<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended December 31, 1994 Commission file number 0-3730
WILLAMETTE INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Oregon 93-0312940
(State of incorporation) (I.R.S. Employer
Identification No.)
3800 First Interstate Tower
1300 S.W. Fifth Avenue
Portland, Oregon 97201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (503) 227-5581
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.50 par value
(Title of class)
Preferred Stock Purchase Rights
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by
non-affiliates of the registrant.
$2,466,920,000 at January 31, 1995
Indicate the number of shares outstanding of each of the
registrant's classes of common stock as of the latest practicable date.
Class Outstanding at March 2, 1995
Common Stock, $.50 par value 55,049,343 shares
DOCUMENTS INCORPORATED BY REFERENCE.
Portions of the registrant's definitive proxy statement for its
1995 annual meeting of shareholders are incorporated by reference into
Part III hereof.
<PAGE>
CROSS REFERENCE SHEET
Showing Location in Definitive Proxy Statement of Items Required
By Form 10-K
Definitive Proxy Statement
-------------------------------
Item No Form 10-K Caption Caption Page No.
- ------- ---------------------------- ------- --------
Item 10 Directors and Executive Election of Directors 3-4
Officers of the Registrant Holders of Common Stock 3
Item 11 Executive Compensation Executive Compensation 5-7
Compensation Committee
Interlocks and Insider
Participation 7-8
Compensation of Directors 11-12
Employment Agreements 12-13
Item 12 Security Ownership of Holders of Common Stock 1-3
Certain Beneficial
Owners and Management
Item 13 Certain Relationships and Compensation Committee
Related Transactions Interlocks and Insider
Participation 7-8
<PAGE>
INDEX
-----
Page
Part I ----
- ------
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Business Segment Information . . . . . . . . . . . . . . . . . . . . . 1
Pulp and Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Converted Paper Products . . . . . . . . . . . . . . . . . . . . . . . 2
Building Materials . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Timberlands. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 6
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . 7
Executive Officers of the Registrant. . . . . . . . . . . . . . . . . . . 7
Part II
- -------
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters . . . . . . . . . . . . . . . . 8
Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . . 9
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . .10
Item 8. Financial Statements and Supplemental Data . . . . . . . . . . .14
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . .14
Part III
- --------
Item 10. Directors and Executive Officers of the Registrant. . . . . . .15
(See Part I for Executive Officers of the Registrant)
Item 11. Executive Compensation. . . . . . . . . . . . . . . . . . . . .15
Item 12. Security Ownership of Certain Beneficial
Owners and Management. . . . . . . . . . . . . . . . . . . . .15
Item 13. Certain Relationships and Related
Transactions . . . . . . . . . . . . . . . . . . . . . . . . .15
Part IV
- -------
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . .15
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Index to Consolidated Financial Statements. . . . . . . . . . . . . . . .18
Index to Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
<PAGE>
PART I
Item 1. Business
General
- -------
Willamette Industries ("Willamette" or the "Company") was founded in 1906
as the Willamette Valley Lumber Co. in Dallas, Oregon. In 1967, Willamette
Valley and several related firms merged to form Willamette Industries, Inc.
Its stock has been publicly traded since 1968.
Willamette is a diversified, integrated forest products company with 90
plants and mills manufacturing containerboard, bag paper, fine paper,
bleached hardwood market pulp, specialty printing papers, corrugated
containers, business forms, cut sheet paper, paper bags, inks, lumber,
plywood, particleboard, medium density fiberboard, laminated beams and
value-added wood products. We own or control 1,235,000 acres of forests.
Willamette is a medium-sized firm in a very competitive industry
consisting of thousands of companies, some larger and more diversified;
others much smaller, producing only one or two products. Very competitive
conditions exist in every industry segment in which the Company operates.
The Company competes in its markets primarily through price, quality and
service.
The Company believes its strengths are its vertical integration; its
geographically diverse, modern, fiber- and energy-efficient facilities; its
concentration on a focused, related product range; its balance among
building materials, white paper and brown paper manufacturing and an
organizational structure that encourages teamwork as well as individual
initiative.
Willamette is listed in the top half of the FORTUNE 500. The Company's
common stock trades on The Nasdaq Stock Market under the symbol: WMTT.
Business Segment Information
- ----------------------------
The Company has two business segments. The Paper Group segment
manufactures and sells pulp and paper products. The Building Materials
Group segment manufactures and sells wood products. Sales and operating
data for the Paper Group and Building Materials Group segments for the past
five years is set forth in the five year comparison captioned "Supplemental
Business Segment Information" located on page 24. The Company has no
foreign operations and is not dependent on any one significant customer or
group of customers. Approximately 97% of the Company's total output is
sold domestically.
Pulp and Paper
- --------------
Bleached pulp and fine paper
Bleached hardwood market pulp is manufactured at Hawesville, Kentucky;
fine paper at Hawesville, Marlboro County, South Carolina and Johnsonburg,
Pennsylvania. We make 4.9% of the nation's bleached hardwood market pulp,
which is sold to outside customers, and 5.9% of the nation's fine paper
production.
Chips from nearby sawmills and plywood plants serve as the primary fiber
source for bleached paper products. Our timberlands in Tennessee and the
Carolinas also serve as a source of fiber.
<PAGE>
Containerboard and bag paper
Four paper mills manufacture 4.1% of the nation's production of
linerboard, corrugating medium and bag paper. All of the product is used
or traded for the needs of Willamette's box and bag manufacturing plants.
In Louisiana, our sawmills, plywood plants and timberlands can provide
100% of the chips needed by our linerboard mill; in Oregon, approximately
80% of our chip requirements could be provided from those sources.
Recycled fiber, in the form of used corrugated containers, provides
58.1% of our fiber needs.
Converted paper products
- ------------------------
Office papers
Six business forms plants manufacture 5.8% of the nation's production of
forms. These forms, mostly long-run continuous computer forms, along with
Willcopy(R), Willamette's photocopy and cut sheet printer paper produced at
our three cut sheet facilities, are marketed by 46 Willamette sales and
distribution centers. Our cut sheets represent 6.5% of the nation's
production.
Corrugated containers and sheets
Corrugated containers and sheets are manufactured by 32 plants,
accounting for 5.7% of the nation's corrugated box production. Products
range from colorful store displays to eye-catching preprinted boxes; from
sturdy wax coated shipping containers to the plain brown box. Corrugated
containers are marketed by our own sales force to a variety of industrial
and agricultural customers.
Bags
Four bag plants make 11.9% of the nation's paper bags, marketed to
grocery, department, drug and hardware stores in the West and South by our
sales force.
Building Materials
- ------------------
Plywood and lumber
Plywood products, totalling 7.0% of the nation's structural panel
production, are manufactured at 10 plants in Arkansas, the Carolinas,
Louisiana and Oregon.
Six sawmills manufacture 1.3% of the nation's lumber production.
Lumber and plywood products are marketed through independent wholesalers
and distributors throughout the U.S.
Composite board
Five particleboard plants in Louisiana and Oregon manufacture 14.0% of
the nation's particleboard. Two medium density fiberboard plants in
Arkansas and South Carolina made 19.5% of the nation's MDF in 1994. These
plants produce value-added products including color-coated, woodgrain-
printed, fire-rated and moisture-resistant boards.
Composite board products are sold nationwide through distributors, as
well as directly to cabinet and furniture manufacturers.
<PAGE>
Laminated beams
Three laminated beam plants in Oregon and Louisiana represent 26.2% of
the nation's production. Laminated beams, both stock and custom made, are
sold nationwide and internationally.
Timberlands
- -----------
Willamette's 1,235,000 acres of timberland supply approximately 40% of
our long-term log needs. The remainder is purchased through government and
private timber sales and open market purchases. In Oregon, we are able to
provide approximately 75% of our log needs from our own timberlands. We
now own or control cutting rights on 566,000 acres in Louisiana, Arkansas
and Texas; 335,000 acres in Oregon; 188,000 acres in Tennessee; and 146,000
acres in the Carolinas. We continually look for opportunities to expand
our fee timber base and make purchases when it is profitable to do so.
Energy
- ------
Through cogeneration, the burning of waste materials and the recycling of
spent pulping liquors, Willamette's manufacturing facilities are able to
generate 62% of their total energy needs.
Employees
- ---------
Willamette employs approximately 12,260 people, of whom about 52% are
represented by labor unions with collective bargaining agreements.
Agreements covering approximately 1,185 employees were negotiated in 1994.
Agreements involving about 1,320 hourly employees are subject to renewal in
1995. In excess of 45% of all salaried employees have been with the
Company more than twelve years.
Environmental Matters
- ---------------------
See "Management's Discussion and Analysis of Financial Conditions and
Results of Operations--Other Matters" for a discussion of the effect on the
Company of laws relating to environmental matters.
Item 2. Properties
Manufacturing Facilities
- ------------------------
The following table sets forth information regarding the Company's
90 manufacturing facilities at December 31, 1994:
Facility Annual Production
-------- -----------------
M Square Ft.
(3/8" Basis)
Western Plywood (3 Plants)
Dallas, Oregon 163,000
Foster, Oregon 98,000
Springfield, Oregon 127,000
-------
Total Western Plants 388,000
-------
<PAGE>
Southern Plywood (5 Plants)
Dodson, Louisiana 218,000
Emerson, Arkansas 235,000
Ruston, Louisiana 173,000
Taylor, Louisiana 210,000
Zwolle, Louisiana 223,000
-------
Total Southern Plants 1,059,000
---------
Atlantic Plywood (2 Plants)
Chester, South Carolina 259,000
Moncure, North Carolina 130,000
-------
Total Atlantic Plants 389,000
-------
(1994 Production-
Total Plywood 1,836,000 1,907,000 M)
---------
Oriented Strand Board
Arcadia, Louisiana(1) -
Total Structural Panels 1,836,000
=========
Western Lumber (4 Mills) M Board Ft
Coburg, Oregon 99,000
Dallas, Oregon 98,000
Lebanon, Oregon-2 mills 114,000
-------
Total Western Mills 311,000
-------
Southern Lumber (2 Mills)
Dodson, Louisiana 75,000
Zwolle, Louisiana 78,000
------
Total Southern Mills 153,000
-------
(1994 Production-
Total Lumber 464,000 446,000 M)
=======
M Square Ft
Particleboard (5 Plants) (3/4" Basis)
Albany, Oregon 217,000
Bend, Oregon 159,000
Eugene, Oregon(2) 37,000
Lillie, Louisiana 113,000
Simsboro, Louisiana 96,000
-------
(1994 Production-
Total Particleboard 622,000 642,000 M)
=======
M Square Ft
Medium Density Fiberboard (2 Plants) (3/4" Basis)
Bennettsville, South Carolina 144,000
Malvern, Arkansas 124,000
-------
(1994 Production-
Total MDF 268,000 239,000 M)
=======
<PAGE>
Engineered Products (5 Plants)
Laminated Beams M Board Ft
Saginaw, Oregon 23,000
Vaughn, Oregon 52,000
Simsboro, Louisiana 19,000
------
(1994 Production-
Total Laminated Beams 94,000 75,000 M)
======
Laminated Veneer Lumber Cubic Ft. (1994 Production-
Winston, Oregon 1,750,000 1,595,000 CF)
=========
Structural I-Beams M Lineal Ft.
Woodburn, Oregon 29,000 (1994 Production-
====== 23,000 M)
Other Divisions (4 Facilities)
Custom Products Albany, Oregon
Custom Services Sweet Home, Oregon
Lebanon Machine Lebanon, Oregon
Coburg Veneer Coburg, Oregon
Pulp and Paper (8 Mills) Tons
Unbleached:
Albany, Oregon 471,000
Campti, Louisiana(3) 698,000
Hawesville, Kentucky 175,000
Oxnard, California 178,000 (1994 Production-
---------
1,522,000 1,324,000 Tons)
Bleached: ---------
Marlboro County, South Carolina 283,000
Hawesville, Kentucky
Bleached Market Pulp 158,000
Fine Paper 205,000
Johnsonburg, Pennsylvania 347,000 (1994 Production-
---------
993,000 903,000 Tons)
---------
Total Pulp and Paper 2,515,000 (1994 Production-
========= 2,227,000 Tons)
Corrugated Containers and Sheets(32 Plants)M Square Ft
Aurora, Illinois 982,000
Beaverton, Oregon 888,000
Bellevue, Washington 615,000
Bellmawr, New Jersey 712,000
Bowling Green, Kentucky 770,000
Cerritos, California 885,000
Compton, California 780,000
Dallas, Texas 1,038,000
Delaware, Ohio 601,000
Elk Grove, Illinois 484,000
Fort Smith, Arkansas 794,000
Fridley, Minnesota 1,102,000
Golden, Colorado 744,000
Griffin, Georgia 966,000
Huntsville, Alabama 1,000,000
Indianapolis, Indiana 626,000
Kansas City, Kansas 846,000
Lincoln, Illinois 445,000
Louisville, Kentucky 460,000
Lumberton, North Carolina 560,000
Maryland Heights, Missouri 867,000
Matthews, North Carolina 444,000
Memphis, Tennessee 49,000
Moses Lake, Washington 911,000
Newton, North Carolina 459,000
Sacramento, California 729,000
San Leandro, California 1,338,000
Sanger, California 838,000
Sealy, Texas 808,000
St. Paul, Minnesota 540,000
Warrensville Heights, Ohio 120,000
West Memphis, Arkansas 848,000
---------- (1994 Production-
Total Corrugated Containers 23,249,000 21,320,000 M)
==========
Business Forms (6 Plants) Tons
Cerritos, California 56,000
Dallas, Texas 46,000
Indianapolis, Indiana 60,000
Langhorne, Pennsylvania 66,000
Rock Hill, South Carolina 44,000
West Chicago, Illinois 50,000
------- (1994 Production-
Total Business Forms 322,000 310,000 Tons)
=======
Cut Sheets and Other Converting (3 Plants) Tons
DuBois, Pennsylvania 96,000
Owensboro, Kentucky 71,000
Tatum, South Carolina 90,000
------- (1994 Production-
Total Cut Sheets 257,000 223,000 Tons)
=======
Kraft Bags and Sacks (4 Plants) Tons
Beaverton, Oregon 65,000
Buena Park, California 53,000
Dallas, Texas 28,000
North Kansas City, Missouri 24,000
------- (1994 Production-
Total Kraft Bags and Sacks 170,000 150,000 Tons)
=======
Preprinted Linerboard (2 Plants) M Square Ft
Richwood, Kentucky 540,000
Tigard, Oregon 480,000
--------- (1994 Production-
Total Preprinted Linerboard 1,020,000 772,000 M)
=========
Inks and Specialty Products(2 Plants) Tons
Beaverton, Oregon 3,000
Delaware, Ohio 3,000
----- (1994 Production-
Total Inks 6,000 5,000 Tons)
=====
(1) Production to begin in 1996.
(2) To be converted to the production of medium density fiberboard by the
fourth quarter of 1995.
(3) Includes a second linerboard machine which began production in January
1995.
Timberlands
- -----------
For information respecting the Company's timberlands, see "Business--
Timberlands."
Item 3. Legal proceedings
There are no material legal proceedings pending as of the date hereof.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
fourth quarter of the year ended December 31, 1994.
Executive Officers of the Registrant
The executive officers of the Company are elected annually by the board
of directors. At February 9, 1995, the executive officers of the Company,
their ages at December 31, 1994, and their positions with the Company were
as follows:
Name Age Position
---- --- --------
William Swindells 64 Chairman of the board and
chief executive officer,
director
Steven R. Rogel 52 President and chief operating
officer
William P. Kinnune 55 Executive vice president-
corrugated containers and bags
Michael R. Onustock 55 Executive vice president-pulp
and fine paper marketing
J. A. Parson 59 Executive vice president and
chief financial officer,
secretary and treasurer
Floyd Vike 59 Executive vice president-
building materials marketing
Each executive officer has been employed by the Company in his present or
in another managerial capacity for more than five years.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
The Company's common stock trades on The Nasdaq Stock Market under the
symbol: WMTT. At December 31, 1994, there were approximately 6,100 holders
of record of the Company's common stock. The following table shows for the
periods indicated the high and low closing sales prices of, and the per
share dividends paid on, the Company's common stock in each case as
adjusted for stock splits.
1994 1993
-------------------- ---------------------
Closing Closing
Dividends Price Dividends Price
Paid High-Low Paid High-Low
--------- -------- --------- --------
1st Quarter.... $0.24 59-45 3/4 $0.22 44-35 7/8
2nd Quarter.... 0.24 49 1/2-42 3/4 0.22 43 1/4-36 3/4
3rd Quarter.... 0.24 52-41 1/2 0.22 42-35 3/4
4th Quarter.... 0.24 50 3/4-41 0.22 49 1/2-37 1/2
A dividend of $.27 per share was declared on the common stock for the
first quarter of 1995 representing an indicated annual dividend rate of
$1.08 per share. The Company expects to continue paying regular cash
dividends, although there is no assurance as to future dividends as they
are dependent on earnings, capital requirements and financial condition.
<PAGE>
Item 6. Selected Financial Data
The following table shows selected financial data for the Company for the
periods indicated:
----------------------------------------------------------------------------
Financial Results
(dollar amounts, except per share amounts, in thousands)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Net sales.....................................$ 3,007,949 2,622,237 2,372,396 2,004,501 1,904,853
===============================================================================================================
Cost and expenses:
Depreciation, amortization and cost
of fee timber harvested..................... 217,252 194,202 173,784 151,258 107,654
Materials, labor and other operating expenses. 2,239,185 1,997,246 1,833,919 1,563,939 1,421,241
----------------------------------------------------------------
Gross profit............................... 551,512 430,789 364,693 289,304 375,958
Selling and administrative expenses............ 184,699 174,413 167,094 145,329 136,624
----------------------------------------------------------------
Operating earnings......................... 366,813 256,376 197,599 143,975 239,334
Interest expense............................... 71,513 63,290 66,422 63,263 29,899
Other income (expense)......................... (6,377) (3,918) (1,725) (7,103) (764)
----------------------------------------------------------------
Earnings before taxes...................... 288,923 189,168 129,452 73,609 208,671
Provision for income taxes..................... 111,300 78,500 47,900 27,800 79,100
----------------------------------------------------------------
Earnings before accounting changes......... 177,623 110,668 81,552 45,809 129,571
Accounting changes............................. - 26,364 - - -
----------------------------------------------------------------
Net earnings .............................. 177,623 137,032 81,552 45,809 129,571
Cash dividends paid............................ 52,807 48,213 45,200 40,715 40,676
Earnings retained in the business.............. 124,816 88,819 36,352 5,094 88,895
Capital expenditures........................... 393,161 386,864 367,173 244,373 346,617
===============================================================================================================
Financial Condition
Working capital...............................$ 138,528 157,576 157,822 147,194 156,677
Long-term debt (non-current portion)........... 915,797 941,710 843,618 746,622 565,224
Stockholders' equity........................... 1,387,865 1,257,870 1,164,828 994,460 987,439
Total assets................................... 3,033,398 2,804,553 2,527,416 2,219,067 1,965,186
===============================================================================================================
Common Stock
Number of stockholders (beneficial)............ 17,000 14,000 11,500 10,500 10,000
Shares outstanding (in thousands) (1).......... 55,036 54,897 54,770 50,962 50,848
===============================================================================================================
Per Share(1)
Earnings before accounting changes............$ 3.23 2.02 1.52 0.90 2.55
Accounting changes ............................ - .48 - - -
----------------------------------------------------------------
Net earnings ................................ 3.23 2.50 1.52 0.90 2.55
Cash dividends paid ........................... 0.96 0.88 0.84 0.80 0.80
Stockholders' equity .......................... 25.22 22.91 21.27 19.51 19.42
===============================================================================================================
Financial Returns
Percent return on equity before accounting
changes (2).................................. 14.12% 9.50% 8.20% 4.64% 14.38%
Percent return on net sales before accounting
changes ..................................... 5.91% 4.22% 3.44% 2.29% 6.80%
===============================================================================================================
Employment
Number of employees............................ 12,260 12,040 12,000 11,350 10,275
Wages, salaries and cost of employee benefits $ 580,561 551,172 507,469 451,770 400,440
===============================================================================================================
(1) All share and per share amounts have been adjusted for stock splits.
(2) Calculated on stockholders' equity at the beginning of the year.
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Paper products markets tend to follow general economic conditions. The
sales and earnings of the building materials business are closely related to
new housing starts, remodeling activity and to the availability and terms of
financing for construction. The cost of wood fiber, the basic raw material
for both industry segments, is sensitive to various supply and demand
factors, including environmental issues affecting log supply.
Results of Operations 1994 vs. 1993
Net sales increased 14.7% in 1994 compared to 1993. Paper products sales
increased 18.4% as unit volume sales increased in all paper product lines.
Unbleached paper products selling prices improved significantly throughout
1994 as demand for these products was strong while available supplies grew at
a far slower pace. In addition, demand for linerboard grew in export markets
further tightening supply. In bleached paper products, hardwood market pulp
prices trended upward throughout 1994. Average sales price realizations for
other bleached paper products trended down through the second quarter of
1994. In the second half of 1994, there was a favorable upward trend in
bleached paper products sales prices such that the average realization for
fine paper prices in the fourth quarter of 1994 were 13.6% above levels from
the same period in 1993. This upward trend continued as we entered the first
quarter of 1995.
Building materials sales were up 8.9% compared with 1993 as average sales
price realizations increased for all building materials product lines. Both
particleboard and medium density fiberboard (MDF) average sales prices
increased in excess of 15.0% in 1994 as compared with 1993. Sales volumes
increased for both particleboard and MDF, however plywood experienced slight
volume declines due to the continuing reduction in the availability of
federal timber in the Pacific Northwest.
As the federal government owns nearly 60% of the commercial timberland in
Oregon, preservationist pressures that have stopped federal timber sales have
caused a significant reduction in available timber supply. State and private
timber supply is inadequate to fill the shortfall. This in turn has resulted
in many mill closures at a time when product demand is increasing, creating
supply-related pressures on lumber and plywood prices. In October 1994, the
Company closed its Sweet Home, Oregon plywood plant due to the reduced
availability of federal timber. Currently, the Company is able to provide
approximately 75% of its Oregon log needs from its own timberlands on a
sustainable basis. No additional plant closures are anticipated in the
immediate future.
Gross profit margins increased to 18.3% in 1994 from 16.4% in 1993. Paper
products gross margins increased to 13.8% from 11.6% in 1993 reflecting
improved selling prices in the last half of 1994. This improvement was
tempered by start-up costs associated with a new pulping facility and paper
machine at the Johnsonburg, Pennsylvania mill. In addition, margins were
also pressured as the prices for old corrugated containers, a recycled raw
material used in the manufacture of unbleached containerboard, increased
68.5% from 1993. Building materials gross profit margins increased to 25.9%
compared with 23.9% in 1993. The improvement in building materials margins
is due mainly to increases in average sales price realizations for all
product lines. However, the Company continues to experience increasing raw
material costs due to environmental and supply and demand factors. The cost
of resin and glue, raw materials used in the manufacture of particleboard,
MDF and plywood, increased significantly from 1993.
Selling and administrative expenses declined to 6.1% of sales compared with
6.7% in 1993. The decline was due primarily to additional sales volumes as
selling and administrative expenses increased 5.9% between the two periods.
Other expense increased to $6.4 million in 1994 compared with $3.9 million
in 1993. The increase is due primarily to a charge of $5.0 million ($.06 per
share, after-tax) for the closure of the Sweet Home, Oregon plywood plant
recorded in the third quarter of 1994.
Interest expense increased to $71.5 million in 1994 compared with $63.3
million in 1993. Although the Company's average outstanding debt increased
$98.7 million between the two periods, gross interest was $80.8 million in
1994 versus $79.2 million in 1993 as the Company's effective interest rate on
average outstanding debt declined from 8.1% in 1993 to 7.5% in 1994.
Capitalized interest declined from $15.9 million in 1993 to $9.3 million in
1994. The weighted average interest rate of all debt was 7.75% at December
31, 1994 compared with 7.31% at December 31, 1993.
The overall effective income tax rate declined to 38.5% in 1994 from 41.5%
in 1993. The federal corporate income tax rate increased in 1993 which
required an increase in the deferred tax liability account and a
corresponding charge to earnings in the amount of $5.9 million or $.11 per
share.
Results of Operations 1993 vs. 1992
Net sales increased 10.5% in 1993 compared to 1992. Paper product sales
increased 7.6%. Volume increases were experienced in all paper product lines
with the exception of bleached market pulp. The acquisition of eleven
corrugated container facilities in June 1992 and the resulting full year's
sales in 1993 accounted for nearly all of the increase in paper product
sales. Excess industry production capacity and weak foreign markets more
than offset improvements in the domestic economy resulting in continued price
declines in all paper product lines with the exception of small increases for
fine paper and cut sheets.
Building materials sales increased 15.4% compared with 1992 as average
sales price realizations increased for all building materials product lines
and, most significantly, for lumber products whose average sales price
realizations increased approximately 34.0%. Sales volumes increased in
composite board panels but decreased in plywood and lumber products 7.0% and
3.5%, respectively, because of reduced operating levels resulting from the
lack of logs.
Gross profit margins increased to 16.4% in 1993 from 15.4% of sales in
1992. Gross profit margins for paper decreased to 11.6% from 14.8% in 1992
reflecting continued poor pricing for paper products. Building materials
gross profit margins increased to 23.9% from 16.3% in 1992 primarily due to
increased average sales price realizations in all building materials product
lines. At the same time, however, costs for open market logs continued to
increase due to supply factors.
Selling and administrative expenses declined to 6.7% of sales in 1993
compared to 7.0% in 1992. The decrease is primarily due to additional sales
volume.
Interest expense declined 4.7% to $63.3 million in 1993 from $66.4 million
in 1992. Gross interest expense increased $5.4 million in 1993 over the
comparable amount in 1992 as the Company's average outstanding debt increased
$129.5 million. However, capitalized interest increased to $15.9 million in
1993 compared to $7.4 million in 1992 which more than offset the increase in
gross interest expense. In addition, the impact of increased debt was
minimized by an overall reduction of effective interest rates. The weighted
average interest rate was 7.31% at December 31, 1993 compared with 8.56% at
December 31, 1992.
Liquidity and Capital Resources
Willamette generates funds internally via net earnings and non-cash charges
against earnings such as depreciation, cost of fee timber harvested and
deferred income taxes. Funds generated externally have usually been through
debt financing.
In 1994, cash flows from operating activities were $396.9 million and
represented an increase of 32.9% over comparable cash flows in 1993. This
increase was primarily due to additional net earnings and depreciation. As a
result of the increase in internally generated cash flows, external long-term
borrowings have been limited to a draw-down in June, 1994 of the remaining
$25 million available under a $100 million revolving credit facility at
market interest rates from a bank. As a result of the above cash flows and
financing activities, the total debt-to-capital ratio is 43.5% at December
31, 1994 compared with 45.2% at December 31, 1993.
The Company is continually making capital expenditures at its manufacturing
facilities to improve fiber utilization, labor efficiency and to expand
production. In 1994, the Company made such capital expenditures of $340.3
million.
During 1994 the following major capital projects were completed:
-- Construction of a new fiberline and paper machine at the
Johnsonburg, Pennsylvania fine paper mill.
-- Modernization of the plywood plant at Moncure, North Carolina.
-- Addition of pulp drying capacity and expansion of the fiberline at
the Marlboro County, South Carolina paper mill.
-- Construction of a glue-laminated beam plant at Simsboro,
Louisiana.
Major capital projects underway at December 31, 1994 include the following:
-- Construction of a second linerboard machine at the paper mill in
Campti, Louisiana which began production in January, 1995.
-- Expansion of the Bennettsville, South Carolina medium density
fiberboard facility.
-- Conversion of the Eugene, Oregon particleboard plant to
manufacture medium density fiberboard.
-- Construction of an oriented strand board facility in Arcadia,
Louisiana.
-- Construction of a gas turbine cogeneration facility at the Albany,
Oregon paper mill.
-- Upgrade and rebuild of three specialty paper machines at the
Johnsonburg, Pennsylvania paper mill.
-- Upgrade and expansion of the paper machine at Oxnard, California.
-- Expansion of the cut sheet facility at Owensboro, Kentucky with a
12-pocket sheeter.
-- Expansion of pulping capacity at the Marlboro County, South
Carolina paper mill.
-- Upgrade to evaporators at the Hawesville, Kentucky bleached pulp
mill.
The total cost of all major capital projects in progress at December 31,
1994 was estimated to be approximately $492.3 million of which $188.3 million
has already been spent. These projects will be funded with internally
generated cash flows and with external borrowings if needed. The Company
believes it has the resources available to meet its liquidity requirements
through internally generated cash flows, short-term borrowings and revolving
credit agreements which could be arranged with a number of banks. In
addition, in April 1994, the Company registered, under the Securities Act of
1933, senior debt securities totaling $200 million. As of December 31, 1994,
none of these debt securities had been issued.
Other Matters
The Company believes it is in substantial compliance with federal, state
and local laws regarding environmental quality.
The Environmental Protection Agency (EPA) has issued proposed rules
regarding air and water quality referred to as the "cluster rules". These
rules are currently undergoing public review and are extremely onerous with a
potential financial impact to the paper industry estimated in excess of $11
billion in capital spending to comply with the proposed rules. This level of
regulation does not appear to be justified on either an environmental impact
or cost benefit basis and it is hoped compromise can be reached lessening the
severity of the rules.
In addition to the impact of the cluster rules on pulp and paper mills, the
Company's other operations are faced with increasingly stringent
environmental regulations. Based upon regulations either enacted or proposed
for future enactment, the Company estimates that over the next five years
required capital expenditures to comply with environmental regulations will
be less than $250 million. Although future environmental capital
expenditures cannot be predicted with any certainty because of continuing
changes in laws, we believe that compliance with such environmental
regulations will not have a material adverse effect upon the Company's
competitive position.
Much attention has been given to the controversy concerning
preservationists' efforts to stop the harvest of timber from Federal
timberlands in the Northwest. Concurrent with these efforts have come
increased regulations, limitations and restrictions on the harvest of timber
from privately-owned timberlands. Current rules and regulations do not
significantly impact the Company's ability to manage its Oregon timberland on
a sustained yield basis.
Over the years, inflation has resulted in replacement costs higher than
those originally needed to purchase existing plants and equipment. Advancing
technology and environmental concerns also contribute to higher costs.
Productivity gains, because of technological improvements, may partially
offset these increased costs. Our use of LIFO to value inventories allows us
to include these inflationary costs in the cost of sales.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data filed as part of this
report follow the signature pages of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Information regarding (i) directors of the Company is set forth on pages 3
and 4 of the Company's definitive proxy statement (the "Proxy Statement") for
its 1995 annual meeting of shareholders, under the heading "Election of
Directors" and (ii) the failure by a director and an emeritus director of the
Company to file, on a timely basis, an aggregate of three reports required by
Section 16(a) of the Securities Exchange Act of 1934, is set forth in the
first paragraph on page 3 of the Proxy Statement, which information is
incorporated herein by reference. Information regarding the executive
officers of the Company is set forth under the heading "Executive Officers of
the Registrant" in Part I of this report.
Item 11. Executive Compensation
Information regarding compensation of directors and executive officers of
the Company is set forth in the Proxy Statement under the headings "Executive
Compensation" on pages 5-7, "Compensation Committee Interlocks and Insider
Participation" on pages 7 and 8, "Compensation of Directors" on pages 11 and
12, and "Employment Agreements" on pages 12 and 13. Such information is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information regarding security ownership of management and certain other
beneficial owners is set forth on pages 1 and 2 of the Proxy Statement under
the heading "Holders of Common Stock," which information is incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions
Information regarding certain relationships and related transactions is
set forth on pages 7 and 8 of the Proxy Statement under the heading
"Compensation Interlocks and Insider Participation," which information is
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statements and Reports on Form 8-K.
(a) 1. and 2. For a list of the financial statements filed herewith, see the
index to consolidated financial statements following the
signature pages of this report.
(a) 3. For a list of the exhibits filed herewith, see the index to
exhibits following the financial statements filed with this
report. Each management contract or compensatory plan or
arrangement required to be filed as an exhibit to this report
is identified in the list.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed for the quarter ended
December 31, 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
WILLAMETTE INDUSTRIES, INC.
(Registrant)
By/s/ J. A. PARSONS
Dated: February 9, 1995 (J. A. Parsons)
Executive Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on February 9, 1995, by the following persons on
behalf of the registrant in the capacities indicated.
Signature Title
Principal Executive Officer
and Director
/s/ WILLIAM SWINDELLS Chairman and Chief Executive Officer and
(William Swindells) Director
Principal Financial Officer
/s/ J. A. PARSONS Executive Vice President and
(J. A. Parsons) Chief Financial Officer, Secretary and
Treasurer
Principal Accounting Officer
/s/ DUANE C. MCDOUGALL Vice President-Controller
(Duane C. McDougall)
/s/ C. M. BISHOP Director
(C. M. Bishop)
/s/ GERARD K. DRUMMOND Director
(Gerard K. Drummond)
/s/ E. B. HART Director
(E. B. Hart)
/s/ C. W. KNODELL Director
(C.W. Knodell)
/s/ PAUL N. MCCRACKEN Director
(Paul N. McCracken)
/s/ STUART J. SHELK, JR. Director
(Stuart J. Shelk, Jr.)
/s/ ROBERT M. SMELICK Director
(Robert M. Smelick)
/s/ SAMUEL C. WHEELER Director
(Samuel C. Wheeler)
/s/ BENJAMIN R. WHITELEY Director
(Benjamin R. Whiteley)
<PAGE>
Index to Consolidated Financial Statements
Page No.
Independent Auditors' Report 19
Consolidated Balance Sheets as of December 31, 1994 and 1993 20
Consolidated Statements of Earnings for the Years ended
December 31, 1994, 1993 and 1992 21
Consolidated Statements of Stockholders' Equity for the Years ended
December 31, 1994, 1993 and 1992 22
Consolidated Statements of Cash Flows for the Years ended
December 31, 1994, 1993 and 1992 23
Supplemental Business Segment Information 24
Selected Quarterly Financial Data 25
Notes to Consolidated Financial Statements 26
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
Willamette Industries, Inc.:
We have audited the accompanying consolidated balance sheets of
Willamette Industries, Inc. and subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of earnings, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1994. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Willamette Industries, Inc. and subsidiaries as of December 31, 1994 and
1993, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 1994 in conformity with
generally accepted accounting principles.
As discussed in the notes to the consolidated financial statements, the
Company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards #106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" and Statement of Financial
Accounting Standards #109, "Accounting for Income Taxes," in 1993.
KPMG PEAT MARWICK LLP
Portland, Oregon
February 9, 1995
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
(dollar amounts, except per share amounts, in thousands)
Assets 1994 1993
-------------- --------------
<S> <C> <C>
Current assets:
Cash $ 12,798 9,543
Notes and accounts receivable, less allowance
for doubtful accounts of $5,278 (1993 - $4,466) 283,055 207,161
Inventories (notes 1 and 2) 256,091 269,063
Deposits on timber cutting contracts 41,248 36,321
Prepaid expenses 11,462 11,124
-------------- --------------
Total current assets 604,654 533,212
-------------- --------------
Timber, timberlands and related facilities, net (note 1) 509,075 483,308
Property, plant and equipment, net (notes 1 and 8) 1,863,505 1,718,063
Other assets 56,164 69,970
-------------- --------------
3,033,398 2,804,553
============== ==============
Liabilities and Stockholders' Equity
Current liabilities:
Current installments on long-term debt (note 4) $ 50,956 1,278
Notes payable (note 4) 100,000 96,000
Accounts payable, includes book 173,549 139,572
overdrafts of $48,589 (1993 - $43,905)
Accrued payrolls and related expenses 58,945 56,498
Accrued interest 22,308 21,586
Other accrued expenses 37,414 47,912
Federal and state taxes on income (notes 1 and 3) 22,954 12,790
-------------- --------------
Total current liabilities 466,126 375,636
-------------- --------------
Deferred income taxes (notes 1 and 3) 231,717 198,295
Other liabilities 31,893 31,042
Long-term debt, net of current installments (note 4) 915,797 941,710
Stockholders' equity (note 6):
Preferred stock, cumulative, of $.50 par value.
Authorized 5,000,000 shares - -
Common stock of $.50 par value. Authorized
75,000,000 shares; issued 55,036,191
shares (1993 - 54,897,648 shares) 27,518 27,449
Capital surplus 293,756 288,646
Retained earnings 1,066,591 941,775
-------------- --------------
Total stockholders' equity 1,387,865 1,257,870
-------------- --------------
$ 3,033,398 2,804,553
============== ==============
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
Years ended December 31, 1994, 1993 and 1992
(dollar amounts, except per share amounts, in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Net sales $ 3,007,949 2,622,237 2,372,396
Cost of sales 2,456,437 2,191,448 2,007,703
---------- ---------- ----------
Gross profit 551,512 430,789 364,693
Selling and administrative expenses 184,699 174,413 167,094
---------- ---------- ----------
Operating earnings 366,813 256,376 197,599
Other income(expense), net (6,377) (3,918) (1,725)
---------- ---------- ----------
360,436 252,458 195,874
Interest expense, net 71,513 63,290 66,422
---------- ---------- ----------
Earnings before taxes and accounting changes 288,923 189,168 129,452
Provision for income taxes (notes 1 and 3) 111,300 78,500 47,900
---------- ---------- ----------
Earnings before accounting changes 177,623 110,668 81,552
Accounting changes (notes 1 and 5) - 26,364 -
---------- ---------- ----------
Net Earnings $ 177,623 137,032 81,552
======== ======== ========
Per share information:
Earnings before accounting changes $ 3.23 2.02 1.52
Accounting changes - 0.48 -
---------- ---------- ----------
Net earnings $ 3.23 2.50 1.52
======== ======== ========
Weighted average number of shares outstanding 55,019 54,810 53,788
======== ======== ========
Per share earnings are based upon the weighted average number of shares
outstanding and have been adjusted for all stock splits.
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1994, 1993 and 1992
(dollar amounts, except per share amounts, in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Common Stock:
Balance at beginning of year $ 27,449 27,385 12,741
2-for-1 stock split - - 13,683
Shares issued for options exercised 69 64 86
Shares issued in stock offering - - 875
---------- ---------- ----------
Balance at end of year $ 27,518 27,449 27,385
========== ========== ==========
Capital Surplus:
Balance at beginning of year $ 288,646 284,487 165,115
2-for-1 stock split - - (13,683)
Shares issued for options exercised 5,110 4,159 6,875
Shares issued in stock offering - - 126,180
---------- ---------- ----------
Balance at end of year $ 293,756 288,646 284,487
========== ========== ==========
Retained Earnings:
Balance at beginning of year $ 941,775 852,956 816,604
Net earnings 177,623 137,032 81,552
Less cash dividends on common stock
($.96, $.88, $.84 per share in
1994, 1993 and 1992 respectively) (52,807) (48,213) (45,200)
---------- ---------- ----------
Balance at end of year $ 1,066,591 941,775 852,956
========== ========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1994, 1993 and 1992
(dollar amounts in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 177,623 137,032 81,552
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Net change in accounting standards - (26,364) -
Depreciation 192,378 166,088 146,032
Cost of fee timber harvested 19,810 21,611 22,650
Other amortization 5,064 6,503 5,102
Increase in deferred income taxes 33,422 32,810 11,697
Changes in working capital items
(net of acquisitions):
Accounts receivable (75,894) (24,365) (7,413)
Inventories 12,972 (20,367) (8,929)
Prepaid expenses and timber deposits (5,265) (7,018) (4,959)
Accounts payable and accrued expenses 26,648 8,444 11,019
Federal and state taxes on income 10,164 4,274 3,804
--------- --------- ---------
Net cash provided by operating activities 396,922 298,648 260,555
--------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of equipment 2,415 6,988 7,002
Expenditures for property, plant and equipment (340,278) (361,488) (337,032)
Expenditures for timber and timberlands, net (45,676) (18,295) (23,649)
Expenditures for roads and reforestation (7,207) (7,081) (6,492)
Acquisitions, net of cash acquired - - (89,292)
Other 17,110 (10,719) 3,166
--------- --------- ---------
Net cash used in investing activities (373,636) (390,595) (446,297)
--------- --------- ---------
Cash flows from financing activities:
Debt borrowing 29,000 388,929 190,259
Proceeds from sale of capital stock 5,011 4,073 134,016
Cash dividends paid (52,807) (48,213) (45,200)
Payment on debt (1,235) (252,333) (86,509)
--------- --------- ---------
Net cash provided by financing activities (20,031) 92,456 192,566
--------- --------- ---------
Net change in cash 3,255 509 6,824
Cash at beginning of year 9,543 9,034 2,210
--------- --------- ---------
Cash at end of year $ 12,798 9,543 9,034
======= ======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 70,791 65,183 62,998
======= ======= =======
Income taxes $ 67,714 41,416 32,399
======= ======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
SUPPLEMENTAL BUSINESS SEGMENT INFORMATION
(dollar amounts in thousands)
<TABLE>
<CAPTION>
1994 % 1993 % 1992 % 1991 % 1990 %
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Sales to outside customers:
Paper Group:
Fabricated paper products........... $ 1,475,593 49 1,232,311 47 1,098,777 46 958,615 48 916,618 48
Pulp and paper...................... 410,365 14 360,014 14 381,529 16 392,910 19 377,729 20
------------- ------------- ------------- ------------- -------------
Total Paper Group..................... 1,885,958 63 1,592,325 61 1,480,306 62 1,351,525 67 1,294,347 68
------------- ------------- ------------- ------------- -------------
Building Materials Group:
Lumber ............................. 188,445 6 184,287 7 147,886 6 112,423 6 81,938 4
Plywood ............................ 441,397 15 425,387 16 397,332 17 296,550 15 288,428 15
Particleboard and MDF .............. 292,153 10 234,123 9 186,973 8 148,749 7 156,665 8
Other wood products................. 199,996 6 186,115 7 159,899 7 95,254 5 83,475 5
------------- ------------- ------------- ------------- -------------
Total Building Materials Group........ 1,121,991 37 1,029,912 39 892,090 38 652,976 33 610,506 32
------------- ------------- ------------- ------------- -------------
Total net sales (1)..................... $ 3,007,949 100 2,622,237 100 2,372,396 100 2,004,501 100 1,904,853 100
============= ============= ============= ============= =============
Intersegment sales at market value
Building Materials Group.............. $ 36,121 39,113 38,128 34,253 31,514
============= ============= ============= ============= ==============
Contribution to earnings (2):
Paper Group........................... $ 124,856 34 53,655 21 95,970 49 119,719 83 196,405 82
Building Materials Group.............. 241,957 66 202,721 79 101,629 51 24,256 17 42,929 18
------------- ------------- ------------- ------------- -------------
Contribution to earnings ........... 366,813 100 256,376 100 197,599 100 143,975 100 239,334 100
=== === === === ===
Other income(expense)................... (6,377) (3,918) (1,725) (7,103) (764)
Interest expense........................ 71,513 63,290 66,422 63,263 29,899
--------- --------- --------- --------- ---------
Earnings before taxes and
accounting changes.................... $ 288,923 189,168 129,452 73,609 208,671
========= ========= ========= ========= =========
Identifiable assets:
Paper Group........................... $ 2,090,399 1,884,017 1,663,990 1,361,437 1,270,874
Building Materials Group.............. 357,276 362,184 346,882 354,322 263,342
Timber, timberlands and related
facilities........................... 509,075 483,308 448,721 443,075 357,373
Corporate............................. 76,648 75,044 67,823 60,233 73,597
--------- --------- --------- --------- ---------
$ 3,033,398 2,804,553 2,527,416 2,219,067 1,965,186
========= ========= ========= ========= =========
(1) The Company has no foreign operations and is not dependent on any one significant customer or group
of customers. Approximately 97% of the Company's total output is sold domestically.
(2) "Contribution to earnings" is defined to be that amount of earnings generated before (a) unallocable
income, such as interest; (b) interest expense; and (c) income taxes.
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED QUARTERLY FINANCIAL DATA
(Unaudited) (dollar amounts, except per share amounts, in thousands)
Earnings Before
Accounting Changes Net Earnings
Net Gross --------------------- ------------------
1994 Sales Profit Amount Per Share Amount Per Share
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1st Quarter........ $ 679,701 114,964 32,885 0.60 32,885 0.60
2nd Quarter........ 728,701 111,554 29,730 0.54 29,730 0.54
3rd Quarter........ 780,827 132,925 37,720 0.68 37,720 0.68
4th Quarter........ 818,720 192,069 77,288 1.41 77,288 1.41
- ------------------------------------------------------------------------------------------
Total.............. $ 3,007,949 551,512 177,623 3.23 177,623 3.23
==========================================================================================
Earnings Before
Accounting Changes Net Earnings
Net Gross --------------------- ------------------
1993 Sales Profit Amount Per Share Amount Per Share
- ------------------------------------------------------------------------------------------
1st Quarter........ $ 633,022 109,237 30,896 0.56 57,260 1.04
2nd Quarter........ 654,064 103,622 26,571 0.49 26,571 0.49
3rd Quarter........ 677,101 106,219 21,105 0.38 21,105 0.38
4th Quarter........ 658,050 111,711 32,096 0.59 32,096 0.59
- ------------------------------------------------------------------------------------------
Total.............. $ 2,622,237 430,789 110,668 2.02 137,032 2.50
==========================================================================================
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992 (dollar amounts, except per share amounts,
in thousands)
1. Summary of Significant Accounting Policies
------------------------------------------
(a) Principles of Consolidation
The consolidated financial statements include the accounts of all
majority-owned subsidiaries. All material intercompany balances
and transactions have been eliminated upon consolidation.
(b) Inventories
Inventories are valued at the lower of cost or market. Cost is
determined on the last-in, first-out (LIFO) method for all major
classes of inventory. All other inventories are valued at average
cost.
(c) Property, Plant and Equipment
Property, plant and equipment is carried at cost and includes
expenditures for new facilities and those which substantially
increase the useful lives of existing plants and equipment.
Maintenance, repairs and minor renewals are expensed as incurred.
When properties are retired or otherwise disposed of, the related
cost and accumulated depreciation are removed from the respective
accounts and any profit or loss on disposition is credited or
charged to income. Depreciation is computed using the
straight-line method over the useful lives of the respective
assets. Leasehold improvements are amortized over the terms of the
respective leases.
(d) Timber, Timberlands and Related Facilities
These accounts are stated at their cost less the cost of fee
timber harvested and the amortization of logging roads.
Amortization of logging roads is charged to expense as timber is
harvested. Both the cost of fee timber harvested and amortization
rates are determined with reference to costs and the related
existing volume of timber estimated to be recoverable.
The Company obtains a portion of its timber requirements from
various public and private sources under timber harvesting
contracts. The Company does not incur a direct liability for, or
ownership of, this timber until it has been harvested; therefore,
the timber is not recorded until cut.
(e) Income Taxes
Deferred income taxes are provided to reflect the tax effect of
temporary differences in reporting income and deductions for tax
purposes.
Effective January 1, 1993, the Company adopted the provisions of
SFAS #109 "Accounting for Income Taxes" which requires deferred
taxes payable in the future to be reflected at current statutory
tax rates. This change resulted in a credit to net earnings and a
reduction in the deferred tax liability by a corresponding amount
of $40,000 or $.73 per share.
(f) Capitalized Interest
Interest is capitalized on funds borrowed during the construction
period on certain assets. Capitalized interest in 1994, 1993 and
1992 was $9,294, $15,904 and $7,354 respectively and is netted
against interest expense in the consolidated statement of earnings.
Such capitalized interest will be amortized over the depreciable
life of the related assets.
2. Inventories
-----------
The major components of inventories for the two years ended December 31,
1994 are as follows:
December 31,
-----------------------
1994 1993
-------- --------
Finished product....................... $ 72,229 78,197
Work in progress....................... 6,794 6,205
Raw material........................... 114,596 128,312
Supplies............................... 62,472 56,349
-------- -------
$256,091 269,063
======= =======
Valued at:
LIFO cost............................ $167,481 185,424
Average cost......................... 88,610 83,639
If current cost rather than LIFO cost had been used by the Company, inven-
tories would have been approximately $81,081 and $59,910 higher in 1994 and
1993 respectively.
3. Income Taxes
The provision for income taxes includes the following:
1994 1993 1992
------- ------ ------
Payable from taxable earnings..........$ 77,478 37,690 17,203
Payable (reduction) due to AMT......... 400 8,000 19,000
------- ------ ------
Currently payable...................... 77,878 45,690 36,203
Deferred taxes due to temporary
differences for:
Accelerated depreciation......... 32,213 24,824 10,143
Increase in Federal corporate
tax rate by 1%................ - 5,864 -
Other............................ 1,209 2,122 1,554
------- ------ ------
Total deferred................ 33,422 32,810 11,697
------- ------ ------
Total provision...............$111,300 78,500 47,900
======= ====== ======
Federal income taxes...................$ 95,000 67,000 40,400
State income taxes..................... 16,300 11,500 7,500
------- ------ ------
$111,300 78,500 47,900
======= ====== ======
The Company has no foreign pretax income. The Company's deferred income
tax liability is mainly due to depreciation. Differences between the
effective tax rate and the Federal statutory rate are shown in the following
table as a percentage of pretax income:
<PAGE>
1994 1993 1992
---- ---- ----
Federal statutory rate....................... 35.0% 35.0% 34.0%
State income taxes, net of
Federal tax effect......................... 3.7 4.0 3.8
Adjustment to deferred taxes due to increase
in Federal corporate tax rate by 1%........ - 3.1 -
Other........................................ (.2) (.6) (.8)
---- ---- ----
38.5% 41.5% 37.0%
==== ==== ====
The Company's consolidated Federal income tax returns for 1978 through 1989
have been examined by the Internal Revenue Service and while final settlement
has not been made, management believes that the Company has provided for all
deficiencies that ultimately might be assessed.
The Tax Reform Act of 1986 expanded the corporate alternative minimum tax
(AMT). Under this Act, the Company's tax liability is the greater of its
regular tax or the AMT. To the extent the Company's AMT liability exceeds
its regular tax liability, the AMT liability may be applied against future
regular tax liabilities. The Company expects to utilize future AMT credits
as taxable income increases and current temporary differences reverse. At
December 31, 1994, the Company had AMT credits of $51,400 which have been
offset against deferred income taxes related to depreciation. No valuation
allowance is required for these credits.
In August 1993, the Federal corporate tax rate increased to 35% retroactive
to January 1, 1993, impacting both the current year's provision for income
taxes and the deferred tax liability. Accounting standards required that the
cumulative impact of the increase in rate ($5,864 or $.11 per share) be
charged to income in the third quarter of 1993 with a corresponding increase
in the deferred tax liability.
4. Long-term Debt
--------------
Long-term debt consists of the following:
December 31,
----------------------
1994 1993
-------- --------
Notes payable to public:
9.55%, due in 1995....................... $100,000 100,000
7.00%, due in 1998....................... 100,000 100,000
9.625%, due in 2000...................... 150,000 150,000
7.75%, due in 2002....................... 100,000 100,000
9.125%, due in 2003...................... 50,000 50,000
9.00%, due in 2021....................... 150,000 150,000
Medium-term notes, with interest
rates ranging from 5.66% to 7.30%,
due in varying amounts through 2013...... 150,000 150,000
Bank term loan, with interest rates
averaging 6.28% and 3.59%, due in 1996... 100,000 75,000
<PAGE>
Revenue bonds, with interest
rates averaging 5.39% and 4.86%,
due in varying amounts
through 2023............................. 62,067 62,704
Other long-term debt, with
interest rates averaging
8.20% and 6.28%, due in
varying amounts through 2006.............. 4,686 5,284
-------- --------
966,753 942,988
Less: Current installments.................. 50,956 1,278
-------- --------
$915,797 941,710
======== ========
Principal payment requirements on the above debt for the four years subse-
quent to 1995 are: 1996, $103,543; 1997, $713; 1998, $152,733; 1999, $753.
The Company has made arrangements to refinance $50,000 of the note due in
1995 on a long-term basis. The balance of this note will be repaid with
internally generated cash flow or short-term borrowing.
The Company utilized short-term borrowings with a number of banks at
various times during 1994 and 1993 with $100,000 outstanding at December 31,
1994. Such borrowings were backed by a line of credit which carried fees at
market rates. Other uncommitted lines of credit are available. Interest is
based upon prevailing short-term rates in effect at the time of the
transaction. Information on short-term debt during 1994 and 1993 is as
follows:
1994 1993
-------- --------
Average daily short-term debt outstanding... $124,767 68,947
Weighted average interest rate.............. 4.51% 3.29%
The fair value of the Corporation's long-term debt is not materially
different than the amount shown on the face of the balance sheet at December
31, 1994. The Company does not have any derivative financial instruments.
5. Pension and Retirement Plans
----------------------------
The Company contributes to multi-employer retirement plans at fixed
payments per hour for certain hourly employees.
DEFINED BENEFIT PLANS
Substantially all other employees of the Company are covered by
noncontributory defined benefit plans. Under the salaried plan, retirement
benefits are based on both years of service and the highest five consecutive
years of compensation prior to retirement. Plans covering hourly employees
provide benefits of stated amounts for each year of service. Total pension
expense in 1994, 1993 and 1992 for all such plans was $9,580, $6,429 and
$6,227 respectively.
The Company makes annual contributions to the plans that are between the
minimum amounts required by the Employee Retirement Income Security Act and
the maximum amounts deductible under current tax regulations. Such
contributions are intended to provide not only for benefits attributed to
service to date, but also for those expected to be earned in the future.
The net periodic pension cost for 1994, 1993 and 1992 included the
following components:
1994 1993 1992
---- ---- ----
Service cost of benefits earned
during the period ................... $11,061 9,158 8,201
Interest cost on projected
benefit contribution ................ 16,843 16,026 14,689
Actual return on assets ............... (2,071) (31,748) (23,611)
Net amortization and deferral ......... (21,470) 9,066 3,139
------ ------ ------
Net periodic pension cost ............. $ 4,363 2,502 2,418
====== ====== ======
The following table sets forth the plans' funded status and amount
recognized in the Company's consolidated financial statements at December 31,
1994 and 1993:
December 31
---------------------------------------------------------
1994 1993
--------------------------- ---------------------------
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
Benefits Exceed Assets Benefits Exceed Assets
------------- ------------- ------------- -------------
Actuarial present
value of benefit
obligations:
Vested benefit
obligation $(169,342) ( 28,431) (177,147) (26,983)
======= ======= ======= ======
Accumulated
benefit
obligation $(171,538) ( 28,725) (179,376) (27,787)
======= ======= ======= ======
(table continued on next page)
<PAGE>
Projected
benefit
obligation $(203,695) (30,328) (217,459) (27,787)
Plan assets
at fair value 252,327 22,557 262,097 20,737
------- ------- ------- ------
Plan assets
greater (less)
than projected
benefit
obligation 48,632 (7,771) 44,638 (7,050)
Unrecognized
net (gain) loss (43,071) 129 (36,432) 1,077
Prior service
cost not yet
recognized in
net periodic
pension cost 6,050 3,321 6,088 1,465
Unrecognized
obligation,
net of
amortization (6,169) 71 (7,718) (306)
------- ------- ------- ------
Prepaid pension
cost(pension
liability)
recognized $ 5,442 (4,250) 6,576 (4,814)
======= ======= ======= ======
The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 8% and 5.5% in 1994 and 7% and 5% in 1993.
The expected long-term rate of return on assets was 9%. Substantially all
plan assets are invested in stocks, bonds and cash equivalents.
CONTRIBUTORY PLANS
The Company covers all salaried employees and some hourly employees under
stock purchase plans. The salaried stock purchase plan allows employees to
contribute up to 7% of their salary (which the Company matches up to 6%).
Total stock purchase plan expense was $8,925, $8,417 and $7,268 in 1994, 1993
and 1992 respectively.
POSTRETIREMENT BENEFIT PLANS
Effective January 1, 1993, the Company adopted the provisions of SFAS #106
"Employers Accounting for Postretirement Benefits Other Than Pensions" which
resulted in a change in accounting for such benefits from the "pay-as-you-go"
basis to the accrual basis.
The Company has a contributory postretirement health plan primarily
covering its salaried employees. Employees become eligible for these
benefits if they meet minimum age and service requirements. The accumulated
postretirement benefit obligation (APBO) as of January 1, 1993 was $21,995
and was recorded as a charge, net of tax, against income on a cumulative
basis in the amount of $13,600 or $.25 per share. The APBO as of December
31, 1994 and 1993 was:
1994 1993
------- -------
Retirees....................................... $10,718 $11,870
Other fully eligible participants.............. 4,339 4,627
Other active participants...................... 9,896 9,913
------- -------
24,953 26,410
Unrecognized loss.............................. (688) (2,925)
------- -------
APBO recognized in balance sheet............... $24,265 $23,485
======= =======
Weighted average discount rates of 8% and 7% were used in determining the
APBO at December 31, 1994 and 1993 respectively.
The components of net periodic postretirement expenses are as follows:
1994 1993
------- ------
Service cost benefits earned in period.......... $ 826 $ 675
Interest cost on accumulated benefit obligation. 1,811 1,725
Amortization of (gain) loss from earlier periods 60 -
------- ------
Net expense..................................... $ 2,697 $ 2,400
======= ======
Weighted average discount rates of 7% and 8% were used to determine the
interest cost component of the 1994 and 1993 net periodic expense.
For the year 1994, a 10.5% increase in the medical cost trend rate was
assumed. This rate decreases incrementally to an annual rate of 5% after 11
years. A 1% increase in the medical trend rate would increase the APBO by
$3,000 and increase the net periodic postretirement expense by $330.
6. Stockholders' Equity
--------------------
The Company has a Stock Option and Stock Appreciation Rights Plan (the
Plan). The Plan provides that options be granted at exercise prices not less
than market value on the date the option is granted. Options granted
generally become exercisable after one year in 33-1/3% increments per year
and expire ten years from the date of grant. The Company has reserved
3,000,000 shares for distribution under the Plan. A summary of stock option
activity related to the Plan is as follows:
Option Price
Shares Per Share
--------- ------------
Outstanding December 31, 1991 1,172,020 16.75-28.875
Granted 182,400 38.875
Exercised 323,990 16.75-28.875
Canceled or surrendered 23,858 16.75-28.875
--------- ------------
Outstanding December 31, 1992 1,006,572 16.75-38.875
Granted 259,150 39.25
Exercised 137,459 16.75-38.875
Canceled or surrendered 1,460 38.875-39.25
--------- ------------
Outstanding December 31, 1993 1,126,803 16.75-39.25
Granted 259,420 45.375
Exercised 143,045 16.75-39.25
Canceled or surrendered 10,367 16.75-45.375
--------- ------------
Outstanding December 31, 1994 1,232,811 $16.75-45.375
========= ============
Shares exercisable 776,305 $16.75-45.375
========= ============
In addition, stock appreciation rights (SARs) which have been awarded and
are outstanding to officers of the Company amount to 88,790 shares, of these
4,110 with a basis of $16.75; 2,410 with a basis of $28.875; 10,400 with a
basis of $24.25; 31,250 with a basis of $23.25 and 40,620 with a basis of
$26.25 were available for exercise at December 31, 1994. On exercise of the
SAR, the holder receives in cash an amount equal to the difference between
the market price of the common stock at the date the SAR is exercised and the
basis of the SAR.
Under the Plan, a committee of the Board of Directors of the Company is
authorized to issue up to 500,000 restricted shares of common stock to
eligible employees. These shares are subject to certain transfer
restrictions, including the passage of time, and vesting may be dependent
upon continued employment, the attainment of performance goals, or both. The
Company has awarded 36,425 restricted shares of common stock to certain
officers at no cost. These shares will vest in one-third annual increments
beginning after three years of continuous employment. At December 31, 1994,
17,551 restricted shares have not yet vested and 18,874 have been either
issued or cancelled. Unearned compensation, representing the fair market
value of the shares at the date of issuance, is charged to income over the
vesting period.
The Company has a shareholder rights plan providing for the distribution
of rights to shareholders ten days after a person or group (an "acquiring
person") becomes the owner of 20% or more of the Company's common stock or
makes a tender offer or exchange offer which would result in the ownership of
30% or more of the common stock. Once the rights are distributed, each right
becomes exercisable to purchase, for $175, 1/100th of a share of new series
of Company preferred stock, which 1/100th share is intended to equal one
common share in market value. Ten days after an acquiring person becomes the
owner of 20% or more of the Company's common stock, each right (other than
rights held by the acquiring person) becomes exercisable to purchase for
$175, common shares with a market value of $350. The rights will expire in
2000 and may be redeemed at $.01 per right any time prior to the tenth day
after an acquiring person becomes the owner of 20% or more of the common
stock.
7. Business Segments
-----------------
The Company operates in two principal business segments: Paper Products
and Building Materials. Timber, timberlands and related facilities have not
been allocated to the two segments because they are managed to supply raw
materials to both segments. Information with respect to the sales, operating
income and identifiable assets of these segments is included in the five-year
comparison on page 24. Information with respect to depreciation, cost of fee
timber harvested, amortization and capital expenditures for the years ended
December 31, 1994, 1993 and 1992 is shown below:
Depreciation,
Cost of Fee Timber Harvested
and Amortization
----------------------------
1994 1993 1992
---- ---- ----
Paper Products............. $152,983 129,069 111,661
Building Materials......... 44,459 43,522 39,473
Timber, timberlands and
related facilities...... 19,810 21,611 22,650
------- ------- -------
$217,252 194,202 173,784
======= ======= =======
<PAGE>
Capital Expenditures
--------------------------
1994 1993 1992
---- ---- ----
Paper Products............. $298,931 323,952 300,505
Building Materials......... 41,347 37,536 36,527
Timber, timberlands and
related facilities...... 52,883 25,376 30,141
------- ------- -------
$393,161 386,864 367,173
======= ======= =======
8. Property, Plant and Equipment
-----------------------------
Property, plant and equipment accounts are summarized as follows:
Principal
range of December 31
useful lives 1994 1993
------------ -------- --------
Land........................ - $ 28,933 26,593
Building materials
manufacturing facilities. 10 - 25 518,295 494,833
Paper products
manufacturing and
converting facilities.... 10 - 30 2,383,177 1,977,473
Furniture and fixtures...... 3 - 10 58,930 47,482
Leasehold improvements...... life of lease 6,195 6,036
Construction in progress.... 169,857 287,506
--------- ---------
3,165,387 2,839,923
Accumulated depreciation.... 1,301,882 1,121,860
--------- ---------
$1,863,505 1,718,063
========= =========
9. Contingencies
-------------
There are various lawsuits, claims and environmental matters pending
against the Company. While any proceeding or litigation has an element of
uncertainty, management believes that the outcome of any lawsuit or claim
that is pending or threatened, or all of them combined will not have a
material adverse effect on the Company's financial condition or operations.
10. Acquisition of Corrugated Facilities
------------------------------------
On June 30, 1992, the Company acquired eleven corrugated facilities from
Boise Cascade Corporation for cash including inventories and certain other
assets and liabilities. The acquisition was accounted for as a purchase.
Supplemental information concerning the acquisition follows:
Cash purchase price.................... $ 89,292
=======
Purchase was allocated to:
Non-cash working capital............ $ 10,578
Plant and equipment................. 78,714
-------
$ 89,292
=======
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
- -------
2. Not applicable.
3A. Third Restated Articles of Incorporation of the registrant.
Incorporated by reference from Exhibit 3A of the registrant's annual
report on Form 10-K for the year ended December 31, 1993 ("1993 Form
10-K").
3B. Bylaws of the registrant as amended through November 11, 1993.
Incorporated by reference from Exhibit 3B of the 1993 Form 10-K.
4A. Indenture dated as of March 15, 1983, between registrant and The
Chase Manhattan Bank. Incorporated by reference from Exhibit 4A of
the registration statement on Form S-3 effective December 13, 1985
(File No. 33-1876). [89]
4A1. Terms of the series of 9.55% Notes due 1995 and form of Note for such
series. Incorporated by reference from Exhibit 4A4 of the
registrant's annual report on Form 10-K for the year ended
December 31, 1990 ("1990 Form 10-K"). [5]
4A2. Terms of the series of 9.625% Notes due 2000 and form of Note for
such series. Incorporated by reference from Exhibit 4A5 of the 1990
Form 10-K. [5]
4A3. Terms of the series of 9.125% Notes due 2003 and form of Note for
such series. Incorporated by reference from Exhibit 4A6 of the
registrant's annual report on Form 10-K for the year ended
December 31, 1991 ("1991 Form 10-K"). [5]
4A4. Terms of the series of 9.0% Notes due 2021 and form of Note for such
series. Incorporated by reference from Exhibit 4A7 of the 1991
Form 10-K. [5]
4A5. Terms of the series of 7.75% Notes due 2002 and form of Note for such
series. Incorporated by reference from Exhibit 4A8 of the
registrant's annual report on Form 10-K for the year ended
December 31, 1992. [5]
4A6. Form of Note for the series of 7.0% Notes due 1998 in the aggregate
principal amount of $100,000,000. Incorporated by reference from
Exhibit 4D of the registrant's current report on Form 8-K dated
December 29, 1992. [5]
4B. Indenture dated as of January 30, 1993 between the registrant and The
Chase Manhattan Bank. Incorporated by reference from Exhibit 1B of
the registration statement on Form S-3 effective March 1, 1993
(File No. 33-58044) ("1993 Form S-3). [82]
4B1. Form of Medium-Term Note (fixed rate) for the Medium-Term Notes,
Series A. Incorporated by reference from Exhibit 4D to the 1993
Form S-3. [2]
4B2. Terms of the Medium-Term Notes, Series A, due 1998-2013.
Incorporated by reference from Exhibit 4B2 to the 1993 Form 10-K.
[1]
4C. Preferred Stock Purchase Rights of Willamette Industries, Inc.
Incorporated by reference from Exhibit 2 of the registrant's Form 8-A
filed February 26, 1990. [61]
9. Not applicable.
10A. Willamette Industries, Inc. Deferred Compensation Plan for Directors.
Incorporated by reference from Exhibit 10 of the registrant's annual
report on Form 10-K for the year ended December 31, 1983.* [5]
10B. Willamette Industries, Inc. 1986 Stock Option and Stock Appreciation
Rights Plan, as amended. Incorporated by reference from Exhibit 10B
of the 1990 Form 10-K.* [6]
10C. Willamette Industries, Inc. Retirement Plan for Non-Employee
Directors. Incorporated by reference from Exhibit 10 of the 1989
Form 10-K.* [2]
10D. Willamette Industries Inc. Severance Agreement with Key Management
Group. Incorporated by reference from Exhibit 10 of the 1991
Form 10-K.* [13]
10E. Willamette Industries 1993 Deferred Compensation Plan. Incorporated
by reference from Exhibit 10E to the 1993 Form 10-K.* [16]
10F. Willamette Industries 1995 Long-Term Incentive Compensation Plan.*
[12]
11. Computation of per share earnings is obtainable from the financial
statements filed with this annual report on Form 10-K.
12. Computation of Ratio of Earnings to Fixed Charges. [1]
13. Not applicable.
16. Not applicable.
18. Not applicable.
21. Omitted because the registrant's subsidiaries considered in the
aggregate as a single subsidiary do not constitute a significant
subsidiary.
22. Not applicable.
23. Consent of Independent Auditors to the incorporation by reference of
their report dated February 9, 1995, in the registrant's registration
statements on Forms S-3 and S-8. [1]
24. Not applicable.
27. Financial Data Schedule. [1]
28.-99. Not applicable.
The registrant will furnish a copy of any exhibit to this annual
report on Form 10-K to any security holder for a fee of $0.30 per page to
cover the registrant's expenses in furnishing the copy. The number of pages
of each exhibit is indicated in brackets at the end of each exhibit
description.
- ---------------------
*Management contract or compensatory plan or arrangement.
Note: Certain instruments with respect to the long-term debt of the
registrant are not filed herewith where the total amount of
securities authorized thereunder does not exceed 10 percent of the
total assets of the registrant and its subsidiaries on a consolidated
basis. The registrant agrees to furnish copies of such instruments
to the Commission on request.
<PAGE>
<PAGE>
EXHIBIT 10.F
WILLAMETTE INDUSTRIES
1995 LONG-TERM INCENTIVE
COMPENSATION PLAN
1. General. Pursuant to the terms and conditions of the
WILLAMETTE INDUSTRIES 1995 LONG-TERM INCENTIVE COMPENSATION PLAN (the
"Plan"), hereinafter set forth, the Committee specified in Article 2 may from
time to time grant or award to eligible employees of Willamette Industries,
Inc. ("Company"), and of those corporations ("Subsidiaries") in which Company
owns at least 50 percent of the total combined voting power of all classes of
stock, options to purchase shares of the $.50 par value common stock
("Stock") of Company, stock appreciation rights, and restricted Stock. In
addition, the Plan provides for the automatic grant of options to
Non-Employee Directors as defined in Article 8. Such options, stock
appreciation rights, and restricted Stock are sometimes referred to
collectively as "grants and awards." The purpose of the Plan is to motivate
special achievement by officers and other key employees of Company and its
Subsidiaries by assisting them in acquiring or increasing an equity interest
in Company, and, in the case of Non-Employee Directors, to align their
interest more closely to that of Company. The options shall be nonqualified
stock options subject to Section 83 of the Internal Revenue Code, and not
incentive stock options subject to Section 422A of the Internal Revenue Code.
2. Administration. The Board of Directors of Company ("the
Board") shall designate a Committee of not less than two members of the Board
("the Committee") who shall administer the Plan and serve at the pleasure of
the Board. The number and identity of the members of, and any name given to
the Committee, may be changed by the Board at any time and from time to time.
The Committee may also have other duties, as would be the case if the Board
should designate the Company's Compensation and Nomination Committee (or a
successor thereto) to act as the Committee under the Plan. No person shall
be eligible or continue to serve as a member of the Committee unless such
person is a "disinterested person" within the meaning of Rule 16b-3 ("Rule
16b-3") of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or any law, rule, regulation,
or other provision that may hereafter replace such rule. Also, unless the
Board determines otherwise, members of the Committee must be "outside
directors" within the meaning of Section 162(m) of the Internal Revenue Code
of 1986, as amended, and the rules thereunder. Subject to the express
provisions of the Plan, the Committee shall have full and final authority,
acting in its sole discretion, to interpret the Plan, to establish rules and
regulations relating to the Plan, and to take such action and make such
determinations as the Committee may deem necessary or advisable in the
administration of the Plan. However, Committee shall have no discretion as
to any aspect of grants to Non-Employee Directors; these grants shall be
governed by Article 8. No member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
grant or award made thereunder, nor be liable for any good faith reliance
upon any report or other information furnished to the Committee by Company's
officers, its independent public accountants, or by any other person or
entity.
3. Eligibility. Except as otherwise provided in Article 8,
employees eligible to receive grants and awards under the Plan shall be such
key employees (including officers, regardless whether they are directors) of
Company and its Subsidiaries as may be selected from time to time by the
Committee. Except for the provisions in Articles 5, 6, and 7 setting a
per-employee maximum limit on the number of stock options, stock appreciation
rights, or shares of restricted Stock whose vesting is based on attainment of
one or more performance goals, no provision of the Plan shall be construed to
prohibit the Committee from making additional grants or awards under the
Plan to employees who have previously received grants or awards. No
provision of the Plan shall be construed as automatically entitling an
employee to a grant or award, regardless whether the employee has received a
grant or award in a prior year or has attained a particular executive
position or salary level.
4. Shares Subject to the Plan. Subject to Article 16 hereof, the
total number of shares of Stock issuable under the Plan shall not exceed
2,750,000. For purposes of this limitation, (a) any option or stock
appreciation right which terminates or expires without exercise shall
thereafter be deemed not to have been granted, and (b) shares of restricted
Stock which are forfeited shall thereafter be deemed not to have been issued.
Shares of Stock available for issue under the Plan shall be authorized and
unissued shares or shares acquired by Company and held in treasury.
5. Stock Options. The Committee may from time to time grant
options to eligible employees. Subject to appropriate adjustment pursuant to
Article 16, no employee may receive, under the Plan, stock options or stock
appreciation rights which in the aggregate would exceed 350,000 shares of
Stock. The price at which a share of Stock may be purchased on exercise of
an option shall be fixed by the Committee at the date of grant of such option
and shall not be less than the fair market value of a share of Stock at that
date. Fair market value, as used in this Article 5 and elsewhere in the
Plan, shall, unless the Committee shall determine otherwise, be the closing
price of Stock on the date the option is granted as reported on the NASDAQ
national market system for such date or, if such closing price is not
available for a date (because the date is not a trading day or otherwise),
for the next preceding date for which such closing price is available.
At the time an option is granted, the Committee shall specify the
period during which it is not exercisable, and whether the option is to be
thereafter exercisable in full or in installments. The Committee may also
specify that all the shares become exercisable no later than upon termination
of employment for certain reasons, such as death, disability, or retirement.
The Committee may at any time after the grant accelerate the exercisability
of the option. Options granted under the Plan shall expire not more than ten
years and two days from the date of the grant of the option as specified by
the Committee (the "stated period of the option") at date of grant.
No employee to whom an option is granted shall be entitled to any
of the rights of a shareholder of Company with respect to any shares covered
by the option until certificates representing such shares have been issued to
the employee.
No option may be transferred except by will or the laws of descent
and distribution and, during the lifetime of an employee to whom an option is
granted, such option may be exercised only by the employee, the employee's
guardian or legal representative. Notwithstanding the foregoing, the
Committee, in its sole discretion, may include in the agreement referred to
in Article 12 evidencing the grant of an option to an employee a provision
permitting the employee to transfer such option upon the terms and conditions
specified in such agreement, provided that the foregoing provisions of this
sentence shall apply to any person subject to the reporting provisions of
Section 16(a) of the Exchange Act only to the extent that the exemption given
by Rule 16b-3 shall continue to be available to the grant of such option.
Upon termination of employment for any reason other than death,
disability, or retirement ("disability" and "retirement" are defined in
Article 10) of an employee to whom an option has been granted, the employee
may, at any time prior to the earlier of (a) 30 days after termination of
employment or (b) the expiration of the stated period of the option, exercise
the option to the same extent, if any, that the option was exercisable by the
employee on the date of termination of employment under the terms of the
option. Notwithstanding the foregoing, the Committee may in its discretion,
after giving consideration to the circumstances of the termination of
employment of an employee to whom an option has been granted, extend said
30-day period to a period of three years after termination of employment.
The option shall expire on the date of termination of employment to the
extent it was not then exercisable and otherwise shall expire upon the
earlier of 30 days (three years, if the Committee has extended the period)
after termination of employment or the expiration of the stated period of the
option.
Upon the termination of employment by reason of death, disability,
or retirement of an employee to whom an option has been granted, the employee
(or, in case of death, any person or persons, including the legal
representative of the employee's estate, to whom the option passes by will or
by the laws of descent and distribution) may, at any time prior to the
expiration of the stated period of the option, exercise the option to the
same extent, if any, that the option was exercisable by the employee on the
date of termination of employment under the terms of the option. The option
shall expire on the date of termination of employment to the extent it was
not then exercisable and otherwise shall expire upon the expiration of the
stated period of the option.
Payment upon exercise of an option shall be made in cash, by
certified check or bank draft payable to the order of Company or, at the
Committee's discretion, in whole or in part in any other form, including by
personal check or by the delivery to Company of shares of Stock previously
acquired by the employee or by any combination of the foregoing.
6. Stock Appreciation Rights. The Committee may from time to time
award stock appreciation rights to eligible employees and determine the base
price for each stock appreciation right (which may be higher than, equal to,
or less than the fair market value of a share of Stock on the date of award).
A "stock appreciation right" is a right to receive cash as provided in this
Article 6. Subject to appropriate adjustment pursuant to Article 16, no
employee may receive, under the Plan, stock options or stock appreciation
rights which in the aggregate would exceed 350,000 shares of Stock.
Upon the exercise of a stock appreciation right, the optionee shall
be entitled to the excess of the fair market value of one share of Stock on
the date of such exercise over the base price specified in the award
agreement for the stock appreciation right.
Except as otherwise provided in this Article 6, the terms and
conditions relating to exercise and expiration of stock appreciation rights
shall be as determined by the Committee under the same rules as provided in
Article 5 for stock options and shall be subject to the same restraints on
transferability, except that the exercise of stock appreciation rights shall
be subject to such conditions as are required to prevent the employee from
incurring liability under Section 16(b) of the Exchange Act.
7. Awards of Restricted Stock. The Committee may from time to
time make awards of restricted Stock under the Plan to eligible employees.
An award may be either of two types:
(a) Stock whose vesting is based on years of continuous
employment after the date of award.
(b) Stock whose vesting is based on attainment of one or more
performance goals.
Years of Continuous Employment. At the time of an award of shares
whose vesting is based on years of continuous employment, the Committee shall
specify the number of continuous years of employment required for vesting,
except that full vesting shall occur no later than upon termination of
employment by reason of death, disability, or retirement ("disability" and
"retirement" are defined in Article 10). The Committee may at any time after
the award accelerate the vesting as to part or all the shares awarded. There
is no per-employee maximum limit on the number of shares of restricted Stock
whose vesting is based on years of continuous employment.
Attainment of Goals. At the time of an award of shares whose
vesting is based on attainment of performance goals, the Committee shall
specify the performance goal or goals which must be attained, and the date by
which they must be attained, in order to cause the shares to vest. The
performance goal or goals shall be one or more of earnings per share, return
on equity, return on assets, growth in earnings, growth in sales revenue,
corporate profitability, or shareholder returns. These can be measured in
comparison to the performance of a group of peer companies selected by the
Committee or based on Company's results. Notwithstanding the foregoing, full
vesting shall occur upon death or disability. Also, the Committee may, in
its discretion, at the time an award is made, specify that the shares shall
become fully vested upon retirement in the event retirement occurs before the
attainment of the performance goal or goals. If the specified performance
goal or goals are not met within the time specified, the nonvested shares
subject to such goal or goals shall be forfeited. Furthermore, upon
termination of employment for any reason other than death, disability, or (in
those cases where the Committee has specified full vesting on retirement)
retirement of an employee to whom an award has been made, any nonvested
shares shall be forfeited. Subject to appropriate adjustment pursuant to
Article 16, no employee may receive, under the Plan, more than 50,000 shares
of restricted Stock whose vesting is based on attainment of performance
goals.
General Provisions. While the shares are not vested, the employee
shall have all the rights of a shareholder of Company as to the nonvested
shares, except that the shares may not be sold, assigned, transferred,
pledged, or otherwise encumbered. Certificates representing awarded shares
shall be registered in the name of the employee but held (with a stock power
endorsed in blank) by Company until the shares have vested, at which time
they shall be delivered to the employee or legal representative free of
restrictions.
The Committee may, in its discretion, provide that a portion of the
award of restricted Stock shall be made in cash rather than shares. Any such
cash shall be payable at the same time or times as the shares to which the
cash relates become vested. If shares are forfeited, the related amount of
unpaid cash shall also be forfeited.
8. Non-Employee Directors. Grants shall be made to members of the
Board who are not employees of Company or any Subsidiary ("Non-Employee
Directors") only under this Article 8. No person, including the members of
the Board or the Committee, shall have any discretion as to the selection of
eligible recipients or the determination of the type, amount, or terms of
grants pursuant to this Article 8. The persons eligible to receive grants
pursuant to this Article 8 are all Non-Employee Directors.
Initial Options. Upon the date of approval of the Plan by
Company's shareholders (the "Approval Date"), each person who is then a
Non-Employee Director shall be automatically granted an option (a "Director
Option") to purchase 1,000 shares of Stock. Each person who becomes a
Non-Employee Director after the Approval Date shall be automatically granted,
on the date such person becomes a Non-Employee Director, an initial Director
Option to purchase 1,000 Shares; provided, however, that a director who was
at any time an officer of Company or any Subsidiary shall not be entitled to
a grant of the initial Director Option.
Annual Options. On the date of each annual meeting of Company's
shareholders beginning with the meeting in 1996, each person who is then a
Non-Employee Director and who is to continue as a member of the Board
following the annual meeting, and without regard to how long the person has
been a Non-Employee Director or whether the person had ever been an officer
of Company or any Subsidiary, shall be automatically granted an annual
Director Option to purchase 600 shares of Stock.
Option Price. The option price for all Director Options shall be
the fair market value of a share of Stock at the date of grant.
Option Agreements. Each grant of Director Options made pursuant to
this Article 8 shall be governed by and shall be subject to the terms and
conditions set forth in an Option Agreement in the form attached to the Plan
as Exhibit A. Except to the extent otherwise provided in this Article 8 or
in such Option Agreement, each such grant shall be governed by the Plan's
provisions relating to the grant of options to, and the exercise of options
by, employees.
9. Change in Control. For purposes of the Plan, "change in
control" means the occurrence of any of the following events without approval
by the affirmative vote of at least two thirds of those members of the Board
who (i) are members of the Board immediately prior to the event, and (ii) are
not employees of Company or a Subsidiary:
(a) The merger or consolidation of Company with, or the sale
of all or substantially all the assets of Company to, any person or
entity or group of associated persons or entities.
(b) The attainment of direct or indirect beneficial ownership
of securities of Company which in the aggregate represent
20 percent or more of the total combined voting power of Company's
then issued and outstanding securities by any person or entity or
group of associated persons or entities acting in concert who is
not affiliated (within the meaning of the Securities Act of 1933)
with Company as of November 10, 1994; provided, however, the Board
may at any time in its discretion increase the 20 percent
requirement but not beyond 40 percent.
(c) The approval by the shareholders of Company of any plan
or proposal for the liquidation or dissolution of Company.
A change in control shall also be deemed to occur upon a change in
the membership of the Board at any time during any consecutive 24-month
period such that the "continuity" directors cease for any reason to
constitute at least 70 percent of the Board. The continuity directors are
those members of the Board who were either (i) members of the Board at the
beginning of such consecutive 24-month period, or (ii) elected by, or on the
nomination or recommendation of, at least two thirds of the members of the
Board.
If a change in control occurs, all options and stock appreciation
rights previously granted or awarded which are not fully exercisable shall
become exercisable in full upon the date of such occurrence and shall remain
so exercisable until the earlier of (a) three years after the date of such
occurrence, or (b) the expiration of the stated period of the option. After
the end of the three-year period, the options and rights shall revert to
being exercisable in accordance with their terms, although no option or
rights which have previously been exercised or otherwise terminated shall
become exercisable. Notwithstanding the foregoing, no stock appreciation
rights may be exercised within six months of the date of award of the rights.
Notwithstanding the provisions of Articles 5 and 6 relating to the
expiration of options and stock appreciation rights in connection with
termination of employment, upon termination of employment for any reason
(other than by reason of conduct which constitutes a felony under federal law
or the law of the state in which the employee resides) within the two-year
period following the occurrence of a change in control, the option and rights
may be exercised at any time prior to the earlier of (a) three years after
termination of employment or (b) the expiration of the stated period of the
option.
If a change in control occurs, all shares of restricted Stock
previously awarded which are not vested shall become vested upon the date of
such occurrence.
10. Right to Receive Cash on Change in Control. If a change in
control, as defined in Article 9, occurs, each employee (including those who
are not officers) holding an unexercised option, and regardless whether the
option is then otherwise fully exercisable, may make a cash exercise of all
or any portion of the option in lieu of the purchase of Stock under the
option. A cash exercise may be made, without any payment to Company, by
surrendering unexercised the option or any portion thereof. Upon such
exercise and surrender, the optionee shall be entitled to receive cash (less
applicable withholding taxes) in an amount equal to the excess of the
aggregate fair market value of the shares of Stock covered by the option, or
the relevant portion thereof, on the date of such exercise and surrender over
the aggregate exercise price of such Stock under the option. The cash
exercise may be made only during the period beginning on the first day
following the date on which Company has actual knowledge of the actual
occurrence of the change in control and ending on the 45th day following such
date. Notwithstanding the foregoing, no cash exercise may be made by an
officer (as defined under Section 16 of the Exchange Act) of Company within
six months of the date of grant of the option and no cash exercise may be
made by any optionee after the expiration of the stated period of the option.
11. Disability; Retirement. Except as otherwise provided in
Exhibit A for Non-Employee Directors, "disability" for purposes of this Plan
shall have the same meaning as "total and permanent disability" under the
Willamette Industries, Inc., and Associated Companies Salaried Employees'
Retirement Plan (regardless whether the employee is covered by such
Retirement Plan), and "retirement" shall mean:
(a) Termination of employment at or after attainment of
age 62, provided the employee has (or would have, if covered by
such Retirement Plan) at least ten vesting credits as defined under
such Retirement Plan, or
(b) Termination of employment at or after attainment of
age 65, regardless of the number of such vesting credits, if any.
12. Agreement. Each employee to whom a grant or award is made
under the Plan shall execute an appropriate agreement with respect to such
grant or award referring to the terms and conditions thereof and of the Plan.
The form of agreements may be changed from time to time and need not be
identical among those receiving the grants or awards.
13. Withholding Taxes. Company shall have the right to deduct
from all cash payments made under the Plan any federal, state, or local taxes
required by law to be withheld with respect to such cash payments, and, in
the event such cash payments are insufficient to cover the required
withholding, the employee or other person receiving such payment may be
required to pay to Company the additional amount necessary for this purpose.
In the case of an exercise of an option or an award of restricted Stock, the
employee or other person exercising such option or taxable in connection with
such award may be required to pay to Company the amount of any such taxes
that Company is required to withhold with respect to such exercise or award.
Company shall also have the right to deduct any such taxes from the shares
that would otherwise be issued to or vest in the employee or other person.
The Committee may, in its discretion, allow the employee or other
person to make the required payment to Company by delivery of shares of
previously acquired Stock.
14. Employment. Nothing contained in the Plan or in any grant or
award under the Plan shall confer upon any employee any right with respect to
the continuation of employment with Company or its Subsidiaries or interfere
in any way with the right of Company or its Subsidiaries to terminate the
employee's employment at any time. Nothing contained in the Plan shall
confer upon any employee or other person any claim or right to any grant or
award under the Plan.
15. Governmental Compliance. Each grant and award under the Plan
shall be subject to the requirement that, if at any time the Committee shall
determine that the listing, registration, or qualification of any shares
issuable thereunder upon any securities exchange or under any federal or
state law, or the consent or approval of any governmental or self-regulatory
body is necessary or desirable as a condition thereof, or in connection
therewith, no such grant or award may be exercised or shares issued unless
such listing, registration, qualification, consent, or approval shall have
been effected or obtained free of any conditions not acceptable to the
Committee.
16. Adjustments. The right and power of Company to provide for
reclassifications, reorganizations, recapitalizations, stock splits, stock
dividends, combination of shares, merger, consolidation, or any other change
in the capital structure or shares of Company shall not be affected by the
Plan. In the event of any such action, the Committee or the Board may make
such adjustments, if any, as it may deem appropriate in the number of shares
available for grants and awards under the Plan, that may be granted or
awarded to an individual employee or Non-Employee Director, and to grants and
awards made under the Plan.
17. Expenses. The expenses of administering the Plan shall be
borne by Company.
18. Termination. No grants or awards under the Plan shall be made
after April 27, 2005, or such earlier date as the Board may determine.
19. Successors and Assigns. The provisions of the Plan (and
interpretations and determinations made by the Committee pursuant thereto)
shall be conclusive and binding upon Company and its Subsidiaries, their
successors and assigns, and upon each employee receiving grants or awards
under the Plan and the employee's heirs, successors, and assigns.
20. Amendment. The Plan may be amended by the Board as it deems
advisable, provided that no such amendments shall adversely affect the rights
of participants to whom grants and awards under the Plan shall have been made
without the consent of the participants affected thereby, nor shall the
Board, without approval of Company's shareholders:
(a) Except as provided in Article 16, increase the number of
shares of Stock that are subject to the Plan or the number of
shares that may be received by any one employee;
(b) Extend the period during which grants and awards under
the Plan may be made;
(c) Otherwise materially increase the benefits accruing to
participants under the Plan;
(d) Amend the requirements of the Plan in respect of
eligibility to receive grants and awards under the Plan; or
(e) Establish the price at which shares may be purchased on
the exercise of an option at less than the fair market value of the
Stock at the time the option is granted.
The provisions of Article 8 of the Plan shall not be amended more
than once every six months, other than to comport with changes in the
Internal Revenue Code or in Rule 16b-3 under the Exchange Act.
<PAGE>
EXHIBIT A
As adopted by Board of Directors
February 9, 1995
OPTION AGREEMENT
FOR NON-EMPLOYEE DIRECTOR OPTION
THIS AGREEMENT, made this ____ day of _____________, 19____, by and
between WILLAMETTE INDUSTRIES, INC., hereinafter referred to as "Company,"
and __________________________, hereinafter referred to as "Optionee,"
W I T N E S S E T H :
WHEREAS Article 8 of the Willamette Industries 1995 Long-Term
Incentive Compensation Plan (Plan) provides for the automatic grant of
options to Non-Employee Directors to purchase Company's $.50 par value common
stock (Stock),
NOW, THEREFORE, the parties agree as follows:
1. Grant of Option.
---------------
Company hereby, on the date of this Agreement, grants Optionee the
option to purchase _____________ shares of Stock on the terms and conditions
hereinafter set forth and subject to the provisions of the Plan. The option
price shall be $_____________ per share, which is the average of the best bid
and the best ask at closing on the date the option is granted, as reported on
NASDAQ (or, if the Stock is listed on one or more stock exchanges, as
reported on the principal stock exchange on which the Stock is listed) or, if
such closing information is not available for a date (because the date is not
a trading day or otherwise), for the next preceding date for which such
closing information is available.
2. Exercise of Option.
------------------
(a) Except as otherwise provided in paragraph 3, the option
shall become exercisable according to the following schedule.
Notwithstanding anything in this Agreement to the contrary, neither
the option nor any portion thereof is exercisable after the
expiration of ten years and two days (the "stated period of the
option") from the date this option is granted:
Years of Continuous Service as Percentage of Shares
a Director From Date Option Granted Exercisable
- ----------------------------------- --------------------
After one year Up to 33 1/3 percent of the number of
shares subject to the option;
After two years Up to 66 2/3 percent;
After three years All the shares subject to the option.
Notwithstanding the foregoing schedule, all the shares subject to
the option shall become exercisable upon termination of service as
a director by reason of death, disability, or retirement or upon
the date of occurrence of a change in control as defined in the
Plan. In this Agreement, "disability" means the inability to
engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than 12 months.
"Retirement" means termination of service as a director on or after
attaining age 72.
(b) Optionee shall, in the event he elects to exercise the
option, give Company written notice of exercise. The notice shall
specify the number of full shares to be purchased and shall be
accompanied with the payment of the purchase price in cash or by
delivery of shares of previously acquired Stock. Subject to
paragraph 3(d), Company shall thereupon promptly issue a
certificate to Optionee representing the number of full shares so
purchased. No option shall be exercisable with respect to a
fractional share. Optionee shall have no obligation to exercise
the option.
(c) The option may be exercised by Optionee in whole or in
part or parts; provided, however, that no less than 100 shares
shall be purchased under any exercise unless the number purchased
is the total number purchasable under the option. All partial
exercises shall be noted on Company's and on Optionee's copy of
this Agreement.
(d) The written notice of exercise must be accompanied by any
amount required under federal or state withholding laws or
regulations, either in cash or by delivery of shares of previously
acquired Stock.
3. Limitations on exercise.
-----------------------
The option shall be subject to the following limitations on
exercise:
(a) If Optionee's service as a director is terminated for any
reason other than death, disability, or retirement, the option may
be exercised, to the extent exercisable as of the date of
termination of service, and to the extent it has not previously
been exercised, but not after the first to occur of the expiration
of the stated period of the option or the expiration of 30 days
from the date of termination of service.
(b) If Optionee's service as a director is terminated by
reason of death, disability, or retirement, the option may be
exercised (in the case of death, by the estate of the decedent or
by a person who acquired the right to exercise the option by
bequest or inheritance) at any time thereafter, to the extent it
has not previously been exercised, but not after the expiration of
the stated period of the option.
(c) If Company at any time determines that registration or
qualification of the Stock covered by the option under state or
federal law or the consent or approval of any governmental or self-
regulatory body is necessary or desirable, the option may not be
exercised in whole or in part until such registration,
qualification, consent, or approval shall have been effected or
obtained free of any conditions not acceptable to Company.
4. Nontransferability of option.
----------------------------
The option and all rights and privileges conferred thereby shall
not be transferable by Optionee otherwise than by will or the laws of descent
and distribution and shall be exercisable during Optionee's lifetime only by
him. The option and all rights and privileges conferred thereby shall also
not be assigned, pledged, or hypothecated in any way (whether by operation of
law or otherwise) and shall not be subject to execution, attachment, or
similar process. Upon any attempt to transfer, assign, pledge, hypothecate,
or otherwise dispose of the option or any right or privilege conferred
thereby, or upon the levy or any attachment or similar process upon the
option or the rights and privileges conferred thereby, the option and the
rights and privileges conferred thereby shall immediately terminate and
become null and void.
5. Adjustment.
----------
In the event of payment of a dividend on Stock payable in Stock
after the option is granted, Stock then subject to the option shall be
increased proportionately without any change in the aggregate purchase price
therefor. In the event the outstanding Stock shall be changed into or
exchanged for a different number or class of shares of Company, or of another
corporation, whether through reorganization, recapitalization, stock split-
up, combination of shares, merger, or consolidation, then there shall be
substituted for each share of Stock then subject to the option the number and
class of shares into which each outstanding share of Stock shall be so
exchanged, all without any change in the aggregate purchase price for the
shares then subject to such option.
6. Right to Receive Cash on Change in Control.
------------------------------------------
If a change in control as defined in the Plan occurs, Optionee may,
regardless whether the option is then otherwise fully exercisable, make a
cash exercise of all or any portion of the option (to the extent not
previously exercised) in lieu of the purchase of Stock under the option. The
cash exercise may be made, without any payment to Company, by surrendering
unexercised the option or any portion thereof. Upon exercise and surrender,
Optionee shall be entitled to receive cash (less applicable withholding
taxes, if any) in an amount equal to the excess of the aggregate fair market
value of the shares of Stock covered by the option (or the relevant portion
thereof) on the date of the cash exercise and surrender over the aggregate
purchase price of the shares specified in the option. The cash exercise may
be made only during the period beginning on the first day following the date
on which Company has actual knowledge of the actual occurrence of the change
in control and ending on the 45th day following that date. Notwithstanding
the foregoing, no cash exercise may be made by Optionee sooner than six
months from the date the option is granted or after the expiration of the
stated period of the option.
7. Assignment.
----------
This Agreement shall be binding upon the successors and assigns of
Company. Upon the sale of all or substantially all the assets of Company, or
upon the merger of Company with another corporation, this Agreement shall
inure to the benefit of and be binding on both Optionee and such purchaser or
surviving corporation, as the case may be.
<PAGE>
IN WITNESS WHEREOF, Company has caused this Agreement to be
executed by its executive vice president and its assistant secretary, they
being thereunto duly authorized, and Optionee has set his hand hereto, on the
date first hereinabove written.
WILLAMETTE INDUSTRIES, INC.
By
Executive Vice President
By
Assistant Secretary
Optionee
<PAGE>
EXHIBIT 12
WILLAMETTE INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
Year Ended December 31,
----------------------------------------------
1990 1991 1992 1993 1994
------ ------ ------ ------ -------
Fixed Charges:
Interest Cost $ 52,028 $ 63,986 $ 73,776 $ 79,194 $ 80,807
1/3 rent expense 2,948 3,725 4,495 4,819 5,227
------- ------- ------- ------- -------
Total Fixed Charges 54,976 67,711 78,271 84,013 86,034
======= ======= ======= ======= =======
Add (Deduct):
Earnings before
Income Taxes 208,671 73,609 129,452 189,168 288,923
Interest Capitalized (22,129) (723) (7,354) (15,904) ( 9,294)
------- ------- ------- ------- -------
Earnings-Fixed Charges $241,518 $140,597 $200,369 $257,277 $365,663
======= ======= ======= ======= =======
Ratio of Earnings to
Fixed Charges 4.39 2.08 2.56 3.06 4.25
======= ======= ======= ======= =======
<PAGE>
EXHIBIT 23
Consent of Independent Auditors
The Board of Directors
Willamette Industries, Inc.:
We consent to incorporation by reference in the Registration Statements
No. 2-89514, No. 33-5847 and No. 33-40504 on Form S-8 and No. 33-53263 on
Form S-3 of Willamette Industries, Inc. of our report dated February 9, 1995,
relating to the consolidated balance sheets of Willamette Industries, Inc.
and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1994, which
report appears in the December 31, 1994 annual report on Form 10-K of
Willamette Industries, Inc. As discussed in the notes to the consolidated
financial statements, the Company changed its method of accounting for income
taxes and postretirement benefits other than pensions in 1993.
KPMG PEAT MARWICK LLP
Portland, Oregon
March 17, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE COMPANY'S CONSOLIDATED BALANCE
SHEETS AND RELATED CONSOLIDATED STATEMENTS OF
EARNINGS FOR THE PERIOD ENDED DECEMBER 31, 1994 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 12,798
<SECURITIES> 0
<RECEIVABLES> 288,333
<ALLOWANCES> 5,278
<INVENTORY> 256,091
<CURRENT-ASSETS> 604,654
<PP&E> 3,674,462
<DEPRECIATION> 1,301,882
<TOTAL-ASSETS> 3,033,398
<CURRENT-LIABILITIES> 466,126
<BONDS> 915,797
0
0
<COMMON> 27,518
<OTHER-SE> 1,360,347
<TOTAL-LIABILITY-AND-EQUITY> 3,033,398
<SALES> 3,007,949
<TOTAL-REVENUES> 3,007,949
<CGS> 2,456,437
<TOTAL-COSTS> 2,456,437
<OTHER-EXPENSES> 191,076
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 71,513
<INCOME-PRETAX> 288,923
<INCOME-TAX> 111,300
<INCOME-CONTINUING> 177,623
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 177,623
<EPS-PRIMARY> 3.23
<EPS-DILUTED> 3.23
</TABLE>
