-----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, It69tk3Vf+Iy5CSGUoxmC86TH0A9Q+2bqSrxA+5ARN2HqVePC1g18IpjX2lm7nY7 XO0SIElXqPQSvpGHnilPrg== 0000106535-97-000011.txt : 19970512 0000106535-97-000011.hdr.sgml : 19970512 ACCESSION NUMBER: 0000106535-97-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970330 FILED AS OF DATE: 19970509 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: 97598930 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 QUARTERLY REPORT PURSUANT TO SECTION 13 OR X 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the thirteen weeks ended March 30, 1997 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 (253) 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 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___. The number of shares outstanding of the registrant's class of common stock, as of May 2, 1997 was 198,242,115 common shares ($1.25 par value). Weyerhaeuser Company - -2-
WEYERHAEUSER COMPANY AND SUBSIDIARIES Index to Form 10-Q Filing For the Thirteen Weeks Ended March 30, 1997 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 20-22 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 22
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 29, 1996. Though not examined by independent public accountants, the financial information reflects, in the opinion of management, all adjustments necessary to present a fair statement of results for the interim periods indicated. The results of operations for the thirteen week period ending March 30, 1997 should not be regarded as necessarily indicative of the results that may be expected for the full year. Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. WEYERHAEUSER COMPANY By /s/ K. J. Stancato ---------------------- K. J. Stancato Duly Authorized Officer and Principal Accounting Officer May 9, 1997 Weyerhaeuser Company - -3-
WEYERHAEUSER COMPANY AND SUBSIDIARIES ____________ CONSOLIDATED EARNINGS For the thirteen week periods ended March 30, 1997 and March 31, 1996 (Dollar amounts in millions except per share figures) (Unaudited) March 30, March 31, 1997 1996 --------- --------- Net sales and revenues: Weyerhaeuser $ 2,394 $ 2,373 Real estate and financial services 214 232 --------- --------- Net sales and revenues 2,608 2,605 --------- --------- Costs and expenses: Weyerhaeuser: Costs of products sold 1,888 1,739 Depreciation, amortization and fee stumpage 161 142 Selling, general and administrative expenses 152 178 Research and development expenses 13 14 Taxes other than payroll and income taxes 37 37 Charge for closure or disposition of facilities 49 -- --------- --------- 2,300 2,110 --------- --------- Real estate and financial services: Costs and operating expenses 153 164 Depreciation and amortization 4 5 Selling, general and administrative expenses 45 37 Taxes other than payroll and income taxes 2 2 --------- --------- 204 208 --------- --------- Total costs and expenses 2,504 2,318 --------- --------- Operating income 104 287 Interest expense and other: Weyerhaeuser: Interest expense incurred 69 65 Less interest capitalized 4 6 Other income (expense), net (2) 7 Real estate and financial services: Interest expense incurred 33 34 Less interest capitalized 18 18 Other income (expense), net 11 3 --------- --------- Earnings before income taxes 33 222 Income taxes (Note 2) 12 80 --------- --------- Net earnings $ 21 $ 142 ========= ========= Per common share (Note 1): Net earnings $ .10 $ .72 ========= ========= Dividends paid $ .40 $ .40 ========= =========
See Accompanying Notes to Financial Statements Weyerhaeuser Company - -4-
WEYERHAEUSER COMPANY AND SUBSIDIARIES ____________ CONSOLIDATED BALANCE SHEET March 30, 1997 and December 29, 1996 (Dollar amounts in millions) March 30, Dec. 29, 1997 1996 ----------- ----------- (Unaudited) Assets - ------ Weyerhaeuser Current assets: Cash and short-term investments (Note 1) $ 38 $ 33 Receivables, less allowances 954 902 Inventories (Note 3) 1,079 1,001 Prepaid expenses 304 289 ----------- ----------- Total current assets 2,375 2,225 Property and equipment (Note 4) 6,887 7,007 Construction in progress 445 417 Timber and timberlands at cost, less fee stumpage charged to disposals 1,078 1,073 Other assets and deferred charges 236 246 ----------- ----------- 11,021 10,968 ----------- ----------- Real estate and financial services Cash and short-term investments, including restricted deposits 49 38 Receivables, less discounts and allowances 88 99 Mortgage notes held for sale 410 334 Mortgage loans receivable 119 133 Mortgage-backed certificates and other pledged financial instruments 149 154 Real estate in process of development and for sale 693 680 Land being processed for development 758 719 Investments in and advances to joint ventures and limited partnerships, less reserves 106 115 Rental properties, less accumulated depreciation 149 150 Other assets 132 206 ----------- ----------- 2,653 2,628 ----------- ----------- Total assets $ 13,674 $ 13,596 =========== ===========
See Accompanying Notes to Financial Statements Weyerhaeuser Company - -5-
March 30, Dec. 29, 1997 1996 ----------- ----------- (Unaudited) Liabilities and shareholders' interest - -------------------------------------- Weyerhaeuser Current liabilities: Notes payable $ 13 $ 16 Current maturities of long-term debt 61 80 Accounts payable (Note 1) 728 725 Accrued liabilities (Note 5) 583 662 ----------- ----------- Total current liabilities 1,385 1,483 Long-term debt (Note 7) 3,751 3,546 Deferred income taxes 1,324 1,324 Deferred pension and other liabilities 493 493 Minority interest in subsidiaries 114 113 Commitments and contingencies (Note 9) -- -- ----------- ----------- 7,067 6,959 ----------- ----------- Real estate and financial services Notes payable and commercial paper 269 245 Long-term debt (Note 7) 1,577 1,537 Other liabilities 215 251 Commitments and contingencies (Note 9) -- -- ----------- ----------- 2,061 2,033 ----------- ----------- Total liabilities 9,128 8,992 ----------- ----------- Shareholders' interest (Note 8) Common shares: authorized 400,000,000 shares, issued 206,072,890 shares, $1.25 par value 258 258 Other capital 405 407 Cumulative translation adjustment (101) (93) Retained earnings 4,313 4,372 Treasury common shares, at cost: 7,483,170 and 7,736,601 (329) (340) ----------- ----------- Total shareholders' interest 4,546 4,604 ----------- ----------- Total liabilities and shareholders'interest $ 13,674 $ 13,596 =========== ===========
Weyerhaeuser Company - -6-
WEYERHAEUSER COMPANY AND SUBSIDIARIES ____________ CONSOLIDATED STATEMENT OF CASH FLOWS For the thirteen week periods ended March 30, 1997 and March 31, 1996 (Dollar amounts in millions) (Unaudited) Consolidated ------------------- March 30, March 31, 1997 1996 --------- --------- Cash provided by (used for) operations: Net earnings $ 21 $ 142 Non-cash charges to income: Depreciation, amortization and fee stumpage 165 147 Deferred income taxes, net 7 50 Charge for closure or disposition of facilities 49 -- Decrease (increase) in working capital: Accounts receivable (48) (51) Inventories, prepaid expenses, real estate and land (147) (134) Mortgage notes held for sale and mortgage loans receivable (60) (138) Accounts payable and accrued liabilities (73) (201) Loss on disposition of assets 11 11 Loss on disposition of a business 8 -- Other (7) (20) --------- --------- Cash (used for) operations (74) (194) --------- --------- Cash provided by (used for) investing activities: Property and equipment (109) (182) Timber and timberlands (20) (239) Mortgage and investment securities acquired (1) (2) Proceeds from sale of: Property and equipment 3 2 Mortgage and investment securities 6 83 A business 12 -- Other 24 14 --------- --------- Cash provided by (used for) investing activities (85) (324) --------- --------- Cash provided by (used for) financing activities: Issuances of debt 8 5 Notes and commercial paper borrowings, net 296 679 Cash dividends on common shares (80) (79) Payments on debt (57) (66) Purchase of treasury common shares -- (34) Exercise of stock options 9 8 Other (1) -- --------- --------- Cash provided by financing activities 175 513 --------- --------- Net increase (decrease) in cash and short-term investments 16 (5) Cash and short-term investments at beginning of year 71 84 --------- --------- Cash and short-term investments at end of period $ 87 $ 79 ========= ========= Cash paid (received) during the period for: Interest, net of amount capitalized $ 120 $ 116 ========= ========= Income taxes $ 6 $ 90 ========= =========
See Accompanying Notes to Financial Statements Weyerhaeuser Company - -7-
Real Estate and Weyerhaeuser Financial Services - ------------------- ------------------- March 30, March 31, March 30, March 31, 1997 1996 1997 1996 - --------- --------- --------- --------- $ 17 $ 137 $ 4 $ 5 161 142 4 5 -- 27 7 23 49 -- -- -- (54) 10 6 (61) (94) (172) (53) 38 -- -- (60) (138) (72) (209) (1) 8 11 11 -- -- 8 -- -- -- (28) (9) 21 (11) - --------- --------- --------- --------- (2) (63) (72) (131) - --------- --------- --------- --------- (108) (181) (1) (1) (20) (239) -- -- -- -- (1) (2) 3 2 -- -- -- -- 6 83 12 -- -- -- 9 (4) 15 18 - --------- --------- --------- --------- (104) (422) 19 98 - --------- --------- --------- --------- 2 5 6 -- 208 625 88 54 (80) (79) -- -- (27) (46) (30) (20) -- (34) -- -- 9 8 -- -- (1) -- -- -- - --------- --------- --------- --------- 111 479 64 34 - --------- --------- --------- --------- 5 (6) 11 1 33 34 38 50 - --------- --------- --------- --------- $ 38 $ 28 $ 49 $ 51 ========= ========= ========= ========= $ 104 $ 100 $ 16 $ 16 ========= ========= ========= ========= $ 44 $ 107 $ (38) $ (17) ========= ========= ========= =========
Weyerhaeuser Company - -8- This page intentionally left blank. Weyerhaeuser Company - -9- WEYERHAEUSER COMPANY AND SUBSIDIARIES ____________ NOTES TO FINANCIAL STATEMENTS For the thirteen week periods ended March 30, 1997 and March 31, 1996 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 5.3 million acres of company-owned and .3 million acres of leased forestland in the United States and 22.9 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 1996, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (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 and SFAS No. 127, "Deferral of the Effective Date of Certain Provisions of FASB Statement No. 125 -- an amendment of FASB Statement No. 125," which deferred for one year the effective date of certain provisions. The company's adoption of SFAS No. 125 in the first quarter of 1997 did not, and the subsequent adoption of SFAS No. 127 will not, have a significant impact on results of operations or financial position. In 1996, the American Institute of Certified Public Accountants issued Statement of Position 96-1, "Environmental Remediation Liabilities." This statement, which provides guidance on the recognition and disclosure of environmental liabilities, is effective for fiscal years beginning after December 15, 1996. The adoption of this statement in 1997 first quarter did not have a significant impact on the company's results of operations or financial position. Prospective Accounting Pronouncements In 1997 first quarter, the FASB issued the following statements: . SFAS No. 128, "Earnings per Share," which supersedes APB Opinion No. 15, "Earnings per Share," and is effective for financial statements issued after December 15, 1997. This statement replaces the presentation of primary earnings per share (EPS) with a presentation of basic EPS, which excludes dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS, which is computed similarly to fully diluted EPS pursuant to APB Opinion No. 15, reflects the potential Weyerhaeuser Company - -10- dilution that would occur if securities or other contracts to issue common stock were exercised or converted to common stock or resulted in the issuance of common stock that would then share in the earnings of the entity. If SFAS No. 128 were implemented for the current quarter, the reported EPS would be as follows:
Thirteen Weeks Ended --------------------- March 30, March 31, 1997 1996 ----------- ---------- Basic earnings per share $ .10 $ .72 Diluted earnings per share $ .10 $ .72
Options to purchase 1,217,350 shares of common stock at $45.94 per share were outstanding during the thirteen week period ended March 31, 1996. These options were not included in the computation of diluted EPS because the options' exercise price was greater than the average market price of common shares during the period. . SFAS No. 129, "Disclosure of Information about Capital Structure," which is effective for financial statements for periods ending after December 15, 1997, continues the existing requirements to disclose the pertinent rights and privileges of all securities other than common stock, but expands the number of companies subject to portions of its requirements. The company's current capital structure will not require any additional disclosures as a result of this pronouncement. 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 198,515,503 and 198,195,035 at March 30, 1997, and March 31, 1996, 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 billion and $807 million at March 30, 1997, and December 29, 1996, 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 $302 million and $296 million at March 30, 1997, and December 29, 1996, respectively. The balance of domestic raw material and product inventories, all materials and supplies inventories, and all foreign inventories is costed at either the first-in, first-out (FIFO) or moving average cost methods. Had the FIFO method been used to cost all inventories, the amounts at which product inventories are stated would have been $236 million and $239 million greater at March 30, 1997, and December 29, 1996, respectively. Property and Equipment The company's property accounts are maintained on an individual asset basis. Betterments and replacements of major units are capitalized. Maintenance, repairs and minor replacements are expensed. Depreciation is provided generally on the straight-line or unit-of-production 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 costs 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 $154 million and $164 million at March 30, 1997, and December 29, 1996, 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. Weyerhaeuser Company - -12- 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. Real Estate and Financial Services Real estate held for sale is stated at the lower of cost or 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, in which case, it is carried at fair value. 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 aggregated principal balance of approximately $4.3 billion and $4.4 billion at March 30, 1997, and December 29, 1996, respectively. 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. These certificates and other financial instruments are pledged as collateral for the CMO bonds and are held by banks as trustees. Principal and interest collections are used to meet the interest payments and reduce the outstanding principal balance of the bonds. The CMO bonds are the obligation of the issuer, and neither the company nor any affiliated company has guaranteed or is otherwise obligated with respect to the bonds. They are carried at amortized 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: Thirteen Weeks Ended -------------------- March 30, March 31, Dollar amounts in millions 1997 1996 ---------- --------- Federal: Current $ 3 $ 19 Deferred 6 50 ---------- --------- 9 69 ---------- --------- State: Current -- 3 Deferred 1 4 ---------- --------- 1 7 ---------- --------- Foreign: Current 2 8 Deferred -- (4) ---------- --------- 2 4 ---------- --------- Total $ 12 $ 80 ========== =========
Income tax provisions for interim periods are based on the current best estimate of the effective tax rate expected to be applicable for the full year. The effective tax rate reflects anticipated tax credits, foreign taxes and other tax planning alternatives. For the periods ended March 30, 1997, and March 31, 1996, the company's provision for income taxes as a percent of earnings before income taxes is greater than the 35% federal statutory rate due principally to the effect of state income taxes. The effective tax rates for the thirteen week periods ended March 30, 1997, and March 31, 1996, were 37% and 36%, 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
March 30, Dec. 29, 1997 1996 Dollar amounts in millions --------- -------- Logs and chips $ 153 $ 120 Lumber, plywood and panels 176 148 Pulp, newsprint and paper 212 202 Containerboard, paperboard and packaging 112 108 Other products 139 146 Materials and supplies 287 277 --------- -------- $ 1,079 $ 1,001 ========= ========
Weyerhaeuser Company - -14- Note 4: Property and Equipment
March 30, Dec. 29, 1997 1996 Dollar amounts in millions --------- -------- Property and equipment, at cost: Land $ 159 $ 158 Buildings and improvements 1,663 1,686 Machinery and equipment 9,681 9,713 Rail and truck roads and other 596 596 --------- -------- 12,099 12,153 Less allowance for depreciation and amortization 5,212 5,146 --------- -------- $ 6,887 $ 7,007 ========= ========
Note 5: Accrued Liabilities
March 30, Dec. 29, 1997 1996 Dollar amounts in millions --------- -------- Payroll - wages and salaries, incentive awards, retirement and vacation pay $ 233 $ 279 Taxes - social security and real and personal property 65 57 Interest 40 79 Income taxes 5 51 Other 240 196 --------- -------- $ 583 $ 662 ========= ========
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, all of which could be availed of by the company, WRECO and WMC at March 30, 1997, and December 29, 1996. No portion of these lines has been availed of by the company, WRECO or WMC at March 30, 1997, and December 29, 1996. 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 March 30, 1997, and December 29, 1996. Borrowings against these lines were $52 million and $54 million as of March 30, 1997, and December 29, 1996, respectively. Note 7: Long-Term Debt The company's lines of credit include a five-year competitive advance and revolving credit facility agreement entered into in 1994 with a group of banks that provides for borrowings of up to the total amount of $1.55 billion, all of which is available to the company, and $1 billion, which is available to WMC. Borrowings are at LIBOR or other such interest rates as mutually agreed to between the borrower and lending banks. At March 30, 1997, and December 29, 1996, respectively, WMC had $10 million and $25 million outstanding against a one-year evergreen credit commitment of $35 million 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 note as of July 1, 1998, to a five-year term loan payable in equal quarterly installments. Weyerhaeuser Company - -15- WFS has a revolving credit facility agreement that provides for: (1) borrowings of up to $375 million and $450 million at March 30, 1997, and December 29, 1996, 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 facility. $355 million was outstanding under this facility at both March 30, 1997, and December 29, 1996. To the extent that these credit commitments expire more than one year after the balance sheet date and are unused, an equal amount of commercial paper is classifiable as long-term debt. Amounts so classified are:
March 30, Dec. 29, 1997 1996 Dollar amounts in millions --------- -------- Weyerhaeuser $ 1,098 $ 889 Real estate and financial services 312 248
No portion of these lines has been availed of by the company, WRECO, WMC or WFS at March 30, 1997, and December 29, 1996, except as noted. 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 7,211,025 shares at March 30, 1997, and 6,243,102 shares at December 29, 1996. Note 9: Commitments and Contingencies The company's capital expenditures, excluding acquisitions, have averaged about $912 million in recent years, but are expected to be approximately $750 million in 1997; however, that expenditure level could be increased or decreased as a consequence of future economic conditions. The company is a party to legal proceedings and environmental matters generally incidental to its business. Although the final outcome of any legal proceeding or environmental matter is subject to a great many variables and cannot be predicted with any degree of certainty, the company presently believes that the ultimate outcome resulting from these proceedings and matters would not have a material effect on the company's current financial position, liquidity or results of operations; however, in any given future reporting period, such proceedings or matters could have a material effect on results of operations. Weyerhaeuser Company - -16- WEYERHAEUSER COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Net sales and revenues and earnings before interest expense and income taxes by segment are:
Thirteen Weeks Ended -------------------- March 30, March 31, Dollar amounts in millions 1997 1996 --------- ---------- Net sales and revenues: Timberlands and wood products $ 1,251 $ 1,116 Pulp, paper and packaging 1,106 1,217 Real estate 164 183 Financial services 50 49 Corporate and other 37 40 --------- ---------- $ 2,608 $ 2,605 ========= ========== Earnings before interest expense and income taxes: Timberlands and wood products $ 171 $ 152 Pulp, paper and packaging (1) (43) 162 Real estate 5 7 Financial services (2) 1 3 Corporate and other (3) (36) (43) --------- ---------- $ 98 $ 281 ========= ==========
(1) 1997 results include a special charge of $49 million for the consolidation, closure or disposition of certain recycling facilities and the permanent closure of the Longview, Washington corrugated medium machine. (2) Includes net interest expense of $15 million and $16 million related to the financial services businesses. (3) 1997 results include income of $10 million from the net effect of interest income from the favorable federal income tax decision related to timber casualty losses incurred in the 1980 eruption of Mount St. Helens, and the loss incurred in the sale of Shemin Nurseries, a wholesale nursery business based in Danbury, Connecticut. Consolidated Results Net earnings for the 1997 first quarter were $21 million, or 10 cents per common share, compared with $142 million or 72 cents per common share, in the prior year. Included in the 1997 results was an after tax special charge of $25 million, or 12 cents per common share. This charge reflects the company's ongoing efforts to narrow its portfolio and upgrade the quality of assets in the core businesses. It includes losses from the anticipated consolidation, closure or disposition of certain recycling facilities, the permanent closure of the corrugated medium machine at Longview, Washington and the sale of Shemin Nurseries, a wholesale nursery business based in Danbury, Connecticut. These losses were offset, in part, by interest income from the favorable federal income tax decision related to timber casualty losses incurred in the eruption of Mount St. Helens in 1980. Consolidated net sales and revenues for the quarter were $2.6 billion, matching those reported in the same quarter a year earlier. Increases in domestic lumber volumes and pricing were offset by weaker log exports and lower pricing in oriented strandboard and most pulp, paper and packaging products. Timberlands and Wood Products Operating earnings for the quarter in the timberlands and wood products segment were $171 million, an increase of 13 percent over the $152 million in the 1996 first quarter. The segment reported net sales of $1.3 billion in the quarter, up from $1.1 billion a year earlier. Softwood lumber showed gains over the first quarter of 1996 with higher volumes and pricing. These gains were offset, in part, by weaker export log markets, which were impacted by the stronger US dollar/Yen exchange rate and lower Japanese housing starts, and by continued weakness in oriented strandboard prices compared to a year ago. Weyerhaeuser Company - -17- Third party sales and total production volumes for the major products in this segment for the thirteen weeks ended March 30, 1997, and March 31, 1996, are as follows:
Third Party Sales Total Production ------------------- ------------------- Thirteen Weeks Thirteen Weeks Ended Ended ------------------- ------------------- March 30, March 31, March 30, March 31, Products (in millions) 1997 1996 1997 1996 - ---------------------- --------- --------- --------- --------- Raw materials--cubic feet 146 132 -- -- Logs--cubic feet -- -- 292 230 Softwood lumber--board feet 1,136 1,010 993 842 Softwood plywood and veneer--square feet (3/8") 489 484 279 318 Composite panels--square feet (3/4") 143 153 123 137 Oriented strand board--square feet (3/8") 562 460 426 391 Hardwood lumber--board feet 90 89 85 83 Engineered wood products--lineal feet 27 21 -- -- Hardwood doors (thousands) 168 146 182 146
Pulp, Paper and Packaging The pulp, paper and packaging segment's operating earnings were $6 million for the first quarter of 1997, before the effect of special charges, compared to $162 million for the first quarter of 1996. Including the $49 million pretax charge for the consolidation, closure or disposition of certain recycling facilities and the permanent closure of the Longview, Washington corrugated medium machine, the segment reported a $43 million operating loss. The segment's sales were $1.1 billion, down about one percent from the same quarter last year as prices were lower across most product lines although volumes were up. Third party sales and total production volumes for the major products in this segment for the thirteen weeks ended March 30, 1997, and March 31, 1996, are as follows:
Third Party Sales Total Production ------------------- ------------------- Thirteen Weeks Thirteen Weeks Ended Ended ------------------- ------------------- March 30, March 31, March 30, March 31, Products (in thousands) 1997 1996 1997 1996 - ----------------------- --------- --------- --------- --------- Pulp--air-dry metric tons 454 397 520 525 Newsprint--metric tons 160 135 173 134 Paper--tons 304 246 284 261 Paperboard--tons 59 46 49 48 Containerboard--tons 99 66 602 564 Packaging--MSF 10,953 10,016 11,465 10,627 Recycling--tons 550 443 929 801
Real Estate and Financial Services Real estate and financial services segments earned a combined $6 million in the current quarter compared to $10 million for the same period last year. The 1996 results included the closing of several major commercial projects. Costs and Expenses Weyerhaeuser's first quarter 1997 costs of products sold is up $149 million over 1996, and as a percent of net sales was 79 percent in the current quarter compared to 73 percent in the 1996 first quarter and 76 percent in the fourth quarter of 1996, reflecting the significant decline in pulp, paper and packaging pricing. Depreciation, amortization and fee stumpage for 1997 first quarter increased $19 million, or 13 percent, over 1996 as new or acquired facilities were added and optimization, expansion, modernization or upgrade projects were completed at existing facilities. Non-cash charges to income include a charge of $49 million for the closure or disposition of facilities. Weyerhaeuser Company - -18- Weyerhaeuser's selling, general and administrative expenses were down $26 million, or 15 percent, from the prior year's first quarter. Cost improvements in most areas, along with some reductions as a result of divestitures, accounted for this decrease. There were no significant changes in costs and expenses for the combined real estate and financial services segments from period to period. 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. Other than the $10 million net income effect of interest income from the favorable federal income tax decision related to timber casualty losses incurred in the 1980 eruption of Mount St. Helens and the loss incurred in the sale of Shemin Nurseries, in the current quarter, no individual income or (expense) item for the thirteen week periods ended March 30, 1997, and March 31, 1996, was significant in relation to net earnings. Liquidity and Capital Resources General 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 Weyerhaeuser's net cash used by operations was $2 million in the first quarter of 1997 compared to a use of $63 million in the first quarter of 1996. In the current quarter, funds were provided from net income of $17 million along with $161 million from depreciation, amortization and fee stumpage and the $49 million non-cash charge for closure or disposition of facilities. Working capital, net of the effects of the sale of a business, used funds of $220 million in the quarter with significant items being increases of $54 million in accounts receivable and $78 million in inventories, spread across all product lines, and a decrease of $72 million in accounts payable and accrued liabilities, primarily payroll, interest and income taxes. The product inventory turnover rate increased to 10.9 turns in the quarter, up slightly from the fourth quarter of 1996; but a significant increase from the 8.7 turns in the first quarter of 1996. In the same quarter of 1996, significant items creating a working capital increase of $371 million were $132 million in increased inventory and a reduction of $218 million in accounts payable and accrued liabilities. The net cash used by operations in the combined real estate and financial services segments in the current quarter was $72 million, including $53 million for real estate and land purchases and development. An increase of $138 million in mortgages held for sale, as originations exceeded sales, was the principal use of cash by operations in the first quarter of the previous year. Earnings before interest expense and income taxes plus non-cash charges for the thirteen week periods ended March 30, 1997, and March 31, 1996, were $224 million and $198 million, respectively, for the timberlands and wood products segment, and $111 million and $252 million, respectively, for the pulp, paper and packaging segment. Weyerhaeuser Company - -19- Investing Capital expenditures for the quarter were $129 million compared to $421 million, which included $231 million for the acquisition of southern U.S. timber and timberlands, in the same period last year. The 1997 spending by segment was $57 million for timberlands and wood products, $68 million for the pulp, paper and packaging segment and $4 million for other segments. The company currently anticipates capital expenditures, excluding acquisitions, to approximate $750 million for the year. However, this expenditure level could increase or decrease as a consequence of future economic conditions. The cash needed to meet these and other company needs is generated from internal cash flow and short-term borrowing. The company also received $12 million in proceeds from the sale of the wholesale nursery business in the 1997 first quarter. The combined real estate and financial services segments had minimal net cash flows from investing activities in the 1997 first quarter; however, in the same quarter of 1996, proceeds from the sale of capitalized servicing rights and adjustable rate mortgages generated proceeds of $83 million. Financing During the quarter, Weyerhaeuser increased commercial paper borrowings by $208 million while paying down debt of $27 million, accounting for the majority of the $183 million increase in debt. This increase along with a decrease in shareholders' equity, caused the company's debt to total capital ratio to increase from 37.9 percent at December 1996, and 38.9 percent at March 31, 1996, to 39.3 percent at the end of the current quarter. The increase in the 1996 first quarter was due primarily to issuances of $675 million in notes and commercial paper. The net increase of $64 million in real estate and financial services segments' long-term debt was primarily from $94 million of commercial paper borrowings, used to fund the increase in mortgage notes held for sale, and real estate purchase and development activities, offset in part by a $30 million pay down of debt. During the first quarter of 1997, the company paid $80 million in cash dividends compared to $79 million in 1996 first quarter. In the 1996 first quarter, the company repurchased $34 million of common shares as a part of the 11 million share repurchase program. Other Items On April 10, the company announced an agreement to purchase a 51 percent interest in an existing New Zealand joint venture located in the northern end of the South Island. The company will pay $185 million for timber, land and related assets, plus an additional amount for net working capital at closing. The forested area of the joint venture consists of 148,000 acres of Crown Forest License cutting rights and approximately 45,000 acres of freehold land. The company will become responsible for the management and marketing activities of the joint venture. The acquisition is subject to approvals by the New Zealand government and the investors in RII New Zealand Forests I Inc., which hold the remaining 49 percent interest in the joint venture. The company announced it has reached an agreement to sell its wholly owned subsidiary, Weyerhaeuser Mortgage Company, to WMC Acquisition Co., an entity formed by Apollo Management, L.P., and Spring Mountain Escrow, Inc. The transaction is expected to close in the second quarter of 1997, subject to regulatory approvals and other contingencies. The company expects this transaction to have a material favorable effect on operating results and cash flow if it closes. Weyerhaeuser Company - -20- 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. 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 contended that the company overpaid federal income taxes in 1977 through 1983. The alleged overpayments resulted from 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 (successor to the United States Claims Court) issued an opinion on the casualty loss issues which resulted 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 United States Supreme Court denied the government's request for certiorari on January 21, 1997. 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. After voluntary dismissal on 6 sites, trial for the remaining 10 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. 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 8, 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. Weyerhaeuser Company - -21- PART II Item 1. Legal Proceedings - Continued - -------------------------------------- The company conducted a review of its 10 major 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 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 concerning alleged PSD and permit violations at the company's Springfield, Oregon, containerboard manufacturing facility. The Washington Department of Ecology investigated the accidental release of chorine, 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 settled the matter on January 21, 1997, agreeing to pay a penalty of $68 thousand and to perform supplemental environmental projects in the amount of $110 thousand. On September 25, 1996, the company learned that the EPA has commenced a preliminary criminal investigation of the incident, and in late November learned that the investigation had been discontinued. The Washington Department of Ecology 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, which has been paid. The EPA is also investigating. The Washington Department of Ecology has issued a notice of violation and a $40 thousand penalty because of an accidental spill of an estimated 8,700 gallons of crude sulfate turpentine on January 27, 1997, at the company's pulp and paper operations in Longview. The EPA is also investigating. On April 9, 1993, the company entered into a SFO with the Oregon Department of Environmental Quality (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 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. The NOV was referred to the Wisconsin Department of Justice (WDOJ) for enforcement action on July 2, 1996. The WDOJ accepted the referral. Settlement negotiations with WDNR and WDOJ are ongoing. 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, the company removed the asbestos abatement subcontractor from the plantsite. The WDNR and EPA Region V are 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 - -22- PART II Item 1. Legal Proceedings - Continued - -------------------------------------- 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 for $2.5 million. The agreement is subject to the approval of the court in the Alabama action. In November 1996, an action was filed against the company in Superior Court for King County, Washington, on behalf of a purported class of all individuals and entities that own property in the United States on which exterior hardboard siding manufactured by the company has been installed since 1980. The action alleges the company has manufactured and distributed defective hardboard siding and has breached express warranties and consumer protection statutes in its sale of hardboard siding. The action seeks compensatory damages, including prejudgment interest, and seeks damages for the cost of replacing siding that rots subsequent to the entry of any judgment. In January 1997, an action was filed, also in Superior Court for King County, Washington, on behalf of a purported class of all individuals, proprietorships, partnerships, corporations, and other business entities in the United States on whose homes, condominiums, apartment complexes or commercial buildings hardboard siding manufactured by the company has been installed. The action alleges the company has breached express and implied warranties in its sale of hardboard siding and also has violated the Consumer Protection Act of the State of Washington. The action seeks damages, prejudgment interest, costs and reasonable attorney fees. The company is a defendant in approximately fifteen other hardboard siding cases, one of which purports to be a class action on behalf of purchasers of single- or multi-family residences in Nebraska that contain the company's hardboard siding. 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 January 22, February 24, and April 15, 1997, reporting information under Item 5, Other Events. Weyerhaeuser Company - -23- This page intentionally left blank. EX-27 2
5 1000000 3-MOS DEC-28-1997 MAR-30-1997 87 0 1042 0 1079 2375 6887 0 13674 1385 5328 0 0 258 4288 13674 2608 2608 2041 2041 253 1 80 33 12 21 0 0 0 21 .10 .10
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