EX-99.2 5 v79545a1ex99-2.txt EXHIBIT 99.2 EXHIBIT 99.2 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FISCAL YEAR 2001
PRO FORMA WEYERHAEUSER WILLAMETTE ADJUSTMENTS ------------------- ------------------- ------------------- PRO FORMA (DECEMBER 30, 2001) (DECEMBER 31, 2001) FOOTNOTES AMOUNTS CONSOLIDATED ------------------- ------------------- --------- ------- ------------ (dollars in millions, except per share data) Sales Forest product operations................ $13,084 $4,454 1 $(138) $17,400 Real estate and related assets........... 1,461 -- -- 1,461 ------- ------ ----- ------- 14,545 4,454 (138) 18,861 ------- ------ ----- ------- Costs and expenses Forest product operations: Costs of products sold................. 10,415 3,382 1 (138) 13,659 Depreciation, amortization and fee stumpage............................. 869 332 5,6,11 170 1,371 Selling, general and administrative expenses............................. 1,114 274 2 1 1,389 Other operating costs, net............. 14 25 2,3 (32) 7 Charges for support alignment costs, integration of facilities, closure of facilities and settlement of hardboard siding claims.............. 139 -- 2 8 147 ------- ------ ----- ------- 12,551 4,013 9 16,573 ------- ------ ----- ------- Real estate and related assets: Costs and operating expenses........... 1,140 -- -- 1,140 Depreciation and amortization.......... 7 -- -- 7 Selling, general and administrative expenses............................. 96 -- -- 96 Other operating costs, net............. (6) -- -- (6) ------- ------ ----- ------- 1,237 -- -- 1,237 ------- ------ ----- ------- Total costs and expenses.......... 13,788 4,013 9 17,810 ------- ------ ----- ------- Operating earnings......................... 757 441 (147) 1,051 Interest expense and other Forest product operations: Interest expense incurred (net of capitalized interest)................ (339) (95) 4,13 (245) (679) Interest income and other.............. 23 -- 2 2 25 Equity in income of unconsolidated entities............................. 33 -- 2 (1) 32 Real estate and related assets........... 42 -- -- 42 ------- ------ ----- ------- Earnings before income taxes............... 516 346 (391) 471 Income taxes............................... 162 97 7,8,13 (153) 106 ------- ------ ----- ------- Net earnings from continuing operations............................. $ 354 $ 249 $(238) $ 365 ======= ====== ===== ======= Basic net earnings per share............... $ 1.61 $ 1.66 ======= ======= Diluted net earnings per share............. $ 1.61 $ 1.66 ======= ======= Weighted average shares outstanding (thousands) Basic.................................... 219,644 219,644 Dilutive effect of stock options......... 313 10 242 555 ------- ------- Diluted weighted average shares outstanding.......................... 219,957 220,199 ======= =======
2 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET FISCAL YEAR END 2001
PRO FORMA PRO FORMA WEYERHAEUSER WILLAMETTE ADJUSTMENTS CONSOLIDATED ------------------- ------------------- ------------------- ------------ FOOTNOTES AMOUNTS (DECEMBER 30, 2001) (DECEMBER 31, 2001) --------- ------- (dollars in millions) Assets Forest product operations: Cash and short term investments........ $ 202 $ 22 13 $ -- $ 224 Receivables............................ 1,024 400 1 (2) 1,422 Inventories............................ 1,428 473 -- 1,901 Prepaid expenses....................... 407 33 9 (33) 407 ------- ------ ------- ------- Total forest product operations current assets................ 3,061 928 (35) 3,954 Property and equipment................. 8,737 3,305 9 1,659 13,701 Timber and timberlands................. 1,789 965 9 1,608 4,362 Investments in and advances to equity affiliates........................... 541 -- -- 541 Goodwill............................... 1,095 -- 9 1,788 2,883 Other assets and deferred charges...... 1,053 127 9,12,13 (7) 1,173 ------- ------ ------- ------- Total forest products operations.................... 16,276 5,325 5,013 26,614 ------- ------ ------- ------- Real estate and related assets........... 2,017 -- -- 2,017 ------- ------ ------- ------- Total assets.................... $18,293 $5,325 $5,013 $28,631 ======= ====== ======= ======= Liabilities Forest product operations: Notes payable.......................... $ 4 $ 110 $ -- $ 114 Current portion of long-term debt...... 8 9 9,12 290 307 Accounts payable....................... 809 255 1 (2) 1,062 Accrued liabilities.................... 1,042 201 -- 1,243 ------- ------ ------- ------- Total forest product operations current liabilities........... 1,863 575 288 2,726 Long-term debt........................... 5,095 1,531 9 6,000 12,626 Deferred income taxes.................... 2,377 632 8,9 1,274 4,283 Other long-term obligations.............. 877 38 -- 915 ------- ------ ------- ------- Total forest products operations.................... 10,212 2,776 7,562 20,550 ------- ------ ------- ------- Real estate and related assets........... 1,386 -- -- 1,386 ------- ------ ------- ------- Total liabilities............... 11,598 2,776 7,562 21,936 ------- ------ ------- ------- Shareholders' Equity..................... 6,695 2,549 9 (2,549) 6,695 ------- ------ ------- ------- Total liabilities and shareholders' equity.......... $18,293 $5,325 $5,013 $28,631 ======= ====== ======= =======
3 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. INTERCOMPANY TRANSACTIONS AND BALANCES To eliminate intercompany transactions and resulting account balances between Weyerhaeuser and Willamette, except for intercompany profit in inventory as the intercompany profit was not significant. 2. RECLASSIFICATIONS To reclassify certain of Willamette's 2001 non-recurring operating gains and losses to conform to the format of Weyerhaeuser's unaudited pro forma condensed consolidated statement of earnings. 3. UNSOLICITED TAKEOVER DEFENSE COSTS To eliminate the costs incurred by Willamette in fiscal year 2001 in defending against Weyerhaeuser's unsolicited takeover proposal. 4. INTEREST EXPENSE AND AMORTIZATION OF PREPAID BANK COMMITMENT FEE -- To record $202 million of interest expense related to a total of approximately $6.3 billion indebtedness incurred to finance the acquisition of Willamette, and to pay other costs and expenses relating to the Willamette acquisition. The unaudited pro forma condensed consolidated financial statements assume that this indebtedness consists of: -- $2.3 billion of borrowings under credit facilities at an assumed weighted average interest rate of 3.32% per annum, which assumed interest rate is based upon the interest rates in effect under those credit facilities as of February 22, 2002, and -- $4.0 billion of borrowings under a credit facility with an assumed weighted average interest rate of 3.14% per annum. -- To record $43 million of amortization expense related to prepaid bank commitment fees incurred to obtain the credit facilities that were used to finance the acquisition of Willamette. 5. DEPRECIATION OF STEP-UP IN PROPERTY, PLANT AND EQUIPMENT. To recognize the additional depreciation expense resulting from the step-up of the book value of Willamette's property, plant and equipment from Willamette's historical cost basis to its estimated fair market value. The additional depreciation expense has been calculated on the straight-line basis over 15 years. 6. DEPLETION OF STEP-UP IN TIMBER To recognize the additional depletion expense resulting from the step-up of Willamette's timber and timberlands from Willamette's historical cost basis to its estimated fair market value. The additional depletion expense has been calculated on a basis consistent with Willamette's cost-per-unit-harvested methodology, with Willamette's historical cost of timber replaced by the estimated fair market value of the timber. 4 7. INCOME TAX BENEFIT AND EXPENSE To recognize the income tax benefit or expense related to interest expense, amortization of prepaid bank commitment fees, depreciation, depletion expense and the reversal of Willamette's unsolicited takeover defense costs. 8. INCOME TAX ADJUSTMENTS The increase in deferred income taxes relates to the tax effect of the step-up of Willamette's assets and liabilities to estimated fair market value. 9. PURCHASE PRICE ALLOCATION Reflects the allocation of the purchase price of $55.50 per share of Willamette common stock paid in the tender offer and payable in the pending second-step merger and cash paid to acquire outstanding Willamette stock options. Holders of options to purchase shares of Willamette common stock were entitled to elect either to surrender their options in exchange for a per option cash payment equal to the amount by which $55.50 exceeds the option exercise price or to convert those options into options to acquire shares of Weyerhaeuser common stock in an amount and at an exercise price adjusted by a conversion ratio based on the $55.50 per share price we paid in the tender offer for Willamette common stock and on the market price of Weyerhaeuser's common stock. Holders of Willamette stock options have already been required to make this election and, accordingly, the unaudited pro forma condensed consolidated financial statements reflect the results of those elections. The unaudited pro forma condensed consolidated financial statements have been prepared on a basis of assumptions relating to the allocation of the total purchase price to the assets and liabilities of Willamette based upon preliminary estimates of their fair market value. The actual allocation of the total purchase price may differ from the allocation reflected in the unaudited pro forma condensed consolidated financial statements after appraisals and valuations of those assets and liabilities are obtained and other procedures are completed. The purchase price payable to acquire shares of Willamette common stock in the tender offer and the pending second-step merger and to pay cash in respect of outstanding Willamette stock options plus estimated direct transaction costs and expenses and the deferred tax effect of applying purchase accounting at December 30, 2001, over the historical cost of Willamette's net assets were calculated as follows (in millions): Purchase price for outstanding Willamette shares and options................................................... $ 6,176 Estimated direct transaction costs and expenses............. 100 Deferred tax effect of applying purchase accounting......... 1,274 Less Willamette historical net assets....................... (2,495) ------- Excess purchase price allocated to property, plant and equipment, and timber and timberlands, and goodwill.... $ 5,055 ======= The excess purchase price was allocated as follows: Property, Plant and Equipment, and Timber and Timberlands... $ 3,267 Goodwill.................................................... 1,788 ------- $ 5,055 =======
10. DILUTIVE EFFECT OF CONVERTED STOCK OPTIONS For calculating pro forma diluted net earnings per common share from continuing operations, the pro forma weighted average shares outstanding for each period was increased by Willamette stock options outstanding at the beginning of or granted during the fiscal year 2001, which were converted to Weyerhaeuser 5 stock options. The pro forma basic and diluted earnings per share for fiscal 2001 are calculated based upon the weighted average common shares outstanding as follows (in thousands): Basic....................................................... 219,644 Dilutive effect of stock options............................ 555 ------- Diluted..................................................... 220,199 =======
11. GOODWILL In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, issued by the Financial Accounting Standards Board in June 2001, the excess purchase price allocated to goodwill has not been amortized in these unaudited pro forma condensed consolidated financial statements. 12. DEFERRED COSTS To record prepaid bank commitment fees incurred to obtain the credit facilities used to finance the acquisition of Willamette. 13. REFINANCING Weyerhaeuser intends to refinance approximately $4 billion of borrowings outstanding under its credit facilities. Assuming the weighted average interest rate of the $4 billion of indebtedness incurred in the refinancing is 5.87% per annum, the pro forma interest expense would increase to $804 million and the pro forma income tax expense would decrease to $57 million resulting in pro forma net earnings of $289 million. In addition, cash and short-term investments would decrease by $22 million, and other assets and deferred charges would increase by the same amount. Weyerhaeuser's ability to obtain refinancing is subject to a number of risks and uncertainties. Accordingly, there can be no assurance that Weyerhaeuser will obtain such refinancing or that the weighted average interest rate of any refinancing indebtedness will be 5.87% per annum. 6