 Engineered wood products--lineal feet 34 41 88 100 Hardwood doors (thousands) 179 155 493 485 Total production volumes (millions): Logs--cubic feet 233 225 681 676 Softwood lumber--board feet 955 835 2,770 2,586 Softwood plywood and veneer--square feet (3/8") 318 320 964 949 Composite panels--square feet (3/4") 123 149 415 429 Oriented strand board-- square feet (3/8") 452 408 1,297 1,221 Hardboard--square feet (7/16") 20 31 86 92 Hardwood lumber--board feet 78 67 251 191 Hardwood doors (thousands) 173 161 485 485
Weyerhaeuser Company - -18- Pulp, Paper and Packaging The pulp, paper and packaging segment operating earnings this quarter were $79 million, significantly lower than the $364 million earned in the comparable quarter last year, but an improvement over the $35 million reported in 1996 second quarter. The decline in profitability from the previous year is attributed to lower pricing across all product lines in the segment, somewhat tempered by ongoing efficiencies and cost containment, and the increased packaging and recycling volume from the acquired plants. Third party sales and total production volumes for the major products in this segment for the thirteen weeks and thirty-nine weeks ended September 29, 1996 and September 24, 1995, respectively, are as follows:
Thirteen Weeks Thirty-nine Weeks Ended Ended ------------------- ------------------- Sept. 29, Sept. 24, Sept. 29, Sept. 24, 1996 1995 1996 1995 --------- --------- --------- --------- Third party sales volumes (thousands): Pulp--air-dry metric tons 479 536 1,404 1,559 Newsprint--metric tons 150 163 454 493 Paper--tons 248 242 740 761 Paperboard--tons 58 55 160 171 Containerboard--tons 108 58 255 192 Packaging--MSF 10,905 8,471 31,793 25,157 Recycling--tons 514 390 1,473 1,009 Total production volumes (thousands): Pulp--air-dry metric tons 549 561 1,510 1,607 Newsprint--metric tons 165 165 460 499 Paper--tons 262 259 763 784 Paperboard--tons 55 53 156 170 Containerboard--tons 597 598 1,759 1,794 Packaging--MSF 11,498 8,840 33,444 26,377 Recycling--tons 884 683 2,567 1,921
Real Estate and Financial Services The company's real estate and financial services segments earned a combined $5 million during the current quarter compared to a loss of $293 million in the same period a year ago. The 1995 loss included a $290 million charge to operations. The majority of the charge was a direct result of the company's decision to accelerate the disposition of certain real estate assets previously held for development and use. The remainder of the charge resulted from the application of those provisions of SFAS No. 121 relating to the valuation of assets held for future use where estimated undiscounted future cash flows from those assets did not exceed the carrying value of those assets. Costs and Expenses There were no material differences in Weyerhaeuser's costs and expenses or interest expense incurred from the third quarter of 1995 to 1996. Weyerhaeuser's cost of products sold, as a percentage of sales, rose to 76 percent in the current quarter compared to 69 percent in the same quarter last year which was a result of the dramatic increase in pulp, paper and packaging pricing in 1995. This has started to correct itself in the current business cycle. Inventories continue to come down from their cyclical high at the end of the first quarter of 1996, and turnover rates are lower than those experienced in the peak of the 1995 pulp, paper and packaging segment business cycle. The significant difference in costs and expenses for the real estate and financial services segments between the two periods was the revaluation of real estate assets in 1995 described above. Selling, general and administrative expenses increased in both the current quarter and year to date, compared to the previous year, as a result of the company's mortgage banking business opening additional branch offices during 1996. 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 thirty-nine week periods ended September 29, 1996 and September 24, 1995 was significant in relation to operating earnings. Weyerhaeuser Company - -19- Liquidity and Capital Resources General Earnings before interest expense and income taxes plus non-cash charges for the thirty-nine week periods ended September 29, 1996 and September 24, 1995 were $741 million and $769 million, respectively, for the timberlands and wood products segment, and $535 million and $1.1 billion, 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. 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. Operations On a consolidated basis, net cash provided by operations in the thirty- nine week period of 1996 was $701 million compared to $846 million in the same period of 1995. Net earnings provided by Weyerhaeuser were $353 million, down $387 million from the $740 million provided in the same period a year ago due primarily to the decline of prices in the pulp, paper and packaging markets in the current year. The real estate and financial services segments provided $12 million from net earnings in 1996 compared to a net loss of $192 million in 1995. The 1995 net loss included a $184 million after-tax charge to operations as a result of the company's decision to accelerate the disposition of certain real estate assets previously held for development and use and the application of those provisions of SFAS No. 121 relating to the valuation of assets held for future use where estimated undiscounted future cash flows from those assets did not exceed the carrying value of those assets. This 1995 charge included in net earnings and a related $93 million use of funds in deferred taxes are offset by the $290 million charge as a non-cash source of funds. 1996 year-to-date shows minimal change in accounts receivable and inventories compared to 1995 year-to-date, where significant increases were the result of strong pulp, paper and packaging markets. The increase in use of funds for other liabilities in 1996 over 1995 is related, primarily, to reductions in payroll, interest and taxes payable. Investing Capital expenditures for 1996 year-to-date were $582 million, excluding acquisitions, compared to $637 million in the same period last year. Acquisitions of timber and timberlands and two sawmills in the southern U.S. totaled $448 million in the first three quarters of 1996. The 1996 spending by segment, excluding acquisitions was: $288 million for timberlands and wood products; $263 million for pulp, paper and packaging; and $31 million for other segments. The company currently anticipates capital expenditures, excluding acquisitions, to approximate $900 million for the year. However, this expenditure level could increase or decrease as a consequence of future economic conditions. Proceeds from the sale of the property and equipment include $33 million received for production facilities and logging equipment in the sale of the company's Klamath Falls manufacturing and timberlands operations. The timberlands portion of this transaction involved like-kind exchanges of other timberlands as described in Note 10 of the Notes to Financial Statements included in this filing. Weyerhaeuser Company - -20- The company's financial services segment provided $111 million during 1996 from the sale of capitalized servicing rights and adjustable rate mortgages compared to $197 million due principally to the sale of adjustable rate mortgages in the same period of 1995. The cash needed to meet these and other company needs was generated from internal cash flow and short-term borrowing. Financing During the first three quarters of 1996, the company paid $238 million in cash dividends compared to $225 million in the prior year. The increase from year to year is attributable to the quarterly dividend rate being raised from 30 cents to 40 cents effective with the second quarter of 1995, resulting in an annualized rate of $1.60 per common share. The company repurchased $45 million of common shares in the first three quarters of 1996 as a part of the 10 million share repurchase program, which commenced in the second quarter of 1995, bringing the total acquired to 9.6 million shares at September 29, 1996. The company's board of directors has authorized an increase of one million shares in the share repurchase program to 11 million shares to offset shares issued in conjunction with a recent acquisition. Weyerhaeuser's long-term debt as a percentage of shareholders' equity increased in 1996 compared to 1995, due principally to acquisition activity, with a significant part of it used to fund the acquisition of southern timberlands, two sawmills and related working capital. Commercial paper borrowings, which ar e classified as long-term debt, increased by $753 million in 1996. This increase less debt payments of $178 million, principally medium term notes and a fixed rate note, accounts for the increase of $633 million in long-term debt at September 29, 1996. The 1995 sales of debentures and industrial revenue bonds and related payments on debentures and other debt and a reduction in commercial paper were a result of replacing maturing and higher cost debt, on an accelerated basis, with lower priced instruments. The combined real estate and financial services segments used funds provided by the sale of some commercial real estate properties, impaired assets, capitalized servicing rights and adjustable rate mortgages to reduce commercial paper and long-term debt by $160 million in the first nine months of 1996. In the same period of 1995, these segments increased commercial paper and other borrowings and sold mortgage and investment securities to finance construction activity, fund mortgage loan originations, and pay down higher cost long-term debt. 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. Both the company and the government appealed the decision. On August 2, 1996, the Court of Appeals for the Federal Circuit issued its opinion on the remaining timber casualty loss issues, ruling in favor of the company on both the company's appeal and the government's appeal. The government did not seek a rehearing of the decision, but has requested an extension of the time to request review by the United States Supreme Court. 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. The remaining defendant provided first layer excess coverage during a three year period. That defendant's liability on groups of sites is being tried in phases. Two trials against the remaining defendant, affecting nine sites, began in October 1994 and February 1996 and resulted in verdicts assigning 100 percent clean-up responsibility to the defendant on three sites, partial responsibility on three others and a finding of no liability as to the remaining three. The trial court has ruled that the primary policy has been exhausted and imposed an obligation on the remaining defendant to provide a defense on one of the sites, a ruling that may be expanded to include other sites. Trial for the remaining 16 sites has been set for June 1997. The company received from the Lane County, Oregon Regional Air Pollution Control Authority (LRAPA) a draft Notice of Violation which seeks penalties for alleged Prevention of Significant Deterioration (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 (NOV) and will not seek fines or penalties. On September 15, 1995, however, LRAPA issued a revised draft NOV (the Revised Draft NOV), which alleged that the Springfield particleboard facility had violated a condition of its Air Contaminant Discharge Permit (ACDP). The allegations in the Revised Draft NOV are based upon the same facts and circumstances relied upon by LRAPA in the prior draft NOV. The company has contested LRAPA's issuance of the Revised Draft NOV. On June 18, 1996, the company and LRAPA entered into a Stipulated Final Order (SFO) to resolve all past and ongoing alleged PSD issues, contested matters and alleged violations associated with extended hours of operation at the Springfield particleboard facility. In exchange for a full resolution of all past and ongoing contested matters, the company agreed to pay a total civil penalty of $19.5 thousand, of which $7.5 thousand was paid directly to LRAPA. The remaining $12 thousand civil penalty was suspended. The company also agreed to implement a Supplemental Environmental Project (SEP) consisting of the funding of the preparation of a nitrogen oxides (NOx) emission inventory for Lane County. The emission inventory will be conducted by an outside environmental consultant at a cost not to exceed $40 thousand. The company conducted a review of its 10 pulp and paper facilities to evaluate the facilities' compliance with federal PSD regulations. The results of the reviews were disclosed to seven state agencies and the Environmental Protection Agency (EPA) during 1994 and 1995. At the Cosmopolis, Washington, Columbus, Mississippi, and Flint River, Georgia, facilities, the state regulatory agencies agreed with the company's conclusions regarding the status of each facility. For the Cosmopolis facility, the Washington Department of Ecology agreed the changes made at the facility did not require PSD review. For the Columbus and Flint River facilities, the states concluded the original PSD permits issued to the facilities require updating. The company will update emissions data for the Columbus and Flint River facilities as part of the Title V permitting process. No penalties were assessed for the issues identified at Columbus and Flint River. Agreements resolving the alleged PSD issues have been reached with the states of Washington, Oklahoma and North Carolina, as noted below. No issues were identified at the company's Rothschild, Wisconsin, facility. In April 1995, EPA Region X issued a NOV to the company and to North Pacific Paper Corporation (NORPAC), a joint venture in which the company has an 80 percent ownership interest. The NOV addresses alleged PSD violations at NORPAC's Longview, Washington, newsprint manufacturing facility. A settlement resolving alleged PSD issues at the Longview/NORPAC complex was reached with the State of Weyerhaeuser Company - -22- Washington on January 26, 1996. On November 14, 1995, the company entered into a settlement with the State of Oklahoma to resolve alleged PSD violations at the company's Valliant, Oklahoma, containerboard manufacturing facility. The company also entered into Special Orders by Consent with the State of North Carolina to resolve alleged PSD issues at the New Bern, North Carolina, pulp mill and the Plymouth, North Carolina, pulp and paper complex. No decision has been made by the LRAPA or the Oregon Department of Environmental Quality (DEQ) concerning alleged PSD and permit violations at the company's Springfield, Oregon, containerboard manufacturing facility. The Washington State Department of Ecology investigated the accidental release of chlorine, chlorine dioxide and noncondensable gasses in July 1994 at the company's pulp mill in Longview, and issued a $10 thousand penalty for the chlorine release and a $5 thousand penalty for the noncondensable gasses release which have been paid by the company. In June 1995, EPA issued an Administrative Complaint against the company, seeking penalties of $225 thousand and alleging a failure to timely report the chlorine release. The company has appealed. On September 25, 1996, the company learned that the EPA has commenced a preliminary criminal investigation of the incident. The Washington State Department of Ecology has issued a $10 thousand penalty to the company because of three accidental chlorine releases which occurred at the company's pulp mill in Longview on March 18, 1996. The EPA is also investigating. On April 9, 1993, the company entered into a SFO with the DEQ for alleged air emissions in excess of permit levels and PSD noncompliance at the company's North Bend, Oregon, containerboard facility. The SFO established a compliance schedule for installing control technology. A Supplemental SFO assessed a $247 thousand initial penalty and a $500 per day stipulated penalty until compliance was demonstrated. On November 15, 1995, DEQ issued a letter, indicating that the company had satisfied the requirements of the SFO and Supplemental SFO. No further penalties were assessed against the company. Termination of the SFO will occur after issuance of the federal air operating permit to the North Bend containerboard facility. The North Bend containerboard facility received its federal air operating permit on July 1, 1996. 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, as orally amended on February 1, 1996, the geographical boundaries of the class were amended to run from below the Columbus mill's wastewater discharge pipe to just above the confluence of the Black Warrior River and the Tennessee Tombigbee Waterway. The class is estimated to range from approximately 1,000 to 1,500 members. In late July, 1996, the company reached an agreement to settle both the Mississippi action and the Alabama action fo r $2.5 million. The agreement is subject to the approval of the court in the Alabama action. On June 20, 1996, the Wisconsin Department of Natural Resources (WDNR) issued a NOV for alleged air violations at the Marshfield, Wisconsin, wood products manufacturing facility. No penalty was assessed in the NOV. Since the WDNR lacks an administrative mechanism to assess penalties for alleged regulatory non-compliance, it referred the NOV to the Wisconsin Department of Justice for enforcement action on July 2, 1996. The Wisconsin Department of Justice has accepted the referral. On October 2, 1996, the WDNR conducted an inspection of a building demolition project at the company's Marshfield, Wisconsin facility. The WDNR noted several potential non-compliance issues in the work performed by the asbestos abatement subcontractor retained for the project. Upon learning of the issues observed by WDNR, Weyerhaeuser removed the asbestos abatement subcontractor from the plantsite. The WDNR and EPA Region V are currently reviewing the work performed to evaluate whether an enforcement action should be brought against the asbestos abatement subcontractor, the general contractor, and/or the company. Weyerhaeuser Company - -23- 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 filed reports on Form 8-K dated February 14, April 24, July 17, July 26, and October 15, 1996 reporting information under Item 5, Other Events. EX-27 2
5 1000000 9-MOS DEC-29-1996 SEP-29-1996 83 0 1074 0 947 2263 6585 0 13679 1381 5359 258 0 0 4330 13679 8343 8343 6254 6254 569 4 241 570 205 365 0 0 0 365 1.84 1.84 Receivables are stated net of allowances and Property, Plant and Equipment is stated net of accumulated depreciation.
EX-27 3
5 1000000 9-MOS DEC-31-1995 SEP-24-1995 227 0 1177 0 874 2424 6229 0 13338 1849 4242 258 0 0 4208 13338 8732 8732 6119 6119 830 5 235 863 315 548 0 0 0 548 2.68 2.68 Receivables are stated net of allowances and Property, Plant and Equipment is stated net of accumulated depreciation.
EX-27 4
5 1000000 6-MOS DEC-31-1995 JUN-25-1995 291 0 1152 0 830 408 6209 0 13587 1878 4443 258 0 0 4256 13587 5695 5695 4015 4015 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.
EX-27 5
5 1000000 3-MOS DEC-31-1995 MAR-26-1995 531 0 1053 0 870 2620 6134 0 13619 1818 4670 258 0 0 4175 13619 2686 2686 1882 1882 183 1 73 328 121 207 0 0 0 207 1.00 1.00 Receivables are stated net of allowances and Property, Plant and Equipment is stated net of accumulated depreciation.
EX-27 6
5 1000000 YEAR DEC-25-1994 DEC-25-1994 263 0 1039 14 746 2129 10853 4657 13158 1818 4666 258 0 0 4032 13158 10398 10398 7670 7670 694 6 277 920 331 589 0 0 0 589 2.86 2.86 For year end, Receivables and Property, Plant and Equipment are stated at gross.
EX-27 7
5 1000000 9-MOS DEC-25-1994 SEP-25-1994 197 0 1008 0 745 2100 5764 0 12947 1420 5106 258 0 0 3928 12947 7665 7665 5696 5696 509 9 206 630 230 400 0 0 0 400 1.95 1.95 Receivables are stated net of allowances and Property, Plant and Equipment is stated net of accumulated depreciation.
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