SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
X 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the thirteen weeks ended March 30, 1997 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 (253) 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) Chicago Stock Exchange
New York Stock Exchange
Pacific Stock Exchange
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 2, 1997 was 198,242,115 common shares ($1.25 par value).
<PAGE>
Weyerhaeuser Company
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<TABLE>
<CAPTION>
WEYERHAEUSER COMPANY AND SUBSIDIARIES
Index to Form 10-Q Filing
For the Thirteen Weeks Ended March 30, 1997
Page No.
----------------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statement of Earnings 3
Consolidated Balance Sheet 4-5
Consolidated Statement of Cash Flows 6-7
Notes to Financial Statements 9-15
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 16-20
Part II. Other Information
Item 1. Legal Proceedings 20-22
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 22
</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
29, 1996. 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 30, 1997 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, 1997
<PAGE>
Weyerhaeuser Company
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<TABLE>
<CAPTION>
WEYERHAEUSER COMPANY AND SUBSIDIARIES
____________
CONSOLIDATED EARNINGS
For the thirteen week periods
ended March 30, 1997 and March 31, 1996
(Dollar amounts in millions except per share figures)
(Unaudited)
March 30, March 31,
1997 1996
--------- ---------
<S> <C> <C>
Net sales and revenues:
Weyerhaeuser $ 2,394 $ 2,373
Real estate and financial services 214 232
--------- ---------
Net sales and revenues 2,608 2,605
--------- ---------
Costs and expenses:
Weyerhaeuser:
Costs of products sold 1,888 1,739
Depreciation, amortization and fee stumpage 161 142
Selling, general and administrative expenses 152 178
Research and development expenses 13 14
Taxes other than payroll and income taxes 37 37
Charge for closure or disposition of facilities 49 --
--------- ---------
2,300 2,110
--------- ---------
Real estate and financial services:
Costs and operating expenses 153 164
Depreciation and amortization 4 5
Selling, general and administrative expenses 45 37
Taxes other than payroll and income taxes 2 2
--------- ---------
204 208
--------- ---------
Total costs and expenses 2,504 2,318
--------- ---------
Operating income 104 287
Interest expense and other:
Weyerhaeuser:
Interest expense incurred 69 65
Less interest capitalized 4 6
Other income (expense), net (2) 7
Real estate and financial services:
Interest expense incurred 33 34
Less interest capitalized 18 18
Other income (expense), net 11 3
--------- ---------
Earnings before income taxes 33 222
Income taxes (Note 2) 12 80
--------- ---------
Net earnings $ 21 $ 142
========= =========
Per common share (Note 1):
Net earnings $ .10 $ .72
========= =========
Dividends paid $ .40 $ .40
========= =========
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
Weyerhaeuser Company
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<TABLE>
<CAPTION>
WEYERHAEUSER COMPANY AND SUBSIDIARIES
____________
CONSOLIDATED BALANCE SHEET
March 30, 1997 and December 29, 1996
(Dollar amounts in millions)
March 30, Dec. 29,
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
Assets
- ------
Weyerhaeuser
Current assets:
Cash and short-term investments (Note 1) $ 38 $ 33
Receivables, less allowances 954 902
Inventories (Note 3) 1,079 1,001
Prepaid expenses 304 289
----------- -----------
Total current assets 2,375 2,225
Property and equipment (Note 4) 6,887 7,007
Construction in progress 445 417
Timber and timberlands at cost, less fee
stumpage charged to disposals 1,078 1,073
Other assets and deferred charges 236 246
----------- -----------
11,021 10,968
----------- -----------
Real estate and financial services
Cash and short-term investments,
including restricted deposits 49 38
Receivables, less discounts and allowances 88 99
Mortgage notes held for sale 410 334
Mortgage loans receivable 119 133
Mortgage-backed certificates and
other pledged financial instruments 149 154
Real estate in process of development
and for sale 693 680
Land being processed for development 758 719
Investments in and advances to joint ventures
and limited partnerships, less reserves 106 115
Rental properties, less accumulated depreciation 149 150
Other assets 132 206
----------- -----------
2,653 2,628
----------- -----------
Total assets $ 13,674 $ 13,596
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
Weyerhaeuser Company
- -5-
<TABLE>
<CAPTION>
March 30, Dec. 29,
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
Liabilities and shareholders' interest
- --------------------------------------
Weyerhaeuser
Current liabilities:
Notes payable $ 13 $ 16
Current maturities of long-term debt 61 80
Accounts payable (Note 1) 728 725
Accrued liabilities (Note 5) 583 662
----------- -----------
Total current liabilities 1,385 1,483
Long-term debt (Note 7) 3,751 3,546
Deferred income taxes 1,324 1,324
Deferred pension and other liabilities 493 493
Minority interest in subsidiaries 114 113
Commitments and contingencies (Note 9) -- --
----------- -----------
7,067 6,959
----------- -----------
Real estate and financial services
Notes payable and commercial paper 269 245
Long-term debt (Note 7) 1,577 1,537
Other liabilities 215 251
Commitments and contingencies (Note 9) -- --
----------- -----------
2,061 2,033
----------- -----------
Total liabilities 9,128 8,992
----------- -----------
Shareholders' interest (Note 8)
Common shares: authorized 400,000,000 shares,
issued 206,072,890 shares, $1.25 par value 258 258
Other capital 405 407
Cumulative translation adjustment (101) (93)
Retained earnings 4,313 4,372
Treasury common shares, at cost:
7,483,170 and 7,736,601 (329) (340)
----------- -----------
Total shareholders' interest 4,546 4,604
----------- -----------
Total liabilities and shareholders'interest $ 13,674 $ 13,596
=========== ===========
</TABLE>
<PAGE>
Weyerhaeuser Company
- -6-
<TABLE>
<CAPTION>
WEYERHAEUSER COMPANY AND SUBSIDIARIES
____________
CONSOLIDATED STATEMENT OF CASH FLOWS
For the thirteen week periods ended March 30, 1997 and March 31, 1996
(Dollar amounts in millions)
(Unaudited)
Consolidated
-------------------
March 30, March 31,
1997 1996
--------- ---------
<S> <C> <C>
Cash provided by (used for) operations:
Net earnings $ 21 $ 142
Non-cash charges to income:
Depreciation, amortization and fee stumpage 165 147
Deferred income taxes, net 7 50
Charge for closure or disposition of facilities 49 --
Decrease (increase) in working capital:
Accounts receivable (48) (51)
Inventories, prepaid expenses, real estate
and land (147) (134)
Mortgage notes held for sale and
mortgage loans receivable (60) (138)
Accounts payable and accrued liabilities (73) (201)
Loss on disposition of assets 11 11
Loss on disposition of a business 8 --
Other (7) (20)
--------- ---------
Cash (used for) operations (74) (194)
--------- ---------
Cash provided by (used for) investing activities:
Property and equipment (109) (182)
Timber and timberlands (20) (239)
Mortgage and investment securities acquired (1) (2)
Proceeds from sale of:
Property and equipment 3 2
Mortgage and investment securities 6 83
A business 12 --
Other 24 14
--------- ---------
Cash provided by (used for) investing activities (85) (324)
--------- ---------
Cash provided by (used for) financing activities:
Issuances of debt 8 5
Notes and commercial paper borrowings, net 296 679
Cash dividends on common shares (80) (79)
Payments on debt (57) (66)
Purchase of treasury common shares -- (34)
Exercise of stock options 9 8
Other (1) --
--------- ---------
Cash provided by financing activities 175 513
--------- ---------
Net increase (decrease) in cash and
short-term investments 16 (5)
Cash and short-term investments at beginning of year 71 84
--------- ---------
Cash and short-term investments at end of period $ 87 $ 79
========= =========
Cash paid (received) during the period for:
Interest, net of amount capitalized $ 120 $ 116
========= =========
Income taxes $ 6 $ 90
========= =========
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
Weyerhaeuser Company
- -7-
<TABLE>
<CAPTION>
Real Estate and
Weyerhaeuser Financial Services
- ------------------- -------------------
March 30, March 31, March 30, March 31,
1997 1996 1997 1996
- --------- --------- --------- ---------
<C> <C> <C> <C>
$ 17 $ 137 $ 4 $ 5
161 142 4 5
-- 27 7 23
49 -- -- --
(54) 10 6 (61)
(94) (172) (53) 38
-- -- (60) (138)
(72) (209) (1) 8
11 11 -- --
8 -- -- --
(28) (9) 21 (11)
- --------- --------- --------- ---------
(2) (63) (72) (131)
- --------- --------- --------- ---------
(108) (181) (1) (1)
(20) (239) -- --
-- -- (1) (2)
3 2 -- --
-- -- 6 83
12 -- -- --
9 (4) 15 18
- --------- --------- --------- ---------
(104) (422) 19 98
- --------- --------- --------- ---------
2 5 6 --
208 625 88 54
(80) (79) -- --
(27) (46) (30) (20)
-- (34) -- --
9 8 -- --
(1) -- -- --
- --------- --------- --------- ---------
111 479 64 34
- --------- --------- --------- ---------
5 (6) 11 1
33 34 38 50
- --------- --------- --------- ---------
$ 38 $ 28 $ 49 $ 51
========= ========= ========= =========
$ 104 $ 100 $ 16 $ 16
========= ========= ========= =========
$ 44 $ 107 $ (38) $ (17)
========= ========= ========= =========
</TABLE>
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<PAGE>
Weyerhaeuser Company
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WEYERHAEUSER COMPANY AND SUBSIDIARIES
____________
NOTES TO FINANCIAL STATEMENTS
For the thirteen week periods ended March 30, 1997 and March 31, 1996
Note 1: Summary of Significant Accounting 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 subsidiary is Weyerhaeuser Mortgage Company (WMC).
Nature of Operations
The company's principal business segments, which account for the majority of
sales, earnings and the asset base, are:
. Timberlands and wood products, which is engaged in the management of 5.3
million acres of company-owned and .3 million acres of leased forestland in
the United States and 22.9 million acres of forestland in Canada under long-
term licensing arrangements and the production of a full line of solid wood
products that are sold primarily through the company's own sales
organizations to wholesalers, retailers and industrial users in North
America, the Pacific Rim and Europe.
. Pulp, paper and packaging, which manufactures and sells pulp, newsprint,
paper, paperboard and containerboard in North American, Pacific Rim and
European markets, and packaging products for the domestic markets, and
which operates an extensive wastepaper recycling system that serves company
mills and worldwide markets.
Accounting Pronouncements Implemented
In 1996, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," to provide
accounting and reporting guidance for transfers and servicing of financial
assets and extinguishments of liabilities and SFAS No. 127, "Deferral of the
Effective Date of Certain Provisions of FASB Statement No. 125 -- an
amendment of FASB Statement No. 125," which deferred for one year the
effective date of certain provisions. The company's adoption of SFAS No. 125
in the first quarter of 1997 did not, and the subsequent adoption of SFAS No.
127 will not, have a significant impact on results of operations or financial
position.
In 1996, the American Institute of Certified Public Accountants issued
Statement of Position 96-1, "Environmental Remediation Liabilities." This
statement, which provides guidance on the recognition and disclosure of
environmental liabilities, is effective for fiscal years beginning after
December 15, 1996. The adoption of this statement in 1997 first quarter did
not have a significant impact on the company's results of operations or
financial position.
Prospective Accounting Pronouncements
In 1997 first quarter, the FASB issued the following statements:
. SFAS No. 128, "Earnings per Share," which supersedes APB Opinion No. 15,
"Earnings per Share," and is effective for financial statements issued
after December 15, 1997. This statement replaces the presentation of
primary earnings per share (EPS) with a presentation of basic EPS, which
excludes dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding
for the period. Diluted EPS, which is computed similarly to fully diluted
EPS pursuant to APB Opinion No. 15, reflects the potential
<PAGE>
Weyerhaeuser Company
- -10-
dilution that would occur if securities or other contracts to issue common
stock were exercised or converted to common stock or resulted in the
issuance of common stock that would then share in the earnings of the
entity.
If SFAS No. 128 were implemented for the current quarter, the reported EPS
would be as follows:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
---------------------
March 30, March 31,
1997 1996
----------- ----------
<S> <C> <C>
Basic earnings per share $ .10 $ .72
Diluted earnings per share $ .10 $ .72
</TABLE>
Options to purchase 1,217,350 shares of common stock at $45.94 per share
were outstanding during the thirteen week period ended March 31, 1996.
These options were not included in the computation of diluted EPS because
the options' exercise price was greater than the average market price of
common shares during the period.
. SFAS No. 129, "Disclosure of Information about Capital Structure," which is
effective for financial statements for periods ending after December 15,
1997, continues the existing requirements to disclose the pertinent rights
and privileges of all securities other than common stock, but expands the
number of companies subject to portions of its requirements. The company's
current capital structure will not require any additional disclosures as a
result of this pronouncement.
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 198,515,503 and 198,195,035 at March 30, 1997, and March 31, 1996,
respectively.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Derivatives
The company has only limited involvement with derivative financial instruments
and does not use them for trading purposes. They are used to manage well-
defined interest rate and foreign exchange risks. These include:
. Foreign exchange contracts, which are hedges for foreign denominated
accounts receivable and payable, have gains or losses recognized at
settlement date.
. Interest rate swaps entered into with major banks or financial institutions
in which the company pays a fixed rate and receives a floating rate with
the interest payments being calculated on a notional amount. The premiums
received by the company on the sale of these swaps are treated as deferred
income and amortized against interest expense over the term of the
agreements.
. Hedging transactions entered into by the company's mortgage banking
subsidiary to protect both the completed loan inventory and loans in
process against changes in interest rates. The financial instruments used
to manage interest rate risk are forward sales commitments, interest rate
futures and options. 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 company is exposed to credit-related losses in the event of
nonperformance by counterparties to financial instruments but does not expect
any counterparties to fail to meet their obligations. The company deals only
with highly rated counterparties.
<PAGE>
Weyerhaeuser Company
- -11-
The notional amounts of these derivative financial instruments are $1
billion and $807 million at March 30, 1997, and December 29, 1996,
respectively. These notional amounts do not represent amounts
exchanged by the parties and, thus, are not a measure of exposure to the
company through its use of derivatives. The exposure in a derivative
contract is the net difference between what each party is required to pay
based on the contractual terms against the notional amount of the contract,
such as interest rates or exchange rates. The use of derivatives does not
have a significant effect on the company's results of operations or its
financial position.
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.
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. LIFO inventories were $302 million and $296
million at March 30, 1997, and December 29, 1996, respectively. The
balance of domestic raw material and product inventories, all materials
and supplies inventories, and all foreign inventories is costed at either
the first-in, first-out (FIFO) or moving average cost methods. Had the FIFO
method been used to cost all inventories, the amounts at which product
inventories are stated would have been $236 million and $239 million
greater at March 30, 1997, and December 29, 1996, 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 method 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 included in earnings.
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. Depletion rates used to relieve timber inventory are
determined with reference to the net carrying value of timber and the
related volume of timber estimated to be recoverable. Timber carrying
costs are expensed as incurred. The cost of timber harvested is
included in the carrying values of raw material and product inventories,
and in the costs of products sold as these inventories are disposed of.
Accounts Payable
The company's banking system provides for the daily replenishment of major
bank accounts as checks are presented. Accordingly, there were negative
book cash balances of $154 million and $164 million at March 30,
1997, and December 29, 1996, respectively. Such balances result from
outstanding checks that had not yet been paid by the bank and are
reflected in accounts payable in the consolidated balance sheets.
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.
<PAGE>
Weyerhaeuser Company
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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.
Reclassifications
Certain reclassifications have been made to conform prior years' data to the
current format.
Real Estate and Financial Services
Real estate held for sale is stated at the lower of cost or fair value.
The determination of fair value is based on appraisals and market pricing
of comparable assets, when available, or the discounted value of estimated
future cash flows from these assets. Real estate held for development is
stated at cost to the extent it does not exceed the estimated
undiscounted future net cash flows, in which case, it is carried at fair
value.
The company's financial services businesses are engaged in the
mortgage banking industry, hold mortgage-backed certificates and other
financial instruments pledged as collateral for collateralized
mortgage obligation (CMO) bonds, and also offer insurance services.
The company's mortgage banking business was servicing mortgage loans, which
had an aggregated principal balance of approximately $4.3 billion
and $4.4 billion at March 30, 1997, and December 29, 1996, respectively.
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).
Mortgage-backed certificates are carried at par value, adjusted for any
unamortized discount or premium. Management's intent is to hold these
certificates until maturity. These certificates and other financial
instruments are pledged as collateral for the CMO bonds and are held by
banks as trustees. Principal and interest collections are used to meet
the interest payments and reduce the outstanding principal balance of
the bonds.
The CMO bonds are the obligation of the issuer, and neither the
company nor any affiliated company has guaranteed or is otherwise
obligated with respect to the bonds. They are carried at amortized cost.
Discounts and premiums are amortized using a method that approximates
the effective interest method over their estimated lives.
<PAGE>
Weyerhaeuser Company
- -13-
Note 2: Income Taxes
<TABLE>
<CAPTION>
Provisions for income taxes include the following: Thirteen Weeks Ended
--------------------
March 30, March 31,
Dollar amounts in millions 1997 1996
---------- ---------
<S> <C> <C>
Federal:
Current $ 3 $ 19
Deferred 6 50
---------- ---------
9 69
---------- ---------
State:
Current -- 3
Deferred 1 4
---------- ---------
1 7
---------- ---------
Foreign:
Current 2 8
Deferred -- (4)
---------- ---------
2 4
---------- ---------
Total $ 12 $ 80
========== =========
</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 periods ended March 30, 1997, and March 31, 1996, 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 30, 1997, and March 31, 1996, were
37% and 36%, respectively.
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.
Note 3: Inventories
<TABLE>
<CAPTION>
March 30, Dec. 29,
1997 1996
Dollar amounts in millions --------- --------
<S> <C> <C>
Logs and chips $ 153 $ 120
Lumber, plywood and panels 176 148
Pulp, newsprint and paper 212 202
Containerboard, paperboard and packaging 112 108
Other products 139 146
Materials and supplies 287 277
--------- --------
$ 1,079 $ 1,001
========= ========
</TABLE>
<PAGE>
Weyerhaeuser Company
- -14-
Note 4: Property and Equipment
<TABLE>
<CAPTION>
March 30, Dec. 29,
1997 1996
Dollar amounts in millions --------- --------
<S> <C> <C>
Property and equipment, at cost:
Land $ 159 $ 158
Buildings and improvements 1,663 1,686
Machinery and equipment 9,681 9,713
Rail and truck roads and other 596 596
--------- --------
12,099 12,153
Less allowance for depreciation
and amortization 5,212 5,146
--------- --------
$ 6,887 $ 7,007
========= ========
</TABLE>
Note 5: Accrued Liabilities
<TABLE>
<CAPTION>
March 30, Dec. 29,
1997 1996
Dollar amounts in millions --------- --------
<S> <C> <C>
Payroll - wages and salaries, incentive awards,
retirement and vacation pay $ 233 $ 279
Taxes - social security and real
and personal property 65 57
Interest 40 79
Income taxes 5 51
Other 240 196
--------- --------
$ 583 $ 662
========= ========
</TABLE>
Note 6: Short-Term Debt
The company has short-term bank credit lines that provide for
borrowings of up to the total amount of $375 million, all of which could
be availed of by the company, WRECO and WMC at March 30, 1997, and December
29, 1996. No portion of these lines has been availed of by the company,
WRECO or WMC at March 30, 1997, and December 29, 1996. None of the
entities referred to herein is a guarantor of the borrowings of the
others.
WMC has short-term special credit lines that provide for borrowings of up to
$230 million at March 30, 1997, and December 29, 1996. Borrowings
against these lines were $52 million and $54 million as of March 30, 1997,
and December 29, 1996, respectively.
Note 7: Long-Term Debt
The company's lines of credit include a five-year competitive advance and
revolving credit facility agreement entered into in 1994 with a group of
banks that provides for borrowings of up to the total amount of $1.55
billion, all of which is available to the company, and $1 billion,
which is available to WMC. Borrowings are at LIBOR or other such interest
rates as mutually agreed to between the borrower and lending banks.
At March 30, 1997, and December 29, 1996, respectively, WMC had $10
million and $25 million outstanding against a one-year evergreen credit
commitment of $35 million entered into in 1990.
WMC has a revolving credit agreement with a bank to provide for: (1)
borrowings of up to $35 million for two 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 note as of July 1,
1998, to a five-year term loan payable in equal quarterly installments.
<PAGE>
Weyerhaeuser Company
- -15-
WFS has a revolving credit facility agreement that provides for: (1)
borrowings of up to $375 million and $450 million at March 30, 1997, and
December 29, 1996, respectively, at LIBOR or other such rates as may be
agreed upon by WFS and the banks; and (2) a commitment fee on the unused
portion of the credit facility. $355 million was outstanding under
this facility at both March 30, 1997, and December 29, 1996.
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 30, Dec. 29,
1997 1996
Dollar amounts in millions --------- --------
<S> <C> <C>
Weyerhaeuser $ 1,098 $ 889
Real estate and financial services 312 248
</TABLE>
No portion of these lines has been availed of by the company, WRECO, WMC or
WFS at March 30, 1997, and December 29, 1996, except as noted.
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 8: Shareholders' Interest
Common shares reserved for stock option plans were 7,211,025 shares at March
30, 1997, and 6,243,102 shares at December 29, 1996.
Note 9: Commitments and Contingencies
The company's capital expenditures, excluding acquisitions, have
averaged about $912 million in recent years, but are expected to be
approximately $750 million in 1997; however, that expenditure level could
be increased or decreased as a consequence of future economic conditions.
The company is a party to legal proceedings and environmental matters
generally incidental to its business. Although the final outcome of any
legal proceeding or environmental matter is subject to a great many
variables and cannot be predicted with any degree of certainty, the company
presently believes that the ultimate outcome resulting from these
proceedings and matters would not have a material effect on the company's
current financial position, liquidity or results of operations; however,
in any given future reporting period, such proceedings or matters
could have a material effect on results of operations.
<PAGE>
Weyerhaeuser Company
- -16-
WEYERHAEUSER COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net sales and revenues and earnings before interest expense and income taxes
by segment are:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------
March 30, March 31,
Dollar amounts in millions 1997 1996
--------- ----------
<S> <C> <C>
Net sales and revenues:
Timberlands and wood products $ 1,251 $ 1,116
Pulp, paper and packaging 1,106 1,217
Real estate 164 183
Financial services 50 49
Corporate and other 37 40
--------- ----------
$ 2,608 $ 2,605
========= ==========
Earnings before interest expense and income taxes:
Timberlands and wood products $ 171 $ 152
Pulp, paper and packaging (1) (43) 162
Real estate 5 7
Financial services (2) 1 3
Corporate and other (3) (36) (43)
--------- ----------
$ 98 $ 281
========= ==========
</TABLE>
(1) 1997 results include a special charge of $49 million for the
consolidation, closure or disposition of certain recycling facilities
and the permanent closure of the Longview, Washington corrugated medium
machine.
(2) Includes net interest expense of $15 million and $16 million related to
the financial services businesses.
(3) 1997 results include income of $10 million from the net effect of
interest income from the favorable federal income tax decision related to
timber casualty losses incurred in the 1980 eruption of Mount St. Helens,
and the loss incurred in the sale of Shemin Nurseries, a wholesale nursery
business based in Danbury, Connecticut.
Consolidated Results
Net earnings for the 1997 first quarter were $21 million, or 10 cents per
common share, compared with $142 million or 72 cents per common share, in
the prior year. Included in the 1997 results was an after tax special
charge of $25 million, or 12 cents per common share. This charge reflects
the company's ongoing efforts to narrow its portfolio and upgrade the quality
of assets in the core businesses. It includes losses from the anticipated
consolidation, closure or disposition of certain recycling facilities, the
permanent closure of the corrugated medium machine at Longview,
Washington and the sale of Shemin Nurseries, a wholesale nursery
business based in Danbury, Connecticut. These losses were offset, in
part, by interest income from the favorable federal income tax
decision related to timber casualty losses incurred in the eruption of
Mount St. Helens in 1980.
Consolidated net sales and revenues for the quarter were $2.6 billion,
matching those reported in the same quarter a year earlier. Increases in
domestic lumber volumes and pricing were offset by weaker log exports
and lower pricing in oriented strandboard and most pulp, paper and packaging
products.
Timberlands and Wood Products
Operating earnings for the quarter in the timberlands and wood
products segment were $171 million, an increase of 13 percent over the $152
million in the 1996 first quarter.
The segment reported net sales of $1.3 billion in the quarter, up from $1.1
billion a year earlier. Softwood lumber showed gains over the first
quarter of 1996 with higher volumes and pricing. These gains were offset,
in part, by weaker export log markets, which were impacted by the
stronger US dollar/Yen exchange rate and lower Japanese housing
starts, and by continued weakness in oriented strandboard prices
compared to a year ago.
<PAGE>
Weyerhaeuser Company
- -17-
Third party sales and total production volumes for the major products in
this segment for the thirteen weeks ended March 30, 1997, and March 31,
1996, are as follows:
<TABLE>
<CAPTION>
Third Party Sales Total Production
------------------- -------------------
Thirteen Weeks Thirteen Weeks
Ended Ended
------------------- -------------------
March 30, March 31, March 30, March 31,
Products (in millions) 1997 1996 1997 1996
- ---------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Raw materials--cubic feet 146 132 -- --
Logs--cubic feet -- -- 292 230
Softwood lumber--board feet 1,136 1,010 993 842
Softwood plywood and
veneer--square feet (3/8") 489 484 279 318
Composite panels--square feet (3/4") 143 153 123 137
Oriented strand board--square
feet (3/8") 562 460 426 391
Hardwood lumber--board feet 90 89 85 83
Engineered wood products--lineal feet 27 21 -- --
Hardwood doors (thousands) 168 146 182 146
</TABLE>
Pulp, Paper and Packaging
The pulp, paper and packaging segment's operating earnings were $6
million for the first quarter of 1997, before the effect of special charges,
compared to $162 million for the first quarter of 1996. Including the
$49 million pretax charge for the consolidation, closure or disposition of
certain recycling facilities and the permanent closure of the Longview,
Washington corrugated medium machine, the segment reported a $43 million
operating loss.
The segment's sales were $1.1 billion, down about one percent from the same
quarter last year as prices were lower across most product lines although
volumes were up.
Third party sales and total production volumes for the major products in
this segment for the thirteen weeks ended March 30, 1997, and March 31,
1996, are as follows:
<TABLE>
<CAPTION>
Third Party Sales Total Production
------------------- -------------------
Thirteen Weeks Thirteen Weeks
Ended Ended
------------------- -------------------
March 30, March 31, March 30, March 31,
Products (in thousands) 1997 1996 1997 1996
- ----------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Pulp--air-dry metric tons 454 397 520 525
Newsprint--metric tons 160 135 173 134
Paper--tons 304 246 284 261
Paperboard--tons 59 46 49 48
Containerboard--tons 99 66 602 564
Packaging--MSF 10,953 10,016 11,465 10,627
Recycling--tons 550 443 929 801
</TABLE>
Real Estate and Financial Services
Real estate and financial services segments earned a combined $6
million in the current quarter compared to $10 million for the same period
last year. The 1996 results included the closing of several major
commercial projects.
Costs and Expenses
Weyerhaeuser's first quarter 1997 costs of products sold is up $149
million over 1996, and as a percent of net sales was 79 percent in the
current quarter compared to 73 percent in the 1996 first quarter and 76
percent in the fourth quarter of 1996, reflecting the significant decline in
pulp, paper and packaging pricing.
Depreciation, amortization and fee stumpage for 1997 first quarter
increased $19 million, or 13 percent, over 1996 as new or acquired
facilities were added and optimization, expansion, modernization or
upgrade projects were completed at existing facilities. Non-cash
charges to income include a charge of $49 million for the closure or
disposition of facilities.
<PAGE>
Weyerhaeuser Company
- -18-
Weyerhaeuser's selling, general and administrative expenses were down $26
million, or 15 percent, from the prior year's first quarter. Cost
improvements in most areas, along with some reductions as a result of
divestitures, accounted for this decrease.
There were no significant changes in costs and expenses for the
combined real estate and financial services segments from period to
period.
Other income (expense) is an aggregation of both recurring and
occasional non-operating income and expense items and, as a result,
fluctuates from period to period. Other than the $10 million net income
effect of interest income from the favorable federal income tax decision
related to timber casualty losses incurred in the 1980 eruption of
Mount St. Helens and the loss incurred in the sale of Shemin Nurseries,
in the current quarter, no individual income or (expense) item for the
thirteen week periods ended March 30, 1997, and March 31, 1996, was
significant in relation to net earnings.
Liquidity and Capital Resources
General
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.
Operations
Weyerhaeuser's net cash used by operations was $2 million in the first
quarter of 1997 compared to a use of $63 million in the first quarter of
1996.
In the current quarter, funds were provided from net income of $17
million along with $161 million from depreciation, amortization and fee
stumpage and the $49 million non-cash charge for closure or disposition of
facilities. Working capital, net of the effects of the sale of a
business, used funds of $220 million in the quarter with significant items
being increases of $54 million in accounts receivable and $78 million
in inventories, spread across all product lines, and a decrease of $72
million in accounts payable and accrued liabilities, primarily payroll,
interest and income taxes. The product inventory turnover rate
increased to 10.9 turns in the quarter, up slightly from the fourth
quarter of 1996; but a significant increase from the 8.7 turns in the
first quarter of 1996.
In the same quarter of 1996, significant items creating a working
capital increase of $371 million were $132 million in increased
inventory and a reduction of $218 million in accounts payable and
accrued liabilities.
The net cash used by operations in the combined real estate and
financial services segments in the current quarter was $72 million,
including $53 million for real estate and land purchases and
development. An increase of $138 million in mortgages held for sale, as
originations exceeded sales, was the principal use of cash by operations
in the first quarter of the previous year.
Earnings before interest expense and income taxes plus non-cash
charges for the thirteen week periods ended March 30, 1997, and March
31, 1996, were $224 million and $198 million, respectively, for the
timberlands and wood products segment, and $111 million and $252
million, respectively, for the pulp, paper and packaging segment.
<PAGE>
Weyerhaeuser Company
- -19-
Investing
Capital expenditures for the quarter were $129 million compared to $421
million, which included $231 million for the acquisition of southern
U.S. timber and timberlands, in the same period last year. The 1997
spending by segment was $57 million for timberlands and wood products, $68
million for the pulp, paper and packaging segment and $4 million for
other segments. The company currently anticipates capital expenditures,
excluding acquisitions, to approximate $750 million for the year.
However, this expenditure level could increase or decrease as a consequence
of future economic conditions.
The cash needed to meet these and other company needs is generated from
internal cash flow and short-term borrowing.
The company also received $12 million in proceeds from the sale of the
wholesale nursery business in the 1997 first quarter.
The combined real estate and financial services segments had minimal net
cash flows from investing activities in the 1997 first quarter; however,
in the same quarter of 1996, proceeds from the sale of capitalized
servicing rights and adjustable rate mortgages generated proceeds of $83
million.
Financing
During the quarter, Weyerhaeuser increased commercial paper borrowings by
$208 million while paying down debt of $27 million, accounting for the
majority of the $183 million increase in debt. This increase along with
a decrease in shareholders' equity, caused the company's debt to total
capital ratio to increase from 37.9 percent at December 1996, and 38.9
percent at March 31, 1996, to 39.3 percent at the end of the current
quarter.
The increase in the 1996 first quarter was due primarily to issuances of
$675 million in notes and commercial paper.
The net increase of $64 million in real estate and financial services
segments' long-term debt was primarily from $94 million of commercial paper
borrowings, used to fund the increase in mortgage notes held for sale, and
real estate purchase and development activities, offset in part by a $30
million pay down of debt.
During the first quarter of 1997, the company paid $80 million in cash
dividends compared to $79 million in 1996 first quarter.
In the 1996 first quarter, the company repurchased $34 million of common
shares as a part of the 11 million share repurchase program.
Other Items
On April 10, the company announced an agreement to purchase a 51
percent interest in an existing New Zealand joint venture located in the
northern end of the South Island. The company will pay $185 million
for timber, land and related assets, plus an additional amount for net
working capital at closing. The forested area of the joint venture
consists of 148,000 acres of Crown Forest License cutting rights and
approximately 45,000 acres of freehold land. The company will become
responsible for the management and marketing activities of the joint
venture. The acquisition is subject to approvals by the New Zealand
government and the investors in RII New Zealand Forests I Inc., which hold
the remaining 49 percent interest in the joint venture.
The company announced it has reached an agreement to sell its wholly owned
subsidiary, Weyerhaeuser Mortgage Company, to WMC Acquisition Co., an
entity formed by Apollo Management, L.P., and Spring Mountain Escrow, Inc.
The transaction is expected to close in the second quarter of 1997,
subject to regulatory approvals and other contingencies. The company
expects this transaction to have a material favorable effect on operating
results and cash flow if it closes.
<PAGE>
Weyerhaeuser Company
- -20-
Contingencies
The company is a party to legal proceedings and environmental matters
generally incidental to its business. Although the final outcome of any
legal proceeding or environmental matter is subject to a great many
variables and cannot be predicted with any degree of certainty, the company
presently believes that the ultimate outcome resulting from these
proceedings and matters would not have a material effect on the company's
current financial position, liquidity or results of operations; however,
in any given future reporting period such proceedings or matters
could have a material effect on results of operations.
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 contended that the company overpaid federal income taxes in 1977
through 1983. The alleged overpayments resulted from the disallowance
of certain timber casualty losses and certain deductions claimed by the
company arising from export transactions. The refund sought was
approximately $29 million, plus statutory interest from the dates of the
alleged overpayments. The company settled the portion of the case relating
to export transactions and received a tax refund of approximately $10
million, plus statutory interest. In September 1994, the United States
Court of Federal Claims (successor to the United States Claims Court)
issued an opinion on the casualty loss issues which resulted in the
allowance of additional tax refunds of approximately $2 million, plus
statutory interest. Both the company and the government appealed the
decision. On August 2, 1996, the Court of Appeals for the Federal
Circuit issued its opinion on the remaining timber casualty loss issues,
ruling in favor of the company on both the company's appeal and the
government's appeal. The United States Supreme Court denied the government's
request for certiorari on January 21, 1997.
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 all but
one of the defendants. The remaining defendant provided first layer excess
coverage during a three year period. That defendant's liability on groups
of sites is being tried in phases. Two trials against the remaining
defendant, affecting nine sites, began in October 1994 and February 1996
and resulted in verdicts assigning 100 percent clean-up responsibility to
the defendant on three sites, partial responsibility on three others and a
finding of no liability as to the remaining three. The trial court has
ruled that the primary policy has been exhausted and imposed an obligation
on the remaining defendant to provide a defense on one of the sites, a
ruling that may be expanded to include other sites. After voluntary
dismissal on 6 sites, trial for the remaining 10 sites has been set for June
1997.
The company received from the Lane County, Oregon Regional Air
Pollution Control Authority (LRAPA) a draft Notice of Violation which seeks
penalties for alleged Prevention of Significant Deterioration (PSD)
violations at the company's Springfield, Oregon, particleboard operations.
LRAPA informed the company in July 1995 that it will withdraw its draft
Notice of Violation (NOV) and will not seek fines or penalties. On
September 15, 1995, however, LRAPA issued a revised draft NOV (the Revised
Draft NOV), which alleged that the Springfield particleboard facility had
violated a condition of its Air Contaminant Discharge Permit. The
allegations in the Revised Draft NOV are based upon the same facts and
circumstances relied upon by LRAPA in the prior draft NOV. The company
has contested LRAPA's issuance of the Revised Draft NOV. On June 8,
1996, the company and LRAPA entered into a Stipulated Final Order (SFO)
to resolve all past and ongoing alleged PSD issues, contested matters
and alleged violations associated with extended hours of operation at
the Springfield particleboard facility. In exchange for a full resolution
of all past and ongoing contested matters, the company agreed to pay a total
civil penalty of $19.5 thousand, of which $7.5 thousand was paid directly to
LRAPA. The remaining $12 thousand civil penalty was suspended. The company
also agreed to implement a Supplemental Environmental Project (SEP)
consisting of the funding of the preparation of a nitrogen oxides (Nox)
emission inventory for Lane County. The emission inventory will be
conducted by an outside environmental consultant at a cost not to exceed $40
thousand.
<PAGE>
Weyerhaeuser Company
- -21-
PART II
Item 1. Legal Proceedings - Continued
- --------------------------------------
The company conducted a review of its 10 major pulp and paper
facilities to evaluate the facilities' compliance with federal PSD
regulations. The results of the reviews were disclosed to seven state
agencies and the Environmental Protection Agency (EPA) during 1994 and 1995.
At the Cosmopolis, Washington, Columbus, Mississippi, and Flint River,
Georgia, facilities, the state regulatory agencies agreed with the
company's conclusions regarding the status of each facility. For the
Cosmopolis facility, the Washington Department of Ecology agreed the
changes made at the facility did not require PSD review. For the Columbus
and Flint River facilities, the states concluded the original PSD permits
issued to the facilities require updating. The company will update
emissions data for the Columbus and Flint River facilities as part of the
Title V permitting process. No penalties were assessed for the issues
identified at Columbus and Flint River. Agreements resolving the alleged PSD
issues have been reached with the states of Washington, Oklahoma and North
Carolina, as noted below. No issues were identified at the company's
Rothschild, Wisconsin, facility. In April 1995, EPA Region X issued a NOV
to the company and to North Pacific Paper Corporation (NORPAC), a joint
venture in which the company has an 80 percent ownership interest.
The NOV addresses alleged PSD violations at NORPAC's Longview,
Washington, newsprint manufacturing facility. A settlement resolving
alleged PSD issues at the Longview/NORPAC complex was reached with the
State of Washington on January 26, 1996. On November 14, 1995, the company
entered into a settlement with the State of Oklahoma to resolve
alleged PSD violations at the company's Valliant, Oklahoma,
containerboard manufacturing facility. The company also entered into Special
Orders by Consent with the State of North Carolina to resolve alleged PSD
issues at the New Bern, North Carolina, pulp mill and the Plymouth, North
Carolina, pulp and paper complex. No decision has been made by the LRAPA
concerning alleged PSD and permit violations at the company's
Springfield, Oregon, containerboard manufacturing facility.
The Washington Department of Ecology investigated the accidental
release of chorine, chlorine dioxide and noncondensable gasses in July 1994
at the company's pulp mill in Longview, and issued a $10 thousand penalty
for the chlorine release and a $5 thousand penalty for the noncondensable
gasses release which have been paid by the company. In June 1995, EPA issued
an Administrative Complaint against the company, seeking penalties of $225
thousand and alleging a failure to timely report the chlorine release.
The company settled the matter on January 21, 1997, agreeing to pay a
penalty of $68 thousand and to perform supplemental environmental
projects in the amount of $110 thousand. On September 25, 1996, the
company learned that the EPA has commenced a preliminary criminal
investigation of the incident, and in late November learned that the
investigation had been discontinued.
The Washington Department of Ecology issued a $10 thousand penalty to the
company because of three accidental chlorine releases which occurred
at the company's pulp mill in Longview on March 18, 1996, which has been
paid. The EPA is also investigating.
The Washington Department of Ecology has issued a notice of violation and a
$40 thousand penalty because of an accidental spill of an estimated
8,700 gallons of crude sulfate turpentine on January 27, 1997, at the
company's pulp and paper operations in Longview. The EPA is also
investigating.
On April 9, 1993, the company entered into a SFO with the Oregon
Department of Environmental Quality (DEQ) for alleged air emissions in excess
of permit levels and PSD noncompliance at the company's North Bend,
Oregon, containerboard facility. The SFO established a compliance
schedule for installing control technology. A Supplemental SFO assessed a
$247 thousand initial penalty and a $500 per day stipulated penalty until
compliance was demonstrated. On November 15, 1995, DEQ issued a letter,
indicating that the company had satisfied the requirements of the SFO
and Supplemental SFO. No further penalties were assessed against the
company. Termination of the SFO will occur after issuance of the federal
air operating permit to the North Bend containerboard facility. The North
Bend containerboard facility received its federal air operating permit on
July 1, 1996.
On June 20, 1996, the Wisconsin Department of Natural Resources (WDNR) issued
a NOV for alleged air violations at the Marshfield, Wisconsin, wood products
manufacturing facility. No penalty was assessed in the NOV. The NOV was
referred to the Wisconsin Department of Justice (WDOJ) for enforcement
action on July 2, 1996. The WDOJ accepted the referral. Settlement
negotiations with WDNR and WDOJ are ongoing.
On October 2, 1996, the WDNR conducted an inspection of a building
demolition project at the company's Marshfield, Wisconsin facility. The
WDNR noted several potential non-compliance issues in the work performed
by the asbestos abatement subcontractor retained for the project. Upon
learning of the issues observed by WDNR, the company removed the asbestos
abatement subcontractor from the plantsite. The WDNR and EPA Region V are
reviewing the work performed to evaluate whether an enforcement action
should be brought against the asbestos abatement subcontractor, the general
contractor, and/or the company.
<PAGE>
Weyerhaeuser Company
- -22-
PART II
Item 1. Legal Proceedings - Continued
- --------------------------------------
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 Greene County, Alabama, on behalf
of a similar purported class of riparian owners with essentially the same
claims as the Mississippi case. By order dated April 5, 1995, venue of
the Alabama action was transferred to Sumter County, Alabama. On January
20, 1995, the court in the Alabama action certified a class of all persons
who, as of the date the action commenced, were riparian owners, lessees and
licensees of properties located on the Tennessee Tombigbee Waterway in
Greene, Sumter, Pickens and Marengo counties, Alabama, and Lowndes and
Noxubee counties, Mississippi, to determine whether the company is
liable to the members of the class for compensatory and/or punitive
damages and to determine the amount of punitive damages, if any, to be
awarded to the class as a whole. By order dated April 12, 1995, as orally
amended on February 1, 1996, the geographical boundaries of the class were
amended to run from below the Columbus mill's wastewater discharge pipe
to just above the confluence of the Black Warrior River and the
Tennessee Tombigbee Waterway. The class is estimated to range from
approximately 1,000 to 1,500 members. In late July, 1996, the company
reached an agreement to settle both the Mississippi action and the
Alabama action for $2.5 million. The agreement is subject to the approval
of the court in the Alabama action.
In November 1996, an action was filed against the company in Superior Court
for King County, Washington, on behalf of a purported class of all
individuals and entities that own property in the United States on which
exterior hardboard siding manufactured by the company has been installed
since 1980. The action alleges the company has manufactured and distributed
defective hardboard siding and has breached express warranties and consumer
protection statutes in its sale of hardboard siding. The action seeks
compensatory damages, including prejudgment interest, and seeks damages for
the cost of replacing siding that rots subsequent to the entry of any
judgment. In January 1997, an action was filed, also in Superior Court
for King County, Washington, on behalf of a purported class of all
individuals, proprietorships, partnerships, corporations, and other business
entities in the United States on whose homes, condominiums, apartment
complexes or commercial buildings hardboard siding manufactured by the
company has been installed. The action alleges the company has breached
express and implied warranties in its sale of hardboard siding and
also has violated the Consumer Protection Act of the State of Washington.
The action seeks damages, prejudgment interest, costs and reasonable
attorney fees. The company is a defendant in approximately fifteen other
hardboard siding cases, one of which purports to be a class action on
behalf of purchasers of single- or multi-family residences in Nebraska that
contain the company's hardboard siding.
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 EPA 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 outcome
resulting from the legal proceedings discussed herein, or all of them
combined, would not have a material effect on the company's current
financial position, liquidity or results of operations; however, in any
given future reporting period, such legal proceedings could have a material
effect on results of operations.
Item 6. Exhibits and Reports on Form 8-K
(a) Not applicable.
(b) The registrant filed reports on Form 8-K dated January 22,
February 24, and April 15, 1997, reporting information under Item 5,
Other Events.
<PAGE>
Weyerhaeuser Company
- -23-
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> MAR-30-1997
<CASH> 87
<SECURITIES> 0
<RECEIVABLES> 1042
<ALLOWANCES> 0
<INVENTORY> 1079
<CURRENT-ASSETS> 2375
<PP&E> 6887
<DEPRECIATION> 0
<TOTAL-ASSETS> 13674
<CURRENT-LIABILITIES> 1385
<BONDS> 5328
0
0
<COMMON> 258
<OTHER-SE> 4288
<TOTAL-LIABILITY-AND-EQUITY> 13674
<SALES> 2608
<TOTAL-REVENUES> 2608
<CGS> 2041
<TOTAL-COSTS> 2041
<OTHER-EXPENSES> 253
<LOSS-PROVISION> 1
<INTEREST-EXPENSE> 80
<INCOME-PRETAX> 33
<INCOME-TAX> 12
<INCOME-CONTINUING> 21
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
