<PAGE>
Rule 424(b)(3)
Registration No. 333-05967
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 20, 1996
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE 20, 1996
$400,000,000
WILLAMETTE INDUSTRIES, INC.
$ % DEBENTURES DUE , 2026
$ % DEBENTURES DUE , 2026
-----------
Interest on the Debentures is payable on and of each year, commencing
, 199 . The Debentures are not redeemable at the Company's option prior to
maturity and will not be entitled to any sinking fund.
The holder of each % Debenture Due , 2026, may elect to have that
Debenture, or any portion of the principal amount thereof that is a multiple of
$1,000, repaid on , 2006, at 100% of the principal amount thereof, together
with accrued interest to , 2006. Such election, which is irrevocable when
made, must be made within the period commencing on , 2006, and ending at the
close of business on , 2006. No similar right is available to the holders of
the % Debentures Due , 2026.
The Debentures offered hereby will be represented by global Debentures
registered in the name of the nominee of The Depository Trust Company ("DTC").
Beneficial interests in the global Debentures will be shown on, and transfers
thereof will be effected only through, records maintained by DTC and its
participants. Except as described herein, Debentures in definitive form will
not be issued. The Debentures will be issued only in registered form in
denominations of $1,000 and integral multiples thereof. See "Description of the
Debentures."
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-----------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT(2) COMPANY(1)(3)
----------------- ------------ -------------
<S> <C> <C> <C>
Per % Debenture Due , 2026..... % % %
Total.............................. $ $ $
Per % Debenture Due , 2026..... % % %
Total.............................. $ $ $
</TABLE>
- -----
(1) Plus accrued interest, if any, from , 1996.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting estimated expenses of $305,000 payable by the Company.
-----------
The Debentures offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that the
Debentures will be ready for delivery in book-entry form only through the
facilities of DTC in New York, New York, on or about , 1996, against payment
therefor in immediately available funds.
GOLDMAN, SACHS & CO.
SALOMON BROTHERS INC
DILLON, READ & CO. INC.
BA SECURITIES, INC.
J.P. MORGAN & CO.
-----------
The date of this Prospectus Supplement is , 1996.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEBENTURES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
RECENT DEVELOPMENTS
In May 1996, the Company completed the purchase of 602,000 acres of
timberland and related assets (the "Cavenham Timberland") in the Pacific
Northwest and North Louisiana for approximately $1,144,860,000 before the sale
of the Contract Parcels described below, and subject to post-closing
adjustments. Accordingly, after giving effect to the sale of the Contract
Parcels, the Company will have acquired 546,000 acres of timberland and
related assets for approximately $947,000,000, subject to post-closing
adjustments which, at June 19, 1996, approximate an additional $10,000,000. As
a result of the acquisition, the percentage of the Company's long-term saw log
requirements provided by its own timberland is expected to increase from 40%
to 60%. See "Business--Timber and Other Fiber Resources."
The Company has agreed to sell parcels of the Cavenham Timberland (the
"Contract Parcels") aggregating 56,000 acres to John Hancock Mutual Life
Insurance Company ("Hancock") for a total price of $197,860,000 plus certain
expenses incurred by the Company. The sales are to be completed by November
14, 1997. Hancock's obligation to purchase the Contract Parcels is subject to
its ability to secure client funding for the purchases, which it has agreed to
make diligent and sustained efforts to obtain, and to certain other
conditions. The Company and Hancock have also entered into a Management
Agreement covering the Contract Parcels and a Right of First Offer Agreement
and a Timber Supply Agreement with respect to the Contract Parcels and other
timberland. See "Recent Timberland Acquisition" in the accompanying Prospectus
dated June 20, 1996 (the "Prospectus"), for additional information regarding
the acquisition of the Cavenham Timberland by the Company and its agreements
with Hancock.
The Company funded the purchase price for the Cavenham Timberland primarily
by borrowing $1,100,000,000 under a Credit Agreement dated as of May 10, 1996,
among the Company and a group of banks providing for a revolving loan and a
term loan. The revolving loan provides for borrowings of up to $1,000,000,000
in principal amount, matures on May 15, 2001, and at June 19, 1996, had an
outstanding principal balance of $450,000,000. The term loan is in the
principal amount of $600,000,000 and matures on May 15, 1998. Both loans bear
interest at either a Base Rate or a LIBO Rate, as defined in the Credit
Agreement and selected by the Company. The interest rates are subject to
periodic adjustment. At June 19, 1996, the weighted average interest rates per
annum for indebtedness outstanding under the revolving loan and the term loan
were 5.76% and 5.73%, respectively.
The Credit Agreement contains certain restrictions on the Company's
activities and obligates the Company to comply with certain financial
covenants. For additional information regarding the Credit Agreement, see
"Recent Timberland Acquisition" in the Prospectus.
USE OF PROCEEDS
The net proceeds to be received by the Company from the issue and sale of
the Debentures offered hereby are estimated to be $396,645,000 and, as
required by the Credit Agreement, will be used to reduce the Company's
indebtedness under the term loan made pursuant to the Credit Agreement.
Pending such utilization, the proceeds will be held in an interest-bearing
escrow account with Bank of America National Trust and Savings Association
("Bank of America"). Bank of America, an affiliate of BA Securities, Inc., and
Morgan Guaranty Trust Company of New York, an affiliate of J.P. Morgan
Securities Inc., are lenders under the Credit Agreement and will receive
approximately $38,463,000 and $30,049,000, respectively, of repayment of
principal of the term loan from the net proceeds of this offering. See
"Underwriting."
S-2
<PAGE>
THE COMPANY
The Company is a diversified, integrated forest products company which
manufactures unbleached paper products, white paper products and wood-based
building materials at 96 plants located throughout the United States.
Excluding the Contract Parcels which the Company has agreed to sell to
Hancock, the Company owns or controls approximately 1,800,000 acres of
timberland in Arkansas, Louisiana, North Carolina, Oregon, South Carolina,
Tennessee, Texas and Washington.
The Company has two business segments. The Paper Group segment manufactures
and sells primary products including kraft liner, corrugating medium, bag
paper, fine paper, hardwood market pulp and specialty printing papers, and
finished products, including corrugated containers, business forms, cut sheet
paper, paper bags and ink. The Building Materials Group segment manufactures
and sells lumber, plywood, oriented strand board, particleboard, medium
density fiberboard ("MDF"), laminated beams, laminated veneer lumber, wooden
I-beams and other value-added wood products.
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, fine paper and unbleached paper manufacturing and an organizational
structure that encourages teamwork as well as individual initiative.
S-3
<PAGE>
CAPITALIZATION
The following table sets forth as of March 31, 1996, (i) the historical
capitalization of the Company, (ii) the pro forma capitalization of the
Company reflecting the purchase of the Cavenham Timberland on May 15, 1996,
and the concurrent receipt by the Company of proceeds of a borrowing on May
15, 1996, to fund the acquisition (see "Recent Developments"), and (iii) the
pro forma capitalization as adjusted to reflect the issuance of the Debentures
offered hereby and the application of the net proceeds therefrom after
deducting estimated offering expenses and an assumed underwriting discount.
See "Use of Proceeds" and "Unaudited Condensed Pro Forma Combined Financial
Statements." The pro forma capitalization has not been adjusted to reflect the
application of the proceeds from the sale of the Contract Parcels.
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------------
PRO FORMA
AS
ACTUAL PRO FORMA ADJUSTED
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-Term Obligations:
Notes payable and current installments on
long-term debt.......................... $ 73,588 $ 73,588 $ 73,588
Borrowings under credit agreement, term.. -- 200,000 200,000
---------- ---------- ----------
Total short-term obligations........... $ 73,588 $ 273,588 $ 273,588
========== ========== ==========
Long-Term Obligations:
Long-term debt, net of current
installments............................ $ 793,160 $ 793,160 $ 793,160
Borrowings under credit agreement,
revolving............................... -- 500,000 500,000
Borrowings under credit agreement, term.. -- 400,000 -- (1)
Debentures offered hereby................ -- -- 400,000
---------- ---------- ----------
Total long-term obligations............ 793,160 1,693,160 1,693,160
---------- ---------- ----------
Stockholders' Equity:
Preferred stock, $.50 par value.......... -- -- --
Common stock, $.50 par value............. 27,613 27,613 27,613
Capital surplus.......................... 300,898 300,898 300,898
Retained earnings........................ 1,574,774 1,574,774 1,574,774
---------- ---------- ----------
Total stockholders' equity............. 1,903,285 1,903,285 1,903,285
---------- ---------- ----------
Total capitalization................. $2,696,445 $3,596,445 $3,596,445
========== ========== ==========
</TABLE>
- --------
(1) Long-term term borrowings under the Credit Agreement in excess of the net
proceeds from the issue and sale of the Debentures are expected to be
repaid with internally generated cash.
S-4
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The Selected Historical Financial Data below should be read in conjunction
with the more detailed information appearing in the Company's annual report on
Form 10-K for the year ended December 31, 1995, and the other documents
available as described under "Incorporation of Certain Documents by Reference"
in the Prospectus. The Selected Historical Financial Data for each of the five
years ended December 31, 1995, have been derived from audited financial
statements, certain of which are incorporated by reference herein. The
Selected Historical Financial Data for the three-month periods ended March 31,
1995, and March 31, 1996, are derived from unaudited financial statements and,
in the opinion of management, include all adjustments (consisting only of
normal recurring accruals) necessary to present fairly the data for such
periods. Results for the three-month period ended March 31, 1996, are not
necessarily indicative of the results for the full year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------- ----------------------
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF EARNINGS:
Net sales.............. $2,004,501 $2,372,396 $2,622,237 $3,007,949 $3,873,575 $ 900,638 $ 866,112
Cost of sales.......... 1,715,197 2,007,703 2,191,448 2,456,437 2,777,735 670,809 678,166
---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross Profit........... 289,304 364,693 430,789 551,512 1,095,840 229,829 187,946
Selling and
administrative
expenses.............. 145,329 167,094 174,413 184,699 201,784 49,402 55,150
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating Earnings..... 143,975 197,599 256,376 366,813 894,056 180,427 132,796
Interest expense....... 63,263 66,422 63,290 71,513 71,050 19,201 14,086
Other income (expense). (7,103) (1,725) (3,918) (6,377) 798 (115) 204
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings before taxes.. 73,609 129,452 189,168 288,923 823,804 161,111 118,914
Provision for income
taxes................. 27,800 47,900 78,500 111,300 309,000 62,028 45,544
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings before
accounting changes.... 45,809 81,552 110,668 177,623 514,804 99,083 73,370
Accounting changes..... -- -- 26,364 -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net earnings........... $ 45,809 $ 81,552 $ 137,032 $ 177,623 $ 514,804 $ 99,083 $ 73,370
========== ========== ========== ========== ========== ========== ==========
BALANCE SHEET DATA:
Working capital........ $ 147,194 $ 157,822 $ 157,576 $ 138,528 $ 359,258 $ 164,106 $ 330,809
Long-term debt
(noncurrent portion).. 746,622 843,618 941,710 915,797 790,210 865,858 793,160
Stockholders' equity... 994,460 1,164,828 1,257,870 1,387,865 1,846,890 1,472,772 1,903,285
Total assets........... 2,219,067 2,527,416 2,804,553 3,033,398 3,413,555 3,136,491 3,492,272
RATIO OF EARNINGS TO
FIXED CHARGES(A)....... 2.08 2.56 3.06 4.25 10.83 8.24 7.38
</TABLE>
- --------
(a) For the purposes of computing the ratio, "earnings" consist of income
before taxes plus fixed charges. "Fixed charges" consist of interest
expense plus one-third of rent expense (which is deemed to be
representative of an interest factor.)
S-5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
HISTORICAL FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information set forth below should be read in conjunction with the
consolidated financial statements and other information included in the
documents incorporated by reference in the Prospectus.
Paper product 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--1ST QUARTER 1996 VS. 1ST QUARTER 1995
Net sales decreased 3.8% in the first quarter of 1996 compared with the
first quarter of 1995. Paper products sales increased 2.8%. The increase in
paper products sales was due to higher unit shipments and higher selling
prices for most fine paper products that were partially offset by declines in
selling prices for unbleached paper products lines. Unit shipments of the
Company's paper products exceeded levels from the first quarter of 1995 as
several capital expansion projects, including the acquisition of the
Kingsport, Tennessee, fine paper mill, have come on-line since the first
quarter of 1995. During the first quarter of 1996, prices for all paper
products trended downward and the Company took downtime at some of its paper
mills as a result of the inventory buildup in the market and continued excess
capacity. Pricing pressures in all paper products lines may continue if
further corrections to paper inventories are necessary.
Building materials sales decreased 18.6% compared with the first quarter of
1995 due to declines in both selling prices and unit shipments for all
building materials product lines. Selling prices and unit shipments for all
building materials product lines declined 11.8% and 9.6%, respectively, on a
one-inch basis compared with the first quarter of 1995. Poor weather
conditions along with the recent completion of several new structural panel
and composite board plants have created a supply and demand imbalance
resulting in price decreases in all building materials markets. Selling prices
for building materials product lines were also lower due to exceptionally
strong pricing in the first quarter of 1995.
Gross profit margins decreased to 21.7% in the first quarter of 1996 from
25.5% in the first quarter of 1995. Paper product gross margins decreased to
25.7% from 26.6% in the first quarter of 1995. While selling prices for
unbleached paper products were lower in the first quarter of 1996 compared
with the first quarter of 1995, gross margins improved slightly as costs for
old corrugated containers ("OCC"), a material used in the manufacture of
paper, decreased 42.1% in the first quarter of 1996 compared with the first
quarter of 1995. A decline in fine paper products gross margins during the
first quarter of 1996 more than offset the slight increase in gross margins
realized by unbleached paper products. Gross margins for fine paper products
declined mainly due to significantly lower selling prices for hardwood market
pulp. Prices for hardwood market pulp decreased 35.9% in the first quarter of
1996 from the comparable period in 1995.
Building materials gross margins declined to 10.5% compared with 23.2% in
the first quarter of 1995. The decrease in building materials gross margins is
mainly due to lower selling prices in all building materials product lines.
The cost of logs increased 3.8% in the first quarter of 1996 over levels from
the first quarter of 1995 exacerbating the decline in building materials gross
margins. Log costs increased primarily due to higher open market log prices in
the Company's southern operating regions. Building materials gross margins
were also negatively affected by start-up costs for a new oriented strand
board plant and an MDF plant that came on-line during the first quarter of
1996.
S-6
<PAGE>
Selling and administrative expenses increased $5.7 million or 11.6% mostly
due to expansion of Company operations. The ratio of selling and
administrative expenses to net sales increased to 6.4% for the first quarter
of 1996 compared with 5.5% for the first quarter of 1995. The increase in this
ratio was due to higher selling and administrative expenses coupled with a
decline in net sales.
Interest expense was $14.1 million in the first quarter of 1996 compared
with $19.2 million in the first quarter of 1995. The Company's average
outstanding debt decreased $180.6 million between the two periods which was
the main reason for the decline in interest expense. In addition, the
Company's effective interest rate on average outstanding debt was 7.79% in the
first quarter of 1996 compared with 7.99% for the first quarter of 1995.
RESULTS OF OPERATIONS--1995 VS. 1994
Net sales increased 28.8% in 1995 compared with 1994. Paper products sales
increased 49.0% as selling prices increased by 30.0% or more in all paper
products lines. Except for grocery bags and corrugated container shipments,
unit sales volumes increased by 5.7% or more in all other paper products
lines. Grocery bag and corrugated container shipments were down 11.7% and
2.5%, respectively, from 1994 mainly due to exceptionally strong demand for
these products during 1994. During the fourth quarter of 1995, selling prices
for all paper products lines declined from record levels achieved in the third
quarter of 1995.
Building materials sales decreased 5.2% in 1995 compared with 1994 mostly
due to lower unit shipments of at least 3.7% in all building materials product
lines. Unit shipments declined primarily due to weaker building materials
markets, downtime taken associated with the completion of capital expansion
projects and the closure of the Sweet Home, Oregon, plywood plant in the
fourth quarter of 1994. Except for lumber, selling prices in all other
building materials product lines were higher in 1995 than 1994; however,
prices in the fourth quarter of 1995 were lower in all product lines than for
the first three quarters of 1995.
The gross profit margin was 28.3% for 1995 compared with 18.3% for 1994.
Paper products gross margins increased to 30.6% in 1995 compared with 13.8%
for 1994 reflecting improved selling prices for all paper products lines and
improved unit sales volumes in all fine paper products lines. Paper products
gross margins also improved because 1995 costs were not impacted by the start-
up costs incurred in 1994 for the installation of a new pulping facility and
paper machine at the Company's Johnsonburg, Pennsylvania, mill. Another
significant improvement to gross margins in 1995 was the start-up of the
second linerboard machine at Campti, Louisiana, which allowed the Company to
replace linerboard previously purchased from others with internally produced
product at a much lower cost. Partially offsetting the increase in gross
margins was the escalation of OCC prices. Prices for OCC increased 47.3%
compared with 1994.
Building materials gross profit margins decreased to 22.9% compared with
25.9% in 1994. The drop in building materials margins is mainly due to
decreases in unit shipments coupled with higher log, glue and resin costs. Log
costs in 1995 increased 8.8% over costs from 1994. The cost of glue and resin,
raw materials used in the manufacture of plywood and composite board products,
increased 16.8% in 1995 over 1994.
Selling and administrative expenses declined to 5.2% of net sales in 1995
compared with 6.1% for 1994. The drop was due to higher net sales as selling
and administrative expenses increased 9.3% between 1995 and 1994 mainly due to
expansion of the Company's operations.
Other income (expense) was $.8 million in 1995 versus $(6.4) million for
1994. The expense in 1994 was mostly due to the closure of the Sweet Home,
Oregon, plywood plant with a related charge of $5.0 million.
S-7
<PAGE>
Interest expense was $71.0 million in 1995 compared with $71.5 million in
1994. Because the Company's average outstanding debt decreased $105.2 million
between 1995 and 1994, gross interest declined to $77.2 million in 1995 versus
$80.8 million in 1994. Capitalized interest declined to $6.2 million in 1995
versus $9.3 million in 1994. The weighted average interest rate of all debt
was 7.67% at December 31, 1995, compared with 7.75% at December 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company generates funds internally via net earnings adjusted for noncash
charges against earnings such as depreciation, cost of fee timber harvested
and deferred income taxes. Funds generated externally have usually been
through debt financing.
During the first three months of 1996, the Company had capital expenditures
of $109.2 million and made a deposit of $50.0 million in connection with the
asset purchase of the Cavenham Timberlands. These investments were funded with
internally generated cash flows. Cash flows from operating activities
increased $41.1 million or 24.9% in the first three months of 1996 from the
comparable period in 1995 mainly due to a reduction in the Company's
investment in working capital.
The total debt to capital ratio decreased to 31.3% at March 31, 1996, from
32.0% at December 31, 1995. At May 31, 1996, subsequent to the May 15, 1996,
closing of, and concurrent borrowing to fund, the purchase of the Cavenham
Timberland, the total debt to capital ratio was 50.3%. The Company anticipates
it can maintain its planned level of capital spending over the next three
years and still reduce its debt to capital ratio to below 40% by 1999. Net
working capital decreased to $330.8 million at March 31, 1996, from $359.3
million at December 31, 1995.
The Company believes it has the resources available to meet its liquidity
requirements. Resources include internally generated funds, short-term
borrowing agreements and the unused portion of the revolving loan available
under the Credit Agreement.
ENVIRONMENTAL MATTERS
The Company believes it is in substantial compliance with federal, state and
local laws regarding environmental quality. The Environmental Protection
Agency has issued proposed rules regarding air and water quality referred to
as the "cluster rules," which are currently undergoing public review. As
proposed, the rules would have a particularly onerous effect on the paper
industry. If the proposed rules were to be adopted without modification, the
financial impact on the paper industry has been estimated at more than $11
billion for capital expenditures to comply with the rules. The Company
believes that the proposed level of regulation is not justified on either an
environmental impact or cost benefit basis and hopes that a compromise will be
reached to lessen 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. However, based upon regulations either enacted or proposed, the
Company estimates that over the next five years capital expenditures required
to comply with environmental regulations will not exceed $125 million plus
capital expenditures now in progress. Although future environmental capital
expenditures cannot be predicted with any certainty because of continuing
changes in laws, the Company believes 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. With these efforts have come increased
regulations, limitations and restrictions on the harvest of timber from
privately owned timberland.
S-8
<PAGE>
Current rules and regulations do not significantly impact the Company's
ability to manage its Pacific Northwest timberland on a sustained-yield basis.
FORWARD-LOOKING STATEMENTS
The statements regarding the anticipated reduction in the Company's debt to
capital ratio and the impact of the cluster rules and other environmental
regulations in "--Liquidity and Capital Resources" and "--Environmental
Matters," respectively, constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 that involve a
number of risks and uncertainties. In particular, the anticipated reduction in
the debt to capital ratio will depend in part on the results of the Company's
operations which are affected by general economic conditions, new housing
starts, remodeling activity, the availability and terms of financing for
construction, competitive factors, including pricing pressures, and
fluctuations in the cost and availability of wood fiber and on the assumption
that the Company will not incur significant indebtedness for acquisitions or
capital expenditures in excess of projected amounts. The impact of
environmental regulations will depend on the particular environmental
regulations ultimately adopted and the construction and other costs associated
with complying with such regulations. In view of these uncertainties,
prospective investors are cautioned not to place undue reliance on such
forward-looking statements. The Company disclaims any obligation to publicly
announce the results of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
S-9
<PAGE>
UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL DATA
On May 15, 1996, the Company acquired the Cavenham Timberland in a
transaction to be accounted for as a purchase.
The following unaudited condensed pro forma combined balance sheet has been
prepared from the consolidated balance sheet of the Company as of March 31,
1996, and gives effect, on a pro forma basis as of March 31, 1996, to (i) the
acquisition of the Cavenham Timberland and related assets on May 15, 1996,
(ii) the sale of the related assets to third parties in transactions which
were consummated simultaneously with the consummation of the Company's
acquisition of the Cavenham Timberland, and (iii) the receipt by the Company
of the proceeds of a borrowing on May 15, 1996, under the Credit Agreement.
The following unaudited condensed pro forma combined statements of earnings
combine the results of operations of the Company and the Cavenham Timberland
for the year ended December 31, 1995, and the three months ended March 31,
1996, respectively, on a pro forma basis as though the acquisition had
occurred as of the beginning of the period.
The unaudited condensed pro forma combined financial statements should be
read in conjunction with the historical financial statements and notes
included in the Company's annual report on Form 10-K for the year ended
December 31, 1995, its quarterly report on Form 10-Q for the period ended
March 31, 1996, and its current report on Form 8-K filed May 29, 1996, as
amended by Form 8-K/A filed June 10, 1996. The pro forma information is not
necessarily indicative of the results that would have been reported had such
events actually occurred on the dates specified, nor is it indicative of the
Company's future results.
S-10
<PAGE>
WILLAMETTE INDUSTRIES, INC. AND ASSETS PURCHASED FROM CAVENHAM
UNAUDITED CONDENSED PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 1996
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------- ----------------------------------------
ASSETS SOLD
ASSETS & FINANCING
COMPANY PURCHASED(A) OBTAINED COMBINED
---------- ------------ ----------- ---------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash................... $ 44,925 -- 5,140 (e) 50,065
Accounts receivables,
net................... 312,537 -- -- 312,537
Inventories............ 359,319 8,000 -- 367,319
Prepaid expenses....... 42,147 -- -- 42,147
Assets held for sale... -- 641,000 (443,140)(b) 197,860(b)
---------- ---------- ---------- ---------
Total current assets. 758,928 649,000 (438,000) 969,928
---------- ---------- ---------- ---------
Timber, timberlands and
related facilities...... 569,609 947,003 (50,000)(c) 1,466,612
Property, plant and
equipment, net.......... 2,098,204 7,720 -- 2,105,924
Other assets............. 65,531 -- -- 65,531
---------- ---------- ---------- ---------
Total assets......... $3,492,272 1,603,723 (488,000) 4,607,995
========== ========== ========== =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Current debt........... $ 73,588 -- 200,000 (d) 273,588
Accounts payable and
accrued liabilities... 298,233 -- -- 298,233
Accrued income taxes... 56,298 -- -- 56,298
---------- ---------- ---------- ---------
Total current liabil-
ities............... 428,119 -- 200,000 628,119
---------- ---------- ---------- ---------
Long-term debt, net of
current installments.... 793,160 -- 900,000 (d) 1,693,160
Other liabilities........ 30,279 15,723 -- 46,002
Deferred income taxes.... 337,429 -- -- 337,429
Stockholders' equity:
Preferred stock, $.50
par value............. -- -- -- --
Common stock, $.50 par
value................. 27,613 -- -- 27,613
Capital surplus........ 300,898 -- -- 300,898
Retained earnings...... 1,574,774 -- -- 1,574,774
---------- ---------- ---------- ---------
Total stockholders'
equity.............. 1,903,285 -- -- 1,903,285
---------- ---------- ---------- ---------
Total liabilities &
stockholders'
equity.............. $3,492,272 15,723 1,100,000 4,607,995
========== ========== ========== =========
Net pro forma adjust-
ments................... $1,588,000(f) $1,588,000
========== ==========
</TABLE>
See explanation of pro forma adjustments in Notes to Unaudited Condensed
Pro Forma Combined Financial Statements.
S-11
<PAGE>
WILLAMETTE INDUSTRIES, INC. AND ASSETS PURCHASED FROM CAVENHAM
UNAUDITED CONDENSED PRO FORMA COMBINED STATEMENT OF EARNINGS YEAR ENDED
DECEMBER 31, 1995
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ADJUSTMENTS
------------------- -----------------------------
CAVENHAM
COMPANY ASSETS DEBIT CREDIT COMBINED
---------- -------- ------ ------ ---------
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales.................... $3,873,575 123,893 -- -- 3,997,468
Cost of sales................ 2,777,735 67,329 35,784(g) -- 2,880,848
---------- ------- ------ ------ ---------
Gross profit............... 1,095,840 56,564 35,784 -- 1,116,620
Selling and administrative
expenses.................... 201,784 1,403 -- -- 203,187
---------- ------- ------ ------ ---------
Operating earnings......... 894,056 55,161 35,784 -- 913,433
Other income, net............ 798 796 -- -- 1,594
---------- ------- ------ ------ ---------
894,854 55,957 35,784 -- 915,027
Interest expense............. 71,050 -- 55,458(h) -- 126,508
---------- ------- ------ ------ ---------
Earnings before taxes........ 823,804 55,957 91,242 -- 788,519
Provision for income taxes... 309,000 -- -- 13,231(i) 295,769
---------- ------- ------ ------ ---------
Net earnings............... $ 514,804 55,957 91,242 13,231 492,750
========== ======= ====== ====== =========
Weighted average number of
shares outstanding (in
thousands).................. 55,146 55,146
========== =========
Earnings per share........... $ 9.34 $ 8.94
========== =========
</TABLE>
See explanation of pro forma adjustments in Notes to Unaudited Condensed Pro
Forma Combined Financial Statements.
S-12
<PAGE>
WILLAMETTE INDUSTRIES, INC. AND ASSETS PURCHASED FROM CAVENHAM
UNAUDITED CONDENSED PRO FORMA COMBINED STATEMENT OF EARNINGS
THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ADJUSTMENTS
----------------- ----------------------------
CAVENHAM
COMPANY ASSETS DEBIT CREDIT COMBINED
-------- -------- ------ ------ --------
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales........................ $866,112 38,568 -- -- 904,680
Cost of sales.................... 678,166 19,769 10,887(g) -- 708,822
-------- ------ ------ ----- -------
Gross profit................... 187,946 18,799 10,887 -- 195,858
Selling and administrative ex-
penses.......................... 55,150 289 -- -- 55,439
-------- ------ ------ ----- -------
Operating earnings............. 132,796 18,510 10,887 -- 140,419
Other income, net................ 204 111 -- -- 315
-------- ------ ------ ----- -------
133,000 18,621 10,887 -- 140,734
Interest expense................. 14,086 -- 13,864(h) -- 27,950
-------- ------ ------ ----- -------
Earnings before taxes............ 118,914 18,621 24,751 -- 112,784
Provision for income taxes....... 45,544 -- -- 2,347(i) 43,197
-------- ------ ------ ----- -------
Net earnings................... $ 73,370 18,621 24,751 2,347 69,587
======== ====== ====== ===== =======
Weighted average number of shares
outstanding (in thousands)...... 55,224 55,224
======== =======
Earnings per share............... $ 1.33 $ 1.26
======== =======
</TABLE>
See explanation of pro forma adjustments in Notes to Unaudited Condensed Pro
Forma Combined Financial Statements.
S-13
<PAGE>
NOTES TO UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) Reflects the purchase of approximately 1,088,000 acres of timberland, a
sawmill, and related assets and the assumption of certain related liabilities.
The assets purchased included approximately 542,000 acres of timberland and
related assets that were sold pursuant to separate agreements with three
designees for an aggregate purchase price of $641,000,000, and which are
reflected herein as "Assets held for sale." The assets sold included the
assets described in the last sentence of Note (b).
(b) Reflects the sale of approximately 486,000 acres of timberland and
related assets contemplated by the separate designee agreements in
transactions consummated concurrently with the consummation of the asset
purchase described in Note (a). Approximately 56,000 acres of timberland and
related assets remain to be conveyed to one designee for approximately
$197,860,000.
(c) Reflects an escrow deposit applied to the payment of the purchase price
which the Company had previously recorded in "Timber, timberlands and related
facilities."
(d) Reflects the $1,100,000,000 loan obtained as the primary funding of the
asset purchase. The loan was made under a Credit Agreement between the Company
and a group of banks providing for a revolving loan and a term loan. The
revolving loan provides for borrowings of up to $1,000,000,000 in principal
amount to mature on May 15, 2001, and had an initial outstanding principal
balance of $500,000,000. The term loan is in the principal amount of
$600,000,000 to mature on May 15, 1998. The initial weighted average interest
rates per annum for indebtedness outstanding under the revolving loan and the
term loan are 5.75% and 5.72%, respectively. The amount of $200,000,000
reflected in "Current debt" corresponds to the anticipated sale of "Assets
held for sale" discussed in Note (b) above and concurrent pay down of a
portion of the term loan upon such sale with the net proceeds therefrom as
required by the Credit Agreement. Interest expense does not include any
adjustments for interest on debt attributable to the "Assets held for sale" as
these costs are reimbursable expenses pursuant to the agreement with the
purchaser.
(e) Reflects excess loan proceeds.
(f) Excluded from the initial purchase price are post-closing purchase price
adjustments, which, at June 10, 1996, approximate an additional $10,000,000,
including approximately $7,000,000 for inventories.
(g) Reflects additional timber depletion and road amortization expense
attributable to the increase in the cost basis for the Company, as compared to
Cavenham, of timber and roads as a result of the purchase transaction.
(h) Reflects the increase in interest expense related to the increase in
debt discussed in Note (d) above.
(i) Reflects the related tax effects of the pro forma adjustments at the
Company's effective tax rate.
S-14
<PAGE>
BUSINESS
GENERAL
The Company is a diversified, integrated forest products company with 1995
sales in excess of $3.87 billion. The Company manufactures unbleached paper
products, white paper products and wood-based building materials in 96 plants
located throughout the United States. Excluding the Contract Parcels that the
Company has agreed to sell to Hancock, the Company owns or controls
approximately 1,800,000 acres of timberland in Arkansas, Louisiana, North
Carolina, Oregon, South Carolina, Tennessee, Texas and Washington.
The Company has two business segments. The Paper Group segment manufactures
and sells primary products including kraft liner, corrugating medium, bag
paper, fine paper, hardwood market pulp and specialty printing papers, and
finished products, including corrugated containers, business forms, cut sheet
paper, paper bags and ink. The Building Materials Group segment manufactures
and sells lumber, oriented strand board, plywood, particleboard, MDF,
laminated beams, laminated veneer lumber, wooden I-beams and other value-added
wood products.
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, fine paper and unbleached paper manufacturing and an organizational
structure that encourages teamwork as well as individual initiative.
BUSINESS SEGMENT DATA
The following table sets forth sales and operating earnings data with
respect to the Company's Paper Group and Building Materials Group segments for
the periods indicated. The Company is not dependent on any one significant
customer or group of customers and has no material foreign operations.
Approximately 95% of the Company's sales are to domestic customers.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------- --------------------------
1993 1994 1995 1995 1996
-------------- -------------- -------------- ------------ ------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales to outside
customers:
Paper Group:
Fabricated paper
products.............. $1,232,311 47% $1,475,593 49% $2,128,428 55% $473,982 53% $492,983 57%
Pulp and paper......... 360,014 14 410,365 14 681,094 18 148,459 16 146,691 17
---------- --- ---------- --- ---------- --- -------- --- -------- ---
Total Paper Group..... 1,592,325 61 1,885,958 63 2,809,522 73 622,441 69 639,674 74
---------- --- ---------- --- ---------- --- -------- --- -------- ---
Building Materials
Group:
Lumber................. 184,287 7 188,445 6 169,753 4 47,484 5 38,672 4
Plywood................ 425,387 16 441,397 15 428,707 11 115,427 13 91,089 11
Particleboard and MDF.. 234,123 9 292,153 10 272,336 7 78,276 9 62,655 7
Other wood products.... 186,115 7 199,996 6 193,257 5 37,010 4 34,022 4
---------- --- ---------- --- ---------- --- -------- --- -------- ---
Total Building
Materials Group...... 1,029,912 39 1,121,991 37 1,064,053 27 278,197 31 226,438 26
---------- --- ---------- --- ---------- --- -------- --- -------- ---
Total net sales....... $2,622,237 100% $3,007,949 100% $3,873,575 100% $900,638 100% $866,112 100%
========== === ========== === ========== === ======== === ======== ===
Contribution to
earnings:(1)
Paper Group............ $ 53,655 21% $ 124,856 34% $ 707,234 79% $129,750 72% $124,027 93%
Building Materials
Group................. 202,721 79 241,957 66 186,822 21 50,677 28 8,769 7
---------- --- ---------- --- ---------- --- -------- --- -------- ---
Contribution to
earnings............. $ 256,376 100% $ 366,813 100% $ 894,056 100% $180,427 100% $132,796 100%
========== === ========== === ========== === ======== === ======== ===
</TABLE>
- --------
(1) "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.
S-15
<PAGE>
PAPER GROUP
Market Pulp and Fine Paper. The Company manufactures hardwood market pulp,
which is sold to outside customers, at its facility in Hawesville, Kentucky.
Fine paper is produced at a fine paper mill at the Hawesville facility and at
mills in Johnsonburg, Pennsylvania; Kingsport, Tennessee; and Marlboro County,
South Carolina. In 1995, the Company made 4.8% of the hardwood market pulp
produced in the U.S and accounted for 7.7% of the nation's fine paper
production. Chips from nearby sawmills and plywood plants serve as the primary
fiber source for the Company's fine paper mills. The Company's timberland in
Tennessee and the Carolinas also serves as a source of fiber.
Unbleached Paper. Four Company paper mills accounted for 5.0% of the 1995
U.S. production of linerboard, corrugating medium and bag paper. Nearly all of
the Company's production of these products is used by the Company's box and
bag manufacturing plants or is traded for their needs. The Company's plywood
plants, sawmills and timberland can provide 100% of the chips needed by the
Company's linerboard mill in Campti, Louisiana, and almost 100% of chip
requirements for the linerboard mill in Albany, Oregon. Recycled fiber, in the
form of used corrugated containers, provided 58.7% of the fiber used by the
four mills in 1995.
Office Papers. The Company's seven business forms plants manufactured 8.8%
of the forms produced in the U.S. in 1995. These forms, mostly long-run
continuous computer forms, along with Willcopy(R), the Company's photocopy and
cut-sheet printer paper produced at its four cut-sheet facilities, are
marketed by 73 Company sales and distribution centers nationwide. In 1995, the
Company's cut sheets accounted for 9.5% of the nation's production.
Corrugated Containers and Sheets. Corrugated containers and sheets
manufactured by the Company's 32 corrugated container plants accounted for
5.6% of 1995 U.S. corrugated container production. Products range from eye-
catching preprinted boxes to sturdy wax-coated shipping containers to plain
brown boxes. Corrugated containers are marketed by the Company's sales force
to a variety of industrial and agricultural customers.
Bags. The Company's four bag plants made 14.4% of the paper bags produced in
the U.S. in 1995. Bags are marketed to grocery, department, drug and hardware
stores in the West and South by the Company's sales force.
BUILDING MATERIALS GROUP
Structural Panels and Lumber. Plywood products, totaling 6.6% of the
nation's 1995 structural panel production, are manufactured at the Company's
10 plants in Arkansas, the Carolinas, Louisiana and Oregon. The Company's
oriented strand board plant in Louisiana began production in the first quarter
of 1996. In 1995, the Company's six sawmills in Arkansas, Louisiana and Oregon
accounted for 1.3% of U.S. lumber production. In May 1996, the Company
acquired an additional sawmill in Oregon as part of the Cavenham Timberland.
Structural panels and lumber products are marketed through independent
wholesalers and distributors throughout the United States.
Composite Board. Four Company particleboard plants in Louisiana and Oregon
accounted for 12.8% of U.S. particleboard production in 1995. The Company's
three MDF plants in Arkansas, Oregon and South Carolina made 19.7% of the MDF
produced in the U.S. in 1995. These plants also produce value-added products
such as color-coated, woodgrain-printed, fire-rated and moisture-resistant
board. Composite board products are sold nationwide to distributors and to
cabinet and furniture manufacturers.
S-16
<PAGE>
Engineered Wood Products. The Company's three laminated beam plants in
Oregon and Louisiana accounted for 28.4% of the 1995 U.S. production. Two
laminated veneer lumber plants and one wooden I-beam plant, all located in
Oregon, manufactured 5.3% and 5.2%, respectively, of the laminated veneer
lumber and wooden I-beams produced in the U.S. in 1995. Engineered wood
products, both stock and custom-made, are sold nationwide and internationally.
CAPITAL INVESTMENT
The Company is continuously making capital expenditures at its manufacturing
facilities to improve fiber utilization and labor efficiency and to expand
production capacity. In 1995, the Company's capital expenditures, including
environmental capital expenditures, aggregated $412.0 million. At December 31,
1995, the estimated cost of major capital projects in progress was
approximately $922.9 million of which $179.3 million had been spent.
TIMBER AND OTHER FIBER RESOURCES
Excluding the Contract Parcels which the Company has agreed to sell to
Hancock, the Company owns or controls approximately 1,800,000 acres of
timberland. Prior to the acquisition of the Cavenham Timberland, the Company's
timberland provided approximately 70% of the Company's long-term saw log
requirements for its Pacific Northwest operations, 27% of such requirements
for its Southern Operations and 40% of the long-term saw log requirements for
all its operations. The remainder was purchased through government and private
timber sales and open market purchases. As a result of the acquisition of the
Cavenham Timberland, the Company expects that its own timberland will supply
all the saw logs needed for its Pacific Northwest operations and additional
logs for sale in the domestic or export markets, 27% of its long-term saw log
needs for its Southern Operations and 60% of its overall long-term saw log
needs. The Company's timberland is distributed geographically as follows:
728,000 acres in Louisiana, Arkansas and Texas; 611,000 acres in Oregon
(excluding the Contract Parcels); 188,000 acres in Tennessee; 156,000 acres in
the Carolinas; and 117,000 acres in Washington.
Recycled fiber is an important raw material source for the Company's
unbleached paper mills. In 1995, used corrugated containers provided 58.7% of
the Company's fiber requirements for linerboard, corrugating medium and bag
paper production.
ENERGY
The Company's manufacturing facilities are able to generate 60% of their
total energy needs through cogeneration, burning waste materials and recycling
spent pulp liquors.
EMPLOYEES
The Company has approximately 13,000 employees. Approximately 52% of the
employees are represented by labor unions with which the Company has
collective bargaining agreements including approximately 1,150 employees who
are continuing to work under the terms of agreements which expired on June 1,
1996. At June 18, 1996, the Company and the unions were engaged in
negotiations for new agreements. There can be no assurance that the employees
will continue to work while the negotiations continue.
DESCRIPTION OF THE DEBENTURES
The following information concerning the % Debentures Due , 2026
(the " % Debentures"), and the % Debentures Due , 2026 (the " %
Debentures"), offered hereby supplements and should be read in conjunction
with the statements in the Prospectus under
S-17
<PAGE>
the caption "Description of Securities." Capitalized terms not otherwise
defined herein shall have the meanings given to them in the Prospectus.
GENERAL
The Debentures will be issued as unsecured obligations of the Company in an
aggregate principal amount of $400,000,000. The % Debentures will be limited
to $ aggregate principal amount and will mature on , 2026. The %
Debentures will be limited to $ aggregate principal amount and will mature
on , 2026.
The Debentures will bear interest from , payable semi-annually in arrears
on each and , commencing , 199 , at the rates per annum set forth on
the cover page of this Prospectus Supplement, to the persons in whose names
the Debentures are registered on the preceding and , respectively.
The Debentures are subject to the provisions of the Indenture relating to
defeasance and covenant defeasance as described in the Prospectus under
"Description of Securities-Defeasance and Covenant Defeasance."
OPTIONAL REPAYMENT
The % Debentures may be repaid on , 2006, at the option of the Holders
of the % Debentures at 100% of their principal amount, together with accrued
interest to , 2006. In order for a Holder to exercise this option, the
Company must receive at its office or agency in New York, New York, during the
period beginning on , 2006, and ending at 5:00 p.m. (New York City time) on
, 2006 (or, if , 2006, is not a Business Day, the next succeeding
Business Day), the % Debentures with the form entitled "Option to Elect
Repayment on , 2006" on the last page of the % Debentures duly completed.
Any such notice received by the Company during the period beginning on ,
2006, and ending at 5:00 p.m. (New York City time) on , 2006, shall be
irrevocable. See "--Book-Entry System." The repayment option may be exercised
by a Holder of the % Debentures for less than the entire principal amount of
the % Debentures held by such Holder, so long as the principal amount that is
to be repaid is equal to $1,000 or an integral multiple of $1,000. All
questions as to the validity, form, eligibility (including time of receipt)
and acceptance of any % Debentures for repayment will be determined by the
Company, whose determination will be final and binding.
Failure by the Company to repay the % Debentures when required as described
in the preceding paragraph will result in an Event of Default under the
Indenture.
As long as the % Debentures are represented by a Global Security, DTC or
DTC's nominee will be the registered holder of the % Debentures and therefore
will be the only entity that can exercise a right to repayment. See "--Book-
Entry System."
No similar right of repayment is available to holders of the % Debentures.
BOOK-ENTRY SYSTEM
The % Debentures and the % Debentures will be represented by Global
Securities that will be deposited with, or on behalf of, DTC and registered in
the name of a nominee of DTC.
DTC has advised the Company and the Underwriters as follows: DTC is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant
S-18
<PAGE>
to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC
was created to hold securities of its participating organizations
("participants") and to facilitate the clearance and settlement of securities
transactions, such as transfers and pledges, among its participants, thereby
eliminating the need for physical movement of securities certificates.
Participants include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations and certain other
organizations, some of whom (and/or their representatives) own DTC. Access to
DTC's book-entry system is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. Persons who
are not participants may beneficially own securities held by DTC only through
participants.
The Debentures will not be transferable or exchangeable for Debentures in
certificated form except under the limited circumstances described in the
Prospectus under "Description of Securities--Global Securities."
A further description of DTC's procedures with respect to the Debentures is
set forth in the Prospectus under "Description of Securities--Global
Securities."
So long as the % Debentures are represented by a Global Security, DTC or
DTC's nominee will be the only entity that can exercise a right to repayment
pursuant to the Holder's option to elect repayment of its % Debentures.
Notice by participants or by owners of beneficial interests in a Global
Security held through such participants of the exercise of the option to elect
repayment of beneficial interests in % Debentures represented by a Global
Security must be transmitted to DTC in accordance with its procedures on a
form required by DTC and provided to participants. In order to ensure that DTC
or DTC's nominee will timely exercise a right to repayment with respect to a
particular % Debenture, the beneficial owner of such % Debenture must
instruct the broker or other participant through which it holds an interest in
such % Debenture to notify DTC of its desire to exercise a right to
repayment. Different firms have different cut-off times for accepting
instructions from their customers and, accordingly, each beneficial owner
should consult the broker or other participant through which it holds an
interest in a % Debenture in order to ascertain the cut-off time by which
such an instruction must be given in order for timely notice to be delivered
to DTC. The Company will not be liable for any delay in delivery of such
notice to DTC.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Company has agreed to sell to each of the Underwriters named below, and
each of the Underwriters has severally agreed to purchase, the principal
amount of the Debentures set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF
% %
UNDERWRITER DEBENTURES DEBENTURES
----------- ---------- ----------
<S> <C> <C>
Goldman, Sachs & Co....................................... $ $
Salomon Brothers Inc......................................
Dillon, Read & Co. Inc....................................
BA Securities, Inc........................................
J.P. Morgan Securities Inc................................
----- -----
Total................................................. $ $
===== =====
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Debentures, if any
are taken.
S-19
<PAGE>
The Underwriters propose to offer the % Debentures in part directly to the
public at the initial public offering price set forth on the cover page of
this Prospectus Supplement and in part to certain securities dealers at such
price less a concession of % of the principal amount of the % Debentures.
The Underwriters may allow, and such dealers may reallow, a concession not to
exceed % of the principal amount of the % Debentures to certain brokers and
dealers. After the % Debentures are released for sale to the public, the
offering price and other selling terms may from time to time be varied by the
Underwriters.
The Underwriters propose to offer the % Debentures in part directly to the
public at the initial public offering price set forth on the cover page of
this Prospectus Supplement and in part to certain securities dealers at such
price less a concession of % of the principal amount of the % Debentures.
The Underwriters may allow, and such dealers may reallow, a concession not to
exceed % of the principal amount of the % Debentures to certain brokers and
dealers. After the % Debentures are released for sale to the public, the
offering price and other selling terms may from time to time be varied by the
Underwriters.
The Debentures are new issues of securities with no established trading
market. The Company has been advised by the Underwriters that they intend to
make a market in the Debentures but are not obligated to do so and may
discontinue market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for the Debentures.
In the ordinary course of their respective businesses, certain of the
Underwriters and their affiliates engage and may in the future engage in
investment banking and commercial banking activities with the Company and its
subsidiaries. The net proceeds of this offering will be used to reduce the
Company's indebtedness under the term loan made pursuant to the Credit
Agreement. Bank of America, an affiliate of BA Securities, Inc., and Morgan
Guaranty Trust Company of New York, an affiliate of J.P. Morgan Securities
Inc., are lenders and, respectively, agent and a co-agent under the Credit
Agreement. BA Securities, Inc., arranged the Credit Agreement. See "Use of
Proceeds." Accordingly, the offerings made hereby will be made in accordance
with Rule 2710(c)(8) of the Conduct Rules of the National Association of
Securities Dealers, Inc. Neither BA Securities, Inc., nor J.P. Morgan
Securities Inc. will receive any benefit in connection with this offering
other than customary managing, underwriting and selling fees.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
VALIDITY OF THE DEBENTURES
The validity of the Debentures will be passed upon for the Company by
Miller, Nash, Wiener, Hager & Carlsen LLP, Portland, Oregon, and for the
Underwriters by Sullivan & Cromwell, Los Angeles, California. Sullivan &
Cromwell will rely on Miller, Nash, Wiener, Hager & Carlsen LLP as to all
matters governed by Oregon law.
S-20
<PAGE>
PROSPECTUS
LOGO
$400,000,000
WILLAMETTE INDUSTRIES, INC.
SENIOR DEBT SECURITIES
----------------
Willamette Industries, Inc. (the "Company"), may from time to time offer to
or through underwriters, or directly to other purchasers or through agents, up
to $400,000,000 aggregate principal amount (or its equivalent in any other
currency or composite currency) of its senior debt securities (the
"Securities"). The Securities will be offered in one or more separate series
in amounts, at prices and on terms to be determined at the time of sale. See
"Plan of Distribution."
The specific designation, aggregate principal amount, authorized
denominations, maturity, rate and time of payment of interest, terms for
redemption, if any, the initial public offering price, the names of, and the
principal amounts to be purchased by or through, underwriters, dealers or
agents, if any, the compensation of such persons and the other special terms
in connection with the offering and sale of the series of the Securities in
respect of which this Prospectus is being delivered (the "Offered Securities")
will be set forth in an accompanying supplement to this Prospectus (the
"Prospectus Supplement"). If the terms of a depositary arrangement with
respect to a specific series of Offered Securities are set forth in the
Prospectus Supplement relating to such series, the Offered Securities of such
series may be issued in whole or in part in global form. The Offered
Securities will be denominated in United States dollars unless another
currency, which may be a composite currency such as the European Currency
Unit, is specified in the Prospectus Supplement.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JUNE 20, 1996
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy statements and other information filed by the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C.; 500
West Madison Street, Chicago, Illinois; and 7 World Trade Center, New York,
New York. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. This Prospectus does not contain all information set
forth in the related registrations statement and exhibits thereto which the
Company has filed with the Commission under the Securities Act of 1933 and to
which reference is hereby made.
The Company will send to all registered holders of the Securities such
annual and other reports as are sent to its shareholders in conformity with
the requirements of the Exchange Act.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates herein by reference its annual report on Form 10-K
for the year ended December 31, 1995, its quarterly report on Form 10-Q for
the quarter ended March 31, 1996, its current report on Form 8-K filed March
14, 1996, and its current report on Form 8-K filed May 29, 1996, as amended by
Form 8-K/A filed June 10, 1996 (the "May Form 8-K").
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Securities to which this Prospectus
relates shall be deemed to be incorporated by reference into this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any or all the foregoing documents incorporated by reference
herein (other than exhibits to such documents which are not specifically
incorporated by reference in such documents). Requests should be directed to
J. A. Parsons, Executive Vice President, Willamette Industries, Inc., 1300
S.W. Fifth Avenue, Suite 3800, Portland, Oregon 97201, telephone (503) 227-
5581.
RECENT TIMBERLAND ACQUISITION
On March 12, 1996, the Company entered into an agreement (the "Cavenham
Agreement") with Cavenham Energy Resources Inc., Cavenham Forest Industries
Inc. and Hanson Natural Resources Company (collectively "Cavenham") providing
for the sale by Cavenham and the purchase by the Company of approximately
1,088,000 acres of timberland and related assets used in Cavenham's timber,
wood products, and energy business in the Pacific Northwest and in North and
Southwest Louisiana for $1,588,000,000.
In April 1996, the Company entered into separate agreements (the "Designee
Agreements") with Crown Pacific Limited Partnership ("Crown"), John Hancock
Mutual Life Insurance Company ("Hancock") and Temple-Inland Forest Products
Corporation ("Temple") providing for the purchase by them (each a "Designee")
of an aggregate of approximately 542,000 acres of the timberland and related
assets covered by the Cavenham Agreement for an aggregate price of
$641,000,000.
The Designee Agreements with Crown and Temple provided that the transactions
contemplated by such agreements would be consummated concurrently with the
consummation of the Cavenham
2
<PAGE>
Agreement. The Designee Agreement with Hancock provided for the division of
the timberland covered by the agreement into parcels with the purchase and
sale of at least one parcel to be consummated concurrently with the
consummation of the Cavenham Agreement and the purchase and sale of the
remaining parcels (the "Contract Parcels") to be consummated by November 14,
1997. Hancock's obligation to purchase the Contract Parcels is subject to its
ability to secure client funding for the purchases, which it has agreed to
make diligent and sustained efforts to obtain, and to certain other
conditions.
On May 15, 1996, the transactions contemplated by the Cavenham Agreement and
the Designee Agreements were simultaneously consummated, resulting in the
purchase by the Company from Hanson Natural Resources Company of approximately
602,000 acres of timberland in the Pacific Northwest and North Louisiana, a
sawmill in Warrenton, Oregon, inventories and other assets for approximately
$1,144,860,000. The timberland acquired by the Company includes Contract
Parcels aggregating approximately 56,000 acres in Oregon which are to be
conveyed to Hancock for approximately $197,860,000 plus certain expenses
incurred by the Company. Accordingly, after giving effect to the sale of the
Contract Parcels, the Company will have acquired 546,000 acres of timberland
and related assets for approximately $947,000,000, subject to post-closing
price adjustments which at June 10, 1996, approximate an additional
$10,000,000.
Pursuant to the Cavenham Agreement, the Company assumed Cavenham's
environmental and other liabilities relating to the assets covered by the
Cavenham Agreement other than accounts payable, obligations for borrowed money
and specified excluded liabilities. Pursuant to the Designee Agreements, each
Designee assumed and indemnified the Company against such liabilities relating
to the assets purchased by such Designee.
The Company funded the purchase price primarily by borrowing $1,100,000,000
on May 15, 1996, under a credit agreement (the "Credit Agreement") dated as of
May 10, 1996, among the Company and a group of banks providing for a revolving
loan and a term loan. The revolving loan provides for borrowings of up to
$1,000,000,000 in principal amount, matures on May 15, 2001, and at June 12,
1996, had an outstanding principal balance of $500,000,000. The term loan is
in the principal amount of $600,000,000 and matures on May 15, 1998. Both
loans bear interest at either a Base Rate or a LIBO Rate, as defined in the
Credit Agreement and selected by the Company. The interest rates are subject
to periodic adjustment. At June 12, 1996, the weighted average interest rates
per annum for indebtedness outstanding under the revolving loan and the term
loan were 5.75% and 5.72%, respectively.
The Credit Agreement contains certain restrictions on the Company's
activities which include, among other things, restrictions relating to sales
and lease backs, mergers, sales of assets not in the ordinary course of
business, and encumbrances on the Company's property. The Credit Agreement
also provides that the Company will not permit (i) its Consolidated Interest
Coverage Ratio, as defined, for any period of four consecutive fiscal quarters
to be less than 1.5 to 1.0; (ii) its Consolidated Funded Debt, as defined, to
exceed 60% of the sum of its Consolidated Funded Debt plus its consolidated
net worth until the earlier of (A) March 31, 1997, and (B) the repayment of
the term loan; and (iii) its Consolidated Funded Debt to thereafter exceed 55%
of the sum of its Consolidated Funded Debt plus its consolidated net worth.
Reference should be made to the copy of the Credit Agreement filed as an
exhibit to the May Form 8-K for a complete description of its terms.
Pursuant to the Designee Agreement with Hancock, on May 15, 1996, the
Company and Hancock entered into:
1. An agreement (the "Management Agreement") providing for the management of
the Contract Parcels by a Hancock subsidiary until such parcels are purchased
by Hancock or Hancock's right to
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<PAGE>
purchase such parcels expires. During the period a Contract Parcel is subject
to the Management Agreement, the net cash income, as defined, from such parcel
is credited against the purchase price for the parcel. The Hancock subsidiary
and a subsidiary of the Company are also parties to the Management Agreement.
2. An agreement (the "Right of First Offer Agreement") providing that
Hancock will not sell or transfer to a third party any tract of the timberland
it acquires pursuant to its Designee Agreement, other than certain exempt
sales and transfers, without first offering to sell such tract to the Company
at the price and on terms at which Hancock proposes to sell or transfer such
tract to the third party. If the Company does not accept an offer and the
tract is thereafter sold to the third party as permitted by the Right of First
Offer Agreement, the Company's rights under the Right of First Offer Agreement
terminate with respect to such tract. The Right of First Offer Agreement
expires on May 15, 2121.
3. An agreement (the "Timber Supply Agreement") providing that Hancock will
offer to sell to the Company 25% of various categories of the logs harvested
from the timberland subject to the Right of First Offer Agreement at a price
equal to the highest sales price at which Hancock is selling logs pursuant to
its open market bidding procedures to unaffiliated customers. The Timber
Supply Agreement expires on June 30, 2001.
The above descriptions of the Cavenham Agreement, the Designee Agreements,
the Management Agreement, the Right of First Offer Agreement, and the Timber
Supply Agreement are summaries and do not purport to be complete. Reference
should be made to the copies of such agreements filed as exhibits to the May
Form 8-K for a complete description of their respective terms.
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THE COMPANY
The Company is a diversified, integrated forest products company which
manufactures unbleached paper products, white paper products and wood-based
building materials at 96 plants located throughout the United States.
Excluding the Contract Parcels which the Company has agreed to sell to
Hancock, the Company owns or controls approximately 1,800,000 acres of
timberland in Arkansas, Louisiana, North Carolina, Oregon, South Carolina,
Tennessee, Texas and Washington.
The Company was incorporated in Oregon in 1906. Its executive offices are
located at 1300 S.W. Fifth Avenue, Suite 3800, Portland, Oregon 97201, and its
telephone number is (503) 227-5581.
USE OF PROCEEDS
As required by the Credit Agreement, the Company will use the net proceeds
from the sale of the Securities to repay outstanding indebtedness under the
term loan provided to the Company pursuant to the Credit Agreement. Pending
such utilization, the proceeds will be held in an interest-bearing escrow
account with one of the Banks.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31 MARCH 31
------------------------- -------------
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges...... 2.08 2.56 3.06 4.25 10.83 8.24 7.38
</TABLE>
For purposes of computing the ratio, "earnings" consist of income before
income taxes plus fixed charges. "Fixed charges" consist of interest expense
plus one-third of rent expense (which is deemed representative of an interest
factor).
5
<PAGE>
DESCRIPTION OF SECURITIES
The Securities will be issued under an indenture dated as of January 30,
1993 (the "Indenture"), between the Company and The Chase Manhattan Bank
(National Association), 1 Chase Manhattan Plaza, New York, New York 10081, as
trustee (the "Trustee"). A copy of the Indenture is filed as an exhibit to
each registration statement. The following description summarizes certain
provisions of the Indenture and is subject to the detailed provisions of the
Indenture. Whenever any particular article or section of the Indenture or any
term defined therein is referred to, such article, section or definition is
incorporated by reference, and the statement in connection with which such
reference is made is qualified in its entirety by such reference. Further
terms of each series of the Offered Securities will be set forth in the
Prospectus Supplement.
GENERAL
The Indenture does not limit the aggregate principal amount of the
Securities which may be issued thereunder and provides that the Securities may
be issued from time to time in series. The Securities will be unsecured
obligations of the Company and will rank equally and ratably with other
unsecured and unsubordinated indebtedness of the Company. The Indenture does
not limit the Company's ability to incur other unsecured indebtedness or
contain provisions that would require the Company to repurchase or redeem or
otherwise modify the terms of the Securities upon a change in control or other
event involving the Company that may adversely affect the credit quality of
the Company.
The Prospectus Supplement will describe the following terms of the Offered
Securities: (1) the title of the Offered Securities; (2) any limit on the
aggregate principal amount of the Offered Securities; (3) the date or dates on
which the Offered Securities will mature; (4) the rate or rates per annum at
which the Offered Securities will bear interest, if any, or the manner in
which such rates are determined and the date from which such interest, if any,
will accrue; (5) the dates on which such interest, if any, on the Offered
Securities will be payable and the Regular Record Dates for such Interest
Payment Dates; (6) the currency or currency unit, if other than United States
dollars, of payment of principal of, and premium and interest, if any, on, the
Offered Securities; (7) if the Offered Securities are to be issued in the form
of one or more global securities (a "Global Security"), the identity of the
depositary for such Global Security or Securities; (8) any mandatory or
optional sinking fund or analogous provision; (9) any redemption terms; (10)
the applicability of certain provisions of the Indenture as described under
"Defeasance and Covenant Defeasance"; and (11) any other specific terms,
including additional Events of Default, if any, with respect to the Offered
Securities. (Section 301.)
Unless otherwise provided in the Prospectus Supplement, principal of, and
premium and interest, if any, on, the Offered Securities will be payable, and
the transfer of the Offered Securities will be registrable, at the Corporate
Trust Office of the Trustee in the Borough of Manhattan, the City of New York,
New York, except that payment of interest, if any, may be made at the option
of the Company by check mailed to the address of the person entitled thereto
as it appears in the register for the Offered Securities. (Sections 301, 305
and 1002.)
Unless otherwise indicated in the Prospectus Supplement, the Offered
Securities will be issued only in fully registered form without coupons and,
if denominated in U.S. dollars, will be issued in denominations of $1,000 or
any integral multiple thereof. No service charge will be made for any transfer
or exchange of Securities of any series, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith. The Company shall not be required (i) to issue, register
the transfer of or exchange any Securities of any series during a period
beginning at the opening of business 15 days before the day of the mailing of
a notice of redemption of Securities of that series selected for redemption
and ending at the close of business on the day of such mailing, or (ii) to
register the transfer of or exchange any Security so
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<PAGE>
selected for redemption in whole or in part, except the unredeemed portion of
Securities being redeemed in part. (Sections 302 and 305.)
Securities of a single series may be issued at various times with different
maturity dates, may bear interest at different rates and may otherwise vary,
all as provided in the Indenture. (Sections 301 and 303.)
All moneys paid by the Company to the Trustee or any Paying Agent for the
payment of principal of and premium and interest on any Security which remain
unclaimed for two years after such principal, premium or interest shall have
become due and payable may be repaid to the Company and thereafter the Holder
of such Security shall look only to the Company for payment thereof. (Section
1003.)
If any Securities are payable in a currency or currency unit other than U.S.
dollars, the special federal income tax considerations applicable to such
Securities will be described in the Prospectus Supplement relating thereto.
The Securities may be issued as original issue discount Securities (bearing
no interest or bearing interest at a rate which at the time of issue is below
market rates) to be sold at a substantial discount below their principal
amount. If the Securities are issued as original issue discount Securities,
the special federal income tax and other considerations applicable thereto
will be described in the Prospectus Supplement relating thereto.
CERTAIN COVENANTS OF THE COMPANY
Certain Definitions Applicable to Covenants
"Subsidiary" of the Company is defined as a corporation more than 50% of the
outstanding voting stock of which is owned, directly or indirectly, by the
Company and/or one or more Subsidiaries of the Company. "Restricted
Subsidiary" is defined as a Subsidiary of the Company substantially all the
property of which is located, or substantially all the business of which is
carried on, within the present 50 states of the United States or in Canada and
which owns a Principal Property, excluding, however, any Subsidiary of the
Company which is primarily engaged in the development and sale or financing of
real property. "Principal Property" is defined as (i) any mill, converting
plant, or manufacturing plant owned by the Company or a Restricted Subsidiary
which is located within the present 50 states of the United States or in
Canada and the gross book value of which (without deduction of any
depreciation reserves) on the date as of which the determination is made
exceeds 1% of Consolidated Net Tangible Assets, and (ii) Timberlands other
than those being held primarily for development or sale; such property,
however, will exclude (a) any property which in the opinion of the Board of
Directors of the Company is not of material importance to the total business
conducted by the Company and its Restricted Subsidiaries as an entirety or (b)
any portion of a particular property which is similarly found not to be of
material importance to the use or operation of such property or (c) any oil,
gas or other minerals or mineral rights. "Attributable Debt" is defined as the
total net amount of rent required to be paid during the remaining primary term
of certain leases, discounted at the rate of 15% per annum. "Consolidated Net
Tangible Assets" is defined as the aggregate amount of assets after deducting
(i) all liabilities, other than deferred income taxes, Funded Debt and
shareholders' equity, and (ii) goodwill and like intangibles, of the Company
and its consolidated Subsidiaries. "Funded Debt" is defined as all
indebtedness for money borrowed having a maturity of more than 12 months from
the date as of which the determination is made (or being renewable beyond such
period) and rental obligations (at the amount capitalized) payable more than
12 months from such date under capitalized leases. (Section 101.)
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<PAGE>
Restrictions on Secured Debt
The Indenture provides that the Company may not, nor may it permit any
Restricted Subsidiary to, create, assume or guarantee any loan or evidence of
indebtedness for money borrowed ("Debt") secured by a mortgage, pledge or lien
("Mortgage") on any Principal Property of the Company or any Restricted
Subsidiary, or on any share of Capital Stock or Debt of any Restricted
Subsidiary, without securing or causing such Restricted Subsidiary to secure
the Securities equally and ratably with (or, at the Company's option, prior
to) such secured Debt, unless the aggregate amount of all such secured Debt,
together with all Attributable Debt with respect to sale and leaseback
transactions involving Principal Properties (with the exception of such
transactions which are excluded as described in "Restrictions on Sale of
Leaseback Transactions" below), would not exceed 10% of Consolidated Net
Tangible Assets. (Section 1005.)
This restriction does not apply to, and there shall be excluded from secured
Debt in any computation under such restriction, Debt secured by: (a) Mortgages
on property of, or on any shares of Capital Stock of or Debt of, any
corporation existing at the time such corporation becomes a Restricted
Subsidiary, (b) Mortgages in favor of the Company or a Restricted Subsidiary,
(c) Mortgages in favor of governmental bodies to secure progress or advance
payments, (d) Mortgages on property, shares of stock or Debt existing at the
time of acquisition thereof (including acquisition through merger or
consolidation) and purchase money and construction Mortgages which are entered
into within specified time limits, (e) Mortgages securing industrial revenue
or pollution control bonds, and (f) any extension, renewal or refunding of any
Mortgages referred to in the foregoing clauses (a) through (e), inclusive.
(Section 1005.)
Restrictions on Sale and Leaseback Transactions
The Indenture provides that neither the Company nor any Restricted
Subsidiary may enter into any sale and leaseback transaction involving any
Principal Property, unless the aggregate amount of all Attributable Debt with
respect to such sale and leaseback transactions, plus all secured Debt (with
the exception of secured Debt which is excluded as described in "Restrictions
on Secured Debt" above), would not exceed 10% of Consolidated Net Tangible
Assets. (Section 1006.)
This restriction does not apply to, and there shall be excluded from
Attributable Debt in any computation under such restriction, any sale and
leaseback transaction if (a) the lease is for a period, including renewal
rights, of not in excess of three years, (b) the sale or transfer of the
Principal Property is made within a specified period after its acquisition or
construction, (c) the lease secures or relates to industrial revenue or
pollution control bonds, (d) the transaction is between the Company and a
Restricted Subsidiary or between Restricted Subsidiaries or (e) the Company or
such Restricted Subsidiary, within 180 days after the sale is completed,
applies to the retirement of Funded Debt of the Company or a Restricted
Subsidiary, or the purchase of other property which will constitute Principal
Property of a value at least equal to the value of the Principal Property
leased, an amount not less than the greater of (i) the net proceeds of the
sale of the Principal Property leased or (ii) the fair market value of the
Principal Property leased; provided that the amount of proceeds to be applied
to the retirement of Funded Debt shall be reduced by an amount, if any, equal
to the principal amount of debentures or notes (including the Securities) of
the Company or a Restricted Subsidiary surrendered for cancellation to the
applicable trustee thereof and the principal amount of other Funded Debt
voluntarily retired, in each case within 180 days after such sale. (Section
1006.)
Restrictions on Funded Debt of Restricted Subsidiaries
The Indenture provides that the Company may not permit any Restricted
Subsidiary to create, assume or guarantee any Funded Debt except (i) Funded
Debt owed to the Company or a Restricted Subsidiary, (ii) Funded Debt secured
by Mortgages permitted as described under "Restrictions on Secured Debt,"
(iii) Funded Debt of any corporation outstanding at the time such corporation
became
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<PAGE>
a Restricted Subsidiary, (iv) Funded Debt of any person outstanding at the
time of its acquisition, or the acquisition of substantially all its
properties, by such Restricted Subsidiary, (v) Funded Debt incurred in
connection with certain refundings, (vi) Funded Debt constituting Attributable
Debt permitted as described under "Restrictions on Sale and Leaseback
Transactions" and (vii) any other Funded Debt if the aggregate principal
amount of all Funded Debt of all Restricted Subsidiaries permitted under this
clause (vii) does not exceed 10% of Consolidated Net Tangible Assets. (Section
1007.)
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to the
Securities of any series: (a) default in the payment of principal of or any
premium on any Security of that series when due; (b) default in the payment of
any interest on any Security of that series when due continued for 30 days;
(c) default in the deposit of any sinking fund payment, when due, in respect
of any Security of that series; (d) default in the performance of any other
covenant of the Company in the Indenture (other than a covenant included in
the Indenture solely for the benefit of a series of the Securities other than
that series), continued for 90 days after written notice as provided in the
Indenture; (e) certain events in bankruptcy, insolvency or reorganization; and
(f) any other Event of Default provided with respect to Securities of a
particular series. (Section 501.) No Event of Default with respect to the
Securities of a particular series necessarily constitutes an Event of Default
with respect to the Securities of any other series.
If an Event of Default with respect to the Securities of any series at the
time Outstanding occurs and is continuing, either the Trustee or the Holders
of at least 25% in aggregate principal amount of the Outstanding Securities of
that series may declare the principal amount (or, if the Securities of that
series are original issue discount Securities, such portion of the principal
amount as may be specified in the terms of that series) of all the Securities
of that series to be due and payable immediately. At any time after a
declaration of acceleration with respect to the Securities of any series has
been made, but before a judgment or decree based on acceleration has been
obtained, the Holders of a majority in principal amount of the Outstanding
Securities of that series may, under certain circumstances, rescind and annul
such acceleration. (Section 502.)
The Indenture provides that, subject to the duty of the Trustee during the
continuance of an Event of Default to act with the required standard of care,
the Trustee will be under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any of the Holders,
unless such Holders shall have offered to the Trustee reasonable indemnity.
(Section 601.) Subject to such provisions for the indemnification of the
Trustee, the Holders of a majority in principal amount of the Outstanding
Securities of any series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of that series. (Section 512.) The right of a Holder of any
Security to institute a proceeding with respect to the Indenture is subject to
certain conditions precedent, but each Holder has an absolute right to receive
payment of principal or premium and interest, if any, when due and to
institute suit for the enforcement of any such payment. (Sections 507 and
508.)
The Company is required to furnish to the Trustee annually a statement as to
the performance by the Company of its obligations under the Indenture and as
to any default in such performance. (Section 1008.)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of a majority in principal amount
of the Outstanding Securities of each series affected by such modification or
amendment; provided, however, that no such modification or
9
<PAGE>
amendment may, without the consent of the Holder of each Outstanding Security
affected thereby, (a) change the stated maturity date of the principal of, or
any installment of principal of or interest, if any, on, any Security, (b)
reduce the principal amount of, or premium or rate of interest, if any, on,
any Security, (c) reduce the amount of principal of an original issue discount
Security payable upon acceleration of the maturity thereof, (d) change the
place or currency of payment of principal of, or premium or interest, if any,
on, any Security, (e) impair the right to institute suit for the enforcement
of any payment on or with respect to any Security, (f) change the provisions
for defeasance or covenant defeasance (each as defined below) made applicable
to any Security, or (g) reduce the percentage in principal amount of
Outstanding Securities of any series, the consent of whose Holders is required
for modification or amendment of the Indenture or for waiver of compliance
with certain provisions of the Indenture or for waiver of certain defaults.
(Section 902.)
The Holders of a majority in principal amount of the Outstanding Securities
of each series may, on behalf of all Holders of the Securities of that series,
waive, insofar as that series is concerned, compliance by the Company with
certain restrictive provisions of the Indenture. (Section 1009.) The Holders
of a majority in aggregate principal amount of the Outstanding Securities of
each series may, on behalf of all Holders of the Securities of that series,
waive any past default under the Indenture with respect to the Securities of
that series, except a default in the payment of principal, or premium or
interest, if any, or in respect of a covenant or condition which cannot be
waived without the consent of each Holder of the Securities of that series.
(Section 513.)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of the Holders of any of the Outstanding
Securities under the Indenture, may consolidate with or merge into, or
transfer its assets substantially as an entirety to, any corporation organized
under the laws of any domestic jurisdiction, and any other person may
consolidate with, or merge into, or transfer its assets substantially as an
entirety to the Company provided that (i) the successor corporation (if any)
assumes the Company's obligations on the Securities and under the Indenture,
(ii) after giving effect to the transaction and treating any indebtedness
which becomes an obligation of the Company or a Subsidiary as a result of such
transaction as having been incurred by the Company or the Subsidiary at the
time of such transaction, no Event of Default, and no event which, after
notice or lapse of time, would become an Event of Default, shall have occurred
and be continuing, (iii) if as a result of the transaction a Principal
Property would become subject to a Mortgage which would not be permitted by
the Indenture, the Securities shall be secured equally with (or prior to) the
indebtedness secured thereby, and (iv) certain other conditions are met.
(Section 801.)
GLOBAL SECURITIES
The Offered Securities may be issued in whole or in part in the form of one
or more Global Securities that will be deposited with, or on behalf of, a
depositary (the "Depositary") identified in the Prospectus Supplement relating
to such Offered Securities. Unless and until it is exchangeable in whole or in
part for Offered Securities in definitive form, a Global Security may not be
transferred except as a whole by the Depositary for such Global Security to a
nominee of such Depositary or by a nominee of such Depositary to such
Depositary or another nominee of such Depositary or by such Depositary or any
such nominee to a successor of such Depositary or a nominee of such successor.
(Sections 303 and 305.)
The specific terms of the depositary arrangement, if any, with respect to a
series of Offered Securities will be described in the Prospectus Supplement
relating to such series. The Company anticipates that the following provisions
will apply to all depositary arrangements.
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Ownership of beneficial interests in a Global Security will be limited to
persons that have accounts with the Depositary for such Global Security or its
nominee ("Participants") or persons that may hold interests through
Participants. Such accounts shall be designated by the underwriters or agents
with respect to the Offered Securities underwritten or solicited by them. The
Company expects that upon the issuance of a Global Security, the Depositary
for such Global Security will credit, on its book-entry registration and
transfer system, the Participants' accounts with the respective principal
amounts of the Offered Securities represented by such Global Security.
Ownership of beneficial interests in such Global Security will be shown on,
and the transfer of such ownership interests will be effected only through,
records maintained by the Depositary (with respect to interests of
Participants) and on the records of Participants (with respect to interests of
persons held through Participants). The laws of some states may require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to own,
transfer or pledge beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or Holder of the Offered
Securities represented by such Global Security for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in a
Global Security will not be entitled to have the Offered Securities
represented by such Global Security registered in their names, will not
receive or be entitled to receive physical delivery of the Offered Securities
in definitive form and will not be considered the owners or Holders thereof
under the Indenture. Accordingly, each person owning a beneficial interest in
such a Global Security must rely on the procedures of the Depositary and, if
such person is not a Participant, on the procedures of the Participant through
which such person owns its interest, to exercise any rights of a Holder under
the Indenture. The Company understands that under existing industry practices,
in the event that the Company requests any action of Holders or that an owner
of a beneficial interest in such a Global Security desires to give or take any
action which a Holder is entitled to give or take under the Indenture, the
Depositary would authorize the Participants holding the relevant beneficial
interests to give or take such action, and such Participants would authorize
beneficial owners owning through such Participants to give or take such action
or would otherwise act upon the instructions of beneficial owners owning
through them.
Payment of principal of, and premium and interest, if any, on, Offered
Securities registered in the name of a Depositary or its nominee will be made
to the Depositary or its nominee, as the case may be, as the registered owner
of the Global Security representing such Offered Securities. None of the
Company, the Trustee, any Paying Agent or any other agent of the Company or
the Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Security for such Offered Securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Company expects that upon receipt of any payment of principal of, or
premium or interest on, a Global Security, the Depositary will immediately
credit Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global
Security as shown on the records of the Depositary. Payments by Participants
to owners of beneficial interests in such Global Security held through such
Participants will be the responsibility of such Participants, as is now the
case with securities held for the accounts of customers registered in "street
name."
A Global Security is exchangeable for definitive Securities in registered
form only if (i) the Depositary for any Offered Securities represented by a
Global Security notifies the Company that it is unwilling or unable to
continue as Depositary or ceases to be a clearing agency registered under the
Exchange Act and a successor Depositary is not appointed by the Company within
90 days after receiving such notice or becoming aware that the Depositary is
no longer so registered, (ii) the Company in its sole discretion determines
that such Global Security shall be exchangeable for
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definitive Securities in registered form and notifies the Trustee thereof, or
(iii) there shall have occurred and be continuing an Event of Default or an
event which after notice or lapse of time would be an Event of Default with
respect to the Offered Securities represented by such Global Security. The
Company will issue Securities in definitive form upon registration of transfer
of, or in exchange for, any Global Security exchangeable pursuant to the
preceding sentence. (Section 305.)
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides, if such provision is made applicable to the
Securities of any series (which will be indicated in the Prospectus
Supplement) that the Company may elect either (a) to defease and be discharged
from any and all obligations in respect of the Securities of such series
(except for certain obligations to register the transfer or exchange of
Securities of such series, to replace mutilated, destroyed, lost or stolen
Securities of such series, to maintain paying agencies and to hold moneys for
payment in trust) ("defeasance") or (b) to be released from its obligations
with respect to the Securities of such series under certain restrictive
covenants of the Indenture, including those described under "Certain Covenants
of the Company," and "Consolidation, Merger and Sale of Assets" ("covenant
defeasance") and the occurrence of an event described in clause (d) under
"Events of Default" shall no longer be an Event of Default with respect to the
Securities of such series, in each case, if the Company deposits, in trust,
with the Trustee money and/or Government Obligations, which through the
payment of interest thereon and principal thereof in accordance with their
terms will provide money in an amount sufficient, without reinvestment, to pay
the principal of and any premium and interest on the Outstanding Securities of
such series and any mandatory sinking fund payments or analogous payments in
accordance with the terms of the Outstanding Securities of such series and the
Indenture. Such a trust may only be established if, among other things, (i) no
Event of Default or event which with the giving of notice or lapse of time, or
both, would become an Event of Default with respect to such series under the
Indenture shall have occurred and be continuing on the date of such deposit,
(ii) such deposit will not cause the Trustee to have any conflicting interest
with respect to other securities of the Company and (iii) the Company shall
have delivered an Opinion of Counsel to the effect that the Holders will not
recognize income, gain or loss for federal income tax purposes as a result of
such defeasance and will be subject to federal income tax on the same amounts,
in the same manner, and at the same times as if such defeasance had not
occurred. In the event the Company exercises its covenant defeasance option
with respect to the Securities of any series and the Securities of such series
are declared due and payable because of the occurrence of any Event of
Default, the amount of money and Government Obligations on deposit with the
Trustee will be sufficient to pay amounts due on the Securities of such series
at the time of their Stated Maturity but may not be sufficient to pay amounts
due on the Securities of such series at the time of the acceleration resulting
from such Event of Default. However, the Company will remain liable with
respect to such payments. (Article Thirteen.)
GOVERNING LAW
The Indenture and the Securities are governed by and construed in accordance
with the laws of the state of New York.
REGARDING THE TRUSTEE
The Company maintains deposit accounts and conducts other banking
transactions with The Chase Manhattan Bank (National Association) in the
ordinary course of the Company's business. The Chase Manhattan Bank (National
Association) serves as trustee under another indenture with respect to certain
of the Company's other senior debt securities.
12
<PAGE>
VALIDITY OF OFFERED SECURITIES
The validity of the Offered Securities will be passed upon for the Company
by Miller, Nash, Wiener, Hager & Carlsen LLP, 111 S.W. Fifth Avenue, Portland,
Oregon 97204.
EXPERTS
The consolidated financial statements of the Company included in the
Company's annual report on Form 10-K for the year ended December 31, 1995,
have been audited by KPMG Peat Marwick LLP, independent auditors, as set forth
in their report included therein and incorporated herein by reference. The
report of KPMG Peat Marwick LLP covering the consolidated financial statements
refers to a change in accounting for income taxes and post retirement benefits
in 1993. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report and upon the authority of such firm as
experts in accounting and auditing.
PLAN OF DISTRIBUTION
The Company may sell the Securities to one or more underwriters for public
offering and sale by them or may sell the Securities to investors directly or
through agents. Any such underwriter or agent involved in the offer and sale
of the Offered Securities will be named in the Prospectus Supplement.
Underwriters may offer and sell the Offered Securities at a fixed price or
prices, which may be changed, or from time to time at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. In connection with the sale of the Offered Securities,
underwriters may be deemed to have received compensation from the Company in
the form of underwriting discounts or commissions and may also receive
commissions from purchasers of the Offered Securities for whom they may act as
agent. Underwriters may sell the Offered Securities to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters or commissions from the purchasers for whom
they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of the Offered Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the Prospectus Supplement. Underwriters, dealers and
agents participating in the distribution of the Offered Securities may be
deemed to be underwriters, and any discounts and commissions received by them
and any profit realized by them on resale of the Offered Securities may be
deemed to be underwriting discounts and commissions under the Securities Act
of 1933. Underwriters, dealers and agents may be entitled, under agreements
entered into with the Company, to indemnification against or contribution
toward certain civil liabilities, including liabilities under the Securities
Act of 1933.
If so indicated in the Prospectus Supplement, the Company will authorize
dealers acting as the Company's agents to solicit offers by certain
institutions to purchase the Offered Securities from the Company at the public
offering price set forth in the Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on the date or dates
stated in the Prospectus Supplement. Each of such contracts will be for an
amount not less than, and unless the Company otherwise agrees the aggregate
principal amount of Securities sold pursuant to such contracts shall be not
more than, the respective amounts stated in the Prospectus Supplement.
Certain of the underwriters or agents and their associates may engage in
transactions with and perform services for the Company in the ordinary course
of business.
13
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SE-
CURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Recent Developments....................................................... S-2
Use of Proceeds........................................................... S-2
The Company............................................................... S-3
Capitalization............................................................ S-4
Selected Historical Financial Data........................................ S-5
Management's Discussion and Analysis of Historical Financial Condition and
Results of Operations.................................................... S-6
Unaudited Condensed Pro Forma Combined Financial Data..................... S-10
Business.................................................................. S-15
Description of the Debentures............................................. S-17
Underwriting.............................................................. S-19
Validity of the Debentures................................................ S-20
PROSPECTUS
Available Information..................................................... 2
Incorporation by Reference................................................ 2
Recent Timberland Acquisition............................................. 2
The Company............................................................... 5
Use of Proceeds........................................................... 5
Ratio of Earnings to Fixed Charges........................................ 5
Description of Securities................................................. 6
Validity of Offered Securities............................................ 13
Experts................................................................... 13
Plan of Distribution...................................................... 13
</TABLE>
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$400,000,000
WILLAMETTE INDUSTRIES, INC.
$
% DEBENTURES DUE , 2026
$
% DEBENTURES DUE , 2026
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LOGO
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GOLDMAN, SACHS & CO.
SALOMON BROTHERS INC
DILLON, READ & CO. INC.
BA SECURITIES, INC.
J.P. MORGAN & CO.
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