SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 26, 1993 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 . Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X] The aggregate market value of
registrant's voting shares held by non-affiliates was $9,764,032,027
as of February 25, 1994. The number of shares outstanding of
registrant's class of common stock, as of February 25, 1994, was
205,558,569 common shares ($1.25 par value).
<PAGE>
Weyerhaeuser Company and Subsidiaries
Documents Incorporated
by Reference
- ------------------------------------------------------------------------
The following documents are incorporated in this Form 10-K Annual
Report by reference:
Part of Form 10-K
Document Into Which Document Incorporated
-------- --------------------------------
Weyerhaeuser Company Annual Report* Part I, Item 1 and Part II, Items 5-8
Notice of 1994 Annual Meeting Part III
of Shareholders and Proxy Statement*
*Such sections, identified by page numbers, as are referenced in the
Cross Reference Sheet included with this Form 10-K Annual Report.
2
<PAGE>
Weyerhaeuser Company and Subsidiaries
Cross Reference Sheet
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
Location, by Page Number,
in Document Incorporated by Reference
-------------------------------------
1993 Notice of 1994
Weyerhaeuser Annual Meeting
Company of Shareholders
Annual and Proxy
Form 10-K Item Report Statement
---------------- ------------- ----------------
<S> <C> <C>
Part I
Item 1. Business
General Development of Business 34-40 -
Financial Information About Industry Segments 73-75 -
Narrative Description of Business 34-40 -
Financial Information About Foreign and Domestic
Operations and Export Sales 34, 55-56 -
Item 2. Properties - -
Item 3. Legal Proceedings - -
Item 4. Submission of Matters to a Vote of Security Holders - -
Part II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters
Market Information 75 -
Holders 76-77 -
Dividends 75 -
Item 6. Selected Financial Data 76-77 -
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 23-32, 34-44 -
Item 8. Financial Statements and Supplementary Data
Report of Independent Public Accountants 44 -
Consolidated Statement of Earnings 45 -
Consolidated Balance Sheet 46-47 -
Consolidated Statement of Cash Flows 48-49 -
Consolidated Statement of Shareholders' Interest 50-51 -
Notes to Financial Statements (including
business segments data required by
Financial Accounting Standards Board
Statement No. 14) 52-77 -
Selected Quarterly Financial Data 75 -
</TABLE>
3
<PAGE>
Weyerhaeuser Company and Subsidiaries
Cross Reference Sheet - Continued
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Location, by Page Number,
in Document Incorporated by Reference
-------------------------------------
1993 Notice of 1994
Weyerhaeuser Annual Meeting
Company of Shareholders
Annual and Proxy
Form 10-K Item Report Statement
-------------- ----------- ----------------
<S> <C> <C>
Part II - Continued
Item 9. Changes in and Disagreements on Accounting
and Financial Disclosure** - -
Part III
Item 10. Directors and Executive Officers of the Registrant - 1-4
Item 11. Executive Compensation - 5-12
Item 12. Security Ownership of Certain Beneficial
Owners and Management - 4-5
Item 13. Certain Relationships and Related Transactions - 15-16
</TABLE>
**Item not applicable.
4
<PAGE>
Weyerhaeuser Company and Subsidiaries
PART I
Item 1. Business
- -----------------------------------------------------------------------------
DESCRIPTION OF THE BUSINESS OF THE COMPANY
Weyerhaeuser Company (the company) was incorporated in the state of
Washington in January 1900, as Weyerhaeuser Timber Company. It is
principally engaged in growing and harvesting of timber and the
manufacture, distribution and sale of forest products, real estate
development and construction, and financial services. Its principal
business segments include timberlands and wood products, pulp and
paper products, real estate, and financial services. A description of
each of these business segments follows.
Timberlands and Wood Products
The company owns approximately 5.5 million acres of commercial
forestland in the United States (50% in the South and 50% in the
Pacific Northwest), most of it highly productive and located
extremely well to serve both domestic and international markets. The
company has, additionally, long-term license arrangements in Canada
covering approximately 17.8 million acres (of which 14 million acres
are considered to be productive forestland). The combined total
timber inventory on these U.S. and Canadian lands is approximately 245
million cunits (a cunit is 100 cubic feet of solid wood), of which
approximately 75% is softwood species. The relationship between cubic
measurement and the quantity of end products that may be produced from
timber varies according to the species, size and quality of timber,
and will change through time as the mix of these variables changes.
To sustain the timber supply from its fee timberland, the company is
engaged in extensive planting, suppression of nonmerchantable species,
precommercial and commercial thinning and fertilization and
operational pruning, all of which increase the yield from its fee
timberland acreage.
<TABLE>
<CAPTION>
Inventory Thousands of Acres at December 26, 1993
---------- -------------------------------------------
Millions Fee Long-term License
of Cunits Ownership Leases Arrangements Total
---------- --------- --------- ------------ ------
<S> <C> <C> <C> <C> <C>
Geographic Area
Washington
Cascade 13 502 - - 502
Longview 10 439 - - 439
Twin Harbors 20 580 - - 580
---------- --------- --------- ------------ ------
43 1,521 - - 1,521
---------- --------- --------- ------------ ------
Oregon
Coos Bay 5 210 - - 210
Klamath Falls 4 598 - - 598
Willamette 9 403 - - 403
---------- ---------- --------- ------------ ------
18 1,211 - - 1,211
---------- ---------- --------- ------------ ------
Southern
Mississippi/
Alabama 4 383 101 - 484
North Carolina/
Georgia 9 717 48 - 765
Oklahoma/
Arkansas 13 1,680 9 - 1,689
---------- --------- --------- ------------ -------
26 2,780 158 - 2,938
---------- --------- --------- ------------ -------
Total United States 87 5,512 158 - 5,670
---------- --------- --------- ------------ -------
Canada
Alberta 91 - - 5,793 5,793
British Columbia 10 12 - 3,595 3,607
Saskatchewan 57 - - 8,457 8,457
---------- --------- --------- ----------- -------
Total Canada 158 12 - 17,845 17,857
---------- --------- --------- ----------- -------
TOTAL 245 5,524 158 17,845 23,527
========== ========= ========= =========== =======
</TABLE>
5
<PAGE>
Weyerhaeuser Company and Subsidiaries
Part I
Item 1. Business - Continued
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Thousand Acres Million Thousand Acres
------------------ Seedlings -------------------------------
Harvested Planted Planted Stocking Control Fertilization
--------- ------- ------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
1993 Activity
Washington 27.0 30.0 14.9 10.4 53.6
Oregon 15.1 16.1 7.1 20.4 26.7
Southern 54.6 40.1 19.9 8.3 195.0
--------- ------- ------- ---------------- -------------
Total United
States 96.7 86.2 41.9 39.1 275.3
========= ======= ======= ================ =============
Cumulative
Activity 4,142.1 3,500.6 2,496.2 1,494.3 3,584.1
========= ======= ======= ================ =============
</TABLE>
The company's wood products businesses produce and sell softwood
lumber, plywood and veneer; composite panels; oriented strand board;
hardboard; hardwood lumber and plywood; doors; treated products; logs;
chips and timber. These products are sold primarily through the
company's own sales organizations. Building materials are sold to
wholesalers, retailers and industrial users.
Sales by volumes by major product class are as follows (millions):
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Raw materials - cubic ft. 547 545 538 540 587
Softwood lumber - board ft. 4,230 3,440 3,269 3,417 4,223
Softwood plywood and veneer - sq. ft. (3/8") 2,435 2,227 2,135 2,212 2,441
Composite panels - sq. ft. (3/4") 626 590 685 641 635
Oriented strand board - sq. ft. (3/8") 1,672 1,484 1,205 1,185 1,180
Hardboard - sq. ft. (7/16") 140 133 114 126 133
Hardwood lumber - board ft. 240 218 219 209 223
Hardwood doors (thousands) 556 514 525 697 1,146
</TABLE>
Selected product prices:
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Export logs (#2 sawlog-bark on) - $/MBF
Cascade - Douglas fir $1,211 $ 930 $ 687 $ 641 $ 645
Coastal - Hemlock 828 562 531 558 520
Coastal - Douglas fir 1,104 858 633 588 525
Lumber (common) - $/MBF
2x4 Douglas fir (kiln dried) 418 295 250 241 263
2x4 Douglas fir (green) 383 261 224 223 247
2x4 southern yellow pine (kiln dried) 397 285 237 233 224
2x4 spruce-pine-fir (kiln dried) 334 231 187 186 184
Plywood (1/2" CDX) - $/MSF
West 321 281 220 209 224
South 282 249 192 184 200
Oriented strand board (7/16"-24/16)
North Central price - $/MSF 235 217 147 129 170
</TABLE>
6
<PAGE>
Weyerhaeuser Company and Subsidiaries
Part I
Item 1. Business - Continued
- -----------------------------------------------------------------------------
Pulp and Paper Products
The company's pulp and paper products businesses include: Pulp, which
manufactures chemical wood pulp for world markets; Newsprint, which
manufactures newsprint at the company's North Pacific Paper
Corporation mill and markets it to West Coast and Japanese newspaper
publishers; Paper, which manufactures and markets a range of both
coated and uncoated fine papers through paper merchants and printers;
Containerboard Packaging, which manufactures linerboard and
corrugating medium, which is primarily used in the production of
corrugated shipping containers and manufactures and markets corrugated
shipping containers for industrial and agricultural packaging;
Paperboard, which manufactures bleached paperboard that is used for
production of liquid containers and is marketed to West Coast and
Pacific Rim customers; Recycling, which operates an extensive
wastepaper collection system and markets it to company mills and
worldwide customers; Chemicals, which produces chlorine, caustic and
tall oil, which are used principally by the company's pulp and paper
operations; and Personal Care Products, which manufactures disposable
diapers sold under the private-label brands of many of North America's
largest retailers (this business was sold in February 1993 through an
initial public offering of stock).
Sales volumes by major product class are as follows (thousands):
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Pulp - air-dry metric tons 1,886 1,238 1,433 1,194 1,116
Newsprint - metric tons 609 575 450 453 473
Paper - tons 990 966 869 893 849
Paperboard - tons 222 238 234 220 197
Containerboard - tons 290 318 418 444 497
Packaging - MSF 31,386 29,414 26,525 25,022 24,560
Recycling - tons 851 778 735 648 633
Personal care products - standard cases - 17,017 14,929 11,471 12,181
</TABLE>
Selected product prices (per ton):
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Pulp - NBKP-air-dry metric-U.S. $ 445 $ 551 $ 568 $ 800 $ 830
Paper - uncoated free sheet-U.S. 627 630 713 859 889
Linerboard - 42 lb.-Eastern U.S. 295 343 330 360 404
Newsprint - metric -West Coast U.S. 435 433 549 561 567
</TABLE>
7
<PAGE>
Weyerhaeuser Company and Subsidiaries
Part I
Item 1. Business - Continued
- -----------------------------------------------------------------------------
Real Estate
The company, through its real estate subsidiary, Weyerhaeuser Real
Estate Company, is a builder/developer of for-sale housing and
apartments, develops commercial and residential lots for sale to users
and other builders, builds commercial buildings for sale to
institutional investors, and is an investor in joint ventures and
limited partnerships.
Volumes sold:
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Single-family units 1 3,879 3,917 4,410 5,113 5,858
Multi-family units 1 1,141 60 317 358 412
Lots 1 1,372 2,762 1,138 3,008 2,729
Commercial space (thousand sq. ft.) 88 142 269 235 945
1 Includes proportional share of joint venture sales.
</TABLE>
Financial Services
The company, through its financial services subsidiary, Weyerhaeuser
Financial Services, Inc., is involved in a range of financial
services. The principal operating unit is Weyerhaeuser Mortgage
Company, which has origination offices in 12 states, with a servicing
portfolio of $8.4 billion covering approximately 112,000 loans
throughout the country. Mortgages are resold in the secondary market
through mortgage-backed securities to financial institutions and
investors. Through its insurance services organization, it also
offers a broad line of property, life and disability insurance. GNA
Corporation, a subsidiary that specialized in the sale of life
insurance annuities and mutual funds to the customers of financial
institutions, was sold in April 1993. Republic Federal Savings & Loan
Association, a subsidiary that operated in Southern California through
1991, was dissolved in 1992.
Volume information (millions):
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Loan servicing portfolio $8,400 $9,800 $10,600 $11,600 $11,800
Single-family loan originations $4,405 $3,380 $2,496 $2,131 $3,251
</TABLE>
8
<PAGE>
Weyerhaeuser Company and Subsidiaries
Part I
Item 2. Properties
- -----------------------------------------------------------------------------
Timberlands and Wood Products
Facilities and annual production are summarized by major product class
as follows (millions):
<TABLE>
<CAPTION>
Number
Production of
Capacity Facilities 1993 1992 1991 1990 1989
---------- ---------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Logs - cubic ft. - - 673 749 782 817 839
Softwood lumber - board ft. 3,215 27 3,135 2,782 2,687 2,719 2,759
Softwood plywood
and veneer - sq. ft. (3/8") 1,246 8 1,188 1,125 966 1,076 1,069
Composite panels
- sq. ft. (3/4") 609 6 564 540 493 505 587
Oriented strand
board - sq. ft. (3/8") 1,440 5 1,443 1,234 1,208 1,156 1,121
Hardboard - sq. ft. (7/16") 130 1 120 118 90 119 131
Hardwood lumber - board ft. 255 8 221 210 196 202 212
Hardwood doors (thousands) 561 1 522 469 448 556 833
</TABLE>
Principal manufacturing facilities are located as follows:
Softwood lumber and plywood Hardwood doors
Alabama, Arkansas, Georgia, Idaho, Wisconsin
Mississippi,
North Carolina, Oklahoma, Oregon, Composite panels
Washington, and Georgia, North Carolina,
Alberta, British Columbia, and Oregon and Wisconsin
Saskatchewan, Canada
Oriented strand board
Hardwood lumber Michigan, North Carolina,
Arkansas, Oklahoma, Pennsylvania, and Alberta, Canada
Washington,
and Wisconsin Hardboard
Oregon
9
<PAGE>
Weyerhaeuser Company and Subsidiaries
Part I
Item 2. Properties - Continued
- ------------------------------------------------------------------------------
Pulp and Paper Products
Facilities and annual production are summarized by major product class
as follows (thousands):
<TABLE>
<CAPTION>
Number
Production of
Capacity Facilities 1993 1992 1991 1990 1989
---------- ---------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Pulp - air-dry metric tons 2,130 8 2,096 1,506 1,527 1,386 1,275
Newsprint - metric tons 675 1 618 588 461 459 486
Paper - tons 1,015 5 1,007 971 889 900 919
Paperboard - tons 220 1 217 229 238 217 221
Containerboard - tons 2,360 5 2,269 2,240 2,224 2,171 2,168
Packaging - MSF 36,800 36 32,795 31,040 27,583 26,146 25,764
Recycling - tons - 21 1,847 1,692 1,415 1,204 1,163
Personal care
products - standard cases - - - 16,743 14,902 11,471 12,019
</TABLE>
Principal manufacturing facilities are located as follows:
Pulp Containerboard
Georgia, Mississippi, North North Carolina, Oklahoma,
Carolina, Washington, and Oregon, and Washington
Alberta, British Columbia, and
Saskatchewan, Canada Packaging
Arizona, California, Florida,
Newsprint Georgia, Hawaii, Illinois,
Washington Indiana, Iowa, Kentucky, Maine,
Michigan, Minnesota,
Paper Mississippi, Missouri, Nebraska,
Mississippi, North Carolina, New Jersey, New York, North
Washington, Wisconsin, and Carolina, Ohio, Oregon,
Saskatchewan, Canada Tennessee, Texas, Virginia,
Washington, and Wisconsin
Paperboard
Washington Recycling
California, Colorado, Iowa,
Kansas, Maryland, North
Carolina, Oklahoma, Oregon,
Texas, Virginia, Washington, and
British Columbia, Canada
Chemicals
Georgia, Mississippi, North
Carolina, Oklahoma, Washington,
and Saskatchewan, Canada
10
<PAGE>
Weyerhaeuser Company and Subsidiaries
Part I
Item 2. Properties - Continued
- -----------------------------------------------------------------------------
Real Estate
Principal operations are located as follows:
<TABLE>
<CAPTION>
Activity
--------------------------------------------------------------
Com-
Primary Resi- Com- mercial General
Real Estate States of Single- Multi- dential mercial Acre- Pro- Con- Venture
Companies Operations Family Family Lots Lots age jects tracting Capital
- ----------- ---------- ------- ------ ------- ------- ----- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Centennial Texas x x x
Homes, Inc.
Land Management Alabama, x x x
Arkansas,
Georgia,
Mississippi,
North Carolina,
Oregon,
Washington
Pardee California, x x x x x
Construction Nevada
Co.
The Quadrant Washington x x x x x x
Corp.
Scarborough New Jersey x x x
Corporation
Scarborough Florida x x x x
Constructors,
Inc.
Trendmaker, Inc. Texas x x
Westminster
Homes, Inc. North Carolina x x x x x
Winchester Maryland, x x x x
Homes, Inc. Virginia
Weyerhaeuser Alaska, Arizona, x
Venture Co. California,
Colorado, Florida,
Nevada,
Oregon,
Washington
Weyerhaeuser Washington
Real
Estate Company
(Parent Company)
</TABLE>
11
<PAGE>
Weyerhaeuser Company and Subsidiaries
Part I
Item 2. Properties - Continued
- -----------------------------------------------------------------------------
Financial Services
Principal operations are located as follows:
<TABLE>
<CAPTION>
Activity
------------------------------------------
Mort- Invest- Mort-
Financial Primary Mort- gage ment gage
Services States of gage Ser- Insur- Sales & Sec-
Companies Operations Lending vicing ance Service urities
---------------- ------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Weyerhaeuser Branches in 12 x x x x
Mortgage states with major
Company concentrations
in California,
Hawaii, and
Nevada
Mortgage California x
Securities
Corporations
WFS (Republic) California x
Inc.
Weyerhaeuser Delaware
Financial
Services, Inc.
(Parent Company)
</TABLE>
12
<PAGE>
Weyerhaeuser Company and Subsidiaries
Part I
Item 3. 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 has reached an agreement with the United States Department of
Justice to settle the portion of the case relating to export
transactions. That settlement has been approved by the Joint
Committee on Taxation of the U.S. Congress. The tax refund remaining
in dispute is approximately $9 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 six of the defendants. In July
1993, the trial court dismissed fourteen of the thirty-five sites
named in the complaint. Appeal of those dismissals was heard by the
Washington State Supreme Court on February 22, 1994. Trial on two
sites is scheduled for October 1994.
In April 1991, the United States Environmental Protection Agency (EPA)
issued an amended complaint adding the company as an additional
defendant in an administrative proceeding under the Toxic Substances
Control Act (TSCA). The proceeding seeks penalties of $171,000 from
all defendants with respect to alleged improper storage and record
keeping between 1980 and 1989 for certain transformers which contained
polychlorinated biphenyls. The transformers, which the company sold
in 1980, were located at the company's former hardboard siding mill in
Doswell, Virginia. The company is currently negotiating with the EPA
to settle the matter with no admission of liability or penalties.
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 $35,000 penalty and a stipulated
penalty of $100 per day until the facility is in full compliance with
particulate emission requirements. The Consent Order sets 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 $170,000. The State of Alabama has issued a compliance
order with penalties totaling $100,000 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 $140,000 and are currently negotiating a separate consent
agreement for its Moncure, North Carolina facility involving penalties
of $140,000. The company has signed a consent agreement including
penalties of $140,000 relating to PSD issues at the company's Wright
City, Oklahoma facility with the State of Oklahoma Department of
Environmental Quality. The company is negotiating a consent agreement
with the State of Arkansas concerning PSD related issues for two
facilities in that state involving $375,000 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 settlement of those alleged permit
violations and other PSD related issues with the Michigan Department
of Natural Resources and the EPA that may involve penalties of up to
$416,000. 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 company is also undertaking a review of its
pulp and paper facilities for PSD compliance.
13
<PAGE>
Weyerhaeuser Company and Subsidiaries
Part I
Item 3. Legal Proceedings - Continued
- ------------------------------------------------------------------------------
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 $247,000 and
penalties of $500 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.
In August 1992, the EPA issued an administrative complaint for the
assessment of $215,000 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 $118,150,
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 $118,150 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.
Trial began in January 1994 in the United States District Court for
the District of Alaska of claims filed against Weyerhaeuser by two
corporations with which Weyerhaeuser had entered into financing
arrangements, a marketing agreement, and a technical assistance
agreement. The plaintiffs claim 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, seek 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 has been dismissed by the trial court.
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.
14
<PAGE>
Weyerhaeuser Company and Subsidiaries
Part III
Item 10. Directors and Executive Officers of the Registrant
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name Title Age
---- ----- ---
<S> <S> <C>
Charles W. Bingham Executive Vice President 60
William R. Corbin Executive Vice President 52
John W. Creighton, Jr. President 61
Steven R. Hill Senior Vice President 46
Norman E. Johnson Senior Vice President 60
William C. Stivers Senior Vice President 55
</TABLE>
Part IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K
- -----------------------------------------------------------------------------
Financial Statements
Weyerhaeuser Company and Subsidiaries 1
Financial Statement Schedules
Schedule V - Property and Equipment
Schedule VI - Allowance for Depreciation and Amortization of
Property and Equipment
Schedule VIII - Valuation and Qualifying Accounts
Schedule IX - Short-term Borrowings
Schedule X - Supplementary Income Statement Information
Exhibits
Exhibit 3 - Articles of Incorporation and Bylaws
Exhibit 10 - Material Contracts
(a) Agreement with N. E. Johnson
(b) Agreement with W. R. Corbin
Exhibit 11 - Statement Re: Computation of Per Share Earnings
(incorporated by reference to page 52 of the 1993
Weyerhaeuser Company Annual Report)
Exhibit 13 - Portions of the 1993 Weyerhaeuser Company Annual
Report specifically incorporated by reference herein
Exhibit 22 - Subsidiaries of the Registrant
Exhibit 24 - Consents of Experts and Counsel
Reports on Form 8-K
The registrant has not filed a report on Form 8-K during the last
fiscal quarter of the period for which this Form 10-K is filed.
1 Incorporated in Part II, Item 8 by reference.
15
<PAGE>
Weyerhaeuser Company and Subsidiaries
Report of Independent Public Accountants
- ------------------------------------------------------------------------------
To Weyerhaeuser Company:
We have audited in accordance with generally accepted auditing
standards, the financial statements included in Weyerhaeuser
Company's annual report to shareholders incorporated by reference in
this Form 10-K, and have issued our report thereon dated February 8,
1994. Our report on the financial statements includes an explanatory
paragraph with respect to the change in the method of accounting for
income taxes and postretirement benefits other than pensions. Our
audit was made for the purpose of forming an opinion on those
statements taken as a whole. The schedules listed on page 15 are the
responsibility of the company's management and are presented for
purposes of complying with the Securities and Exchange Commission's
rules and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion,
fairly state in all material respects the financial data required to
be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN & CO.
Seattle, Washington,
February 8, 1994
16
<PAGE>
Weyerhaeuser Company and Subsidiaries
Schedule V -
Property and Equipment
For the three years ended December 26, 1993
Dollar amounts in thousands
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 26, 1993
Other Changes
------------------------
Balance at Other Balance at
Beginning Additions Retirements Reclassifi- Debits End of
Classification of Period at Cost or Sales cations or (Credits) Period
- -------------- ---------- --------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Timber and timberlands $ 591,610 $ 40,582 $ 4,451 $ - $ (19,014)1 $ 604,773
292 2
(88)3
(2,275)4
(1,883)6
---------- -------- ---------- ---------- ----------- ------------
$ 591,610 $ 40,582 $ 4,451 $ - $ (22,968) $ 604,773
========== ======== ========== ========== =========== ============
Property and equipment:
Land $ 152,632 $ 7,775 $ 2,153 $ 93 $ (195)2 $ 157,611
(940)3
399 6
Buildings and improvements 1,395,142 65,299 48,689 5,866 10,547 2 1,416,740
(11,598)3
173 6
Machinery and equipment 7,768,170 444,983 299,875 (5,751) (9,482)2 7,839,070
(58,911)3
(788)5
724 6
Rail and truck roads 561,043 13,150 3,975 (140) (30)2 569,842
(143)4
(63)6
Other 47,372 2,475 - (204) (51)2 49,676
84 6
Leased property under
capital leases 618 - - - - 618
Construction in progress 322,376 373,473 22,220 136 (3,006)2 666,177
(3,813)3
(769)6
----------- -------- ---------- --------- --------- -------------
$10,247,353 $907,155 $ 376,912 $ - $ (77,862) $ 10,699,734
=========== ======== ========== ========= ========== =============
Notes:
1 Fee stumpage charged to income and credited to the asset
account. Reference should be made to Note 1 of Notes to
Financial Statements contained in the 1993 Weyerhaeuser
Company Annual Report for a statement of the practices of
the company and subsidiaries in providing depreciation,
amortization and fee stumpage.
2 Reclassification from (to) other balance sheet accounts.
3 Adjustments to reflect application of Statement of
Financial Accounting Standards No. 52, "Foreign Currency
Translation."
4 Assets transferred from (to) Weyerhaeuser Real Estate
Company.
5 Canadian investment tax credit adjustment.
6 Miscellaneous adjustments.
</TABLE>
17
<PAGE>
Weyerhaeuser Company and Subsidiaries
Schedule V -
Property and Equipment - Continued
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 27, 1992
Other Changes
-------------------------
Balance at Other Balance at
Beginning Additions Retirements Reclassifi- Debits End of
Classification of Period at Cost or Sales cations or (Credits) Period
- -------------- ---------- --------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Timber and timberlands $ 550,820 $ 63,987 $ 7,828 $ - $ (15,980)1 $ 591,610
1,828 2
(147)3
(1,021)4
(49)6
----------- --------- --------- ---------- ------------ -----------
$ 550,820 $ 63,987 $ 7,828 $ - $ (15,369) $ 591,610
=========== ========= ========= ========== ============ ===========
Property and equipment:
Land $ 136,177 $ 6,835 $ 4,298 $ 14,336 $ 486 2 $ 152,632
(894)3
(140)4
130 6
Buildings and improvements 1,312,880 88,281 25,147 30,583 (733)2 1,395,142
(14,348)3
(83)4
3,709 6
Machinery and equipment 7,119,019 928,789 205,026 (12,412) (523)2 7,768,170
(62,034)3
(145)4
(1,585)5
2,087 6
Rail and truck roads 558,961 15,128 12,394 299 (506)2 561,043
(52)4
(393)6
Other 79,522 2,731 1,414 (33,464) (2)2 47,372
(1)6
Leased property under
capital leases 109,972 - 107,225 - (2,129)6 618
Construction in progress 261,592 68,476 1,041 658 (3,423)2 322,376
(2,715)3
(1,171)6
---------- ---------- --------- ---------- ----------- ------------
$9,578,123 $1,110,240 $ 356,545 $ - $ (84,465) $ 10,247,353
========== ========== ========= ========== =========== ============
</TABLE>
See notes on page 17.
18
<PAGE>
Weyerhaeuser Company and Subsidiaries
Schedule V -
Property and Equipment - Continued
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 29, 1991
Other Changes
------------------------
Balance at Other Balance at
Beginning Additions Retirements Reclassifi- Debits End of
Classification of Period at Cost or Sales cations or (Credits) Period
- -------------- ---------- --------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Timber and timberlands $ 570,800 $ 15,484 $ 16,812 $ - $ (20,171)1 $ 550,820
3 3
(953)4
2,469 6
---------- --------- ---------- ---------- ------------ ------------
$ 570,800 $ 15,484 $ 16,812 $ - $ (18,652) $ 550,820
========== ========= ========== ========== ============ ============
Property and equipment:
Land $ 136,029 $ 3,728 $ 2,589 $ 1,762 $ 955 2 $ 136,177
(81)3
(4,047)4
420 6
Buildings and improvements 1,267,860 93,189 16,727 (31,536) (42)3 1,312,880
136 6
Machinery and equipment 6,649,370 770,505 304,182 441 2,172 2 7,119,019
252 3
118 4
(325)5
668 6
Rail and truck roads 554,916 15,545 11,357 - (20)2 558,961
(123)4
Other 92,552 2,467 23,655 8,158 - 79,522
Leased property under
capital leases 109,724 248 - - - 109,972
Construction in progress 491,994 (248,798) 51 21,175 (2,383)2 261,592
89 3
(434)6
---------- ---------- ----------- -------- ----------- -----------
$9,302,445 $ 636,884 $ 358,561 $ - $ (2,645) $ 9,578,123
========== ========== =========== ======== =========== ===========
</TABLE>
See notes on page 17.
19
<PAGE>
Weyerhaeuser Company and Subsidiaries
Schedule VI -
Allowance for Depreciation and
Amortization of Property and Equipment
For the three years ended December 26, 1993
Dollar amounts in thousands
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 26, 1993
Other Changes
-----------------------
Balance at Additions Other Balance at
Beginning Charged Retirements Reclassifi- (Debits) End of
Classification of Period to Income 1 or Sales cations or Credits Period
- -------------- ---------- ------------ ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Buildings and improvements $ 509,593 $ 46,354 $ 28,410 $ 705 $ 374 2 $ 537,043
11,956 3
(3,546)4
17 7
Machinery and equipment 3,341,313 357,413 239,457 (1,429) 1,035 2 3,438,433
563 3
(21,000)4
(5)7
Rail and truck roads 399,515 13,936 3,586 - (20)3 409,696
(89)5
(60)7
Other 16,636 7,078 - 724 25,726 3 50,580
416 7
Restructuring 45,247 - 32,368 - (28,900)3 (8,756)
7,265 7
Leased property under
capital leases 453 36 - - - 489
---------- --------- --------- --------- --------- ----------
$4,312,757 $ 424,817 $ 303,821 $ - $(6,268) $4,427,485
========== ========= ========= ========= ========= ==========
Notes:
1 Reference should be made to Note 1 of Notes to Financial
Statements contained in the 1993 Weyerhaeuser Company Annual
Report for a statement of the practices of the company and
subsidiaries in providing depreciation and amortization. It
is not practicable to present all the rates used in
computing depreciation provisions; however, the range of the
estimated useful lives and the weighted average depreciation
rates for the two principal property and equipment
classifications for the three years ended December 26, 1993
were as follows:
</TABLE>
<TABLE>
<CAPTION>
Estimated
Useful Lives 1993 1992 1991
-------------- ---- ---- ----
<S> <C> <C> <C> <C>
Buildings and improvements 10 to 40 years 3.3% 3.3% 3.3%
Machinery and equipment 3 to 40 years 4.6% 4.9% 5.2%
</TABLE>
2 Depreciation charged to construction.
3 Depreciation allowance reclassified (to) from other balance
sheet accounts.
4 Adjustments to reflect application of Statement of
Financial Accounting Standards No. 52, "Foreign Currency
Translation."
5 Depreciation allowance on assets transferred to
Weyerhaeuser Real Estate Company (see Schedule V, Note 4).
6 Adjustment to reflect plants and facilities identified for
planned divestment or closure.
7 Miscellaneous adjustments.
20
<PAGE>
Weyerhaeuser Company and Subsidiaries
Schedule VI -
Allowance for Depreciation and
Amortization of Property and Equipment - Continued
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 27, 1992
Other Changes
----------------------
Balance at Additions Other Balance at
Beginning Charged Retirements Reclassifi- (Debits) End of
Classification of Period to Income 1 or Sales cations or Credits Period
- -------------- ---------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Buildings and improvements $ 464,377 $ 44,075 $ 17,868 $ 21,798 $ 411 2 $ 509,593
1,355 3
(4,520)4
(76)5
41 7
Machinery and equipment 3,179,552 366,322 171,914 5,263 1,770 2 3,341,313
(18,585)3
(22,542)4
(145)5
1,592 7
Rail and truck roads 390,529 16,823 7,494 2 (313)3 399,515
(32)5
Other 29,715 714 426 (16,075) 1,276 2 16,636
(358)3
1,790 7
Restructuring 158,385 - 13,390 (10,988) (88,760)3 45,247
Leased property under
capital leases 106,845 2,837 109,230 - 1 7 453
---------- ----------- -------- -------- ----------- -----------
$4,329,403 $ 430,771 $320,322 $ - $(127,095) $ 4,312,757
========== =========== ======== ======== =========== ===========
</TABLE>
See notes on page 20.
21
<PAGE>
Weyerhaeuser Company and Subsidiaries
Schedule VI -
Allowance for Depreciation and
Amortization of Property and Equipment - Continued
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 29, 1991
Other Changes
-------------------------
Balance at Additions Other Balance at
Beginning Charged Retirements Reclassifi- (Debits) End of
Classification of Period to Income 1 or Sales cations or Credits Period
- -------------- ---------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Buildings and improvements $ 436,122 $ 44,801 $ 9,175 $ (7,694) $ 436 2 $ 464,377
(171)3
(58)4
116 7
Machinery and equipment 3,052,684 354,987 228,978 1,507 1,786 2 3,179,552
(1,841)3
(185)4
116 5
(524)7
Rail and truck roads 374,181 17,780 1,358 - (11)3 390,529
(74)5
11 7
Other 26,567 1,173 6,914 5,737 714 2 29,715
2,438 7
Restructuring 76,477 - 34,820 (1,272) 118,000 6 158,385
Leased property under
capital leases 97,753 7,370 - 1,722 - 106,845
---------- --------- --------- --------- --------- -----------
$4,063,784 $ 426,111 $ 281,245 $ - $120,753 $4,329,403
========== ========= ========= ========= ========= ===========
</TABLE>
See notes on page 20.
22
<PAGE>
Weyerhaeuser Company and Subsidiaries
Schedule VIII -
Valuation and Qualifying Accounts
For the three years ended December 26, 1993
Dollar amounts in thousands
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balance at Charged Deductions Balance at
Beginning to from End of
Description of Period Income Reserve Period
- ----------- --------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Weyerhaeuser
Reserve deducted from related assets:
Doubtful accounts - Accounts receivable
1993 $ 9,614 $ 7,308 $ 7,124 $ 9,798
======= ======= ======= =======
1992 $10,274 $ 6,848 $ 7,508 $ 9,614
======= ======= ======= =======
1991 $ 9,422 $13,421 $12,569 $10,274
======= ======= ======= =======
Real Estate and Financial Services
Reserve deducted from related assets:
Doubtful accounts - Receivables
1993 $ 3,528 $ 472 $ 1,741 $ 2,259
======= ======= ======= =======
1992 $11,033 $ 2,425 $ 9,930 $ 3,528
======= ======= ======= =======
1991 $ 9,601 $ 2,546 $ 1,114 $11,033
======= ======= ======= =======
Unamortized discount - Receivables
1993 $ 2,340 $ 179 $(1,811) 1 $ 4,330
======= ======= ======= =======
1992 $ 2,621 $ 670 $ 951 $ 2,340
======= ======= ======= =======
1991 $ 3,322 $ 405 $ 1,106 $ 2,621
======= ======= ======= =======
Real estate in process of development
1993 $76,920 $ 3,443 $50,580 $29,783
======= ======= ======= =======
1992 $93,390 $ 265 $16,735 $76,920
======= ======= ======= =======
1991 $48,300 $52,566 $ 7,476 $93,390
======= ======= ======= =======
Land being processed for development
1993 $28,053 $ - $ 8,921 $19,132
======= ======= ======= =======
1992 $58,104 $ 5 $30,056 $28,053
======= ======= ======= =======
1991 $27,421 $43,727 $13,044 $58,104
======= ======= ======= =======
Investments in and advances to
joint ventures
and limited partnerships
1993 $65,791 $ 8,723 $19,363 $55,151
======= ======= ======= =======
1992 $89,679 $ 874 $24,762 $65,791
======= ======= ======= =======
1991 $36,287 $74,153 $20,761 $89,679
======= ======= ======= =======
Note:
1 Includes $2,114 of discount on a partnership note consolidated by
Weyerhaeuser Venture Company.
</TABLE>
23
<PAGE>
Weyerhaeuser Company and Subsidiaries
Schedule VIII -
Valuation and Qualifying Accounts - Continued
For the three years ended December 26, 1993
Dollar amounts in thousands
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balance at Charged Deductions Balance at
Beginning to from End of
Description of Period Income Reserve Period
- ----------- ---------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Real Estate and Financial Services - Continued
Allowance for loan
losses - Mortgage loans
receivable
1993 $19,591 $ 8,707 $ 7,262 $21,036
======= ======= ======= =======
1992 $26,640 $ 6,354 $13,403 $19,591
======= ======= ======= =======
1991 $18,541 $17,132 $ 9,033 $26,640
======= ======= ======= =======
Reserve for valuation of
investment in subsidiary
1991 $57,000 $ - $57,000 $ -
======== ======= ======= =======
</TABLE>
24
<PAGE>
Weyerhaeuser Company and Subsidiaries
Schedule IX -
Short-term Borrowings
For the three years ended December 26, 1993
Dollar amounts in thousands
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
End of Year For the Year
----------------- ----------------------------------
Maximum
Weighted Amount Monthly Weighted
Average Outstanding Average Average
Interest During Amount Interest
Description Balance Rate the Year Outstanding Rate
- ----------- ------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Weyerhaeuser
December 26, 1993
Commercial paper $378,727 3.3% $957,491 $509,477 3.2%
Short-term note payable 115,000 3.2% 115,000 8,846 3.2%
Reclassified to
long-term debt (493,727)
--------
$ -
========
December 27, 1992
Commercial paper $898,565 3.6% $898,565 $298,412 3.6%
Reclassified to
long-term debt (898,565)
--------
$ -
========
December 29, 1991
Commercial paper $394,751 5.1% $993,760 $643,465 6.2%
Reclassified to
long-term debt (394,751)
--------
$ -
========
</TABLE>
25
<PAGE>
Weyerhaeuser Company and Subsidiaries
Schedule IX -
Short-term Borrowings - Continued
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
End of Year For the Year
---------------- -------------------------------
Maximum
Weighted Amount Monthly Weighted
Average Outstanding Average Average
Interest During Amount Interest
Description Balance Rate the Year Outstanding Rate
- ----------- ------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Real Estate and Financial Services
December 26, 1993
Commercial paper $647,406 3.3% $1,138,568 $873,583 3.2%
Payable to banks
and others 258,538 .8% 258,538 187,657 .9%
Reclassified to
long-term debt (616,906)
--------
$289,038
========
December 27, 1992
Commercial paper $771,580 3.5% $1,020,618 $850,413 3.8%
Payable to banks
and others 220,351 1.1% 220,351 188,402 1.1%
Reclassified to
long-term debt (771,580)
--------
$220,351
========
December 29, 1991
Commercial paper $948,340 5.1% $1,203,253 $1,054,294 6.1%
Payable to banks
and others 220,971 1.1% 220,971 116,314 2.0%
Reclassified to
long-term debt (948,340)
--------
$220,971
========
</TABLE>
26
<PAGE>
Weyerhaeuser Company and Subsidiaries
Schedule X -
Supplementary Income Statement Information
For the three years ended December 26, 1993
Dollar amounts in thousands
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Weyerhaeuser
1993 1992 1991
--------- ---------- ----------
<S> <C> <C> <C>
Charged directly to costs and expenses:
Maintenance and repairs $ 664,463 $ 584,350 $ 605,639
========== ========== ==========
Taxes, other than payroll and income taxes:
Real estate and personal property $ 100,244 $ 88,031 $ 86,349
Other 36,653 33,762 33,934
---------- ---------- ----------
$ 136,897 $ 121,793 $ 120,283
========== ========== ==========
Real Estate and Financial Services
1993 1992 1991
---------- ---------- ----------
Charged directly to costs and expenses:
Maintenance and repairs $ 12,035 $ 12,260 $ 12,571
========== ========== ==========
Taxes, other than payroll
and income taxes $ 9,191 $ 11,700 $ 9,838
========== =========== ==========
Advertising $ 16,988 $ 15,933 $ 16,463
========== =========== ==========
Amortization of intangible assets $ 27,057 $ 42,025 $ 42,562
========== =========== ==========
</TABLE>
27
<PAGE>
Weyerhaeuser Company and Subsidiaries
Signatures
- -----------------------------------------------------------------------------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized on
March 11, 1994.
Weyerhaeuser Company
/s/ John W. Creighton, Jr.
--------------------------
John W. Creighton, Jr.
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant in the capacities indicated on March 11, 1994.
/s/ John W. Creighton, Jr.
- ------------------------------
John W. Creighton, Jr.
President, Principal Executive
Officer
and Director
- ------------------------------
George H. Weyerhaeuser
Chairman of the Board and
Director
/s/ William C. Stivers
- ------------------------------
William C. Stivers
Principal Financial
Officer
/s/ Kenneth J. Stancato
- ------------------------------
Kenneth J. Stancato
Principal Accounting
Officer
/s/ William Clapp
- ------------------------------
William H. Clapp
Director
/s/ W. John Driscoll
- ------------------------------
W. John Driscoll
Director
- ------------------------------
Don C. Frisbee
Director
/s/ P. M. Hawley
- ------------------------------
Philip M. Hawley
Director
/s/ E. B. Ingram
- ------------------------------
E. Bronson Ingram
Director
/s/ John Kieckhefer
- ------------------------------
John I. Kieckhefer
Director
/s/ William D. Ruckelshaus
- ------------------------------
William D. Ruckelshaus
Director
/s/ Richard H. Sinkfield
- ------------------------------
Richard H. Sinkfield
Director
28
<PAGE>
Weyerhaeuser Company and Subsidiaries
Exhibit 22
Subsidiaries of the Registrant
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percentage
State or Ownership of
Country of Immediate
Name Incorporation Parent
---- ------------- ------------
<S> <C> <C>
Columbia & Cowlitz Railway Company Washington 100%
DeQueen and Eastern Railroad Company Arkansas 100
Energy Holding Company Delaware 100
Fisher Lumber Company California 100
Golden Triangle Railroad Mississippi 100
Green Arrow Motor Express Company Delaware 100
J.H. Hamlen & Son, Inc. Arkansas 100
Mississippi & Skuna Valley Railroad Company Mississippi 100
Mountain Tree Farm Company Washington 50
North Pacific Paper Corporation Delaware 80
Norpac Sales Corporation Guam 100
Pacific Veneer, Ltd. Washington 90
Shemin Nurseries, Inc. Delaware 100
Texas, Oklahoma & Eastern Railroad Company Oklahoma 100
Westwood Shipping Lines, Inc. Washington 100
Weycomp Claims Management Service, Inc. Texas 100
Weyerhaeuser Financial Services, Inc. Delaware 100
CMO Finance Corp. Nevada 100
Mortgage Securities II Corporation Nevada 100
Mortgage Securities III Corporation Nevada 100
R4 Participant Corporation Nevada 100
ver Bes' Insurance Co. Vermont 100
de Bes' Insurance Ltd. Bermuda 100
Weyerhaeuser Mortgage Company California 100
The Giddings Mortgage Investment Company California 100
Gudig Abfall, Inc. California 100
Trimark Development Company California 100
Westwood Associates California 100
Westwood Insurance Agency California 100
WMC Finance Corp. I California 100
Woodland Hills Properties-W., Inc Nevada 100
Placer Business Center, Inc. California 100
Terman Properties, Inc. California 100
R. J. Plaza II, Inc. Nevada 100
WFS (Republic), Inc. Nevada 100
Abfall Finance Corp. California 100
Brookview, Inc. Nevada 100
Kachura Finance Corp. California 100
McGNT Finance Corp. California 100
RFS Finance Corp. California 100
</TABLE>
29
<PAGE>
Weyerhaeuser Company and Subsidiaries
Exhibit 22
Subsidiaries of the Registrant - Continued
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percentage
State or Ownership of
Country of Immediate
Name Incorporation Parent
---- ------------- ------------
<S> <C> <C>
Weyerhaeuser International, Inc. Washington 100%
Sensor & Simulation Products International AB Sweden 100
Weyerhaeuser Canada Ltd. Canada 100
Big River Lumber Corporation Canada 100
Saskatoon Chemicals, Ltd. Canada 100
Weyerhaeuser China, Ltd. Washington 100
Weyerhaeuser (Far East) Limited Hong Kong 100
Weyerhaeuser Japan Ltd. Japan & Delaware 100
Weyerhaeuser Korea, Ltd. Korea 100
Weyerhaeuser, S.A. Panama 100
Weyerhaeuser International Sales Corporation Guam 100
Weyerhaeuser (Mexico) Inc. Washington 100
Weyerhaeuser Midwest, Inc. Washington 100
Weyerhaeuser Overseas Finance Company Delaware 100
Weyerhaeuser Real Estate Company Washington 100
The Babcock Company Florida 100
Centennial Homes, Inc. Texas 100
Pardee Construction Company California 100
Marmont Realty Company California 100
Pardee Construction Company of Nevada Nevada 100
Pardee Investment Company California 100
Parvada, Inc. Nevada 100
The Quadrant Corporation Washington 100
Quadrant Real Estate Services, Inc. Washington 100
Scarborough Corporation New Jersey 100
Scarborough Constructors, Inc. Florida 100
Trendmaker, Inc. Texas 100
Westminster Homes, Inc. North Carolina 100
Weyerhaeuser Real Estate Company of Nevada Nevada 100
Weyerhaeuser Capital Corp. N.V. Netherlands Antilles 100
Weyerhaeuser Venture Company Nevada 100
Las Positas Land Co. California 100
Weyerhaeuser Realty Investors, Inc. Washington 100
Winchester Homes, Inc. Delaware 100
</TABLE>
30
<PAGE>
Weyerhaeuser Company and Subsidiaries
Exhibit 24
Consents of Experts and Counsel
- ------------------------------------------------------------------------------
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the
incorporation of our reports included and incorporated by reference in
this Form 10-K, into Weyerhaeuser Company's previously filed
Registration Statement No. 33-59974 on Form S-3 and Nos. 2-61042,
2-81463, 33-25928, 33-24385, 33-24979, 33-31622, 33-32605, 33-34460,
33-41414, 33-47392 and 2-88109 on Form S-8.
ARTHUR ANDERSEN & CO.
Seattle, Washington,
March 11, 1994
31
Timberlands and Wood Products
Timberlands and Wood Products reported operating earnings of
$891 million in 1993 as compared with $515 million in 1992,
a 73 percent increase. Timber-supply restrictions in the
public forests of the Pacific Northwest and improving single-
family home-building markets bolstered prices in the
domestic market during the year. U.S. single-family housing
starts reached 1.12 million in 1993 and are expected to move
to the 1.2-1.3 million range in 1994. > Prices for logs
and building materials were also strong in the Japanese
market. Wooden-housing starts in Japan were up in 1993 over
1992 and are expected to at least hold that level in 1994.
Government support to upgrade the housing stock, declining
interest rates, and
a desire to improve living conditions have helped keep
housing starts in Japan - especially wooden starts - at a
high level despite the continuing recession. >
Weyerhaeuser lumber operations experienced strong markets in
1993 with the slowly improving U.S. economy, but prices were
volatile due to the tight supply situation and uncertainty
around the strength and pace of the recovery. Record lumber
prices were set in both the first and fourth quarters.
Markets were strong and prices volatile for structural
panels as well. > The Engineered Fiber Products business,
producer of oriented strand board, particleboard and other
panels, showed strong operating performance during most of
the year including significant market
<TABLE>
<CAPTION>
N E T S A L E S 1993 1992 1991 1990 1989
------------------------------------
<S> <C> <C> <C> <C> <C>
(Millions of dollars)
Raw materials (logs, chips and timber) $1,021 $ 872 $ 843 $ 834 $ 893
Softwood lumber 1,669 1,097 938 1,016 1,229
Softwood plywood and veneer 567 498 412 411 490
Oriented strand board, composite
and other panels 623 495 383 381 424
Hardwood lumber 154 127 118 117 119
Hardwood plywood and doors 141 116 117 135 236
Treated products 84 67 65 80 95
Miscellaneous products 209 145 72 99 180
------------------------------------
$4,468 $3,417 $2,948 $3,073 $3,666
------------------------------------
------------------------------------
</TABLE>
23
<PAGE>
improvement in composite panels after 2 1/2 years of
depressed prices. The Plywood business had a good year
despite being hampered by delays in receiving air quality
permits for newly installed and rebuilt
dryers. > The Building Materials Distribution business had
another excellent year, topping last year's record sales and
earnings. Low interest rates, healthy markets in residential
building and repair and
remodel, and focus on customer satisfaction benefited
business units throughout the system. The outlook is
optimistic for 1994 to be even better than 1993 as interest
rates are expected to remain low, and building products
demand high in both new residential and repair and remodel
markets. > WOOD PRODUCTS ACCOMPLISHMENTS Major
accomplishments in 1993 included a better than 30 percent
improvement
<TABLE>
<CAPTION>
S A L E S V O L U M E S 1993 1992 1991 1990 1989
---------------------------------
<S> <C> <C> <C> <C> <C>
(Millions)
Raw materials - cubic feet 547 545 538 540 587
Softwood lumber - board feet 4,230 3,440 3,269 3,417 4,223
Softwood plywood and veneer -
square feet (3/8") 2,435 2,227 2,135 2,212 2,441
Composite panels - square feet (3/4") 626 590 685 641 635
Oriented strand board - square feet (3/8") 1,672 1,484 1,205 1,185 1,180
Hardboard - square feet (7/16") 140 133 114 126 133
Hardwood lumber - board feet 240 218 219 209 223
Hardwood doors (thousands) 556 514 525 697 1,146
</TABLE>
toward 1995 companywide safety targets; start-up of the
Slave Lake, Alberta, oriented strand board (OSB) mill;
achievement of 107 percent of the business improvement
target for the Plywood business; record production in OSB,
softwood and hardwood lumber; and successful completion of
modernizations of lumber mills at Philadelphia, Miss.;
Dierks, Ark.; Bruce, Miss.; Drayton Valley, Alberta; and
Princeton, British Columbia. > FOREST MANAGEMENT FOCUS
Public attention was again focused on forest
management issues in 1993, including President Clinton's
forest conference held in Portland, Ore., in April.
Following the conference, a list of options was prepared by
the administration, and in July, one
was selected. The plan would reduce federal timber harvests
from certain national forests in Oregon,
24
<PAGE>
Washington and
northern California to 1.2 billion board feet annually (down
from the 4-5 billion board-foot level typical of the 1980s).
In December, the Clinton administration proposed to develop
a new
rule, authorized under Section 4(d) of the Endangered
Species Act, to ease restrictions for protection of the
northern spotted owl on non-federal lands. The proposal
identifies federal lands as those most
important to the protection of the spotted owl and envisions
that private and state lands provide supplemental support to
the federal lands, where necessary. Weyerhaeuser is working
with the U.S. Fish
and Wildlife Service to develop a habitat-conservation plan
for its timberlands near Coos Bay, Ore.
> TIMBERLANDS ACCOMPLISHMENTS Accomplishments for the year
included substantial improvements in all regions against
safety-performance goals, further Total Quality education
across the business
relating to "customer value propositions," the expansion of
a commercial thinning program in Oregon's Willamette
operations, a major salvage operation in drought- and insect-
damaged fir and pine in Oregon's Klamath Falls operation,
and commencement of operational pruning on Western
timberlands. Timberlands Forest Councils made further
headway during 1993 to ensure alignment of Forest Council
goals with the overall goals and objectives of the
timberlands businesses. The councils were formed in
<TABLE>
<CAPTION>
A N N U A L P R O D U C T I O N CAPACITY 1993 1992 1991 1990 1989
---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(Millions)
Logs - cubic feet _ 673 749 782 817 839
Softwood lumber - board feet 3,215 3,135 2,782 2,687 2,719 2,759
Softwood plywood and veneer -
square feet (3/8") 1,246 1,188 1,125 966 1,076 1,069
Composite panels - square feet (3/4") 609 564 540 493 505 587
Oriented strand board -
square feet (3/8") 1,440 1,443 1,234 1,208 1,156 1,121
Hardboard - square feet (7/16") 130 120 118 90 119 131
Hardwood lumber - board feet 255 221 210 196 202 212
Hardwood doors (thousands) 561 522 469 448 556 833
</TABLE>
25
<PAGE>
1992 to guide Weyerhaeuser's efforts, and maintain our
industry leadership, into the 21st century.
They focus on adapting forest management practices to meet
changing environmental goals and future public expectations
related to forestry. The councils operate in all geographic
regions and include
employees from operations, research and engineering,
communications and government affairs. > After
Washington's Forest Practices Board adopted a watershed
analysis process to address the cumulative
effects of forest practices, Weyerhaeuser became the first
landowner to launch a full-scale analysis on the Tolt River
watershed basin, where Weyerhaeuser is the primary
landowner. This process has been widely recognized as a
potential model for resolving resource-management issues. In
addition, Washington's
<TABLE>
<CAPTION>
P R I N C I P A L M A N U F A C T U R I N G F A C I L I T I E S
- -------------------------------------------------------------------
<S> <C>
Softwood lumber, plywood and veneer 35
Composite panels 6
Oriented strand board 5
Hardboard 1
Hardwood lumber 8
Hardwood doors 1
</TABLE>
Forest Council developed a process - including training in
landscape architecture - to manage the
aesthetics of harvesting. > 1994 PRIORITIES Safety
improvement will top the list of priorities in all
timberlands and wood products businesses in 1994 and beyond.
Actions designed to eliminate both work- and non-work-
related injuries of employees are being implemented in all
businesses, and safe work standards are being reinforced
with contractors and suppliers. > Customer satisfaction
and continuous improvement in business basics also remain
high on the list of goals in 1994 for timberlands and wood
products businesses. One of our principal strategies is
empowering people to use their skills and talents
to meet customers' needs, financial goals and productivity-
improvement targets.
26
<PAGE>
Pulp, Paper and Packaging
Worldwide oversupply in the pulp and paper industry kept
product prices depressed in 1993 - some at their lowest
levels in real dollars since World War II. For the year,
operating earnings of the company's pulp and paper segment
were $61 million as compared with operating earnings of $251
million in 1992,
a 76 percent decrease. > Recovery in prices is expected to
accelerate in the coming year as the U.S. economy improves
even though some weakness will continue in the European and
Japanese economies. Worldwide competition will continue as
a result, affecting the rate of price improvement.
Devaluations
of Swedish and Finnish currencies in late 1992 dramatically
improved the Scandinavian producers' export cost position
and, therefore, their competitiveness in Europe and the
United States. Given continuing oversupply in Europe, the
devaluations have led to significant penetration of the U.S.
market in some
paper grades. > The world pulp market was oversupplied
throughout 1993, with price pressure increased by excess
inventory built in the second half of 1992. Decreased prices
during the year led to significant downtime for the pulp
industry, including some permanent mill shutdowns. There are
many indications that the bottom of the cycle has been
reached and that market balance may be achieved by mid-1994.
<TABLE>
<CAPTION>
N E T S A L E S 1993 1992 1991 1990 1989
------------------------------------------
<S> <C> <C> <C> <C> <C>
(Millions of dollars)
Pulp $ 823 $ 711 $ 803 $ 865 $ 917
Newsprint 322 326 288 293 321
Paper 648 673 655 751 733
Paperboard and containerboard 255 321 361 366 373
Container and packaging products 1,302 1,323 1,175 1,183 1,261
Recycling 77 93 90 88 85
Chemicals 32 31 34 28 31
Personal care products _ 514 450 338 347
Miscellaneous products 120 117 147 140 147
------------------------------------------
$3,579 $4,109 $4,003 $4,052 $4,215
------------------------------------------
------------------------------------------
</TABLE>
27
<PAGE>
Modest growth in paper-grade pulp demand is expected during
1994. > At the same time, little new chemical pulp
capacity is expected to start up in 1994. A large part of
the capacity that will start up
in the next few years will be hardwood from the Southern
Hemisphere. Current weak earnings, environmental
expenditures required on existing facilities, and increasing
environmental regulation related
to the construction of new mills should constrain future
capacity growth. > Weyerhaeuser's
major mill modernizations, announced last year, will put the
company in a strong competitive position
in terms of product and process quality and the
environmental status of our mill system. Parts of the
Plymouth, N.C., modernization are scheduled to start up
during 1994, including the rebuilt No. 4
<TABLE>
<CAPTION>
S A L E S V O L U M E S 1993 1992 1991 1990 1989
--------------------------------------
<S> <C> <C> <C> <C> <C>
(Thousands)
Pulp - air-dry metric tons 1,886 1,238 1,433 1,194 1,116
Newsprint - metric tons 609 575 450 453 473
Paper - tons 990 966 869 893 849
Paperboard - tons 222 238 234 220 197
Containerboard - tons 290 318 418 444 497
Packaging - MSF 31,386 29,414 26,525 25,022 24,560
Recycling - tons 851 778 735 648 633
Personal care products -
standard cases _ 17,017 14,929 11,471 12,181
</TABLE>
uncoated free-sheet paper machine. The rebuilt machine will
increase capacity, product quality and mix capabilities,
while lowering costs. Also part of the Plymouth project is a
rebuild of the No. 1 linerboard machine, which will be the
first Weyerhaeuser linerboard machine to use 100 percent
recycled furnish.
> Containerboard prices deteriorated during 1993, forcing
many of our competitors to take market-
related containerboard mill downtime. Board and box prices
began to strengthen in the fourth quarter, continuing into
early 1994. The outlook is for improved business conditions
in 1994 as we continue to concentrate on the development of
key customer partnerships. > Major factors affecting the
Fine Paper business in 1993 were industry overcapacity in
the uncoated free-sheet market and the slow pace of
28
<PAGE>
U.S. economic growth. The inflow of European-made,
particularly Scandinavian, lightweight coated
into the U.S. market in the fourth quarter came just as this
paper grade was beginning to show some
price recovery. The outlook for the Fine Paper business is
strengthening demand and slowly improving prices in 1994. >
U.S. economic weakness and the Japanese recession resulted
in no growth in U.S. newsprint consumption and declines in
Japanese consumption during 1993. The decline in Japan was
driven by lack of print advertising due to the poor economic
climate. There was excess newsprint supply in both markets
and newsprint prices continued to decline in North America.
Scandinavian imports
found their way into eastern U.S. newsprint markets as a
result of the devaluations. The outlook is for continued
difficult economic conditions and slow domestic recovery in
1994. > Weyerhaeuser's
Recycling business experienced price erosion due to the
general weakness in the pulp and paper industry during 1993.
Market demand for high grades dropped dramatically as a
result of pulp price declines. In addition, as a result of
Germany's recycling subsidy program and the oversupply
situation throughout
Europe, European exports became a factor in Far East
markets. The 1994 outlook for the business is for
<TABLE>
<CAPTION>
A N N U A L P R O D U C T I O N CAPACITY 1993 1992 1991 1990 1989
-------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(Thousands)
Pulp - air-dry metric tons 2,130 2,096 1,506 1,527 1,386 1,275
Newsprint - metric tons 675 618 588 461 459 486
Paper - tons 1,015 1,007 971 889 900 919
Paperboard - tons 220 217 229 238 217 221
Containerboard - tons 2,360 2,269 2,240 2,224 2,171 2,168
Packaging - MSF 36,800 32,795 31,040 27,583 26,146 25,764
Recycling - tons _ 1,847 1,692 1,415 1,204 1,163
Personal care products -
standard cases _ _ 16,743 14,902 11,471 12,019
</TABLE>
29
<PAGE>
significant volume growth with three new facilities coming
on line. New de-ink market pulp mills
starting up in late 1994 and 1995 will strengthen markets
for high-grade recyclable fiber. > The bleached paperboard
industry experienced significant oversupply for most of 1993
and will continue
to do so in 1994. However, the liquid packaging segment of
the market has remained relatively firm.
> ACCOMPLISHMENTS In spite of very difficult market
challenges, the pulp and paper businesses continued on an
improvement track aimed at positioning for the eventual
recovery. > The Pulp business
accomplished a smooth integration of the Oglethorpe, Ga.,
and Grande Prairie, Alberta, people and
facilities into its system. Containerboard Packaging
received major awards of new business from General Mills,
Quaker Oats Company and Philip Morris Companies. > The
Fine Paper business achieved safety
<TABLE>
<CAPTION>
P R I N C I P A L M A N U F A C T U R I N G F A C I L I T I E S
- --------------------------------------------------------------------
<S> <C>
Pulp 8
Newsprint 1
Paper 5
Paperboard 1
Containerboard 5
Packaging 36
Recycling 21
Chemicals 7
</TABLE>
performance above averages for the industry as well as
Weyerhaeuser's major mill average. The business produced in
excess of 1 million tons for the first time in 1993 and was
one of only a few industry competitors taking no downtime
for lack of orders. > The Newsprint business received "#1
North American Supplier" recognition by Gannett Supply
Corporation and increased its western U.S. market share.
The business also used Total Quality Management tools to
improve facility production capability to
expansion target levels. > The Recycling business
continued its growth path, reaching a collection
volume of 1.8 million tons of wastepaper. The business
acquired CC&C Recycling in Des Moines, Iowa, and reduced
fiber costs to Weyerhaeuser mills between 1992 and 1993 by
over $5 million.
30
<PAGE>
Real Estate and Financial Services
Weyerhaeuser Real Estate Company (WRECO) earned $18.3
million in 1993, a 42 percent improvement over 1992 earnings
of $12.9 million. The company benefited from improving
housing market conditions in all regions except Southern
California. Consumer confidence and mortgage rates improved
during
the year, driving a healthy increase in national starts of
both single- and multi-family housing. With
interest rates continuing at low levels, U.S. single-family
housing starts are expected to strengthen further in 1994.
> In 1993 WRECO's Winchester Homes subsidiary was awarded
one of the first "National Housing Quality Awards," ever
given by the National Association of Home Builders and
Professional Builder magazine. > In 1994 WRECO will be
emphasizing additional employee education and training in
Total Quality principles and processes. Improved safety
practices by employees and contractors, as in all other
Weyerhaeuser businesses, are receiving special attention. >
Weyerhaeuser Financial Services, Inc. (WFS), whose principal
subsidiaries are Weyerhaeuser Mortgage Company and Mortgage
Securities
Corporations, earned $76.4 million in 1993 as compared with
$67.6 million in 1992. Earnings for WFS
in 1993 included the gain on the sale, completed in April
1993, of GNA Corporation to General Electric Capital
Corporation. Propelled by continued low interest rates and
business expansions, Weyerhaeuser
<TABLE>
<CAPTION>
V O L U M E S S O L D 1993 1992 1991 1990 1989
---------------------------------
<S> <C> <C> <C> <C> <C>
Single-family units(1) 3,879 3,917 4,410 5,113 5,858
Multi-family units(1) 1,141 60 317 358 412
Lots(1) 1,372 2,762 1,138 3,008 2,729
Commercial space
(thousand square feet) 88 142 269 235 945
(1)Includes one-half of joint-venture sales.
</TABLE>
31
<PAGE>
Mortgage Company (WMC) set a new record for single-family
loan originations in 1993 of $4.4 billion. Falling interest
rates during the year spurred further refinance activity as
the company's planned expansion came on line. Strong housing
sales are forecast for 1994, which should help offset an
expected slowdown in refinance activity. Stepped-up customer
satisfaction measurement and response and continuous focus
on productivity improvement are planned for the year.
<TABLE>
<CAPTION>
N E T S A L E S A N D R E V E N U E S - WRECO 1993 1992 1991 1990 1989
--------------------------
<S> <C> <C> <C> <C> <C>
(Millions of dollars)
Single-family units $615 $569 $591 $644 $718
Multi-family units 30 4 16 15 12
Residential lots 43 39 25 35 44
Commercial lots 41 6 17 10 27
Commercial buildings 3 5 30 23 66
Acreage 27 20 16 31 55
Other 70 47 49 53 53
--------------------------
$829 $690 $744 $811 $975
--------------------------
--------------------------
</TABLE>
<TABLE>
<CAPTION>
N E T S A L E S A N D R E V E N U E S - WFS 1993 1992 1991 1990 1989
----------------------------
<S> <C> <C> <C> <C> <C>
(Millions of dollars)
Interest $110 $144 $209 $278 $383
Investment income 116 452 454 369 314
Loan origination and servicing fees 127 103 98 89 92
Premiums 14 21 19 23 21
Other revenues 34 112 82 49 41
----------------------------
$401 $832 $862 $808 $851
----------------------------
----------------------------
</TABLE>
32
<PAGE>
Description of the Business of the Company
Weyerhaeuser Company (the company) was incorporated in the
state of Washington in January 1900 as Weyerhaeuser Timber
Company. It is principally engaged in the growing and
harvesting of timber and the manufacture, distribution and
sale of forest products, real estate development and
construction, and financial services.
The company has 37,000 employees, of which 34,200 are
employed in its timber-based businesses, and of this number,
approximately 17,000 are covered by collective bargaining
agreements, which generally are negotiated on a multi-year
basis.
Approximately 2,800 of the company's employees are
involved in the activities of its real estate and financial
services subsidiaries.
The major markets, both domestic and foreign, in which the
company sells its products are highly competitive, with
numerous strong sellers competing in each. Many of the
company's products also compete with substitutes for wood
and wood fiber products. The real estate and financial
services subsidiaries also operate in highly competitive
markets, competing with numerous regional and national firms
in real estate development and construction and in financial
services.
In 1993 the company's sales to customers outside the
United States totaled $2.2 billion (including $1.8 billion
of exports from the United States and Canada), or 23 percent
of total consolidated sales and revenues. The company
believes these sales contributed a higher proportion of
aggregate operating profits (see Note 3 of Notes to
Financial Statements). All sales to customers outside the
United States are subject to risks related to international
trade and to political, economic and other factors that vary
from country to country.
Principal Business Segments
Timberlands and Wood Products
The company owns approximately 5.5 million acres of
commercial forestland in the United States (50 percent in
the South and 50 percent in the Pacific Northwest), most of
it highly productive and located extremely well to serve
both domestic and international markets. The company has,
additionally, long-term license arrangements in Canada
covering approximately 17.8 million acres (of which 14
million acres are considered to be productive forestland).
The combined total timber inventory on these U.S. and
Canadian lands is approximately 245 million cunits (a cunit
is 100 cubic feet of solid wood), of which approximately 75
percent is softwood species. The relationship between cubic
measurement and the quantity of end products that may be
produced from timber varies according to the species, size
and quality of timber, and will change through time as the
mix of these variables changes. To sustain the timber
supply from its fee timberland, the company is engaged in
extensive planting, suppression of non-merchantable species,
precommercial and commercial thinning, fertilization and
operational pruning, all of which increase the yield from
its fee timberland acreage.
The company's wood products businesses produce and sell
softwood lumber, plywood and veneer; composite panels;
oriented strand board; hardboard; hardwood lumber and
plywood; doors; treated products; logs; chips and timber.
These products are sold primarily through the company's own
sales organizations. Building materials are sold to whole
salers, retailers and industrial users.
34
<PAGE>
<TABLE>
Net sales (millions):
<CAPTION>
1993 1992 1991 1990 1989
----------------------------------
<S> <C> <C> <C> <C> <C>
Raw materials (logs,
chips and timber) $1,021 $ 872 $ 843 $ 834 $ 893
Softwood lumber 1,669 1,097 938 1,016 1,229
Softwood plywood
and veneer 567 498 412 411 490
Oriented strand board,
composite and other panels 623 495 383 381 424
Hardwood lumber 154 127 118 117 119
Hardwood plywood
and doors 141 116 117 135 236
Treated products 84 67 65 80 95
Miscellaneous products 209 145 72 99 180
---------------------------------
$4,468 $3,417 $2,948 $3,073 $3,666
---------------------------------
---------------------------------
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
-----------------------------
<S> <C> <C> <C> <C> <C>
Timberlands and wood
products' approximate contributions
to earnings (millions): $891 $515 $155 $300 $299
-----------------------------
-----------------------------
After net restructuring charges of $152 in 1991 and $96 in
1989.
</TABLE>
Pulp and Paper Products
The company's pulp and paper products businesses include:
Pulp, which manufactures chemical wood pulp for world
markets; Newsprint, which manufac-
tures newsprint at the company's North Pacific Paper
Corporation mill and markets it to West Coast and Japanese
newspaper publishers; Paper, which manufactures and markets
a range of both coated and uncoated fine papers through
paper merchants and printers; Containerboard Packaging,
which manufactures linerboard and corrugating medium, which
is primarily used in the production of corrugated shipping
containers, and manufactures and markets corrugated shipping
containers for industrial and agricultural packaging;
Paperboard, which manufactures bleached paperboard that is
used for production of liquid containers and is marketed to
West Coast and Pacific Rim customers; Recycling, which
operates an extensive wastepaper collection system and mar-
kets it to company mills and worldwide customers; Chemicals,
which produces chlorine, caustic and tall oil, which are
used principally by the company's pulp and paper operations;
and Personal Care Products, which manufactures disposable
diapers sold under the private-label brands of many of North
America's largest retailers (this business was sold in
February 1993 through an initial public offering of stock).
35
<PAGE>
<TABLE>
<CAPTION>
Net sales (millions):
1993 1992 1991 1990 1989
-----------------------------------
<S> <C> <C> <C> <C> <C>
Pulp $ 823 $ 711 $ 803 $ 865 $ 917
Newsprint 322 326 288 293 321
Paper 648 673 655 751 733
Paperboard and
containerboard 255 321 361 366 373
Container and packaging
products 1,302 1,323 1,175 1,183 1,261
Recycling 77 93 90 88 85
Chemicals 32 31 34 28 31
Personal care products _ 514 450 338 347
Miscellaneous products 120 117 147 140 147
-----------------------------------
$3,579 $4,109 $4,003 $4,052 $4,215
-----------------------------------
-----------------------------------
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
-----------------------------
<S> <C> <C> <C> <C> <C>
Pulp and paper products'
approximate contributions
to earnings (millions): $61 $251 $108 $484 $588
-----------------------------
-----------------------------
After net restructuring charges of $129 in 1991 and $80 in
1989.
</TABLE>
Real Estate
The company, through its real estate subsidiary,
Weyerhaeuser Real Estate Company, is a builder/developer of
for-sale housing and apartments, de-
velops commercial and residential lots for sale to users and
other builders, builds commercial buildings for sale to
institutional investors, and is an investor in joint
ventures and limited partnerships.
<TABLE>
<CAPTION>
Net sales and revenues (millions):
1993 1992 1991 1990 1989
-----------------------------------
<S> <C> <C> <C> <C> <C>
Single-family units $615 $569 $591 $644 $718
Multi-family units 30 4 16 15 12
Residential lots 43 39 25 35 44
Commercial lots 41 6 17 10 27
Commercial buildings 3 5 30 23 66
Acreage 27 20 16 31 55
Other 70 47 49 53 53
-----------------------------------
$829 $690 $744 $811 $975
-----------------------------------
-----------------------------------
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
------------------------------
<S> <C> <C> <C> <C> <C>
Real estate's approximate
contributions to earnings (millions): $ 18 $ 13 $(175) $ 35 $ 26
------------------------------
------------------------------
After restructuring charges of $155 in 1991 and $89 in 1989.
</TABLE>
36
<PAGE>
Financial Services
The company, through its financial services subsidiary,
Weyerhaeuser Financial Services, Inc., is involved in a
range of financial services. The principal operating unit
is Weyerhaeuser Mortgage Company, which has origination
offices in 12 states, with a servicing portfolio of $8.4 bil
lion covering approximately 112,000 loans throughout the
country. Mortgages are resold in the secondary market
through mortgage-backed securities to financial institutions
and investors. Through its insurance services organization,
it also offers a broad line of property, life and disability
insurances.
GNA Corporation, a subsidiary that specialized in the sale
of life insurance annuities and mutual funds to the
customers of financial institutions, was sold in April 1993.
Republic Federal Savings & Loan Association, a subsidiary
that operated in Southern California through 1991, was
dissolved in 1992.
<TABLE>
<CAPTION>
Net sales and revenues (millions):
1993 1992 1991 1990 1989
----------------------------
<S> <C> <C> <C> <C> <C>
Premiums $ 14 $ 21 $ 19 $ 23 $ 21
Interest 110 144 209 278 383
Investment income 116 452 454 369 314
Loan origination and
servicing fees 127 103 98 89 92
Other revenues 34 112 82 49 41
----------------------------
$401 $832 $862 $808 $851
----------------------------
----------------------------
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
-------------------------------
<S> <C> <C> <C> <C> <C>
Financial services' approximate
contributions to earnings (millions):$ 76 $ 68 $ 60 $ 47 $(67)
-------------------------------
-------------------------------
After restructuring charges of $73 in 1989.
</TABLE>
Corporate and Other
Corporate and other includes nursery and garden supply
products, which are sold primarily to retailers and
landscapers by the company's sales force; health and beauty
aids; marine transportation; and miscellaneous corporate
activities. With one exception, all of the nursery and
garden supply operations and the health and beauty aids
business have been sold.
<TABLE>
<CAPTION>
Net sales (millions):
1993 1992 1991 1990 1989
-----------------------------
<S> <C> <C> <C> <C> <C>
Nursery and garden supply
and health and beauty aids $ 60 $ 62 $ 74 $232 $316
Corporate and miscellaneous
activities 209 158 142 91 159
-----------------------------
$269 $220 $216 $323 $475
-----------------------------
-----------------------------
</TABLE>
<TABLE>
<CAPTION>
Approximate contributions to earnings (millions):
1993 1992 1991 1990 1989
--------------------------------
<S> <C> <C> <C> <C> <C>
Nursery and garden supply
and health and beauty aids $ (1) $ (1) $ 1 $ _ $ (60)
Corporate and miscellaneous
activities (46) (106) (149) (115) (131)
---------------------------------
$(47) $(107) $(148) $(115) $(191)
---------------------------------
---------------------------------
After net restructuring charges of $9 in 1991 and $112 in
1989.
</TABLE>
37
<PAGE>
Environmental Matters
In 1990 the northern spotted owl was listed as a threatened
species under the Endangered Species Act (ESA). In 1992,
the marbled murrelet was listed as a threatened species
under the ESA. Certain Snake River salmon runs have been
listed as threatened or endangered under the ESA. Petitions
have been filed to list certain Pacific Northwest coastal
salmon runs as threatened or endangered under the ESA. A
consequence of these listings has been, and a possible
consequence of future listings may be, reductions in the
sale and harvest of timber on federal timberlands in the
Pacific Northwest. Uncertainty regarding the provision of
habitat for threatened and endangered species on non-federal
timberlands has resulted, and may in the future result, in
restrictions on timber harvest on some non-federal
timberlands in the Pacific Northwest, including some
timberlands of the company. The listing of the red-cockaded
woodpecker as an endangered species under the ESA has had
some impact on the harvest of public and private timber in
the southeastern United States, but has had little impact on
the company's timberlands. Forest practice acts in some of
the states in which the company has timber increasingly
impact present or future harvests and forest management
activities. In addition, the statutory requirements with
respect to the preservation of wetlands and threatened or
endangered species may affect future harvest and forest
management activities on some of the company's Southern
timberlands.
In July 1993, the Clinton administration announced its
plan with respect to management of federal timberlands in
the Pacific Northwest. If implemented, this plan will
reduce timber sales from certain federal lands in western
Washington, western Oregon and northern California by about
75 percent from harvest levels in the 1980s to approximately
1.2 billion board feet per year. If implemented, this
reduction in federal timber harvest will seriously reduce
log supplies to many independent sawmills that have been
important suppliers of wood chips to the company's pulp and
paper mills in Washington and Oregon. The company
anticipates that there will be alternate sources of wood
chips or other fiber to supply its operations.
The administration also stated in its proposal that
reduced timber harvest on federal lands will allow
modifications to the current federal requirements for
protection of northern spotted owls on private lands. On
December 10, 1993, the administration announced that it was
taking the first steps in the regulatory process to ease
those harvest restrictions. The company believes that the
regulatory changes might ultimately allow it to harvest fee
timber in some areas where it has not been operating because
of uncertainties regarding the provision of habitat for the
northern spotted owl. Whether those regulatory changes will
be implemented is uncertain. If those regulatory changes
are not implemented, the company may not harvest some timber
that it otherwise plans to harvest in 1994.
Because those regulatory changes may not be implemented,
and in order to avoid existing uncertainty under the ESA,
the company is seeking approval from the United States Fish
and Wildlife Service for a permit and associated Habitat
Conservation Plan (HCP) with respect to northern spotted
owls on a portion of its Oregon coastal timberlands. That
HCP would establish a protocol for the harvest of timber and
the protection of northern spotted owls on those
timberlands. The company believes the most effective way to
manage its timberlands for the growth and harvest of timber
and the protection of wildlife and fish habitat is to
develop a comprehensive plan for the management of all the
resources on those timberlands. Accordingly, the company
may attempt to develop HCPs for other parts of its Pacific
Northwest timberlands that would address the protection of
wildlife and fish habitat for both listed and non-listed
species.
38
<PAGE>
The combination of the forest management and harvest
restrictions and impacts described in the preceding four
paragraphs has increased operating costs, resulted in
increases in the value of timber and logs from the company's
Pacific Northwest timberlands, and contributed to an
increase in prices for wood products. The company does not
know whether these effects will continue. If wood products
prices remain at their present levels, there may be an
increase in substitution of other products for lumber and
plywood.
The company does not believe that the restrictions and
impacts described in the above paragraphs have had, or in
1994 or 1995 will have, a significant effect on the
company's total harvest of timber, although they may have
such an effect in the future.
In addition to the foregoing, the company is subject to
federal, state or provincial, and local air, water and land
pollution control, solid and hazardous waste management,
disposal and remediation laws and regulations in all areas
in which it has operations, and to market demands with
respect to chemical content of some products and use of
recycled fiber. Compliance with these laws, regulations and
demands usually involves capital expenditures as well as
operating costs. The company cannot easily quantify future
amounts of capital expenditures required to comply with
these laws, regulations and demands, or the impact on
operating costs, because in some instances compliance
standards have not been developed or have not become final
or definitive. In addition, compliance with standards
frequently serves other purposes such as extension of
facility life, increase in capacity, changes in raw material
requirements, or increase in economic value of assets or
products. While it is difficult to isolate the
environmental component of most manufacturing capital
projects, the company estimates that capital expenditures
for environmental compliance were approximately 8 percent of
total capital expenditures in 1992 and 1993, and based on
its understanding of current regulatory requirements, the
company expects this percentage to increase to approximately
11 percent in 1994 and to range from 13 to 14 percent of
total capital expenditures in 1995.
The company is involved in the environmental remediation
of numerous sites, including 37 Superfund sites where the
company has been named as a potentially responsible party.
Some of the sites are on property presently or formerly
owned by the company where the company has the sole
obligation to remediate the site or shares that obligation
with one or more parties, and others are third-party sites
involving several parties who have a joint and several
obligation to remediate the site. The company's liability
with respect to these sites ranges from insignificant at
some to substantial at others, depending on the quantity,
toxicity and nature of materials deposited by the company at
the site and, with respect to some sites, the number and
economic viability of the other responsible parties.
The company spent $24 million in 1992 and $57 million in
1993, and expects to spend $45 million in 1994 on
environmental remediation of these sites. It is the
company's policy to accrue for environmental remediation
costs when it is determined that it is probable that such an
obligation exists and the amount of the obligation can be
reasonably estimated. Based on currently available
information and analysis, the company believes that it is
reasonably possible that costs associated with all
identified sites may exceed current accruals by amounts that
may prove insignificant or that could range, in the
aggregate, up to approximately $140 million over several
years. This estimate of the upper end of the range of
reasonably possible additional costs is much less certain
than the estimates upon which accruals are currently based
and is based on assumptions less favorable to the company
among the range of reasonably possible outcomes.
39
<PAGE>
The company has completed a review of all its wood
products facilities for compliance with the Prevention of
Significant Deterioration (PSD) regulations under the Clean
Air Act and has disclosed PSD compliance issues to
appropriate state agencies and the Environmental Protection
Agency (EPA) and is negotiating compliance settlements with
those agencies. Based on its understanding of the current
status of discussions, the company expects to spend $30-40
million of capital for required installations of emission-
control equipment at its wood products facilities during
1994-95. The company anticipates completing a similar
review of all its pulp and paper facilities for PSD
compliance in 1994.
A new regulation under Title 5 of the Clean Air Act will
require additional operating permits at many of the
company's manufacturing operations.
Although significant work
is required to prepare the permit applications in 1994 and
1995, the company anticipates that it will be able to obtain
the necessary permits.
As a result of advances in measurement technology, minute
amounts of dioxin have been detected in wastewater effluent,
sludges and pulp from bleached kraft pulp mills, including
certain of the company's mills. The company has changed
operating procedures, allocated capital, and made very
substantial progress in reducing dioxin in the mills'
sludge, pulp, effluent and ultimate product.
The EPA has published proposed regulations, known as the
"cluster rules," which would establish maximum achievable
control technology standards for non-combustion sources
under the Clean Air Act, and the development of revised
wastewater effluent limitations under the Clean Water Act.
The company's operations are well positioned to meet the
proposed limits for dioxin. However, if the cluster rules
are adopted as proposed, they will require the company to
commit additional capital to further reduce air emissions
and wastewater discharges by 1999. Preliminary estimates of
that additional capital range as high as $400 million, which
may further increase the annual percentage of the company's
total capital expenditures devoted to environmental
compliance, although that is not anticipated prior to 1996.
40
<PAGE>
Financial Review
1993 versus 1992
Sales and revenues in 1993 were $9.5 billion, an increase of
3 percent over 1992. Net earnings were $579 million, or
$2.83 per common share, up from 1992 net earnings of $372
million, or $1.83 per common share. Included in 1993 net
earnings are after-tax gains of:
-$52 million, or $.25 per common share, from the
extinguishment of debt, which is reported as an
extraordinary item.
-$44 million, or $.22 per common share, from the sale of
the infant diaper business.
-$36 million, or $.18 per common share, from the sale of
GNA Corporation, a wholly owned subsidiary.
And a charge of $20 million, or $.10 per common share, to
reflect the new 1993 federal corporate tax rate in the
company's deferred and current tax accounts. This charge
consists of $.08 per common share due to the effect of the
higher rate on the accumulated temporary differences at
December 27, 1992, and $.02 per common share related to the
current year.
The net sales and revenues and related costs and expenses
of real estate and financial services are substantially less
in 1993 as compared with 1992 as a result of the sale of GNA
Corporation.
During 1993 the company refinanced a significant amount of
debt, which resulted in a short-term increase in interest
expense. The increase in capitalized interest over the
prior year coincides with expanded activity in the company's
major capital projects.
The significant decrease in financial services interest
expense is due to the liquidation of Republic Federal
Savings & Loan Association during 1992 and the sale of GNA
Corporation in early 1993. In addition, accelerated
prepayments caused by mortgage refinancings significantly
reduced collateralized mortgage obligation bonds.
Significant items in relation to net earnings included in
other income for 1993 were a $70 million pretax gain on the
disposal of the company's investment in the infant diaper
business through a public offering in a new company, Paragon
Trade Brands, Inc., and the real estate and financial
services pretax gain of $42 million on the sale of GNA
Corporation.
The timberlands and wood products operating earnings for
1993 were $891 million, an increase of 73 percent over the
$515 million recorded in 1992. Prices for logs and lumber
continue to exceed 1992 levels due to increasing demand for
housing construction materials and raw material supply
shortages resulting from reduced harvests in the Western
public forests.
The pulp and paper products segment had a $61 million
operating profit in 1993, significantly below the $251
million posted in 1992. Prices for most of the products in
this segment continue to be at levels well below the
previous year. The personal care products business included
in this segment was divested in the first quarter of 1993.
The real estate and financial services segments had
operating earnings of $94 million in 1993 compared with $81
million in 1992.
As a part of the GNA Corporation sales transaction, the
company assumed $225 million of GNA debt.
1992 versus 1991
Sales and revenues in 1992 were $9.3 billion, up 6 percent
from 1991. Net earnings were $372 million, or $1.83 per
common share, compared with a 1991 loss of $162 million, or
$.80 per common share. 1991 results reflected an after-tax
special-items charge to earnings of $344 million. 1992
research and development expenses decreased 24 percent from
1991 as a result of the implementation of certain of the
company's restructuring and business improvement plans.
Interest expense incurred for 1992 was down by $68 million,
or 14 percent, primarily due to the dissolution of the
company's savings and loan operations in Southern California
during the year. Significant changes in other income in
1992, compared with 1991, included a $25 million partial
settlement accrued in 1992 with respect to a lawsuit for the
refund of federal income taxes, and earnings of $2 million
in the company's real estate joint-venture and limited-
partnership activities in 1992, after losses of $17 million
in 1991, attributable to the restructuring or sale of a
number of these investments.
41
<PAGE>
In 1992 the company purchased two pulp mills, three
sawmills, timberlands in Georgia, and a forest management
license in Alberta, Canada, from Procter & Gamble.
The 1992 timberlands and wood products operating earnings
were $515 million, compared with $155 million in 1991, which
included a restructuring charge of $152 million. This
segment posted near-record earnings in the year with strong
raw material and converted wood products prices. The
curtailment of wood supply from public lands in the western
United States, along with increased demand generated by the
slowly improving U.S. economy, exerted upward pressure on
the value of wood products in both the domestic and export
markets.
Pulp and paper products operating earnings were $251
million for 1992, compared with $108 million in the previous
year, which included a restructuring charge of $129 million.
While pulp pricing showed some temporary strength due to the
mid-year strike in the company's Canadian pulp mills, the
overall trend from a year ago was down. Newsprint and paper
suffered continued weak prices throughout 1992.
Real estate posted operating earnings of $13 million in
1992 after recording a loss of $175 million in 1991, which
included a $155 million restructuring charge.
Financial services operating earnings were $68 million in
1992, up 13 percent from the 1991 results of $60 million.
While this segment benefited from lower interest rates for
most of the year, earnings were affected as a result of
reduced investment returns. The dissolution of the
company's wholly owned subsidiary Republic Federal Savings &
Loan Association, which operated primarily in Southern
California, was completed during 1992.
1991 versus 1990
Sales and revenues in 1991 were $8.8 billion, down 3 percent
from 1990. The net loss was $162 million, or $.80 per
common share, down from 1990 earnings of $394 million, or
$1.87 per common share. The 1991 net loss included an after-
tax special-items charge of $344 million, or $1.70 per
common
share. (See Notes 1, 2 and 24 of Notes to Financial
Statements.)
The $344 million special-items charge included:
-Implementation of two accounting pronouncements relating
to postretirement benefits and income taxes. The net effect
of the two pronouncements was a charge of $61 million, or
$.30 per common share.
-A special charge to operations of $283 million, or $1.40
per common share, related to the following:
<TABLE>
<CAPTION>
Millions
-------------------
Pretax After-tax
-------------------
<S> <C> <C>
Weyerhaeuser:
Sharper contractions in public timber supply
in the Northwest, causing early closure of some
manufacturing plants and contributing to losses
from contractual obligations $ 95 $ 60
Modernization and/or closure of certain facilities
with environmental and operational
deficiencies to achieve updated business
improvement plans 92 58
Severance and outplacement costs associated
with closures and realignment of the company's
support functions 21 13
Environmental remediation costs (including costs
associated with "Superfund" solid waste
disposal sites, company-owned facilities
requiring remediation or removal of underground
storage tanks, and sites previously owned by the
company where it has retained an environ-
mental cleanup liability) 82 52
-------------------
290 183
-------------------
Real estate and financial services:
Losses associated with real estate land values and
partnerships that were affected by the U.S.
recession, which was longer and deeper
than expected 155 100
-------------------
$445 $283
-------------------
-------------------
</TABLE>
42
<PAGE>
Timberlands and wood products operating earnings for 1991
were $155 million compared with $300 million in 1990. The
decrease from 1990 in operating earnings was due to charges
of $152 million for special items. The improvement in
operations, exclusive of special-item charges, was due
primarily to improvement in manufacturing efficiency and
strength in wood products prices reflecting concern about
the impact, on raw materials supply, of the restrictions on
the harvest of public timber in the Northwest and was
accomplished in spite of an economic climate that included
the lowest rate of U.S. housing starts since World War II
and Japanese housing starts down 20 percent from 1990.
Pulp and paper products operating earnings for 1991 were
$108 million, down 78 percent from 1990. Earnings in all of
the company's major pulp and paper products businesses were
severely impacted by significant price erosion during the
year and by a $129 million charge for special items. In
pulp, paper and containerboard, real prices reached their
lowest levels since the mid-'80s. Real prices for uncoated
paper and newsprint were at their lowest points in 20 years.
Real estate lost $175 million in 1991 including a $155
million charge for special items, down from the $35 million
earned in 1990. In addition to the special items, 1991
results were heavily impacted by the low rate of U.S.
housing starts and the capital-constrained banking industry,
which made it very difficult for home builders to obtain
project financing and to sell finished commercial projects.
The company's continuing real estate operations are engaged
primarily in single-family home construction. The operating
profits from real estate's continuing operations were more
than offset by losses and reserves relating to discontinued
operations, joint ventures and limited partnerships.
Financial services operating earnings for 1991 were $60
million, up 28 percent from 1990. Financial services
businesses, consisted principally of GNA Corporation, which
specialized in the sale of annuities and mutual funds to the
customers of financial institutions, and Weyerhaeuser
Mortgage Company, a multi-state residential mortgage
originator and servicer, posted record profits for the year.
Capital Resources and Liquidity
The company's financial position in 1993 remained strong as
it generated $982 million of cash flow from operations
before changes in working capital. Cash was also generated
from the sale of mortgage-backed securities. Capital
expenditures amounted to $967 million during the year and
are currently expected to approximate $1.1 billion in 1994;
however, the expenditures could be increased or decreased as
a consequence of future economic conditions. The company
had approximately $600 million in capital expenditures com-
mitted on major projects at year-end 1993, representing con-
struction activities at its Longview, Wash., and Plymouth,
N.C., pulp and paper facilities.
<TABLE>
Cash flow from operations before changes in working capital
by business segment (millions):
<CAPTION>
Business Segment 1993 1992 1991
---------------------
<S> <C> <C> <C>
Timberlands and wood products $1,052 $ 668 $ 473
Pulp and paper products 326 513 487
Real estate 29 42 28
Financial services 12 80 69
Corporate and other (437) (264) (221)
--------------------
$ 982 $1,039 $ 836
--------------------
--------------------
</TABLE>
<TABLE>
Recent capital spending, including acquisitions, has been in
the following areas (millions):
<CAPTION>
Business Segment 1993 1992 1991
----------------------
<S> <C> <C> <C>
Timberlands and wood products $241 $ 246 $162
Pulp and paper products 652 932 472
Corporate and other 74 28 29
----------------------
$967 $1,206 $663
----------------------
----------------------
</TABLE>
43
<PAGE>
As a matter of policy, 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 under-
lying interests of its shareholders and lenders, and the
desire to have access, at all times, to 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. Long-term debt maturities are
shown in Notes 16 and 17 of Notes to Financial Statements.
To ensure its ability to meet future commitments,
Weyerhaeuser Company, Weyerhaeuser Real Estate Company and
Weyerhaeuser Mortgage Company, a subsidiary of Weyerhaeuser
Financial Services, Inc., have established at year-end 1993
unused bank lines of credit in the maximum aggregate sum of
approximately $2.2 billion. None of the entities is a
guarantor of the borrowings of the others under any of these
credit facilities.
Cash dividends paid on common shares amounted to $246
million in 1993. Although common share dividends have
exceeded our target payout ratio in recent years, it is the
company's intent, over time, to pay dividends to its common
shareholders in a range of 35 to 45 percent of common share
earnings.
During the year, the Accounting and Reporting Standards
Committee, comprised of four outside directors, reviewed
with the company's management and with its independent
public accountants the scope and results of the company's
internal and external audit activities and the adequacy of
the company's internal accounting controls. The committee
also reviewed current and emerging accounting and reporting
requirements and practices affecting the company.
Report of Independent Public Accountants
To the shareholders of Weyerhaeuser Company:
We have audited the accompanying consolidated balance sheet
of Weyerhaeuser Company (a Washington
corporation) and subsidiaries as of December 26, 1993, and
December 27, 1992, and the related consolidated statements
of earnings, cash flows and shareholders' interest for each
of the three years in the period ended December 26, 1993.
These financial statements are the responsibility of the
company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements
are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Weyerhaeuser Company and subsidiaries as of
December 26, 1993, and December 27, 1992, and the results of
their operations and their cash flows for each of the three
years in the period ended December 26, 1993, in conformity
with generally accepted accounting principles.
As explained in Note 1 of Notes to Financial Statements,
effective December 31, 1990, the company changed its method
of accounting for income taxes and postretirement benefits
other than pensions.
Seattle, Washington,
February 8, 1994.
ARTHUR ANDERSEN & CO.
44
<PAGE>
<TABLE>
Consolidated Statement of Earnings
<CAPTION>
For the three years in the period ended December 26, 1993
Dollar amounts in thousands except per-share figures
1993 1992 1991
--------------------------------------
<S> <C> <C> <C>
Net sales and revenues:
Weyerhaeuser $8,314,368 $7,743,738 $7,165,844
Real estate and financial services 1,230,424 1,522,731 1,606,769
--------------------------------------
Net sales and revenues 9,544,792 9,266,469 8,772,613
--------------------------------------
Costs and expenses:
Weyerhaeuser:
Costs of products sold 6,251,612 5,919,199 5,581,388
Depreciation, amortization and
fee stumpage 443,832 446,751 446,282
Selling, general and
administrative expenses 592,586 591,845 572,605
Research and development expenses 44,456 42,981 56,257
Taxes other than payroll and
income taxes 136,897 121,793 120,283
Restructuring and other
charges (Note 2) _ _ 290,000
--------------------------------------
7,469,383 7,122,569 7,066,815
--------------------------------------
Real estate and financial services:
Costs and operating expenses 835,400 979,478 1,026,546
Depreciation and amortization 43,099 55,995 55,040
Selling, general and
administrative expenses 206,174 252,337 232,055
Taxes other than payroll and
income taxes 9,191 11,700 9,838
Restructuring and other
charges (Note 2) _ _ 155,000
--------------------------------------
1,093,864 1,299,510 1,478,479
--------------------------------------
Total costs and expenses 8,563,247 8,422,079 8,545,294
--------------------------------------
Operating income 981,545 844,390 227,319
Interest expense and other:
Weyerhaeuser:
Interest expense incurred 214,813 189,648 197,337
Less interest capitalized 23,179 12,845 18,950
Other income (expense), net (Note 4) 60,339 35,050 9,977
Real estate and financial services:
Interest expense incurred 172,955 220,677 280,889
Less interest capitalized (Note 17) 77,646 72,561 67,903
Other income (expense), net (Note 4) 53,512 8,828 (23,771)
-------------------------------------
Earnings (loss) before income taxes,
extraordinary item and effect of
accounting changes 808,453 563,349 (177,848)
Income taxes before extraordinary
item and effect of accounting
changes (Note 5 ) 281,168 191,300 (76,900)
-------------------------------------
Earnings (loss) before extraordinary
item and effect of accounting
changes 527,285 372,049 (100,948)
Extraordinary item, net of
applicable taxes of $33,732 (Note 6) 52,052 _ _
Effect of accounting
changes (Note 1) _ _ (61,000)
-------------------------------------
Net earnings (loss) $ 579,337 $ 372,049 $(161,948)
-------------------------------------
-------------------------------------
Per common share (Note 1):
Earnings (loss) before extraordinary
item and effect of accounting
changes $ 2.58 $ 1.83 $ (.50)
Extraordinary item (Note 6) .25 _ _
Effect of accounting changes _ _ (.30)
--------------------------------------
Net earnings (loss) $ 2.83 $ 1.83 $ (.80)
--------------------------------------
--------------------------------------
Dividends paid $ 1.20 $ 1.20 $ 1.20
--------------------------------------
--------------------------------------
See notes on pages 52 through 77.
</TABLE>
45
<PAGE>
<TABLE>
Consolidated Balance Sheet
<CAPTION>
Dollar amounts in thousands December 26, 1993 December 27, 1992
-------------------------------------
<S> <C> <C>
Assets
Weyerhaeuser
Current assets:
Cash and short-term investments,
including restricted deposits
of $14,351 and $23,706 $ 73,257 $ 40,985
Receivables, less allowances
of $9,798 and $9,614 782,507 769,910
Inventories (Note 9) 762,471 723,904
Prepaid expenses 280,511 168,079
--------------------------
Total current assets 1,898,746 1,702,878
Property and equipment (Note 10) 5,606,072 5,612,220
Construction in progress 666,177 322,376
Timber and timberlands at cost,
less fee stumpage charged to
disposals 604,773 591,610
Other assets and deferred charges 191,946 208,948
--------------------------
Total assets 8,967,714 8,438,032
--------------------------
Real estate and financial services
Cash and short-term investments,
including restricted deposits
of $34,042 and $38,432 86,598 483,340
Receivables, less discounts and
allowances of $6,589 and $5,868 135,347 172,897
Mortgage and construction notes and
mortgage loans receivable (Note 12) 830,569 857,963
Investments (Note 13) 60,355 5,232,428
Mortgage-backed certificates and
restricted deposits (Note 14) 349,757 614,252
Real estate in process of development,
less reserves of $29,783
and $76,920 (Note 11) 738,597 617,087
Land being processed for development,
less reserves of $19,132 and $28,053 699,611 711,129
Deferred acquisition costs 39,751 295,314
Other assets 730,154 735,961
-------------------------
Total assets 3,670,739 9,720,371
-------------------------
$12,638,453 $18,158,403
-------------------------
-------------------------
See notes on pages 52 through 77.
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
Dollar amounts in thousands December 26, 1993 December 27, 1992
------------------------------------
<S> <C> <C>
Liabilities and
shareholders' interest
Weyerhaeuser
Current liabilities:
Notes payable $ 4,624 $ 14,684
Current maturities of senior
long-term debt 14,522 113,607
Accounts payable 492,040 386,561
Accrued liabilities (Note 15) 565,002 623,163
---------------------------
Total current liabilities 1,076,188 1,138,015
Senior long-term debt (Note 16) 2,997,890 2,658,867
Convertible subordinated
debentures (Note 18) _ 193,035
Limited recourse income
debenture (Note 18) _ 187,963
Deferred income taxes (Note 5) 904,332 760,876
Deferred pension and other
liabilities (Notes 7 and 8) 535,162 511,839
Minority interest in subsidiaries 109,314 93,476
Commitments (Note 21)
--------------------------
Total liabilities 5,622,886 5,544,071
--------------------------
Real estate and financial services
Notes and commercial paper 289,038 280,351
Future annuity and contract reserves _ 5,529,700
Collateralized mortgage obligation
bonds (Note 14) 307,416 543,157
Long-term debt (Note 17) 1,997,146 2,195,715
Other liabilities 455,871 419,420
Commitments (Note 21)
--------------------------
Total liabilities 3,049,471 8,968,343
--------------------------
Shareholders' interest (Note 23):
Common shares: authorized 400,000,000
shares, issued 206,072,890 shares,
$1.25 par value 257,591 257,591
Other capital 411,096 404,250
Cumulative translation adjustment (73,363) (36,481)
Retained earnings 3,391,217 3,057,702
Treasury common shares,
at cost: 983,952 and 1,795,595 (20,445) (37,073)
--------------------------
Total shareholders' interest 3,966,096 3,645,989
--------------------------
$12,638,453 $18,158,403
--------------------------
--------------------------
</TABLE>
47
<PAGE>
<TABLE>
Consolidated Statement of Cash Flows
<CAPTION>
Consolidated
----------------------------------
For the three years in the
period ended December 26, 1993
Dollar amounts in thousands 1993 1992 1991
----------------------------------
<S> <C> <C> <C>
Cash flows provided by operations:
Net earnings (loss) $ 579,337 $ 372,049 $(161,948)
Non-cash charges to income:
Depreciation, amortization and fee stumpage 486,931 502,746 501,322
Deferred income taxes, net 93,033 125,300 (43,000)
Contributions to employee investment plans 2,462 31,577 25,420
Extraordinary item, including
current tax benefit (90,419) _ _
Deferred income taxes on extraordinary item 38,367 _ _
Effect of accounting change _ _ 198,000
Effect of accounting changes-deferred taxes _ _ (137,000)
Restructuring and other charges _ _ 445,000
Changes in working capital:
Receivables (93,196) (191,078) 20,060
Inventories, prepaid expenses, real estate
and land (246,356) (174,519) 3,183
Mortgages held for sale 22,758 164,686 168,875
Other liabilities 177,629 289,041 372,262
(Gain) loss on disposition of assets (16,352) 9,868 7,776
Gain on sales of businesses (111,750) (2,742) _
Other 18,826 (17,222) (67,451)
--------------------------------
Net cash provided by operations 861,270 1,109,706 1,332,499
--------------------------------
Cash flows from investing in the business:
Property and equipment (926,899) (574,715) (647,887)
Timber and timberlands (40,582) (41,436) (15,484)
Mortgage and investment
securities acquired (776,424) (4,556,619) (1,765,701)
Acquisition of businesses _ (589,363) _
Proceeds from sale of:
Property and equipment 53,710 55,362 51,259
Businesses 615,784 _ 22,668
Mortgage and investment securities 509,982 4,276,056 1,280,131
Other (25,393) (18,215) (50,227)
---------------------------------
Net cash flows from investing
in the business (589,822) (1,448,930) (1,125,241)
---------------------------------
Cash flows from financing activities:
Sale of debentures, notes
and CMO bonds 1,290,889 782,116 847,002
Sale of industrial revenue bonds 135,400 151,840 40,900
Savings deposits, net _ (618,467) (142,465)
Notes and commercial paper borrowings, net (659,939) 421,435 (445,004)
Sales of receivables _ _ 64,417
Proceeds from issuance of
investment contracts 60,943 430,566 566,469
Cash dividends on common shares (245,822) (243,965) (241,814)
Intercompany cash dividends on common shares _ _ _
Payments on debentures, notes, bank credit
agreements, income debenture, capital
leases and CMO bonds (1,243,094) (692,725) (502,554)
Exercise of stock options 20,571 27,060 4,438
Other 5,134 (10,231) 2,003
----------------------------------
Net cash flows from financing activities (635,918) 247,629 193,392
----------------------------------
Net increase (decrease) in cash and
short-term investments (364,470) (91,595) 400,650
Cash and short-term investments at
beginning of year 524,325 615,920 215,270
----------------------------------
Cash and short-term investments
at end of year $ 159,855 $ 524,325 $ 615,920
----------------------------------
----------------------------------
Cash paid (received) during the year for:
Interest, net of amount capitalized $ 306,050 $ 331,832 $ 376,154
----------------------------------
----------------------------------
Income taxes $ 158,002 $ (17,900) $ 73,250
----------------------------------
----------------------------------
See notes on pages 52 through 77.
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
Real Estate and
Weyerhaeuser Company Financial Services
------------------------------ ------------------------------
1993 1992 1991 1993 1992 1991
---------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$ 511,594 $ 332,043 $ (89,185) $ 67,743 $ 40,006 $ (72,763)
443,832 446,751 446,282 43,099 55,995 55,040
107,591 97,192 (6,530) (14,558) 28,108 (36,470)
2,462 31,577 25,420 _ _ _
(90,419) _ _ _ _ _
38,367 _ _ _ _ _
_ _ 187,000 _ _ 11,000
_ _ (122,505) _ _ (14,495)
_ _ 290,000 _ _ 155,000
(55,155) (120,186) 5,606 (38,041) (70,892) 14,454
(164,475) (31,551) (30,341) (81,881) (142,968) 33,524
_ _ _ 22,758 164,686 168,875
61,971 (78,407) 66,676 115,658 367,448 305,586
(2,741) 9,509 8,476 (13,611) 359 (700)
(70,199) _ _ (41,551) (2,742) _
34,325 7,789 27,514 (15,499) (25,011) (94,965)
- ----------------------------------------------------------------------------
817,153 694,717 808,413 44,117 414,989 524,086
- ----------------------------------------------------------------------------
(907,155) (564,200) (636,884) (19,744) (10,515) (11,003)
(40,582) (41,436) (15,484) _ _ _
_ _ _ (776,424) (4,556,619) (1,765,701)
_ (589,363) _ _ _ _
26,954 52,034 47,703 26,756 3,328 3,556
204,100 _ 22,668 411,684 _ _
_ _ _ 509,982 4,276,056 1,280,131
(5,675) 58,942 (6,460) (19,718) (77,157) (43,767)
- -----------------------------------------------------------------------------
(722,358) (1,084,023) (588,457) 132,536 (364,907) (536,784)
- -----------------------------------------------------------------------------
930,882 117,451 633,755 360,007 664,665 213,247
135,400 151,840 40,900 _ _ _
_ _ _ _ (618,467) (142,465)
(519,837) 503,813 (585,773) (140,102) (82,378) 140,769
_ _ 64,417 _ _ _
_ _ _ 60,943 430,566 566,469
(245,822) (243,965) (241,814) _ _ _
435,000 22,300 23,000 (435,000) (22,300) (23,000)
(823,851) (222,783) (78,654) (419,243) (469,942) (423,900)
20,571 27,060 4,438 _ _ _
5,134 (10,231) (675) _ _ 2,678
- ----------------------------------------------------------------------------
(62,523) 345,485 (140,406) (573,395) (97,856) 333,798
- ----------------------------------------------------------------------------
32,272 (43,821) 79,550 (396,742) (47,774) 321,100
40,985 84,806 5,256 483,340 531,114 210,014
- ----------------------------------------------------------------------------
$ 73,257 $ 40,985 $ 84,806 $ 86,598 $ 483,340 $ 531,114
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
$ 203,618 $ 181,630 $ 160,157 $ 102,432 $ 150,202 $ 215,997
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
$ 161,236 $ (10,138) $ 26,056 $ (3,234) $ (7,762) $ 47,194
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
49
</TABLE>
<PAGE>
<TABLE>
Consolidated Statement of Shareholders' Interest
<CAPTION>
Number of Common
Shares Outstanding
----------------------
For the three years in the period ended December 26, 1993 Issued Treasury
----------------------
<S> <C> <C>
Balance at December 30, 1990 206,072,890 4,938,461
Net loss _ _
Cash dividends:
Common - $1.20 a share _ _
Translation adjustment _ _
Stock options exercised _ (199,080)
Contributions to employee
investment plans _ (946,124)
Purchases of treasury common shares _ 22,563
Other transactions, net _ (1,449)
----------------------
Balance at December 29, 1991 206,072,890 3,814,371
Net earnings _ _
Cash dividends:
Common - $1.20 a share _ _
Translation adjustment _ _
Stock options exercised _ (1,096,140)
Contributions to employee
investment plans _ (919,535)
Other transactions, net _ (3,101)
----------------------
Balance at December 27, 1992 206,072,890 1,795,595
Net earnings _ _
Cash dividends:
Common - $1.20 a share _ _
Translation adjustment _ _
Stock options exercised _ (744,206)
Contributions to employee
investment plans _ (59,367)
Other transactions, net _ (8,070)
----------------------
Balance at December 26, 1993 206,072,890 983,952
----------------------
----------------------
See notes on pages 52 through 77.
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- -----------------------------------------------------------------------------
Cumulative Treasury Total
Common Other Capital Translation Retained Common Shareholders'
Shares Common Adjustment Earnings Shares Interest
- -----------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$ 257,591 $ 380,975 $ (6,373) $3,333,380 $(101,769) $3,863,804
_ _ _ (161,948) _ (161,948)
_ _ _ (241,814) _ (241,814)
_ _ (80) _ _ (80)
_ 334 _ _ 4,104 4,438
_ 5,914 _ _ 19,506 25,420
_ _ _ _ (511) (511)
_ 29 _ _ 30 59
- -----------------------------------------------------------------------------
257,591 387,252 (6,453) 2,929,618 (78,640) 3,489,368
_ _ _ 372,049 _ 372,049
_ _ _ (243,965) _ (243,965)
_ _ (30,028) _ _ (30,028)
_ 4,501 _ _ 22,559 27,060
_ 12,603 _ _ 18,974 31,577
_ (106) _ _ 34 (72)
- -----------------------------------------------------------------------------
257,591 404,250 (36,481) 3,057,702 (37,073) 3,645,989
_ _ _ 579,337 _ 579,337
_ _ _ (245,822) _ (245,822)
_ _ (36,882) _ _ (36,882)
_ 5,138 _ _ 15,433 20,571
_ 1,236 _ _ 1,226 2,462
_ 472 _ _ (31) 441
- -----------------------------------------------------------------------------
$ 257,591 $ 411,096 $ (73,363) $3,391,217 $(20,445) $3,966,096
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
</TABLE>
51
<PAGE>
Notes to Financial Statements
For the three years in the period ended December 26, 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 state-
ments and notes to financial statements are pre-
sented 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.
Republic Federal Savings & Loan Association (RFS&LA), a sub
sidiary of WFS, was dissolved in 1992, and GNA Corporation,
a subsidiary of WFS, was sold in April 1993.
Net Earnings (Loss) Per Common Share
Net earnings (loss) per common share are based on the
weighted average number of common shares outstanding during
the respective periods. Average common equivalent shares
(stock options) outstand-
ing have not been included, as the computation would not be
dilutive. Weighted average common shares outstanding were
204,866,000, 203,373,000 and 201,578,000 for the years ended
December 26, 1993, December 27, 1992, and December 29, 1991,
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
During the fourth quarter of 1991, the company implemented,
effective with the first quarter of 1991, Statements of
Financial Accounting Standards (SFAS) No. 96, "Accounting
for Income Taxes," and No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The effect of
the implementation of SFAS No. 96 was an increase in net
earnings of $64,000 ($.32 per common share). The effect of
the implementation of SFAS No. 106 for the company's U.S.
operations was a charge to net earnings of $198,000 less
related tax effect of $73,000, or $125,000 ($.62 per common
share).
SFAS No. 106 is expected to be implemented for the
company's wholly owned subsidiary Weyerhaeuser Canada Ltd.
(WCL) in the first quarter of 1995. The company believes
that the future implementation of this pronouncement will
not have a significant impact on the company's results of
operations or its financial position.
In February 1992, the Financial Accounting Standards Board
(FASB) issued SFAS No. 109, "Accounting for Income Taxes,"
superseding SFAS No. 96, but reaffirming the use of the
liability method. The company reviewed the provisions of
SFAS No. 109 and determined that it did not require any
significant adjustments to the deferred tax accounts
previously reported under SFAS No. 96. Effective with the
beginning of the 1992 fiscal year, the company is
determining its income tax accounts in accordance with SFAS
No. 109.
In November 1992, the FASB issued SFAS
No. 112, "Employers' Accounting for Postemploy-
ment Benefits," to be effective for fiscal years begin-
ning after December 15, 1993. The company believes that the
future implementation of this pronouncement will 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.
Had the FIFO method
52
<PAGE>
been used to cost all inventories, the amounts at which
product inventories are stated would have been $238,560 and
$203,859 greater at December 26, 1993, and December 27,
1992, respectively.
Property and Equipment
The company's property accounts are maintained on an
individual asset basis. Betterments and replacements of
major units are capitalized. Maintenance, repairs and minor
replacements are expensed. Depreciation is provided
generally on the straight-line or unit-of-production methods
at rates based on estimated service lives. Amortization of
logging railroads and truck roads is provided generally as
timber is harvested and is based upon rates determined with
reference to the volume of timber estimated to be removed
over such facilities.
The cost and related depreciation of property sold or
retired is removed from the property and allowance for
depreciation accounts and the gain or loss is recorded.
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 Nos. 96 and 109, deferred income taxes are
provided to reflect temporary differences between the
financial and tax bases of assets and lia-
bilities 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
10 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 (see Note
19), 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.
Weyerhaeuser Real Estate Company
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.
53
<PAGE>
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 March 1992, Republic Federal Savings and Loan
Association, which was a federally chartered savings and
loan institution that operated primarily in Southern
California, sold the remainder of its branches, ceased
accepting deposits as a federally chartered savings and loan
institution, and filed an application with the Office of
Thrift Supervision to undergo a voluntary dissolution, which
was approved in the fourth quarter of 1992. During its
operation:
-Interest income was recorded on the accrual method;
however, interest was not accrued on loans that were more
than 90 days contractually delinquent and on certain other
loans that management felt may not be recoverable.
-U.S. government and other securities were carried at
amortized cost. Gains or losses were recognized upon
realization.
-Discounts on loans purchased were amortized into income
over the expected average loan lives.
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 securi-
ties 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.
54
<PAGE>
NOTE 2:
Restructuring and Other Charges
In the 1991 fourth quarter, the company recorded pretax
restructuring and other charges against earnings of
$445,000, which was necessitated by the following factors:
<TABLE>
<CAPTION>
Millions
-------------------
Pretax After-tax
-------------------
<S> <C> <C>
Weyerhaeuser:
Sharper contractions in public timber supply in the
Northwest, causing early closure of some
manufacturing plants and contributing to losses
from contractual obligations $ 95 $ 60
Modernization and/or closure of certain facilities
with environmental and operational
deficiencies to achieve updated business
improvement plans 92 58
Severance and outplacement costs associated
with closures and realignment of the company's
support functions 21 13
Environmental remediation costs (including
costs associated with "Superfund" solid waste
disposal sites, company-owned facilities
requiring remediation or removal of underground
storage tanks, and sites previously owned by the
company where it has retained an environ-
mental cleanup liability) 82 52
---------------
290 183
---------------
Real estate and financial services:
Losses associated with real estate land values
and partnerships that were affected by the U.S.
recession, which was longer and deeper
than expected 155 100
---------------
$445 $283
---------------
---------------
</TABLE>
NOTE 3:
Foreign Operations and Export Sales
The following net assets, net sales and net earnings,
related to operations outside the United States, principally
Canada, are included in the company's consolidated financial
statements:
<TABLE>
<CAPTION>
December 26, 1993 December 27,1992 December 29, 1991
----------------------------------------------------
<S> <C> <C> <C>
Net assets:
Working capital $100,419 $ 111,593 $105,484
Timber-cutting rights 1,551 2,296 2,494
Property and equipment, net 852,963 870,581 726,645
Other assets 36,419 36,076 46,930
-------------------------------------------
991,352 1,020,546 881,553
Other liabilities (231,865) (417,197) (441,671)
-------------------------------------------
Net assets $759,487 $ 603,349 $439,882
-------------------------------------------
-------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991
-------------------------------------------
<S> <C> <C> <C>
Net sales $971,937 $875,215 $830,569
Net earnings (loss) 115,793 16,727 (40,808)
</TABLE>
55
<PAGE>
The company is engaged in the sale of products for export
from the United States. These sales consist principally of
pulp, newsprint, paperboard, containerboard, logs, lumber
and wood chips to Japan; pulp, containerboard, lumber and
plywood to Europe; and logs to China and Korea. The fol-
lowing table compares the company's export sales from the
United States to customers in Japan and elsewhere with its
total net sales and revenues.
<TABLE>
<CAPTION>
1993 1992 1991
---------------------------------
<S> <C> <C> <C>
Export sales:
Customers in Japan $ 952,000 $ 912,000 $ 887,000
Customers outside Japan 493,000 589,000 663,000
----------------------------------
Total export sales $1,445,000 $1,501,000 $1,550,000
----------------------------------
----------------------------------
Total net sales and revenues $9,545,000 $9,266,000 $8,773,000
----------------------------------
----------------------------------
</TABLE>
NOTE 4:
Other Income (Expense), Net
Other income (expense), net, is an aggregation of non-
operating income and expense items, both recurring and
occasional, and as a result, fluctuates from period to
period. No individual income or (expense) item is
significant in relationship to net earnings (loss) other
than:
<TABLE>
<CAPTION>
1993 1992 1991
----------------------------------
<S> <C> <C> <C>
Weyerhaeuser:
Interest income $ 7,248 $36,368 $ 18,553
Loss on abandonments (9,597) (9,867) (12,369)
Gain on sale of capital assets 12,338 2,307 3,943
Gain on sale of business 70,199 _ _
Real estate and financial services:
Interest income 4,647 4,870 4,603
Gain on sale of businesses 41,551 2,742 _
Joint venture and limited
partnership earnings (losses) (1,379) 1,916 (17,170)
</TABLE>
NOTE 5:
Income Taxes
Earnings (losses) before income taxes, extraordinary item
and accounting changes are comprised of
the following:
<TABLE>
<CAPTION>
1993 1992 1991
-----------------------------------
<S> <C> <C> <C>
Domestic earnings (losses) $738,508 $537,354 $(109,752)
Foreign earnings (losses) 69,945 25,995 (68,096)
------------------------------------
$808,453 $563,349 $(177,848)
------------------------------------
------------------------------------
</TABLE>
56
<PAGE>
Provisions for income taxes include the following:
<TABLE>
<CAPTION>
1993 1992 1991
------------------------------------
<S> <C> <C> <C>
Federal:
Current $144,935 $ 46,800 $ (23,100)
Deferred 81,700 105,400 (29,700)
-------------------------------------
226,635 152,200 (52,800)
-------------------------------------
State:
Current 16,500 15,500 3,600
Deferred 10,500 9,500 (3,800)
-------------------------------------
27,000 25,000 (200)
-------------------------------------
Foreign:
Current 26,700 3,700 (14,400)
Deferred 833 10,400 (9,500)
-------------------------------------
27,533 14,100 (23,900)
-------------------------------------
Income taxes before extraordinary item
and accounting changes 281,168 191,300 (76,900)
-------------------------------------
Income taxes apportionable to
extraordinary item:
Current (4,635) _ _
Deferred 38,367 _ _
-------------------------------------
33,732 _ _
-------------------------------------
Deferred income taxes applicable to the
cumulative effect of accounting changes:
SFAS No. 96 _ _ (64,000)
SFAS No. 106 _ _ (73,000)
------------------------------------
_ _ (137,000)
------------------------------------
$314,900 $191,300 $(213,900)
------------------------------------
------------------------------------
</TABLE>
The corporate income tax rate was increased from 34
percent to 35 percent, retroactive to January 1, 1993, by
legislation enacted during the third quarter of 1993. This
change in tax law increased income taxes in 1993 by $15,400
due to the effect of the higher tax rate on the accumulated
temporary differences at December 27, 1992, and $4,500 due
to the effect of adjusting the annual effective tax rate
used in prior quarters.
A reconciliation between income (losses) taxed at the
federal statutory tax rate and the company's tax provision
before the extraordinary item and accounting changes
follows:
<TABLE>
<CAPTION>
1993 1992 1991
------------------------------
<S> <C> <C> <C>
Statutory tax on income (loss) before
extraordinary item and accounting changes $282,959 $191,539 $(60,468)
State income taxes, net of federal tax benefit 22,017 19,812 (1,300)
Foreign sales corporations (18,550) (19,566) (17,834)
Partial settlement - lawsuit _ (9,900) _
Tax rate change - SFAS No. 109 15,400 _ _
All other, net (20,658) 9,415 2,702
------------------------------
Income taxes before extraordinary item
and accounting changes $281,168 $191,300 $(76,900)
------------------------------
------------------------------
</TABLE>
57
<PAGE>
The deferred tax (liabilities) assets are comprised of the
following:
<TABLE>
<CAPTION>
December 26, 1993 December 27, 1992
-------------------------------------
<S> <C> <C>
Depreciation $ (998,207) $ (878,415)
Depletion (86,265) (79,153)
Capitalized interest and taxes - real
estate development (76,014) (73,111)
Other (126,471) (140,442)
----------------------------------
Total deferred tax (liabilities) (1,286,957) (1,171,121)
----------------------------------
Pension and retiree health care 118,311 111,633
Restructure reserves 80,354 127,496
Alternative minimum tax credit carryforward 69,619 33,709
Other 209,318 213,112
----------------------------------
Total deferred tax assets 477,602 485,950
----------------------------------
$ (809,355) $ (685,171)
----------------------------------
----------------------------------
</TABLE>
As of December 26, 1993, the company has avail-
able approximately $70 million of alternative minimum tax
credit carryover, which does not expire, and $7 million of
investment tax credit carryover in
Canada, expiring as follows: $1 million in 1997, $4 million
in 1998, and $2 million in 2003.
The company intends to reinvest undistributed earnings of
certain foreign subsidiaries; therefore, no U.S. taxes have
been provided. These earnings totaled approximately $318
million at the end of 1993. While it is not practicable to
determine the income tax liability that would result from re
patriation, it is estimated that withholding taxes payable
upon repatriation would approximate $32 million.
NOTE 6:
Extraordinary Item
In 1993 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.
NOTE 7:
Pension Plans
Net annual pension cost includes the following components:
<TABLE>
<CAPTION>
1993 1992 1991
------------------------------
<S> <C> <C> <C>
Service cost-benefits earned during the period $38,563 $ 33,745 $ 27,947
Interest cost on projected benefit obligation 92,688 86,295 78,457
Actual return on plan assets (279,563) (123,178) (236,943)
Net amortization and deferrals 165,494 16,727 143,942
Pension expense due to sales, closures
and SFAS No. 88 (1,302) _ _
------------------------------
$ 15,880 $ 13,589 $ 13,403
------------------------------
------------------------------
</TABLE>
58
<PAGE>
The assumptions used were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
----------------------------
<S> <C> <C> <C>
Discount rate 7.5% 8.5% 8.75%
Rate of increase in compensation levels 4.5% 6.0% 6.0%
Expected long-term rate of return on plan assets 11.5% 11.5% 11.5%
</TABLE>
The following table sets forth the plans' funded status and
amounts recognized in the company's consolidated balance
sheet for its U.S. and Canadian pension plans:
<TABLE>
<CAPTION>
December 26, 1993
--------------------------------------
Assets Accumulated
Exceed Benefits
Accumulated Exceed
Benefits Assets Total
--------------------------------------
<S> <C> <C> <C>
Accumulated benefit obligation:
Vested $ 1,122,684 $ 20,672 $ 1,143,356
Non-vested 24,694 340 25,034
--------------------------------------
$ 1,147,378 $ 21,012 $ 1,168,390
--------------------------------------
--------------------------------------
Projected benefit obligation 1,270,151 21,542 1,291,693
Fair value of plan assets (1,292,344) (17,755) (1,310,099)
Unrecognized prior service cost (39,271) (2,794) (42,065)
Unrecognized net gain 105,695 2,643 108,338
Unrecognized net transition asset 42,272 (2,158) 40,114
Additional liability _ 276 276
--------------------------------------
Accrued pension cost $ 86,503 $ 1,754 $ 88,257
--------------------------------------
--------------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 27, 1992
---------------------------------------
Assets Accumulated
Exceed Benefits
Accumulated Exceed
Benefits Assets Total
---------------------------------------
<S> <C> <C> <C>
Accumulated benefit obligation:
Vested $ 680,729 $ 258,839 $ 939,568
Non-vested 16,236 2,071 18,307
---------------------------------------
$ 696,965 $ 260,910 $ 957,875
---------------------------------------
---------------------------------------
Projected benefit obligation $ 834,204 $ 261,681 $1,095,885
Fair value of plan assets (848,599) (242,145) (1,090,744)
Unrecognized prior service cost (10,640) (12,241) (22,881)
Unrecognized net gain 42,191 12,336 54,527
Unrecognized net transition asset 50,189 (367) 49,822
Additional liability _ 2,859 2,859
---------------------------------------
Accrued pension cost $ 67,345 $ 22,123 $ 89,468
---------------------------------------
---------------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 29, 1991
--------------------------------------
Assets Accumulated
Exceed Benefits
Accumulated Exceed
Benefits Assets Total
--------------------------------------
<S> <C> <C> <C>
Accumulated benefit obligation:
Vested $ 638,462 $ 244,606 $ 883,068
Non-vested 17,668 940 18,608
-------------------------------------
$ 656,130 $ 245,546 $ 901,676
-------------------------------------
-------------------------------------
Projected benefit obligation $ 784,053 $ 245,546 $ 1,029,599
Fair value of plan assets (764,181) (217,911) (982,092)
Unrecognized prior service cost (8,547) (13,689) (22,236)
Unrecognized net gain 30,450 16,980 47,430
Unrecognized net transition asset 57,362 (1,247) 56,115
Additional liability _ 5,112 5,112
-------------------------------------
Accrued pension cost $ 99,137 $ 34,791 $ 133,928
-------------------------------------
-------------------------------------
</TABLE>
59
<PAGE>
The assets of the U.S. and Canadian pension plans, as of
December 26, 1993, consist of a highly diversified mix of
marketable securities, real estate and private equity
securities.
Approximately 1,700 employees are covered by union-
administered multi-employer pension plans to which the
company makes negotiated contributions based generally on
fixed amounts per hour per employee. Contributions to these
plans were $5,780 in 1993, $4,606 in 1992 and $4,372 in
1991.
NOTE 8:
Postretirement Benefits Other Than Pensions
The company sponsors defined benefit postretirement plans
that provide medical and life insurance coverage as follows:
-Two salaried retiree medical plans that cover sub-
stantially all salaried employees who retire under the
company's retirement plan and their spouses. Plan I covers
those retired or eligible to retire as of January 1, 1990,
and provides full health coverage. Plan II includes those
salaried employees not eligible for Plan I, under which the
company provides a fixed dollar amount per year of service
toward the premium, with the retiree paying the remainder.
The company reserves the right to revise the fixed dollar
amount.
-An hourly retiree medical plan that covers approximately
3,700 active hourly employees and their spouses. For some,
the coverage stops at age 65, while others have lifetime
coverage. In some units the retiree must pay a portion of
the premium, while in others the company pays the full cost.
There are approximately 1,000 retired hourly employees and
their spouses currently covered under these programs.
-A salaried retiree life insurance plan that starts at 80
percent of salary at retirement and reduces to six thousand
dollars in 20 percent increments. Approximately 5,200 per-
sons who are retired or were eligible to retire as of
December 31, 1991, are subject to a different schedule.
-An hourly retiree life insurance plan in which approxi-
mately 11,000 active hourly employees are eligible and
approximately 2,000 hourly retirees have coverage. Most of
these are covered by fixed dollar amount coverage that is
graded down after retirement. Some units have pay-related
insurance on which the company pays the full cost.
The following table sets forth the plans' combined accrued
postretirement benefit costs for its U.S. operations as of
December 26, 1993, December 27, 1992, and December 29, 1991:
<TABLE>
<CAPTION>
December 26, 1993
------------------------------------
Health Other Total
------------------------------------
<S> <C> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $ 127,791 $ 21,945 $ 149,736
Fully eligible and other active
plan participants 96,219 11,661 107,880
-----------------------------------
224,010 33,606 257,616
Unrecognized actuarial gain/(loss) (30,371) (951) (31,322)
-----------------------------------
Accrued postretirement benefit cost $ 193,639 $ 32,655 $ 226,294
-----------------------------------
-----------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 27, 1992
-----------------------------------
Health Other Total
-----------------------------------
<S> <C> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $ 136,808 $ 21,157 $ 157,965
Fully eligible and other active
plan participants 82,970 10,472 93,442
-----------------------------------
219,778 31,629 251,407
Unrecognized actuarial gain/(loss) (32,220) 8 (32,212)
-----------------------------------
Accrued postretirement benefit cost $ 187,558 $ 31,637 $ 219,195
-----------------------------------
-----------------------------------
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
December 29, 1991
-----------------------------------
Health Other Total
-----------------------------------
<S> <C> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $ 119,109 $ 18,834 $ 137,943
Fully eligible and other active
plan participants 66,393 13,054 79,447
-----------------------------------
185,502 31,888 217,390
Unrecognized actuarial gain/(loss) (10,364) (1,526) (11,890)
-----------------------------------
Accrued postretirement benefit cost $ 175,138 $ 30,362 $ 205,500
-----------------------------------
-----------------------------------
</TABLE>
Net annual postretirement benefit costs included the
following components:
<TABLE>
<CAPTION>
1993
------------------------------
Health Other Total
------------------------------
<S> <C> <C> <C>
Service cost-benefits attributed to
service during the period $ 3,547 $ 626 $ 4,173
Interest cost on accumulated post-
retirement benefit obligation 16,466 2,538 19,004
Amortization of loss/(gain) _ 47 47
------------------------------
Net postretirement benefit cost $ 20,013 $ 3,211 $ 23,224
------------------------------
------------------------------
</TABLE>
<TABLE>
<CAPTION>
1992
------------------------------
Health Other Total
------------------------------
<S> <C> <C> <C>
Service cost-benefits attributed to
service during the period $ 3,513 $ 584 $ 4,097
Interest cost on accumulated post-
retirement benefit obligation 17,700 2,574 20,274
Amortization of loss/(gain) 1,003 (49) 954
------------------------------
Net postretirement benefit cost $ 22,216 $ 3,109 $ 25,325
------------------------------
------------------------------
</TABLE>
<TABLE>
<CAPTION>
1991
-----------------------------
Health Other Total
-----------------------------
<S> <C> <C> <C>
Service cost-benefits attributed to
service during the period $ 2,478 $ 659 $ 3,137
Interest cost on accumulated post-
retirement benefit obligation 15,169 2,635 17,804
Amortization of loss/(gain) _ _ _
-----------------------------
Net postretirement benefit cost $ 17,647 $ 3,294 $ 20,941
-----------------------------
-----------------------------
</TABLE>
For measurement purposes, a 12.0, 11.5 and 11.0 percent
annual rate of increase in the per
capita cost of covered health care benefits was assumed for
1991, 1992 and 1993, respectively; the rate is assumed to
decrease by 0.5 percent annually to a level of 6.0 percent
for the year 2003 and all years thereafter. The effect of a
one percent increase in the assumed health care cost trend
rates would increase the accumulated postretirement benefit
obligation as of December 26, 1993, by 11.8 percent, and the
aggregate of the service and interest cost components of net
annual postretirement benefit cost for 1993 by 14.0 percent.
Other assumptions used were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------------------------
<S> <C> <C> <C>
Discount rate 7.5% 8.5% 8.5%
Rate of increase in compensation levels:
Salaried 4.5% 6.0% 6.0%
Hourly 3.0% 3.0% 3.0%
</TABLE>
61
<PAGE>
NOTE 9:
Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
December 26, 1993 December 27, 1992
------------------------------------
<S> <C> <C>
Logs and chips $ 103,195 $ 83,563
Lumber, plywood and panels 92,488 84,247
Pulp, newsprint and paper 124,131 111,664
Containerboard, paperboard and containers 70,915 80,528
Other products 121,949 95,705
Materials and supplies 249,793 268,197
-----------------------------
$ 762,471 $ 723,904
-----------------------------
-----------------------------
</TABLE>
NOTE 10:
Property and Equipment
<TABLE>
<CAPTION>
December 26, 1993 December 27, 1992
------------------------------------
Property and equipment, at cost:
<S> <C> <C>
Land $ 157,611 $ 152,632
Buildings and improvements 1,416,740 1,395,142
Machinery and equipment 7,839,070 7,768,170
Rail and truck roads and other 620,136 609,033
-------------------------------
10,033,557 9,924,977
Less allowance for depreciation and
amortization 4,427,485 4,312,757
-------------------------------
$ 5,606,072 $ 5,612,220
-------------------------------
-------------------------------
</TABLE>
NOTE 11:
Real Estate in Process of Development
Real estate in process of development includes the
following:
<TABLE>
<CAPTION>
December 26, 1993 December 27, 1992
------------------------------------
<S> <C> <C>
Dwelling units:
Completed $ 105,777 $ 108,801
Under construction 153,734 116,265
Residential lots:
Developed 71,611 88,393
Under development 184,302 138,425
Commercial lots:
Developed 66,620 73,063
Under development 77,050 49,391
Commercial projects:
Completed 3,005 7,578
Under construction 14,533 47,480
Acreage listed for sale 88,912 62,996
Other inventories 2,836 1,615
----------------------------
768,380 694,007
Less reserves 29,783 76,920
----------------------------
$ 738,597 $ 617,087
----------------------------
----------------------------
</TABLE>
62
<PAGE>
NOTE 12:
Mortgage and Construction Notes and Mortgage Loans
Receivable
Mortgage and construction notes and mortgage loans
receivable are summarized as follows:
<TABLE>
<CAPTION>
December 26, 1993 December 27, 1992
--------------------------------------
<S> <C> <C>
Mortgage notes held for sale $ 520,634 $ 475,447
Construction mortgage notes 43,732 61,069
Mortgage loans receivable:
First mortgages 44,318 52,613
Second trust deeds 3,100 1,880
FHA-VA insured loans 14,014 13,361
Income property loans 224,271 272,491
Other loans, net 1,536 693
-------------------------------
851,605 877,554
Less allowance for loan losses 21,036 19,591
-------------------------------
$ 830,569 $ 857,963
-------------------------------
-------------------------------
</TABLE>
NOTE 13:
Investments
Investments are as follows:
<TABLE>
<CAPTION>
December 26, 1993 December 27, 1992
--------------------------------------
<S> <C> <C>
U.S. treasury securities and obligations of
U.S. government corporations and agencies $ _ $ 68,054
State and political subdivision obligations _ 8,500
Foreign government debt securities _ 6,250
Corporate securities _ 2,425,421
Mortgage-backed securities 2,940 1,655,679
Mortgage loans 41,651 1,057,361
Other 15,764 11,163
------------------------------
$ 60,355 $ 5,232,428
------------------------------
------------------------------
</TABLE>
Debt securities held as assets are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
----------------------------------------------
<S> <C> <C> <C> <C>
December 26, 1993:
Mortgage-backed securities $ 290,540 $ 19,543 $ (870) $ 309,213
----------------------------------------------
----------------------------------------------
December 27, 1992:
U.S. treasury securities and
obligations of U.S. government
corporations and agencies $ 68,054 $ 1,706 $ (1,465) $ 68,295
State and political subdivision
obligations 8,500 475 _ 8,975
Foreign government debt
securities 6,250 _ (101) 6,149
Corporate securities 2,425,421 63,700 (16,875) 2,472,246
Mortgage-backed securities 2,145,036 66,263 (43,971) 2,167,328
-----------------------------------------------
$4,653,261 $ 132,144 $ (62,412) $ 4,722,993
-----------------------------------------------
-----------------------------------------------
</TABLE>
63
<PAGE>
Debt securities held as assets include mortgage-backed
certificates, net of unamortized discounts or premiums,
pledged as collateral for the CMO bonds totaling $287,600
and $489,357 at December 26, 1993, and December 27, 1992,
respectively.
The amortized cost and estimated market value of debt
securities by contractual maturity are shown in the
following table. Expected maturities will differ from
contractual maturities because borrowers may have the right
to call or prepay obligations with or without penalties.
<TABLE>
<CAPTION>
December 26, 1993 December 27, 1992
--------------------- --------------------------
Amortized Amortized
Cost Fair Value Cost Fair Value
-------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less $ _ $ _ $ 85,103 $ 86,898
Due after one year
through five years _ _ 1,540,361 1,582,569
Due after five years
through ten years _ _ 835,729 837,584
Due after ten years _ _ 47,032 48,614
-------------------------------------------------
_ _ 2,508,225 2,555,665
Mortgage-backed securities 290,540 309,213 2,145,036 2,167,328
-------------------------------------------------
$290,540 $ 309,213 $4,653,261 $ 4,722,993
-------------------------------------------------
-------------------------------------------------
</TABLE>
Proceeds from sales of investments in debt securities were
$15,052 in 1993, $31,917 in 1992 and $34,633 in 1991. Gross
gains of $1,426 in 1993, $2,973 in 1992 and $1,491 in 1991
and gross losses of $122 in 1991 were realized on
those sales.
NOTE 14:
Mortgage-Backed Certificates and Restricted Deposits, and
Collateralized Mortgage Obligation Bonds
Mortgage-backed certificates and restricted deposits are as
follows:
<TABLE>
<CAPTION>
December 26, 1993 December 27, 1992
--------------------------------------
<S> <C> <C>
Mortgage-backed certificates,
including accrued interest $ 290,545 $ 495,117
Trust deeds, including accrued interest 19,155 63,526
Restricted deposits 40,658 57,791
Unamortized discount, net (601) (2,182)
------------------------------
$ 349,757 $ 614,252
------------------------------
------------------------------
</TABLE>
The mortgage-backed certificates, trust deeds and the
restricted deposits are pledged as collateral for the
collateralized mortgage obligation bonds. These assets are
held by banks as trustees. Principal and interest
collections on the certificates are used to meet the
interest payments and to reduce the outstanding principal
balance of the bonds.
64
<PAGE>
Collateralized mortgage obligation bonds are as follows:
<TABLE>
<CAPTION>
December 26, 1993 December 27, 1992
------------------------------------
<S> <C> <C>
CMO bonds with maturities ranging from
2003 to 2019, weighted average interest
rates are approximately 9.2% $ 318,012 $ 563,405
Unamortized discount (10,596) (20,248)
-----------------------------
$ 307,416 $ 543,157
-----------------------------
-----------------------------
</TABLE>
Bond principal payments during the next five years are:
<TABLE>
<S> <C>
1994 $ 68,304
1995 49,812
1996 37,013
1997 27,705
1998 20,955
</TABLE>
The above maturities are calculated based on anticipated
prepayments on the certificates. The bonds are the
obligation of the issuer, and neither the company nor any
affiliated company has guar-
anteed or is otherwise obligated with respect to the bonds.
NOTE 15:
Accrued Liabilities
Accrued liabilities are as follows:
<TABLE>
<CAPTION>
December 26, 1993 December 27, 1992
-----------------------------------
<S> <C> <C>
Payroll - wages and salaries, incentive
awards, retirement, vacation pay and
severance pay $ 239,434 $ 235,052
Taxes - social security and real and
personal property 58,952 53,434
Interest 66,967 48,189
Other 199,649 286,488
----------------------------
$ 565,002 $ 623,163
----------------------------
----------------------------
</TABLE>
65
<PAGE>
NOTE 16:
Senior Long-Term Debt
Senior long-term debt obligations, including the current
portion, are as follows:
<TABLE>
<CAPTION>
December 26, 1993 December 27, 1992
-------------------------------------
<S> <C> <C>
Sinking fund debentures:
8 5/8% issued 1970 $ _ $ 25,907
8.90% issued 1974 _ 82,399
7.95% issued 1976 _ 119,840
8 3/8% debentures due 2007 150,000 150,000
7.50% debentures due 2013 250,000 _
7.25% debentures due 2013 250,000 _
7 1/8% debentures due 2023 250,000 _
9 3/8% notes due 1998 150,000 150,000
9 1/4% notes due 1995 200,000 200,000
9.05% notes due 2003 200,000 200,000
9.36% notes due 1995 100,000 _
7.28% note due 1996 40,000 _
8.50% notes _ 25,000
Industrial revenue bonds, rates from
2.7% (variable) to 10.0% (fixed),
due 1994-2028 467,085 406,240
Medium-term notes, rates from
6.43% to 8.98%, due 1996-2005 427,850 387,850
Commercial paper/credit agreements 378,727 898,565
Other 148,750 126,673
-----------------------------
3,012,412 2,772,474
Less portion due within one year 14,522 113,607
-----------------------------
$ 2,997,890 $ 2,658,867
-----------------------------
-----------------------------
</TABLE>
Senior long-term debt maturities during the next five years
are:
<TABLE>
<S> <C>
1994 $ 14,522
1995 804,224
1996 119,676
1997 69,685
1998 196,063
</TABLE>
66
<PAGE>
At December 26, 1993, and December 27, 1992, the company's
lines of credit include:
-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, a
subsidiary of WFS. 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.
-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:
<TABLE>
<CAPTION>
December 26, 1993 December 27, 1992
------------------------------------
<S> <C> <C>
The company
and:
WMC and
WRECO $ 215,000 $ 215,000
WMC 70,000 70,000
WRECO 20,000 20,000
WMC (only) 35,000 35,000
</TABLE>
At December 26, 1993, and December 27, 1992, respectively,
WMC had $35,000 outstanding against this commitment.
-Short-term bank credit lines, which provide for
borrowings of up to the total amount of $200,000, all of
which can be availed of by the company and WRECO, and
$150,000, which can be availed of
by WMC.
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 shown in the tables in
this and the following note. No portion of these lines has
been availed of by the company, WRECO, WMC or WFS at
December 26, 1993, or December 27, 1992, except as noted.
In 1993, WFS completed the sale of GNA Corporation. As a
part of this transaction, the com-
pany assumed $225,000 of outstanding GNA debt.
NOTE 17:
Real Estate and Financial Services Long-Term Debt
Real estate and financial services long-term debt, including
the current portion, consists of the following:
<TABLE>
<CAPTION>
December 26, 1993 December 27, 1992
------------------------------------
<S> <C> <C>
Notes payable secured principally by
land and lots under development;
weighted average interest rates are
approximately 8.9% and 8.4% $ 18,107 $ 26,948
Notes payable secured principally by
multi-family projects, on a non-recourse
basis; weighted average interest
rates are approximately 10.0% and 10.1% 41,716 61,331
Notes payable, unsecured; weighted average
interest rates are approximately
7.4% and 8.2% 957,190 716,258
Notes payable secured by first trust
deeds; weighted average interest rates
are approximately 9.5% and 7.3% 3,227 17,876
Bank and other borrowings, unsecured;
weighted average interest rates are
approximately 3.3% and 5.5% 360,000 601,722
Commercial paper/credit agreements 616,906 771,580
-----------------------------
$1,997,146 $ 2,195,715
-----------------------------
-----------------------------
Portion due within one year $ 151,998 $ 225,261
-----------------------------
-----------------------------
</TABLE>
67
<PAGE>
Long-term debt maturities during the next five years are:
<TABLE>
<S> <C>
1994 $ 151,998
1995 1,043,685
1996 120,877
1997 98,552
1998 135,773
</TABLE>
WMC has a revolving credit agreement with a bank to
provide for: (1) borrowings of 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, and
December 27, 1992, $30,000 and $12,000, respectively, were
outstanding under the revolving credit agreement.
During 1992 WFS entered into a three-year term loan
facility with a group of banks that provides for: (1)
borrowings of up to $295,000 at December 26, 1993, and
$330,000 at December 27, 1992, at LIBOR or other such rates
as may be agreed upon by WFS and the banks, and (2) a
commitment fee based on the unused credit. $295,000 and
$330,000 were outstanding against this facility at December
26, 1993, and December 27, 1992, respectively.
WMC has short-term special credit lines
that provide for borrowings of up to $265,000 at December
26, 1993, and $205,000 at December 27, 1992. Borrowings
against these lines were
$254,000 and $204,500 as of December 26, 1993, and
December 27, 1992, respectively.
In 1985 WRECO entered into an interest rate swap agreement
with a major bank. Payments between the parties are
calculated by reference to fixed or floating per-annum
rates. Under the agreement, the company makes semi-annual
payments at a rate of 10.09 percent per annum and receives
from the bank a monthly payment at a rate equivalent to the
30-day commercial paper rate. The interest payments are
calculated on the notional amount of $25,000. The agreement
expires in November 1995. The company is exposed to credit
loss in the event of non-performance by the other party to
the interest rate swap agreement. However, the company does
not anticipate non-performance by the counterparty.
Total interest costs incurred by WRECO during the three
years ended December 26, 1993, have been capitalized and
will ultimately be accounted for as an element of operating
costs.
The company's compensating balance agreements were not
significant.
NOTE 18:
Subordinated Debentures
The 5 1/4 percent convertible subordinated debentures were
issued in 1990 in exchange for the company's outstanding
$2.625 convertible exchangeable preference shares. In the
first quarter of 1993, the company called this issue in full
and paid principal plus premium and accrued interest to
those debenture holders who had not previously exercised the
option to convert their debentures into common shares.
The limited recourse income debenture, which was repaid in
January 1993, was the obligation of Weyerhaeuser Canada Ltd.
and was issued as total consideration for the purchase of a
pulp mill, chemical plant and sawmill in Saskatchewan.
68
<PAGE>
NOTE 19:
Disclosure About Fair Value of Financial Instruments
The fair value of the company's financial instruments, and
the methods and assumptions used to estimate fair value of
each class of financial instruments for which it is
practicable to estimate that value, are as follows:
Weyerhaeuser
-Long-term debt and other liabilities - the
fair value of the company's long-term debt (including
WRECO and WFS) is estimated based on quoted market prices
for the same issues or on the discounted value of the future
cash flows expected to be paid using incremental rates of
borrowing for similar liabilities.
-Foreign exchange contracts - the fair value of the
company's $26,500 foreign exchange contracts (see Note 22)
was estimated by obtaining quotes from its currency brokers.
At December 26, 1993, the fair value of these contracts was
approximately $28,000.
-Notes and contracts receivable - the company and WRECO
estimate that the carrying value of their notes and
contracts receivable approximates their fair values as of
December 26, 1993, and December 27, 1992.
Real Estate and Financial Services
-Joint venture and partnership guarantees - WRECO has
guaranteed certain borrowings of
joint ventures in which it is a participant in the aggregate
amount of $116,954. During the year, WRECO reduced the
maximum aggregate sum available through several bank credit
arrangements from $100,000 at December 27, 1992, to $30,000
at December
26, 1993. These credit arrangements were established to
guarantee certain borrow-
ings made by subsidiary limited partnerships. At
December 26, 1993, and December 27, 1992, the amount
utilized under these arrangements is
$22,558 and $54,319, respectively. In addition, WRECO has
entered into various other contractual obligations to fund,
if certain specified events occur, $11,774 to the capital of
its real estate partnerships. If funded, these commitments
would increase WRECO's equity investment in partnerships
and, therefore, are not subject to fair value disclosure.
-Interest rate swaps - WRECO has an interest rate swap
agreement whereby the interest payments under the agreement
are calculated on the notional amount of $25,000 (see Note
17). The liquidation cost (which has been estimated using
rates currently available for an instrument with similar
terms) to WRECO as of December 26, 1993, and December 27,
1992, if the agreement was canceled, would approximate
$2,753 and $4,472, respectively.
-Mortgage notes held for sale - are estimated using the
quoted market prices for securities backed by similar loans
adjusted for differences in loan characteristics. The
estimated fair value is net of related hedge instruments,
which were estimated based upon quoted market prices for
securities.
-Construction mortgage notes and mortgage loans receivable
- - are based on the discounted value of estimated future cash
flows using current rates for loans with similar terms and
risks.
-Investments - are estimated using quoted market prices
for similar securities. The fair value of mortgage loans
held as investments is based on the discounted value of
estimated future cash flows using current rates.
-Mortgage-backed certificates and restricted deposits -
the fair value of mortgage-backed certificates is estimated
using the quoted market prices for securities backed by
similar loans; restricted deposits are a reasonable estimate
of fair value.
-Notes and commercial paper - WRECO and WFS estimate that
the carrying value of their notes and commercial paper
approximates their fair value as of December 26, 1993, and
December 27, 1992.
-Future annuity and contract reserves - were the cash
surrender value payable on demand.
-Collateralized mortgage obligation (CMO)
bonds - fair value is estimated using analysis of projected
cash flows discounted at market yields.
-Loans sold with recourse - the fair value is estimated
based upon market spreads for sales of similar loans without
recourse or estimates of the credit risk of the associated
recourse obligation. The fair value of the recourse on
these loans (see Note 21) is estimated to be $14.8 million.
69
<PAGE>
The carrying and fair values of significant financial
instruments are:
<TABLE>
<CAPTION>
December 26, 1993 December 27, 1992
-------------------- ----------------------
Carrying Fair Carrying Fair
Value Value Value Value
----------------------------------------------
<S> <C> <C> <C> <C>
Weyerhaeuser:
Long-term debt $3,012,412 $3,266,923 $3,153,472 $3,192,846
Other liabilities 99,624 92,756 13,538 12,445
----------------------------------------------
Real estate and financial
services:
Mortgage notes held for sale 520,634 523,563 475,447 478,916
Construction mortgage notes 43,732 42,434 61,069 53,378
Mortgage loans receivable 266,203 252,902 321,447 309,348
Investments 60,355 56,360 5,232,428 5,274,274
Mortgage-backed certificates
and restricted deposits 349,757 365,659 614,252 646,063
Future annuity and contract
reserves _ _ 5,529,700 5,336,046
Collateralized mortgage
obligation bonds 307,416 330,644 543,157 581,440
Long-term debt 1,997,146 2,042,540 2,195,715 2,250,032
</TABLE>
NOTE 20:
Legal Proceedings
On November 2, 1992, an action was filed against the company
in the Circuit Court for the First Judicial District of
Hinds County, Miss., on behalf of a pur-
ported 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, Miss., 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, Ala., 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.
The company is 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
adverse effect on the company's financial position.
70
<PAGE>
NOTE 21:
Commitments and Contingencies
The company's capital expenditures, excluding acquisitions,
have averaged about $823,000 in recent years but are
expected to approximate $1,100,000 in 1994; however, the
1994 expenditure level could be increased or decreased as a
consequence of future economic conditions. The company had
approximately $600,000 in capital expenditures committed on
major projects at year-end 1993.
It is the company's policy to accrue for environmental
remediation costs when it is determined that it is probable
that such an obligation exists and the amount of the
obligation can be reasonably estimated. Based on currently
available information and analysis, the company believes
that it is reasonably possible that costs associated with
all identified sites may exceed current accruals by amounts
that may prove insignificant or that could range, in the
aggregate, up to approximately $140 million over several
years. This estimate of the upper end of the range of rea-
sonably possible additional costs is much less certain than
the estimates upon which accruals are currently based, and
is based on assumptions less favorable to the company among
the range of reasonably possible outcomes. In estimating
both its current reserves for environmental remediation and
the possible range of additional future costs, the company
has assumed that it will not bear the entire cost of
remediation of every site to the exclusion of other known
potentially responsible parties who may be jointly and
severally liable. The ability of other potentially
responsible parties to participate has been taken into
account, based generally on each party's financial condition
and probable contribution on a per-site basis. No amounts
have been recorded for potential recoveries from insurance
carriers.
WRECO is exposed to contingent liabilities arising from
joint-venture participations and real estate limited
partnerships as described in Note 19.
As of December 26, 1993, WFS was committed to fund
approximately $397,812 in mortgage loans, of which $111,627
was with affiliates. Included in WFS's funding commitments
were approximately $227,324 of commitments to fund mortgage
loans at floating prices. WFS had firm agreements with in-
vestors for the sale of loans in the aggregate amount of
approximately $523,326 as of December 26, 1993. WFS's
construction lending program, which was principally in
California, was terminated during 1993. All construction
loan investments relate to transactions that were originally
committed prior to 1993. At December 26, 1993, WFS is com-
mitted to fund an additional $13,831 of construction loan
advances. Included therein is $9,358 committed to various
joint ventures in which WFS is a partner. WFS recorded
interest and fee income of $1,903, $2,165 and $3,723 on
loans to these partnerships during 1993, 1992 and 1991,
respectively.
During the normal course of business, WFS has sold loans
with limited recourse requirements. In accordance with
generally accepted accounting principles, estimated probable
loan losses and related costs are provided for at the time
of such sales when deemed appropriate. At December 26,
1993, the outstanding balance of loans sold by WFS with
recourse is approximately $1.1 billion. In the event of
borrower non-performance, WFS would assume losses to the
extent they exceed the value of the collateral and private
mortgage insurance or Veterans Administration guarantees.
WFS has not historically experienced material losses on
these recourse obligations.
71
<PAGE>
NOTE 22:
Financial Instruments With Credit or Off-Balance Sheet Risk
Receivables
WRECO's accounts receivable and notes and contracts
receivable by geographic region, less discounts and
allowances, are as follows:
<TABLE>
<CAPTION>
1993 1992
--------------------
<S> <C> <C>
West $ 53,411 $ 23,456
South 20,487 16,112
East 32,351 21,880
--------------------
$106,249 $ 61,448
--------------------
--------------------
</TABLE>
WRECO's policy for requiring collateral is that a secured
interest will be established on receivables generated from
the sale of inventory and land and that the collateral will
be subject to foreclosure in the event of the purchaser's
default. Collateral
is not required for short-term, general accounts receivable.
WFS originates and holds loans in a number of states. The
remaining gross principal balance of mortgage notes held for
sale or investment, construction mortgage notes, mortgage
loans receivable and other trust deeds receivable by
geographic region are as follows:
<TABLE>
<CAPTION>
1993 1992
-------------------------
<S> <C> <C>
West $757,353 $1,527,600
South 47,279 155,787
East 93,621 196,733
Other 16,233 124,209
-------------------------
$914,486 $2,004,329
-------------------------
-------------------------
</TABLE>
Foreign Exchange Contracts
At December 26, 1993, the company had foreign exchange
contracts maturing from January 14, 1994, to September 1,
1994, worth $26,500 in foreign currency.
NOTE 23:
Shareholders' Interest
Preferred and Preference Shares
The company is authorized to issue:
- 7,000,000 preferred shares having a par value of $1.00
per share, of which none were issued and outstanding at
December 26, 1993, and December 27, 1992; and
- 40,000,000 preference shares having a par value of $1.00
per share, of which none were
issued and outstanding at December 26, 1993, and
December 27, 1992.
The preferred and preference shares may be issued in one
or more series with varying rights and preferences including
dividend rates, redemption rights, conversion terms, sinking
fund provisions, values in liquidation and voting rights.
When issued, the outstanding preferred and preference shares
rank senior to outstanding common shares as to dividends and
assets available on liquidation.
The company has reserved but not issued 2,000,000 shares
of cumulative preference shares, fourth series, for the
exercise of the rights described under Common Shares.
Common Shares
Common shares reserved for stock option plans and for
conversion of issued and outstanding convertible
subordinated debentures were 5,178,000 shares at December
26, 1993, and 9,021,000 shares at December 27, 1992. As to
the company's various stock option plans, the following
information is provided:
<TABLE>
<CAPTION>
1993 1992 1991
--------------------------------
<S> <C> <C> <C>
At end of year:
Options outstanding 5,177,401 4,999,874 5,414,948
Options exercisable 3,981,751 3,865,624 4,440,948
During the year:
Options granted 1,195,650 1,134,250 974,000
Options exercised 878,755 1,261,212 297,519
Options forfeited 139,368 288,112 146,900
Average prices per
share:
Options outstanding $32.32 $28.85 $26.00
Options granted $42.31 $36.18 $25.22
Options exercised $26.72 $24.06 $22.70
</TABLE>
In December 1986, the company adopted a Shareholder Rights
Plan (the "Plan") and declared a dividend distribution of
0.6667 right on each outstanding
72
<PAGE>
common share. Each right entitles its holder to purchase
after the distribution date and until December 1996 one one-
hundredth of a share of the company's cumulative preference
shares, fourth series, at a price of $70, subject to
adjustment. The distribution date is the earlier of 20
business days after the announcement that a person or group
has acquired 20 percent or more of Weyerhaeuser's out
standing common shares or 20 business days after a person or
group commences a tender or exchange offer that could result
in the person or group owning 30 percent or more of the
company's outstanding common shares. Following the
distribution date, if anyone owning 20 percent or more of
the company's outstanding common shares merges with the
company, with the company as the survivor, and the company's
common shares are not changed or exchanged, or engages in
certain self-dealing transactions with the company, or if an
event occurs that results in such 20 percent owner's
interest being increased by more than one percent (e.g., a
reverse stock split), or if anyone acquires 40 percent or
more of the company's outstanding common shares, each right
holder, other than such person or group, will be able, upon
payment of the right's exercise price, to acquire shares of
the company's common stock or other securities or assets
having an aggregate market value equal to twice the right's
purchase price. If, after the company announces that
someone owns 20 percent or more of the company's outstanding
common shares, the company is acquired in a merger or other
business combination, and the company is not the survivor,
or the company engages in a merger or other business
combination transaction in which the company is the
surviving corporation but the company's common shares are
changed or exchanged, or if 50 percent of the company's
earning power or assets is sold in one or several related
transactions, each right holder, other than any 20 percent
shareholder, will receive shares of the acquiring company's
common stock having a market value equal to twice the
right's exercise price. Subject to certain time periods and
conditions, the Plan may be amended and the rights may be
redeemed at a price of $.05 per right, subject to
adjustment.
NOTE 24:
Business Segments
The company is principally engaged in the growing and
harvesting of timber and the manufacture, distribution and
sale of forest products. The four principal business
segments are timberlands and wood products (including
softwood lumber, plywood and veneer; composite panels;
oriented strand board; hardboard; logs; chips; timber;
doors; hardwood lumber and plywood; and treated products);
pulp and paper products (including pulp, newsprint, paper,
containerboard, paperboard and shipping containers,
recycling and chemicals); real estate development and
construction; and financial services.
The timber-based businesses involve a high degree of
integration among timber operations; building materials
conversion facilities; and pulp, newsprint, paper,
containerboard and paperboard primary manufacturing and
secondary conversion facilities, including extensive
transfers of raw materials, semi-finished materials and end
products between and among these groups. Accounting for
segment profitability involves allocations of joint raw
materials and conversion costs and the use of transfer
prices that attempt to approximate current market values.
73
<PAGE>
The following table sets forth an analysis of the company's
operations by the four principal business segments:
<TABLE>
<CAPTION>
Sales to and
Revenue from Intersegment Total Approximate
Unaffiliated Sales and Sales and Contribution
Business Segments Customers Revenue Revenue to Earnings
-----------------------------------------------------
<S> <C> <C> <C> <C>
1993:
Timberlands and
wood products $4,467,751 $ 352,314 $4,820,065 $ 891,431
Pulp and paper products 3,579,042 6,189 3,585,231 60,854
Real estate 828,713 _ 828,713 18,326
Financial services 401,711 _ 401,711 76,437
Corporate and other 269,181 28,409 297,590 (46,961)
---------------------------------------------------
9,546,398 386,912 9,933,310 1,000,087
Eliminations (1,606) (386,912) (388,518) _
Interest expense _ _ _ (292,459)
Less: capitalized
interest _ _ _ 100,825
-------
Income before income
taxes and extraordinary
item _ _ _ 808,453
Income taxes _ _ _ (281,168)
Extraordinary item _ _ _ 52,052
-----------------------------------------------------
$9,544,792 $ _ $9,544,792 $ 579,337
-----------------------------------------------------
-----------------------------------------------------
1992:
Timberlands and
wood products $3,416,832 $ 340,368 $3,757,200 $ 515,394
Pulp and paper products 4,109,080 28,822 4,137,902 251,091
Real estate 690,342 _ 690,342 12,897
Financial services 832,389 _ 832,389 67,633
Corporate and other 220,032 29,907 249,939 (106,863)
---------------------------------------------------
9,268,675 399,097 9,667,772 740,152
Eliminations (2,206) (399,097) (401,303) _
Interest expense _ _ _ (262,209)
Less: capitalized
interest _ _ _ 85,406
---------
Income before income
taxes _ _ _ 563,349
Income taxes _ _ _ (191,300)
---------------------------------------------------
$9,266,469 $ _ $9,266,469 $ 372,049
---------------------------------------------------
---------------------------------------------------
1991:
Timberlands and
wood products $2,948,358 $ 366,988 $3,315,346 $ 155,386
Pulp and paper products 4,002,738 19,685 4,022,423 108,287
Real estate 744,366 _ 744,366 (175,331)
Financial services 862,403 _ 862,403 60,409
Corporate and other 215,501 29,062 244,563 (148,212)
---------------------------------------------------
8,773,366 415,735 9,189,101 539
Eliminations (753) (415,735) (416,488) _
Interest expense _ _ _ (265,240)
Less: capitalized
interest _ _ _ 86,853
--------
Income (loss) before
income taxes and effect
of accounting changes _ _ _ (177,848)
Income taxes _ _ _ 76,900
Effect of accounting
changes _ _ _ (61,000)
----------------------------------------------------
$8,772,613 $ _ $8,772,613 $ (161,948)
----------------------------------------------------
----------------------------------------------------
Interest expense of $95,309, $151,519 and $219,441 before
the elimination of intercompany
interest of $0, $3,403 and $6,455 in 1993, 1992 and 1991,
respectively, is included in the
determination of "approximate contribution to earnings" for
financial services.
Certain reclassifications have been made to conform prior
years' data to the current format.
</TABLE>
<TABLE>
<CAPTION>
Depreciation,
Amortization
and Fee Capital
Business Segments Stumpage Expenditures Assets
---------------------------------------------
<S> <C> <C> <C>
1993:
Timberlands and
wood products $ 161,903 $ 240,760 $ 2,582,832
Pulp and paper products 263,961 652,092 5,731,965
Real estate 9,123 15,007 1,863,615
Financial services 33,976 4,737 1,892,180
Corporate and other 17,968 54,885 1,274,185
------------------------------------------
486,931 967,481 13,344,777
Eliminations _ _ (706,324)
Interest expense _ _ _
Less: capitalized
interest _ _ _
Income before income
taxes and extraordinary
item _ _ _
Income taxes _ _ _
Extraordinary item _ _ _
------------------------------------------
$ 486,931 $ 967,481 $ 12,638,453
------------------------------------------
------------------------------------------
1992:
Timberlands and
wood products $ 149,504 $ 246,096 $ 2,374,152
Pulp and paper products 254,956 931,913 5,614,490
Real estate 7,310 7,869 1,693,741
Financial services 48,685 2,646 8,148,285
Corporate and other 42,291 16,990 1,201,418
------------------------------------------
502,746 1,205,514 19,032,086
Eliminations _ _ (873,683)
Interest expense _ _ _
Less: capitalized
interest _ _ _
Income before income
taxes _ _ _
Income taxes _ _ _
------------------------------------------
$ 502,746 $ 1,205,514 $ 18,158,403
------------------------------------------
------------------------------------------
1991:
Timberlands and
wood products $ 157,506 $ 161,589 $ 2,223,886
Pulp and paper products 245,533 472,412 4,928,239
Real estate 8,197 7,485 1,500,250
Financial services 46,843 3,518 7,956,631
Corporate and other 43,243 18,367 1,186,906
------------------------------------------
501,322 663,371 17,795,912
Eliminations _ _ (810,038)
Interest expense _ _ _
Less: capitalized
interest _ _ _
Income (loss) before
income taxes and effect
of accounting changes _ _ _
Income taxes _ _ _
Effect of accounting
changes _ _ _
------------------------------------------
$ 501,322 $ 663,371 $ 16,985,874
------------------------------------------
------------------------------------------
</TABLE>
74
<PAGE>
The following table sets forth an analysis of the company's
1991 approximate contribution to earnings by the four
principal business segments before and after restructuring
and other charges:
<TABLE>
<CAPTION>
Approximate
Contribution to
Earnings Before Approximate
Restructuring and Restructuring and Contribution
Business Segments Other Charges Other Charges to Earnings
------------------------------------------------------
<S> <C> <C> <C>
Timberlands and
wood products $ 307,386 $ (152,000) $ 155,386
Pulp and paper products 237,287 (129,000) 108,287
Real estate (20,331) (155,000) (175,331)
Financial services 60,409 _ 60,409
Corporate and other (139,212) (9,000) (148,212)
-----------------------------------------------
$ 445,539 $ (445,000) $ 539
-----------------------------------------------
-----------------------------------------------
</TABLE>
NOTE 25:
Unaudited Financial Information
Selected quarterly financial data:
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
---------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales:
1993 $ 2,341,016 $ 2,387,505 $ 2,224,928 $ 2,591,343
1992 2,204,904 2,352,356 2,349,107 2,360,102
Operating income:
1993 280,469 292,170 183,349 225,557
1992 216,484 227,011 214,134 186,761
Earnings before
income taxes and
extraordinary item:
1993 264,579 272,336 130,018 141,520
1992 133,293 142,904 164,917 122,235
Net earnings(1):
1993 229,463 181,536 66,618 101,720
1992 86,593 92,904 107,217 85,335
Net earnings per
common share(1):
1993 1.12 .89 .32 .50
1992 .43 .45 .53 .42
Dividends per
common share:
1993 .30 .30 .30 .30
1992 .30 .30 .30 .30
Market prices -
high/low:
1993 45 1/2-36 1/4 46 1/2-38 3/4 44-38 1/4 45 5/8-36 7/8
1992 37 5/8-26 5/8 37 1/2-31 3/8 36-31 1/8 39 1/4-31 3/8
(1)First quarter 1993 results reflect an extraordinary item
from the realization of a net gain as a result of
extinguishing certain debt obligations of $52,052, or $.25
per common share.
</TABLE>
75
<PAGE>
NOTE 26:
Historical Summary
<TABLE>
<CAPTION>
Dollar amounts in thousands except
per-share figures 1993 1992 1991
--------------------------------------
<S> <C> <C> <C>
Per common share:
Net earnings (loss) from
continuing operations, before
extraordinary item and effect
of accounting changes: $ 2.58 1.83 (.50)
Extraordinary item(1) $ .25 _ _
Effect of accounting changes $ _ _ (.30)
--------------------------------------
Net earnings (loss) $ 2.83 1.83 (.80)
--------------------------------------
--------------------------------------
Dividends paid $ 1.20 1.20 1.20
Shareholders'interest (end of year)$ 19.34 17.85 17.25
Financial position:
Total assets:
Weyerhaeuser $ 8,967,714 8,438,032 7,550,490
Real estate and financial services$ 3,670,739 9,720,371 9,435,384
--------------------------------------
$12,638,453 18,158,403 16,985,874
--------------------------------------
--------------------------------------
Long-term debt (net of current portion):
Weyerhaeuser:
Senior long-term debt $ 2,997,890 2,658,867 2,195,510
Capital lease obligations $ 160 222 249
Convertible subordinated
debentures $ _ 193,035 193,035
Limited recourse income
debenture $ _ 187,963 204,027
--------------------------------------
$ 2,998,050 3,040,087 2,592,821
--------------------------------------
--------------------------------------
Real estate and financial services:
Collateralized mortgage
obligation bonds $ 240,794 440,354 701,871
Long-term debt $ 1,845,148 1,970,454 1,718,812
--------------------------------------
$ 2,085,942 2,410,808 2,420,683
--------------------------------------
--------------------------------------
Redeemable preferred and preference shares:
Weyerhaeuser $ _ _ _
Real estate and financial services$ _ _ _
Shareholders' interest $ 3,966,096 3,645,989 3,489,368
Percent earned on
shareholders' interest 15.2% 10.4% (4.4)%
Operating results:
Net sales and revenues:
Weyerhaeuser $ 8,314,368 7,743,738 7,165,844
Real estate and financial services$ 1,230,424 1,522,731 1,606,769
--------------------------------------
$ 9,544,792 9,266,469 8,772,613
--------------------------------------
--------------------------------------
Net earnings (loss) from continuing
operations before extraordinary
item and effect of accounting
changes:
Weyerhaeuser $ 459,542 332,043 (24,690)
Real estate and financial services$ 67,743 40,006 (76,258)
Less subsidiaries preferred
share dividends $ _ _ _
--------------------------------------
$ 527,285 372,049 (100,948)(2)
Extraordinary item(1) $ 52,052 _ _
Effect of accounting changes $ _ _ (61,000)
--------------------------------------
Net earnings (loss) $ 579,337 372,049 (161,948)
--------------------------------------
--------------------------------------
Statistics (unaudited):
Number of employees 36,748 39,022 38,669
Salaries and wages $ 1,584,770 1,580,005 1,475,950
Employee benefits $ 346,528 323,316 321,174
Total taxes $ 577,165 442,715 172,758
Timberlands (thousands of acres):
Fee ownership 5,524 5,604 5,517
Long-term license arrangements 17,845 18,828 13,491
Number of shareholder accounts
at year-end:
Common 25,282 26,334 26,937
Preferred _ _ _
Preference _ _ _
Average common and common
equivalent shares
outstanding (thousands) 204,866 203,373 201,578
(1)1993 results reflect an extraordinary item from the
realization of a gain as a result of extinguishing certain
debt obligations of $85,784 less related tax effect of
$33,732, or $52,052.
(2)1991 results reflect restructuring and other charges of
$445,000 less related tax effect of $162,000, or $283,000.
</TABLE>
Historical Summary
<TABLE>
<CAPTION>
Dollar amounts in thousands except
per-share figures 1990 1989
---------------------------
<S> <C> <C>
Per common share:
Net earnings (loss) from
continuing operations, before
extraordinary item and effect
of accounting changes: $ 1.87 1.56
Extraordinary item(1) $ _ _
Effect of accounting changes $ _ _
---------------------------
Net earnings (loss) $ 1.87 1.56
---------------------------
---------------------------
Dividends paid $ 1.20 1.20
Shareholders' interest (end of year) $ 19.21 18.55
Financial position:
Total assets:
Weyerhaeuser $ 7,556,078 7,371,069
Real estate and financial services $ 8,799,741 8,604,883
---------------------------
$ 16,355,819 15,975,952
---------------------------
---------------------------
Long-term debt (net of current portion):
Weyerhaeuser:
Senior long-term debt $ 2,168,125 1,501,523
Capital lease obligations $ 6,794 22,793
Convertible subordinate
debentures $ 193,175 _
Limited recourse income
debenture $ 203,861 204,217
---------------------------
$ 2,571,955 1,728,533
---------------------------
---------------------------
Real estate and financial services:
Collateralized mortgage
obligation bonds $ 837,796 931,019
Long-term debt $ 1,798,978 1,074,537
---------------------------
$ 2,636,774 2,005,556
---------------------------
---------------------------
Redeemable preferred and preference shares:
Weyerhaeuser $ _ _
Real estate and financial services $ _ _
Shareholders' interest $ 3,863,804 4,147,566
Percent earned on
shareholders' interest 9.8% 8.3%
Operating results:
Net sales and revenues:
Weyerhaeuser $ 7,447,329 8,355,176
Real estate and financial services $ 1,618,502 1,826,123
---------------------------
$ 9,065,831 10,181,299
---------------------------
---------------------------
Net earnings (loss) from continuing
operations before extraordinary
item and effect of accounting
changes:
Weyerhaeuser $ 340,281 376,838
Real estate and financial services $ 53,417 (35,767)
Less subsidiaries preferred
share dividends $ _ _
---------------------------
$ 393,698 341,071(3)
Extraordinary item(1) $ _ _
Effect of accounting changes $ _ _
---------------------------
Net earnings (loss) $ 393,698 341,071
---------------------------
---------------------------
Statistics (unaudited):
Number of employees 40,621 45,214
Salaries and wages $ 1,531,220 1,563,194
Employee benefits $ 318,055 324,663
Total taxes $ 445,804 403,072
Timberlands (thousands of acres):
Fee ownership 5,621 5,693
Long-term license arrangements 13,491 13,324
Number of shareholder accounts
at year-end:
Common 28,187 29,847
Preferred _ 12
Preference _ 443
Average common and common
equivalent shares
outstanding (thousands) 203,673 204,331
(3)1989 results reflect net special items charges of
$401,010 less related tax effect of $140,674, or $260,336.
</TABLE>
76
<PAGE>
<TABLE>
<CAPTION>
1988 1987 1986 1985 1984 1983
-------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
2.68 2.12 1.27 .88 1.01 .90
_ _ _ _ _ _
_ _ _ _ _ _
- --------------------------------------------------------------------------
2.68 2.12 1.27 .88 1.01 .90
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
1.15 .90 .87 .87 .87 .87
18.14 16.54 14.82 14.42 14.50 14.43
6,982,522 6,418,174 5,888,910 5,495,805 5,641,420 5,649,457
8,401,629 6,498,557 5,083,296 3,868,861 2,503,358 1,732,635
- --------------------------------------------------------------------------
15,384,151 12,916,731 10,972,206 9,364,666 8,144,778 7,382,092
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
1,643,879 1,540,323 1,411,754 1,156,626 1,066,397 1,217,331
37,439 51,127 63,751 77,585 93,681 108,968
_ _ _ _ _ _
197,734 180,984 171,781 _ _ _
- --------------------------------------------------------------------------
1,879,052 1,772,434 1,647,286 1,234,211 1,160,078 1,326,299
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
1,045,611 840,321 597,723 292,478 98,861 _
1,272,393 1,290,296 1,101,270 710,676 433,667 384,254
- --------------------------------------------------------------------------
2,318,004 2,130,617 1,698,993 1,003,154 532,528 384,254
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
_ _ 14,700 14,700 14,700 14,700
_ _ _ 72,000 223,000 223,000
4,043,550 3,713,750 3,250,866 3,324,051 3,188,352 3,223,347
14.6% 12.8% 8.4% 6.1% 7.1% 6.5%
7,860,727 6,988,213 5,650,391 5,205,579 5,549,738 4,882,629
1,467,157 1,396,726 1,241,038 1,069,928 892,217 631,374
- --------------------------------------------------------------------------
9,327,884 8,384,939 6,891,429 6,275,507 6,441,955 5,514,003
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
515,796 379,015 179,645 131,678 174,502 167,572
49,794 67,417 97,040 81,491 74,500 59,885
_ _ _ 13,053 22,815 22,614
- -------------------------------------------------------------------------
565,590 446,432 276,685 200,116 226,187 204,843
_ _ _ _ _ _
_ _ _ _ _ _
- -------------------------------------------------------------------------
565,590 446,432 276,685 200,116 226,187 204,843
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
46,976 45,123 41,757 38,922 40,919 42,751
1,422,767 1,277,009 1,143,028 1,134,049 1,167,413 1,139,065
291,938 250,293 224,864 259,233 274,155 250,717
511,143 466,846 309,547 266,051 269,028 258,823
5,833 5,871 5,962 5,979 5,915 5,918
13,324 12,064 12,064 3,590 3,595 4,438
30,379 32,535 31,682 37,135 40,361 40,586
25 26 1,825 2,192 2,317 2,290
351 106 7 2,242 2,213 1,818
207,785 202,544 195,456 194,828 196,518 196,065
</TABLE>
77
