UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
February 19, 2016
(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)) |
EXPLANATORY NOTE
This Amendment No. 1 to the Current Report on Form 8-K (this Amendment) of Weyerhaeuser Company (Weyerhaeuser or the Registrant) amends the Registrants original Current Report on Form 8-K filed February 19, 2016 (Film No. 161442437). This Amendment files (1) the historical audited consolidated financial statements of Plum Creek Timber Company, Inc. (Plum Creek), (2) the historical audited consolidated financial statements of Plum Creek Timberlands, L.P. and (3) the unaudited pro forma condensed combined financial information, in each case including the notes related thereto, in connection with the merger of Plum Creek with and into Weyerhaeuser on February 19, 2016, with Weyerhaeuser continuing as the surviving entity in the merger.
ITEM 9.01 Financial Statements and Exhibits
(a) | Financial Statements of Businesses Acquired |
Plum Creeks audited consolidated balance sheets at December 31, 2015 and 2014, and Plum Creeks audited consolidated statements of income, cash flows and comprehensive income for the years ended December 31, 2015, 2014 and 2013 and the notes related thereto are filed as Exhibit 99.1 hereto and are incorporated herein by reference.
Plum Creek Timberlands, L.P.s audited consolidated balance sheets at December 31, 2015 and 2014, and Plum Creek Timberlands, L.P.s audited consolidated statements of income, cash flows and comprehensive income for the years ended December 31, 2015, 2014 and 2013 and the notes related thereto are filed as Exhibit 99.2 hereto and are incorporated herein by reference.
(b) | Pro Forma Financial Information |
The Weyerhaeuser and Plum Creek unaudited pro forma condensed combined balance sheet as of December 31, 2015 and the Weyerhaeuser and Plum Creek unaudited pro forma condensed combined statement of operations for the year ended December 31, 2015 and the notes related thereto are filed as Exhibit 99.3 hereto and are incorporated herein by reference.
(d) | Exhibits |
The following items are filed as exhibits to this report:
23.1 | Consent of Ernst & Young LLP, independent registered public accounting firm for Plum Creek | |
99.1 | Plum Creeks audited consolidated balance sheets at December 31, 2015 and 2014, and Plum Creeks audited consolidated statements of income, cash flows and comprehensive income for the years ended December 31, 2015, 2014 and 2013 and the notes related thereto (incorporated by reference to Part II, Item 8 of Plum Creeks Annual Report on Form 10-K, filed February 18, 2016) | |
99.2 | Plum Creek Timberlands, L.P.s audited consolidated balance sheets at December 31, 2015 and 2014, and Plum Creek Timberlands, L.P.s audited consolidated statements of income, cash flows and comprehensive income for the years ended December 31, 2015, 2014 and 2013 and the notes related thereto (incorporated by reference to Part II, Item 8 of Plum Creeks Annual Report on Form 10-K, filed February 18, 2016) | |
99.3 | Weyerhaeuser and Plum Creek unaudited pro forma condensed combined balance sheet as of December 31, 2015 and the Weyerhaeuser and Plum Creek unaudited pro forma condensed combined statement of operations for the year ended December 31, 2015 and the notes related thereto |
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 hereunto duly authorized.
WEYERHAEUSER COMPANY | ||
By: | /s/ Jeanne M. Hillman | |
Name: | Jeanne M. Hillman | |
Title: | Vice President and Chief Accounting Officer |
Date: March 11, 2016
EXHIBIT INDEX
Exhibit No. |
Description | |
23.1 | Consent of Ernst & Young LLP, independent registered public accounting firm for Plum Creek | |
99.1 | Plum Creeks audited consolidated balance sheets at December 31, 2015 and 2014, and Plum Creeks audited consolidated statements of income, cash flows and comprehensive income for the years ended December 31, 2015, 2014 and 2013 and the notes related thereto (incorporated by reference to Part II, Item 8 of Plum Creeks Annual Report on Form 10-K, filed February 18, 2016) | |
99.2 | Plum Creek Timberlands, L.P.s audited consolidated balance sheets at December 31, 2015 and 2014, and Plum Creek Timberlands, L.P.s audited consolidated statements of income, cash flows and comprehensive income for the years ended December 31, 2015, 2014 and 2013 and the notes related thereto (incorporated by reference to Part II, Item 8 of Plum Creeks Annual Report on Form 10-K, filed February 18, 2016) | |
99.3 | Weyerhaeuser and Plum Creek unaudited pro forma condensed combined balance sheet as of December 31, 2015 and the Weyerhaeuser and Plum Creek unaudited pro forma condensed combined statement of operations for the year ended December 31, 2015 and the notes related thereto |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in this Amendment No. 1 to the Current Report on Form 8-K and in the following Registration Statements:
| Registration Statement of Weyerhaeuser Company on Form S-3 No. 333-204721, |
| Registration Statement of Weyerhaeuser Company on Form S-4 No. 333-208465, |
| Registration Statement on Form S-8 No. 333-209617 pertaining to the Plum Creek Timber Company, Inc. 2012 Stock Incentive Plan and the Plum Creek Timber Company, Inc. Amended and Restated Stock Incentive Plan, |
| Registration Statement on Form S-8 No. 333-188256 pertaining to the Weyerhaeuser 2013 Long-Term Incentive Plan, |
| Registration Statement on Form S-8 No. 333-183980 pertaining to the Weyerhaeuser 2004 Long-Term Incentive Plan, |
| Registration Statement on Form S-8 No. 333-182810 pertaining to the Weyerhaeuser Salaried and NORPAC 401(K) Plan and the Weyerhaeuser Hourly 401(K) Plan, and |
| Registration Statement on Form S-8 No. 333-182224 pertaining to the Weyerhaeuser Salaried and NORPAC 401(K) Plan and the Weyerhaeuser Hourly 401(K) Plan; |
of our reports dated February 18, 2016, with respect to the consolidated financial statements of Plum Creek Timber Company, Inc., and Plum Creek Timberlands, L.P. and the effectiveness of internal control over financial reporting of Plum Creek Timber Company, Inc., included in the Annual Report on Form 10-K of Plum Creek Timber Company, Inc. for the year ended December 31, 2015, filed with the Securities and Exchange Commission on February 18, 2016.
/s/ Ernst & Young LLP
Seattle, Washington
March 10, 2016
Exhibit 99.3
WEYERHAEUSER COMPANY
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information is based on the historical consolidated financial information of Weyerhaeuser Company (referred to as Weyerhaeuser) and Plum Creek Timber Company, Inc. (referred to as Plum Creek) and has been prepared to reflect the following:
1. | The merger of Weyerhaeuser and Plum Creek (referred to as the Merger Transaction), and |
2. | Weyerhaeusers $2.5 billion bank term loan agreements and repurchase of $2.5 billion of outstanding common shares (referred to as the Capital Transaction). |
The unaudited pro forma condensed combined balance sheet as of December 31, 2015 is presented as if the Merger Transaction and the Capital Transaction were completed on that date. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2015, assumes that the Merger Transaction and Capital Transaction were completed on January 1, 2015. The historical consolidated financial information has been adjusted to give effect to estimated pro forma events that are (1) directly attributable to the Merger Transaction or the Capital Transaction, (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 with the historical consolidated financial statements and accompanying notes of Plum Creek.
The unaudited pro forma condensed combined financial information is presented for illustrative purposes only, contains a variety of adjustments, assumptions and 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 Merger Transaction and Capital Transaction 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 Merger Transaction and Capital Transaction.
The pro forma adjustments are based on the information available at the time of the preparation of this financial information. For purposes of the unaudited pro forma condensed combined financial information, the value of the equity consideration issued by Weyerhaeuser in exchange for 100% of Plum Creeks equity has been preliminarily allocated to the Plum Creek assets acquired and liabilities assumed based on an initial estimate of fair values.
Additionally, the unaudited pro forma condensed combined financial information does not reflect the cost of any integration activities or benefits from synergies or different asset management strategies that may be derived from any integration activities, nor does it include any items not expected to have a continuing impact on the consolidated results of operations of Weyerhaeuser.
On November 8, 2015 Weyerhaeuser announced that the Weyerhaeuser board authorized the exploration of strategic alternatives for Weyerhaeusers Cellulose Fibers business. The pro forma condensed combined financial information does not include any adjustments to reflect potential outcomes of the Weyerhaeuser boards evaluation process.
Weyerhaeuser Company
Unaudited Pro Forma Condensed Combined Statement of Operations
For the year ended December 31, 2015
in millions, except per share amounts | ||||||||||||||||||||||||
Note 1 | Note 3 |
Note 3 | ||||||||||||||||||||||
Weyerhaeuser Company |
Plum Creek Timber Company, Inc. |
Merger Pro Forma |
Combined Company Pro Forma |
Capital Pro Forma Adjustments |
Combined Company Pro Forma |
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Net Sales |
$ | 7,082 | $ | 1,445 | (27) | A | $ | 8,471 | $ | 8,471 | ||||||||||||||
(29) | D | |||||||||||||||||||||||
| E | |||||||||||||||||||||||
Cost of products sold |
5,694 | 1,037 | (27) | A | 6,753 | 6,753 | ||||||||||||||||||
33 | B | |||||||||||||||||||||||
16 | C | |||||||||||||||||||||||
| E | |||||||||||||||||||||||
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Gross margin |
1,388 | 408 | (78) | 1,718 | | 1,718 | ||||||||||||||||||
Selling, general and administrative expenses |
402 | 150 | (8) | H | 544 | 544 | ||||||||||||||||||
Research and development expenses |
24 | | 24 | 24 | ||||||||||||||||||||
Charges for restructuring, closures and impairments |
25 | | 25 | 25 | ||||||||||||||||||||
Other operating costs (income), net |
18 | (16 | ) | (29) | D | (41 | ) | (41 | ) | |||||||||||||||
(14) | H | |||||||||||||||||||||||
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Operating income |
919 | 274 | (27) | 1,166 | | 1,166 | ||||||||||||||||||
Earnings from unconsolidated entities |
(105 | ) | 83 | (18) | F | (40 | ) | (40 | ) | |||||||||||||||
Interest income and other |
36 | | 36 | 36 | ||||||||||||||||||||
Interest expense, net: |
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Interest expense (debt obligations to unrelated parties) |
(347 | ) | (105 | ) | 9 | G | (443 | ) | (38 | ) I | (481 | ) | ||||||||||||
Interest expense (note payable to Timberland Venture) |
| (58 | ) | 31 | G | (27 | ) | (27 | ) | |||||||||||||||
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Total interest expense, net: |
(347 | ) | (163 | ) | 40 | (470 | ) | (38 | ) | (508 | ) | |||||||||||||
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Earnings from continuing operations before income taxes |
503 | 194 | (5) | 692 | (38 | ) | 654 | |||||||||||||||||
Income taxes |
3 | 3 | 6 | C | 12 | 12 | ||||||||||||||||||
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Net earnings from continuing operations |
506 | 197 | 1 | 704 | (38 | ) | 666 | |||||||||||||||||
Dividends on preference shares |
(44 | ) | | (44 | ) | (44 | ) | |||||||||||||||||
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Net earnings from continuing operations attributable to common shareholders |
462 | 197 | 1 | 660 | (38 | ) | 622 | |||||||||||||||||
Basic earnings per share from continuing operations: |
$ | 0.89 | $ | 0.82 | K | $ | 0.88 | K | ||||||||||||||||
Diluted earnings per share from continuing operations: |
$ | 0.89 | $ | 0.82 | K | $ | 0.88 | K | ||||||||||||||||
Weighted average number of common shares outstanding: |
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Basic |
516.4 | 795.3 | J | 702.9 | J | |||||||||||||||||||
Diluted |
519.6 | 799.0 | J | 706.6 | J |
* | The accompanying notes are an integral part of, and should be read together with, this unaudited pro forma condensed combined financial information. |
Weyerhaeuser Company
Unaudited Pro Forma Condensed Combined Balance Sheet
As of December 31, 2015
in millions | ||||||||||||||||||||||||||
Note 1 | Note 3 |
Note 3 | ||||||||||||||||||||||||
Weyerhaeuser Company |
Plum Creek Timber Company, Inc. |
Merger Pro Forma |
Combined Company Pro Forma |
Capital Pro Forma Adjustments |
Combined Company Pro Forma |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ | 1,012 | $ | 88 | $ (104) | S | $ | 252 | $ | (2 | ) U | $ | 250 | |||||||||||||
(744) | T | |||||||||||||||||||||||||
Receivables, less allowances |
487 | 32 | 519 | 519 | ||||||||||||||||||||||
Receivables for taxes |
30 | | 6 | S | 36 | 36 | ||||||||||||||||||||
Inventories |
568 | 57 | 625 | 625 | ||||||||||||||||||||||
Assets held for sale |
| 24 | 25 | L | 49 | 49 | ||||||||||||||||||||
Prepaid expenses and other current assets |
77 | 16 | 93 | 93 | ||||||||||||||||||||||
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Total current assets |
2,174 | 217 | (817) | 1,574 | (2 | ) | 1,572 | |||||||||||||||||||
Property and equipment, net |
2,586 | 113 | 105 | N | 2,804 | 2,804 | ||||||||||||||||||||
Construction in progress |
195 | | 195 | 195 | ||||||||||||||||||||||
Timber and timberlands at cost, less depletion charged to disposals |
6,480 | 3,910 | 4,286 | M | 14,676 | 14,676 | ||||||||||||||||||||
Minerals and mineral rights, net |
| 281 | 75 | M | 356 | 356 | ||||||||||||||||||||
Investments in and advances to equity affiliates |
74 | 337 | 634 | O | 1,045 | 1,045 | ||||||||||||||||||||
Goodwill |
40 | | | Q | 40 | 40 | ||||||||||||||||||||
Deferred tax assets |
4 | 37 | (37) | N | 4 | 4 | ||||||||||||||||||||
Other assets |
318 | 95 | 413 | 2 | U | 415 | ||||||||||||||||||||
Restricted financial investments held by variable interest entities |
615 | | 615 | 615 | ||||||||||||||||||||||
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Total assets |
$ | 12,486 | $ | 4,990 | $ 4,246 | $ | 21,722 | $ | | $ | 21,722 | |||||||||||||||
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Line of credit |
$ | | $ | 519 | $ (519) | T | $ | | $ | | ||||||||||||||||
Accounts payable |
326 | 22 | 348 | 348 | ||||||||||||||||||||||
Other current liabilities |
549 | 129 | 3 | S | 681 | 681 | ||||||||||||||||||||
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Total current liabilities |
875 | 670 | (516) | 1,029 | | 1,029 | ||||||||||||||||||||
Long-term debt |
4,891 | 1,976 | 62 | P | 6,704 | 2,500 | U | 9,204 | ||||||||||||||||||
(225) | T | |||||||||||||||||||||||||
Note payable to Timberland Venture |
| 783 | 86 | P | 869 | 869 | ||||||||||||||||||||
Long-term debt (nonrecourse to the company) held by variable interest entities |
511 | | 511 | 511 | ||||||||||||||||||||||
Deferred income taxes |
86 | | | N | 86 | 86 | ||||||||||||||||||||
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Deferred pension and other postretirement benefits |
987 | | 987 | 987 | ||||||||||||||||||||||
Other liabilities |
267 | 83 | 350 | 350 | ||||||||||||||||||||||
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Total liabilities |
7,617 | 3,512 | (593) | 10,536 | 2,500 | 13,036 | ||||||||||||||||||||
Commitments and contingencies |
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Equity: |
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Mandatory convertible preference shares |
14 | | 14 | 14 | ||||||||||||||||||||||
Common shares |
638 | 2 | 349 | Q | 987 | (115 | ) U | 872 | ||||||||||||||||||
(2) | R | |||||||||||||||||||||||||
Other capital |
4,080 | 2,988 | 6,034 | Q | 10,114 | (2,385 | ) U | 7,729 | ||||||||||||||||||
(2,988) | R | |||||||||||||||||||||||||
Retained Earnings (Accumulated Deficit) |
1,349 | (382 | ) | 382 | R | 1,283 | 1,283 | |||||||||||||||||||
(66) | S | |||||||||||||||||||||||||
Treasury stock (Common shares at cost) |
| (1,094 | ) | 1,094 | R | | | |||||||||||||||||||
Cumulative other comprehensive income (loss) |
(1,212 | ) | (36 | ) | 36 | R | (1,212 | ) | (1,212 | ) | ||||||||||||||||
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Total equity |
4,869 | 1,478 | 4,839 | 11,186 | (2,500 | ) | 8,686 | |||||||||||||||||||
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Total liabilities and equity |
$ | 12,486 | $ | 4,990 | $ 4,246 | $ | 21,722 | $ | | $ | 21,722 | |||||||||||||||
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* | The accompanying notes are an integral part of, and should be read together with, this unaudited pro forma condensed combined financial information. |
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
NOTE 1: | BASIS OF PRO FORMA PRESENTATION |
The unaudited pro forma condensed combined financial information is based upon the historical consolidated financial information of Weyerhaeuser and Plum Creek.
On February 19, 2016, pursuant to the Agreement and Plan of Merger (the merger agreement), dated as of November 6, 2015, between Weyerhaeuser and Plum Creek, Plum Creek merged with and into Weyerhaeuser. Each outstanding share of Plum Creek common stock (other than shares of Plum Creek common stock owned by Plum Creek as treasury stock, which were canceled) was automatically converted into the right to receive 1.60 Weyerhaeuser common shares, with cash paid in lieu of any fractional shares. Weyerhaeuser will account for the Merger Transaction as the acquirer in a business combination using the acquisition method in accordance with accounting principles generally accepted in the United States. Under the acquisition method, the assets acquired and liabilities assumed by Weyerhaeuser from Plum Creek will be recorded as of the date of the acquisition at their respective fair values. The pro forma financial information also reflects adjustments needed to conform Plum Creeks historical financial information to Weyerhaeusers historical accounting policies and practices.
Weyerhaeuser also announced its intention to repurchase $2.5 billion of outstanding Weyerhaeuser common shares following the closing of the merger. Weyerhaeuser has entered into $2.5 billion of bank term loans to finance the repurchase.
The pro forma financial statements have been derived from the historical consolidated financial statements of Weyerhaeuser and Plum Creek. Assumptions and estimates underlying the pro forma adjustments are described in these notes, which should be read in conjunction with the pro forma financial statements. Since the pro forma financial statements have been prepared based upon preliminary estimates and assumptions, the final amounts recorded may differ materially from the information presented.
The pro forma statement of operations for the year ended December 31, 2015, gives effect to the Merger Transaction and the Capital Transaction as if they were consummated on January 1, 2015. The pro forma balance sheet as of December 31, 2015, gives effect to the Merger Transaction and the Capital Transaction as if they were consummated on December 31, 2015.
The pro forma financial statements do not reflect any cost savings or associated costs to achieve such savings from operating efficiencies, synergies, debt refinancing or other restructuring that may result from the Merger Transaction except for the pro forma adjustments related to the Capital Transaction.
On November 8, 2015, Weyerhaeuser announced that the Weyerhaeuser board authorized the exploration of strategic alternatives for its Cellulose Fibers business. The pro forma condensed combined financial information does not include any adjustments to reflect potential outcomes of the Weyerhaeuser boards evaluation process. See discussion and summary historical segment financial information in Note 4. Strategic Evaluation of Weyerhaeusers Cellulose Fibers Business for more information.
NOTE 2: MERGER TRANSACTION BUSINESS COMBINATION AND PURCHASE PRICE ALLOCATION
Calculation of Preliminary Purchase Consideration
The preliminary purchase price reflects the market value of Weyerhaeusers common shares issued in connection with the Merger Transaction. For pro forma purposes, the fair value of the consideration given and thus the preliminary purchase price was determined primarily based on the $22.87 per share closing price of Weyerhaeuser common shares on February 19, 2016. Additionally, the preliminary purchase price includes additional consideration related to converted Plum Creek stock options.
The following table summarizes the estimated purchase price for accounting purposes (dollars in millions, except per share amounts):
Number of shares of Plum Creek common stock outstanding(1) |
174,307,267 | |||||||
Exchange ratio(2) |
1.60 | |||||||
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Weyerhaeuser shares issued in exchange for Plum Creek equity |
278,891,627 | |||||||
Price per Weyerhaeuser common share(3) |
$ | 22.87 | ||||||
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Aggregate value of Weyerhaeuser common stock issued |
$ | 6,378 | ||||||
Fair value of stock options(4) |
5 | |||||||
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Estimated purchase price |
$ | 6,383 | ||||||
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(1) | Number of shares of Plum Creek common stock issued and outstanding as of February 19, 2016. |
(2) | Exchange ratio per the merger agreement. |
(3) | Closing price of Weyerhaeuser common shares on the NYSE on February 19, 2016. |
(4) | The estimated fair value of Plum Creek stock options for pre-combination services rendered have been added to the calculation of estimated purchase price. |
Preliminary Purchase Price Allocation
Under the acquisition method of accounting, the identifiable assets acquired and liabilities assumed of Plum Creek are recorded at the acquisition date fair values and added to those of Weyerhaeuser. The pro forma adjustments are preliminary and based on estimates of the fair value and useful lives of the assets acquired and liabilities assumed as of December 31, 2015 and have been prepared to illustrate the estimated effect of the Merger Transaction.
For the purpose of measuring the estimated fair value of the assets acquired and liabilities assumed, Weyerhaeuser has applied the accounting guidance for fair value measurements in Accounting Standards Codification Topic 820, Fair Value Measurement. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date, which, in this case, will be the date of the merger. This is an exit price concept for the valuation of the asset or liability. In addition, market participants are assumed to be buyers and sellers in the principal (or the most advantageous) market for the asset or liability. Fair value measurements for an asset assume the highest and best use by these market participants. As a result, the pro forma financial statements may record assets at fair value measures that do not reflect Weyerhaeusers intended use of those assets. Many fair value measurements can be highly subjective, and it is possible that others applying reasonable judgment to the same facts and circumstances could develop and support a range of alternative estimated amounts.
The purchase price allocation and underlying valuations may change materially based on the receipt of more detailed information. Furthermore, the actual allocations will differ from the pro forma adjustments presented. There can be no assurances that these additional analyses and final valuations will not result in significant changes to the estimates of fair value set forth below.
The following table presents the general assumptions reflected in the pro forma balance sheet for the assets acquired and liabilities assumed from Plum Creek:
ASSETS: |
FAIR VALUE ASSUMPTIONS: | |
Cash and cash equivalents | Approximates carrying value, per Note 11 of Plum Creeks Form 10-K for the year ended December 31, 2015 | |
Receivables, less allowances | Equal to carrying value; fair value may change as additional analysis is performed | |
Inventories | Accounted for at lower of average cost or market per Note 3 of Plum Creeks Form 10-K for the year ended December 31, 2015, which approximates fair value; amounts may be adjusted as additional analysis is performed | |
Timber and timberlands; Assets held for sale |
Preliminarily estimated adjustment to fair values using both the income and market approaches; amounts may be adjusted as additional analysis is performed | |
Minerals and mineral rights | Preliminarily estimated adjustment to fair values using income approach; amounts may be adjusted as additional analysis is performed | |
Property and equipment | Preliminarily estimated adjustment to fair values using income approach; amounts may be adjusted as additional analysis is performed | |
Equity investment in Timberland Venture | Preliminarily estimated adjustment to fair value based on the estimated fair value of the Timberland Ventures underlying assets using the market approach; amounts may be adjusted as additional analysis is performed | |
Equity investment in Real Estate Development Ventures | Fair value is estimated to be approximately equal to the investments carrying value based on a 2014 appraisal; fair value may change as additional analysis is performed | |
Other current assets and other noncurrent assets | Equal to carrying value; fair value may change as additional analysis is performed |
LIABILITIES: |
FAIR VALUE ASSUMPTIONS: | |
Long-term debt, including current maturities | Estimated based on fair value per Note 11 of Plum Creeks Form 10-K for the year ended December 31, 2015; fair value may change as additional analysis is performed | |
Note Payable to Timberland Venture | Estimated based on fair value per Note 11 of Plum Creeks Form 10-K for the year ended December 31, 2015; fair value may change as additional analysis is performed | |
Other current and noncurrent liabilities | Equal to carrying value; fair value may change as additional analysis is performed |
For pro forma purposes we have assumed that the combined company incurred certain non-recurring expenses directly attributable to the Merger Transaction, including termination benefits for certain Plum Creek executives, investment banking fees, legal fees, accounting and appraisal fees, and other costs related to filing the joint proxy statement/prospectus for the Merger Transaction. As described in H. and S. in Note 3. Pro Forma Adjustments, these amounts are excluded from the unaudited pro forma condensed combined statement of operations because they are charges directly attributable to the merger, factually supportable, and will not have a continuing impact on Weyerhaeusers operations; however, these amounts are reflected in the unaudited pro forma condensed combined balance sheet.
The following table summarizes the estimated purchase price for accounting purposes (in millions):
Cash and cash equivalents |
$ | 55 | ||
Accounts receivable, net |
32 | |||
Inventories |
57 | |||
Assets held for sale |
49 | |||
Other current assets |
17 | |||
Timberlands |
8,196 | |||
Minerals and mineral rights |
356 | |||
Property, plant, and equipment |
218 | |||
Equity investment in Timberland Venture |
869 | |||
Equity investment in Real Estate Development Venture |
102 | |||
Investment in Grantor Trusts |
54 | |||
Other noncurrent assets |
41 | |||
|
|
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Total assets acquired |
$ | 10,046 | ||
Line of credit |
519 | |||
Accounts payable |
22 | |||
Deferred revenue |
23 | |||
Other current liabilities |
109 | |||
Long-term debt |
2,038 | |||
Note Payable to Timberland Venture |
869 | |||
Other noncurrent liabilities |
83 | |||
|
|
|||
Total liabilities assumed |
$ | 3,663 | ||
|
|
|||
Net assets acquired |
$ | 6,383 | ||
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NOTE 3: | PRO FORMA ADJUSTMENTS |
The following notes describe the adjustments presented on the unaudited pro forma condensed combined financial information.
Based on the amounts reported in the Weyerhaeuser consolidated balance sheet as of December 31, 2015 and the consolidated statement of operations for the year ended December 31, 2015, and the Plum Creek consolidated balance sheet as of December 31, 2015 and the consolidated statement of income for the year ended December 31, 2015, certain financial statement line items included in Plum Creeks historical presentation have been reclassified to conform to corresponding financial statement line items included in Weyerhaeusers historical presentation. These reclassifications had no material impact on the historical operating earnings, earnings from continuing operations, total assets, liabilities or shareholders equity reported by Weyerhaeuser or Plum Creek.
Statement of operations
Presented for the year ended December 31, 2015.
A. | Net Sales and Cost of Products Sold. These adjustments reflect the elimination of purchases and sales between Weyerhaeuser and Plum Creek. For the year ended December 31, 2015, the operating income of Plum Creek included revenue of $27 million for sales of logs and chips to Weyerhaeuser, and Weyerhaeusers operating income included cost of products sold of $27 million related to these sales. These pro forma adjustments assume that no profit from these sales remains in Weyerhaeusers ending inventory. |
B. | Cost of Products Sold. This adjustment reflects (1) the impact of conforming Plum Creeks historical accounting practices for reforestation costs to align with Weyerhaeusers historical accounting practices, (2) increased depletion expense resulting from the increase in depletable basis of the Plum Creek Timber and Timberlands as a result of the fair value adjustment recorded to these assets in applying acquisition accounting for the Merger Transaction, (3) decreased amortization expense resulting from conforming amortization of Plum Creek capital road costs to Weyerhaeusers method of amortizing capital road costs, and (4) increased depletion expense resulting from the increase in depletable basis of the Plum Creek Minerals and Mineral Rights as a result of the fair value adjustment recorded to these assets in applying acquisition accounting for the Merger Transaction. |
Year ended December 31, 2015 |
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Effect of conforming practices of accounting for reforestation costs |
$ | 18 | ||
Increase to Timber and Timberlands depletion from fair value adjustment |
20 | |||
Decrease to capital road cost amortization |
(8 | ) | ||
Increase to Minerals and Mineral Rights depletion from fair value adjustment |
3 | |||
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|
|||
Total pro forma adjustment to Cost of Products Sold |
$ | 33 |
Plum Creek capitalizes reforestation costs and other costs, such as site preparation, seedlings, planting, fertilization, herbicide application and the thinning of tree stands, to the depletable bases of Timber assets. Weyerhaeuser capitalizes only initial site preparation and planting costs to the depletable bases of Timber assets. Weyerhaeuser generally expenses costs after the first planting as incurred, with the exception of fertilization expense, which is capitalized and amortized on a straight-line basis over five years. This pro forma adjustment reflects the impact of applying Weyerhaeusers historical accounting practices to Plum Creeks reforestation costs, resulting in additional pro forma amortization expense of $18 million for the year ended December 31, 2015.
To adjust depletion to reflect increasing the carrying value of Timber and Timberlands assets, Plum Creek depletion rates were revised to reflect the fair value estimated in the purchase price allocation excluding estimated future silviculture costs divided by historical estimated volume of timber to be available over the growth cycle. These adjusted depletion rates were applied to historical units of production for the year ended December 31, 2015 to estimate additional pro forma depletion expense of $20 million.
Plum Creeks historical treatment of amortizing capital road costs was revised to conform with Weyerhaeusers historical treatment, resulting in decreased amortization expense of $8 million for the year ended December 31, 2015.
To adjust depletion to reflect the increase to the carrying value of Minerals and Mineral Rights assets, Plum Creek depletion rates were revised to reflect the fair value estimated in the purchase price allocation. For pro forma purposes these assets are amortized on a straight-line basis over an estimated economic life of 15 years, resulting in additional depletion expense for minerals and mineral rights of $3 million for the year ended December 31, 2015.
C. | Cost of Products Sold and Income Tax Expense. This adjustment reflects $16 million of additional depreciation expense for the year ended December 31, 2015, resulting from the increase of Plum Creeks property and equipment to fair value as of the assumed date of the Merger Transaction. These pro forma adjustments assume a remaining weighted average useful life of eight years for these assets. Also, these pro forma adjustments assume that depreciation costs related to these manufacturing assets are attributable to Weyerhaeusers Taxable REIT Subsidiary (TRS) and therefore would result in pro forma income tax benefits of $6 million. We have estimated the tax effect using the U.S. federal statutory rate of 35%, and have assumed that state and local income taxes would be immaterial. |
D. | Net Sales and Other Operating Costs (Income), Net. This adjustment reflects the reclassification of $29 million of Plum Creeks revenues derived from recreational access leases associated with Plum Creeks timberlands for the year ended December 31, 2015, to conform to Weyerhaeusers presentation of these transactions as Other Operating Costs (Income), net. |
E. | Net Sales and Cost of Products Sold. There are no pro forma adjustments related to Plum Creeks historical land sales to third parties that occurred during the year ended December 31, 2015 because the acres sold were not acquired by Weyerhaeuser via the Merger Transaction and therefore were not remeasured to estimated fair value in the purchase price allocation. However, the operating margin from future land sales associated with timber and timberlands acquired from Plum Creek is expected to be substantially lower as a result of allocating a significant portion of the purchase price to timber and timberlands. For the year ended December 31, 2015, the operating income of Plum Creek included revenue of $318 million and related costs of sales of $166 million from the sale of approximately 284,000 acres. |
F. | Earnings from Unconsolidated Entities. This adjustment reflects the reversal of equity earnings recognized by Plum Creek from amortization of the basis difference between Plum Creeks equity investment in the Timberlands Venture and the Timberlands Ventures timber and timberlands assets. Plum Creeks basis in its equity investment is equal to the historical book value of assets contributed to the Timberlands Venture, whereas the Timberland Ventures basis in its timber and timberlands assets was recorded at the fair value at the time Plum Creek contributed the assets to the Timberlands Venture. As a result of applying acquisition accounting for the Merger Transaction, the basis in its equity investment in the Timberland Venture is increased to fair value, which would eliminate the basis difference and the related amortization to equity earnings. Therefore $18 million of equity earnings recognized by Plum Creek for the year ended December 31, 2015 was eliminated. |
G. | Interest Expense, net. This adjustment records the amortization of the incremental bases of Plum Creeks outstanding debt instruments that arise from increasing the assumed Plum Creek Long-term Debt and Note Payable to fair value as a result of applying acquisition accounting. This adjustment decreases interest expense by $40 million for the year ended December 31, 2015. |
H. | Selling, General, and Administrative Expenses and Other Operating Costs (Income), Net. This adjustment reflects the $14 million incurred by Weyerhaeuser and the $8 million incurred by Plum Creek during 2015 for non-recurring |
expenses directly attributable to the Merger Transaction, including investment banking fees, legal fees, accounting and appraisal fees, and other costs related to filing the joint proxy statement/prospectus for the Merger Transaction. These amounts are being removed from the unaudited pro forma condensed combined statement of operations because they are charges directly attributable to the merger, factually supportable, and will not have a continuing impact on Weyerhaeusers operations. |
I. | Interest Expense, net. This adjustment reflects the increase in interest expense of $38 million for the year ended December 31, 2015, in connection with Weyerhaeuser entering into $2.5 billion of bank term loans to repurchase outstanding Weyerhaeuser common shares at the anticipated rate of interest, plus applicable margins. The anticipated rate of interest used to calculate the increase in interest expense was 1.5% for the year ended December 31, 2015. Should the interest rate increase or decrease by 1/8%, the impact on the earnings from continuing operations before income taxes would be $3 million for the year ended December 31, 2015. The timing and amount of funds borrowed may differ from the $2.5 billion assumed in this adjustment. |
J. | Basic and Diluted Weighted Average Number of Common Shares Outstanding. Pro forma condensed combined basic earnings per common share are based on the historical Weyerhaeuser weighted average shares outstanding, adjusted to assume the issuance of Weyerhaeuser common shares in exchange for the outstanding common stock of Plum Creek at a ratio of 1.60:1 in accordance with the merger agreement and the $2.5 billion repurchase of Weyerhaeuser common shares at $27.07 per share (the March 2, 2016 close price). Basic pro forma combined weighted average shares outstanding is calculated as follows (shares in millions): |
For the year ended December 31, 2015 |
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Weyerhaeuser basic weighted average shares outstanding for the year ended December 31, 2015 |
516.4 | |||
Weyerhaeuser shares issued in exchange for Plum Creek equity (174.3 shares converted at 1.60:1) |
278.9 | |||
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|
|||
Merger Transaction pro forma weighted average shares outstanding for the year ended December 31, 2015 |
795.3 | |||
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|
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Weyerhaeuser shares repurchased assuming $27.07 repurchase price per share |
(92.4 | ) | ||
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|
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Basic Pro Forma Combined weighted average shares outstanding for the year ended December 31, 2015 |
702.9 | |||
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|
Additionally, pro forma weighted average shares outstanding used in calculating pro forma diluted earnings per share were adjusted to reflect the dilutive impact of Plum Creek options and restricted stock units outstanding by converting dilutive Plum Creek shares at a ratio of 1.60:1 in accordance with the Merger Agreement. Diluted pro forma combined weighted average shares outstanding is calculated as follows (shares in millions):
For the year ended December 31, 2015 |
||||
Weyerhaeuser diluted weighted average shares outstanding for the year ended December 31, 2015 |
519.6 | |||
Weyerhaeuser shares issued in exchange for Plum Creek equity (174.3 shares converted at 1.60:1) |
278.9 | |||
Dilutive impact of Plum Creek options and RSUs outstanding (0.3 shares converted at 1.60:1) |
0.5 | |||
|
|
|||
Merger Transaction pro forma weighted average shares outstanding for the year ended December 31, 2015 |
799.0 | |||
|
|
|||
Weyerhaeuser shares repurchased assuming $27.07 repurchase price per share |
(92.4 | ) | ||
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|
|||
Diluted Pro Forma Combined weighted average shares outstanding at December 31, 2015 |
706.6 | |||
|
|
K. | Basic and Diluted Earnings Per Share from Continuing Operations. This adjustment reflects the recomputed basic and diluted earnings per share after giving effect to all pro forma adjustments impacting Net earnings from continuing operations attributable to common shareholders. |
Balance Sheet
Presented as of December 31, 2015.
L. | Assets Held For Sale. This adjustment reflects the $25 million increase to record Plum Creeks assets held for sale at fair value less estimated selling costs. See Preliminary Purchase Price Allocation discussion in Note 2. Business Combination and Purchase Price Allocation for more information on the value of assets acquired and liabilities assumed. Due to the preliminary nature of these estimates, actual results could differ significantly from such estimates. |
M. | Timber and Timberlands at Cost, Less Depletion Charged to Disposals, and Minerals and Mineral Rights, Net. These adjustments reflect the $4,286 million and $75 million increases to the fair values of Plum Creeks Timber and Timberlands and Minerals and Mineral Rights assets, respectively. See Preliminary Purchase Price Allocation discussion in Note 2. Business Combination and Purchase Price Allocation for more information on the value of assets acquired and liabilities assumed. Due to the preliminary nature of these estimates, actual results could differ significantly from such estimates. |
N. | Property and Equipment, Net, Deferred Tax Assets, and Deferred Tax Liabilities. This adjustment reflects the estimated increase of $105 million to record Plum Creeks Property and Equipment at fair value. These assets are Plum Creeks manufacturing operations, which are not used in activities to generate REIT earnings. Weyerhaeuser continues to be required to pay federal and state corporate income taxes on earnings of the TRS. As such, the adjustment of these assets to fair value resulted in the recognition of a $37 million deferred income tax liability. We have estimated the tax effect using the U.S. federal statutory rate of 35%, and have assumed that state and local income taxes would be immaterial. See Preliminary Purchase Price Allocation discussion in Note 2. Business Combination and Purchase Price Allocation for more information on the value of assets acquired and liabilities assumed. Due to the preliminary nature of these estimates, actual results could differ significantly from such estimates. |
O. | Investments In and Advances To Equity Affiliate. This adjustment reflects the estimated increase of $634 million to record Plum Creeks equity investment in the Timberlands Venture to fair value. See Preliminary Purchase Price Allocation discussion in Note 2. Business Combination and Purchase Price Allocation for more information on the value of assets acquired and liabilities assumed. Due to the preliminary nature of these estimates, actual results could differ significantly from such estimates. |
P. | Long-term Debt and Note Payable to Timberland Venture. This adjustment reflects the $62 million increase to record Plum Creeks long-term debt at fair value. Additionally, this adjustment reflects the $86 million increase to record Plum Creeks Note Payable to Timberland Venture at fair value. See Preliminary Purchase Price Allocation discussion in Note 2. Business Combination and Purchase Price Allocation for more information on the value of assets acquired and liabilities assumed. Due to the preliminary nature of these estimates, actual results could differ significantly from such estimates. |
Q. | Common Shares and Other Capital. This adjustment reflects the issuance of common stock by Weyerhaeuser as a result of the Merger Transaction. The adjustment assumes that Weyerhaeuser issued 278.9 million shares of $1.25 par value common stock at $22.87 per share for consideration of $6,378 million and an additional $5 million of Other Capital related to Plum Creek share-based payment awards for services rendered prior to the Merger Transaction for total consideration of $6,383 million. |
R. | Common Shares, Other Capital, Retained Earnings (Accumulated Deficit), Treasury Stock, and Cumulative Other Comprehensive Income (Loss). These adjustments reflect the elimination of Plum Creeks equity balances upon the closing of the Merger Transaction. |
S. | Cash and Cash Equivalents, Receivables for Taxes, Other Current Liabilities, and Retained Earnings (Accumulated Deficit). This adjustment reflects the impact to the December 31, 2015 pro forma balance sheet for $107 million of estimated non-recurring transaction and other costs directly attributable to the Merger Transaction that have been incurred by Plum Creek or Weyerhaeuser or are expected to be incurred by Weyerhaeuser within one year of the effective time of the merger. These amounts are excluded from the unaudited pro forma condensed combined statement of operations because they are charges directly attributable to the merger, factually supportable, and will not |
have a continuing impact on Weyerhaeusers operations; however, these amounts are reflected as a reduction to Cash and Cash Equivalents ($104 million), an increase to Taxes Receivable ($6 million), an increase to Other Current Liabilities assumed in purchase accounting ($3 million) and a reduction to Retained Earnings ($66 million) in the unaudited pro forma condensed combined balance sheet. The following table details the adjustments to the pro forma balance sheet for these non-recurring costs (in millions): |
Purchase-price allocation |
Charges to income |
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Transaction costs incurred by Plum Creek(1) |
$ | 33 | $ | | ||||
Transaction costs incurred by Weyerhaeuser(2) |
| 36 | ||||||
Accelerated vesting of Plum Creek liability classified share-based compensation awards due to pre-combination service and the change-in-control provisions(3) |
3 | | ||||||
Charges related to termination of certain Plum Creek executives determined to be directly attributable to the Merger Transaction(4)(5): |
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Severance charges and other separation benefits |
| 20 | ||||||
Accelerated vesting of Plum Creek restricted stock units |
| 11 | ||||||
Accelerated vesting of Plum Creek liability classified share-based compensation awards |
| 4 | ||||||
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|
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$ | 36 | $ | 71 | |||||
Income tax benefit(6) |
$ | 1 | $ | 5 |
(1) | Represents transaction-related costs, primarily investment banking fees, incurred by Plum Creek between January 1, 2016 and February 19, 2016 in connection with the Merger Transaction. This adjustment is reflected as a reduction in cash and cash equivalents acquired by Weyerhaeuser from Plum Creek via acquisition accounting. |
(2) | Weyerhaeuser expects to incur transaction related costs of approximately $36 million subsequent to December 31, 2015. These costs include investment banking fees, legal fees, accounting and appraisal fees, and other costs related to filing the joint proxy statement/prospectus for the Merger Transaction. |
(3) | Represents share-based compensation costs for Plum Creeks liability-classified awards related to pre-combination service and accelerated vesting due to triggering of change-in-control provisions incurred by Plum Creek in connection with the Merger Transaction. This adjustment is reflected in Other Current Liabilities assumed by Weyerhaeuser from Plum Creek via acquisition accounting. Share-based compensation costs for Plum Creeks equity-classified awards related to pre-combination service are included in the calculation of the purchase price as described in Note 2. |
(4) | Represents severance and accelerated share-based payment costs that are incurred upon the expected qualifying terminations of certain Plum Creek executive officers that were not named to the Weyerhaeuser Senior Management Team subsequent to the Merger Transaction. These costs relate only to the qualifying terminations that have been determined by Weyerhaeuser to be directly attributable to the consummation of the Merger Transaction. |
(5) | Weyerhaeuser has not yet made a determination regarding the continued employment of other non-executive Plum Creek employees; therefore these adjustments do not reflect costs arising from potential qualifying terminations of Plum Creeks non-executive employees as they are not directly attributable to the Merger Transaction. |
(6) | The pro forma adjustment assumes that approximately 40% of the charges related to Plum Creek compensation costs that are directly attributable to the merger would be incurred by either Plum Creeks or Weyerhaeusers TRS, resulting in the recognition of a $6 million current tax receivable, as these costs would be deductible immediately. We have estimated the tax effect using the U.S. federal statutory rate of 35%, and have assumed that state and local income taxes would be immaterial. |
T. | Cash and Cash Equivalents, Line of Credit, and Long-term Debt. This adjustment reflects the repayment of the Plum Creek line of credit and term loan by Weyerhaeuser in conjunction with the Merger Transaction. |
U. | Cash and Cash Equivalents, Other Assets, Long-term Debt, Common Stock, and Other Capital. This adjustment reflects the repurchase of $2.5 billion of Weyerhaeuser common stock ($1.25 par value) as part of the Capital Transaction. The pro forma adjustment assumes that the share repurchases will be financed using $2.5 billion of proceeds from issuance of new debt. This pro forma adjustment also assumes that all $2.5 billion of share repurchases will be at an average price of $27.07 per share (closing price of Weyerhaeuser common stock on March 2, 2016), and that all repurchased shares will be retired upon repurchase. The adjustment also reflects an assumption that Weyerhaeuser will incur $2 million of costs attributable to the debt issuance to be capitalized and added to the Other Assets balance, and that these costs would be paid from the balance of cash on hand upon consummation of the Capital Transaction. |
NOTE 4: STRATEGIC EVALUATION OF WEYERHAEUSERS CELLULOSE FIBERS BUSINESS
On November 8, 2015, Weyerhaeuser announced that the Weyerhaeuser board authorized the exploration of strategic alternatives for its Cellulose Fibers business. At this time there can be no assurance that the boards evaluation process will result in any transaction or that any transaction, if pursued, will be consummated. The pro forma condensed combined financial information does not include any adjustments to reflect potential outcomes of the boards evaluation process.
The following table provides summary historical financial information of Weyerhaeusers Cellulose Fibers operating segment for the year ended December 31, 2015 (in millions):
Year ended December 31, 2015 |
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Net sales |
$ | 1,860 | ||
Contribution to earnings from continuing operations before interest and income taxes |
119 | |||
As of December 31, 2015 |
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Total assets |
$ | 1,984 |