UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
July 23, 2013
(Date of earliest event reported)
WEYERHAEUSER COMPANY
(Exact name of registrant as specified in charter)
Washington | 1-4825 | 91-0470860 | ||
(State or other jurisdiction of incorporation or organization) |
(Commission File Number) |
(IRS Employer Identification Number) |
Federal Way, Washington 98063-9777
(Address of principal executive offices)
(zip code)
Registrants telephone number, including area code:
(253) 924-2345
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.01 Completion of Acquisition or Disposition of Assets |
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Exhibit 99.1 |
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Exhibit 99.2 |
ITEM 2.01 | COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS |
On July 23, 2013, Weyerhaeuser Company (Weyerhaeuser or the Company) completed the acquisition of Longview Timber LLC (Longview Timber) pursuant to the Stock Purchase Agreement, dated June 14, 2013, with Longview Timber Holdings, Corp. and certain of its security holders (the Purchase Agreement). Pursuant to the Purchase Agreement and other related agreements, the Company acquired, for cash, all of the equity interests in Longview Timber (the Acquisition) for an aggregate purchase price of approximately $2.65 billion, which includes the assumption of Longview Timbers debt. The purchase price is subject to post-closing adjustment based on Longview Timbers net working capital and net cash at closing in accordance with the terms of the Purchase Agreement. As at June 30, 2013, an aggregate principal amount of approximately $1.07 billion of fixed and floating rate notes was outstanding under Longview Timbers existing senior secured credit agreement.
The foregoing description of the Purchase Agreement is qualified in its entirety by reference to the Purchase Agreement, which was filed as Exhibit 2.1 to a Current Report on Form 8-K filed by the Company with the SEC on June 17, 2013, and is incorporated herein by reference.
This Form 8-K/A amends the Current Report on Form 8-K filed by the Company with the SEC on July 26, 2013, to include the financial statements of Longview Timber and pro forma financial information described in Item 9.01 hereof.
ITEM 9.01. | FINANCIAL STATEMENTS AND EXHIBITS |
(a) | Financial statements of business acquired. |
Audited consolidated financial statements of Longview Timber as of and for the year ended December 31, 2012 and the notes thereto, together with the related auditors consent, were filed as Exhibits 99.1 and 23.2, respectively, to a Current Report on Form 8-K filed by the Company with the SEC on June 17, 2013, and are incorporated herein by reference.
Unaudited consolidated interim financial statements of Longview Timber as of June 30, 2013 and December 31, 2012 and for the six month periods ended June 30, 2013 and 2012 and the notes thereto are filed as Exhibit 99.1 hereto.
(b) | Pro forma financial information. |
Unaudited pro forma condensed consolidated financial statements as of and for the six month period ended June 30, 2013, for the six month period ended June 30, 2012 and for the twelve month period ended December 31, 2012 and the notes thereto with respect to the Acquisition are filed as Exhibit 99.2 hereto.
(d) | Exhibits. |
The following items are filed as exhibits to this report:
99.1 | Unaudited consolidated interim financial statements of Longview Timber LLC as of June 30, 2013 and December 31, 2012 and for the six month periods ended June 30, 2013 and 2012 and the notes thereto. |
99.2 | Unaudited pro forma condensed consolidated financial statements as of and for the six month period ended June 30, 2013 and for the twelve month period ended December 31, 2012 and the notes thereto. |
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 hereunto duly authorized.
WEYERHAEUSER COMPANY | ||||
By: | /s/ Jeanne M. Hillman | |||
Name: | Jeanne M. Hillman | |||
Title: | Vice President and | |||
Chief Accounting Officer |
Date: August 7, 2013
Longview Timber LLC
Unaudited Consolidated Interim Financial Statements as of
June 30, 2013 and December 31, 2012 and for the six month
periods ended June 30, 2013 and 2012
LONGVIEW TIMBER LLC
TABLE OF CONTENTS
Page | ||
CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2013 AND DECEMBER 31, 2012 AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2013 AND 2012 (UNAUDITED) |
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Balance Sheets |
1 | |
Statements of Operations |
2 | |
Statements of Comprehensive Loss |
3 | |
Statements of Equity |
4 | |
Statements of Cash Flows |
5 | |
Notes to Consolidated Financial Statements |
616 |
LONGVIEW TIMBER LLC
CONSOLIDATED BALANCE SHEETS (Unaudited)
As of (Dollars in thousands) |
Note | June 30 2013 |
Dec. 31 2012 |
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Assets |
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Current Assets |
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Cash and cash equivalents |
$ | 31,892 | $ | 25,331 | ||||||
Accounts receivable |
10,690 | 6,147 | ||||||||
Deferred income tax asset |
8 | 318 | 318 | |||||||
Inventories |
2 | 6,141 | 6,134 | |||||||
Prepaid expenses and other current assets |
3 | 4,133 | 517 | |||||||
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Total current assets |
53,174 | 38,447 | ||||||||
Property, plant and equipment net |
4 | 2,411 | 2,388 | |||||||
Timber, timberlands and logging roads net |
5 | 1,491,348 | 1,552,635 | |||||||
Investment in IFA Nurseries |
6 | 705 | 705 | |||||||
Deferred debt issuance costs net |
7 | 4,652 | 3,797 | |||||||
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TOTAL ASSETS |
$ | 1,552,290 | $ | 1,597,972 | ||||||
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Liabilities and equity |
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Current Liabilities |
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Accounts payable |
$ | 4,860 | $ | 2,836 | ||||||
Accounts payable related party |
12 | | 3,665 | |||||||
Taxes payable |
2,195 | 2,466 | ||||||||
Accrued liabilities |
9 | 11,540 | 12,328 | |||||||
Current portion long-term debt |
10 | | 453,333 | |||||||
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Total current liabilities |
18,595 | 474,628 | ||||||||
Long-term debt |
10 | 1,070,000 | 616,667 | |||||||
Due to related party |
12 | 19,692 | 18,010 | |||||||
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Total liabilities |
1,108,287 | 1,109,305 | ||||||||
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COMMITMENTS AND CONTINGENCIES |
16 | |||||||||
Equity |
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Noncontrolling interest |
14 | (9 | ) | (1 | ) | |||||
Members equity |
15 | 444,012 | 488,668 | |||||||
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Total equity |
444,003 | 488,667 | ||||||||
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TOTAL LIABILITIES AND EQUITY |
$ | 1,552,290 | $ | 1,597,972 | ||||||
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See notes to consolidated financial statements.
- 1 -
LONGVIEW TIMBER LLC
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the six month periods ended June 30 (Dollars in thousands) |
Note | 2013 | 2012 | |||||||
Sales |
12 | $ | 160,150 | $ | 123,784 | |||||
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Costs and expenses |
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Cost of goods sold |
64,439 | 57,019 | ||||||||
Depletion, depreciation, and amortization |
64,747 | 58,581 | ||||||||
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Total |
129,186 | 115,600 | ||||||||
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Gross profit |
30,964 | 8,184 | ||||||||
Selling, general and administrative expenses |
12 | 5,814 | 8,831 | |||||||
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Operating income (loss) |
25,150 | (647 | ) | |||||||
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Other income (expense) |
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Interest income |
19 | 16 | ||||||||
Interest expense |
(29,376 | ) | (30,059 | ) | ||||||
Other income |
| 1,170 | ||||||||
Gain on sales of assets |
1,842 | 168 | ||||||||
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Total other expense, net |
(27,515 | ) | (28,705 | ) | ||||||
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Loss before income taxes |
(2,365 | ) | (29,352 | ) | ||||||
Provision for taxes |
8 | |||||||||
Current |
(1,687 | ) | (1,110 | ) | ||||||
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Total provision for taxes |
(1,687 | ) | (1,110 | ) | ||||||
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NET LOSS |
$ | (4,052 | ) | $ | (30,462 | ) | ||||
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See notes to consolidated financial statements.
- 2 -
LONGVIEW TIMBER LLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)
For the six month periods ended June 30 (Dollars in thousands) |
Note | 2013 | 2012 | |||||||
Net loss |
$ | (4,052 | ) | $ | (30,462 | ) | ||||
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Other comprehensive income |
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Amortization of cumulative derivative loss (net of income taxes $0) |
13 | 2,155 | 2,155 | |||||||
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Comprehensive loss |
$ | (1,897 | ) | $ | (28,307 | ) | ||||
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See notes to the consolidated financial statements.
- 3 -
LONGVIEW TIMBER LLC
CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)
For the six month periods ended June 30, 2013 and 2012 (Dollars in thousands) |
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Members Equity | ||||||||||||||||||||||||
Initial Member |
Special Member |
Accumulated Other Comprehensive Loss |
Total Members Equity |
Non controlling Interest |
Total | |||||||||||||||||||
Balance January 1, 2012 |
$ | 621,213 | $ | 7,449 | $ | (26,410 | ) | $ | 602,252 | $ | 15 | $ | 602,267 | |||||||||||
Amortization of cumulative derivative loss |
2,155 | 2,155 | 2,155 | |||||||||||||||||||||
Net loss |
(30,124 | ) | (338 | ) | (30,462 | ) | (30,462 | ) | ||||||||||||||||
Dividends |
(29,667 | ) | (333 | ) | (30,000 | ) | (8 | ) | (30,008 | ) | ||||||||||||||
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Balance June 30, 2012 |
$ | 561,422 | $ | 6,778 | $ | (24,255 | ) | $ | 543,945 | $ | 7 | $ | 543,952 | |||||||||||
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Balance January 1, 2013 |
$ | 504,627 | $ | 6,143 | $ | (22,102 | ) | $ | 488,668 | $ | (1 | ) | $ | 488,667 | ||||||||||
Amortization of cumulative derivative loss |
2,155 | 2,155 | 2,155 | |||||||||||||||||||||
Net loss |
(4,007 | ) | (45 | ) | (4,052 | ) | (4,052 | ) | ||||||||||||||||
Dividends |
(42,285 | ) | (474 | ) | (42,759 | ) | (8 | ) | (42,767 | ) | ||||||||||||||
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Balance June 30, 2013 |
$ | 458,335 | $ | 5,624 | $ | (19,947 | ) | $ | 444,012 | $ | (9 | ) | $ | 444,003 | ||||||||||
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See notes to consolidated financial statements.
- 4 -
LONGVIEW TIMBER LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the six month periods ended June 30 (Dollars in thousands) |
Note | 2013 | 2012 | |||||||
Cash provided by (used in) operating activities: |
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Net loss |
$ | (4,052 | ) | $ | (30,462 | ) | ||||
Adjustments to reconcile net loss to cash provided by operating activities: |
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Depletion, depreciation, and amortization |
64,747 | 58,581 | ||||||||
Amortization of deferred debt issuance costs |
7 | 806 | 1,110 | |||||||
Gain on sales of fixed assets |
(1,842 | ) | (168 | ) | ||||||
Amortization of cumulative derivative loss |
13 | 2,155 | 2,155 | |||||||
Change in assets and liabilities: |
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Accounts receivable |
(4,543 | ) | (228 | ) | ||||||
Inventories |
(2,021 | ) | (2,961 | ) | ||||||
Prepaid expenses and other current assets |
(3,616 | ) | (151 | ) | ||||||
Accounts payable and accrued liabilities |
1,236 | 545 | ||||||||
Accounts payable related party |
(3,665 | ) | (50 | ) | ||||||
Taxes payable |
(271 | ) | 392 | |||||||
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Cash provided by operating activities |
48,934 | 28,763 | ||||||||
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Cash provided by (used in) investing activities: |
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Additions to capital assets |
(3,153 | ) | (2,596 | ) | ||||||
Proceeds from the sale of capital assets net of selling costs |
3,526 | 204 | ||||||||
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Cash provided by (used in) investing activities |
373 | (2,392 | ) | |||||||
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Cash provided by (used in) financing activities: |
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Debt issuance costs |
7 | (1,661 | ) | | ||||||
Due to related party |
12 | 1,682 | (101 | ) | ||||||
Dividend paid to noncontrolling interest |
14 | (8 | ) | (8 | ) | |||||
Distributions paid to special member |
15 | (474 | ) | (333 | ) | |||||
Distributions paid to initial member |
15 | (42,285 | ) | (29,667 | ) | |||||
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Cash used in financing activities |
(42,746 | ) | (30,109 | ) | ||||||
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Change in cash and cash equivalents |
6,561 | (3,738 | ) | |||||||
Cash equivalents beginning of period |
25,331 | 25,185 | ||||||||
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Cash and cash equivalents end of period |
$ | 31,892 | $ | 21,447 | ||||||
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Supplemental disclosures: |
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Cash paid for interest |
$ | 26,554 | $ | 26,539 | ||||||
Cash paid for taxes |
$ | 1,580 | $ | 500 | ||||||
Supplemental disclosures of noncash investing activities: |
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Use of seedlings inventory for reforestation of timber, timberlands, and logging roads |
$ | 2,014 | $ | 2,508 | ||||||
Supplemental disclosures of noncash financing activities: |
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Current portion of long-term debt repaid through issuance of long-term debt agreement |
$ | 453,333 | $ | |
See notes to consolidated financial statements.
- 5 -
LONGVIEW TIMBER LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AS OF JUNE 30, 2013 AND DECEMBER 31, 2012 AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2013 AND 2012
1. | SUMMARY OF ACCOUNTING POLICIES |
Nature of Business:
General Longview Timber LLC (or the Company) is a limited liability company engaged in the ownership and management of timberlands in Oregon and Washington, which principally produce logs for sale from its timberlands. All of the timber facilities are located in the United States (U.S.). Longview Timber LLC owns and manages approximately 644,900 acres of timberlands in the U.S. Pacific Northwest composed primarily of softwoods. Longview Timber LLC is owned 98.89% by Longview Timber Holdings LLC, its initial member and 1.11% by Longview GP LLC, its special member.
Longview Timber LLC is the owner of Longview Fibre Company which is a real estate investment trust (REIT). A REIT is a company that derives most of its income from investments in real estate, which includes timberlands. A corporation that qualifies as a REIT generally will not be subject to corporate taxes on income and gains from investments in real estate to the extent that it distributes such income and gains to its shareholders. The principal REIT qualifying investment of Longview Timber LLC consists of timberlands. As a REIT, Longview Fibre Company will be required to pay federal corporate income tax on earnings from non-real estate investments and on earnings from real estate investments that are not distributed to its shareholders.
Basis of Presentation The consolidated financial statements presented herein are those of Longview Timber LLC and its subsidiaries, and are derived from the records of such entities after the elimination of intercompany balances and transactions. Reference to Longview Timber LLC or the Company also includes, as applicable, reference directly or indirectly to any of its subsidiaries including Longview Fibre Company; Longview Timberlands LLC; and Longview Timber, Corp. The consolidated financial statements have been prepared by Longview Timber LLC without audit and are subject to year-end adjustment, in accordance with accounting principles generally accepted in the United States of America, except that certain information and footnote disclosures made in the latest year-end financial statements may have been condensed or omitted for the interim statements. Certain costs are estimated for the full year and allocated into interim periods based on estimates of operating time expired, benefit received, or activity associated with the interim period. The consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.
Cash and Cash Equivalents Cash and cash equivalents consist of cash and highly liquid investments purchased with maturities of three months or less at date of acquisition. Cash equivalents held by Longview Timber LLC are considered Level 2 assets as defined by fair value accounting guidance, as the fair value of such assets are based on inputs, other than quoted prices in active markets which are observable either directly or indirectly.
- 6 -
Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are comprised mainly of trade accounts receivable primarily from the sale of products on credit. Credit is extended to customers based on an evaluation of their financial condition. The adequacy of the allowance for doubtful accounts is based on historical experience and past due status, in addition to managements evaluation of material customer accounts including ability to pay, bankruptcy, payment history, and other factors.
Bad debt expense associated with uncollectible accounts was zero for the six month periods ended June 30, 2013 and June 30, 2012, respectively. The Company recorded no allowance for doubtful accounts as of June 30, 2013 and December 31, 2012, respectively.
Inventories Inventories are stated at the lower of cost or market. If actual demand or market conditions are less favorable than those projected by management, inventory write-downs may be required. Cost is determined on a first-in, first-out basis except for supplies, which are stated using the average cost method. Seedlings are reclassified to timber, timberlands, and logging roads when used in the reforestation process.
Timber, Timberlands, and Logging Roads; Timber Depletion, Logging Roads Amortization and Bridge Amortization Timber, timberlands and logging roads are stated at cost, net of accumulated depletion and amortization. Timber, upon reaching the age of 35 years, is considered merchantable and available for harvesting, with all timber younger than 35 years of age being classified as premerchantable. Timber is tracked on a county-by-county basis whereby capital costs and estimated recoverable timber volumes are accumulated in the county in which the related timber is located. Expenditures for reforestation, including costs such as site preparation, tree planting, fertilization and herbicide application for the two years after planting, are capitalized and depleted as timber is harvested. After two years of age, plantation maintenance and tree farm management costs, consisting of recurring items necessary to the ownership and administration of the timber and timberlands, are recorded as a current period expense. Impairment is reviewed annually, or whenever events or circumstances indicate that the carrying value of an asset or group of assets may not be recovered pursuant to Accounting Standards Codification (ASC) 360, Property, Plant and Equipment.(ASC 360). Management evaluates whether or not the undiscounted future cash flows generated by the asset, or comparable sales will exceed its carrying value. If estimated future cash flows indicate the carrying value of an asset or group of assets may not be recoverable, impairment exists, and the assets net book value is written down to its estimated fair value.
Provision for depletion of merchantable timber represents a charge per unit of production (depletion rate) applied to actual harvest volumes. Management has applied four depletion rates for its timberlands which are based on geographical regions in Oregon and Washington. The depletion rates are validated to a computer growth index model that tracks the timber volumes through the growth cycle and is based upon actual growth rates from permanent timber growth plots throughout the U.S. Pacific Northwest. The depletion rates are adjusted annually for timber maturity, estimated growth, and actual harvest volumes or when there is a significant acquisition or disposition.
Direct costs associated with the building of primary and major secondary access logging roads are capitalized and amortized on the straight-line basis over estimated useful lives ranging from 3 to 15 years. Bridges are amortized over an estimated useful life of 35 years. Costs incurred for logging roads that serve short-term harvest needs are expensed as incurred. Costs for road base construction of mainline roads, such as clearing and grading, are not amortized and remain a capitalized cost until disposition as they provide permanent value to the timberlands.
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Timberland acquisitions are recorded originally at fair value and any gain or loss on timberland dispositions are recorded at the time of sale.
Property, Plant and Equipment, and Depreciation Property, plant and equipment are recorded at cost, net of accumulated depreciation. Plant and equipment, include those additions and improvements that add to production capacity or extend useful life. Impairment, in accordance with ASC 360, is reviewed annually, or whenever events or circumstances indicate that the carrying value of an asset or group of assets may not be recovered. Impairment evaluates whether or not the undiscounted future cash flows generated by an asset will exceed its carrying value. If estimated future cash flows indicate the carrying value of an asset or group of assets may not be recoverable, impairment exists, and the assets net book value is written down to its estimated fair value. When properties are sold or otherwise disposed of, the cost and the related accumulated depreciation are removed from the respective accounts, and the resulting profit or loss is recorded in operations. The costs of maintenance and repairs are charged to operations when incurred.
Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. The estimated useful lives of assets range from 4 to 10 years for machinery and equipment.
Revenue Recognition Revenues are recognized from sales to customers when title and risk of loss pass to the customer and when the sales price is fixed or determinable. For all sales, ownership transfers upon receipt by customers of logs (FOB-destination) or upon shipment to customers of logs (FOB-shipping point).
Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.
New Accounting Pronouncements In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, which amends FASB Accounting Standards Codification (ASC) Topic 220, Comprehensive Income. The amendments in this guidance require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of AOCI by the respective line items of net income if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required by GAAP that provide additional detail about those amounts. This guidance is effective prospectively for interim and annual reporting periods beginning after December 15, 2012. Longview Timber LLC has evaluated the impact of adopting this guidance on its financial statements and disclosures included within Notes to Consolidated Financial Statements and has determined the standard had no impact.
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2. | INVENTORIES |
Inventories at June 30, 2013 and December 31, 2012, consisted of the following (dollars in thousands):
2013 | 2012 | |||||||
Seed, cones, seedlings |
$ | 995 | $ | 1,003 | ||||
Rock and gravel |
2,533 | 2,431 | ||||||
Nursery bed stock |
2,310 | 2,553 | ||||||
Supplies |
303 | 147 | ||||||
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Total inventories |
$ | 6,141 | $ | 6,134 | ||||
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3. | PREPAID EXPENSES AND OTHER CURRENT ASSETS |
Prepaid expenses and other current assets at June 30, 2013 and December 31, 2012, consisted of the following (dollars in thousands):
2013 | 2012 | |||||||
Timber land deals |
$ | 3,438 | $ | 38 | ||||
Insurance |
139 | 120 | ||||||
Other miscellaneous, dues, fees |
556 | 359 | ||||||
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Total prepaid expenses and other current assets |
$ | 4,133 | $ | 517 | ||||
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Timber land deals represents payments that have been made for fees and other costs associated with the purchase and sale of timberlands. When payments associated with the purchase or sale of timberlands are made, they are recorded in the timber land deals until the purchase or sale is finalized.
4. | PROPERTY, PLANT AND EQUIPMENT NET |
Property, plant and equipment net at June 30, 2013 and December 31, 2012, consisted of the following (dollars in thousands):
2013 | ||||||||||||
Cost | Accumulated Depreciation |
Net Book Value |
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Land |
$ | 1,440 | $ | | $ | 1,440 | ||||||
Equipment |
2,723 | (1,752 | ) | 971 | ||||||||
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Total property, plant and equipment net |
$ | 4,163 | $ | (1,752 | ) | $ | 2,411 | |||||
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2012 | ||||||||||||
Cost | Accumulated Depreciation |
Net Book Value |
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Land |
$ | 1,440 | $ | | $ | 1,440 | ||||||
Equipment |
2,551 | (1,603 | ) | 948 | ||||||||
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Total property, plant and equipment net |
$ | 3,991 | $ | (1,603 | ) | $ | 2,388 | |||||
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5. | TIMBER, TIMBERLANDS AND LOGGING ROADS NET |
Timber, timberlands and logging roads net at June 30, 2013 and December 31, 2012, consisted of the following (dollars in thousands):
2013 | ||||||||||||
Cost | Accumulated Depletion and Amortization |
Net Book Value |
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Timber |
$ | 1,902,332 | $ | (622,176 | ) | $ | 1,280,156 | |||||
Timberlands |
196,963 | | 196,963 | |||||||||
Logging roads* |
17,566 | (3,337 | ) | 14,229 | ||||||||
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|||||||
Total timber, timberlands and logging roads net |
$ | 2,116,861 | $ | (625,513 | ) | $ | 1,491,348 | |||||
|
|
|
|
|
|
2012 | ||||||||||||
Cost | Accumulated Depletion and Amortization |
Net Book Value |
||||||||||
Timber |
$ | 1,898,855 | $ | (557,579 | ) | $ | 1,341,276 | |||||
Timberlands |
197,337 | | 197,337 | |||||||||
Logging roads* |
16,969 | (2,947 | ) | 14,022 | ||||||||
|
|
|
|
|
|
|||||||
Total timber, timberlands and logging roads net |
$ | 2,113,161 | $ | (560,526 | ) | $ | 1,552,635 | |||||
|
|
|
|
|
|
* includes bridges
During the six month periods ended June 30, 2013 and June 30, 2012, Longview Timber LLC sold timber and timberlands (including higher and better use lands) for net proceeds of $3.5 million and $0.2 million, realizing a gain of $1.8 million and $0.2 million, respectively.
6. | INVESTMENT IN IFA NURSERIES |
Investment of $705 thousand at June 30, 2013 and December 31, 2012, represents Longview Timber LLCs interest in IFA Nurseries Inc., a company which provides various reforestation goods and services. Longview Timber LLC accounts for its investment in IFA Nurseries, Inc. on the cost method.
7. | DEFERRED DEBT ISSUANCE COSTS |
Debt issuance costs, net of amortization, were $4.7 million and $3.8 million as of June 30, 2013 and December 31, 2012, respectively. Debt issuance costs are deferred and amortized over the respective terms to maturity.
Amortization expense for the six month periods ended June 30, 2013 and June 30, 2012, was $0.8 million and $1.1 million, respectively, and is included in interest expense on the consolidated statement of operations. Amortization expense for the next five years is as follows: 2013 (July-December) of $0.7 million, 2014 of $1.3 million, 2015 of $0.9 million, 2016 of $0.8 million, 2017 of $0.8 million and 2018 (Jan-June) of $0.2 million. Unamortized debt issuance costs as of June 30, 2013 includes $1.7 million incurred for the long term debt refinancing (see Note 10).
- 10 -
8. | INCOME TAXES |
Longview Timber LLC is taxable as a partnership and is generally not subject to income taxes on its stand-alone taxable income from operations and investments; such taxes are the responsibility of the individual members. During the six month periods ended June 30, 2013 and 2012, Longview Timber LLC made cash distributions to its members of $42.8 million and $30.0 million, respectively.
Generally, in any year which Longview Timber LLCs subsidiary Longview Fibre Company qualifies as a REIT under the Internal Revenue Code (IRC), it is not subject to federal income tax on that portion of its income that it distributes to its shareholders. During the six month periods ended June 30, 2013 and 2012, Longview Fibre Company made cash distributions to its shareholders of $43.3 million and $29.7 million, respectively. Such distributions in the six month periods ended June 30, 2013 and 2012 have been designated as $26.0 and $16.4 million of capital gain distributions and $17.3 and $13.3 million of return of capital, respectively. None of the amounts distributed were ordinary dividends as defined by the IRC. In addition, Longview Fibre Company anticipates it will distribute all of the net capital gains for 2013. All of the net capital gains for 2012 were distributed as noted above.
With limited exceptions, Longview Fibre Company will; however, be subject to corporate tax on built-in gains (the excess of fair market value over tax basis of property at January 1, 2006, the date of REIT election) on taxable sales of such built-in gain property during the ten years following REIT conversion. Built-in gain tax from the sale of REIT property may be off-set by utilization of pre-REIT net operating losses or by reinvesting sale proceeds in similar property that qualifies as like-kind under requirements of the IRC.
In order to maintain compliance with REIT tax rules, Longview Fibre Company utilizes a taxable REIT subsidiary (TRS) for various non-REIT qualifying activities including the harvest and sale of logs. The TRS is consolidated by Longview Timber LLC.
Accordingly, the provision for corporate income taxes relates to deferred tax on certain property sales (from utilization of pre-REIT net operating losses) and on income from TRS operations.
The provision for income taxes for the six month periods ended June 30, 2013 and 2012, consisted of the following (dollars in thousands):
2013 | 2012 | |||||||
Current federal tax |
$ | 1,687 | $ | 1,110 | ||||
|
|
|
|
|||||
Total provision for income taxes |
$ | 1,687 | $ | 1,110 | ||||
|
|
|
|
- 11 -
An analysis of the income tax provision for the six month periods ended June 30, 2013 and 2012, is as follows (dollars in thousands):
2013 | 2012 | |||||||
Expected federal income tax (benefit) at statutory rate |
$ | (828 | ) | $ | (10,273 | ) | ||
REIT losses not subject to income taxes |
2,515 | 11,383 | ||||||
|
|
|
|
|||||
Total provision for income taxes |
$ | 1,687 | $ | 1,110 | ||||
|
|
|
|
The tax effect of temporary differences giving rise to deferred tax assets at June 30, 2013 and December 31, 2012, is as follows (dollars in thousands):
2013 | 2012 | |||||||
Deferred tax assets REIT net operating loss carry forward from prior years |
$ | 318 | $ | 318 | ||||
|
|
|
|
The tax years 2009 through 2012 are subject to examination by the tax authorities. With few exceptions, Longview Timber LLC is no longer subject to U.S. federal, state, local examinations by tax authorities for years before 2009.
Uncertain Tax Positions Income tax positions must meet a more likely than not recognition threshold at the effective date to be recognized upon the adoption of ASC 740, Income Taxes (ASC 740), and in subsequent periods. ASC 740 also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
Longview Timber LLC recognizes tax liabilities in accordance with ASC 740 and adjusts these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined. Longview Timber LLC records the related interest and penalties on these within income tax expense as well.
Longview Timber LLC does not have any reserves for uncertain tax positions as of June 30, 2013 or December 31, 2012.
9. | ACCRUED LIABILITIES |
Accrued liabilities at June 30, 2013 and December 31, 2012, consisted of the following (dollars in thousands):
2013 | 2012 | |||||||
Workers payroll and benefit liability |
$ | 736 | $ | 1,259 | ||||
Accrued interest payable long term debt |
10,804 | 11,069 | ||||||
|
|
|
|
|||||
Total other accrued liabilities |
$ | 11,540 | $ | 12,328 | ||||
|
|
|
|
- 12 -
10. | DEBT |
Debt is provided by Metropolitan Life Insurance Company and a syndicate of lenders (the Lenders). The total debt on the balance sheet is $1,070 million as of June 30, 2013 and December 31, 2012. The debt is collateralized with the timber, timberlands, and logging roads.
Total debt consists of the following tranches:
Maturity Date |
Amount (USD$millions) |
Interest Rate |
||||||
Apr 3, 2015 |
$ | 308.3 | 5.12 | % | ||||
Apr 3, 2018 |
$ | 308.4 | 5.66 | % | ||||
Apr 3, 2018 |
$ | 453.3 | LIBOR + margin |
The portion of the debt ($453.3 million), which originally matured on April 3, 2013, was replaced through a new agreement with the Lenders with variable rate debt on June 18, 2013. This debt matures on April 3, 2018. The variable rates are calculated quarterly as the three-month LIBOR interest rate, which is a predetermined number of days prior to the interest payment, plus a set amount of basis points as defined in the related debt agreement on the 15th day of the month starting the calendar quarter. The LIBOR rate used for the most recent interest payment was 2.273%. The related cash interest expense recorded was $26.6 million and $26.5 million during the six month periods ended June 30, 2013, and 2012, respectively.
Longview Timber LLCs debt agreements contain customary covenants and default provisions, including a covenant not to exceed a specified debt-to-value ratio of 0.60. It also includes a restriction on distributions if the cash flow coverage ratio is less than 1.25 on a rolling eight-quarter basis. See Note 15 related to distribution amounts to shareholders. As of June 30, 2013, Longview Timber LLC was in compliance with all financial and nonfinancial covenants of its debt agreements.
11. | EMPLOYEE BENEFIT PLANS |
Longview Timber LLC has no participation in any pension, retiree medical, or health care insurance plans. Longview Timber LLC has a matching defined contribution 401k plan. The amount contributed and expensed to the 401k plan was $0.2 million for the six month periods ended June 30, 2013 and 2012, respectively.
12. | RELATED PARTIES |
A summary of the significant related party transactions is provided below:
a) | Accounts payable related party amount of zero and $3.7 million as of June 30, 2013 and December 31, 2012, respectively, is with Longview GP LLC (LVGP), a U.S. company indirectly owned by Brookfield Asset Management Inc. (Brookfield) for services provided pursuant to the terms of the October 9, 2008, amended and restated management agreement between Longview Timber LLC and LVGP. The amount is calculated based on 0.65% per annum of the sum of all effective capital contributions to Longview Timberlands LLC and is payable semi-annually. The parties agreed there would be no amount for 2013. The expense recorded in selling, general and administrative expenses was zero and $3.6 million for the six month periods ended June 30, 2013 and 2012, respectively. |
- 13 -
b) | Longview Timber LLC sells pulp logs to Longview Fibre Paper and Packaging Inc. (PPI), an entity controlled by Brookfield. Sales to PPI were $1.8 million and $5.0 million during the six month periods ended June 30, 2013 and 2012, respectively. Included in accounts receivable are amounts from PPI zero and $0.2 million as of June 30, 2013 and December 31, 2012, respectively. |
c) | The due to related party amount of $19.7 million and $18.0 million as of June 30, 2013 and December 31, 2012 respectively is with the parent company, Longview Timber Holdings, Corp. and reflects advances in connection with the initial acquisition of the previous Longview Fibre Company by Brookfield on April 20, 2007. |
d) | Longview Timber LLC had access to a $25 million revolving credit facility provided by a related party, Brookfield US Corporation, which was undrawn at December 31, 2012. The related fee which is recorded as interest expense was $0.1 million during the six month periods ended June 30, 2013 and 2012, respectively. The revolving credit facility matured on April 2, 2013 and was not renewed. |
13. | ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES |
In 2008, Longview Timber LLC held a bridge loan with three lenders Merrill Lynch USA, Royal Bank of Canada and The Bank of Nova Scotia (the Bridge Loan). On April 3, 2008, the Bridge Loan was refinanced with a combination of long-term debt and a short-term related party bridge loan. Longview Timber LLC used fixed interest rate swap agreements (swaps) to manage changes in cash flow as a result of changes in interest rate movements on certain of the variable rate debt formerly held under the Bridge Loan. Longview Timber LLC had designated these swaps as cash flow hedges. To receive hedge accounting treatment, all of the swaps were formally documented at the inception of each hedge and the hedges were determined to be highly effective at swap inception and throughout the term of the Bridge Loan. As the swaps were highly effective, the change in fair value, net of income taxes, was recorded in other comprehensive income or loss, except for the ineffective portion of the fair value change, which was recognized in operations. If the swaps had not been determined to be highly effective, Longview Timber LLC would have recorded the change in fair value in operations.
Longview Timber LLC terminated the swaps in connection with the re-financing of the Bridge Loan in 2008 with $53.5 million being paid to the counterparties.
The previously recognized losses related to these swaps, which are recorded in accumulated other comprehensive loss, will be recorded into operations in the same periods that the hedged transaction affects operations. The amounts are recorded within interest expense and the expense related to this was $2.2 million for the six month periods ended June 30, 2013 and 2012, respectively.
14. | NONCONTROLLING INTEREST |
Noncontrolling interest represents preferred stock interest in the equity of Longview Fibre Company, which was recorded as noncontrolling interest within equity in the amount of $(9) thousand and $(1) thousand as of June 30, 2013 and December 31 2012, respectively.
- 14 -
On May 10, 2007, Longview Fibre Company issued 125 shares of non-voting preferred stock with par value of $1 thousand to 125 individual stockholders. Preferred stock has a par value of $1 thousand per share, with liquidation preference of the same amount. The dividend rate for preferred shares is 12.5%. The shares were callable with a premium of 5% as of December 31, 2012. The premium reduced, net of issuance costs, 5% per annum such that there will be no premium after December 31, 2012.
Dividends Longview Fibre Company declared and paid dividends in the amount of $8 thousand for the six month periods ended June 30, 2013 and 2012, respectively.
15. | MEMBERS EQUITY |
Longview Timber LP entered into a limited partnership as of April 20, 2007, with Longview GP LLC as the general partner and Longview Timber Holdings LLC as the limited partner. On October 9, 2008, Longview Timber LP converted to a limited liability company, Longview Timber LLC, pursuant to and in accordance with the Delaware Limited Liability Company Act upon which Longview GP LLC became the special member and Longview Timber Holdings LLC became the initial member. As of June 30, 2013 and December 31, 2012, the ownership interest is 1.11% or 15,295 units as to the special member and 98.89% or 1,364,458 units as to the initial member.
Allocation and Distribution to Members Profit and loss shall be allocated to the members in proportion to their interest percentage for the period. All cash derived from operations of the limited liability company, but less cash used to pay current operating expenses and to pay or establish reasonable reserves as determined by the special member, shall be distributed to the members in proportion to their interest percentage.
Longview Timber LLC made distributions of $42.3 million and $29.7 million to the initial member and $0.5 million and $0.3 million to the special member for the six month periods ended June 30, 2013 and 2012, respectively.
16. | COMMITMENTS AND CONTINGENCIES |
Legal Matters and Litigation Longview Timber LLC is subject to legal proceedings and claims that arise in the ordinary course of the business. Although there can be no assurance as to the disposition of these matters and the proceedings, it is the opinion of Longview Timber LLCs management, based upon the information available at this time, that the expected outcome of these matters, individually or in aggregate, will not have a material effect on the ongoing results of operations, the financial condition of the business, or cash flows.
Log Sales Agreement Longview Timber LLC has two log sale agreements with Hampton Tree Farms, Inc., a subsidiary of Hampton Affiliates, under which Longview Timber LLC must provide a combined 50 million board feet of logs per year at the applicable market rate. One agreement, which supplies 20 million board feet annually, runs through October 2023 and may be extended for an additional five year term unless it is terminated by either party. The other agreement, which supplies 30 million board feet annually, runs through December 2016.
- 15 -
17. | FAIR VALUE MEASUREMENTS |
Longview Timber LLCs debt is carried at cost in the consolidated financial statements. The fair value of fixed-rate debt has been estimated based on the present value of future cash flows discounted at rates consistent with comparable maturities with similar credit risks. The carrying amount of variable-rate debt approximates fair value because of the frequent re-pricing of these instruments at market rates. The following table presents the carrying amount and estimated fair value of Longview Timber LLCs fixed-rate and variable-rate debt (in thousands):
Debt |
Cost Basis | Fair Value | ||||||
June 30, 2013 |
$ | 1,070,000 | $ | 1,126,737 | ||||
|
|
|
|
|||||
December 31, 2012 |
$ | 1,070,000 | $ | 1,135,636 | ||||
|
|
|
|
18. | CONCENTRATIONS OF CREDIT RISK |
Longview Timber LLC had the following concentrations of Sales and Accounts Receivable as of and for the six month periods ended June 30, 2013 and 2012:
2013 | 2012 | |||||||||||||||
Sales | Accounts Receivable |
Sales | Accounts Receivable |
|||||||||||||
Customer 1 |
33 | % | 17 | % | 26 | % | 17 | % | ||||||||
Customer 2 |
12 | % | 25 | % | 12 | % | 13 | % | ||||||||
Customer 3 |
9 | % | 16 | % | 11 | % | 15 | % | ||||||||
Customer 4 |
6 | % | 2 | % | 9 | % | 15 | % |
The Company maintains cash balances, which, at times, exceed the federally insured amount of $250,000. The Company has not experienced any losses from these accounts and believes it is not exposed to significant credit risk.
19. | SUBSEQUENT EVENTS |
Longview Timber LLC has evaluated subsequent events through July 26, 2013 which is the date the consolidated financial statements were available to be issued. On June 14, 2013, Weyerhaeuser Columbia Holding Co. LLC entered into an agreement to acquire 100% of the members units of Longview Timber LLC. The sales price was $2,650 million adjusted for normal working capital as defined in the agreement, with closing occurring on July 23, 2013.
******
- 16 -
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information is based upon the historical consolidated financial information of Weyerhaeuser for the year ended December 31, 2012 and as of and for the six month periods ended June 30, 2013 and 2012, included in the Companys annual report on Form 10-K for the year ended December 31, 2012 and the Companys quarterly report on Form 10-Q for the respective periods, and Longview Timber LLC (Longview or Longview Timber) included or incorporated by reference in this Report on Form 8-K/A.
The unaudited pro forma condensed combined balance sheet as at June 30, 2013, is presented as if the Additional Common Shares Offering (as defined below) and the acquisition by Weyerhaeuser of all of the outstanding equity interests in Longview Timber (the Acquisition) were completed on that date. The unaudited pro forma condensed combined statements of operations data for the six month periods ended June 30, 2013 and 2012, and the year ended December 31, 2012, assume that the Prior Offerings (as defined below) and the Acquisition were completed on January 1, 2012. The historical consolidated financial information has been adjusted to give effect to estimated pro forma events that are (1) directly attributable to the Prior Offerings and the Acquisition, (2) factually supportable and (3) with respect to the statement of operations, expected to have a continuing impact on the combined results of operations.
The unaudited pro forma condensed combined financial information should be read in conjunction with the historical consolidated financial statements and accompanying notes of Weyerhaeuser and Longview.
The unaudited pro forma condensed combined financial information contained in this Form 8K/A is presented for illustrative purposes only, contains a variety of adjustments, assumptions and preliminary estimates, is subject to numerous other uncertainties and does not reflect what the combined companys financial position or results of operations would have been had the Transactions (as defined below) been completed as of the dates assumed for purposes of that pro forma financial information nor does it reflect the financial position or results of operations of the combined company following the Acquisition. The pro forma adjustments are based on the preliminary information available at the time of the preparation of this Form 8K/A. For purposes of the unaudited pro forma condensed combined financial information, the Acquisition consideration has been preliminarily allocated to the assets acquired and liabilities assumed based on limited information presently available to Weyerhaeuser to estimate fair values. The Acquisition consideration has been allocated among the relative fair values of the assets acquired and liabilities assumed based on their estimated fair values as of the date of the Acquisition. The final allocation is dependent upon certain valuations and other analyses that could not be completed prior to the Acquisition and are required to make a definitive allocation. The actual amounts recorded upon completion of the valuation and other analyses related to the values as of July 23, 2013, the closing date of the Acquisition, may differ materially from the information presented in the accompanying unaudited pro forma condensed combined financial information. Additionally, the unaudited pro forma condensed combined financial information does not reflect the cost of any integration activities or benefits from synergies that may be derived from any integration activities nor does it include any other items not expected to have a continuing impact on the consolidated results of operations. In addition, the pro forma adjustments for the Acquisition do not include any post-closing adjustments that may occur pursuant to the Purchase Agreement (as defined below), which may include adjustments of the purchase price, and any such post-closing adjustments may be material.
The unaudited pro forma condensed combined financial information contained in this Report on Form 8K/A assumes that we elect to pay any and all dividends with respect to the Mandatory Convertible Preference Shares (as defined below) in cash.
Certain amounts in the historical consolidated financial statements of Longview will be reclassified to conform to Weyerhaeusers financial statement presentation. Management will also continue to assess Longviews accounting policies for adjustments in addition to those reflected in the pro forma condensed combined information that may be required to conform Longviews accounting policies to those of Weyerhaeuser.
Weyerhaeuser Company
Unaudited Pro Forma Condensed Combined Balance Sheet
As at June 30, 2013
(In millions)
Weyerhaeuser (Historical) |
Longview (Historical) |
Adjustments for the Additional Common Shares Offering |
Purchase Accounting Adjustments |
Pro Forma Combined |
||||||||||||||||
ASSETS |
||||||||||||||||||||
Forest Products |
||||||||||||||||||||
Current assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 908 | $ | 32 | $ | | $ | (34 | ) | $ | 860 | |||||||||
(32 | ) | |||||||||||||||||||
(11 | ) | |||||||||||||||||||
(2 | ) | |||||||||||||||||||
(1 | ) | |||||||||||||||||||
Receivables |
632 | 11 | | (2 | ) | 641 | ||||||||||||||
Inventories |
561 | 6 | | | 567 | |||||||||||||||
Prepaid expenses |
96 | 4 | | | 100 | |||||||||||||||
Deferred tax assets |
144 | | | | 144 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current assets |
2,341 | 53 | | (82 | ) | 2,312 | ||||||||||||||
Property and equipment |
2,706 | 2 | | | 2,708 | |||||||||||||||
Construction in progress |
72 | | | | 72 | |||||||||||||||
Timber and timberlands |
3,949 | 1,491 | | 1,245 | 6,685 | |||||||||||||||
Cash and cash equivalents designated for the Purchase of Longview Timber LLC |
1,450 | | 117 | (1,567 | ) | | ||||||||||||||
Investments in and advances to equity affiliates |
186 | 1 | | | 187 | |||||||||||||||
Other assets |
455 | 5 | | (5 | ) | 468 | ||||||||||||||
11 | ||||||||||||||||||||
2 | ||||||||||||||||||||
Restricted financial investments held by variable interest entities |
615 | | | | 615 | |||||||||||||||
Real Estate assets |
2,134 | | | | 2,134 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total assets |
$ | 13,908 | $ | 1,552 | $ | 117 | $ | (396 | ) | $ | 15,181 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
LIABILITIES AND EQUITY |
||||||||||||||||||||
Forest Products |
||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||
Notes payable |
$ | 2 | $ | | $ | | $ | | $ | 2 | ||||||||||
Current maturities of long-term debt |
163 | | | | 163 | |||||||||||||||
Accounts payable |
341 | 7 | | (2 | ) | 346 | ||||||||||||||
Accrued liabilities |
573 | 12 | | | 585 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current liabilities |
1,079 | 19 | | (2 | ) | 1,096 | ||||||||||||||
Long-term debt |
3,842 | 1,070 | | 70 | 4,982 | |||||||||||||||
Long-term debt (nonrecourse to the company) held by variable interest entities |
511 | | | | 511 | |||||||||||||||
Due to related party |
| 19 | | (19 | ) | | ||||||||||||||
Deferred income taxes |
38 | | | | 38 | |||||||||||||||
Deferred pension and other postretirement benefits |
1,785 | | | | 1,785 | |||||||||||||||
Other liabilities |
446 | | | | 446 | |||||||||||||||
Real Estate liabilities |
301 | | | | 301 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities |
8,002 | 1,108 | | 49 | 9,159 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Equity: |
||||||||||||||||||||
Weyerhaeuser shareholders interest: |
||||||||||||||||||||
Mandatory Convertible Preference Shares |
14 | | | | 14 | |||||||||||||||
Common Shares |
722 | | 5 | | 727 | |||||||||||||||
Other capital |
6,290 | | 112 | | 6,402 | |||||||||||||||
Retained earnings |
350 | | | (1 | ) | 349 | ||||||||||||||
Cumulative comprehensive loss |
(1,508 | ) | | | | (1,508 | ) | |||||||||||||
Members equity |
| 444 | | (444 | ) | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Weyerhaeuser shareholders interest |
5,868 | 444 | 117 | (445 | ) | 5,984 | ||||||||||||||
Noncontrolling interests |
38 | | | | 38 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total equity |
5,906 | 444 | 117 | (445 | ) | 6,022 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities and equity |
$ | 13,908 | $ | 1,552 | $ | 117 | $ | (396 | ) | $ | 15,181 | |||||||||
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
Weyerhaeuser Company
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Six Months Ended June 30, 2013
(In millions, except per share data)
Weyerhaeuser (Historical) |
Longview (Historical) |
Adjustments for Prior Offerings |
Purchase Accounting Adjustments |
Pro Forma Combined |
||||||||||||||||
Net sales and revenues |
$ | 4,092 | $ | 160 | $ | | $ | (53 | ) | $ | 4,199 | |||||||||
Cost of products sold |
3,197 | 129 | | (53 | ) | 3,232 | ||||||||||||||
(41 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross margin |
895 | 31 | | 41 | 967 | |||||||||||||||
Selling, general and administrative expenses |
331 | 6 | | | 337 | |||||||||||||||
Research and development expenses |
15 | | | | 15 | |||||||||||||||
Charges for restructuring, closures and impairments |
10 | | | | 10 | |||||||||||||||
Other operating income, net |
(28 | ) | (2 | ) | | | (30 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income |
567 | 27 | | 41 | 635 | |||||||||||||||
Interest income and other |
21 | | | | 21 | |||||||||||||||
Interest expense, net of capitalized interest |
(163 | ) | (29 | ) | | 4 | (188 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings before income taxes |
425 | (2 | ) | | 45 | 468 | ||||||||||||||
Income taxes |
(83 | ) | (2 | ) | | | (85 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earnings |
342 | (4 | ) | | 45 | 383 | ||||||||||||||
Dividends on preference shares |
(2 | ) | | (20 | ) | | (22 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earnings attributable to Weyerhaeuser common shareholders |
$ | 340 | $ | (4 | ) | $ | (20 | ) | $ | 45 | $ | 361 | ||||||||
|
|
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|
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Earnings per share attributable to Weyerhaeuser common shareholders: |
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Basic |
$ | 0.62 | $ | 0.62 | ||||||||||||||||
Diluted |
$ | 0.61 | $ | 0.62 | ||||||||||||||||
Weighted average shares outstanding (in thousands): |
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Basic |
549,159 | 580,426 | ||||||||||||||||||
Diluted |
554,301 | 585,568 |
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
Weyerhaeuser Company
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Six Months Ended June 30, 2012
(In millions, except per share data)
Weyerhaeuser (Historical) |
Longview (Historical) |
Adjustments for Prior Offerings |
Purchase Accounting Adjustments |
Pro Forma Combined |
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Net sales and revenues |
$ | 3,287 | $ | 124 | $ | | $ | (32 | ) | $ | 3,379 | |||||||||
Cost of products sold |
2,806 | 116 | | (32 | ) | 2,856 | ||||||||||||||
(34 | ) | |||||||||||||||||||
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Gross margin |
481 | 8 | | 34 | 523 | |||||||||||||||
Selling, general and administrative expenses |
292 | 9 | | | 301 | |||||||||||||||
Research and development expenses |
15 | | | | 15 | |||||||||||||||
Charges for restructuring, closures and impairments |
16 | | | | 16 | |||||||||||||||
Other operating income, net |
(119 | ) | | | | (119 | ) | |||||||||||||
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Operating income |
277 | (1 | ) | | 34 | 310 | ||||||||||||||
Interest income and other |
23 | 2 | | | 25 | |||||||||||||||
Interest expense, net of capitalized interest |
(173 | ) | (30 | ) | | 3 | (200 | ) | ||||||||||||
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Earnings before income taxes |
127 | (29 | ) | | 37 | 135 | ||||||||||||||
Income taxes |
(2 | ) | (1 | ) | | | (3 | ) | ||||||||||||
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Net earnings |
125 | (30 | ) | | 37 | 132 | ||||||||||||||
Dividends on preference shares |
| | (22 | ) | | (22 | ) | |||||||||||||
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Net earnings attributable to Weyerhaeuser common shareholders |
$ | 125 | $ | (30 | ) | $ | (22 | ) | $ | 37 | $ | 110 | ||||||||
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Earnings per share attributable to Weyerhaeuser common shareholders: |
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Basic |
$ | 0.23 | $ | 0.19 | ||||||||||||||||
Diluted |
$ | 0.23 | $ | 0.19 | ||||||||||||||||
Weighted average shares outstanding (in thousands): |
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Basic |
537,667 | 571,017 | ||||||||||||||||||
Diluted |
539,880 | 573,230 |
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
Weyerhaeuser Company
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2012
(In millions, except per share data)
Weyerhaeuser (Historical) |
Longview (Historical) |
Adjustments for Prior Offerings |
Purchase Accounting Adjustments |
Pro Forma Combined |
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Net sales and revenues |
$ | 7,059 | $ | 245 | $ | | $ | (68 | ) | $ | 7,236 | |||||||||
Cost of products sold |
5,810 | 230 | | (68 | ) | 5,904 | ||||||||||||||
(68 | ) | |||||||||||||||||||
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Gross margin |
1,249 | 15 | | 68 | 1,332 | |||||||||||||||
Selling, general and administrative expenses |
630 | 19 | | | 649 | |||||||||||||||
Research and development expenses |
32 | | | | 32 | |||||||||||||||
Charges for restructuring, closures and impairments |
32 | | | | 32 | |||||||||||||||
Other operating income, net |
(180 | ) | | | | (180 | ) | |||||||||||||
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Operating income |
735 | (4 | ) | | 68 | 799 | ||||||||||||||
Interest income and other |
52 | | | | 52 | |||||||||||||||
Interest expense, net of capitalized interest |
(348 | ) | (60 | ) | | 6 | (402 | ) | ||||||||||||
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Earnings before income taxes |
439 | (64 | ) | | 74 | 449 | ||||||||||||||
Income taxes |
(55 | ) | (2 | ) | | | (57 | ) | ||||||||||||
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Net earnings |
384 | (66 | ) | | 74 | 392 | ||||||||||||||
Net loss attributable to noncontrolling interests |
1 | | | | 1 | |||||||||||||||
Dividends on preference shares |
| | (44 | ) | | (44 | ) | |||||||||||||
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Net earnings attributable to Weyerhaeuser common shareholders |
$ | 385 | $ | (66 | ) | $ | (44 | ) | $ | 74 | $ | 349 | ||||||||
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Earnings per share attributable to Weyerhaeuser common shareholders: |
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Basic |
$ | 0.71 | $ | 0.61 | ||||||||||||||||
Diluted |
$ | 0.71 | $ | 0.61 | ||||||||||||||||
Weighted average shares outstanding (in thousands): |
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Basic |
539,140 | 572,490 | ||||||||||||||||||
Diluted |
542,310 | 575,660 |
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
1. Basis of Presentation
On June 14, 2013, we entered into a purchase agreement (the Purchase Agreement) with Longview Timber Holdings, Corp. and certain of its security holders, other related agreements to acquire, with cash, all of the equity interests in Longview Timber for an aggregate purchase price of $2.65 billion (which amount includes the assumption of Longviews senior secured fixed and floating rate loans in an aggregate principal amount of $1.07 billion under the Amended and Restated Loan Agreement dated as of November 4, 2008, as further amended, among Longview Timber Corp., Longview Timberlands LLC and Metropolitan Life Insurance Company (collectively, the Longview Existing Debt), and is subject to adjustment based on Longviews net working capital and net cash at the closing date of the Acquisition in accordance with the terms of the Purchase Agreement. To finance the Acquisition, Weyerhaeuser issued the following:
| 29,000,000 of our common shares, par value $1.25 per share (the Common Shares), on June 24, 2013, at the price of $27.75 per common share for net proceeds of $781 million (the Common Shares Offering); |
| 13,800,000 6.375% Mandatory Convertible Preference Shares, Series A, par value $1.00 and liquidation preference of $50.00 per share (the Mandatory Convertible Preference Shares), on June 24, 2013, for net proceeds of $669 million (the Mandatory Convertible Preference Shares Offering and, together with the Common Shares Offering and the Additional Common Shares Offering, the Prior Offerings); and |
| 4,350,000 common shares on July 8, 2013, at the price of $27.75 per share for net proceeds of $117 million, in connection with the exercise by the underwriters of the Common Shares Offering of the additional common shares purchase option (the Additional Common Shares Offering). |
Net proceeds received from the issuances of shares are recorded in Cash and cash equivalents designated for the purchase of Longview Timber LLC in the Unaudited Pro Forma Condensed Combined Balance Sheet. The Acquisition closed on July 23, 2013.
Weyerhaeuser will account for the Acquisition as a purchase in accordance with accounting principles generally accepted in the United States. Under the purchase method, the assets and liabilities of Longview will be recorded as of the date of the Acquisition at their respective fair values.
2. Pro Forma Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet
The following table presents the preliminary purchase accounting adjustments to the net book value of the assets acquired and liabilities of Longview assumed based on the preliminary estimates of fair values of the assets acquired and liabilities assumed as if the Acquisition occurred at June 30, 2013.
Net cash paid |
$ | 1,601 | ||
Less book value of Longview net assets |
(444 | ) | ||
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Excess purchase price to be allocated |
$ | 1,157 | ||
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Fair market value adjustments: |
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Eliminate Longview cash |
$ | (32 | ) | |
Timber and timberlands |
1,245 | |||
Eliminate deferred debt costs |
(5 | ) | ||
Eliminate related party payables |
19 | |||
Long-term debt |
(70 | ) | ||
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Total allocations |
$ | 1,157 | ||
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Purchase accounting adjustments have been reflected to eliminate the historical Longview equity balances. Receivable and accounts payable balances related to Longview sales to Weyerhaeuser have been eliminated. Weyerhaeuser paid an $11 million deposit related to interest on the assumed Longview debt that is reflected as a long-term asset and $2 million to transfer the debt to Weyerhaeuser from Longview, which is reflected as a long-term asset and will be amortized over the life of the debt. A purchase accounting adjustment has been reflected on the retained earnings line to include estimated other transaction expenses of $1 million.
No deferred income taxes have been provided on the fair market value adjustments because Longview operates as a REIT and almost all of its income will continue to be distributed to shareholders without first paying corporate level tax.
3. Pro Forma Adjustments to Unaudited Pro Forma Condensed Combined Statement of Operations
The adjustment to net sales and revenues and cost of products sold includes the elimination of Longview sales to Weyerhaeuser. Additionally, cost of products sold includes a net reduction in combined depletion expense. Longview computed depletion rates by dividing the carrying amount of merchantable timber by the volume of merchantable timber estimated to be available by region in Oregon and Washington. Weyerhaeuser computes depletion rates by dividing the net carrying value of timber by the related volume of timber estimated to be available over the growth cycle. Further, Weyerhaeuser calculates depletion in the West in a Western depletion pool, as opposed to by region in Oregon and Washington. Conforming Longviews depletion method to Weyerhaeusers depletion method results in a decrease in Longviews historical depletion for the periods presented. This is partially offset by an increase in Weyerhaeusers historical depletion as a result of including the fair value basis of the Longview timber in Weyerhaeusers Western depletion pool. Total depletion under the two depletion methods will be the same amount over the harvest cycle.
The adjustment to interest expense, net of capitalized interest, reflects the elimination of amortization of losses recognized by Longview on terminated interest rate swaps and the elimination of amortization of Longviews deferred loan costs. During second quarter 2013, we paid $11 million in fees related to a bridge loan commitment obtained in connection with the Acquisition. Upon closing of the Acquisition on July 23, 2013, we terminated the bridge loan commitment, which was unfunded, and the fees associated therewith will be expensed in third quarter 2013.
For purposes of calculating pro forma condensed combined basic and diluted earnings per share, we gave effect to the Prior Offerings and used the actual dividend rate of 6.375% on the Mandatory Convertible Preference Shares, or $3.1875 per Mandatory Convertible Preference Share annually. Accordingly, dividends on the Mandatory Convertible Preference Shares would have been $22 million for each of the six month periods ended June 30, 2013 and 2012, and $44 million for the year ended December 31, 2012, and were subtracted from net earnings attributable to Weyerhaeuser common shareholders, or $0.04 and $0.08 per Common Share, respectively, during such periods. The Mandatory Convertible Preference Shares are initially convertible into a maximum of 20,720,721 Common Shares, assuming mandatory conversion based on an applicable market rate (as determined pursuant to the terms of the Mandatory Convertible Preference Shares) for our Common Shares equal to $33.30 per Common Share. We have assumed that none of the Mandatory Convertible Preference Shares have been converted for purposes of calculating pro forma combined diluted earnings per share because conversion would have had an antidilutive effect. We have also assumed that we elect to pay all dividends on the Mandatory Convertible Preference Shares in cash.