<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the twenty-six weeks ended June 26, 1994 or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 1-4825
WEYERHAEUSER COMPANY
A Washington Corporation (IRS Employer Identification
No. 91-0470860)
Tacoma, Washington 98477
Telephone (206) 924-2345
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
- ------------------------------- -------------------------
Common Shares ($1.25 par value) Midwest Stock Exchange
New York Stock Exchange
Pacific Stock Exchange
Tokyo Stock Exchange
Rights to Purchase Cumulative New York Stock Exchange
Preference Shares, Fourth Series
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No ___. The number of shares outstanding of the
registrant's class of common stock, as of July 29, 1994 was
205,584,969 common shares ($1.25 par value).
<PAGE>
Weyerhaeuser Company
- -2-
This page intentionally left blank.
<PAGE>
Weyerhaeuser Company
- -3-
<TABLE>
WEYERHAEUSER COMPANY AND SUBSIDIARIES
Index to Form 10-Q Filing
For the Twenty-six Weeks Ended June 26, 1994
<CAPTION>
Page No.
----------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statement of Earnings 4-5
Consolidated Balance Sheet 6-7
Consolidated Statement of Cash Flows 8-9
Notes to Financial Statements 10-15
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 16-17
Part II. Other Information
Item 1. Legal Proceedings 18-19
Item 2. Changes in Securities (not applicable)
Item 3. Defaults upon Senior Securities (not applicable)
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information (not applicable)
Item 6. Exhibits and Reports on Form 8-K 19
</TABLE>
The financial information included in this report has been prepared in
conformity with accounting practices and methods reflected in the
financial statements included in the annual report (Form 10-K) filed
with the Securities and Exchange Commission for the year ended
December 26, 1993. Though not examined by independent public
accountants, the financial information reflects, in the opinion of
management, all adjustments necessary to present a fair statement of
results for the interim periods indicated. The results of operations
for the twenty-six week period ending June 26, 1994 should not be
regarded as necessarily indicative of the results that may be expected
for the full year.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereto duly authorized.
WEYERHAEUSER COMPANY
By /s/ K. J. Stancato
-----------------------------
K. J. Stancato
Duly Authorized Officer and
Principal Accounting Officer
August 5, 1994
<PAGE>
Weyerhaeuser Company
- -4-
<TABLE>
WEYERHAEUSER COMPANY AND SUBSIDIARIES
____________
CONSOLIDATED EARNINGS
For the thirteen and twenty-six week periods ended
June 26, 1994 and June 27, 1993
(Dollar amounts in thousands except per share figures)
(Unaudited)
<CAPTION>
Thirteen weeks ended: June 26, June 27,
1994 1993
---------- ----------
<S> <C> <C>
Net sales and revenues:
Weyerhaeuser $2,312,438 $2,123,990
Real estate and financial services 285,998 263,515
---------- ----------
2,598,436 2,387,505
---------- ----------
Costs and expenses:
Weyerhaeuser:
Costs of products sold 1,726,970 1,563,105
Depreciation, amortization and fee stumpage 129,355 110,379
Selling, general and administrative expenses 144,895 144,462
Research and development expenses 11,924 10,902
Taxes other than payroll and income taxes 37,084 35,305
---------- ----------
2,050,228 1,864,153
---------- ----------
Real estate and financial services:
Costs and operating expenses 217,809 178,101
Depreciation and amortization 7,360 7,752
Selling, general and administrative expenses 39,409 43,270
Taxes other than payroll and income taxes 2,048 2,059
---------- ----------
266,626 231,182
---------- ----------
2,316,854 2,095,335
---------- ----------
Operating income 281,582 292,170
Interest expense and other:
Weyerhaeuser:
Interest expense incurred 59,126 50,988
Less interest capitalized 9,644 4,821
Other income (expense), net (15,341) 4,930
Real estate and financial services:
Interest expense incurred 39,033 42,962
Less interest capitalized 19,913 19,012
Other income (expense), net 3,720 45,353
---------- ----------
Earnings before income taxes 201,359 272,336
Income taxes (Note 2) 72,500 90,800
---------- ----------
Net earnings $ 128,859 $ 181,536
========== ==========
Per common share (Note 1):
Net earnings $ .62 $ .89
========== ==========
Dividends paid $ .30 $ .30
========== ==========
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
Weyerhaeuser Company
- -5-
<TABLE>
<CAPTION>
Twenty-six weeks ended: June 26, June 27,
1994 1993
---------- ----------
<S> <C> <C>
Net sales and revenues:
Weyerhaeuser $4,437,770 $4,124,522
Real estate and financial services 546,430 603,999
---------- ----------
4,984,200 4,728,521
---------- ----------
Costs and expenses:
Weyerhaeuser:
Costs of products sold 3,278,490 3,016,742
Depreciation, amortization and fee stumpage 245,304 221,795
Selling, general and administrative expenses 291,655 297,403
Research and development expenses 23,352 20,072
Taxes other than payroll and income taxes 76,088 69,487
---------- ----------
3,914,889 3,625,499
---------- ----------
Real estate and financial services:
Costs and operating expenses 403,747 396,941
Depreciation and amortization 14,954 23,688
Selling, general and administrative expenses 83,632 104,894
Taxes other than payroll and income taxes 4,256 4,860
---------- ----------
506,589 530,383
---------- ----------
4,421,478 4,155,882
---------- ----------
Operating income 562,722 572,639
Interest expense and other:
Weyerhaeuser:
Interest expense incurred 116,512 102,414
Less interest capitalized 17,662 8,052
Other income (expense), net (29,956) 63,694
Real estate and financial services:
Interest expense incurred 77,585 89,363
Less interest capitalized 40,143 38,031
Other income (expense), net 8,946 46,276
---------- ----------
Earnings before income taxes and extraordinary item 405,420 536,915
Income taxes before extraordinary item (Note 2) 150,000 177,968
---------- ----------
Earnings before extraordinary item 255,420 358,947
Extraordinary item, net of applicable taxes of $33,732 (Note 9) - 52,052
---------- ----------
Net earnings $ 255,420 $ 410,999
========== ==========
Per common share (Note 1):
Earnings before extraordinary item $ 1.24 $ 1.76
Extraordinary item _ .25
---------- ----------
Net earnings $ 1.24 $ 2.01
========== ==========
Dividends paid $ .60 $ .60
========== ==========
</TABLE>
<PAGE>
Weyerhaeuser Company
- -6-
<TABLE>
WEYERHAEUSER COMPANY AND SUBSIDIARIES
____________
CONSOLIDATED BALANCE SHEET
June 26, 1994 and December 26, 1993
(Dollar amounts in thousands)
<CAPTION>
June 26, Dec. 26,
1994 1993
------------ -----------
(Unaudited)
<S> <C> <C>
Assets
- -------
Weyerhaeuser
Current assets:
Cash and short-term investments,
including restricted deposits $ 38,821 $ 73,257
Receivables, less allowances 912,623 782,507
Inventories (Note 3) 763,616 762,471
Prepaid expenses 301,457 280,511
----------- -----------
Total current assets 2,016,517 1,898,746
Property and equipment (Note 4) 5,766,607 5,606,072
Construction in progress 789,227 666,177
Timber and timberlands at cost, less fee
stumpage charged to disposals 608,900 604,773
Other assets and deferred charges 203,151 191,946
----------- -----------
Total assets 9,384,402 8,967,714
----------- -----------
Real estate and financial services
Cash and short-term investments,
including restricted deposits 59,543 86,598
Receivables, less discounts and allowances 112,296 135,347
Mortgage and construction notes and
mortgage loans receivable 613,313 830,569
Investments 56,795 60,355
Mortgage-backed certificates and
restricted deposits 262,637 349,757
Real estate in process of development,
less reserves 761,306 738,597
Land being processed for development,
less reserves 727,860 699,611
Deferred acquisition costs 37,474 39,751
Other assets 691,463 730,154
----------- -----------
Total assets 3,322,687 3,670,739
----------- -----------
$12,707,089 $12,638,453
============ ===========
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
Weyerhaeuser Company
- -7-
<TABLE>
<CAPTION>
June 26, Dec. 26,
1994 1993
----------- -----------
(Unaudited)
<S> <C> <C>
Liabilities and shareholders' interest
- --------------------------------------
Weyerhaeuser
Current liabilities:
Notes payable $ 1,946 $ 4,624
Current maturities of senior long-term debt 16,510 14,522
Accounts payable 563,320 492,040
Accrued liabilities (Note 5) 656,819 565,002
----------- -----------
Total current liabilities 1,238,595 1,076,188
Senior long-term debt (Note 6) 3,106,816 2,997,890
Deferred income taxes 945,123 904,332
Deferred pension and other liabilities 556,747 535,162
Minority interest in subsidiaries 102,870 109,314
Commitments (Note 8) _ _
----------- -----------
Total liabilities 5,950,151 5,622,886
----------- -----------
Real estate and financial services
Notes and commercial paper 148,121 289,038
Collateralized mortgage obligation bonds 228,149 307,416
Long-term debt (Note 6) 1,904,551 1,997,146
Other liabilities 397,575 455,871
----------- -----------
Total liabilities 2,678,396 3,049,471
----------- -----------
Shareholders' interest (Note 7)
Common shares: authorized 400,000,000 shares,
issued 206,072,890 shares, $1.25 par value 257,591 257,591
Other capital 416,234 411,096
Cumulative translation adjustment (108,343) (73,363)
Retained earnings 3,523,315 3,391,217
Treasury common shares, at cost:
488,771 and 983,952 (10,255) (20,445)
----------- -----------
Total shareholders' interest 4,078,542 3,966,096
----------- -----------
$12,707,089 $12,638,453
=========== ===========
</TABLE>
<PAGE>
Weyerhaeuser Company
- -8-
<TABLE>
WEYERHAEUSER COMPANY AND SUBSIDIARIES
____________
CONSOLIDATED STATEMENT OF CASH FLOWS
For the twenty-six week periods ended
June 26, 1994 and June 27, 1993
Dollar amounts in thousands
(Unaudited)
<CAPTION>
Consolidated
---------------------
June 26, June 27,
1994 1993
--------- ----------
<S> <C> <C>
Cash flows provided by operations:
Net earnings $ 255,420 $ 410,999
Non-cash charges to income:
Depreciation, amortization and fee stumpage 260,258 245,483
Deferred income taxes, net 52,300 55,733
Contributions to employee investment plans _ 2,462
Extraordinary item, including current tax benefit _ (90,419)
Deferred income taxes on extraordinary item _ 38,367
Changes in working capital:
Receivables (125,492) (112,863)
Inventories, prepaid expenses, real estate and land (44,142) (160,313)
Mortgages held for sale 207,804 (161,692)
Other liabilities 65,534 118,237
(Gain) loss on disposition of assets 2,685 (13,753)
Gain on sale of a business _ (111,750)
Other 212 1,000
--------- ---------
Net cash provided by operations 674,579 221,491
--------- ---------
Cash flows from investing in the business:
Property and equipment (532,184) (371,017)
Timber and timberlands (14,454) (37,528)
Mortgage and investment securities acquired (3,528) (771,776)
Proceeds from sale of:
Property and equipment 27,687 30,546
Businesses 14,250 615,784
Mortgage and investment securities 86,754 386,138
Other (4,052) (48,985)
--------- ---------
Net cash flows from investing in the business (425,527) (196,838)
--------- ---------
Cash flows from financing activities:
Sale of debentures, notes and CMO bonds 239,846 427,971
Sale of industrial revenue bonds 100,000 74,500
Notes and commercial paper borrowings, net (238,684) 65,217
Proceeds from issuance of investment contracts _ 60,943
Cash dividends on common shares (123,322) (122,816)
Intercompany cash dividends on common shares _ _
Payments on debentures, notes, bank credit
agreements, income debenture, capital leases,
industrial revenue bonds and CMO bonds (304,899) (878,979)
Exercise of stock options 14,857 17,571
Other 1,659 (32,330)
--------- ---------
Net cash flows from financing activities (310,543) (387,923)
--------- ---------
Net increase (decrease) in cash and short-term investments (61,491) (363,270)
Cash and short-term investments at beginning of year 159,855 524,325
-------- ----------
Cash and short-term investments at end of period $ 98,364 $ 161,055
========= ==========
Cash paid (received) during the year for:
Interest, net of amount capitalized $ 137,380 $ 178,460
========= =========
Income taxes $ 92,455 $ 102,062
========= =========
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
Weyerhaeuser Company
- -9-
<TABLE>
<CAPTION>
Real Estate and
Weyerhaeuser Financial Services
-------------------- ----------------------
June 26, June 27, June 26, June 27,
1994 1993 1994 1993
-------- --------- -------- ---------
<C> <C> <C> <C>
$ 246,800 $ 359,116 $ 8,620 $ 51,883
245,304 221,795 14,954 23,688
40,791 77,697 11,509 (21,964)
_ 2,462 _ _
_ (90,419) _ _
_ 38,367 _ _
(130,111) (82,835) 4,619 (30,028)
(22,035) (116,478) (22,107) (43,835)
_ _ 207,804 (161,692)
138,239 6,885 (72,705) 111,352
6,862 (13,801) (4,177) 48
_ (70,199) _ (41,551)
(16,886) (12,460) 17,098 13,460
-------- -------- -------- --------
508,964 320,130 165,615 (98,639)
-------- -------- -------- --------
(522,581) (356,708) (9,603) (14,309)
(14,454) (37,528) _ _
_ _ (3,528) (771,776)
5,740 29,897 21,947 649
_ 204,100 14,250 411,684
_ _ 86,754 386,138
(14,220) (4,723) 10,168 (44,262)
-------- -------- -------- --------
(545,515) (164,962) 119,988 (31,876)
-------- -------- -------- --------
123,128 261,675 116,718 166,296
100,000 74,500 _ _
15,450 (166,058) (254,134) 231,275
_ _ _ 60,943
(123,322) (122,816) _ _
_ 435,000 _ (435,000)
(129,657) (615,489) (175,242) (263,490)
14,857 17,571 _ _
1,659 (32,330) _ _
-------- -------- -------- --------
2,115 (147,947) (312,658) (239,976)
-------- -------- -------- --------
(34,436) 7,221 (27,055) (370,491)
73,257 40,985 86,598 483,340
-------- -------- -------- --------
$ 38,821 $ 48,206 $ 59,543 $112,849
======== ======== ======== ========
$ 99,538 $122,875 $ 37,842 $ 55,585
======== ======== ======== ========
$ 24,022 $104,371 $ 68,433 $ (2,309)
======== ======== ======== ========
</TABLE>
<PAGE>
Weyerhaeuser Company
- -10-
WEYERHAEUSER COMPANY AND SUBSIDIARIES
____________
NOTES TO FINANCIAL STATEMENTS
For the twenty-six week periods ended June 26, 1994 and June 27, 1993
(Dollar amounts in thousands except per share figures)
Note 1: Summary of Significant Accounting and Reporting Policies
Consolidation
The consolidated financial statements include the accounts of
Weyerhaeuser Company and all of its majority-owned domestic and
foreign subsidiaries. Significant intercompany transactions and
accounts are eliminated.
Certain of the consolidated financial statements and notes to
financial statements are presented in two groupings: (1) Weyerhaeuser
Company (Weyerhaeuser, or the company), which is principally engaged
in the growing and harvesting of timber and the manufacture,
distribution and sale of forest products, and (2) Real estate and
financial services, which includes Weyerhaeuser Real Estate Company
(WRECO), which is involved in real estate development and
construction, and Weyerhaeuser Financial Services, Inc. (WFS), whose
principal subsidiaries are Weyerhaeuser Mortgage Company (WMC) and
Mortgage Securities Corporations. GNA Corporation, a subsidiary of
WFS, was sold in April 1993.
Net Earnings Per Common Share
Net earnings per common share are based on the weighted average number
of common shares outstanding during the respective periods. Average
common equivalent shares (stock options) outstanding have not been
included, as the computation would not be dilutive. Weighted average
common shares outstanding were 205,491,304 and 204,724,122 at June 26,
1994 and June 27, 1993, respectively.
Fully diluted earnings-per-share amounts are not applicable because
the effect of the conversion of the stock options is not dilutive.
Accounting Changes
In November 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 112, Employers'
Accounting for Postemployment Benefits (SFAS 112), which requires
accrual accounting be used for the cost of benefits provided to former
or inactive employees who have not yet retired. In the first quarter
of 1994, the company adopted SFAS 112 by recording a cumulative catch-
up charge to earnings. The adoption of this pronouncement did not
have a significant impact on the company's results of operations or
its financial position.
Inventories
Inventories are stated at the lower of cost or market. Cost includes
labor, materials and production overhead. The last-in, first-out
(LIFO) method is used to cost the majority of domestic raw materials,
in process and finished goods inventories; either the first-in, first-
out (FIFO) or average cost method is used to cost all other
inventories.
Property and Equipment
The company's property accounts are maintained on an individual asset
basis. Betterments and replacements of major units are capitalized.
Maintenance, repairs and minor replacements are expensed.
Depreciation is provided generally on the straight-line or unit-of-
production methods at rates based on estimated service lives.
Amortization of logging rail and truck roads is provided generally as
timber is harvested and is based upon rates determined with reference
to the volume of timber estimated to be removed over such facilities.
The cost and related depreciation of property sold or retired is
removed from the property and allowance for depreciation accounts and
gain or loss is recorded.
<PAGE>
Weyerhaeuser Company
- -11-
Timber and Timberlands
Timber and timberlands are carried at cost less fee stumpage charged
to disposals. Fee stumpage is the cost of standing timber and is
charged to fee timber disposals as fee timber is harvested, lost as
the result of casualty or sold. Stumpage rates are determined with
reference to the cost of timber and the related volume of timber
estimated to be recoverable. Timber carrying costs are expensed as
incurred.
Income Taxes
Under SFAS No. 109, Accounting for Income Taxes, deferred income taxes
are provided to reflect temporary differences between the financial
and tax bases of assets and liabilities using presently enacted tax
rates and laws.
Pension Plans
The company has pension plans covering most of its employees. The
U.S. plan covering salaried employees provides pension benefits based
on the employee's highest monthly earnings for five consecutive years
during the final ten years before retirement. Plans covering hourly
employees generally provide benefits of stated amounts for each year
of service. Contributions to U.S. plans are based on funding
standards established by the Employee Retirement Income Security Act
of 1974 (ERISA).
Postretirement Benefits Other Than Pensions
In addition to providing pension benefits, the company provides
certain health care and life insurance benefits for some retired
employees and accrues the expected future cost of these benefits for
its current eligible retirees and some employees. All of the
company's salaried employees and some hourly employees may become
eligible for these benefits when they retire.
Cash and Short-Term Investments
For purposes of cash flow and fair value reporting, short-term
investments with original maturities of 90 days or less are considered
as cash equivalents. Short-term investments are stated at cost, which
approximates market.
Foreign Exchange Contracts
The company enters into foreign exchange contracts as a hedge for
foreign accounts receivable. Market value gains and losses are
recognized and offset against foreign exchange gains or losses on the
foreign receivables.
Reclassifications
Certain reclassifications have been made to conform prior years' data
to the current format.
WRECO
WRECO recognizes income from the sales of single family housing units
when construction has been completed, required down payments received
and title has passed to the customer. Income from the sales of multi-
family, commercial properties, developed lots and undeveloped land is
recognized when required down payments are received and other income
recognition criteria are satisfied.
Real estate is stated at the lower of cost or net realizable value.
The determination of net realizable value is based on WRECO's plans
for its property and its financial ability to carry out such plans.
Changes in future market demand, interest rates and company plans may
affect net realizable value. Land, land development and construction
costs, including capitalized carrying costs, are accumulated and
allocated to individual units in proportion to relative sales value.
<PAGE>
Weyerhaeuser Company
- -12-
Weyerhaeuser Financial Services
Weyerhaeuser Mortgage Company and its subsidiaries are primarily
engaged in the mortgage banking industry and also offer insurance
services.
- - Mortgage notes held for sale are stated at the lower of cost or
market, which is computed by the aggregate method (unrealized
losses are offset by unrealized gains). Hedging transactions are
entered into to protect the inventory value from increases in
interest rates. Hedge positions are also used to protect the
pipeline of loan applications in process from increases in
interest rates. Hedging gains and losses realized during the
commitment and warehousing period are deferred to the extent of
unrealized gains on the related mortgage loans held for sale.
- - The costs associated with purchasing mortgage servicing rights are
deferred. Excess service fees result from loan sales in which WMC
retains the loan servicing rights and are based on the present
value of future servicing revenue less a normal servicing fee,
based upon the estimated remaining life of the loans sold.
The Mortgage Securities Corporations were formed for the limited
purpose of issuing collateralized mortgage obligation bonds (CMO
bonds) secured by Government National Mortgage Association and Federal
National Mortgage Association certificates. The CMO bonds are the
sole obligation of the issuer, and neither the company nor any
affiliated company has guaranteed or is otherwise obligated with
respect to the CMO bonds.
- - The mortgage-backed certificates are carried at par value adjusted
for any unamortized discount or premium. These discounts or
premiums are amortized using a method that approximates the
effective interest method over the estimated life of the
underlying mortgage loans.
- - CMO bonds are carried at unamortized cost. Discounts and premiums
are amortized using a method that approximates the effective
interest method over their estimated life.
In April 1993, WFS completed the sale of GNA Corporation. As a part
of that transaction, Weyerhaeuser assumed $225 million of outstanding
GNA debt. GNA Corporation and its life insurance subsidiaries
provided annuities, insurance and securities marketed through
financial institutions. During its operation:
- - Payments received on investment and limited payment contracts were
recorded directly as deposits.
- - Investment income was recorded when earned.
- - Investments in bonds were stated at amortized cost; mortgage loans
and other investments were carried at cost.
- - The liability for future annuity and contract reserves on single
premium deferred annuities and single premium whole life policies
was the contract holder's account value. The reserve for single
premium immediate annuity benefits was the present value of such
benefits.
<PAGE>
Weyerhaeuser Company
- -13-
Note 2: Income Taxes
Provisions for income taxes include the following:
<TABLE>
<CAPTION>
Twenty-six Weeks Ended
----------------------
June 26, June 27,
1994 1993
-------- --------
<S> <C> <C>
Federal:
Current $ 54,800 $ 97,061
Deferred 41,400 64,900
-------- --------
96,200 161,961
-------- --------
State:
Current 10,900 15,874
Deferred 3,200 7,400
-------- --------
14,100 23,274
-------- --------
Foreign:
Current 32,000 9,300
Deferred 7,700 (16,567)
-------- --------
39,700 (7,267)
-------- --------
Income taxes before apportionment to
extraordinary item 150,000 177,968
-------- --------
Income taxes apportionable to
extraordinary item:
Current _ (4,635)
Deferred _ 38,367
-------- --------
_ 33,732
-------- --------
$150,000 $211,700
======== ========
</TABLE>
Income tax provisions for interim periods are based on the current
best estimate of the effective tax rate expected to be applicable for
the full year. The effective tax rate reflects anticipated tax
credits, foreign taxes and other tax planning alternatives.
For the period ended June 26, 1994, the company's provision for income
taxes as a percent of earnings before income taxes is greater than the
35% federal statutory rate due principally to the effect of state
income taxes. The effective tax rates for the twenty-six week periods
ended June 26, 1994 and June 27, 1993 were 37% and 34%, respectively.
Under the SFAS 109 liability method, deferred taxes are provided for
the temporary differences between the financial and tax bases of
assets and liabilities, applying presently enacted tax rates and laws.
The major sources of these temporary differences include depreciable
and depletable assets, real estate, restructuring reserves, and
pension and retiree health care liabilities.
<PAGE>
Weyerhaeuser Company
- -14-
<TABLE>
Note 3: Inventories
Inventories consist of the following:
<CAPTION>
June 26, Dec. 26,
1994 1993
-------- --------
<S> <C> <C>
Logs and chips $ 88,818 $103,195
Lumber, plywood and panels 136,260 92,488
Pulp, newsprint and paper 107,721 124,131
Containerboard, paperboard and containers 69,294 70,915
Other products 107,769 121,949
Materials and supplies 253,754 249,793
-------- --------
$763,616 $762,471
======== ========
</TABLE>
<TABLE>
Note 4: Property and Equipment
<CAPTION>
June 26, Dec. 26,
1994 1993
----------- ----------
<S> <C> <C>
Property and equipment, at cost:
Land $ 156,924 $ 157,611
Buildings and improvements 1,439,389 1,416,740
Machinery and equipment 8,092,576 7,839,070
Rail and truck roads and other 622,240 620,136
----------- ----------
10,311,129 10,033,557
Less allowance for depreciation
and amortization 4,544,522 4,427,485
----------- -----------
$ 5,766,607 $ 5,606,072
=========== ===========
</TABLE>
<TABLE>
Note 5: Accrued Liabilities
Accrued liabilities are as follows:
<CAPTION>
June 26, Dec.26,
1994 1993
--------- ---------
<S> <C> <C>
Payroll - wages and salaries, incentive awards,
retirement, vacation pay and severance pay $ 216,112 $ 239,434
Taxes - social security and real
and personal property 69,195 58,952
Interest 66,278 66,967
Income taxes 73,853 12,166
Other 231,381 187,483
--------- ---------
$ 656,819 $ 565,002
========= =========
</TABLE>
Note 6: Long-Term Debt
The company's lines of credit include:
(a) A four-year competitive advance and revolving credit facility
agreement entered into in 1990 with a group of banks which
provides for borrowings of up to the total amount of $1,650,000,
all of which can be availed of by the company and $1,000,000 which
can be availed of by WMC. Borrowings are at LIBOR or other such
interest rates as mutually agreed to between the borrower and
lending banks. This credit facility agreement has been extended
through November 1995.
<PAGE>
Weyerhaeuser Company
- -15-
<TABLE>
(b) A one-year evergreen credit commitment entered into in 1990 with a
group of banks which provides for borrowings of up to the amounts,
and by the entities, as follows:
<CAPTION>
June 26, Dec. 26,
1994 1993
--------- --------
<S> <C> <C>
The company and:
WMC and WRECO $165,000 $215,000
WMC 70,000 70,000
WRECO 20,000 20,000
WMC (only) _ 35,000
</TABLE>
At December 26, 1993, WMC had $35,000 outstanding against this
commitment.
WMC has a revolving credit agreement with a bank to provide for: (1)
borrowings up to $35,000 for three years at prime rate, LIBOR or such
other rate as may be agreed upon by WMC and the banks, (2) a
commitment fee based on the unused credit, and (3) conversion of the
notes as of July 1, 1995, to a five-year term loan payable in equal
quarterly installments. At December 26, 1993, $30,000 was outstanding
under the revolving credit agreement.
During 1992, WFS entered into a three-year term loan facility which
was amended in May 1994 and provides for (1) borrowings of up to
$405,000 at June 26, 1994, and $295,000 at December 26, 1993, at LIBOR
or such other rates as may be agreed upon by WFS and the banks; and
(2) a commitment fee based on the unused credit. $405,000 and
$295,000 were outstanding against this facility at June 26, 1994 and
December 26, 1993, respectively.
To the extent that these credit commitments expire more than one year
after the balance sheet date and are unused, an equal amount of
commercial paper is classifiable as long-term debt. Amounts so
classified are:
<TABLE>
<CAPTION>
June 26, Dec. 26,
1994 1993
--------- --------
<S> <C> <C>
Weyerhaeuser $509,177 $378,727
Real estate and financial services 502,239 616,906
</TABLE>
No portion of these lines has been availed of by the company, WRECO,
WFS, or WMC at June 26, 1994 or December 26, 1993, except as noted.
In 1993, WFS completed the sale of GNA Corporation. As a part of this
transaction, the company assumed $225,000 of outstanding GNA debt.
Total interest costs incurred by WRECO are capitalized and will
ultimately be accounted for as an element of operating costs.
The company's compensating balance agreements were not significant.
Note 7: Shareholders' Interest
Common shares reserved for stock option plans were 5,776,000 shares at
June 26, 1994 and 5,178,000 shares at December 26, 1993.
Note 8: Commitments
The company's capital expenditures have averaged about $823,000 in
recent years but are expected to be approximately $1,100,000 in 1994;
however, the 1994 expenditure level could be increased or decreased as
a consequence of future economic conditions.
Note 9: Extraordinary Item
During the 1993 first quarter, the company realized a net gain of
$52,052 ($85,784 less related tax effect of $33,732) as a result of
extinguishing certain debt obligations.
<PAGE>
Weyerhaeuser Company
- -16-
WEYERHAEUSER COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
<TABLE>
Net sales and revenues and earnings before interest expense, income
taxes and extraordinary item by segment are:
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
--------------------- -----------------------
June 26, June 27, June 26, June 27,
1994 1993 1994 1993
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales and revenues:
Timberlands and wood products $1,249,150 $1,135,057 $2,430,864 $2,145,762
Pulp, paper and packaging 994,945 925,350 1,897,858 1,812,744
Real estate 238,437 192,992 438,924 344,259
Financial services 47,561 70,523 107,506 259,740
Corporate and other 68,343 63,583 109,048 166,016
---------- ---------- ---------- ----------
$2,598,436 $2,387,505 $4,984,200 $4,728,521
========== ========== ========== ==========
Earnings before interest expense,
income taxes and extraordinary item:
Timberlands and wood products $ 243,272 $ 241,871 $ 526,205 $ 467,615
Pulp, paper and packaging 30,079 44,432 35,318 79,397
Real estate 2,945 4,110 3,965 5,172
Financial services(1) 1,027 49,626 7,380 63,388
Corporate and other (26,482) (21,536) (68,598) 15,705
---------- ---------- ---------- ---------
$ 250,841 $ 318,503 $ 504,270 $ 631,277
========== ========== ========== =========
(1)Includes interest expense of $19,120 and $23,950 for thirteen
weeks and $37,442 and $51,332 for twenty-six weeks related to the
financial services businesses.
</TABLE>
Net sales for the second quarter of 1994 were $2.6 billion up
9 percent from the $2.39 billion reported in the same quarter of a
year ago. Net earnings were $128.9 million or 62 cents per common
share, compared to $181.5 million or 89 cents per common share in the
second quarter of 1994. The sale of GNA Corporation in the 1993
second quarter accounted for net earnings of $36 million, or 18 cents
per common share. Second quarter results were mixed with benefit from
higher prices in the pulp, paper and packaging segment at the same
time the company was experiencing lower lumber, plywood and oriented
strand board prices and reduced volume of domestic log sales.
In addition to the gain from the sale of GNA, first half 1993 earnings
included after-tax gains of (1) $44 million, or 22 cents per common
share, on the sale of the company's infant diaper business, and
(2) $52 million, or 25 cents per common share, from the extinguishment
of debt. The latter item was reported as an extraordinary gain on the
company's consolidated statement of earnings. Net earnings from
operations were $255.4 million in the first half of 1994, down
8 percent from the $279 million reported in the first half of 1993.
Operating earnings for the timberlands and wood products segment were
$243.3 million for the second quarter of 1994, a slight increase over
the $241.8 million in the 1993 second quarter.
The pulp, paper and packaging segment's operating earnings were
$30.1 million for the second quarter of 1994 compared with
$44.4 million in the same quarter of 1993. Despite lower segment
results year to year, recent price improvements, particularly in pulp
and containerboard packaging, and to a lesser extent in newsprint and
fine paper, indicate a strengthening recovery in the pulp, paper and
packaging markets.
The company's real estate and financial services segments had
operating earnings of $4 million in the quarter compared with
$12.2 million in the year ago quarter. In addition, the 1993 second
quarter financial services' results included a $41.5 million pre-tax
gain on the sale of GNA Corporation, its wholly owned subsidiary. The
significant fall-off in mortgage refinancing activity due to the rapid
increase in long-term interest rates resulted in lower earnings from
financial services in the quarter.
<PAGE>
Weyerhaeuser Company
- -17-
The increases in the company's interest expense incurred and interest
capitalized, both in the current quarter and year-to-date are related
to the continuing major mill modernization projects underway at the
Plymouth, North Carolina and Longview, Washington facilities.
Other income is an aggregation of both recurring and occasional non-
operating income and expense items and, as a result, fluctuates from
period to period. No individual income or (expense) item is
significant in relation to net earnings other than the $70.2 million
gain on the disposal of the company's investment in the infant diaper
business in the first quarter of 1993, and financial services' gain of
$41.5 million on the sale of GNA Corporation in the second quarter of
1993.
Working capital for Weyerhaeuser decreased $45 million from year end
1993, primarily due to a decrease in cash and short-term investments
and an increase in accounts payable and accrued liabilities, partially
offset by an increase in receivables and prepaid expenses.
During the first half of 1994, the company paid $123 million in cash
dividends and made capital expenditures of $547 million. The cash
needed to meet these and other company needs was generated principally
from internal cash flow.
The company now anticipates total capital expenditures for 1994 to
approximate $1.1 billion. As a result of advances in measurement
technology, minute amounts of dioxin have been detected in waste water
effluent, sludges and pulp from U.S. bleached kraft pulp mills,
including certain of the company's mills. The company has allocated
substantial capital to, and has made very significant progress in,
reducing dioxin in the mills' sludge, pulp, effluent and ultimate
product. The company does not believe that compliance with current
environmental laws and regulations had a material adverse effect on
its capital expenditures, earnings or competitive position in the
second quarter or first half of 1994, nor is it expected to in the
remainder of 1994 or 1995.
The company is committed to the maintenance of a sound, conservative
capital structure. This commitment is based upon two considerations:
the obligation to protect the underlying interests of its shareholders
and lenders and the desire to have access, at all times, to all major
financial markets.
The important elements of the policy governing the company's capital
structure are as follows:
- - To view separately the capital structures of Weyerhaeuser Company,
Weyerhaeuser Real Estate Company and Weyerhaeuser Financial
Services, Inc. given the very different nature of their assets and
business activities. The amount of debt and equity associated
with the capital structure of each will reflect the basic earnings
capacity, real value and unique liquidity characteristics of the
assets dedicated to that business.
- - The combination of maturing short-term debt and the structure of
long-term debt will be managed judiciously to minimize liquidity
risk.
For the twenty-six weeks ended June 26, 1994, earnings before interest
expense and income taxes plus non-cash charges for the timberlands and
wood products and the pulp, paper and packaging segments were
$613 million and $178 million, respectively. Capital expenditures
during this period were $98 million by timberlands and wood products,
$424 million by pulp, paper and packaging and $25 million by other
segments.
<PAGE>
Weyerhaeuser Company
- -18-
Part II. Other Information
Item 1. Legal Proceedings
Trial began in May 1992 in a federal income tax refund case that the
company filed in July 1989 in the United States Claims Court. The
complaint seeks a refund of federal income taxes that the company
contends it overpaid in 1977 through 1983. The alleged overpayments
are the result of the disallowance of certain timber casualty losses
and certain deductions claimed by the company arising from export
transactions. The refund sought was approximately $29 million, plus
statutory interest from the dates of the alleged overpayments. The
company settled the portion of the case relating to export
transactions. The tax refund remaining in dispute is approximately
$10 million plus statutory interest from the dates of the alleged
overpayments. The court has not entered a decision on the remaining
issue.
On March 6, 1992, the company filed a complaint in the Superior Court
for King County, Washington against a number of insurance companies.
The complaint seeks a declaratory judgment that the insurance
companies named as defendants are obligated under the terms and
conditions of the policies sold by them to the company to defend the
company and to pay, on the company's behalf, certain claims asserted
against the company. The claims relate to alleged environmental
damage to third-party sites and to some of the company's own property
to which allegedly toxic material was delivered or on which allegedly
toxic material was placed in the past. Since December 1992, the
company has agreed to settlements with seven of the defendants. In
July 1993, the trial court dismissed fourteen of the thirty-five sites
named in the complaint. In May 1994, the Washington State Supreme
Court reversed the trial court's dismissal of those sites. Trial on
two sites is scheduled for October 1994.
In April 1992, the Georgia Department of Natural Resources,
Environmental Protection Division issued a Notice of Violation to the
company's Adel, Georgia particleboard plant citing violations of
particulate emission standards. A consent order was entered into on
September 18, 1992 assessing a $35 thousand penalty and a stipulated
penalty of 100 dollars per day until the facility is in full
compliance with particulate emission requirements. The Consent Order
set a compliance deadline of January 31, 1994. The Consent Order
also requires that the company demonstrate that the facility is in
compliance with regulations under the Prevention of Significant
Deterioration (PSD) regulations under the Clean Air Act. The company
has submitted compliance data and is awaiting the State's concurrence
that it satisfies the consent order requirements.
The company has undertaken a review of all its wood products
facilities for compliance with the PSD regulations and has disclosed
PSD compliance issues to certain state agencies and the EPA. The
company and the State of Mississippi Department of Environmental
Quality (DEQ) have entered into a consent agreement concerning PSD
regulations at two company facilities in Mississippi involving
penalties of $170 thousand. The State of Alabama has issued a
compliance order with penalties totaling $100 thousand for
noncompliance with PSD regulations at the company's Millport facility.
The company and North Carolina's Division of Environmental Management
have entered into a consent agreement for its Elkin, North Carolina
facility involving penalties of $140 thousand and are currently
negotiating a separate consent agreement for its Moncure, North
Carolina facility involving penalties of $140 thousand. The company
has signed a consent agreement including penalties of $140 thousand
relating to PSD issues at the company's Wright City, Oklahoma facility
with the State of Oklahoma Department of Environmental Quality. The
company has signed consent agreements with the State of Arkansas
concerning PSD related issues for two facilities in that state
involving $375 thousand in total penalties for both facilities.
Region V of the EPA has issued a Notice of Violation for permit
violations at the company's Grayling, Michigan facility. The company
is negotiating a settlement of those alleged permit violations and
other PSD related issues with the Michigan Department of Natural
Resources that is expected to involve penalties of approximately
$464 thousand. In September 1992, the EPA issued a Section 114
Request for Information concerning PSD compliance at the company's
oriented strand board and medium density fiberboard mills. In June
1993, the EPA issued a similar Section 114 request for the company's
plywood and particleboard mills. The EPA has told the company that it
plans to initiate a national PSD enforcement action against the
company and other forest product companies in August 1994. The
company is also undertaking a review of its pulp and paper facilities
for PSD compliance.
The Washington Department of Ecology has indicated that it will
investigate the accidental release of chlorine, chlorine dioxide and
non-condensable gasses at the company's pulp mill in Longview,
Washington in July 1994.
On April 9, 1993, the company entered into a Stipulated Final Order
(SFO) with the Oregon Department of Environmental Quality for alleged
air emissions in excess of permit levels and PSD noncompliance at the
company's North Bend, Oregon containerboard facility. The SFO
establishes a compliance schedule for installing control technology.
A supplemental SFO assessed upfront penalties of $247 thousand and
penalties of 500 dollars per day until compliance is demonstrated.
The SFO requires demonstrated compliance by December 1993 and a
historical evaluation of the facility's PSD status. The company has
submitted a plant site PSD review to the state and is awaiting its
review.
<PAGE>
Weyerhaeuser Company
- -19-
Part II. Other Information
Item 1. Legal Proceedings - continued
In August 1992, the EPA issued an administrative complaint for the
assessment of $215 thousand in civil penalties against the company's
Longview, Washington facility. The penalties are based upon alleged
violations of the record keeping and storage provisions of the
polychlorinated biphenyls rules contained in the TSCA. The company
and the EPA settled the complaint for a maximum penalty of
$118 thousand, 50% of which was paid when the settlement was signed.
Payment of the remaining 50% was deferred and will be eliminated based
on the expenditure of more than $118 thousand by the company to
dispose of PCB contaminated transformers at Longview during 1993.
On November 2, 1992, an action was filed against the company in the
Circuit Court for the First Judicial District of Hinds County,
Mississippi on behalf of a purported class of riparian property owners
in Mississippi and Alabama whose properties are located on the
Tennessee Tombigbee Waterway, Aliceville Lake, Cedar Creek and the
Magoway Creek. The complaint seeks $1 billion in compensatory and
punitive damages for diminution in property value, personal injuries
and mental anguish allegedly resulting from the discharge of purported
hazardous substances, including dioxins and furans, by the company's
pulp and paper mill in Columbus, Mississippi and the alleged
fraudulent concealments of such discharge. The complaint also seeks
an injunction prohibiting future releases and the removal of hazardous
substances allegedly released in the past. On August 20, 1993, a
companion action was filed in Green County, Alabama on behalf of a
similar purported class of riparian owners with essentially the same
claims as the Mississippi case. The action was removed to the Federal
District Court for the Northern District of Alabama, which
subsequently remanded the case to state court. Neither action is
presently scheduled for trial.
The company was sued in the United States District Court for the
District of Alaska by two corporations with which Weyerhaeuser had
entered into financing arrangements, a marketing agreement, and a
technical assistance agreement. The plaintiffs claimed that
Weyerhaeuser breached contractual and common law duties by allegedly
failing to adequately market and ship the plaintiffs' products,
misrepresenting its marketing and shipping capabilities, and acting to
further its interests at the plaintiffs' expense. The plaintiffs in
the First Amended Complaint, filed in May 1992, sought an unstated
amount of damages described as more than $50 million in compensatory
damages plus not less than $75 million in punitive damages. The claim
for punitive damages was dismissed by the trial court. In March 1994,
a jury returned a verdict against the company awarding damages of
$1.2 million. Both the company and the plaintiffs have appealed.
The company is also a party to various proceedings relating to the
clean-up of hazardous waste sites under the Comprehensive
Environmental Response Compensation and Liability Act, commonly known
as "Superfund," and similar state laws. The Environmental Protection
Agency and/or various state agencies have notified the company that it
may be a potentially responsible party with respect to other hazardous
waste sites as to which no proceedings have been instituted against
the company. The company is also a party to other legal proceedings
generally incidental to its business. Although the final outcome of
any legal proceeding is subject to a great many variables and cannot
be predicted with any degree of certainty, the company presently
believes that any ultimate liability resulting from the legal
proceedings discussed herein, or all of them combined, would not have
a material effect on the company's financial position.
Item 4. Submission of Matters to a Vote of Security Holders
Reference is hereby made to the 1994 Weyerhaeuser Company First
Quarter and Annual Meeting Report to Shareholders for information
about the matters voted upon and the votes cast with respect thereto
at the annual meeting of the Shareholders of Weyerhaeuser Company on
April 21, 1994.
Item 6. Exhibits and Reports on Form 8-K
(a) Not applicable.
(b) The registrant has not filed a report on Form 8-K during the
fiscal quarter for which this report on Form 10-Q is filed.
