SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 Commission file number 0-3730
WILLAMETTE INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
OREGON 93-0312940
(State of incorporation) (I.R.S. Employer
Identification No.)
1300 S.W. FIFTH AVENUE, SUITE 3800
PORTLAND, OREGON 97201
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (503) 227-5581
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common stock, $.50 par value New York Stock Exchange
Preferred stock purchase rights New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by
non-affiliates of the registrant.
$ 2,909,491,000 at January 31, 1997
Indicate the number of shares outstanding of each of the
registrant's classes of common stock as of the latest practicable date.
CLASS OUTSTANDING AT JANUARY 31, 1997
Common Stock, $.50 par value 55,363,867 shares
DOCUMENTS INCORPORATED BY REFERENCE.
Portions of the registrant's definitive proxy statement for its 1997 annual
meeting of shareholders are incorporated by reference into Part III hereof.
<PAGE>
<TABLE>
<CAPTION>
CROSS REFERENCE SHEET
Showing Location in Definitive Proxy Statement of Items Required
By Form 10-K
Item No
Caption Form 10-K Caption Definitive Proxy Statement
- ------- ----------------- --------------------------
<S> <C> <C>
Item 10 Directors and Executive Holders of Common Stock
Officers of the Registrant Election of Directors
Section 16(a) Beneficial
Ownership Reporting Compliance
Item 11 Executive Compensation Executive Compensation
Compensation Committee
Interlocks and Insider
Participation
Compensation of Directors
Employment Agreements
Item 12 Security Ownership of Holders of Common Stock
Certain Beneficial
Owners and Management
Item 13 Certain Relationships and Compensation Committee
Related Transactions Interlocks and Insider
Participation
</TABLE>
<PAGE>
INDEX
<TABLE>
<CAPTION>
Page
Part I
<S> <C>
Item 1. Business.................................................................................................1
General...........................................................................................................1
Business Segment Information......................................................................................1
Pulp and Paper....................................................................................................2
Converted Paper Products..........................................................................................2
Building Materials................................................................................................3
Timberlands.......................................................................................................3
Energy............................................................................................................4
Employees.........................................................................................................4
Environmental Matters.............................................................................................4
Item 2. Properties...............................................................................................4
Item 3. Legal Proceedings........................................................................................8
Item 4. Submission of Matters to a Vote of Security Holders......................................................8
Executive Officers of the Registrant...................................................................9
Part II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters.......................................................................10
Item 6. Selected Financial Data.................................................................................11
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.........................................................12
Item 8. Financial Statements and Supplementary Data.............................................................17
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure............................................................................................17
Part III
Item 10. Directors and Executive Officers of the Registrant......................................................18
(See Part I for Executive Officers of the Registrant)
Item 11. Executive Compensation..................................................................................18
Item 12. Security Ownership of Certain Beneficial
Owners and Management.................................................................................18
Item 13. Certain Relationships and Related
Transactions..........................................................................................18
Part IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K...............................................................................19
Signatures............................................................................................20
Index to Consolidated Financial Statements..............................................................22
Index to Exhibits.......................................................................................41
</TABLE>
<PAGE>
PART I
Item 1. Business
GENERAL
Willamette Industries, Inc. (the "Company" or "Willamette") was founded in
1906 as the Willamette Valley Lumber Co. in Dallas, Oregon. In 1967, Willamette
Valley and several related firms merged to form Willamette Industries, Inc. Its
stock has been publicly traded since 1968. Willamette Industries is a
diversified, integrated forest products company with 99 manufacturing facilities
(96 operating and 3 under construction) in 22 states and in Ireland.
The Company's manufacturing facilities produce kraft liner, corrugating
medium, bag paper, fine paper, hardwood market pulp, specialty printing papers,
corrugated containers, business forms, cut sheet paper, paper bags, inks,
lumber, plywood, particleboard, medium density fiberboard, oriented strand
board, laminated beams, laminated veneer lumber, wooden I-joists and other
value-added wood products. We own or manage 1,838,000 acres of timberland in the
United States and employ approximately 13,700 people.
We are a medium-sized firm in a very competitive industry consisting of
thousands of companies, some larger and more diversified, others much smaller,
producing only one or two products. Very competitive conditions exist in every
industry segment in which the Company operates. The Company competes in its
markets primarily through price, quality and service. We feel our strengths are
our vertical integration; our geographically diverse, modern, fiber- and
energy-efficient facilities; our engineering and construction capabilities; our
concentration on a focused, related product range; our balance among building
materials, fine paper and unbleached paper manufacturing; our 57% raw material
self-sufficiency and an organizational structure that encourages teamwork as
well as individual initiative.
Willamette is included in the Fortune 500. The Company's common stock trades
on the New York Stock Exchange (NYSE) under the symbol: WLL.
BUSINESS SEGMENT INFORMATION
The Company has two business segments. The paper group manufactures and sells
pulp and paper products. The building materials group manufactures and sells
wood products. Sales and operating data for the paper group and building
materials group for the past five years are set forth in the five year
comparison captioned "Supplementary Business Segment Information" located on
page 28. The Company is not dependent on any one significant customer or group
of customers. Approximately 95% of the Company's total output is sold
domestically.
1
<PAGE>
PULP AND PAPER
Market pulp and fine paper
Four mills in Kentucky, Pennsylvania, Tennessee and South Carolina manufacture
8.0% of the nation's fine paper production. Additionally, our mill in Kentucky
produces 4.3% of the nation's hardwood market pulp, which is sold to outside
customers.
Chips from nearby sawmills, plywood plants and chip mills serve as the primary
fiber source for our bleached paper products.
Unbleached paper
Four paper mills in Oxnard, California; Hawesville, Kentucky; Campti,
Louisiana and Albany, Oregon manufacture 4.8% of the nation's production of
linerboard, corrugating medium and bag paper. Nearly all of the product is used
or traded for the needs of Willamette's box and bag manufacturing plants.
In Louisiana and Oregon, our sawmills, plywood plants and timberlands can
provide our chip needs for our linerboard mills.
Recycled fiber, in the form of used corrugated containers, provides 59.7% of
our fiber needs.
CONVERTED PAPER PRODUCTS
Office papers
Seven business forms plants in six states manufacture 8.1% of the nation's
production of forms. These forms are mostly long-run continuous computer forms.
Additionally, our four cut sheet facilities (a fifth is under construction to
begin producing in the spring of 1998) make Willcopy(R), Willamette's photocopy
and cut sheet printer paper. Our cut sheets represent 10.9% of the nation's cut
sheet production. Our business forms and Willcopy(R) cut sheets are marketed by
73 sales and distribution centers.
Corrugated containers and sheets
Corrugated containers and sheets are manufactured by 34 plants (including two
to begin production in 1997) in 19 states, accounting for 5.6% of the nation's
corrugated box production. Products range from colorful store displays to
eye-catching preprinted boxes; from sturdy wax coated shipping containers to the
plain brown box. Corrugated containers are marketed by our own sales force to a
variety of industrial and agricultural customers.
2
<PAGE>
Bags
Four bag plants located in California, Missouri, Oregon and Texas make 12.1% of
the nation's paper bags, marketed to grocery, department, drug and hardware
stores in the West, Midwest and South by our sales force.
BUILDING MATERIALS
Structural panels and lumber
Plywood panels are manufactured at 10 plants in Arkansas, the Carolinas,
Louisiana and Oregon. Our new oriented strand board plant in Louisiana began
production in April of 1996. The output of these products total 6.5% and 1.5%,
respectively, of the nation's production.
Seven sawmills manufacture 1.6% of the nation's lumber production.
Lumber and structural panel products are marketed through independent
wholesalers and distributors throughout the U.S.
Composite board
Four particleboard plants in Louisiana and Oregon manufacture 12.3% of the
nation's particleboard. Three medium density fiberboard plants (MDF) in
Arkansas, Oregon and South Carolina made 21.5% of the nation's MDF in 1996. The
MDF plants produce value-added products including color-coated,
woodgrain-printed, fire-rated and moisture-resistant boards.
Composite board products are sold nationwide through independent wholesalers
and distributors.
The newly acquired MDF facility in Clonmel, Ireland accounted for 6.4% of
European production in 1996. The facility operates as "Medite of Europe Limited"
(Medite) and has strong name brand recognition in the European marketplace.
Medite produces specialty grade MDF which includes exterior, moisture-resistant,
fire-retardant, and high density board.
Engineered wood products
Three laminated beam plants in Oregon and Louisiana account for 31.2% of the
nation's production. Two laminated veneer lumber (LVL) plants and one wooden
I-joist plant, all located in Oregon, manufacture 5.2% and 3.9% of the nation's
total production of each respective product. Engineered wood products, both
stock and custom made, are sold in both the domestic and international markets.
TIMBERLANDS
Willamette's 1,838,000 acres of timberland supply approximately 57% of our
long-term log needs. The remainder is purchased through private timber sales and
open market purchases. In Oregon, we are able to provide approximately 90% of
our log needs from timberlands we own or
3
<PAGE>
control. Our timberlands are comprised of 734,000 acres in Louisiana, Arkansas
and Texas; 728,000 acres in Oregon and Washington; and 376,000 acres in
Tennessee, Missouri and the Carolinas. We continually look for opportunities to
expand our fee timber base and make purchases when it is profitable to do so.
ENERGY
Through cogeneration, the burning of waste materials and the recycling of
spent pulping liquors, Willamette's manufacturing facilities are able to
generate 57% of their total energy needs.
EMPLOYEES
Willamette employs approximately 13,700 people, of whom about 52% are
represented by labor unions with collective bargaining agreements. Agreements
covering approximately 2,419 employees were negotiated in 1996. Agreements
involving about 1,974 hourly employees are subject to renewal in 1997.
Approximately 46% of all salaried employees have been with the Company more than
twelve years.
ENVIRONMENTAL MATTERS
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Other Matters" for a discussion of the effect on the Company of
laws relating to environmental matters.
Item 2. Properties
MANUFACTURING FACILITIES
The following table sets forth information regarding the Company's 99
manufacturing facilities at December 31, 1996:
FACILITY 1997 FORECAST
-------- -------------
Western Plywood (3 Plants) M Square Ft. (3/8" Basis)
Dallas, Oregon 96,000
Foster, Oregon 127,000
Springfield, Oregon 120,000
Total Western Plywood 343,000
Southern Plywood (5 Plants)
Dodson, Louisiana 227,000
Emerson, Arkansas 234,000
Ruston, Louisiana 174,000
Taylor, Louisiana 208,000
Zwolle, Louisiana 231,000
---------
Total Southern Plywood 1,074,000
4
<PAGE>
Atlantic Plywood (2 Plants) 1997 FORECAST
-------------
Chester, South Carolina 256,000
Moncure, North Carolina 115,000
---------
Total Atlantic Plywood 371,000
Total Plywood 1,788,000
Oriented Strand Board (1 plant)
Arcadia, Louisiana 323,000
(1996 Production-
Total Structural Panels 2,111,000 1,881,000 M)
=========
Western Lumber (5 Mills) M Board Feet
Coburg, Oregon 146,000
Dallas, Oregon 117,000
Lebanon, Oregon-2 mills 134,000
Warrenton, Oregon 140,000
---------
Total Western Lumber 537,000
---------
Southern Lumber (2 Mills)
Dodson, Louisiana 64,000
Zwolle, Louisiana 51,000
Total Southern Lumber 115,000
---------
(1996 Production-
Total Lumber 652,000 538,000 M)
=========
Particleboard (4 Plants) M Square Ft. (3/4" Basis)
Albany, Oregon 210,000
Bend, Oregon 161,000
Lillie, Louisiana 113,000
Simsboro, Louisiana 99,000
---------
(1996 Production-
Total Particleboard 583,000 546,000 M)
=========
Medium Density Fiberboard (4 Plants) M Square Ft. (3/4" Basis)
Bennettsville, South Carolina 141,000
Eugene, Oregon 59,000
Malvern, Arkansas 156,000
Clonmel, Ireland 158,000
(1996 Production-
Total MDF 514,000 284,000 M)
=========
5
<PAGE>
1997 FORECAST
-------------
Engineered Wood Products (6 Plants) M Board Ft.
Laminated Beams
Saginaw, Oregon 26,000
Simsboro, Louisiana 16,000
Vaughn, Oregon 59,000
---------
(1996 Production-
Total Laminated Beams 101,000 99,000 M)
=========
Laminated Veneer Lumber Cubic Ft.
Albany, Oregon 1,477,000
Winston, Oregon 1,600,000
(1996 Production-
Total LVL 3,077,000 1,571,000 CF)
=========
Structural I-Joists M Lineal Ft. (1996 Production-
Woodburn, Oregon 42,000 24,000 M)
Other Divisions (4 Facilities)
Coburg Veneer - Coburg, Oregon
Custom Products - Albany, Oregon
Lebanon Machine - Lebanon, Oregon
Remanufactured Lumber - Lebanon, Oregon
Pulp and Paper (9 Mills) Tons
Unbleached:
Albany, Oregon 504,000
Campti, Louisiana 793,000
Hawesville, Kentucky 177,000
Oxnard, California 190,000
---------
(1996 Production-
Total Unbleached Pulp and Paper 1,664,000 1,629,000 Tons)
Market Pulp and Fine Paper:
Hawesville, Kentucky
Market Pulp 158,000
Fine Paper(1) 203,000
Johnsonburg, Pennsylvania 382,000
Kingsport, Tennessee 217,000
Marlboro County, South Carolina 295,000
---------
(1996 Production-
Total Market Pulp and Fine Paper 1,255,000 1,174,000 Tons)
(1996 Production-
Total Pulp and Paper 2,919,000 2,803,000 Tons)
=========
6
<PAGE>
1997 FORECAST
-------------
Corrugated Container and Sheets(34 Plants) M Square Ft.
Aurora, Illinois 955,000
Beaverton, Oregon 813,000
Bellevue, Washington 627,000
Bellmawr, New Jersey 673,000
Bowling Green, Kentucky 815,000
Cerritos, California 871,000
Compton, California 710,000
Dallas, Texas 934,000
Delaware, Ohio 659,000
Elk Grove, Illinois 475,000
Fort Smith, Arkansas 816,000
Fridley, Minnesota 980,000
Golden, Colorado 720,000
Griffin, Georgia 1,030,000
Huntsville, Alabama 905,000
Indianapolis, Indiana 776,000
Kansas City, Kansas 842,000
Lincoln, Illinois 520,000
Louisville, Kentucky 441,000
Lumberton, North Carolina 761,000
Maryland Heights, Missouri 674,000
Matthews, North Carolina 448,000
Memphis, Tennessee 58,000
Moses Lake, Washington 705,000
Newton, North Carolina 504,000
Plant City, Florida(2) 344,000
Portland, Oregon(3) 225,000
Sacramento, California 730,000
San Leandro, California 1,184,000
Sanger, California 811,000
Sealy, Texas 787,000
St. Paul, Minnesota 598,000
Warrensville Heights, Ohio 69,000
West Memphis, Arkansas 734,000
----------
(1996 Production-
Total Corrugated Containers 23,194,000 21,528,000 M)
==========
Business Forms (7 Plants) Tons
Cerritos, California 55,000
Dallas, Texas 48,000
DuBois, Pennsylvania 6,000
Indianapolis, Indiana 71,000
Langhorne, Pennsylvania 65,000
Rock Hill, South Carolina 53,000
West Chicago, Illinois 54,000
---------
(1996 Production-
Total Business Forms 352,000 326,000 Tons)
=========
7
<PAGE>
1997 FORECAST
-------------
Cut Sheets and Other Converting (5 Plants) Tons
DuBois, Pennsylvania 138,000
Kingsport, Tennessee 111,000
Brownsville, Tennessee4 -
Owensboro, Kentucky 158,000
Tatum, South Carolina 92,000
(1996 Production-
Total Cut Sheets 499,000 423,000 Tons)
=========
Kraft Bags and Sacks (4 Plants) Tons
Beaverton, Oregon 46,000
Buena Park, California 33,000
Dallas, Texas 26,000
North Kansas City, Missouri 22,000
(1996 Production-
Total Kraft Bags and Sacks 127,000 118,000 Tons)
=========
Preprinted Linerboard (2 Plants) M Square Ft.
Richwood, Kentucky 553,000
Tigard, Oregon 505,000
---------
(1996 Production-
Total Preprinted Linerboard 1,058,000 846,000 M)
=========
Inks and Specialty Products (2 Plants) Tons
Beaverton, Oregon 4,000
Delaware, Ohio 2,000
---------
(1996 Production-
Total Inks 6,000 6,000 Tons)
=========
1 Second machine scheduled for start-up in the spring of 1998.
2 Production to begin in first quarter of 1997.
3 Production to begin in summer of 1997.
4 Production to begin in spring of 1998.
TIMBERLANDS
For information respecting the Company's timberlands, see "Business--
Timberlands."
Item 3. Legal proceedings
There are no material legal proceedings pending as of the date hereof.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
fourth quarter of the year ended December 31, 1996.
8
<PAGE>
Executive Officers of the Registrant
The executive officers of the Company are elected annually by the board of
directors. At February 13, 1997, the executive officers of the Company, their
ages at December 31, 1996, and their positions with the Company were as follows:
Name Age Position
---- --- --------
Steven R. Rogel 54 President and chief
executive officer
William P. Kinnune 57 Executive vice president-
corrugated containers and bags
Michael R. Onustock 57 Executive vice president-
pulp and fine paper marketing
J. A. Parsons 61 Executive vice president and chief financial
officer, secretary and treasurer
Duane C. McDougall 44 Executive vice president-
building materials group
Each executive officer has been employed by the Company in his present or in
another managerial capacity for more than five years.
9
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's common stock trades on the New York Stock Exchange (NYSE) under
the symbol: WLL. At December 31, 1996, there were approximately 6,500 holders of
record of the Company's common stock. The following table shows, for the periods
indicated, the high and low closing sales prices of, and the per share dividends
paid on, the Company's common stock. Prior to December 31, 1996, the Company's
shares traded on NASDAQ under the symbol: WMTT.
<TABLE>
<CAPTION>
1996 1995
----------------------------- --------------------------
Closing Closing
Dividends Price Dividends Price
Paid High-Low Paid High-Low
---- -------- ---- --------
<S> <C> <C> <C> <C>
1st Quarter... $0.31 60 1/4-49 1/4 $0.27 55 - 46 3/4
2nd Quarter... 0.31 64 1/4-57 1/2 0.27 56 1/4-48 1/4
3rd Quarter... 0.31 68 - 56 1/2 0.30 72 3/8-55 1/2
4th Quarter... 0.31 70 1/2-62 1/2 0.30 66 1/2-54 1/4
</TABLE>
A dividend of $.32 per share was declared on the common stock for the first
quarter of 1997 representing an indicated annual dividend rate of $1.28 per
share. The Company expects to continue paying regular cash dividends, although
there is no assurance as to future dividends as they are dependent upon
earnings, capital requirements and financial condition.
10
<PAGE>
Item 6. Selected Financial Data
The following table shows selected financial data for the Company for the
periods indicated:
Financial Results
(dollar amounts, except per share amounts, in thousands)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 3,425,173 3,873,575 3,007,949 2,622,237 2,372,396
=====================================================================================================================
Cost and expenses:
Depreciation, amortization and cost
of fee timber harvested.................. 302,937 249,165 217,252 194,202 173,784
Materials, labor and other operating
expenses................................. 2,495,345 2,528,570 2,239,185 1,997,246 1,833,919
--------------------------------------------------------------------
Gross profit............................. 626,891 1,095,840 551,512 430,789 364,693
Selling and administrative expenses........ 231,862 201,784 184,699 174,413 167,094
--------------------------------------------------------------------
Operating earnings....................... 395,029 894,056 366,813 256,376 197,599
Interest expense........................... 92,804 71,050 71,513 63,290 66,422
Other income (expense)..................... 3,861 798 (6,377) (3,918) (1,725)
---------------------------------------------------------------------
Earnings before provision for income
taxes.................................. 306,086 823,804 288,923 189,168 129,452
Provision for income taxes................. 114,000 309,000 111,300 78,500 47,900
--------------------------------------------------------------------
Earnings before accounting changes....... 192,086 514,804 177,623 110,668 81,552
Accounting changes......................... - - - 26,364 -
--------------------------------------------------------------------
Net earnings............................. 192,086 514,804 177,623 137,032 81,552
Cash dividends paid........................ 68,520 62,874 52,807 48,213 45,200
Earnings retained in the business.......... 123,566 451,930 124,816 88,819 36,352
Capital expenditures....................... 485,769 453,523 393,161 386,864 367,173
=====================================================================================================================
Financial Condition:
Working capital............................ $ 289,134 359,258 138,528 157,576 157,822
(noncurrent portion)...................... 1,766,917 790,210 915,797 941,710 843,618
Stockholders' equity....................... 1,976,281 1,846,890 1,387,865 1,257,870 1,164,828
Total assets............................... 4,720,681 3,413,555 3,033,398 2,804,553 2,527,416
=====================================================================================================================
Common Stock:
Number of stockholders (beneficial)........ 23,000 19,000 17,000 14,000 11,500
Shares outstanding (in thousands).......... 55,354 55,224 55,036 54,897 54,770
=====================================================================================================================
Per Share: (1)
Earnings before accounting changes......... $ 3.48 9.34 3.23 2.02 1.52
Accounting changes......................... - - - 0.48 -
--------------------------------------------------------------------
Net earnings............................. 3.48 9.34 3.23 2.50 1.52
Cash dividends paid........................ 1.24 1.14 0.96 0.88 0.84
Stockholders' equity....................... 35.70 33.44 25.22 22.91 21.27
Year-end Stock Price....................... 69.625 56.25 47.50 49.50 41.25
=====================================================================================================================
Financial Returns:
Percent return on equity before
accounting changes (2).................... 10.4% 37.1% 14.1% 9.5% 8.2%
Percent return on net sales before
accounting changes........................ 5.6% 13.3% 5.9% 4.2% 3.4%
=====================================================================================================================
Employment:
Number of employees........................ 13,700 13,180 12,260 12,040 12,000
Wages, salaries and cost of employee
benefits.................................. $ 672,280 627,835 580,561 551,172 507,469
=====================================================================================================================
(1) All share and per share amounts have been adjusted for stock splits.
(2) Calculated on stockholders' equity at the beginning of the year.
</TABLE>
11
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Company's two basic businesses, paper products and building materials, are
affected by changes in general economic conditions. Paper product sales and
earnings tend to follow the general economy. 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 and recycled fiber, basic raw materials for both
industry segments, is sensitive to various supply and demand factors, including
environmental issues affecting log supply.
RESULTS OF OPERATIONS 1996 VS. 1995
Net sales decreased by 11.6% in 1996 compared with the record levels achieved
in 1995. Pricing in all paper product lines decreased from the record 1995
levels and pricing pressures occurred throughout 1996 as the market adjusted to
further corrections of paper inventories. As a result, paper product sales
decreased by 16.6% as selling prices decreased 14.6% or more for all products.
Unit shipments of unbleached products had mixed results in 1996 as corrugated
containers increased 3.7%, while grocery bag shipments declined 9.0% from 1995.
For bleached products, cut sheet shipments increased by 22.0% while continuous
forms remained stable. The cut sheet increase is primarily due to the sales from
the new sheeter production at Owensboro, Kentucky added in late 1995. During the
fourth quarter of 1996, selling prices for unbleached products showed little
change while prices for bleached products continued to weaken from the third
quarter of 1996.
Building materials sales increased 1.6% in 1996 compared with 1995 as
increases in sales volume more than offset decreases in sales price
realizations. Although lumber prices marginally increased 2.7% during 1996,
prices in the structural panel and composite board markets continued to decline
due to supply and demand imbalances created by construction of new facilities.
As a result, structural panel and composite board product lines had sales price
decreases ranging from 4.1% to 16.0% compared to 1995 levels. Unit shipments
increased in lumber, MDF and OSB primarily due to capacity increases in 1996,
achieved through acquisitions and expansion from capital projects. A sawmill in
Warrenton, Oregon was acquired in the second quarter, and a new MDF plant in
Clonmel, Ireland was acquired in the fourth quarter. In addition, the newly
converted MDF plant in Eugene, Oregon and the new OSB facility in Arcadia,
Louisiana came on line in the first half of 1996. As a result, lumber and MDF
sales volumes increased 25.2% and 28.9% respectively, in 1996.
The gross profit margin for all products was 18.3% for 1996 compared with
28.3% for the same period in 1995. Paper product gross margins
12
<PAGE>
decreased to 20.3% in 1996 compared with 30.4% in 1995, reflecting the decrease
in selling prices in 1996 from the record levels in 1995. In addition, increased
shutdown days in 1996 to adjust for inventory buildup in the market and for
capital expansion projects had a negative impact on margins. Partially
offsetting the effect of decreased sales and down time was the decline in old
corrugated container (OCC) prices, a raw material recycled to manufacture paper,
which decreased 40.0% compared to 1995.
Building materials gross margins decreased to 14.0% compared to 22.9% in 1995.
The decrease in building materials margins is the result of declining prices in
the structural panel and composite board markets. Additionally, start up costs
associated with the new OSB and MDF facilities, as well as the 4th quarter
start-up of the new LVL facility and Custom Products relocation at Albany,
Oregon negatively affected 1996 margins.
Selling and administrative expenses increased to 6.8% of net sales in 1996
compared to 5.2% in 1995. While the increase was due primarily to lower net
sales, selling and administrative expenses increased 14.9% in 1996 from 1995 due
to expansion of Company operations and costs of new facility start-ups.
Interest expense was $92.8 million in 1996 compared to $71.0 million in 1995.
Interest expense increased as a result of increased debt related to the
acquisitions discussed in note 10 to the consolidated financial statements.
Partially offsetting the increase in outstanding debt was the decrease in the
Company's weighted average interest rate from 7.67% in 1995 to 7.12% for 1996.
Additionally, capitalized interest increased from $6.2 million in 1995 to $10.5
million in 1996 due to the significant capital projects underway.
RESULTS OF OPERATIONS 1995 VS. 1994
Net sales increased 28.8% in 1995 compared with 1994. Paper product sales
increased 49.0% as selling prices increased by 30.0% or more in all paper
product lines. Except for grocery bags and corrugated container shipments, unit
sales volumes increased by 5.7% or more in all paper product 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 product 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 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
13
<PAGE>
plywood plant in the fourth quarter of 1994. Except for lumber, selling prices
in all 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
product gross margins increased to 30.4% in 1995 compared with 13.8% for 1994
reflecting the record level selling prices achieved for all paper product lines.
In addition, gross margins in 1995 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 outside with internally produced product at a much lower
cost. Partially offsetting the increase in gross margins was the escalation of
old corrugated container (OCC) prices by 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 costs and increased glue and resin costs.
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.
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
Willamette generates funds internally via net earnings adjusted for non-cash
charges against earnings such as depreciation, cost of fee timber harvested and
deferred income taxes. Funds generated externally have usually been through debt
financing.
In 1996, cash flows from operating activities were $659.3 million and
represented a decrease of 8.1% from comparable cash flows in 1995. This
14
<PAGE>
decrease was primarily due to a decline from the record level of net earnings
achieved in 1995. Internally generated cash flows continued to fund 100% of
capital expenditures in 1996.
Net working capital decreased to $289.1 million at December 31, 1996 from
$359.3 million at December 31, 1995. The decrease is primarily due to reductions
in inventories and receivables. The decrease in inventories of $25.4 million was
due to quantities being unusually high at December 31, 1995 and the receivables
decrease of $41.4 million was primarily due to lower net sales.
The Company is continually making capital expenditures at its manufacturing
facilities to improve fiber utilization, labor efficiency and to expand
production. In 1996, the Company made capital expenditures of $454.7 million.
During 1996 the following major capital projects were completed:
o Construction of an OSB facility in Arcadia, Louisiana.
o Construction of a new LVL and custom products plant in Albany,
Oregon.
o Conversion of the Eugene, Oregon particleboard plant to
manufacture MDF.
o Upgrade of recovery boiler and chemical and fiber recovery at
Kingsport, Tennessee bleached pulp mill.
o Expansion of pulping capacity at the Marlboro County, South
Carolina fine paper mill.
Major capital projects underway at December 31, 1996 include the following:
o Addition of new fine paper machine and related pulping capacity
at Hawesville, Kentucky.
o Construction of a new corrugated box plant in Plant City,
Florida.
o Construction and installation of a new boiler at the Kingsport,
Tennessee bleached pulp mill.
o Expansion of secondary fiber capacity at the paper mill in
Campti, Louisiana.
o Construction of a new cut sheet plant in Brownsville, Tennessee.
o Modernization of the sawmill at Coburg, Oregon.
The cost of all major capital projects in progress at December 31, 1996 is
estimated to be approximately $923.8 million of which $384.9 million has already
been spent. These projects will be funded with internally generated cash flows
and with external borrowings if needed.
15
<PAGE>
In May 1996 the Company acquired the timber operations of Cavenham Forest
Industries, Inc. (the Cavenham acquisition), in Louisiana and the Pacific
Northwest as discussed in note 10 to the consolidated financial statements. The
Company funded the acquisition with cash and $1.1 billion of borrowing under a
Credit Agreement between the Company and a group of banks providing for a
revolving loan and a term loan. On July 1, 1996, the Company issued $400 million
in debentures. The proceeds from the sale were used to reduce indebtedness under
the term loan used to fund the Cavenham acquisition, thus the debenture issuance
had no effect on the Company's total debt-to-capital ratio at that time. In
November, 1996, the Company completed the acquisition of Medite of Europe,
discussed in note 10 to the consolidated financial statements, for $61.5 million
in cash, plus certain closing costs. The transaction was financed by borrowings
from the revolving loan under the Credit Agreement.
The total debt-to-capital ratio has increased to 49.9% at December 31, 1996
from 32.0% at December 31, 1995 due to the acquisitions discussed above. The
Company anticipates it can maintain its present course of capital spending over
the next three years and still reduce its debt-to-capital ratio to below 40% by
1999. Despite a significant increase in the Company's debt-to-capital ratio,
rating agencies have maintained the Company's credit rating in the "A" range,
thereby preserving its cost of capital. Additionally, the Company believes it
has the resources available to meet its short-term and long-term liquidity
requirements. Resources include internally generated funds, short-term borrowing
agreements and the unused portion of the revolving loan available under the
Credit Agreement.
In April, 1996, the Board of Directors of the Company increased the number of
authorized shares of common stock to 150,000,000 from 75,000,000.
OTHER MATTERS
The Company believes it is in substantial compliance with federal, state and
local laws regarding environmental quality.
The Environmental Protection Agency previously issued proposed rules regarding
air and water quality referred to as the "cluster rules". The final rules are
expected to be released sometime in 1997 with implementation expected to be
required by the year 2000. In addition to the impact of the cluster rules on
pulp and paper mills, the Company's other operations are faced with increasingly
stringent environmental regulations. Based upon either enacted or proposed
regulations, the Company estimates that over the next five years, additional
capital expenditures which are not yet in progress to comply with environmental
regulations will not exceed $120 million. Although future environmental capital
expenditures cannot be predicted with any certainty because of
16
<PAGE>
continuing changes in laws, we believe that compliance with such environmental
regulations will not have a material adverse effect upon the Company's
competitive position.
Much attention has been given to the controversy concerning preservationists'
efforts to stop the harvest of timber from Federal timberlands in the Northwest.
Concurrent with these efforts have come increased regulations, limitations and
restrictions on the harvest of timber from privately-owned timberlands. Current
rules and regulations do not significantly impact the Company's ability to
manage its Oregon timberland on a sustained yield basis.
Over the years, inflation has resulted in replacement costs higher than those
originally needed to purchase existing plants and equipment. Advancing
technology and environmental concerns also contribute to higher costs.
Productivity gains, because of technological improvements, may partially offset
these increased costs. Our use of LIFO to value inventories allows us to include
these inflationary costs in the cost of sales.
FORWARD-LOOKING STATEMENTS
Statements contained in this report that are not historical in nature,
including without limitation the discussion of the anticipated reduction in the
Company's debt-to-capital ratio, forecasted sales and production volumes and the
adequacy of the Company's liquidity resources, are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are subject to risks and uncertainties that may cause
actual future results to differ materially. Such risks and uncertainties with
respect to the Company include the effect of general economic conditions; the
level of new housing starts and remodeling activity; the availability and terms
of financing for construction; competitive factors, including pricing pressures;
the cost and availability of wood fiber; the effect of natural disasters on the
Company's timberlands; and the impact of environmental regulations and the
construction and other costs associated with complying with such regulations.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data filed as part of this report
follow the signature pages of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
17
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Information regarding (i) directors of the Company is set forth in the
Company's definitive proxy statement (the "Proxy Statement") for its 1997 annual
meeting of shareholders, under the heading "Election of Directors" and (ii) the
failure by an officer of the Company to file, on a timely basis, one report
required by Section 16 (a) of the Securities Exchange Act of 1934, is set forth
under "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy
Statement, which information is incorporated herein by reference. Information
regarding the executive officers of the Company is set forth under the heading
"Executive Officers of the Registrant" in Part I of this report.
Item 11. Executive Compensation
Information regarding compensation of directors and executive officers of the
Company is set forth in the Proxy Statement under the headings "Executive
Compensation," "Compensation Committee Interlocks and Insider Participation,"
"Compensation of Directors" and "Employment Agreements." Such information is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information regarding security ownership of management and certain other
beneficial owners is in the Proxy Statement under the heading "Holders of Common
Stock" which information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information regarding certain relationships and related transactions is set
forth in the Proxy Statement under the heading "Compensation Committee
Interlocks and Insider Participation" which information is incorporated herein
by reference.
18
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
(a) 1. and 2. For a list of the financial statements filed herewith, see
the index to consolidated financial statements following
the signature pages of this report.
(a) 3. For a list of the exhibits filed herewith, see the index
to exhibits following the financial statements filed with
this report. Each management contract or compensatory plan
or arrangement required to be filed as an exhibit to this
report is identified in the list.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed for the quarter ended
December 31, 1996.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
WILLAMETTE INDUSTRIES, INC.
(Registrant)
By /S/ J. A. PARSONS
Dated: February 13, 1997 (J. A. Parsons)
Executive Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on February 13, 1997, by the following persons on behalf
of the registrant in the capacities indicated.
SIGNATURE TITLE
Principal Executive Officer
and Director
/S/ STEVEN R. ROGEL President and Chief Executive Officer
(Steven R. Rogel) and Director
Principal Financial Officer
/S/ J. A. PARSONS Executive Vice President and
(J. A. Parsons) Chief Financial Officer,
Secretary and Treasurer
Principal Accounting Officer
/S/ G. W. HAWLEY Vice President-Controller
(G. W. Hawley)
/S/ WILLIAM SWINDELLS Chairman of the Board
(William Swindells)
/S/ GERARD K. DRUMMOND Director
(Gerard K. Drummond)
/S/ KENNETH W. HERGENHAN Director
(Kenneth W. Hergenhan)
20
<PAGE>
/S/ C. W. KNODELL Director
(C. W. Knodell)
/S/ PAUL N. MCCRACKEN Director
(Paul N. McCracken)
/S/ G. JOSEPH PRENDERGAST Director
(G. Joseph Prendergast)
/S/ STUART J. SHELK, JR. Director
(Stuart J. Shelk, Jr.)
/S/ ROBERT M. SMELICK Director
(Robert M. Smelick)
/S/ SAMUEL C. WHEELER Director
(Samuel C. Wheeler)
/S/ BENJAMIN R. WHITELEY Director
(Benjamin R. Whiteley)
21
<PAGE>
Index to Consolidated Financial Statements
PAGE NO.
Independent Auditors' Report..................................... 23
Consolidated Balance Sheets as of December 31, 1996 and 1995..... 24
Consolidated Statements of Earnings for years ended
December 31, 1996, 1995 and 1994............................... 25
Consolidated Statements of Stockholders' Equity
for years ended December 31, 1996, 1995 and 1994............... 26
Consolidated Statements of Cash Flows for years ended
December 31, 1996, 1995 and 1994............................... 27
Supplementary Business Segment Information....................... 28
Selected Quarterly Financial Data................................ 29
Notes to Consolidated Financial Statements.......................30-40
22
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Willamette Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Willamette
Industries, Inc. and subsidiaries as of December 31, 1996 and 1995 and the
related consolidated statements of earnings, stockholders' equity and cash flows
for each of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Willamette
Industries, Inc. and subsidiaries at December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996 in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Portland, Oregon
February 13, 1997
23
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Consolidated Balance Sheets
===================================================================================================================
December 31, 1996 and 1995
(dollar amounts, except per share amounts, in thousands)
Assets 1996 1995
------ ------
Current assets:
<S> <C> <C>
Cash $ 22,222 17,961
Accounts receivable, less allowance for doubtful
accounts of $4,460 (1995 - $5,446) 272,709 314,070
Inventories (note 3) 365,949 391,358
Prepaid expenses and deposits on timber cutting contracts 38,454 51,448
Assets held for sale (notes 5 and 10) 160,218 -
-------------- ------------------
Total current assets 859,552 774,837
-------------- ------------------
Timber, timberlands and related facilities, net (note 10) 1,444,873 518,873
Property, plant and equipment, net (notes 9 and 10) 2,330,469 2,054,868
Other assets 85,787 64,977
-------------- ------------------
$ 4,720,681 3,413,555
============== ==================
Liabilities and Stockholders' Equity
Current liabilities:
Current installments on long-term debt (note 5) $ 4,512 29,598
Notes payable (note 5) 200,000 51,000
Accounts payable, includes book overdrafts of $48,005
(1995 - $58,158) 185,437 180,176
Accrued payroll and related expenses 72,661 65,335
Accrued interest 38,336 20,428
Other accrued expenses 52,365 44,506
Accrued income taxes (note 4) 17,107 24,536
-------------- ------------------
Total current liabilities 570,418 415,579
-------------- ------------------
Deferred income taxes (note 4) 374,246 330,142
Other liabilities 32,819 30,734
Long-term debt, net of current installments (note 5) 1,766,917 790,210
Stockholders' equity (note 7):
Preferred stock, cumulative, of $.50 par value. - -
Authorized 5,000,000 shares
Common stock of $.50 par value. Authorized 150,000,000
shares; issued 55,353,654 shares
(1995 - 55,223,706 shares) 27,677 27,612
Capital surplus 306,517 300,757
Retained earnings 1,642,087 1,518,521
-------------- ------------------
Total stockholders' equity 1,976,281 1,846,890
-------------- ------------------
$ 4,720,681 3,413,555
============== ==================
See accompanying notes to consolidated financial statements.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS
====================================================================================================================
Years ended December 31, 1996, 1995 and 1994
(dollar amounts, except per share amounts, in thousands)
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Net sales $ 3,425,173 3,873,575 3,007,949
Cost of sales 2,798,282 2,777,735 2,456,437
--------------- -------------- ------------------
Gross profit 626,891 1,095,840 551,512
Selling and administrative expense 231,862 201,784 184,699
--------------- -------------- ------------------
Operating earnings 395,029 894,056 366,813
Other income (expense) 3,861 798 (6,377)
--------------- -------------- ------------------
398,890 894,854 360,436
Interest expense 92,804 71,050 71,513
--------------- -------------- ------------------
Earnings before provision for income taxes 306,086 823,804 288,923
Provision for income taxes (note 4) 114,000 309,000 111,300
--------------- -------------- ------------------
Net earnings $ 192,086 514,804 177,623
=============== ============== ==================
Earnings per share $ 3.48 9.34 3.23
=============== ============== ==================
Weighted average number of shares
outstanding (in thousands) 55,268 55,146 55,019
=============== ============== ==================
Per share earnings are based upon the weighted average number of shares
outstanding.
See accompanying notes to consolidated financial statements.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
==============================================================================================================
Years ended December 31, 1996, 1995 and 1994
(dollar amounts, except per share amounts, in thousands)
1996 1995 1994
------ ------ -----
Common Stock:
<S> <C> <C> <C>
Balance at beginning of year $ 27,612 27,518 27,449
Shares issued for options exercised 65 119 69
Stock repurchased and cancelled - (25) -
----------------- ----------------- ------------------
Balance at end of year $ 27,677 27,612 27,518
================= ================= ==================
Capital Surplus:
Balance at beginning of year $ 300,757 293,756 288,646
Shares issued for options exercised 5,760 9,689 5,110
Stock repurchased and cancelled - (2,688) -
----------------- ----------------- ------------------
Balance at end of year $ 306,517 300,757 293,756
================= ================= ==================
Retained Earnings:
Balance at beginning of year $ 1,518,521 1,066,591 941,775
Net earnings 192,086 514,804 177,623
Less cash dividends on common stock
($1.24,$1.14, and $.96 per share in
1996, 1995 and 1994 respectively) (68,520) (62,874) (52,807)
----------------- ----------------- ------------------
Balance at end of year $ 1,642,087 1,518,521 1,066,591
================= ================= ==================
See accompanying notes to consolidated financial statements.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
=====================================================================================================================
Years ended December 31, 1996, 1995 and 1994
(dollar amounts in thousands)
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Net earnings $ 192,086 514,804 177,623
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation 246,638 218,580 192,378
Cost of fee timber harvested 43,381 25,061 19,810
Other amortization 12,918 5,524 5,064
Increase in deferred income taxes 40,717 98,425 33,422
Changes in working capital items:
Accounts receivable 56,549 (31,015) (75,894)
Inventories 49,575 (135,267) 12,972
Prepaid expenses and timber deposits 14,282 1,262 (5,265)
Accounts payable and accrued expenses 11,810 18,229 26,648
Accrued income taxes (8,692) 1,582 10,164
----------------- --------------- ---------------
Net cash from operating activities 659,264 717,185 396,922
----------------- --------------- ---------------
Cash flows from investing activities:
Proceeds from sale of equipment 1,781 2,000 2,415
Expenditures for property, plant and equipment (454,744) (411,985) (340,278)
Expenditures for timber and timberlands (16,991) (33,776) (45,676)
Expenditures for roads and reforestation (14,034) (7,762) (7,207)
Acquisitions (note 10) (1,019,274) - -
Assets held for sale (notes 5 and 10) (160,218) - -
Other (8,517) (8,602) 17,110
----------------- --------------- ---------------
Net cash from investing activities (1,671,997) (460,125) (373,636)
----------------- --------------- ---------------
Cash flows from financing activities:
Debt borrowing 1,245,226 79,010 29,000
Proceeds from sale of common stock 5,697 9,635 5,011
Repurchased common stock - (2,713) -
Cash dividends paid (68,520) (62,874) (52,807)
Payment on debt (165,409) (274,955) (1,235)
----------------- --------------- ---------------
Net cash from financing activities 1,016,994 (251,897) (20,031)
----------------- --------------- ---------------
Net change in cash 4,261 5,163 3,255
Cash at beginning of year 17,961 12,798 9,543
----------------- --------------- ---------------
Cash at end of year $ 22,222 17,961 12,798
================= =============== ===============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 74,896 72,930 70,791
================= =============== ===============
Income taxes $ 81,663 208,993 67,714
================= =============== ===============
See accompanying notes to consolidated financial statements.
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
SUPPLEMENTARY BUSINESS SEGMENT INFORMATION
================================================================================================================
(dollar amounts in thousands)
1996 % 1995 % 1994 % 1993 % 1992 %
------------------ ---------------- ---------------- ---------------- -----------------
Sales to outside customers:
Paper Group:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fabricated paper products $ 1,823,652 53 2,128,428 55 1,475,593 49 1,232,311 47 1,098,777 46
Pulp and paper 520,260 15 681,094 18 410,365 14 360,014 14 381,529 16
------------------ ---------------- ---------------- ---------------- -----------------
Total Paper Group 2,343,912 68 2,809,522 73 1,885,958 63 1,592,325 61 1,480,306 62
------------------ ---------------- ---------------- ---------------- -----------------
Building Materials Group:
Lumber 218,153 7 169,753 4 188,445 6 184,287 7 147,886 6
Plywood 378,959 11 428,707 11 441,397 15 425,387 16 397,332 17
Particleboard and MDF 277,375 8 272,336 7 292,153 10 234,123 9 186,973 8
Other wood products 206,774 6 193,257 5 199,996 6 186,115 7 159,899 7
------------------ ---------------- ---------------- ---------------- -----------------
Total Building Materials Group 1,081,261 32 1,064,053 27 1,121,991 37 1,029,912 39 892,090 38
------------------ ---------------- ---------------- ---------------- -----------------
Total net sales (1) $ 3,425,173 100 3,873,575 100 3,007,949 100 2,622,237 100 2,372,396 100
================== ================ ================ ================ =================
Intersegment sales at market value:
Building Materials Group $ 42,692 61,082 36,121 39,113 38,128
============= =========== =========== =========== ===========
Gross Profit (GP): GP% GP% GP% GP% GP%
------ ------ ------ ------ ------
Paper Group $ 475,945 20 855,054 30 260,830 14 184,553 12 219,354 15
Building Materials Group 150,946 14 240,786 23 290,682 26 246,236 24 145,339 16
------------------ ---------------- ---------------- ---------------- -----------------
$ 626,891 18 1,095,840 28 551,512 18 430,789 16 364,693 15
================== ================ ================ ================ =================
Contribution to earnings:
Paper Group $ 306,463 78 707,234 79 124,856 34 53,655 21 95,970 49
Building Materials Group 88,566 22 186,822 21 241,957 66 202,721 79 101,629 51
------------------ ---------------- ---------------- ---------------- -----------
Contribution to earnings(2) 395,029 100 894,056 100 366,813 100 256,376 100 197,599 100
================== ================ ================ ================ =================
Other income (expense) 3,861 798 (6,377) (3,918) (1,725)
Interest expense 92,804 71,050 71,513 63,290 66,422
Earnings before provision for
------------- ----------- ----------- ----------- -----------
income taxes $ 306,086 823,804 288,923 189,168 129,452
============= =========== =========== =========== ===========
Identifiable assets:
Paper Group $ 2,409,719 2,359,462 2,090,399 1,884,017 1,663,990
Building Materials Group 590,102 448,320 357,276 362,184 346,882
Timber, timberlands and
related facilities, net 1,444,873 518,873 509,075 483,308 448,721
Corporate 275,987 86,900 76,648 75,044 67,823
------------- ----------- ----------- ----------- -----------
$ 4,720,681 3,413,555 3,033,398 2,804,553 2,527,416
============= =========== =========== =========== ===========
(1) The Company is not dependent on any one significant customer or group of
customers. Approximately 95% of the Company's total output is sold
domestically.
(2) "Contribution to earnings" is defined to be that amount of earnings
generated before (a) other income (expense), (b) interest expense and (c)
provisions for income taxes.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
SELECTED QUARTERLY FINANCIAL DATA
==========================================================================================================
(Unaudited)(dollar amounts, except per share amounts, in thousands)
Net Earnings
Net Gross -------------------------------
1996 Sales Profit Amount Per Share
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1st Quarter.............. $ 866,112 187,946 73,370 1.33
2nd Quarter.............. 858,792 153,985 48,254 .87
3rd Quarter.............. 862,674 155,142 43,129 .78
4th Quarter.............. 837,595 129,818 27,333 .50
- ------------------------------------------------------------------------------------------------------------------
Total............... $ 3,425,173 626,891 192,086 3.48
==================================================================================================================
Net Earnings
Net Gross -------------------------------
1995 Sales Profit Amount Per Share
- ------------------------------------------------------------------------------------------------------------------
1st Quarter.............. $ 900,638 229,829 99,083 1.80
2nd Quarter.............. 1,003,547 288,989 134,347 2.44
3rd Quarter.............. 1,019,420 311,956 150,705 2.73
4th Quarter.............. 949,970 265,066 130,669 2.37
- ------------------------------------------------------------------------------------------------------------------
Total............... $ 3,873,575 1,095,840 514,804 9.34
==================================================================================================================
</TABLE>
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994 (dollar amounts, except per share amounts, in
thousands)
1. NATURE OF OPERATIONS
Willamette Industries, Inc. is a diversified, integrated forest products
company with 99 manufacturing plants in 22 states and in Ireland. The Company
produces kraft liner, corrugating medium, bag paper, fine paper, hardwood market
pulp, specialty printing papers, corrugated containers, business forms, cut
sheet paper, paper bags, inks, lumber, plywood, particleboard, medium density
fiberboard, oriented strand board, laminated beams, laminated veneer lumber,
wooden I-joists and other value-added wood products. The Company's principal
lines of business are paper products and building materials. Based on sales,
paper products represent approximately two-thirds of the Company's business with
the balance consisting of building materials. The primary market for the
Company's products is the United States domestic market and Europe for MDF
produced by Medite of Europe, a wholly owned subsidiary. Products are sold
through wholesalers and distributors as well as directly to end users.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The consolidated financial statements include the accounts of all
majority-owned subsidiaries. All material intercompany balances and
transactions have been eliminated upon consolidation.
(b) Inventories
Inventories are valued at the lower of cost or market. Cost is
determined on the last-in, first-out (LIFO) method for all major classes
of inventory. All other inventories are valued at average cost.
(c) Property, Plant and Equipment
Property, plant and equipment is carried at cost and includes
expenditures for new facilities and those which substantially increase
the useful lives of existing plants and equipment. Maintenance, repairs
and minor renewals are expensed as incurred. When properties are retired
or otherwise disposed of, the related cost and accumulated depreciation
are removed from the respective accounts and any profit or loss on
disposition is credited or charged to income. Depreciation is computed
using the straight-line method over the useful lives of the respective
assets. Leasehold improvements are amortized over the terms of the
respective leases.
(d) Timber, Timberlands and Related Facilities
These accounts are stated at their cost less the cost of fee timber
harvested and the amortization of logging roads. Both the cost of fee
timber harvested and amortization rates are determined
30
<PAGE>
with reference to costs and the related existing volume of timber
estimated to be recoverable.
The Company obtains a portion of its timber requirements from various
sources under timber harvesting contracts. The Company does not incur a
direct liability for, or ownership of, this timber until it has been
harvested; therefore, the timber is not recorded until cut.
(e) Income Taxes
The Company utilizes the liability method of accounting for income
taxes. This method requires that deferred tax liabilities and assets be
established based on the difference between the financial statement and
income tax bases of assets and liabilities using existing tax rates.
(f) Capitalized Interest
Interest is capitalized on funds borrowed during the construction
period on certain assets. Capitalized interest in 1996, 1995 and 1994
was $10,534, $6,187 and $9,294 respectively and is netted against
interest expense in the consolidated statements of earnings. Such
capitalized interest will be amortized over the depreciable life of the
related assets.
(g) Repurchase of Company Common Stock
The Oregon Business Corporation Act requires the Company to cancel
common stock shares repurchased by the Company. The excess of cost over
par value is charged to capital surplus.
(h) Use of Estimates
Generally accepted accounting principles require management to make
estimates and assumptions that affect the reported amount of assets,
liabilities and contingencies at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
3. INVENTORIES
The major components of inventories are as follows:
DECEMBER 31,
------------
1996 1995
---- ----
Finished product....................... $108,090 98,055
Work in progress....................... 6,182 7,712
Raw material........................... 175,480 212,651
Supplies............................... 76,197 72,940
-------- -------
$365,949 391,358
======== =======
31
<PAGE>
Valued at:
LIFO cost............................ $249,379 289,341
Average cost......................... 116,570 102,017
If current cost rather than LIFO cost had been used by the Company,
inventories would have been approximately $46,261 and $87,707 higher in 1996 and
1995 respectively.
4. INCOME TAXES
The provision for income taxes includes the following:
1996 1995 1994
------ ------ ------
Payable from taxable earnings .......... $ 73,283 261,975 77,478
Payable (reduction) due to AMT ......... - (51,400) 400
-------- -------- --------
Currently payable ...................... 73,283 210,575 77,878
Deferred taxes due to temporary
differences for:
Accelerated depreciation .......... 37,501 91,766 32,213
Other .......................... 3,216 6,659 1,209
-------- -------- --------
Total deferred ................. 40,717 98,425 33,422
-------- -------- --------
Total provision ................ $114,000 309,000 111,300
======== ======== ========
Federal income taxes ................... $ 97,000 265,500 95,000
State income taxes ..................... 17,000 43,500 16,300
-------- -------- --------
$114,000 309,000 111,300
======== ======== ========
The Company's deferred income tax liability is mainly due to depreciation.
Differences between the effective tax rate and the Federal statutory rate are
shown in the following table as a percentage of pretax income:
1996 1995 1994
---- ---- ----
Federal statutory rate ................ 35.0% 35.0% 35.0%
State income taxes, net of
Federal tax effect .................. 3.6 3.4 3.7
Other ................................. (1.4) (.9) (.2)
---- ---- ----
37.2% 37.5% 38.5%
==== ==== ====
The Company's consolidated Federal income tax returns for 1978 through 1991
have been examined by the Internal Revenue Service and while final settlement
has not been made, management believes that the Company has provided for all
deficiencies that ultimately might be assessed.
The Tax Reform Act of 1986 expanded the corporate alternative minimum tax
(AMT). Under this Act, the Company's tax liability is the greater of its regular
tax or the AMT. To the extent the Company's AMT liability exceeds its regular
tax liability, the AMT liability may be applied against future regular tax
liabilities. The Company utilized AMT credits of $51,400 in 1995. At December
31, 1996, the Company had no AMT credits.
32
<PAGE>
5. LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 31,
------------
1996 1995
---- ----
Notes payable to public:
7.00%, due in 1998....................... $100,000 100,000
9.625%, due in 2000...................... 150,000 150,000
7.75%, due in 2002....................... 100,000 100,000
9.125%, due in 2003...................... 50,000 50,000
9.00%, due in 2021....................... 150,000 150,000
7.35%, due in 20261...................... 200,000 -
7.85%, due in 2026....................... 200,000 -
(1) Holders have the option to demand repayment in 2006.
Medium-term notes, with interest
rates ranging from 5.66% to 7.30%,
due in varying amounts through 2013...... 150,000 150,000
Bank loans, with interest rates
averaging 5.79% and 6.38% due
in varying amounts through 2000.......... 705,766 25,000
Revenue bonds, with interest
rates averaging 4.69% and 5.11%,
due in varying amounts
through 2026............................. 121,749 89,265
Other long-term debt, with
interest rates averaging
6.50% and 8.03%, due in
varying amounts through 2006............. 3,914 5,543
--------- -------
1,931,429 819,808
Less: Current installments................. 4,512 29,598
Bank loans classified as Notes Payable 160,000 -
--------- -------
$1,766,917 790,210
========== =======
Principal payment requirements on the above debt for the four years subsequent
to 1997 are: 1998, $165,631; 1999, $4,247; 2000, $151,990; 2001, $240,240.
In connection with the acquisition discussed in note 10, the Company entered
into a Credit Agreement with a group of banks providing for a revolving loan and
a term loan. The revolving loan provides for borrowings up to $1.0 billion in
principal amount, matures on May 15, 2001 and at December 31, 1996 had an
outstanding balance of $300,000. The revolving loan also provides backup credit
for a Master Note program, which at December 31, 1996 had an
33
<PAGE>
outstanding balance of $285,000. The term loan matures on May 15, 1998 and at
December 31, 1996 had an outstanding balance of $100,000. At December 31, 1996,
$160,000 of the revolving and term loans are classified as "notes payable" and
correspond to the anticipated sale of the "assets held for sale" and concurrent
paydown of the term loan with the net proceeds therefrom as required by the
Credit Agreement.
The Company utilized short-term borrowings with a number of banks at various
times during 1996 and 1995 of which $40,000 was outstanding at December 31,
1996. The weighted average interest rate on short-term borrowings at December
31, 1996 and 1995 was 5.61% and 5.58% respectively. Other uncommitted lines of
credit are available. Interest is based upon prevailing short-term rates in
effect at the time of the transaction.
The fair value of the Company's long-term debt is estimated to be
approximately $1,834,395 based on the quoted market prices for the same or
similar issues or on the current rates offered to the Company for debt with the
same remaining maturities.
6. PENSION AND RETIREMENT PLANS
DEFINED BENEFIT PLANS
The Company contributes to multi-employer retirement plans at fixed payments
per hour for certain hourly employees. Substantially all other employees of the
Company are covered by noncontributory defined benefit plans. Under the salaried
plans, retirement benefits are based on both years of service and the highest
five consecutive years of compensation prior to retirement. Plans covering
hourly employees provide benefits of stated amounts for each year of service.
Total pension expense in 1996, 1995 and 1994 for all such plans was $10,628;
$6,189 and $9,580 respectively.
As advised by its actuaries, the Company makes such contributions to provide
not only for benefits attributed to service to date, but also for those benefits
expected to be earned in the future.
The net periodic pension cost for 1996, 1995 and 1994 included the following
components:
1996 1995 1994
---- ---- ----
Service cost of benefits earned
during the period .................. $ 13,968 10,278 11,061
Interest cost on projected
benefit contribution ............... 20,132 18,451 16,843
Actual return on assets .............. (50,017) (70,087) (2,071)
Net amortization and deferral ........ 21,538 43,114 (21,470)
-------- -------- --------
Net periodic pension cost ............ $ 5,621 1,756 4,363
======== ======== ========
34
<PAGE>
The following table sets forth the plans' funded status and amount recognized
in the Company's consolidated financial statements at December 31, 1996 and
1995:
DECEMBER 31
----------------------------------------------------------
1996 1995
--------------------------- -----------------------------
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
Benefits Exceed Assets Benefits Exceed Assets
-------- ------------- -------- -------------
Actuarial present
value of benefit
obligations:
Vested benefit
obligation $(221,382) (30,435) (211,992) (30,234)
======== ====== ======== =======
Accumulated
benefit
obligation $(233,562) (34,635) (215,243) (30,621)
======== ====== ======== =======
Projected
benefit
obligation $(276,637) (34,635) (255,903) (30,621)
Plan assets
at fair value 358,675 31,701 316,589 24,594
------- ------ -------- -------
Plan assets
greater (less)
than projected
benefit
obligation 82,038 (2,934) 60,686 (6,027)
Unrecognized
net (gain)loss (81,548) (2,528) ( 56,751) 96
Prior service
cost not yet
recognized in
net periodic
pension cost 5,628 3,806 5,900 3,535
Unrecognized
obligation,
net of
amortization (2,060) (111) ( 4,079) ( 181)
------ ----- ------- ------
Prepaid pension
cost (pension
liability)
recognized $ 4,058 (1,767) 5,756 (2,577)
====== ====== ======= ======
The weighted average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected benefit
obligation were 7.25% and 5.0% in 1996 versus 7.0% and 5.0% in 1995. The
expected long-term rate of return on assets was 9.0%. Substantially all plan
assets are invested in stocks, bonds and cash equivalents.
35
<PAGE>
CONTRIBUTORY PLANS
The Company covers all salaried employees and some hourly employees under
401(k) plans. The salaried plan allows employees to contribute up to 7% of their
salary (which the Company matches up to 6%). The amounts contributed by the
Company vary for the hourly plans. Total plan expenses were $10,430; $8,857 and
$8,925 in 1996, 1995 and 1994 respectively.
POSTRETIREMENT BENEFIT PLANS
The Company has a contributory postretirement health plan primarily covering
its salaried employees. Employees become eligible for these benefits if they
meet minimum age and service requirements.
The Accumulated Postretirement Benefit Obligation (APBO) as of December 31, 1996
and 1995 was:
1996 1995
---- ----
Retirees.......................... $ 12,410 13,001
Other fully eligible participants. 5,401 5,339
Other active participants......... 13,865 12,421
------ ------
31,676 30,761
Unrecognized loss................. (4,998) (5,056)
------ ------
APBO recognized in balance sheet.. $ 26,678 25,705
====== ======
Weighted average discount rate.... 7.25% 7.0%
===== ====
The components of net periodic postretirement expenses are as follows:
1996 1995 1994
---- ---- ----
Service cost benefits earned in period ........... $1,065 867 826
Interest cost on accumulated benefit obligation .. 2,103 2,043 1,811
Amortization of (gain)loss from earlier periods .. 166 71 60
------ ----- -----
Net expense ...................................... $3,334 2,981 2,697
====== ===== =====
Weighted average discount rate ................... 7.0% 8.0% 7.0%
====== ===== =====
For the year 1996, a 9.5% increase in the medical cost trend rate was
assumed. This rate decreases incrementally to an annual rate of 5% in the year
2000. A 1.0% increase in the medical trend rate would increase the APBO by
$3,000 and increase the net periodic postretirement expense by $390.
36
<PAGE>
7. STOCKHOLDERS' EQUITY
The Company's 1995 Long-Term Incentive Compensation Plan (the Plan), which
replaced an earlier plan, provides for grants of stock options to directors and
key employees and awards of stock appreciation rights (SARS) and restricted
shares of common stock to key employees. Options are granted at exercise prices
not less than the market value of the common stock on the date of grant. Options
generally become exercisable after one year in 33 1/3% increments per year and
expire ten years from the date of grant. The Company has reserved 2,750,000
shares for distribution under the Plan. A summary of stock option activity is as
follows:
Option Price
Shares Per Share
------ ---------
Outstanding December 31, 1993 .............. 1,126,803 $16.75-39.25
Granted ................................. 259,420 45.375
Exercised ............................... 143,045 16.75-39.25
Cancelled or surrendered ................ 10,367 16.75-45.375
--------- -------------
Outstanding December 31, 1994 .............. 1,232,811 16.75-45.375
Granted ................................. 299,990 51.50
Exercised ............................... 244,344 16.75-45.375
Cancelled or surrendered ................ 6,653 16.75-51.50
--------- -------------
Outstanding December 31, 1995 .............. 1,281,804 23.25-51.50
Granted ................................. 273,030 61.75
Exercised ............................... 125,747 23.25-51.50
Cancelled or surrendered ................ 4,740 23.25-61.75
--------- -------------
Outstanding December 31, 1996 .............. 1,424,347 24.25-61.75
========= =============
Shares exercisable ......................... 911,431 $24.25-61.75
========= =============
In addition, SARs which have been awarded and are outstanding to officers of
the Company amount to 53,030 shares, of these 7,340 with a basis of $24.25;
19,350 with a basis of $23.25 and 26,340 with a basis of $26.25 were available
for exercise at December 31, 1996. On exercise of the SAR, the holder receives
in cash an amount equal to the difference between the market price of the common
stock at the date the SAR is exercised and the basis of the SAR.
Restricted shares vest based upon continued employment, the attainment of
performance goals, or both, and are subject to transfer restrictions until
vested. The Company has awarded 44,794 restricted shares to certain officers at
no cost. These shares will vest in one-third annual increments beginning after
three years of continuous employment. At December 31, 1996, 9,612 restricted
shares had not yet vested and 35,182 shares had been either issued or cancelled.
Unearned compensation, representing the fair market value of the shares at the
date of issuance, is charged to income over the vesting period.
37
<PAGE>
The Company has a shareholder rights plan providing for the distribution of
rights to shareholders ten days after a person or group (an "acquiring person")
becomes the owner of 20% or more of the Company's common stock or makes a tender
offer or exchange offer which would result in the ownership of 30% or more of
the common stock. Once the rights are distributed, each right becomes
exercisable to purchase, for $175, 1/100th of a share of new series of Company
preferred stock, which 1/100th share is intended to equal one common share in
market value. Ten days after an acquiring person becomes the owner of 20% or
more of the Company's common stock, each right (other than rights held by the
acquiring person) becomes exercisable to purchase, for $175, common shares with
a market value of $350. The rights will expire in 2000 and may be redeemed at
$.01 per right any time prior to the tenth day after an acquiring person becomes
the owner of 20% or more of the common stock.
In August 1995, the Board of Directors of the Company authorized the
repurchase of up to $100,000 of the Company's common stock. During 1995, the
Company purchased 50,000 shares of its common stock for $2,713.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards #123 (SFAS #123) on accounting for stock-based compensation
that is effective for years beginning after December 15, 1995. As permitted by
SFAS #123, the Company has elected to continue accounting for stock-based
compensation under Accounting Principles Board Opinion #25. The Company has
determined the effects of adopting SFAS #123 would not have a material effect on
the financial statements.
8. BUSINESS SEGMENTS
The Company operates in two principal business segments: paper products and
building materials. Timber, timberlands and related facilities have not been
allocated to the two segments because they are managed to supply raw materials
to both segments. Information with respect to the sales, operating income and
identifiable assets of these segments is included in the five-year comparison on
page 28. Information with respect to depreciation, cost of fee timber harvested,
amortization and capital expenditures for the years ended December 31, 1996,
1995 and 1994 is shown below:
Depreciation,
Cost of Fee Timber Harvested
and Amortization
----------------
1996 1995 1994
---- ---- ----
Paper products...................... $194,816 177,888 152,983
Building materials.................. 64,740 46,216 44,459
Timber, timberlands and
related facilities................ 43,381 25,061 19,810
-------- ------- ------
$302,937 249,165 217,252
======== ======= =======
38
<PAGE>
Capital Expenditures
--------------------
1996 1995 1994
---- ---- ----
Paper products............. $342,268 300,145 298,931
Building materials......... 112,476 111,840 41,347
Timber, timberlands and
related facilities...... 31,025 41,538 52,883
------- ------- -------
$485,769 453,523 393,161
======= ======= =======
9. Property, Plant and Equipment
Property, plant and equipment accounts are summarized as follows:
Principal December 31
range of ------------------
useful lives 1996 1995
------------ ---- ----
Land .............................. - $ 37,270 32,680
Building materials
manufacturing facilities ....... 10 - 20 831,464 534,646
Paper products
manufacturing and
converting facilities .......... 10 - 30 2,889,067 2,726,554
Office equipment .................. 3 - 10 76,870 67,504
Leasehold improvements ............ life of lease 6,300 6,286
Construction in progress .......... - 256,732 181,581
---------- ----------
4,097,703 3,549,251
Accumulated depreciation .......... 1,767,234 1,494,383
---------- ----------
$2,330,469 2,054,868
========== ==========
10. ACQUISITIONS
In May, 1996, the Company acquired approximately 1,088,000 acres of
timberland, a sawmill and related assets in Louisiana and the Pacific Northwest
from Cavenham Forest Industries, Inc., an affiliate of Hanson PLC. (the
"Cavenham acquisition"). The purchase price for the properties was $1.588
billion and was funded through cash and $1.1 billion of borrowing under a Credit
Agreement between the Company and a group of banks providing for a revolving
loan and a term loan. Simultaneous with the purchase, the Company agreed to sell
542,000 acres of the acquired property to third parties for an aggregate price
of $641 million. Of that acreage, approximately 56,000 acres in Oregon was to be
conveyed to a third party for approximately $198 million plus certain expenses
incurred by the Company. At December 31, 1996, approximately $160 million of the
Oregon timberlands remain to be conveyed to a third party and is reflected
herein as "assets held for sale." After giving effect to the sales to third
parties, the Company acquired 546,000 acres of timberland, a sawmill and related
assets for $947 million, plus certain closing costs of approximately $10
million.
39
<PAGE>
In November, 1996, the Company purchased the capital stock of Medite of
Europe Limited ("Medite") for $61.5 million in cash plus certain closing costs.
Medite produces medium density fiberboard at its plant in Clonmel, Ireland.
Both acquisitions were accounted for as purchases. Supplemental
information concerning the two acquisitions follows:
Cavenham Medite
-------- ------
Cash purchase price $957,274 62,000
======== ======
Purchase price was allocated to:
Current assets $ - 29,913
Timber and timberlands 950,380 -
Property, plant and equipment 8,612 60,569
Debt assumed - (20,804)
Other assets and liabilities (1,718) (7,678)
-------- ------
$957,274 62,000
======== ======
11. CONTINGENCIES
There are various lawsuits, claims and environmental matters pending against
the Company. While any proceeding or litigation has an element of uncertainty,
management believes that the outcome of any lawsuit or claim that is pending or
threatened, or all of them combined, will not have a material adverse effect on
the Company's financial condition or operations.
40
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
2.1 Asset sale, purchase and transfer agreement dated March 12, 1996,
between Hanson Natural Resources Company, Cavenham Energy Resources
Inc., Cavenham Forest Industries Inc. and the registrant (previously
filed). Incorporated by reference from Exhibit 2.1 of the
registrant's current report on Form 8-K/A, amendment No. 1, dated
May 15, 1996.
2.2 Asset sale, purchase and transfer agreement dated April 11, 1996,
between the registrant and Crown Pacific Limited Partnership
(previously filed). Incorporated by reference from Exhibit 2.2 of
the registrant's current report on Form 8-K/A, amendment No. 1,
dated May 15, 1996.
2.3 Asset sale, purchase and transfer agreement dated April 23, 1996,
between the registrant and Temple-Inland Forest Products Corporation
(previously filed). Incorporated by reference from Exhibit 2.3 of
the registrant's current report on Form 8-K/A, amendment No. 1,
dated May 15, 1996.
2.4 Asset sale, purchase and transfer agreement dated April 26, 1996,
between the registrant and John Hancock Mutual Life Insurance
Company, together with Addendum No. 1 thereto dated May 13, 1996
(previously filed). Incorporated by reference from Exhibit 2.4 of
the registrant's current report on Form 8-K/A, amendment No. 1,
dated May 15, 1996.
2.5 Management agreement dated May 15, 1996, among the registrant, John
Hancock Mutual Life Insurance Company, Willamette Columbia Timber
Co. and Hancock Natural Resource Group, Inc. (previously filed).
Incorporated by reference from Exhibit 2.5 of the registrant's
current report on Form 8-K/A, amendment No. 1, dated May 15, 1996.
2.6 Right of first offer agreement dated May 15, 1996, between the
registrant and John Hancock Mutual Life Insurance Company
(previously filed). Incorporated by reference from Exhibit 2.6 of
the registrant's current report on Form 8-K/A, amendment No. 1,
dated May 15, 1996.
2.7 Timber supply agreement dated May 15, 1996, between the registrant
and John Hancock Mutual Life Insurance Company (previously filed).
Incorporated by reference from Exhibit 2.7 of the registrant's
current report on Form 8-K/A, amendment No. 1, dated May 15, 1996.
41
<PAGE>
3A. Third Restated Articles of Incorporation of the registrant, as
amended. Incorporated by reference from Exhibit 3A of the
registrant's quarterly report on Form 10-Q for the quarter ended
March 31, 1996. [16]
3B. Bylaws of the registrant as amended through August 1, 1996.
Incorporated by reference from Exhibit 3.2 of the registrant's
quarterly report on Form 10-Q for the quarter ended June 30, 1996.
[27]
4A. Indenture dated as of March 15, 1983, between registrant and The
Chase Manhattan Bank. Incorporated by reference from Exhibit 4A of
the registration statement on Form S-3 effective December 13, 1985
(File No. 33-1876). [89]
4A1. Form of Note for the series of 9.625% Notes due 2000. [4]
4A2. Form of Note for the series of 9.125% Notes due 2003. [4]
4A3. Form of Note for the series of 9.0% Debentures due 2021. [4]
4A4. Terms of the series of 7.75% Notes due 2002 and form of Note for
such series. Incorporated by reference from Exhibit 4A8 of the
registrant's annual report on Form 10-K for the year ended December
31, 1992. [5]
4A5. Form of Note for the series of 7.0% Notes due 1998 in the aggregate
principal amount of $100,000,000. Incorporated by reference from
Exhibit 4D of the registrant's current report on Form 8-K dated
December 29, 1992. [5]
4B. Indenture dated as of January 30, 1993 between the registrant and
The Chase Manhattan Bank. Incorporated by reference from Exhibit 4A
of the registration statement on Form S-3 effective March 1, 1993
(File No. 33-58044) ("1993 Form S-3"). [82]
4B1. Form of Medium-Term Note (fixed rate) for the Medium-Term Notes,
Series A. Incorporated by reference from Exhibit 4D to the 1993 Form
S-3. [2]
4B2. Terms of the Medium-Term Notes, Series A, due 1998-2013.
Incorporated by reference from Exhibit 4B2 to the registrant's
annual report on Form 10-K for the year ended December 31, 1993. [1]
4B3. Form of Note for series of 7.35% Debentures and 7.85% Debentures due
2026 in the aggregate principal amount of $200,000,000 for each
series. [6]
42
<PAGE>
4C. Credit Agreement dated as of May 10, 1996, among the registrant,
Bank of America National Trust and Savings Association, Abn Amro
Bank N.V., Morgan Guaranty Trust Company of New York, Nationsbank,
N.A., Wachovia Bank of Georgia, N.A., and other financial
institutions parties thereto, authorized $1,000,000,000.
Incorporated by reference from Exhibit 4 of the registrant's current
report on Form 8-K/A, amendment No. 1, dated May 15, 1996.
9. Not applicable.
10A. Willamette Industries, Inc. Deferred Compensation Plan for
Directors.* [3]
10B. Willamette Industries, Inc. 1986 Stock Option and Stock Appreciation
Rights Plan, as amended.* [8]
10C. Willamette Industries, Inc. Retirement Plan for Nonemployee
Directors.* [2]
10D. Willamette Industries Inc. Severance Agreement with Key Management
Group.* [13]
10E. Willamette Industries 1993 Deferred Compensation Plan. Incorporated
by reference from Exhibit 10E to the registrant's annual report on
Form 10-K for the year ended December 31, 1993.* [16]
10F. Willamette Industries 1995 Long-Term Incentive Compensation Plan.
Incorporated by reference from Exhibit 10F of the registrant's
annual report on Form 10-K for the year ended December 31, 1994.*
[12]
10G. Consulting agreement dated October 1, 1995 between the registrant
and William Swindells. Incorporated by reference from Exhibit 10G of
the registrant's annual report on Form 10-K for the year ended
December 31, 1996.* [4]
10H. Preferred Stock Purchase Rights of Willamette Industries, Inc.
Incorporated by reference from Exhibit 2 of the registrant's Form
8-A filed February 26, 1990. [61]
11. Computation of per share earnings is obtainable from the financial
statements filed with this annual report on Form 10-K.
12. Computation of Ratio of Earnings to Fixed Charges. [1]
13. Not applicable.
43
<PAGE>
16. Not applicable.
18. Not applicable.
21. Omitted because the registrant's subsidiaries considered in the
aggregate as a single subsidiary do not constitute a significant
subsidiary.
22. Not applicable.
23. Consent of Independent Auditors to the incorporation by reference of
their report dated February 13, 1997, in the registrant's
registration statements on Form S-8. [1]
24. Not applicable.
27. Financial Data Schedule. [1]
28.-98. Not applicable.
99. Description of the registrant's common stock, as amended.
Incorporated by reference from exhibit 99 of the registrant's
quarterly report on Form 10-Q for the quarter ended March 31, 1996.
[4]
The registrant will furnish a copy of any exhibit to this annual
report on Form 10-K to any security holder for a fee of $0.30 per page to cover
the registrant's expenses in furnishing the copy. The number of pages of each
exhibit is indicated in brackets at the end of each exhibit description.
- ------------------------
*Management contract or compensatory plan or arrangement.
Note: Certain instruments with respect to the long-term debt of the
registrant are not filed herewith where the total amount of
securities authorized thereunder does not exceed 10 percent of the
total assets of the registrant and its subsidiaries on a
consolidated basis. The registrant agrees to furnish copies of such
instruments to the Commission on request.
44
WILLAMETTE INDUSTRIES, INC.
9-5/8% NOTE DUE 2000
WILLAMETTE INDUSTRIES, INC., an Oregon corporation (herein
called the "Company," which term includes any successor corporation under the
Indenture referred to below), for value received hereby promises to pay to:
___________________________ or registered assigns, the principal sum of
________________________ dollars on August 15, 2000, and to pay interest thereon
from August 15, 1990, or from the most recent Interest Payment Date to which
Interest has been paid or duly provided for semiannually on February 15 and
August 15 in each year commencing February 15, 1991, at the rate of 9__% per
annum (computed on the basis of a 360-day year of twelve 30-day months) until
the principal hereof is paid or made available for payment. The Interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in said Indenture, be paid to the Person in whose name this
Note (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest, which shall be the
February 1 or August 1 (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Any such Interest not so punctually paid
or duly provided for will forthwith cease to be payable to the holder on such
Regular Record Date and may either be paid to the person in whose name this Note
(or one or more Predecessor Securities) is registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest to be fixed
by the Trustee, notice whereof shall be given to the holder of this Note not
less than ten days prior to such Special Record Date, or be paid at any time in
any other lawful manner not inconsistent with the requirements of any securities
exchange on which the Notes may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said Indenture.
Payment of the principal of and Interest on this Note will be
made at the office or agency of the Company maintained for that purpose in the
Borough of Manhattan, the City of New York, New York, in such coin or currency
of the United States as at the time of payment is legal tender for payment of
public and private debts, provided, however, that at the option of the Company
payment of Interest may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
- 1 -
<PAGE>
Unless the certificate of authentication hereon has been
manually executed by the Trustee or Authenticating Agent referred to in said
Indenture, this Note shall not be entitled to any benefit under the Indenture or
be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this Note to be
duly executed under its corporate seal.
DATED:
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein
issued under the within-mentioned Indenture.
THE CHASE MANHATTAN BANK
(National Association), as Trustee
By
Authorized Officer
Attest: WILLAMETTE INDUSTRIES, INC.
By
President
Secretary
- 2 -
<PAGE>
WILLAMETTE INDUSTRIES, INC.
9-5/8% NOTE DUE 2000
This Note is one of a duly authorized issue of Securities of
the Company, issued and to be issued in one or more series under an Indenture,
dated as of March 15, 1983 (herein called the "Indenture"), between the Company
and The Chase Manhattan Bank (National Association), as trustee (herein called
the "Trustee," which term includes any successor trustee under the Indenture),
to which Indenture and all Indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Note is one of the series of the Securities
designated as the 9-5/8% Notes Due 2000 (herein called the "Notes"), limited in
aggregate principal amount to $150,000,000.
The Notes may not be redeemed prior to Stated Maturity.
If an Event of Default with respect to the Notes shall occur
and be continuing, the principal of the Notes may be declared due and payable in
the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities of
each series under the Indenture to be affected at any time by the Company and
the Trustee with the consent of the Holders of a majority in principal amount of
the Securities at the time Outstanding of each series to be affected. The
Indenture also contains provisions permitting the Holders of a majority in
principal amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Note shall be conclusive and binding upon such Holder and upon
all future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Note is registrable in the
Security Register upon surrender of this Note for registration of transfer at
the office or agency of the Company in any place where the principal of and
Interest on this Note are payable, duly endorsed by, or accompanied by a
- 1 -
<PAGE>
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Notes of authorized
denominations and for the same aggregate principal amount will be issued to the
designated transferee or transferees.
The Notes are issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple of thereof. As provided in
the Indenture and subject to certain limitations therein set forth, the Notes
are exchangeable for a like aggregate principal amount of Notes of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Note is registered as the owner hereof
for all purposes, whether or not this Note be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Note which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OR
ASSIGNEE:
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address, including zip code of assignee)
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing attorney.
- --------------------------------------------------------------------------------
to transfer said Note on the books of the Company, with full power of
substitution in the premises.
Dated:
--------------------------------------------------------------------------
-------------------------------------------------------
NOTICE: The signature to this assignment must respond
with the name as it appears upon the face of the within
Note in every particular, without alteration or
enlargement or any change whatever.
- 2 -
WILLAMETTE INDUSTRIES, INC.
9 1/8% NOTE DUE FEBRUARY 15, 2003
WILLAMETTE INDUSTRIES, INC., an Oregon corporation (herein
called the "Company," which term includes any successor corporation under the
Indenture referred to below), for value received hereby promises to pay to:
___________________________ or registered assigns, the principal sum of
________________________ dollars on February 15, 2003, and to pay interest
thereon from February 11, 1991, or from the most recent Interest Payment Date to
which interest has been paid or duly provided for semiannually on February 15
and August 15 in each year commencing August 15, 1991, at the rate of 9 1/8% per
annum (computed on the basis of a 360-day year of twelve 30-day months) until
the principal hereof is paid or made available for payment. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in said Indenture, be paid to the Person in whose name this
Note (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest, which shall be the
February 1 or August 1 (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Any such interest not so punctually paid
or duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the person in whose name this Note
(or one or more Predecessor Securities) is registered at the close of business
on a Special Record Date for the payment of such Defaulted interest to be fixed
by the Trustee, notice whereof shall be given to the Holder of this Note not
less than ten days prior to such Special Record Date, or be paid at any time in
any other lawful manner not inconsistent with the requirements of any securities
exchange on which the Notes may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said Indenture.
Payment of the principal of and interest on this Note will be
made at the office or agency of the Company maintained for that purpose in the
Borough of Manhattan, the City of New York, New York, in such coin or currency
of the United States as at the time of payment is legal tender for payment of
public and private debts, provided, however, that at the option of the Company
payment of interest may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
- 1 -
<PAGE>
Unless the certificate of authentication hereon has been
manually executed by the Trustee or Authenticating Agent referred to in said
Indenture, this Note shall not be entitled to any benefit under the Indenture or
be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this Note to be
duly executed under its corporate seal.
DATED:
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein
issued under the within-mentioned Indenture.
THE CHASE MANHATTAN BANK
(National Association), as Trustee
By
Authorized Officer
WILLAMETTE INDUSTRIES, INC.
Attest: By
(Facsimile Signature) (Facsimile Signature)
Facsimile Seal
President Secretary
- 2 -
<PAGE>
This Note is one of a duly authorized issue of Securities of
the Company, issued and to be issued in one or more series under an Indenture,
dated as of March 15, 1983 (herein called the "Indenture"), between the Company
and The Chase Manhattan Bank (National Association), as trustee (herein called
the "Trustee," which term includes any successor trustee under the Indenture),
to which Indenture and all Indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Note is one of the series of the Securities
designated as the 9 1/8% Notes Due February 15, 2003 (herein called the
"Notes"), limited in aggregate principal amount to $50,000,000.
The Notes may not be redeemed prior to Stated Maturity.
If an Event of Default with respect to the Notes shall occur
and be continuing, the principal of the Notes may be declared due and payable in
the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities of
each series under the Indenture to be affected at any time by the Company and
the Trustee with the consent of the Holders of a majority in principal amount of
the Securities at the time Outstanding of each series to be affected. The
Indenture also contains provisions permitting the Holders of a majority in
principal amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Note shall be conclusive and binding upon such Holder and upon
all future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Note is registrable in the
Security Register upon surrender of this Note for registration of transfer at
the office or agency of the Company in any place where the principal of and
interest on this Note are payable, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Notes of authorized denominations and for
the same aggregate principal amount will be issued to the designated transferee
or transferees.
- 3 -
<PAGE>
The Notes are issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple of thereof. As provided in
the Indenture and subject to certain limitations therein set forth, the Notes
are exchangeable for a like aggregate principal amount of Notes of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Note is registered as the owner hereof
for all purposes, whether or not this Note be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Note which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OR
ASSIGNEE:
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address, including zip code of assignee)
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing attorney.
- --------------------------------------------------------------------------------
to transfer said Note on the books of the Company, with full power of
substitution in the premises.
Dated:
--------------------------------------------------------------------------
-------------------------------------------------------
NOTICE: The signature to this assignment must respond
with the name as it appears upon the face of the within
Note in every particular, without alteration or
enlargement or any change whatever.
- 2 -
WILLAMETTE INDUSTRIES, INC.
9% NOTE DUE OCTOBER 1, 2021
WILLAMETTE INDUSTRIES, INC., an Oregon corporation (herein
called "Company," which term includes any successor corporation under the
Indenture referred to on the reverse hereof), for value received hereby promises
to pay to: ___________________ _______________________________________, or
registered assigns, the principal sum of ________________ Dollars, on October 1,
2021, and to pay interest thereon from October 1, 1991, or from the most recent
Interest Payment Date to which interest has been paid or duly provided for
semiannually on April 1 and October 1 in each year commencing April 1, 1992, at
the rate of 9% per annum (computed on the basis of a 360-day year of twelve
30-day months) until the principal hereof is paid or made available for payment.
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in said Indenture, be paid to the Person
in whose name the Debenture (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the March 15 or September 15 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Debenture (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holder of this Debenture not less than ten days prior to such Special
Record Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Debentures may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture.
Payment of the principal of and interest on the Debenture will
be made at the office or agency of the Company maintained for that purpose in
the Borough of Manhattan, the City of New York, New York, in such coin or
currency of the United States as at the time of payment is legal tender for
payment of public and private debts, provided, however, that at the option of
the Company payment of interest may be made by check mailed to the address of
the Person entitled thereto as such address shall appear in the Security
Register.
Reference is hereby made to the further provisions of this
Debenture set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
manually executed by the Trustee or Authenticating Agent referred to in said
Indenture, this Debenture shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this Debenture to
be duly executed under its corporate seal.
- 1 -
<PAGE>
DATED:
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein
issued under the within-mentioned Indenture.
THE CHASE MANHATTAN BANK
(National Association), as Trustee
By
Authorized Officer
WILLAMETTE INDUSTRIES, INC.
By
Chairman of the Board and Chief
Executive Officer
Attest:
Secretary
- 2 -
<PAGE>
This Debenture is one of a duly authorized issue of Securities
of the Company, issued and to be issued in one or more series under an
Indenture, dated as of March 15, 1983 (herein called the "Indenture"), between
the Company and The Chase Manhattan Bank (National Association), as trustee
(herein called the "Trustee," which term includes any successor trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, the Trustee and the
Holders of the Securities and of the terms upon which the Securities are, and
are to be, authenticated and delivered. This Debenture is one of the series of
the Securities designated as the 9% Debentures due October 1, 2021 (herein
called the "Debentures"), limited in aggregate principal amount to $150,000,000.
The Debentures may not be redeemed prior to Stated Maturity.
If an Event of Default with respect to the Debentures shall
occur and be continuing, the principal of all the Debentures may be declared due
and payable in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities of
each series under the Indenture to be affected at any time by the Company and
the Trustee with the consent of the Holders of a majority in principal amount of
the Securities at the time Outstanding of each series to be affected. The
Indenture also contains provisions permitting the Holders of a majority in
principal amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Debenture shall be conclusive and binding upon such Holder and
upon all future Holders of this Debenture and of any Debenture issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Debenture.
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Debenture at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Debenture is registrable in
the Security Register upon surrender of this Debenture for registration of
transfer at the office or agency of the Company in any place where the principal
of and interest on this Debenture are payable, duly endorsed by, or accompanied
by a written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Debentures of authorized
denominations and for the same aggregate principal amount will be issued to the
designated transferee or transferees.
- 3 -
<PAGE>
The Debentures are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
the Debentures are exchangeable for a like aggregate principal amount of
Debentures of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Debenture for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Debenture is registered as the owner
hereof for all purposes, whether or not this Debenture be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
All terms used in this Debenture which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OR
ASSIGNEE:
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address, including zip code of assignee)
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing attorney.
- --------------------------------------------------------------------------------
to transfer said Note on the books of the Company, with full power of
substitution in the premises.
Dated:
--------------------------------------------------------------------------
-------------------------------------------------------
NOTICE: The signature to this assignment must respond
with the name as it appears upon the face of the within
Note in every particular, without alteration or
enlargement or any change whatever.
- 2 -
*[Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Company or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or to such
other name as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.]
NUMBER $
CUSIP
WILLAMETTE INDUSTRIES, INC.
% DEBENTURE DUE 20
WILLAMETTE INDUSTRIES, INC., an Oregon corporation (herein
called the "Company," which term includes any successor corporation under the
Indenture referred to herein), for value received hereby promises to pay to:
or registered assigns, the principal sum of DOLLARS on , 20 , and to pay
interest thereon from , 19 , or from the most recent Interest Payment Date to
which interest has been paid or duly provided for semiannually on and in each
year commencing , 19__, at the rate of % per annum (computed on the basis of a
360-day year of twelve 30-day months) until the principal hereof is paid or made
available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in said Indenture,
be paid to the Person in whose name this Debenture (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the or (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date. Any such interest not so
punctually paid or duly provided for will forthwith cease to be payable to the
Holder on such Regular Record Date and may either be paid to the Person in whose
name this Debenture (or one or more Predecessor Securities) is registered at the
close of business on a Special Record Date for the payment of such Defaulted
Interest to be fixed by the Trustee, notice whereof shall be given to the Holder
of this Debenture not less than ten days prior to such Special Record Date, or
be paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Debentures may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in said Indenture.
Payment of the principal of and interest on this Debenture
will be made at the office or agency of the Company maintained for that purpose
in the Borough of Manhattan, the City of New York, New York, in such coin or
currency of the United States as at the time of payment is legal tender for
payment of public and private debts, provided, however, that at the option of
the Company payment of interest may be made by check mailed to the address of
the Person entitled thereto as such address shall appear in the Security
Register.
Reference is hereby made to the further provisions of this
Debenture set forth on the succeeding pages hereof, which further provisions
shall for all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
manually executed by the Trustee or Authenticating Agent referred to in said
Indenture, this Debenture shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this Debenture to
be duly executed under its corporate seal.
<TABLE>
<CAPTION>
<S> <C>
DATED: WILLAMETTE INDUSTRIES, INC.
CERTIFICATE OF AUTHENTICATION BY
THIS IS ONE OF THE SECURITIES OF THE SERIES DESIGNATED HEREIN
REFERRED TO IN THE WITHIN MENTIONED INDENTURE. PRESIDENT
THE CHASE MANHATTAN BANK [GRAPHIC OMITTED]
(NATIONAL ASSOCIATION) AS TRUSTEE ATTEST:
SECRETARY
</TABLE>
BY
AUTHORIZED OFFICER
* The bracketed legend will appear only on certificates issued to the specified
holder.
- 1 -
<PAGE>
This Debenture is one of a duly authorized issue of Securities of
the Company, issued and to be issued in one or more series under an Indenture,
dated as of January 30, 1993 (herein called the "Indenture"), between the
Company and The Chase Manhattan Bank (National Association) (herein called the
"Trustee," which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Debenture is one of the series of the
Securities designated as the % Debentures Due 20 (herein called the
"Debentures"), limited in aggregate principal amount to $ .
[Subject to and upon compliance with the provisions set forth
herein, each Holder shall have the right, at such Holder's option, to require
the Company to repay, and if such right is exercised the Company shall repay,
all or any part of such Holder's Debentures on _____________, 20__ (the
"Repayment Date"), at a price (the "Repayment Price") equal to 100% of the
principal amount thereof, together with accrued interest to _____________,
20__.]
[To exercise such right, the Holder of this Debenture shall
surrender this Debenture, at the office or agency of the Company in New York,
New York during the period beginning on _____________, 20__, and ending at 5
p.m. (New York City time) on _____________, 20__ (or, if _____________, 20__, is
not a Business Day, the next succeeding Business Day), with the form entitled
"Option to Elect Repayment on _____________, 20__ on the last page hereof duly
completed. Any such notice received by the Company during the period beginning
_____________, 20__, and ending at 5 p.m. (New York City time) on _____________,
20__ (or, if _____________, 20__, is not a Business Day, the next succeeding
Business Day) shall be irrevocable. If the Repayment Date falls between any
Regular Record Date and the next succeeding Interest Payment Date, this
Debenture must be accompanied by payment from the Holder of an amount equal to
the interest thereon which the registered Holder thereof is to receive on such
Interest Payment Date. The repayment option may be exercised by any Holder for
less than the entire principal amount of this Debenture, provided that the
principal amount with respect to which such right is exercised must be 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 this Debenture
for repayment shall be determined by the Company, whose determination shall be
final and binding.]
[Failure by the Company to repay the Debentures when required as
described in the preceding two paragraphs will result in an Event of Default
under the Indenture.]
If an Event of Default with respect to the Debentures shall occur
and be continuing, the principal of all the Debentures may be declared due and
payable in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities of
each series under the Indenture to be affected at any time by the Company and
the Trustee with the consent of the Holders of a majority in principal amount of
the Securities at the time Outstanding of each series to be affected. The
Indenture also contains provisions permitting the Holders of a majority in
principal amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Debenture shall be conclusive and binding upon such Holder and
upon all future Holders of this Debenture and of any Debenture issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Debenture.
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Debenture at the times, place and rate, and in the coin or
currency, herein prescribed; subject, however, to the provisions for the
discharge of the Company from its obligation under the Debentures upon
satisfaction of the conditions set forth in the Indenture.
As provided in the Indenture, the Company may elect to defease and
(a) be discharged from all obligations in respect of the Debentures (except for
certain obligations to register the transfer or exchange of the Debentures, to
replace mutilated, destroyed or stolen Debentures, to maintain paying agencies
and to hold moneys in trust) or (b) be released from its obligations with
respect to the Debentures under certain restrictive covenants of the Indenture,
in each case if the Company deposits, in trust, with the Trustee money and/or
Government Obligations, which through the payment of interest and principal
thereon in accordance with their terms will provide money sufficient, without
reinvestment, to pay the principal of and interest on the Debentures. The
Indenture provides that such a trust may only be established if (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 the Debentures shall have
occurred and be continuing, (ii) 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, and (iii) certain other
conditions are satisfied.
[This Debenture may not be redeemed at the option of the Company
prior to Stated Maturity.]
[or]
[This Debenture may be redeemed at the option of the Company on
any date on or after [DATE] upon mailing a notice of such redemption not less
than 30 nor more than 60 days prior to the date fixed for redemption to the
Holder of this Debenture at such Holder's address appearing in the Security
Register, all as provided in the Indenture, at a Redemption Price equal to ____%
of the principal amount, together with accrued interest to the date fixed for
redemption. As provided in the Indenture, if less than all of the Debentures are
to be redeemed, the Trustee shall select by such method as the Trustee shall
deem fair and appropriate, from Debentures that are subject to redemption
pursuant to the terms thereof, the Debenture or Debentures, or portion or
portions thereof, to be redeemed.]
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Debenture is registrable in the Security
Register upon surrender of this Debenture for registration of transfer at the
office or agency of the
- 2 -
<PAGE>
Company in any place where the principal of and interest on this Debenture are
payable, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Security Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Debentures of authorized denominations, of like tenor and of like
aggregate principal amount will be issued to the designated transferee or
transferees.
The Debentures are issuable only in registered form without
coupons in denominations of $1,000 and any amount in excess thereof which is an
integral multiple of $1,000. As provided in the Indenture and subject to certain
limitations therein set forth, at the option of the Holder, this Debenture may
be exchanged for other Debentures of any authorized denomination, of like tenor
and of like aggregate principal amount, upon surrender of this Debenture.
This Debenture is a Global Debenture and shall be exchangeable for
Debentures registered in the name of, and a transfer of this Global Debenture
may be registered to, any Person other than the Depository for this Global
Debenture or its nominee only if permitted by the Indenture.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
All terms used in this Debenture which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
- 3 -
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OR
ASSIGNEE:
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address, including zip code of assignee)
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing attorney.
- --------------------------------------------------------------------------------
to transfer said Note on the books of the Company, with full power of
substitution in the premises.
Dated:
--------------------------------------------------------------------------
-------------------------------------------------------
NOTICE: The signature to this assignment must respond
with the name as it appears upon the face of the within
Note in every particular, without alteration or
enlargement or any change whatever.
- 2 -
WILLAMETTE INDUSTRIES, INC.
DEFERRED COMPENSATION PLAN FOR DIRECTORS
TERMS AND PROVISIONS
1. PURPOSE OF PLAN
The purpose of the Willamette Industries, Inc., Deferred
Compensation Plan for Directors (the "Plan") is to provide those directors of
Willamette Industries, Inc. ("Company"), entitled to compensation by Company for
their services as directors ("Eligible Directors") with a plan in compliance
with applicable federal tax rules whereby one or more Eligible Directors may
elect to defer receipt of such compensation for such period of years, not
exceeding ten years, commencing after the Eligible Director ceases being a
director of Company or retires from his or her principal occupation, as the
Eligible Director may elect.
2. ELECTION TO PARTICIPATE IN THE PLAN
Any Eligible Director may at any time elect to participate in the
Plan with respect to compensation to be earned thereafter as an Eligible
Director by executing and delivering to Company a written election to defer
receipt of all or a specified portion of either or both of his or her annual
fees and meeting fees to be earned for the balance of the calendar year
thereafter and for succeeding years.
3. TERMINATION OF PARTICIPATION IN THE PLAN
Any Eligible Director having previously elected to participate in
the Plan may at any later date elect to terminate his or her participation in
the Plan with respect to compensation as a director to be earned thereafter by
executing and delivering to Company a notice to that effect, in which event the
amount accumulated pursuant to the Plan prior to notice of his or her election
to terminate will continue to be subject to the provisions of the Plan.
4. DIRECTORS ELECTED TO FILL VACANCIES
Any Eligible Director who was elected to fill a vacancy on the Board
of Directors, and who was not an Eligible Director at the end of the last
calendar year, may elect, prior to actual receipt of any fees to which he or she
may be entitled, to participate in the Plan for the balance of the calendar year
after his or her election as well as for succeeding years.
- 1 -
<PAGE>
5. INTEREST ON AMOUNTS DEFERRED UNDER THE PLAN
Interest will be accrued on all amounts deferred under the Plan at a
rate equal to the three months Certificate of Deposit rate for the first working
day of each calendar quarter as quoted by the Wall Street Journal.
A Deferred Fee Account shall be maintained for each participating
Eligible Director, and shall consist of (1) the cumulative amount of deferred
director's fees, less (2) payments made out of such account, plus (3) an amount,
which shall be added to the account as of the last day of each calendar month,
equal to (a) the balance in the account on the first day of that calendar month
after deducting any payment made that day out of the account, times (b)
one-twelfth of the interest rate applicable to the calendar quarter which
includes the calendar month.
6. PAYMENT OF AMOUNTS DEFERRED UNDER THE PLAN
Amounts deferred under the Plan, together with the accumulated
interest as computed above, shall be paid in annual or quarterly installments
over such period of years, not exceeding ten years, as the participating
Eligible Director may elect. The Eligible Director may elect that the
installments commence with the first day of the first calendar month immediately
following the month in which he or she ceases being a director of Company.
Alternatively, the Eligible Director may elect that the installments commence
with the later of (1) the first day of the first calendar month immediately
following the month in which he or she ceases being a director of Company, or
(2) the first day of the calendar year immediately following the year in which
he or she retires from his or her principal occupation. Company may rely upon
the certification of an Eligible Director that such Eligible Director has
retired from his or her principal occupation, but reserves the right, without
obligation to do so, to postpone the commencement of payments of deferred
amounts in such cases upon advice of its tax counsel that such retirement has
not effectively occurred.
7. Election of an Eligible Director to Change Amount of
Compensation and Terms of Payment of Amounts Deferred
UNDER THE PLAN
An Eligible Director may at any time and from time to time by
executing and delivering a new written election to Company elect to increase or
decrease the amount of the compensation to be deferred under the Plan, including
an increase or decrease in either or both of the deferral of the annual fees or
meeting fees, and the terms of payments of such compensation deferred under the
Plan, but only with respect to such compensation to be earned thereafter. All
amounts accumulated pursuant to the Plan prior to such election shall continue
to be
- 2 -
<PAGE>
subject to the terms of any prior election by the Eligible Director in effect
when such amounts were earned. Any election, including an Eligible Director's
initial election to participate in the Plan, continues from year to year until
amended pursuant to this Seciotn 7 or until the Eligible Director terminates his
or her participation in the Plan pursuant to Section 3.
8. DEATH OF AN ELIGIBLE DIRECTOR
Upon the death of an Eligible Director or former Eligible Director,
the balance in full of any amounts deferred under the Plan, together with
accumulated interest, shall be payable to his or her estate on the first day of
the first calendar month immediately following the month in which he or she
dies.
9. AMENDMENT OF THE PLAN
The Plan may be amended from time to time by Company, but no such
amendment shall permit amounts accumulated pursuant to the Plan prior to the
amendment to be paid to an Eligible Director prior to the time he or she would
otherwise be entitled thereto.
10. TERMINATION OF THE PLAN
The Plan will continue in effect until terminated by Company, but in
the event of such termination, the amounts accumulated pursuant to the Plan
prior to termination will continue to be subject to the provisions of the Plan
as if the Plan had not been terminated.
11. NO ASSET SEGREGATION
The Deferred Fee Account is maintained for accounting purposes only.
The Plan does not create an escrow account or trust fund or any other form of
asset segregation by Company for the benefit of any participating Eligible
Director. Any assets purchased with deferred amounts shall at all times remain
solely the property of Company, subject to the claims of its general creditors
and available for Company's use for whatever purpose desired. Amounts deferred
may not be anticipated, alienated, sold, transferred, assigned, pledged or
encumbered and are not liable for the debts, contracts, liabilities, engagements
or torts of the Eligible Director or his or her estate.
- 3 -
WILLAMETTE INDUSTRIES, INC.
1986 STOCK OPTION AND STOCK
APPRECIATION RIGHTS PLAN
AS AMENDED
1. General. Pursuant to the terms and conditions of the WILLAMETTE
INDUSTRIES, INC., 1986 STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN (the
"Plan"), hereinafter set forth, the Committee specified in Article 2 may from
time to time grant or award to eligible employees of Willamette Industries, Inc.
("Company"), and of those corporations ("Subsidiaries") in which Company owns at
least 50 percent of the total combined voting power of all classes of stock,
options to purchase shares of the $.50 par value common stock ("Stock") of
Company, stock appreciation rights, and restricted Stock (shares of Stock which
are awarded subject to restrictions during the vesting period). Such options,
stock appreciation rights, and restricted Stock are sometimes referred to herein
collectively as "grants and awards." The purpose of the Plan is to motivate
special achievement by officers and other key employees of Company and its
Subsidiaries by assisting them in acquiring or increasing an equity interest in
Company. The options shall be nonqualified stock options subject to Section 83
of the Internal Revenue Code, and not incentive stock options subject to Section
422A of the Internal Revenue Code.
2. Administration. The Board of Directors of Company ("the Board")
shall designate a Committee of not less than three members of the Board ("the
Committee") who shall administer the Plan and serve at the pleasure of the
Board. The Committee may also have other duties, as would be the case if the
Board should designate the Company's Compensation and Nomination Committee (or a
successor thereto) to act as the Committee under the Plan. All members of the
Committee shall be disinterested persons. For the purposes of the Plan, a member
of the Committee shall be a "disinterested person" only if such member is not,
at the time any action is taken with regard to the Plan, eligible to receive
grants and awards under the Plan, and has not at any time within one year prior
thereto been so eligible. Subject to the express provisions of the Plan, the
Committee shall have full and final authority, acting in its sole discretion, to
interpret the Plan, to establish rules and regulations relating to the Plan and
to take such action and make such determinations as the Committee may deem
necessary or advisable in the administration of the Plan. No member of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any grant or award made thereunder, nor be liable
for any good faith reliance upon any report or other information furnished to
the Committee by Company's officers, its independent public accountants or by
any other person or entity.
3. Eligibility. Employees eligible to receive grants and awards under
the Plan shall be such key employees (including officers, regardless whether
they are directors) of Company and its Subsidiaries as may be selected from time
to time by the Committee. Any such key employee shall be eligible to receive
grants of options to purchase Stock and awards of restricted Stock, but only
officers shall be eligible to receive awards of stock appreciation rights. No
provision of the Plan shall be construed to prohibit the Committee from making
additional grants or awards under the Plan to employees who have previously
received grants
A-1
<PAGE>
or awards. No provision of the Plan shall be construed as automatically
entitling an employee to a grant or award, regardless whether the employee has
received a grant or award in a prior year or has attained a particular executive
position or salary level.
4. Shares Subject to the Plan. Subject to Article 13 hereof, the total
number of shares of Stock issuable under the Plan shall not exceed 1,500,000, of
which no more than 250,000 may be issued as restricted Stock. For purposes of
these limitations, (a) shares previously issued (or that may be issued in the
future) on the exercise of options granted prior to this amendment and
restatement shall reduce the 1,500,000 maximum limitation, (b) any option which
terminates or expires without exercise and without exercise of stock
appreciation rights (and without the making of a cash exercise under Article 8)
related to that option shall thereafter be deemed not to have been granted, and
(c) shares of restricted Stock which are forfeited shall thereafter be deemed
not to have been issued. Shares of Stock available for issue under the Plan
shall be authorized and unissued shares or shares acquired by Company and held
in treasury.
5. Stock Options. The Committee may from time to time grant options
under the Plan to eligible employees. The price at which a share of Stock may be
purchased on exercise of an option shall be fixed by the Committee at the date
of grant of such option and shall not be less than the fair market value of a
share of Stock at that date. Fair market value, as used in this Article 5 and
elsewhere in the Plan, shall, unless the Committee shall determine otherwise, be
the closing price of Stock on the date the option is granted as reported on the
NASDAQ national market system for such date or, if such closing price is not
available for a date (because the date is not a trading date or otherwise), for
the next preceding date for which such closing price is available.
At the time an option is granted, the Committee shall specify the
period during which it is not exercisable, and whether the option is to be
thereafter exercisable in full or in installments. The Committee may at any time
after the grant accelerate the exercisability of the option. Notwithstanding the
foregoing, no portion of an option covered by related stock appreciation rights
may be exercised within six months of the date of grant. Options granted under
the Plan shall expire not more than ten years and two days from the date of the
grant of the option as specified by the Committee at date of grant.
No employee to whom an option is granted shall be entitled to any of
the rights of a shareholder of Company with respect to any shares covered by the
option until certificates representing such shares have been issued to the
employee.
No option may be transferred except by will or the laws of descent and
distribution and, during the lifetime of an employee to whom an option is
granted, such option may be exercised only by the employee, the employee's
guardian or legal representative.
Upon termination of employment for any reason other than death,
disability, or retirement ("disability" and "retirement" are defined in Article
8A) of an employee to whom an option has been granted, the employee may, at any
time prior to the earlier of (a) 30 days
A-2
<PAGE>
after termination of employment or (b) the expiration of the stated period of
the option, exercise the option to the same extent, if any, that the option was
exercisable by the employee on the date of termination of employment under the
terms of the option. Notwithstanding the foregoing, the Committee may in its
discretion, after giving consideration to the circumstances of the termination
of employment of an employee to whom an option has been granted, extend said
30-day period to a period of three years after termination of employment. The
option shall expire on the date of termination of employment to the extent it
was not then exercisable and otherwise shall expire upon the earlier of 30 days
(three years, if the Committee has extended the period) after termination of
employment or the expiration of the stated period of the option.
Upon the termination of employment by reason of death, disability, or
retirement of an employee to whom an option has been granted, the employee (or,
in case of death, any person or persons, including the legal representative of
the employee's estate, to whom the option passes by will or by the laws of
descent and distribution) may, at any time prior to the earlier of (a) three
years after termination of employment or (b) the expiration of the stated period
of the option, exercise the option to the same extent, if any, that the option
was exercisable by the employee on the date of termination of employment under
the terms of the option. The option shall expire on the date of termination of
employment to the extent it was not then exercisable and otherwise shall expire
upon the earlier of three years after termination of employment or the
expiration of the stated period of the option.
Payment upon exercise of an option shall be made in cash, by certified
check or bank draft payable to the order of Company or, at the Committee's
discretion, in whole or in part in any other form, including by personal check
or by the delivery to Company of shares of Stock previously acquired by the
employee or by any combination of the foregoing.
6. Stock Appreciation Rights. The Committee may, at the time of grant
of an option, or at such later date during the term of the option as the
Committee may determine, make an award of stock appreciation rights in
conjunction with the option. A "stock appreciation right" is a right to receive
cash as provided in this Article 6. The maximum number of stock appreciation
rights that may be awarded to an optionee is 50 percent of the number of shares
of Stock covered by the related option. Any exercise of the related option shall
reduce the number of stock appreciation rights available for exercise. For each
one share of Stock covered by the exercise of the related option, the number of
stock appreciation rights shall be reduced by 50 percent of one stock
appreciation right (except that, if the number of stock appreciation rights that
had been awarded to the optionee is a lesser percentage than the maximum
allowable 50 percent of the number of shares covered by the related option, then
the reduction shall be limited to such lesser percentage of one stock
appreciation right).
A stock appreciation right may be exercised only at the same time as an
exercise of the related option. The maximum number of stock appreciation rights
that can be then exercised is 50 percent of the number of shares of Stock to be
purchased at that time under the option (except that, if the number of stock
appreciation rights that had been awarded to
A-3
<PAGE>
the optionee is a lesser percentage than the maximum allowable 50 percent of the
number of shares covered by the related option, then the maximum number of stock
appreciation rights that can be then exercised shall be such lesser percentage
of the number of shares of Stock to be purchased). Any exercise of stock
appreciation rights shall reduce the number of shares of Stock covered by the
related option. For each one stock appreciation right exercised, the number of
shares shall be reduced by two (unless the number of stock appreciation rights
that had been awarded to the optionee is a lesser percentage than the maximum
allowable 50 percent, in which case the reduction shall be a correspondingly
higher number of shares).
Upon the exercise of a stock appreciation right, the optionee shall be
entitled to the excess of the fair market value of one share of Stock on the
date of such exercise over the purchase price per share specified in the related
option, multiplied by the number of stock appreciation rights so exercised.
Except as otherwise provided in this Article 6, stock appreciation
rights shall be exercisable and expire on the same terms and conditions as the
options to which they relate and shall be subject to the same restraints on
transferability, except that stock appreciation rights shall be exercisable only
during such periods as may be permissible without causing the employee to incur
liability under Section 16(b) of the Securities Exchange Act of 1934, and if a
termination of employment occurs by reason of discharge for cause or voluntary
resignation the employee's stock appreciation rights shall expire on the date of
termination of employment.
6A. Awards of Restricted Stock. The Committee may from time to time
make awards of restricted Stock under the Plan to eligible employees.
At the time an award is made, the Committee shall specify the waiting
period or periods during which the shares are not vested. The vesting of shares
may be dependent on a period of subsequent employment, on the attainment of
performance goals, or both. The Committee may at any time after the award
accelerate the vesting as to part or all the shares awarded.
During the waiting period, the employee shall have all the rights of a
shareholder of Company as to the nonvested shares, except that the shares may
not be sold, assigned, transferred, pledged or otherwise encumbered.
Certificates representing awarded shares shall be registered in the name of the
employee but held (with a stock power endorsed in blank) by Company during the
vesting period.
The shares shall vest and be delivered to the employee or legal
representative free of restrictions at the end of the original or accelerated
vesting period, upon the attainment of specified performance goals or, if
earlier, upon death, disability, or retirement ("disability" and "retirement"
are defined in Article 8A).
Upon termination of employment for any reason other than death,
disability, or retirement of an employee to whom an award has been made, any
nonvested shares shall be
A-4
<PAGE>
forfeited. If any performance criteria are not met within the time specified for
such criteria, the nonvested shares subject to such criteria shall be forfeited.
The Committee may, in its discretion, provide that a portion of the
award of restricted Stock shall be made in cash rather than shares. Any such
cash shall be payable at the same time or times as the shares to which the cash
relates become vested. If shares are forfeited, the related amount of unpaid
cash shall also be forfeited.
7. Change in Control. For purposes of the Plan, "change in control"
means the occurrence of any of the following events without approval by the
affirmative vote of at least two thirds of those members of the Board who (i)
are members of the Board immediately prior to the event, and (ii) are not
employees of Company or a Subsidiary:
(a) The merger or consolidation of Company with, or the sale
of all or substantially all the assets of Company to, any person or
entity or group of associated persons or entities.
(b) The attainment of direct or indirect beneficial ownership
of securities of Company which in the aggregate represent 20 percent or
more of the total combined voting power of Company's then issued and
outstanding securities by any person or entity or group of associated
persons or entities acting in concert who is not affiliated (within the
meaning of the Securities Act of 1933) with Company as of February 13,
1986; provided, however, the Board may at any time in its discretion
increase the 20 percent requirement but not beyond 40 percent.
(c) The approval by the shareholders of Company of any plan or
proposal for the liquidation or dissolution of Company.
A change in control shall also be deemed to occur upon a change in the
membership of the Board at any time during any consecutive 24-month period such
that the "continuity" directors cease for any reason to constitute at least 70
percent of the Board. The continuity directors are those members of the Board
who were either (i) members of the Board at the beginning of such consecutive
24-month period, or (ii) elected by, or on the nomination or recommendation of,
at least two thirds of the members of the Board.
If a change in control occurs, all options and stock appreciation
rights previously granted or awarded which are not fully exercisable shall
become exercisable in full upon the date of such occurrence and shall remain so
exercisable until the earlier of (a) three years after the date of such
occurrence, or (b) the expiration of the stated period of the option. After the
end of the three-year period, the options and rights shall revert to being
exercisable in accordance with their terms, although no option or rights which
have previously been exercised or otherwise terminated shall become exercisable.
Notwithstanding the foregoing, neither stock appreciation rights nor the portion
of the related option covered by the stock
A-5
<PAGE>
appreciation rights may be exercised within six months of the date of award or
grant of the rights or option.
Notwithstanding the provisions of Articles 5 and 6 relating to the
expiration of options and stock appreciation rights in connection with
termination of employment, upon termination of employment for any reason (other
than by reason of conduct which constitutes a felony under federal law or the
law of the state in which the employee resides) within the two-year period
following the occurrence of a change in control, the option and rights may be
exercised at any time prior to the earlier of (a) three years after termination
of employment or (b) the expiration of the stated period of the option.
If a change in control occurs, all shares of restricted Stock
previously awarded which are not vested shall become vested upon the date of
such occurrence.
8. Right to Receive Cash on Change in Control. If a change in control,
as defined in Article 7, occurs, each employee (including those who are not
officers) holding an unexercised option, and regardless whether the option is
then otherwise fully exercisable, may make a cash exercise of all or any portion
of the option in lieu of the purchase of Stock under the option. A cash exercise
may be made, without any payment to Company, by surrendering unexercised the
option (and any related stock appreciation rights) or any portion thereof. Upon
such exercise and surrender, the optionee shall be entitled to receive cash
(less applicable withholding taxes) in an amount equal to the excess of the
aggregate fair market value of the shares of Stock covered by the option, or the
relevant portion thereof, on the date of such exercise and surrender over the
aggregate exercise price of such Stock under the option. The cash exercise may
be made only during the period beginning on the first day following the date on
which Company has actual knowledge of the actual occurrence of the change in
control and ending on the 45th day following such date. Notwithstanding the
foregoing, no cash exercise may be made by an officer of Company or its
Subsidiaries within six months of the date of grant of the option and no cash
exercise may be made by any optionee after the expiration of the stated period
of the option.
8A. Disability; Retirement. "Disability" for purposes of this Plan
shall have the same meaning as "total and permanent disability" under the
Willamette Industries, Inc., and Associated Companies Salaried Employees'
Retirement Plan (regardless whether the employee is covered by such Retirement
Plan). With respect to grants and awards made on or after August 9, 1990,
"retirement" shall mean:
(a) Termination of employment at or after attainment of age
62, provided the employee has (or would have, if covered by such
Retirement Plan) at least ten vesting credits as defined under such
Retirement Plan, or
(b) Termination of employment at or after attainment of age
65, regardless of the number of such vesting credits, if any.
A-6
<PAGE>
9. Employee Agreement. Each employee to whom a grant or award is made
under the Plan shall execute an appropriate agreement with respect to such grant
or award referring to the terms and conditions thereof and of the Plan. The form
of agreements may be changed from time to time and need not be identical among
those receiving the grants or awards.
10. Withholding Taxes. Company shall have the right to deduct from all
cash payments made under the Plan any federal, state or local taxes required by
law to be withheld with respect to such cash payments, and, in the event such
cash payments are insufficient to cover the required withholding, the employee
or other person receiving such payment may be required to pay to Company the
additional amount necessary for this purpose. In the case of an exercise of an
option or an award of restricted Stock, the employee or other person exercising
such option or taxable in connection with such award may be required to pay to
Company the amount of any such taxes that Company is required to withhold with
respect to such exercise or award. Company shall also have the right to deduct
any such taxes from the shares that would otherwise be issued to or vest in the
employee or other person.
The Committee may, in its discretion, allow the employee or other
person to make the required payment to Company by delivery of shares of
previously acquired Stock.
11. Employment. Nothing contained in the Plan or in any grant or award
under the Plan shall confer upon any employee any right with respect to the
continuation of employment with Company or its Subsidiaries or interfere in any
way with the right of Company or its Subsidiaries to terminate the employee's
employment at any time. Nothing contained in the Plan shall confer upon any
employee or other person any claim or right to any grant or award under the
Plan.
12. Governmental Compliance. Each grant and award under the Plan shall
be subject to the requirement that, if at any time the Committee shall determine
that the listing, registration or qualification of any shares issuable
thereunder upon any securities exchange or under any federal or state law, or
the consent or approval of any governmental or self-regulatory body is necessary
or desirable as a condition thereof, or in connection therewith, no such grant
or award may be exercised or shares issued unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Committee.
13. Adjustments. The right and power of Company to provide for
reclassifications, reorganizations, recapitalizations, stock splits, stock
dividends, combination of shares, merger, consolidation or any other change in
the capital structure or shares of Company shall not be affected by the Plan. In
the event of any such action, the Committee or the Board may make such
adjustments, if any, as it may deem appropriate in the number of shares
available for grants and awards under the Plan and to grants and awards made
under the Plan.
A-7
<PAGE>
14. Expenses. The expenses of administering the Plan shall be borne by
Company.
15. Termination. No grants or awards under the Plan shall be made after
April 14, 1996, or such earlier date as the Board may determine.
16. Successors and Assigns. The provisions of the Plan (and
interpretations and determinations made by the Committee pursuant thereto) shall
be conclusive and binding upon Company and its Subsidiaries, their successors
and assigns and upon each employee receiving grants or awards under the Plan and
the employee's heirs, successors and assigns.
17. Amendment. The Plan may be amended by the Board as it deems
advisable, provided that no such amendments shall adversely affect the rights of
employees to whom grants and awards under the Plan shall have been made without
the consent of the employees affected thereby, nor shall the Board, without
approval of Company's shareholders:
(a) Except as provided in Article 13, increase the number of
shares of Stock that are subject to the Plan;
(b) Extend the period during which grants and awards under the
Plan may be made or exercised;
(c) Otherwise materially increase the benefits accruing to
participants under the Plan;
(d) Amend the requirements of the Plan in respect of
eligibility to receive or to exercise grants and awards under the Plan;
or
(e) Establish the price at which shares may be purchased on
the exercise of an option at less than the fair market value of the
Stock at the time the option is granted.
A-8
The Retirement Plan for Nonemployee Directors
(Resolutions adopted August 10, 1989, by Board of Directors
of Willamette Industries, Inc.)
RESOLVED that effective September 1, 1989, the company adopts the
following Retirement Plan for Nonemployee Directors to supplement the
compensation paid to such directors:
ARTICLE I
PURPOSE OF PLAN
The purpose of the Plan is to assist Willamette in attracting and
retaining qualified nonemployee directors by providing such directors with
deferred compensation in addition to their cash retainers and attendance fees.
ARTICLE II
ELIGIBLE DIRECTOR
Any nonemployee director who (i) is on the Willamette Board of
Directors (the "Board") on or after September 1, 1989, and (ii) completes at
least five full years of service after January 31, 1980, as a nonemployee
director shall be eligible to participate in the Plan.
ARTICLE III
BENEFITS
3.1 AMOUNT OF BENEFIT. Upon retirement from the Board, each Eligible
Director shall receive an annual benefit equal in amount to the annual retainer
fee being paid at the time of retirement.
3.2 TIME OF PAYMENT. This annual benefit shall be payable at the
same time as the annual retainer fee is payable to active directors. Payment
shall continue until the Eligible Director dies or receives the maximum number
of payments, whichever occurs first.
3.3 MAXIMUM NUMBER OF PAYMENTS. The maximum number of payments shall
equal the number of complete years of service after January 31, 1980, that the
Eligible Director has been a nonemployee director.
- 1 -
<PAGE>
3.4 DEATH. No further benefits shall be paid to
anyone after the Eligible Director's death.
ARTICLE IV
NONASSIGNMENT
An Eligible Director's benefits under the Plan shall not be
subject to the claims of creditors or others, nor to legal process, and may not
be voluntarily or involuntarily pledged, or encumbered. Any act in violation of
this article shall be void.
ARTICLE V
FUNDING
The Plan shall be unfunded. Benefits shall be payable only from the
general assets of Willamette. Neither Eligible Directors nor their heirs shall
have any interest in any asset of Willamette, and the status of their claims
shall be that of a general creditor of Willamette. The Plan does not create any
escrow account, trust fund, or any other form of asset segregation.
ARTICLE VI
NO RIGHT TO REMAIN DIRECTOR
The Plan shall not be deemed to give any individual a right to
remain a director of Willamette or create any obligations on the part of the
Board to nominate any director for reelection by the stockholders of Willamette.
ARTICLE VII
GOVERNING LAW
This Plan shall be governed by the laws of the State of Oregon.
ARTICLE VIII
AMENDMENT AND TERMINATION
The Board may, at any time and for any reason, amend or terminate
the Plan. In the event of termination, benefits not yet payable under the Plan
shall be forfeited.
- 2 -
---------------------------
Dear _________________:
Willamette Industries, Inc. (which, together with its Subsidiaries,
is referred to as the "Company"), considers the stability of its key management
group to be essential to the best interests of the Company and its shareholders.
The Company recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may arise and that the
attendant uncertainty may result in the departure or distraction of key
management personnel to the detriment of the Company and its shareholders.
Accordingly, the Board of Directors of the Company (the "Board") has
determined that appropriate steps should be taken to encourage members of the
Company's key management group to continue as employees notwithstanding the
future possibility of a change in control of the Company.
The Board also believes it important that, in the event of a
proposal for transfer of control of the Company, you be able to assess the
proposal and advise the Board without being influenced by the uncertainties of
your own situation.
In order to induce you to remain in the employ of the Company, this
Agreement, which has been approved by the Board, sets forth the severance
compensation which the Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to the occurrence of a
"change in control" of the Company as defined and under the circumstances
described below.
<PAGE>
Page 2
1. AGREEMENT TO PROVIDE SERVICES; RIGHT TO TERMINATE.
(a) TERMINATION OF EMPLOYMENT. Except as otherwise provided in
paragraph (b) below, or in any written employment agreement between you and the
Company, you are an "at will" employee and the Company or you may terminate your
employment or this Agreement at any time. If, and only if, your employment
terminates after a change in control of the Company occurs (as defined in
Section 6), the provisions of this Agreement regarding the payment of severance
compensation and benefits shall apply. In all other events, this Agreement does
not provide any additional severance compensation or benefits to you.
(b) TERMINATION SUBSEQUENT TO CERTAIN OFFERS. In the event a tender
offer or exchange offer is made by a Person (as defined in Section 6) for more
than 30 percent of the combined voting power of the Company's outstanding
securities ordinarily having the right to vote at elections of directors
("Voting Securities"), including shares of common stock, $.50 par value, of the
Company (the "Company Shares"), you agree that you will not leave the employ of
the Company (other than as a result of Disability as such term is defined in
Section 6) and will render services to the Company in the capacity in which you
then serve until such tender offer or exchange offer has been abandoned or
terminated or a change in control of the Company has occurred as a result of
such tender offer or exchange offer. If the offer described in the preceding
sentence is not recommended by the Board to the shareholders when initially made
or within ten days thereafter, the Company agrees that during the period
described in the preceding sentence it shall not terminate this Agreement unless
it shall also terminate your employment. If, during the period you are obligated
to continue in the employ of the Company pursuant to this Section 1(b), the
Company reduces your compensation, your obligations under this Section 1(b)
shall thereupon terminate.
(c) OBLIGATIONS AFTER CHANGE IN CONTROL. While employed by the
Company (or its successor) after a change of control occurs, you agree to devote
reasonable attention and time to the business and affairs of the Company and to
use your reasonable best efforts to perform your responsibilities faithfully and
efficiently, consistent with your past practice as an employee of the Company.
2. TERM OF AGREEMENT. This Agreement shall commence on the date
hereof and shall continue in effect until April 16, 1994; PROVIDED, HOWEVER,
that commencing on __________________, and each ______________ thereafter, the
term of this Agreement
<PAGE>
Page 3
shall automatically be extended for one additional year unless at least 90 days
prior to such April 16, the Company or you shall have given notice that this
Agreement shall not be extended; and provided, however, that if a change in
control of the Company shall occur while this Agreement is in effect, this
Agreement shall automatically be extended for 36 months from the date the change
in control occurs. Notwithstanding the preceding sentence, this Agreement shall
not extend beyond your normal retirement date under the Company's retirement
plan. This Agreement shall terminate if you or the Company terminate your
employment prior to the date a change in control of the Company occurs but
without prejudice to any remedy the Company may have for breach of your
obligations, if any, under Section 1(b).
3. SEVERANCE PAYMENT AND BENEFITS IF TERMINATION OCCURS FOLLOWING
CHANGE IN CONTROL FOR DISABILITY, WITHOUT CAUSE, OR WITH GOOD REASON. If, within
36 months from the date a change in control of the Company occurs, your
employment with the Company is terminated (i) by the Company for Disability,
(ii) by the Company without Cause, or (iii) by you with Good Reason (each as
defined in Section 6), you shall be entitled to a severance payment and other
benefits as follows:
(a) DISABILITY. If your employment with the Company is terminated
for Disability, your benefits shall thereafter be determined in accordance with
the Company's long-term disability income plan. If the Company's long-term
disability income plan is modified or terminated following a change in control,
the Company shall substitute such a plan with benefits applicable to you
substantially similar to those provided by the plan prior to its modification or
termination. During any period that you fail to perform your duties hereunder as
a result of incapacity due to physical or mental illness, you shall nonetheless
continue to receive your full base salary and benefits at the rate then in
effect until your employment is terminated by the Company for Disability and you
begin to receive benefits under the Company's disability income plan.
(b) TERMINATION WITHOUT CAUSE OR WITH GOOD REASON. If your
employment with the Company is terminated without Cause by the Company or with
Good Reason by you, then the Company shall pay to you, upon demand, the
following amounts:
(i) Your full base salary and benefits through the Date of
Termination at the rate in effect on the date the change in control
occurs.
(ii) As severance pay, subject in all cases to
<PAGE>
Page 4
reduction as provided in Section 3(c), an amount equal to the product of
(x) the sum of your annual base salary, at the rate in effect on the date
the change in control occurs, plus the average annual cash incentive
compensation (if any) paid to you or accrued for your benefit in respect
of the two fiscal years prior to the fiscal year in which the change in
control occurs, multiplied by (y) the number 2.99.
(iii) In addition, subject in all cases to reduction as provided in
Section 3(c), the Company shall maintain in full force and effect for one
year after the Date of Termination, all noncash employee benefit plans,
programs, or arrangements (including, without limitation, pension and
retirement plans and arrangements, life insurance and health and accident
plans, medical insurance plans, disability plans, and vacation plans) in
which you were entitled to participate immediately prior to the Date of
Termination provided that your continued participation is possible under
the general terms of such plans, programs, and arrangements, but excluding
stock option plans and other plans in which the benefits are measured by
the value of the Company's stock. If your participation in any plan,
program, or arrangement which the Company has agreed to continue is barred
or not possible, the Company shall arrange to provide you with benefits
substantially similar to those which you are entitled to receive under
such plans, programs, and arrangements. However, if you become eligible to
participate in a benefit plan, program, or arrangement of another employer
which confers substantial similar noncash benefits upon you, you shall
cease to receive noncash benefits under this subsection in respect of such
plan, program, or arrangement.
(c) CERTAIN REDUCTION OF PAYMENTS BY THE COMPANY.
(i) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the
Company to or for your benefit (whether pursuant to this Agreement or
otherwise) (a "Payment") would be nondeductible by the Company for Federal
income tax purposes because of Section 280G of the Internal Revenue Code
of 1986, as amended, or the regulations thereunder (the "Code"), then the
aggregate present value of amounts payable or distributable to or for your
benefit pursuant to this Agreement (such payments or distributions the
"Agreement Payments") shall be reduced to an amount which maximizes the
aggregate Agreement Payments without causing any Payment to be
nondeductible by the Company
<PAGE>
Page 5
because of Section 280G of the Code.
(ii) All determinations required to be made under this Section 3(c)
shall be made by the Company's usual outside auditors (the "Accounting
Firm") which shall provide detailed supporting calculations both to the
Company and you within 15 business days of the Date of Termination. Absent
manifest error, the determination by the Accounting Firm shall be binding
upon the Company and on you. The Company shall reasonably determine which
and how much of the Agreement Payments shall be eliminated or reduced
consistent with the requirements of this Section 3(c) and shall notify you
promptly of its determination.
(iii) As a result of the uncertainty in the application of Section
280G of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Agreement Payments will
have been made by the Company which should not have been made (an
"Overpayment") or that additional Agreement Payments which will not have
been made by the Company could have been made (an "Underpayment"), in each
case, consistent with the calculations required to be made hereunder. In
the event a related deficiency is asserted by the Internal Revenue Service
against the Company or you which the Accounting Firm concludes has a high
probability of resolution in favor of the government, then an Overpayment
has been made. Any such Overpayment shall be treated for all purposes as a
loan AB INITIO to you from the Company which you shall repay to the
Company without interest prior to written notice from the Company to you
that repayment is due (and at a rate of 8 percent per annum thereafter);
provided, however, that no such loan shall be deemed to have been made and
no amount shall be payable by you unless and to the extent such deemed
loan and payment would reduce your obligation for excise taxes under
Section 4999 of the Code or generate a refund of such taxes. In the event
the Accounting Firm, based upon controlling precedent or other substantial
authority, determines that an Underpayment has occurred, any such
Underpayment shall be promptly paid by the Company to or for your benefit
together with interest at the rate of 8 percent per annum.
4. PAYMENT IF TERMINATION OCCURS FOLLOWING CHANGE IN CONTROL,
BECAUSE OF DEATH, FOR CAUSE, OR WITHOUT GOOD REASON. If your employment is
terminated after a change in control of the Company occurs because of your
death, or by the Company for Cause, or by you other than for Good Reason, the
Company shall
<PAGE>
Page 6
pay you your full base salary and benefits through the Date of Termination at
the rate in effect on the date the change in control occurs. The Company shall
have no further obligations to you under this Agreement.
5. NO MITIGATION; NO SETOFF. You shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or otherwise, nor, except as expressly set forth herein, shall the
amount of any payment provided for in this Agreement be reduced by any
compensation earned by you as the result of employment by another employer after
the Date of Termination, or otherwise. The Company's obligation to make the
payments to you provided for in this Agreement shall not be affected by any
setoff, counterclaim, recoupment, or other defense or claim which the Company
may have against you, except as provided in Section 3(c) and Section 6(d).
6. DEFINITIONS OF CERTAIN TERMS. For the purposes of this Agreement,
the terms defined below and used in this Agreement shall have the following
meanings:
(a) ACQUIRING PERSON. "Acquiring Person" shall mean any Person or
related Persons that would constitute a "group" for purposes of Section 13(d)
and Rule 13d-5 (as in effect on the date hereof) under the Exchange Act;
provided, however, that the term Acquiring Person shall not include (i) the
Company, any Subsidiary or any employee benefit plan of the Company or any
Subsidiary, (ii) an entity holding voting capital stock of the Company for or
pursuant to the terms of any such plan, (iii) any Person or group solely because
such Person or group has voting power with respect to capital stock of the
Company arising from a revocable proxy or consent given in response to a public
proxy or consent solicitation made pursuant to the Exchange Act (as in effect
from time to time) or (iv) any Person who is a party to an agreement (a "New
Stand-Together Agreement") similar to the former Shareholder Stand-Together
Agreement dated as of January 21, 1985 (the "Former Stand-Together Agreement"),
which New Stand-Together Agreement (1) provides for unified action by Persons
who, or whose families, have historically held substantial amounts of the
Company Shares in the event of a threatened change of control and (2) which has
as parties at least ten shareholders of the Company who were parties to the
Former Stand-Together Agreement, but only while such Person remains a party
thereto.
(b) CAUSE. Termination of your employment by the Company for "Cause"
shall mean termination because, and only because, you committed an act of fraud,
embezzlement, or theft
<PAGE>
Page 7
constituting a felony, or an act intentionally against the interest of the
Company which causes the Company material injury, or you have repeatedly failed,
after written notice, to perform your responsibilities under this Agreement.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board at a meeting of the Board called and held
for the purpose (after reasonable notice to you and an opportunity for you,
together with your counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of conduct constituting Cause as
defined above and specifying the particulars thereof in detail.
(c) CHANGE IN CONTROL. A "change in control" of the Company shall
mean:
(i) A change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A (as in
effect on the date thereof) under the Exchange Act; provided that, without
limitation, such a change in control shall be deemed to have occurred at
such time as any Acquiring Person (as defined in Section 6) hereafter
becomes the "beneficial owner" as defined in Rule 13d-3 (as in effect on
the date thereof) under the Exchange Act, directly or indirectly, of 20
percent or more of the combined voting power of the Company's Voting
Securities; or
(ii) During any period of two consecutive years, individuals who at
the beginning of such period constitute the Board cease for any reason to
constitute at least a majority thereof unless the election, or the
nomination for election by the Company's shareholders, of each new
director was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of the period; or
(iii) There shall be consummated (x) any consolidation or merger of
the Company in which the Company is not the continuing or surviving
corporation or pursuant to which Voting Securities would be converted into
cash, securities, or other property, other than a merger of the Company in
which the holders of Voting Securities immediately prior to the merger own
more than 66-___ percent of the combined voting power of the outstanding
securities ordinarily having the right to vote at elections of directors
of the surviving
<PAGE>
Page 8
corporation immediately after the merger, or (y) any sale, lease,
exchange, or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company;
or
(iv) Approval by the shareholders of the Company of any plan or
proposal for the liquidation or dissolution of the Company.
A change of control "occurs" on the date the change of control first occurs;
PROVIDED, HOWEVER, that if (A) your employment is terminated by the Company
after an offer described in the first sentence of Section 1(b) is made, which
offer is not recommended favorably by the Board to the Company's shareholders
when initially made or within ten days thereafter, and (B) it is reasonably
demonstrated that your termination was at the request of a third party who is
seeking to effect a change of control or otherwise occurred as a result of an
anticipated change of control, and (C) a change of control in fact occurs within
60 days after your termination, then for purposes of determining your right to
any severance compensation and benefits under this Agreement, your termination
shall be deemed to have occurred after a change of control.
(d) DATE OF TERMINATION. "Date of Termination" shall mean (i) if
your employment is terminated by the Company for Disability, 30 days after
Notice of Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such 30-day period), and
(ii) if your employment is terminated for any Good Reason, the date on which a
Notice of Termination is given; provided that if within 30 days after any Notice
of Termination is given the party receiving the Notice of Termination notifies
the other party that a dispute exists concerning the termination, your
employment shall nonetheless be terminated but you shall continue to receive an
amount equal to your base salary and your noncash benefits until the date on
which the dispute is finally determined, either by mutual written agreement of
the parties or by a final judgment, order, or decree of a court of competent
jurisdiction (the time for appeal therefrom having expired and no appeal having
been perfected).
If the dispute is resolved substantially in favor of the Company's
position, you shall repay the amount paid to you equal to your base salary
(without interest) and the Company may set your obligation to repay off against
any amounts owing to you or to be paid on your behalf. If the dispute is
resolved without either party prevailing or if you shall prevail, you shall have
<PAGE>
Page 9
no obligation to repay such amounts.
(e) DISABILITY. Termination of your employment by the Company for
"Disability" shall mean termination because of your absence from your duties
with the Company on a full-time basis for 180 consecutive days as a result of
your incapacity due to physical or mental illness and your failure to return to
the performance of your duties on a full-time basis during the 30-day period
after Notice of Termination is given.
(f) EXCHANGE ACT. "Exchange Act" shall mean the Securities and
Exchange Act of 1934, as amended, as in effect on the date of this Agreement.
(g) GOOD REASON. Termination by you of your employment for "Good
Reason" shall mean termination based on any of the following:
(i) A change in your status or position(s) with the Company, which,
in your reasonable judgment, does not represent a promotion from your
status or position(s) as in effect immediately prior to the change in
control, or a change in your duties or responsibilities which, in your
reasonable judgment, is inconsistent with such status or position(s), or
any removal of you from, or any failure to reappoint or reelect you to,
such position(s), except in connection with the termination of your
employment for Cause or Disability or as a result of your death or by you
other than for Good Reason.
(ii) A reduction by the Company in your base salary as in effect
immediately prior to the change in control.
(iii) The failure by the Company to continue in effect any Plan in
which you are participating at the time of the change in control of the
Company (or Plans providing you with at least substantially similar
benefits) other than as a result of the normal expiration of any such Plan
in accordance with its terms as in effect at the time of the change in
control, or the taking of any action, or the failure to act, by the
Company which would adversely affect your continued participation in any
of such Plans on at least as favorable a basis to you as is the case on
the date of the change in control or which would materially reduce your
benefits in the future under any of such Plans or deprive you of any
material benefit enjoyed by you at the time of the change in control.
<PAGE>
Page 10
(iv) The failure by the Company to provide and credit you with the
number of paid vacation days to which you are then entitled in accordance
with the Company's normal vacation policy as in effect immediately prior
to the change in control.
(v) The Company's requiring you to be based anywhere other than
where your office is located immediately prior to the change in control
except for required travel on the Company's business to an extent
substantially consistent with the business travel obligations which you
understood on behalf of the Company prior to the change in control.
(vi) The failure by the Company to obtain from any successor the
assent to this Agreement contemplated by Section 8 hereof.
(vii) Any purported termination by the Company of your employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of this Agreement; and for purposes of this Agreement, no
such purported termination shall be effective.
(viii) Any refusal by the Company to continue to allow you to attend
to matters or engage in activities not directly related to the business of
the Company which, prior to the change in control, you were permitted by
the Board to attend to or engage in.
(h) NOTICE OF TERMINATION. A "Notice of Termination" of your
employment given by Company shall mean a written notice given to you of the
termination of your employment which shall indicate the specific termination
provision in this Agreement relied upon, and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
your employment under the provision so indicated.
(i) PERSON. "Person" shall mean and include any individual,
corporation, partnership, trust, group, association, or other "person," as such
term is used in Section 14(d) of the Exchange Act.
(j) PLAN. "Plan" shall mean any compensation plan, program or
arrangement such as an incentive plan or an employee benefit plan, program or
arrangement such as a thrift plan, pension or retirement plan, life insurance or
health and accident plan, medical insurance plan, disability plan, vacation plan
or any other plan, program or arrangement of the Company intended to
<PAGE>
Page 11
benefit employees, but excluding any stock option plans or other plans in which
the benefits are measured by the value of the Company's stock.
(k) SUBSIDIARY. "Subsidiary" shall mean a corporation more than 50
percent of the outstanding voting stock of which is owned, directly or
indirectly, by the Company or by one or more other Subsidiaries, or by the
Company and one or more other Subsidiaries. For the purposes of this definition,
"voting stock" means stock which ordinarily has voting power for the election of
directors, whether at all times or only so long as no senior class of stock has
such voting power by reason of any contingency.
7. NOTICE. For the purposes of this Agreement, notice and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid, if to
the Company, addressed to it at 3800 First Interstate Tower, 1300 S.W. Fifth
Avenue, Portland, Oregon 97201, Attention: Chief Executive Officer, and if to
you, addressed to you at the address set forth below your signature hereto, or
to such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
8. SUCCESSORS; BINDING AGREEMENT.
(a) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of, and be binding upon, any corporate or other successor or assignee of
the Company which shall acquire, directly or indirectly, by merger,
consolidation or purchase, or otherwise, all or substantially all of the
business or assets of the Company. The Company shall require any such successor,
by an agreement in form and substance reasonably satisfactory to you, expressly
to assume and agree to perform this Agreement in the same manner and to the same
extent as the Company would be required to perform if no such succession had
taken place.
(b) PERSONAL REPRESENTATIVES. This Agreement shall inure to the
benefit of and be enforceable by your personal or legal representatives, and any
amounts payable to you in accordance with the terms of this Agreement after your
death shall be paid to your estate.
9. TIME OF PAYMENT; ESTIMATED PAYMENT. The severance payment
provided for herein, shall be made not later than the
<PAGE>
Page 12
fifteenth business day following the Date of Termination; provided, however,
that if the amounts of such payments cannot be finally determined on or before
such day, the Company shall pay to you on such day an estimate, as determined in
good faith by the Company, of the minimum amount of such payments, and shall pay
the remainder of such payments (together with interest at the rate of 8 percent
per annum) as soon as the amount thereof can be determined. In the event that
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Company to you,
payable on the fifth day after demand by the Company (together with interest at
the rate of 8 percent per annum).
10. MISCELLANEOUS. No provision of this Agreement may be modified,
waived, or discharged unless such modification, waiver, or discharge is agreed
to in a writing signed by you and the Chief Executive Officer or President of
the Company. No waiver by either party hereto at any time of any breach by the
other party hereto of, or of compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same, or at any prior or
subsequent, time. No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by the laws of the state of Oregon. All obligations of the Company to
make payments or to provide benefits shall be subject to all applicable
withholding and reporting requirements. Any amounts not paid when due hereunder
shall bear interest at the rate of 8 percent per annum.
11. LEGAL FEES AND EXPENSES. The Company shall pay or reimburse any
reasonable legal fees and expenses you may incur in connection with any legal
action to enforce your rights under, or to defend the validity of, this
Agreement. The Company will pay or reimburse such legal fees and expenses on a
regular, periodic basis upon presentation by you of a statement or statements
prepared by your counsel in accordance with its usual practices.
12. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. PAYMENTS DURING CONTROVERSY. Notwithstanding the pendency of any
dispute or controversy, the Company will continue
<PAGE>
to pay you your full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, base salary and installments
of incentive compensation) and continue you as a participant in all Plans in
which you were participating when the notice given rise to the dispute was
given, until the dispute is finally resolved in accordance with Section 6(d).
Amounts paid under this Section are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other amounts due
under this Agreement. You shall be entitled to seek specific performance of your
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
If you accept and agree to the terms of this Agreement, kindly sign
and return to the Company the enclosed copy of this letter, which will then
constitute our agreement on this subject.
Sincerely,
WILLAMETTE INDUSTRIES, INC.
By
Agreed to this _____ day of ______________, 199__.
Address:
Exhibit 12
WILLAMETTE INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
Year Ended December 31,
------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- --------
Fixed Charges:
Interest Cost $73,776 $79,194 $80,807 $77,237 $103,338
One-third rent 4,495 4,819 5,227 5,976 6,906
------- ------- ------- ------- --------
Total Fixed Charges 78,271 84,013 86,034 83,213 110,244
======= ======= ======= ======= ========
Add (Deduct):
Earnings before
Income Taxes 129,452 189,168 288,923 823,804 306,086
Interest Capitalized (7,354) (15,904) (9,294) (6,187) (10,534)
------- ------- ------- ------- -------
Earnings for
Fixed Charges $200,369 $257,277 $365,663 $900,830 $405,796
======== ======= ======= ======= =======
Ratio of Earnings to
Fixed Charges 2.56 3.06 4.25 10.83 3.68
======= ======= ======= ======= =======
EXHIBIT 23
Consent of Independent Auditors
The Board of Directors
Willamette Industries, Inc.:
We consent to incorporation by reference in the Registration Statements No.
33-5847, No. 33-59515 and No. 33-59517 on Form S-8 of Willamette Industries,
Inc. of our report dated February 13, 1997, relating to the consolidated balance
sheets of Willamette Industries, Inc. and subsidiaries as of December 31, 1996
and 1995, and the related consolidated statements of earnings, stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1996, which report appears in the December 31, 1996 annual report
on Form 10-K of Willamette Industries, Inc.
KPMG PEAT MARWICK LLP
Portland, Oregon
March 20, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S CONSOLIDATED
BALANCE SHEETS AND RELATED
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE PERIOD ENDED DECEMBER 31,
1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 22,222
<SECURITIES> 0
<RECEIVABLES> 277,169
<ALLOWANCES> 4,460
<INVENTORY> 365,949
<CURRENT-ASSETS> 859,552
<PP&E> 4,097,703
<DEPRECIATION> 1,767,234
<TOTAL-ASSETS> 4,720,681
<CURRENT-LIABILITIES> 570,418
<BONDS> 1,766,917
0
0
<COMMON> 27,677
<OTHER-SE> 1,948,604
<TOTAL-LIABILITY-AND-EQUITY> 4,720,681
<SALES> 3,425,173
<TOTAL-REVENUES> 3,425,173
<CGS> 2,798,282
<TOTAL-COSTS> 2,798,282
<OTHER-EXPENSES> 228,001
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 92,804
<INCOME-PRETAX> 306,086
<INCOME-TAX> 114,000
<INCOME-CONTINUING> 192,086
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 192,086
<EPS-PRIMARY> 3.48
<EPS-DILUTED> 3.48
</TABLE>
