<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the thirteen weeks ended March 27, 1994 or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 1-4825
WEYERHAEUSER COMPANY
A Washington Corporation (IRS Employer Identification
No. 91-0470860)
Tacoma, Washington 98477
Telephone (206) 924-2345
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
___________________________ _________________________
Common Shares ($1.25 par value) Midwest Stock Exchange
New York Stock Exchange
Pacific Stock Exchange
Tokyo Stock Exchange
Rights to Purchase Cumulative Preference Shares, New York Stock Exchange
Fourth Series
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No ___. The number of shares outstanding of the
registrant's class of common stock, as of May 6, 1994 was
205,567,144 common shares ($1.25 par value).
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<TABLE>
<CAPTION>
WEYERHAEUSER COMPANY AND SUBSIDIARIES
Index to Form 10-Q Filing
For the Thirteen Weeks Ended March 27, 1994
Page No.
________
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statement of Earnings 5
Consolidated Balance Sheet 6-7
Consolidated Statement of Cash Flows 8-9
Notes to Financial Statements 10-15
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 16-17
Part II. Other Information
Item 1. Legal Proceedings 18-19
Item 2. Changes in Securities (not applicable)
Item 3. Defaults upon Senior Securities (not applicable)
Item 4. Submission of Matters to a Vote of Security Holders (not applicable)
Item 5. Other Information (not applicable)
Item 6. Exhibits and Reports on Form 8-K 19
</TABLE>
The financial information included in this report has been prepared in
conformity with accounting practices and methods reflected in the
financial statements included in the annual report (Form 10-K) filed
with the Securities and Exchange Commission for the year ended
December 26, 1993. Though not examined by independent public
accountants, the financial information reflects, in the opinion of
management, all adjustments necessary to present a fair statement of
results for the interim periods indicated. The results of operations
for the thirteen-week period ending March 27, 1994 should not be
regarded as necessarily indicative of the results that may be expected
for the full year.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereto duly authorized.
WEYERHAEUSER COMPANY
By /s/ K. J. Stancato
________________________________
K. J. Stancato
Duly Authorized Officer and
Principal Accounting Officer
May 9, 1994
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<TABLE>
<CAPTION>
WEYERHAEUSER COMPANY AND SUBSIDIARIES
____________
CONSOLIDATED EARNINGS
For the thirteen week periods ended
March 27, 1994 and March 28, 1993
(Dollar amounts in thousands except per share figures)
(Unaudited)
March 27, March 28,
1994 1993
----------- -----------
<S> <C> <C>
Net sales and revenues:
Weyerhaeuser $2,125,332 $2,000,532
Real estate and financial services 260,432 340,484
---------- ----------
2,385,764 2,341,016
---------- ----------
Costs and expenses:
Weyerhaeuser:
Costs of products sold 1,551,520 1,453,637
Depreciation, amortization and fee stumpage 115,949 111,416
Selling, general and administrative expenses 146,760 152,941
Research and development expenses 11,428 9,170
Taxes other than payroll and income taxes 39,004 34,182
---------- ----------
1,864,661 1,761,346
---------- ----------
Real estate and financial services:
Costs and operating expenses 185,938 218,840
Depreciation and amortization 7,594 15,936
Selling, general and administrative expenses 44,223 61,624
Taxes other than payroll and income taxes 2,208 2,801
---------- ----------
239,963 299,201
---------- ----------
2,104,624 2,060,547
---------- ----------
Operating income 281,140 280,469
Interest expense and other:
Weyerhaeuser:
Interest expense incurred 57,386 51,426
Less interest capitalized 8,018 3,231
Other income (expense), net (14,615) 58,764
Real estate and financial services:
Interest expense incurred 38,552 46,401
Less interest capitalized 20,230 19,019
Other income (expense), net 5,226 923
---------- ----------
Earnings before income taxes and extraordinary item 204,061 264,579
Income taxes before extraordinary item (Note 2) 77,500 87,168
---------- ----------
Earnings before extraordinary item 126,561 177,411
Extraordinary item, net of applicable taxes
of $33,732 (Note 9) - 52,052
---------- ----------
Net earnings $ 126,561 $ 229,463
========== ==========
Per common share (Note 1):
Earnings before extraordinary item $ .62 $ .87
Extraordinary item _ .25
--------- -----------
Net earnings $ .62 $ 1.12
========= ==========
Dividends paid $ .30 $ .30
========= ==========
See Accompanying Notes to Financial Statements
</TABLE>
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Weyerhaeuser Company
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<TABLE>
<CAPTION>
WEYERHAEUSER COMPANY AND SUBSIDIARIES
------------
CONSOLIDATED BALANCE SHEET
March 27, 1994 and December 26, 1993
(Dollar amounts in thousands)
March 27, Dec. 26,
1994 1993
------------ -------------
(Unaudited)
<S> <C> <C>
Assets
- - ------
Weyerhaeuser
Current assets:
Cash and short-term investments,
including restricted deposits $ 36,136 $ 73,257
Receivables, less allowances 820,419 782,507
Inventories (Note 3) 846,507 762,471
Prepaid expenses 294,505 280,511
----------- -----------
Total current assets 1,997,567 1,898,746
Property and equipment (Note 4) 5,585,182 5,606,072
Construction in progress 831,316 666,177
Timber and timberlands at cost, less fee
stumpage charged to disposals 606,842 604,773
Other assets and deferred charges 189,927 191,946
----------- -----------
Total assets 9,210,834 8,967,714
----------- -----------
Real estate and financial services
Cash and short-term investments,
including restricted deposits 70,484 86,598
Receivables, less discounts and allowances 128,615 135,347
Mortgage and construction notes and
mortgage loans receivable 771,022 830,569
Investments 57,836 60,355
Mortgage-backed certificates and
restricted deposits 296,621 349,757
Real estate in process of development,
less reserves 754,061 738,597
Land being processed for development,
less reserves 716,932 699,611
Deferred acquisition costs 40,119 39,751
Other assets 709,448 730,154
----------- -----------
Total assets 3,545,138 3,670,739
----------- -----------
$12,755,972 $12,638,453
=========== ===========
See Accompanying Notes to Financial Statements
</TABLE>
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Weyerhaeuser Company
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<TABLE>
<CAPTION>
March 27, Dec. 26,
1994 1993
----------- -----------
(Unaudited)
<S> <C> <C>
Liabilities and shareholders' interest
- - --------------------------------------
Weyerhaeuser
Current liabilities:
Notes payable $ 2,157 $ 4,624
Current maturities of senior long-term debt 14,052 14,522
Accounts payable 507,320 492,040
Accrued liabilities (Note 5) 636,743 565,002
----------- -----------
Total current liabilities 1,160,272 1,076,188
Senior long-term debt (Note 6) 3,072,306 2,997,890
Deferred income taxes 935,288 904,332
Deferred pension and other liabilities 559,229 535,162
Minority interest in subsidiaries 108,569 109,314
Commitments (Note 8) _ _
----------- -----------
Total liabilities 5,835,664 5,622,886
----------- -----------
Real estate and financial services
Notes and commercial paper 143,871 289,038
Collateralized mortgage obligation bonds 258,928 307,416
Long-term debt (Note 6) 2,116,015 1,997,146
Other liabilities 384,303 455,871
----------- -----------
Total liabilities 2,903,117 3,049,471
----------- -----------
Shareholders' interest (Note 7)
Common shares: authorized 400,000,000 shares,
issued 206,072,890 shares, $1.25 par value 257,591 257,591
Other capital 415,754 411,096
Cumulative translation adjustment (101,597) (73,363)
Retained earnings 3,456,126 3,391,217
Treasury common shares, at cost:
509,171 and 983,952 (10,683) (20,445)
----------- -----------
Total shareholders' interest 4,017,191 3,966,096
----------- -----------
$12,755,972 $12,638,453
=========== ===========
</TABLE>
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Weyerhaeuser Company
- - -8-
<TABLE>
<CAPTION>
WEYERHAEUSER COMPANY AND SUBSIDIARIES
------------
CONSOLIDATED STATEMENT OF CASH FLOWS
For thirteen-week periods ended
March 27, 1994 and March 28, 1993
(Dollar amounts in thousands)
(Unaudited)
Consolidated
----------------------
March 27, March 28,
1994 1993
---------- ----------
<S> <C> <C>
Cash flows provided by operations:
Net earnings $ 126,561 $ 229,463
Non-cash charges to income:
Depreciation, amortization and fee stumpage 123,543 127,352
Deferred income taxes, net 30,200 20,433
Contributions to employee investment plans _ 2,462
Extraordinary item, including current tax benefit _ (90,419)
Deferred income taxes on extraordinary item _ 38,367
Changes in working capital:
Receivables (29,538) (103,612)
Inventories, prepaid expenses, real estate
and land (129,998) (180,241)
Mortgages held for sale 46,534 159,620
Other liabilities 1,922 157,531
(Gain) loss on disposition of assets (2,050) (2,498)
Gain on sale of a business _ (70,199)
Other 21,649 7,013
--------- ---------
Net cash provided by operations 188,823 295,272
--------- ---------
Cash flows from investing in the business:
Property and equipment (260,715) (164,865)
Timber and timberlands (7,387) (6,776)
Mortgage and investment securities acquired (2,412) (766,852)
Proceeds from sale of:
Property and equipment 22,228 5,311
Business _ 204,100
Mortgage and investment securities 51,759 341,800
Other (2,476) (37,168)
--------- ---------
Net cash flows from investing in the business (199,003) (424,450)
--------- ---------
Cash flows from financing activities:
Sale of debentures, notes
and CMO bonds 122,130 428,976
Sale of industrial revenue bonds 50,000 _
Notes and commercial paper borrowings, net 59,730 (164,580)
Proceeds from issuance of investment contracts _ 60,943
Cash dividends on common shares (61,652) (61,346)
Payments on debentures, notes, bank credit
agreements, income debenture, capital leases,
industrial revenue bonds and CMO bonds (235,198) (436,364)
Exercise of stock options 14,278 12,481
Other 7,657 6,472
--------- ---------
Net cash flows from financing activities (43,055) (153,418)
--------- ---------
Net increase (decrease) in cash and short-term investments (53,235) (282,596)
Cash and short-term investments at beginning of year 159,855 524,325
--------- ---------
Cash and short-term investments at end of period $ 106,620 $ 241,729
========= =========
Cash paid (received) during the year for:
Interest, net of amount capitalized $ 95,830 $ 125,254
========= =========
Income taxes $ 24,758 $ 12,134
========= =========
See Accompanying Notes to Financial Statements
</TABLE>
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Weyerhaeuser Company
- - -9-
<TABLE>
<CAPTION>
Real Estate and
Weyerhaeuser Financial Services
------------------------- -------------------------
March 27, March 28, March 27, March 28,
1994 1993 1994 1993
--------- --------- --------- ---------
<C> <C> <C> <C>
$ 121,202 $ 220,720 $ 5,359 $ 8,743
115,949 111,416 7,594 15,936
30,956 22,538 (756) (2,105)
_ 2,462 _ _
_ (90,419) _ _
- 38,367 - -
(37,907) (104,357) 8,369 745
(98,016) (149,098) (31,982) (31,143)
- - 46,534 159,620
74,190 66,534 (72,268) 90,997
1,466 (2,452) (3,516) (46)
_ (70,199) _ _
1,666 (5,088) 19,983 12,101
--------- --------- --------- ---------
209,506 40,424 (20,683) 254,848
--------- --------- --------- ---------
(258,422) (153,857) (2,293) (11,008)
(7,387) (6,776) _ _
- - (2,412) (766,852)
1,868 5,143 20,360 168
- 204,100 _ _
- - 51,759 341,800
(15,124) (70,672) 12,648 33,504
--------- --------- --------- ---------
(279,065) (22,062) 80,062 (402,388)
--------- --------- --------- ---------
115,687 255,213 6,443 173,763
50,000 _ _ _
31,145 9,292 28,585 (173,872)
- - - 60,943
(61,652) (61,346) _ _
(124,677) (216,683) (110,521) (219,681)
14,278 12,481 _ _
7,657 6,472 - -
--------- --------- --------- ---------
32,438 5,429 (75,493) (158,847)
--------- --------- --------- ---------
(37,121) 23,791 (16,114) (306,387)
73,257 40,985 86,598 483,340
--------- --------- --------- ---------
$ 36,136 $ 64,776 $ 70,484 $ 176,953
========= ========= ========= =========
$ 76,293 $ 94,485 $ 19,537 $ 30,769
========= ========= ========= =========
$ (43,397) $ 10,808 $ 68,155 $ 1,326
========= ========= ========= =========
</TABLE>
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Weyerhaeuser Company
- - -10-
WEYERHAEUSER COMPANY AND SUBSIDIARIES
____________
NOTES TO FINANCIAL STATEMENTS
For the thirteen-week periods ended March 27, 1994 and March 28, 1993
(Dollar amounts in thousands except per share figures)
Note 1: Summary of Significant Accounting and Reporting Policies
Consolidation
The consolidated financial statements include the accounts of
Weyerhaeuser Company and all of its majority-owned domestic and
foreign subsidiaries. Significant intercompany transactions and
accounts are eliminated.
Certain of the consolidated financial statements and notes to
financial statements are presented in two groupings: (1) Weyerhaeuser
Company (Weyerhaeuser, or the company), which is principally engaged
in the growing and harvesting of timber and the manufacture,
distribution and sale of forest products, and (2) Real estate and
financial services, which includes Weyerhaeuser Real Estate Company
(WRECO), which is involved in real estate development and
construction, and Weyerhaeuser Financial Services, Inc. (WFS), whose
principal subsidiaries are Weyerhaeuser Mortgage Company (WMC) and
Mortgage Securities Corporations. GNA Corporation, a subsidiary of
WFS, was sold in April 1993.
Net Earnings Per Common Share
Net earnings per common share are based on the weighted average number
of common shares outstanding during the respective periods. Average
common equivalent shares (stock options) outstanding have not been
included, as the computation would not be dilutive. Weighted average
common shares outstanding were 205,429,534 and 204,554,142 at
March 27, 1994 and March 28, 1993, respectively.
Fully diluted earnings-per-share amounts are not applicable because
the effect of the conversion of the stock options is not dilutive.
Accounting Changes
In November 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 112, Employers'
Accounting for Postemployment Benefits (SFAS 112), which requires
accrual accounting be used for the cost of benefits provided to former
or inactive employees who have not yet retired. In the first quarter
of 1994, the company adopted SFAS 112 by recording a cumulative catch-
up to earnings. The adoption of this pronouncement did not have a
significant impact on the company's results of operations or its
financial position.
Inventories
Inventories are stated at the lower of cost or market. Cost includes
labor, materials and production overhead. The last-in, first-out
(LIFO) method is used to cost the majority of domestic raw materials,
in process and finished goods inventories; either the first-in, first-
out (FIFO) or average cost method is used to cost all other
inventories.
Property and Equipment
The company's property accounts are maintained on an individual asset
basis. Betterments and replacements of major units are capitalized.
Maintenance, repairs and minor replacements are expensed.
Depreciation is provided generally on the straight-line or unit-of-
production methods at rates based on estimated service lives.
Amortization of logging rail and truck roads is provided generally as
timber is harvested and is based upon rates determined with reference
to the volume of timber estimated to be removed over such facilities.
The cost and related depreciation of property sold or retired is
removed from the property and allowance for depreciation accounts and
gain or loss is recorded.
<PAGE>
Weyerhaeuser Company
- - -11-
Timber and Timberlands
Timber and timberlands are carried at cost less fee stumpage charged
to disposals. Fee stumpage is the cost of standing timber and is
charged to fee timber disposals as fee timber is harvested, lost as
the result of casualty or sold. Stumpage rates are determined with
reference to the cost of timber and the related volume of timber
estimated to be recoverable. Timber carrying costs are expensed as
incurred.
Income Taxes
Under SFAS No. 109, Accounting for Income Taxes,
deferred income taxes are provided to reflect
temporary differences between the financial and tax bases of assets
and liabilities using presently enacted tax rates and laws.
Pension Plans
The company has pension plans covering most of its employees. The
U.S. plan covering salaried employees provides pension benefits based
on the employee's highest monthly earnings for five consecutive years
during the final ten years before retirement. Plans covering hourly
employees generally provide benefits of stated amounts for each year
of service. Contributions to U.S. plans are based on funding
standards established by the Employee Retirement Income Security Act
of 1974 (ERISA).
Postretirement Benefits Other Than Pensions
In addition to providing pension benefits, the company provides
certain health care and life insurance benefits for some retired
employees and accrues the expected future cost of these benefits for
its current eligible retirees and some employees. All of the
company's salaried employees and some hourly employees may become
eligible for these benefits when they retire.
Cash and Short-Term Investments
For purposes of cash flow and fair value reporting, short-term
investments with original maturities of 90 days or less are considered
as cash equivalents. Short-term investments are stated at cost, which
approximates market.
Foreign Exchange Contracts
The company enters into foreign exchange contracts as a hedge for
foreign accounts receivable. Market value gains and losses are
recognized and offset against foreign exchange gains or losses on the
foreign receivables.
Reclassifications
Certain reclassifications have been made to conform prior years' data
to the current format.
WRECO
WRECO recognizes income from the sales of single family housing units
when construction has been completed, required down payments received
and title has passed to the customer. Income from the sales of multi-
family, commercial properties, developed lots and undeveloped land is
recognized when required down payments are received and other income
recognition criteria are satisfied.
Real estate is stated at the lower of cost or net realizable value.
The determination of net realizable value is based on WRECO's plans
for its property and its financial ability to carry out such plans.
Changes in future market demand, interest rates and company plans may
affect net realizable value. Land, land development and construction
costs, including capitalized carrying costs, are accumulated and
allocated to individual units in proportion to relative sales value.
<PAGE>
Weyerhaeuser Company
- - -12-
Weyerhaeuser Financial Services
Weyerhaeuser Mortgage Company and its subsidiaries are primarily
engaged in the mortgage banking industry and also offer insurance
services.
- Mortgage notes held for sale are stated at the lower of cost or
market, which is computed by the aggregate method (unrealized
losses are offset by unrealized gains). Hedging transactions are
entered into to protect the inventory value from increases in
interest rates. Hedge positions are also used to protect the
pipeline of loan applications in process from increases in
interest rates. Hedging gains and losses realized during the
commitment and warehousing period are deferred to the extent of
unrealized gains on the related mortgage loans held for sale.
- The costs associated with purchasing mortgage servicing rights are
deferred. Excess service fees result from loan sales in which WMC
retains the loan servicing rights and are based on the present
value of future servicing revenue less a normal servicing fee,
based upon the estimated remaining life of the loans sold.
The Mortgage Securities Corporations were formed for the limited
purpose of issuing collateralized mortgage obligation bonds (CMO
bonds) secured by Government National Mortgage Association and Federal
National Mortgage Association certificates. The CMO bonds are the
sole obligation of the issuer, and neither the company nor any
affiliated company has guaranteed or is otherwise obligated with
respect to the CMO bonds.
- The mortgage-backed certificates are carried at par value adjusted
for any unamortized discount or premium. These discounts or
premiums are amortized using a method that approximates the
effective interest method over the estimated life of the
underlying mortgage loans.
- CMO bonds are carried at unamortized cost. Discounts and premiums
are amortized using a method that approximates the effective
interest method over their estimated life.
In April 1993, WFS completed the sale of GNA Corporation. As a part
of that transaction, Weyerhaeuser assumed $225 million of outstanding
GNA debt. GNA Corporation and its life insurance subsidiaries
provided annuities, insurance and securities marketed through
financial institutions. During its operation:
- Payments received on investment and limited payment contracts were
recorded directly as deposits.
- Investment income was recorded when earned.
- Investments in bonds were stated at amortized cost; mortgage loans
and other investments were carried at cost.
- The liability for future annuity and contract reserves on single
premium deferred annuities and single premium whole life policies
was the contract holder's account value. The reserve for single
premium immediate annuity benefits was the present value of such
benefits.
<PAGE>
Weyerhaeuser Company
- - -13-
Note 2: Income Taxes
Provisions for income taxes include the following:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
-----------------------
March 27, March 28,
1994 1993
--------- ----------
<S> <C> <C>
Federal:
Current $ 31,200 $ 52,961
Deferred 25,500 40,100
--------- ---------
56,700 93,061
--------- ---------
State:
Current 5,900 8,474
Deferred 1,600 4,000
--------- ---------
7,500 12,474
--------- ---------
Foreign:
Current 10,200 5,300
Deferred 3,100 (23,667)
--------- ---------
13,300 (18,367)
--------- ---------
Income taxes before apportionment to
extraordinary item 77,500 87,168
--------- ---------
Income taxes apportionable to
extraordinary item:
Current - (4,635)
Deferred _ 38,367
--------- ---------
_ 33,732
--------- ---------
$ 77,500 $ 120,900
========= =========
</TABLE>
Income tax provisions for interim periods are based on the current
best estimate of the effective tax rate expected to be applicable for
the full year. The effective tax rate reflects anticipated tax
credits, foreign taxes and other tax planning alternatives.
For the period ended March 27, 1994, the company's provision for
income taxes as a percent of earnings before income taxes is greater
than the 35% federal statutory rate due principally to the effect of
state income taxes. The effective tax rates for the thirteen week
periods ended March 27, 1994 and March 28, 1993 are 38% and 34.5%,
respectively.
Under the SFAS 109 liability method, deferred taxes are provided for
the temporary differences between the financial and tax bases of
assets and liabilities, applying presently enacted tax rates and laws.
The major sources of these temporary differences include depreciable
and depletable assets, real estate, restructuring reserves, and
pension and retiree health care liabilities.
<PAGE>
Weyerhaeuser Company
- - -14-
<TABLE>
Note 3: Inventories
<CAPTION>
Inventories consist of the following:
March 27, Dec. 26,
1994 1993
---------- ---------
<S> <C> <C>
Logs and chips $ 127,570 $ 103,195
Lumber, plywood and panels 144,859 92,488
Pulp, newsprint and paper 135,075 124,131
Containerboard, paperboard and containers 71,829 70,915
Other products 117,165 121,949
Materials and supplies 250,009 249,793
--------- ---------
$ 846,507 $ 762,471
========= =========
</TABLE>
<TABLE>
Note 4: Property and Equipment
<CAPTION>
March 27, Dec. 26,
1994 1993
----------- -----------
<S> <C> <C>
Property and equipment, at cost:
Land $ 157,348 $ 157,611
Buildings and improvements 1,426,266 1,416,740
Machinery and equipment 7,854,366 7,839,070
Rail and truck roads and other 618,449 620,136
----------- -----------
10,056,429 10,033,557
Less allowance for depreciation
and amortization 4,471,247 4,427,485
----------- -----------
$ 5,585,182 $ 5,606,072
=========== ===========
</TABLE>
<TABLE>
Note 5: Accrued Liabilities
<CAPTION>
Accrued liabilities are as follows:
March 27, Dec. 26,
1994 1993
---------- -----------
<S> <C> <C>
Payroll - wages and salaries, incentive awards,
retirement, vacation pay and severance pay $ 226,511 $ 239,434
Taxes - social security and real
and personal property 67,221 58,952
Interest 40,041 66,967
Income taxes 73,517 12,166
Other 229,453 187,483
---------- -----------
$ 636,743 $ 565,002
========== ===========
</TABLE>
Note 6: Long-Term Debt
The company's lines of credit include:
(a) A four-year competitive advance and revolving credit facility
agreement entered into in 1990 with a group of banks which
provides for borrowings of up to the total amount of $1,650,000,
all of which can be availed of by the company and $1,000,000 which
can be availed of by WMC. Borrowings are at LIBOR or other such
interest rates as mutually agreed to between the borrower and
lending banks. This credit facility agreement has been extended
through November 1995.
<PAGE>
Weyerhaeuser Company
- - -15-
<TABLE>
<CAPTION>
(b) A one-year evergreen credit commitment entered into in 1990 with a
group of banks which provides for borrowings of up to the amounts,
and by the entities, as follows:
March 27, Dec. 26,
1994 1993
--------- ---------
<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 March 27, 1994 and December 26, 1993, WMC had $35,000
outstanding against this commitment.
WMC has a revolving credit agreement with a bank to provide for: (1)
borrowings up to $35,000 for three years at prime rate, LIBOR or such
other rate as may be agreed upon by WMC and the banks, (2) a
commitment fee based on the unused credit, and (3) conversion of the
notes as of July 1, 1995, to a five-year term loan payable in equal
quarterly installments. At March 27, 1994, and December 26, 1993,
$30,000 was outstanding under the revolving credit agreement.
During 1992, WFS entered into a three-year term loan facility which
provides for (1) borrowings of up to $295,000 at March 27, 1994 and
December 26, 1993, respectively, at LIBOR or such other rates as may
be agreed upon by WFS and the banks; and (2) a commitment fee based on
the unused credit. $295,000 was outstanding against this facility at
March 27, 1994 and December 26, 1993.
To the extent that these credit commitments expire more than one year
after the balance sheet date and are unused, an equal amount of
commercial paper is classifiable as long-term debt. Amounts so
classified are:
<TABLE>
<CAPTION>
March 27, Dec. 26,
1994 1993
--------- ---------
<S> <C> <C>
Weyerhaeuser $ 524,872 $ 378,727
Real estate and financial services 790,658 616,906
</TABLE>
No portion of these lines has been availed of by the company, WRECO,
WFS, or WMC at March 27, 1994 or December 26, 1993, except as noted.
In 1993, WFS completed the sale of GNA Corporation. As a part of this
transaction, the company assumed $225,000 of outstanding GNA debt.
Total interest costs incurred by WRECO are capitalized and will
ultimately be accounted for as an element of operating costs.
The company's compensating balance agreements were not significant.
Note 7: Shareholders' Interest
Common shares reserved for stock option plans and for conversion of
issued and outstanding convertible subordinated debentures were
5,716,000 shares at March 27, 1994 and 5,178,000 shares at December
26, 1993.
Note 8: Commitments
The company's capital expenditures have averaged about $823,000 in
recent years but are expected to be approximately $1,100,000 in 1994;
however, the 1994 expenditure level could be increased or decreased as
a consequence of future economic conditions.
Note 9: Extraordinary Item
During the 1993 first quarter, the company realized a net gain of
$52,052 ($85,784 less related tax effect of $33,732) as a result of
extinguishing certain debt obligations.
<PAGE>
Weyerhaeuser Company
- - -16-
WEYERHAEUSER COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
<TABLE>
Net sales and revenues and earnings before interest expense, income
taxes and extraordinary item by segment are:
<CAPTION>
Thirteen Weeks Ended
--------------------------
March 27, March 28,
1994 1993
----------- -----------
<S> <C> <C>
Net sales and revenues:
Timberlands and wood products $ 1,181,714 $ 1,010,705
Pulp and paper products 902,913 887,394
Real estate 200,487 151,267
Financial services 59,945 189,217
Corporate and other 40,705 102,433
----------- -----------
$ 2,385,764 $ 2,341,016
=========== ===========
Earnings before interest expense,
income taxes and extraordinary item:
Timberlands and wood products $ 282,933 $ 225,744
Pulp and paper products 5,239 34,965
Real estate 1,020 1,062
Financial services(1) 6,353 13,762
Corporate and other (42,116) 37,241
----------- -----------
$ 253,429 $ 312,774
=========== ===========
(1)Includes interest expense of $18,322 and $27,382 related to the
financial services businesses.
</TABLE>
Net sales were $2.4 billion in the first quarter of 1994, up 2 percent
from the $2.3 billion for the comparable quarter of a year ago. Net
earnings were $126.6 million or 62 cents per common share, compared to
$229.5 million or $1.12 per common share in the first quarter of 1993.
Included in the results for the first quarter of 1993 were after-tax
gains of $44 million, or 22 cents per common share, on the sale of the
company's infant diaper business and $52 million, or 25 cents per
common share, on the extinguishment of debt. The latter item was
reported as an extraordinary gain on the company's consolidated
statement of earnings.
Pre-tax earnings of $204 million in the first quarter of 1994 were up
5 percent from the $194 million reported in the year ago quarter;
however, on a per-share basis, earnings before special items declined
from 65 cents in the 1993 first quarter to 62 cents in the 1994 first
quarter primarily reflecting an increased federal income tax rate.
Operating earnings for the timberlands and wood products segment were
$283 million for the current quarter, up 25 percent from the
$226 million in the 1993 first quarter. The wood products businesses
benefited from good prices in the first quarter, especially in lumber
and oriented strand board. The export log business returned to normal
levels of activity.
The pulp and paper segment's operating earnings were $5 million for
the first quarter of 1994 compared with $35 million in the same
quarter of 1993. Prices in most product lines remained below levels
of a year ago. As a result of recent price improvements in market
pulp and containerboard packaging, this segment showed improved
operating performance compared with a loss in the fourth quarter of
1993.
The company's real estate and financial services segments earned
$7 million in the quarter compared with $15 million in the year ago
quarter. In 1993, the financial services segment included first
quarter profits from GNA Corporation, its wholly owned subsidiary,
which was sold in April 1993.
The increase in the company's interest expense incurred and interest
capitalized is related to the major mill modernization projects
underway at the Plymouth, North Carolina and Longview, Washington
facilities.
<PAGE>
Weyerhaeuser Company
- - -17-
Other income is an aggregation of both recurring and occasional non-
operating income and expense items and, as a result, fluctuates from
period to period. No individual income or (expense) item is
significant in relation to net earnings other than the $70.2 million
gain on the disposal of the company's investment in the infant diaper
business in the first quarter of 1993.
Working capital for Weyerhaeuser increased $15 million from year end
1993, primarily in receivables and inventory and offset, partially, by
a decrease in cash and short-term investments and by an increase in
accounts payable and accrued liabilities.
During the first quarter of 1994, the company paid $62 million in cash
dividends and made capital expenditures of $268 million. The cash
needed to meet these and other company needs was generated from
internal cash flow.
The company now anticipates total capital expenditures for 1994 to
approximate $1.1 billion. As a result of advances in measurement
technology, minute amounts of dioxin have been detected in waste water
effluent, sludges and pulp from U.S. bleached kraft pulp mills,
including certain of the company's mills. The company has allocated
substantial capital to, and has made very significant progress in,
reducing dioxin in the mills' sludge, pulp, effluent and ultimate
product. The company does not believe that compliance with current
environmental laws and regulations had a material adverse effect on
its capital expenditures, earnings or competitive position in the
first quarter of 1994, nor is it expected to in the remainder of 1994
or 1995.
The company is committed to the maintenance of a sound, conservative
capital structure. This commitment is based upon two considerations:
the obligation to protect the underlying interests of its shareholders
and lenders and the desire to have access, at all times, to all major
financial markets.
The important elements of the policy governing the company's capital
structure are as follows:
- To view separately the capital structures of Weyerhaeuser Company,
Weyerhaeuser Real Estate Company and Weyerhaeuser Financial
Services, Inc. given the very different nature of their assets and
business activities. The amount of debt and equity associated
with the capital structure of each will reflect the basic earnings
capacity, real value and unique liquidity characteristics of the
assets dedicated to that business.
- The combination of maturing short-term debt and the structure of
long-term debt will be managed judiciously to minimize liquidity
risk.
For the thirteen weeks ended March 27, 1994, earnings before interest
expense and income taxes plus non-cash charges for the timberlands and
wood products and the pulp and paper products segments were
$327 million and $74 million, respectively. Capital expenditures
during this period were $45 million by timberlands and wood products,
$215 million by pulp and paper products and $8 million by other
segments.
<PAGE>
Weyerhaeuser Company
- - -18-
Part II. Other Information
Item 1. Legal Proceedings
Trial began in May 1992 in a federal income tax refund case that the
company filed in July 1989 in the United States Claims Court. The
complaint seeks a refund of federal income taxes that the company
contends it overpaid in 1977 through 1983. The alleged overpayments
are the result of the disallowance of certain timber casualty losses
and certain deductions claimed by the company arising from export
transactions. The refund sought was approximately $29 million, plus
statutory interest from the dates of the alleged overpayments. The
company 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 seven 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 thousand
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. EPA withdrew its compliant against
the company with prejudice on March 29, 1994.
In April 1992, the Georgia Department of Natural Resources,
Environmental Protection Division issued a Notice of Violation to the
company's Adel, Georgia particleboard plant citing violations of
particulate emission standards. A consent order was entered into on
September 18, 1992 assessing a $35 thousand penalty and a stipulated
penalty of 100 dollars per day until the facility is in full
compliance with particulate emission requirements. The Consent Order
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 thousand. The State of Alabama has issued a
compliance order with penalties totaling $100 thousand for
noncompliance with PSD regulations at the company's Millport facility.
The company and North Carolina's Division of Environmental Management
have entered into a consent agreement for its Elkin, North Carolina
facility involving penalties of $140 thousand and are currently
negotiating a separate consent agreement for its Moncure, North
Carolina facility involving penalties of $140 thousand. The company
has signed a consent agreement including penalties of $140 thousand
relating to PSD issues at the company's Wright City, Oklahoma facility
with the State of Oklahoma Department of Environmental Quality. The
company is negotiating a consent agreement with the State of Arkansas
concerning PSD related issues for two facilities in that state
involving $375 thousand in total penalties for both facilities.
Region V of the EPA has issued a Notice of Violation for permit
violations at the company's Grayling, Michigan facility. The company
is negotiating 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 thousand. In
September 1992, the EPA issued a Section 114 Request for Information
concerning PSD compliance at the company's oriented strand board and
medium density fiberboard mills. In June 1993, the EPA issued a
similar Section 114 request for the company's plywood and
particleboard mills. The company is also undertaking a review of its
pulp and paper facilities for PSD compliance. The company recently
learned that the EPA may initiate a national PSD enforcement action
against the company and other forest product companies.
<PAGE>
Weyerhaeuser Company
- - -19-
Part II.
Item 1. 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 thousand and
penalties of 500 dollars per day until compliance is demonstrated.
The SFO requires demonstrated compliance by December 1993 and a
historical evaluation of the facility's PSD status. The company has
submitted a plant site PSD review to the state and is awaiting its
review.
In August 1992, the EPA issued an administrative complaint for the
assessment of $215 thousand in civil penalties against the company's
Longview, Washington facility. The penalties are based upon alleged
violations of the record keeping and storage provisions of the
polychlorinated biphenyls rules contained in the TSCA. The company
and the EPA settled the compliant for a maximum penalty of
$118 thousand, 50% of which was paid when the settlement was signed.
Payment of the remaining 50% was deferred and will be eliminated based
on the expenditure of more than $118 thousand by the company to
dispose of PCB contaminated transformers at Longview during 1993.
On November 2, 1992, an action was filed against the company in the
Circuit Court for the First Judicial District of Hinds County,
Mississippi on behalf of a purported class of riparian property owners
in Mississippi and Alabama whose properties are located on the
Tennessee Tombigbee Waterway, Aliceville Lake, Cedar Creek and the
Magoway Creek. The complaint seeks $1 billion in compensatory and
punitive damages for diminution in property value, personal injuries
and mental anguish allegedly resulting from the discharge of purported
hazardous substances, including dioxins and furans, by the company's
pulp and paper mill in Columbus, Mississippi and the alleged
fraudulent concealments of such discharge. The complaint also seeks
an injunction prohibiting future releases and the removal of hazardous
substances allegedly released in the past. On August 20, 1993, a
companion action was filed in Green County, Alabama on behalf of a
similar purported class of riparian owners with essentially the same
claims as the Mississippi case. The action was removed to the Federal
District Court for the Northern District of Alabama, which
subsequently remanded the case to state court. Neither action is
presently scheduled for trial.
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. In
March 1994, a jury returned a verdict against the company awarding
damages of $1.2 million.
The company is also a party to various proceedings relating to the
clean up of hazardous waste sites under the Comprehensive
Environmental Response Compensation and Liability Act, commonly known
as "Superfund," and similar state laws. The Environmental Protection
Agency and/or various state agencies have notified the company that it
may be a potentially responsible party with respect to other hazardous
waste sites as to which no proceedings have been instituted against
the company. The company is also a party to other legal proceedings
generally incidental to its business. Although the final outcome of
any legal proceeding is subject to a great many variables and cannot
be predicted with any degree of certainty, the company presently
believes that any ultimate liability resulting from the legal
proceedings discussed herein, or all of them combined, would not have
a material effect on the company's financial position.
Item 6. Exhibits and Reports on Form 8-K
(a) Not applicable.
(b) The registrant has not filed a report on Form 8-K during the
fiscal quarter for which this report on Form 10-Q is filed.