PROSPECTUS SUPPLEMENT Rule 424 (b)(2)
- --------------------- Registration No. 333-32647
(TO PROSPECTUS DATED OCTOBER 7, 1997)
$200,000,000
WILLAMETTE INDUSTRIES, INC.
$100,000,000 6.45% DEBENTURES DUE FEBRUARY 1, 2005
$100,000,000 7.00% DEBENTURES DUE FEBRUARY 1, 2018
----------------------------
Interest on the Debentures is payable on February 1 and August 1 of
each year, commencing August 1, 1998. The Debentures are not redeemable prior to
maturity and will not be entitled to any sinking fund.
The Debentures offered hereby will be represented by global Debentures
registered in the name of the nominee of The Depository Trust Company ("DTC").
Beneficial interests in the global Debentures will be shown on, and transfers
thereof will be effected only through, records maintained by DTC and its
participants. Except as described herein, Debentures in definitive form will not
be issued. The Debentures will be issued only in registered form in
denominations of $1,000 and integral multiples thereof. See "Description of the
Debentures."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
=============================================================================================================================
Initial Public Underwriting Proceeds to
Offering Price(1) Discount(2) Company(1)(3)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per 6.45% Debenture Due February 1, 99.800% .625% 99.175%
2005
- -----------------------------------------------------------------------------------------------------------------------------
Total $99,800,000 $625,000 $99,175,000
- -----------------------------------------------------------------------------------------------------------------------------
Per 7.00% Debenture Due February 1, 98.961% .875% 98.086%
2018
- -----------------------------------------------------------------------------------------------------------------------------
Total $98,961,000 $875,000 $98,086,000
=============================================================================================================================
</TABLE>
- ----------------------------
(1) Plus accrued interest, if any, from January 30, 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting estimated expenses of $205,000 payable by the Company.
----------------------------
The Debentures offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that the Debentures will be ready for delivery in book-entry form only through
the facilities of DTC in New York, New York, on or about January 30, 1998,
against payment therefor in immediately available funds.
----------------------------
SALOMON SMITH BARNEY GOLDMAN, SACHS & CO.
January 27, 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
DEBENTURES, INCLUDING PURCHASES OF THE DEBENTURES TO STABILIZE THEIR MARKET
PRICE AND PURCHASES OF THE DEBENTURES TO COVER ANY SHORT POSITION IN THE
DEBENTURES MAINTAINED BY THE UNDERWRITERS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
----------------------------
USE OF PROCEEDS
The net proceeds to be received by the Company from the issue and sale
of the Debentures offered hereby are estimated to be $197,056,000, of which
$100,000,000 will be used to replace notes bearing interest at the rate of 7.00%
per annum which recently matured, $44,500,000 will be used to replace
medium-term notes bearing interest at the weighted average rate of 5.82% per
annum due in the second quarter of 1998, and the balance of which will be used
to repay overnight borrowings classified as long-term debt bearing interest at
market rates. Pending such uses, the proceeds may temporarily replace short-term
maturity borrowings.
THE COMPANY
The Company is a diversified, integrated forest products company which
manufactures unbleached paper products, white paper products and wood-based
building materials at 96 plants located throughout the United States. The
Company also owns a medium density fiberboard plant in Ireland acquired in late
1996 and purchased a 46% ownership interest in a corrugated box plant located
near Mexico City, Mexico, in January 1998. The Company owns or controls
approximately 1.8 million acres of timberland in Arkansas, Louisiana, Missouri,
North Carolina, Oregon, South Carolina, Tennessee, Texas and Washington.
The Company has two business segments. The Paper Group segment
manufactures and sells primary products including kraft liner, corrugating
medium, bag paper, fine paper, hardwood market pulp and specialty printing
papers, and finished products, including corrugated containers, business forms,
cut sheet paper, paper bags and ink. The Building Materials Group segment
manufactures and sells lumber, plywood, oriented strand board ("OSB"),
particleboard, medium density fiberboard ("MDF"), laminated beams, laminated
veneer lumber, wooden I-joists and other value-added wood products.
The Company believes its strengths are its vertical integration; its
geographically diverse, modern, fiber- and energy-efficient facilities; its
concentration on a focused, related product range; its balance among building
materials, fine paper and unbleached paper manufacturing; and an organizational
structure that encourages teamwork as well as individual initiative.
S - 2
<PAGE>
CAPITALIZATION
The following table sets forth as of September 30, 1997, (i) the
historical capitalization of the Company and (ii) the capitalization as adjusted
to reflect the issuance of the Debentures offered hereby and the application of
the net proceeds therefrom after deducting estimated offering expenses and the
underwriting discount.
<TABLE>
September 30, 1997
Actual As Adjusted
------ -----------
(in thousands)
Short-Term Obligations:
Notes payable and current installments on
<S> <C> <C>
long-term debt................................ $ 117,654 $ 117,654
========= =========
Long-Term Obligations:
Long-term debt, net of current installments $1,908,904 $1,708,904(1)
Debentures offered hereby...................... -- 200,000
---------- ----------
Total long-term obligations................. 1,908,904 1,908,904
---------- ----------
Stockholders' Equity:
Preferred stock, $.50 par value................ __ __
Common stock, $.50 par value................... 55,595 55,595
Capital surplus................................ 290,907 290,907
Retained earnings.............................. 1,640,634 1,640,634
--------- ---------
Total stockholders' equity.................. 1,987,136 1,987,136
--------- ---------
Total capitalization................... $3,896,040 $3,896,040
========= =========
</TABLE>
- --------
(1) Repayment of long-term debt in excess of the net proceeds from the
issue and sale of the Debentures will be made from internally generated cash.
S - 3
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The Selected Consolidated Financial Data below should be read in
conjunction with the more detailed information appearing in the Company's annual
report on Form 10-K for the year ended December 31, 1996, and the other
documents available as described under "Incorporation of Certain Documents by
Reference" in the Prospectus. The Selected Consolidated Financial Data for each
of the five years ended December 31, 1996, have been derived from audited
financial statements, certain of which are incorporated by reference herein. The
Selected Consolidated Financial Data for the nine-month periods ended September
30, 1996, and September 30, 1997, are derived from unaudited financial
statements and, in the opinion of management, include all adjustments
(consisting only of normal recurring accruals) necessary to present fairly the
data for such periods. Results for the nine-month period ended September 30,
1997, are not necessarily indicative of the results for the full year.
<TABLE>
====================================================================================================================================
Nine Months Ended
Year Ended December 31, September 30,
- ------------------------------------------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
Summary of Earnings:
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales......................... $2,372,396 $2,622,237 $3,007,949 $3,873,575 $3,425,173 $2,587,578 $2,568,228
- ------------------------------------------------------------------------------------------------------------------------------------
Cost of sales..................... 2,007,703 2,191,448 2,456,437 2,777,735 2,798,282 2,090,505 2,217,449
--------- --------- --------- --------- --------- --------- ---------
- ------------------------------------------------------------------------------------------------------------------------------------
Gross Profit.................... 364,693 430,789 551,512 1,095,840 626,891 497,073 350,779
- ------------------------------------------------------------------------------------------------------------------------------------
Selling and administrative
expenses........................ 167,094 174,413 184,699 201,784 231,862 167,148 181,933
--------- --------- --------- --------- --------- --------- ---------
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Earnings.............. 197,599 256,376 366,813 894,056 395,029 329,925 168,846
- ------------------------------------------------------------------------------------------------------------------------------------
Interest expense.................. 66,422 63,290 71,513 71,050 92,804 64,615 88,248
- ------------------------------------------------------------------------------------------------------------------------------------
Other income (expense)............ (1,725) (3,918) (6,377) 798 3,861 1,712 1,829
--------- --------- --------- --------- --------- --------- ---------
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings before taxes........... 129,452 189,168 288,923 823,804 306,086 267,022 82,427
- ------------------------------------------------------------------------------------------------------------------------------------
Provision for income taxes........ 47,900 78,500 111,300 309,000 114,000 102,269 30,663
--------- --------- --------- --------- --------- --------- ---------
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings before accounting
changes........................ 81,552 110,668 177,623 514,804 192,086 164,753 51,764
- ------------------------------------------------------------------------------------------------------------------------------------
Accounting changes................ -- 26,364 -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
- ------------------------------------------------------------------------------------------------------------------------------------
Net earnings.................... $ 81,552 $ 137,032 $ 177,623 $ 514,804 $ 192,086 $ 164,753 $ 51,764
========== ========= ========== ========== ========== ========== ==========
- ------------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data:
- ------------------------------------------------------------------------------------------------------------------------------------
Working capital................... $ 157,822 $ 157,576 $ 138,528 $ 359,258 $ 289,134 $ 350,167 $ 336,773
- ------------------------------------------------------------------------------------------------------------------------------------
Long-term debt (noncurrent
portion)........................ 843,618 941,710 915,797 790,210 1,766,917 1,716,638 1,908,904
- ------------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity.............. 1,164,828 1,257,870 1,387,865 1,846,890 1,976,281 1,964,273 1,987,136
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets...................... 2,527,416 2,804,553 3,033,398 3,413,555 4,720,681 4,633,942 4,791,072
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Earnings to Fixed
Charges(a)........................ 2.56 3.06 4.25 10.83 3.68 4.38 1.64
====================================================================================================================================
</TABLE>
- ----------------------------
(a) For the purposes of computing the ratio, "earnings" consist of income
before taxes plus fixed charges. "Fixed charges" consist of interest
expense plus one-third of rent expense (which is deemed to be
representative of an interest factor.)
S - 4
<PAGE>
RECENT OPERATING RESULTS
The following table presents operating results for the Company for the
periods indicated. Data for the year ended December 31, 1997, has been taken
from the Company's recent press release of unaudited information and includes
all adjustments that management believes necessary for a fair presentation of
the data.
<TABLE>
Year Ended December 31,
1996 1997
-------- ------
(in thousands)
<S> <C> <C>
Sales................................................. $3,425,173 $3,438,664
Earnings before taxes................................. 306,086 111,263
Net earnings.......................................... 192,086 72,963
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information set forth below should be read in conjunction with the
consolidated financial statements and other information included in the
documents incorporated by reference in the Prospectus.
Paper product markets tend to follow general economic conditions. The
sales and earnings of the building materials are closely related to new housing
starts and remodeling activity and to the availability and terms of financing
for construction. The cost of wood fiber, the basic raw material for both
industry segments, is sensitive to various supply and demand factors, including
environmental issues affecting log supply.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1997 VS. NINE MONTHS
ENDED SEPTEMBER 30, 1996
Net sales remained stable in the first nine months of 1997 compared
with the same period in 1996. Total paper product sales decreased 7.7% as sales
prices decreased in all paper product lines, except hardwood market pulp. The
decrease in sales prices was partially offset by increased unit shipments in all
paper product lines, excluding paper bags and hardwood market pulp, over unit
shipments for the first nine months of 1996.
Building materials sales increased 14.8% over the first nine months of
1996, as unit shipments increased in all paper product lines except plywood.
Volume increases were primarily the result of the acquisition of an MDF plant in
Ireland in November 1996 and a sawmill in Warrenton, Oregon, in May 1996. In
addition, volumes from the Company's converted MDF plant in Eugene, Oregon and
its OSB plant in Arcadia, Louisiana, both of which commenced operations in the
first half of 1996, significantly increased volumes in 1997. Also, sales price
realization increases in lumber and plywood helped to offset price decreases in
OSB, particleboard, and domestic MDF.
Gross profit margins decreased to 13.7% for the first nine months of
1997 from 19.2% for the same period in 1996. Total paper product gross margins
decreased to 12.6% from 21.5% for the first nine months of 1996 reflecting
declining sales prices in all paper product lines, except hardwood market pulp.
Building materials gross margins were 15.5% for the first nine months of 1997,
an increase from 14.0% realized in 1996. The increase in margins is primarily
the result of (i) new markets created from the addition of an MDF plant in
Ireland and export log sales and (ii) increased prices for lumber and plywood
through the first nine months of 1997 as compared to 1996.
Selling and administrative expenses increased $14.8 million or 8.8%
primarily due to expansion of the Company's operations. The ratio of selling and
administrative expenses to net sales increased to 7.1% for the first nine months
of 1997 compared to 6.5% for the same period in 1996.
Interest expense was $88.2 million for the first nine months of 1997
compared to $64.6 million for the first nine months of 1996. In addition,
capitalized interest increased from $7.1 million for the first nine months of
1996 to $13.3 million in 1997. Interest increased due to increased borrowings in
connection with the acquisition of 546,000 acres of
S - 5
<PAGE>
timberland in May 1996. The Company's effective interest rate on average
outstanding debt decreased to 7.05% for the first nine months of 1997 compared
to 7.13% for the same period in 1996.
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. 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 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, 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
fourth quarter start-up of a new laminated veneer lumber facility and relocation
of the Company's custom products division, both in 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 the Company's operations and costs related to 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
1996 acquisition of 546,000 acres of timberland. 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 in
connection with certain significant capital projects.
LIQUIDITY AND CAPITAL RESOURCES
The Company generates funds internally through net earnings adjusted
for noncash charges against earnings such as depreciation, cost of fee timber
harvested and deferred income taxes. Funds generated externally have usually
been through debt financing.
During the first nine months of 1997, the Company had cash flows from
operating activities of $261.5 million, a decrease of 49.5% from the same period
in 1996. The decrease was primarily attributable to a decline in net earnings.
Internally generated cash flows funded 69.0% of total capital expenditures of
$378.9 million in the first nine months of
S - 6
<PAGE>
1997. The total debt-to-capital ratio increased slightly to 50.5% at September
30, 1997 from 49.9% at December 31, 1996. Net working capital was $336.8 million
at September 30, 1997, compared with $289.1 million at December 31, 1996.
The Company believes it has the resources available to meet its
liquidity requirements. Resources include internally generated funds, short-term
borrowing agreements and the unused portion of the $1 billion revolving loan
available under a credit agreement among the Company and a group of banks.
ENVIRONMENTAL MATTERS
The Company believes it is in substantial compliance with federal,
state and local laws regarding the environment.
The Environmental Protection Agency (the "EPA") recently signed the
final rules regarding air and water quality referred to as the "cluster rules."
The final rules are expected to be released during the first quarter of 1998
with implementation essentially required within three years of the date of
issuance. Certain exceptions to the rules extend the time period for specific
compliance requirements up to eight years. The EPA has also adopted an
incentives program which will lengthen the compliance timeline if advanced
technologies that go beyond the cluster rules are implemented.
In addition to the impact of the cluster rules on pulp and paper mills,
the Company's other operations are faced with increasingly stringent
environmental regulations. Based upon regulations either enacted or proposed,
the Company estimates that over the next five years additional capital
expenditures to comply with environmental regulations will not exceed $120
million. Although future environmental capital expenditures cannot be predicted
with any certainty because of continuing changes in laws, the Company believes
that compliance with such environmental regulations will not have a material
adverse effect upon the Company's competitive position.
Much attention has been given to the controversy concerning
preservationists' efforts to stop the harvest of timber from federal timberlands
in the Northwest. With these efforts have come increased regulations,
limitations, and restrictions on the harvest of timber from privately-owned
timberland. Current rules and regulations do not significantly impact the
Company's ability to manage its Oregon timberland on a sustained-yield basis.
FORWARD-LOOKING STATEMENTS
The statements regarding the adequacy of the Company's liquidity
resources and the impact of the cluster rules and other environmental
regulations in "--Liquidity and Capital Resources" and "--Environmental
Matters," respectively, are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
represent management's assessment based on information currently available and
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, construction delays, and risks of non-performance by third parties,
and on the assumption that the Company will not incur significant indebtedness
for acquisition expenditures in excess of projected amounts. The impact of
environmental regulations will depend on the particular environmental
regulations ultimately adopted and the construction and other costs associated
with complying with such regulations. In view of these uncertainties,
prospective investors are cautioned not to place undue reliance on such
forward-looking statements. The Company disclaims any obligation to publicly
announce the results of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
S - 7
<PAGE>
BUSINESS
GENERAL
The Company is a diversified, integrated forest products company with
1997 sales of $3.439 billion (unaudited). The Company manufactures unbleached
paper products, white paper products and wood-based building materials at 96
plants located throughout the United States. The Company also owns an MDF plant
in Ireland acquired in late 1996 and purchased a 46% ownership interest in a
corrugated box plant located near Mexico City, Mexico, in January 1998. The
Company owns or controls approximately 1.8 million acres of timberland in
Arkansas, Louisiana, Missouri, North Carolina, Oregon, South Carolina,
Tennessee, Texas and Washington.
The Company has two business segments. The Paper Group segment
manufactures and sells primary products including kraft liner, corrugating
medium, bag paper, fine paper, hardwood market pulp and specialty printing
papers, and finished products, including corrugated containers, business forms,
cut sheet paper, paper bags and ink. The Building Materials Group segment
manufactures and sells lumber, OSB, plywood, particleboard, MDF, laminated
beams, laminated veneer lumber, wooden I-joists and other value-added wood
products.
The Company believes its strengths are its vertical integration; its
geographically diverse, modern, fiber- and energy-efficient facilities; its
concentration on a focused, related product range; its balance among building
materials, fine paper and unbleached paper manufacturing; and an organizational
structure that encourages teamwork as well as individual initiative.
BUSINESS SEGMENT DATA
The following table sets forth sales and operating earnings data with
respect to the Company's Paper Group and Building Materials Group segments for
the periods indicated. The Company is not dependent on any one significant
customer or group of customers. During the first nine months of 1997,
approximately 90% of the Company's sales were to domestic customers.
<TABLE>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------- -------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
(DOLLAR AMOUNTS IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
Sales to outside customers:
Paper Group:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fabricated paper products.. $ 1,475,593 49% $ 2,128,428 55% $ 1,823,652 53% $ 1,403,664 54% $ 1,273,757 50%
Pulp and paper............. 410,365 14 681,094 18 520,260 15 385,073 15 377,089 15
--------- --- --------- --- --------- --- --------- --- ---------- ---
Total Paper Group..... 1,885,958 63 2,809,522 73 2,343,912 68 1,788,737 69 1,650,846 65
--------- --- --------- --- --------- --- --------- --- ---------- ---
- -----------------------------------------------------------------------------------------------------------------------------------
Building Materials Group:
Lumber..................... 188,445 6 169,753 4 218,153 7 156,995 6 192,196 7
Plywood.................... 441,397 15 428,707 11 378,959 11 281,971 11 280,374 11
Particleboard and MDF...... 292,153 10 272,336 7 277,375 8 201,835 8 266,736 10
Other wood products........ 199,996 6 193,257 5 206,774 6 158,040 6 178,076 7
--------- --- --------- --- --------- --- ---------- --- ---------- ---
Total Building Materials
Group................. 1,121,991 37 1,064,053 27 1,081,261 32 798,841 31 917,382 35
--------- --- --------- --- --------- --- --------- --- ---------- ---
Total net sales....... $ 3,007,949 100% $ 3,873,575 100% $ 3,425,173 100% $2,587,578 100% $ 2,568,228 100%
========= === ========= === ========= === ========== === ========== ===
- ------------------------------------------------------------------------------------------------------------------------------------
Contribution to earnings: (1)
Paper Group.................. $ 124,856 34% $ 707,234 79% $ 306,463 78% $ 262,934 80% $ 75,569 45%
Building Materials Group..... 241,957 66 186,822 21 88,566 22 66,991 20 93,277 55
--------- --- ----------- --- --------- --- ---------- --- ---------- ---
Contribution to earnings $ 366,813 100% $ 894,056 100% $ 395,029 100% $ 329,925 100% $ 168,846 100%
======= === =========== === ========= === ========== === ========== ===
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------------
(1) "Contribution to earnings" is defined to be that amount of earnings
generated before (a) unallocable income, such as interest, (b) interest
expense, and (c) income taxes.
S - 8
<PAGE>
PAPER GROUP
Market Pulp and Fine Paper. The Company manufactures hardwood market
pulp, which is sold to outside customers, at its facility in Hawesville,
Kentucky. Fine paper is produced at a fine paper mill at the Hawesville facility
and at mills in Johnsonburg, Pennsylvania; Kingsport, Tennessee; and Marlboro
County, South Carolina. In 1996, the Company made 4.3% of the hardwood market
pulp produced in the U.S and accounted for 8.0% of the nation's fine paper
production. Chips from nearby sawmills and plywood plants serve as the primary
fiber source for the Company's fine paper mills. The Company's timberland in
Tennessee and the Carolinas also serves as a source of fiber.
Unbleached Paper. Four Company paper mills accounted for 4.8% of the
1996 U.S. production of linerboard, corrugating medium and bag paper. Nearly all
of the Company's production of these products is used by the Company's box and
bag manufacturing plants or is traded for their needs. In Louisiana and Oregon,
the Company's plywood plants, sawmills, and timberland can provide nearly all of
its chip needs for its linerboard mills. Recycled fiber, in the form of used
corrugated containers, provided 59.7% of the fiber used by the four mills in
1996.
Office Papers. The Company's seven business forms plants manufactured
8.1% of the forms produced in the U.S. in 1996. These forms, mostly long-run
continuous computer forms, along with Willcopy(R), the Company's photocopy and
cut-sheet printer paper produced at its four cut-sheet facilities, are marketed
by 73 Company sales and distribution centers nationwide. In 1996, the Company's
cut sheets accounted for 10.9% of the nation's production.
Corrugated Containers and Sheets. Corrugated containers and sheets
manufactured by the Company's 34 corrugated container plants accounted for 5.6%
of 1996 U.S. corrugated container production. Products range from eye-catching
preprinted boxes to sturdy wax-coated shipping containers to plain brown boxes.
Corrugated containers are marketed by the Company's sales force to a variety of
industrial and agricultural customers.
Bags. The Company's four bag plants made 12.1% of the paper bags
produced in the U.S. in 1996. Bags are marketed to grocery, department, drug and
hardware stores in the West, Midwest and South by the Company's sales force.
BUILDING MATERIALS GROUP
Structural Panels and Lumber. Plywood products, totaling 6.5% of the
nation's 1996 structural panel production, are manufactured at the Company's 10
plants in Arkansas, the Carolinas, Louisiana and Oregon. The Company's OSB plant
in Louisiana began production in April 1996. In 1996, the Company's seven
sawmills in Arkansas, Louisiana and Oregon accounted for 1.6% of U.S. lumber
production. Structural panels and lumber products are marketed through
independent wholesalers and distributors throughout the United States.
Composite Board. Four Company particleboard plants in Louisiana and
Oregon accounted for 12.3% of U.S. particleboard production in 1996. The
Company's three MDF plants in Arkansas, Oregon and South Carolina made 21.5% of
the MDF produced in the U.S. in 1996. The MDF facility in Ireland acquired in
November 1996 accounted for 6.4% of European production. These plants also
produce value-added products such as color-coated, woodgrain-printed, fire-rated
and moisture-resistant boards. Composite board products are sold nationwide
through independent wholesalers and distributors.
Engineered Wood Products. The Company's three laminated beam plants in
Oregon and Louisiana accounted for 31.2% of the 1996 U.S. production. Two
laminated veneer lumber plants and one wooden I-joist plant, all located in
Oregon, manufactured 5.2% and 3.9%, respectively, of the laminated veneer lumber
and wooden I-joists produced in the U.S. in 1996. Engineered wood products, both
stock and custom-made, are sold nationwide and internationally.
S - 9
<PAGE>
CAPITAL INVESTMENT
The Company is continuously making capital expenditures at its
manufacturing facilities to improve fiber utilization and labor efficiency and
to expand production capacity. In 1996 and 1997, the Company's capital
expenditures, including environmental capital expenditures, aggregated $454.7
million and $506.3 million, respectively. At December 31, 1996, the estimated
cost of major capital projects in progress was approximately $923.8 million of
which $384.9 million had been spent.
TIMBER RESOURCES
The Company's 1.840 million acres of timberland supply 56% of its
long-term log needs. The remainder is purchased through government and private
timber sales and open market purchases. The Company manages its own timberland
to supply 85-90% of the saw logs for its Pacific Northwest operations and 30-35%
of the long-term saw logs needed for its Southern operations. The Company's
timberland is distributed geographically as follows: 735,000 acres in Louisiana,
Arkansas and Texas; 727,000 acres in Oregon and Washington; and 378,000 acres in
Tennessee, Missouri and the Carolinas.
ENERGY
The Company's manufacturing facilities are able to generate 57% of
their total energy needs through cogeneration, burning waste materials and
recycling spent pulping liquors.
EMPLOYEES
The Company has approximately 13,800 employees. Approximately 52% of
the employees are represented by labor unions with which the Company has
collective bargaining agreements.
DESCRIPTION OF THE DEBENTURES
The following information concerning the 6.45% Debentures Due February
1, 2005 (the "6.45% Debentures"), and the 7.00% Debentures Due February 1, 2018
(the "7.00% Debentures"), offered hereby supplements and should be read in
conjunction with the statements in the Prospectus under the caption "Description
of the Debt Securities." Capitalized terms not otherwise defined herein shall
have the meanings given to them in the Prospectus.
GENERAL
The Debentures will be issued as unsecured obligations of the Company
in an aggregate principal amount of $200,000,000. The 6.45% Debentures will be
limited to $100,000,000 aggregate principal amount and will mature on February
1, 2005. The 7.00% Debentures will be limited to $100,000,000 aggregate
principal amount and will mature on February 1, 2018.
The Debentures will bear interest from January 30, 1998, payable
semi-annually in arrears on each February 1 and August 1, commencing August 1,
1998, at the rates per annum set forth on the cover page of this Prospectus
Supplement, to the persons in whose names the Debentures are registered on the
preceding January 15 and July 15, respectively.
The Debentures may not be redeemed by the Company prior to maturity and
are not entitled to the benefits of any sinking fund.
The Debentures are subject to the provisions of the Indenture relating
to defeasance and covenant defeasance as described in the Prospectus under
"Description of the Debt Securities--Defeasance and Covenant Defeasance."
S - 10
<PAGE>
BOOK-ENTRY SYSTEM
The 6.45% Debentures and the 7.00% Debentures will be represented by
Global Securities that will be deposited with, or on behalf of, DTC and
registered in the name of a nominee of DTC.
DTC has advised the Company and the Underwriters as follows: DTC is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code and a "clearing agency" registered pursuant
to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC was
created to hold securities of its participating organizations ("participants")
and to facilitate the clearance and settlement of securities transactions, such
as transfers and pledges, among its participants, thereby eliminating the need
for physical movement of securities certificates. Participants include
securities brokers and dealers (including the Underwriters), banks, trust
companies, clearing corporations and certain other organizations, some of whom
(and/or their representatives) own DTC. Access to DTC's book-entry system is
also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly. Persons who are not participants may beneficially
own securities held by DTC only through participants.
The Debentures will not be transferable or exchangeable for Debentures
in certificated form except under the limited circumstances described in the
Prospectus under "Description of the Debt Securities--Book-Entry Debt
Securities."
A further description of DTC's procedures with respect to the
Debentures is set forth in the Prospectus under "Description of the Debt
Securities--Book-Entry Debt Securities."
S - 11
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to each of the Underwriters named
below, and each of the Underwriters has severally agreed to purchase, the
principal amount of the Debentures set forth opposite its name below:
<TABLE>
====================================================================================================================================
PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF
UNDERWRITER 6.45% DEBENTURES 7.00% DEBENTURES
-----------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Salomon Brothers Inc .......................................... $50,000,000 $50,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
Goldman, Sachs & Co. .......................................... 50,000,000 50,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total ....................................... $100,000,000 $100,000,000
=========== ===========
====================================================================================================================================
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Debentures, if any are
taken.
The Underwriters propose to offer the 6.45% Debentures in part directly
to the public at the initial public offering price set forth on the cover page
of this Prospectus Supplement and in part to certain securities dealers at such
price less a concession of 0.375% of the principal amount of the 6.45%
Debentures. The Underwriters may allow, and such dealers may reallow, a
concession not to exceed 0.250% of the principal amount of the 6.45% Debentures
to certain brokers and dealers. After the 6.45% Debentures are released for sale
to the public, the offering price and other selling terms may from time to time
be varied by the Underwriters.
The Underwriters propose to offer the 7.00% Debentures in part directly
to the public at the initial public offering price set forth on the cover page
of this Prospectus Supplement and in part to certain securities dealers at such
price less a concession of 0.500% of the principal amount of the 7.00%
Debentures. The Underwriters may allow, and such dealers may reallow, a
concession not to exceed 0.250% of the principal amount of the 7.00% Debentures
to certain brokers and dealers. After the 7.00% Debentures are released for sale
to the public, the offering price and other selling terms may from time to time
be varied by the Underwriters.
The Debentures are new issues of securities with no established trading
market. The Company has been advised by the Underwriters that they intend to
make a market in the Debentures but are not obligated to do so and may
discontinue market making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Debentures.
In connection with this offering, certain Underwriters and their
affiliates may engage in transactions that stabilize, maintain or otherwise
affect the market price of the Debentures. Such transactions may include
stabilization transactions effected in accordance with Rule 104 of Regulation M,
pursuant to which such persons may bid for or purchase Debentures for the
purpose of stabilizing their market price. The Underwriters also may create a
short position for the account of the Underwriters by selling more Debentures in
connection with the offering than they are committed to purchase from the
Company, and in such case may purchase Debentures in the open market following
completion of the offering to cover such short position. Any of the transactions
described in this paragraph may result in the maintenance of the price of the
Debentures at a level above that which might otherwise prevail in the open
market. None of the transactions described in this paragraph is required, and,
if they are undertaken, they may be discontinued at any time.
S - 12
<PAGE>
In the ordinary course of their respective businesses, certain of the
Underwriters and their affiliates engage and may in the future engage in
investment banking and commercial banking activities with the Company and its
subsidiaries.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
VALIDITY OF THE DEBENTURES
The validity of the Debentures will be passed upon for the Company by
Miller, Nash, Wiener, Hager & Carlsen LLP, Portland, Oregon, and for the
Underwriters by Sullivan & Cromwell, Los Angeles, California. Sullivan &
Cromwell will rely on Miller, Nash, Wiener, Hager & Carlsen LLP as to all
matters governed by Oregon law.
S - 13
<PAGE>
PROSPECTUS [LOGO]
$500,000,000
WILLAMETTE INDUSTRIES, INC.
Senior Debt Securities
-----------------
Willamette Industries, Inc. (the "Company") may offer, from time to
time, unsecured senior debt securities ("Debt Securities") consisting of
debentures, notes or other unsecured evidences of indebtedness, in one or more
series and in amounts, at prices and on terms to be determined at or prior to
the time of sale.
Specific terms of the particular Debt Securities in respect of which
this Prospectus is delivered (the "Offered Securities") will be set forth in an
accompanying Prospectus Supplement or Supplements, together with the terms of
the offering of the Offered Securities, the initial price thereof and the
estimated net proceeds from the sale thereof. The Prospectus Supplement will set
forth with regard to the particular Offered Securities, without limitation, the
designation, aggregate principal amount, denomination, maturity, premium, if
any, exchange, conversion, redemption or sinking fund provisions, if any,
interest rate (which may be fixed or variable), the time and method of
calculating interest payments, put options, if any, public offering price, and
other specific terms of the offering.
The Company may sell the Offered Securities directly, through agents
designated from time to time or through underwriters or dealers. See "Plan of
Distribution." If any agents, underwriters, or dealers are involved in the sale
of the Offered Securities, the names of such agents, underwriters, or dealers
and any applicable commissions and discounts will be set forth in the related
Prospectus Supplement.
This Prospectus may not be used to consummate sales of Offered
Securities unless accompanied by a Prospectus Supplement.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is October 7, 1997.
- 1 -
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, ANY ACCOMPANYING
PROSPECTUS SUPPLEMENT OR THE DOCUMENTS INCORPORATED OR DEEMED INCORPORATED BY
REFERENCE HEREIN, AND ANY INFORMATION OR REPRESENTATIONS NOT CONTAINED HEREIN OR
THEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE
WILLAMETTE TRUSTS OR BY ANY AGENT, DEALER OR UNDERWRITER. THIS PROSPECTUS AND
ANY ACCOMPANYING PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "1934 Act") and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC"). Reports, proxy statements and
other information concerning the Company can be inspected and copied at the
SEC's Public Reference Room, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, DC 20549, as well as the Regional Offices of the SEC at 7 World
Trade Center, Suite 1300, New York, New York 10048 and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such material can be obtained from the Public Reference Section of the
SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, at
prescribed rates. The SEC also maintains a Web site that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the SEC. The address of such site is http://www.sec.gov.
Such reports, proxy statements and other information may also be inspected at
the offices of the NYSE, on which Common Stock is traded, at 20 Broad Street,
New York, New York 10005.
This Prospectus constitutes a part of a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company and the Willamette Trusts with the SEC under
the Securities Act of 1933, as amended (the "Securities Act") with respect to
the Offered Securities. This Prospectus does not contain all of the information
set forth in such Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. Reference is made to such
Registration Statement and to the exhibits relating thereto for further
information with respect to the Company and the Offered Securities. Any
statements contained herein concerning the provisions of any document filed as
an exhibit to the Registration Statement or otherwise filed with the SEC or
incorporated by reference herein are not necessarily complete, and in each
instance reference is made to the copy of such document so filed for a more
complete description of the matter involved. Each such statement is qualified in
its entirety by such reference.
The Company will send to all registered holders of the Offered
Securities such annual and other reports as are sent to its shareholders in
conformity with the requirements of the 1934 Act.
- 2 -
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the SEC pursuant to
the 1934 Act are incorporated by reference herein and made a part hereof:
1. Annual Report on Form 10-K for the year ended December 31, 1996.
2. The Company's quarterly reports on Form 10-Q for the quarters ended
March 31, 1997, and June 30, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the 1934 Act subsequent to the date hereof and prior to the
termination of the offering of the Offered Securities pursuant hereto shall be
deemed to be incorporated by reference in this Prospectus or in any Prospectus
Supplement and to be a part hereof from the date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed
to be incorporated by reference in this Prospectus or in any Prospectus
Supplement shall be deemed to be modified or superseded for purposes of this
Prospectus or any Prospectus Supplement to the extent that a statement contained
in this Prospectus or in any Prospectus Supplement or in any other subsequently
filed document which also is or is deemed to be incorporated by reference in
this Prospectus or in any Prospectus Supplement modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus or any
Prospectus Supplement.
The Company undertakes to provide without charge to each person to whom
a copy of this Prospectus has been delivered, upon the written or oral request
of any such person, a copy of any or all of the foregoing documents incorporated
herein by reference, other than exhibits to such documents (unless such exhibits
are specifically incorporated by reference into such documents). Such requests
should be directed to: Willamette Industries, Inc., 1300 S.W. Fifth Avenue,
Suite 3800, Portland, Oregon 97201, Telephone: (503) 227-5581, Attention:
Investor Relations.
THE COMPANY
The Company is a diversified, integrated forest products company which
manufactures unbleached paper products, white paper products, and wood-based
building materials at 97 locations located throughout the United States and in
Ireland. The Company owns or controls approximately 1.8 million acres of
timberland in Arkansas, Louisiana, Missouri, North Carolina, Oregon, South
Carolina, Tennessee, Texas, and Washington.
The Company was incorporated in Oregon in 1906. Its executive offices
are located at 1300 S.W. Fifth Avenue, Suite 3800, Portland, Oregon 97201, and
its telephone number is (503) 227-5581.
USE OF PROCEEDS
Unless otherwise indicated in a Prospectus Supplement with respect to
the proceeds from the sale of the particular Offered Securities to which such
Prospectus Supplement relates, the Company intends to add the net proceeds
received by it from the sale of Offered Securities to its general funds, to be
used for general corporate purposes, including capital expenditures, working
capital, and repayment of debt.
- 3 -
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratio of earnings to fixed
charges for the periods indicated.
<TABLE>
Six Months
Ended June 30, Year Ended December 31,
------------------- -----------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges (1)(2)................. 1.59 5.46 3.68 10.83 4.25 3.06 2.56
</TABLE>
(1) The Company has authority to issue up to 5,000,000 shares of Preferred
Stock; there are currently no shares outstanding and the Company
currently does not have a Preferred Stock dividend obligation.
Therefore, the Ratio of Combined Earnings to Fixed Charges and
Preferred Stock Dividends is equal to the Ratio of Earnings to Fixed
Charges and is not disclosed separately.
(2) For purposes of computing the ratio, "earnings" consist of income
before income taxes, plus fixed charges. "Fixed charges" consist of
interest expense plus one-third of rent expense (which is deemed
representative of an interest factor).
DESCRIPTION OF THE DEBT SECURITIES
The particular terms of the Debt Securities offered by any Prospectus
Supplement and the extent, if any, to which such general provisions may apply to
the Debt Securities so offered will be described in the Prospectus Supplement
relating to such Debt Securities.
Debt Securities may be issued, from time to time, in one or more
series. Debt Securities will be issued under an Indenture dated January 30, 1993
(the "Indenture"), between the Company and The Chase Manhattan Bank, as trustee
(the "Trustee").
The following summary of certain provisions of the Debt Securities and
the Indenture do not purport to be complete and are subject to, and are
qualified in their entirety by express reference to, all the provisions of the
Indenture, including the definitions therein of certain terms. Certain
capitalized terms herein are defined in the Indenture.
GENERAL
The Debt Securities will be unsecured obligations of the Company. The
Indenture does not limit the aggregate principal amount of Debt Securities which
may be issued thereunder and provides that Debt Securities may be issued
thereunder, from time to time, in one or more series.
The Prospectus Supplement relating to the Offered Securities will
specify, among other things: (1) the title of the Offered Securities; (2) any
limit on the aggregate principal amount of the Offered Securities; (3) the date
or dates on which the Offered Securities will mature; (4) the rate or rates
(which may be fixed or variable) per annum at which the Offered Securities will
bear interest or the method by which such rate or rates shall be determined and
the date from which such interest will accrue or the method by which such date
shall be determined; (5) the dates on which any such interest will be payable
- 4 -
<PAGE>
and the Regular Record Dates for such Interest Payment Dates; (6) the dates, if
any, on which, and the price or prices at which, the Offered Securities may,
pursuant to any mandatory or optional sinking fund provisions, be redeemed by
the Company and other detailed terms and provisions of such sinking funds; (7)
the date, if any, after which, and the price or prices at which, the Offered
Securities may, pursuant to any optional redemption provisions, be redeemed at
the option of the Company or of the Holder thereof and other detailed terms and
provisions of such optional redemption; (8) the right of the Company, if any, to
defer payment of interest on the Offered Securities and the maximum length of
any such deferral period; (9) the right of Holders, if any, to put the Offered
Securities to the Company; (10) the currency unit, if other than United States
dollars, of payment of principal, and premium and interest, if any, on the
Offered Securities; (11) the applicability of certain provisions of the
Indenture as described under "Defeasance and Covenant Defeasance"; and (12) any
other terms of the Offered Securities (which terms shall not be inconsistent
with the Indenture).
Unless otherwise indicated in the Prospectus Supplement relating
thereto, the principal of, and any premium or interest, if any, on, the Offered
Securities will be payable, and the Offered Securities will be exchangeable and
transfers thereof will be registrable, at the Place of Payment, provided 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 it appears in the Security
Register.
Unless otherwise indicated in the Prospectus Supplement relating
thereto, the Offered Securities will be issued in United States dollars in fully
registered form, without coupons, in denominations of $1,000 or any integral
multiple thereof. No service charge will be made for any transfer or exchange of
the Offered Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
CERTAIN COVENANTS OF THE COMPANY
For purposes of the descriptions of the Debt Securities, certain
defined terms have the following meanings:
"Subsidiary" of the Company is defined as a corporation more than 50%
of the outstanding voting stock of which is owned, directly or indirectly, by
the Company and/or one or more Subsidiaries of the Company. "Restricted
Subsidiary" is defined as a Subsidiary of the Company substantially all the
property of which is located, or substantially all the business of which is
carried on, within the present 50 states of the United States or in Canada and
which owns a Principal Property, excluding, however, any Subsidiary of the
Company which is primarily engaged in the development and sale or financing of
real property. "Principal Property" is defined as (i) any mill, converting
plant, manufacturing plant, or other facility owned by the Company or a
Restricted Subsidiary which is located within the present 50 states of the
United States or in Canada and the gross book value of which (without deduction
of any depreciation reserves) on the date as of which the determination is made
exceeds 1% of Consolidated Net Tangible Assets, and (ii) Timberlands other than
those being held primarily for development or sale; such property, however, will
exclude (a) any property which in the opinion of the Board of Directors of the
Company is not of material importance to the total business conducted by the
Company and its Restricted Subsidiaries as an entirety or (b) any portion of a
particular property which is similarly found not to be of material importance to
the use or operation of such property or (c) any oil, gas or other minerals or
mineral rights. "Attributable Debt" is defined as the total net amount of rent
required to be paid during the remaining primary term of certain leases,
discounted at the rate of 15% per annum. "Consolidated Net Tangible Assets" is
defined as the aggregate amount of assets after deducting (i) all liabilities,
other than deferred income taxes, Funded Debt and shareholders' equity, and (ii)
goodwill and like intangibles, of the Company and its consolidated Subsidiaries.
"Funded Debt" is defined as all indebtedness for
- 5 -
<PAGE>
money borrowed having a maturity of more than 12 months from the date as of
which the determination is made (or being renewable beyond such period) and
rental obligations (at the amount capitalized) payable more than 12 months from
such date under capitalized leases.
Restrictions on Secured Debt
The Indenture provides that the Company may not, nor may it permit any
Restricted Subsidiary to, create, assume or guarantee any loan or evidence of
indebtedness for money borrowed ("Debt") secured by a mortgage, pledge or lien
("Mortgage") on any Principal Property of the Company or any Restricted
Subsidiary, or on any share of Capital Stock or Debt of any Restricted
Subsidiary, without securing or causing such Restricted Subsidiary to secure the
Debt Securities equally and ratably with (or, at the Company's option, prior to)
such secured Debt, unless the aggregate amount of all such secured Debt,
together with all Attributable Debt with respect to sale and leaseback
transactions involving Principal Properties (with the exception of such
transactions which are excluded as described in "Restrictions on Sale and
Leaseback Transactions" below), would not exceed 10% of Consolidated Net
Tangible Assets.
This restriction does not apply to, and there shall be excluded from
secured Debt in any computation under such restriction, Debt secured by: (a)
Mortgages on property of, or on any shares of Capital Stock of or Debt of, any
corporation existing at the time such corporation becomes a Restricted
Subsidiary, (b) Mortgages in favor of the Company or a Restricted Subsidiary,
(c) Mortgages in favor of governmental bodies to secure progress or advance
payments, (d) Mortgages on property, shares of stock or Debt existing at the
time of acquisition thereof (including acquisition through merger or
consolidation) and purchase money and construction Mortgages which are entered
into within specified time limits, (e) Mortgages securing industrial revenue or
pollution control bonds, and (f) any extension, renewal or refunding of any
Mortgages referred to in the foregoing clauses (a) through (e), inclusive.
Restrictions on Sale and Leaseback Transactions
The Indenture provides that neither the Company nor any Restricted
Subsidiary may enter into any sale and leaseback transaction involving any
Principal Property, unless the aggregate amount of all Attributable Debt with
respect to such sale and leaseback transactions, plus all secured Debt (with the
exception of secured Debt which is excluded as described in "Restrictions on
Secured Debt" above), would not exceed 10% of Consolidated Net Tangible Assets.
This restriction does not apply to, and there shall be excluded from
Attributable Debt in any computation under such restriction, any sale and
leaseback transaction if (a) the lease is for a period, including renewal
rights, of not in excess of three years, (b) the sale or transfer of the
Principal Property is made within a specified period after its acquisition or
construction, (c) the lease secures or relates to industrial revenue or
pollution control bonds, (d) the transaction is between the Company and a
Restricted Subsidiary or between Restricted Subsidiaries or (e) the Company or
such Restricted Subsidiary, within 180 days after the sale is completed, applies
to the retirement of Funded Debt of the Company or a Restricted Subsidiary, or
the purchase of other property which will constitute Principal Property of a
value at least equal to the value of the Principal Property leased, an amount
not less than the greater of (i) the net proceeds of the sale of the Principal
Property leased or (ii) the fair market value of the Principal Property leased;
provided that the amount of proceeds to be applied to the retirement of Funded
Debt shall be reduced by an amount, if any, equal to the principal amount of
debentures or notes (including the Debt Securities) of the Company or a
Restricted Subsidiary surrendered for cancellation to the applicable trustee
thereof and the principal amount of other Funded Debt voluntarily retired, in
each case within 180 days after such sale.
- 6 -
<PAGE>
Restrictions on Funded Debt of Restricted Subsidiaries
The Indenture provides that the Company may not permit any Restricted
Subsidiary to create, assume or guarantee any Funded Debt except (i) Funded Debt
owed to the Company or a Restricted Subsidiary, (ii) Funded Debt secured by
Mortgages permitted as described under "Restrictions on Secured Debt," (iii)
Funded Debt of any corporation outstanding at the time such corporation became a
Restricted Subsidiary, (iv) Funded Debt of any person outstanding at the time of
its acquisition, or the acquisition of substantially all its properties, by such
Restricted Subsidiary, (v) Funded Debt incurred in connection with certain
refundings, (vi) Funded Debt constituting Attributable Debt permitted as
described under "Restrictions on Sale and Leaseback Transactions" and (vii) any
other Funded Debt if the aggregate principal amount of all Funded Debt of all
Restricted Subsidiaries permitted under this clause (vii) does not exceed 10% of
Consolidated Net Tangible Assets.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to
the Debt Securities of any series: (a) default in the payment of principal of or
any premium on any Debt Security of that series when due; (b) default in the
payment of any interest on any Debt Security of that series when due continued
for 30 days; (c) default in the deposit of any sinking fund payment, when due,
in respect of any Debt Security of that series; (d) default in the performance
of any other covenant of the Company in the Indenture (other than a covenant
included in the Indenture solely for the benefit of a series of the Debt
Securities other than that series), continued for 90 days after written notice
as provided in the Indenture; (e) certain events in bankruptcy, insolvency or
reorganization; and (f) any other Event of Default provided with respect to Debt
Securities of a particular series. No Event of Default with respect to the Debt
Securities of a particular series necessarily constitutes an Event of Default
with respect to the Debt Securities of any other series.
If an Event of Default with respect to the Debt Securities of any
series at the time Outstanding occurs and is continuing, either the Trustee or
the Holders of at least 25% in aggregate principal amount of the Outstanding
Debt Securities of that series may declare the principal amount (or, if the Debt
Securities of that series are original issue discount Debt Securities, such
portion of the principal amount as may be specified in the terms of that series)
of all the Debt Securities of that series to be due and payable immediately. At
any time after a declaration of acceleration with respect to the Debt Securities
of any series has been made, but before a judgment or decree based on
acceleration has been obtained, the Holders of a majority in principal amount of
the Outstanding Debt Securities of that series may, under certain circumstances,
rescind and annul such acceleration.
The Indenture provides that, subject to the duty of the Trustee during
the continuance of an Event of Default to act with the required standard of
care, the Trustee will be under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any of the Holders,
unless such Holders shall have offered to the Trustee reasonable indemnity.
Subject to such provisions for the indemnification of the Trustee, the Holders
of a majority in principal amount of the Outstanding Debt Securities of any
series will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred on the Trustee, with respect to the Debt Securities of that
series. The right of a Holder of any Debt Security to institute a proceeding
with respect to the Indenture is subject to certain conditions precedent, but
each Holder has an absolute right to receive payment of principal or premium and
interest, if any, when due and to institute suit for the enforcement of any such
payment.
- 7 -
<PAGE>
The Company is required to furnish to the Trustee annually a statement
as to the performance by the Company of its obligations under the Indenture and
as to any default in such performance.
The Debt Securities may be issued as Original Issue Discount Securities
to be offered and sold at a substantial discount below their principal amount.
Special federal income tax, accounting and other considerations applicable to
any such Original Issue Discount Securities will be described in any Prospectus
Supplement relating thereto. "Original Issue Discount Security" means any
security which provides for an amount less than the principal amount thereof to
be due and payable upon a declaration of acceleration of the maturity thereof as
a result of the occurrence of an Event of Default and the continuation thereof.
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in
the form of one or more Global Securities (as such term is defined below) that
will be deposited with, or on behalf of, a Depositary ("Depositary") or its
nominee identified in the applicable Prospectus Supplement. In such a case, one
or more Global Securities will be issued in a denomination or aggregate
denomination equal to the portion of the aggregate principal amount of
outstanding Debt Securities of the series to be represented by such Global
Security or Global Securities. Unless and until it is exchanged in whole or in
part for Debt Securities in registered form, a Global Security may not be
registered for transfer or exchange except as a whole by the Depositary for such
Global Security to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by such
Depositary or any nominee to a successor Depositary or a nominee of such
successor Depositary and except in the circumstances described in the applicable
Prospectus Supplement. The term "Global Security", when used with respect to any
series of Debt Securities, means a Debt Security that is executed by the Company
and authenticated and delivered by the Trustee to the Depositary or pursuant to
the Depositary's instruction, which shall be registered in the name of the
Depositary or its nominee and which shall represent, and shall be denominated in
an amount equal to the aggregate principal amount of, all of the Outstanding
Debt Securities of such series or any portion thereof, in either case having the
same terms, including, without limitation, the same original issue date, date or
dates on which principal is due, and interest rate or method of determining
interest.
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the applicable Prospectus Supplement. The Company expects
that the following provisions will apply to depositary arrangements. Unless
otherwise specified in the applicable Prospectus Supplement, Debt Securities
which are to be represented by a Global Security to be deposited with or on
behalf of a Depositary will be represented by a Global Security registered in
the name of such Depositary or its nominee. Upon the issuance of such Global
Security, and the deposit of such Global Security with or on behalf of the
Depositary for such Global Security, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Debt Securities represented by such Global Security to the accounts of
institutions that have accounts with such Depositary or its nominee
("participants"). The accounts to be credited will be designated by the
underwriters or agents of such Debt Securities or, if such Debt Securities are
offered and sold directly by the Company, by the Company. Ownership of
beneficial interests in such Global Security will be limited to participants or
Persons that may hold interests through participants. Ownership of beneficial
interests by participants in such Global Security will be shown on, and the
transfer of that ownership interest will be effected only through, records
maintained by the Depositary or its nominee for such Global Security. Ownership
of beneficial interests in such Global Security by Persons that hold through
participants will be shown on, and the transfer of that ownership interest
within such participant will be effected only through, records maintained by
such participant.
- 8 -
<PAGE>
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in certificated form. The foregoing
limitations and such laws may impair the ability to transfer beneficial
interests in such Global Securities.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or Holder of the Securities
represented by such Global Security for all purposes under the Indenture. Unless
otherwise specified in the applicable Prospectus Supplement, owners of
beneficial interests in such Global Security will not be entitled to have Debt
Securities of the series represented by such Global Security registered in their
names, will not receive or be entitled to receive physical delivery of Debt
Securities of such series in certificated form and will not be considered the
Holders thereof for any purposes under the Indenture. Accordingly, each Person
owning a beneficial interest in such Global Security must rely on the procedures
of the Depositary and, if such Person is not a participant, on the procedures of
the participant through which such Person owns its interest, to exercise any
rights of a Holder under the Indenture. The Company understands that under
existing industry practices, if the Company requests any action of Holders or an
owner of a beneficial interest in such Global Security desires to give any
notice or take any action a Holder is entitled to give or take under the
Indenture, the Depositary would authorize the participants to give such notice
or take such action, and participants would authorize beneficial owners owning
through such participants to give such notice or take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
Principal of and any premium and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of the Holders of any of the
Outstanding Debt Securities under the Indenture, may consolidate with or merge
into, or transfer its assets substantially as an entirety to, any corporation
organized under the laws of any domestic jurisdiction, and any other person may
consolidate with, or merge into, or transfer its assets substantially as an
entirety to the Company provided that (i) the successor corporation (if any)
assumes the Company's obligations on the Debt Securities and under the
Indenture, (ii) after giving effect to the transaction and treating any
indebtedness which becomes an obligation of the Company or a Subsidiary as a
result of such transaction as having been incurred by the Company or the
Subsidiary at the time of such transaction, no Event of Default, and no event
which, after notice or lapse of time, would become an Event of Default, shall
have occurred and be continuing, (iii) if as a result of the transaction a
Principal Property would become subject to a Mortgage which would not be
permitted by the Indenture, the Debt Securities shall be secured equally with
(or prior to) the indebtedness secured thereby, and (iv) certain other
conditions are met.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides, if such provision is made applicable to the
Debt Securities of any series (which will be indicated in the Prospectus
Supplement) that the Company may elect either (a) to defease and be discharged
from any and all obligations in respect of the Debt Securities of such series
(except for certain obligations to register the transfer or exchange of Debt
Securities of such series, to replace mutilated, destroyed, lost or stolen Debt
Securities of such series, to maintain paying agencies and to hold moneys for
payment in trust) ("defeasance") or (b) to be released from its obligations with
respect to the Debt Securities of such series under certain restrictive
covenants of the Indenture, including those described under "Certain Covenants
of the Company" and "Consolidation, Merger and Sale of Assets" ("covenant
defeasance"), and the occurrence of an event described in clause (d) under
"Events of Default"
- 9 -
<PAGE>
shall no longer be an Event of Default with respect to the Debt Securities of
such series, in each case, if the Company deposits, in trust, with the Trustee
money and/or Government Obligations, which through the payment of interest
thereon and principal thereof in accordance with their terms will provide money
in an amount sufficient, without reinvestment, to pay the principal of and any
premium and interest on the Outstanding Debt Securities of such series and any
mandatory sinking fund payments or analogous payments in accordance with the
terms of the Outstanding Debt Securities of such series and the Indenture. Such
a trust may only be established if, among other things, (i) no Event of Default
or event which with the giving of notice or lapse of time, or both, would become
an Event of Default with respect to such series under the Indenture shall have
occurred and be continuing on the date of such deposit, (ii) such deposit will
not cause the Trustee to have any conflicting interest with respect to other
securities of the Company and (iii) the Company shall have delivered an Opinion
of Counsel to the effect that the Holders will not recognize income, gain or
loss for federal income tax purposes as a result of such defeasance and will be
subject to federal income tax on the same amounts, in the same manner, and at
the same times as if such defeasance had not occurred. In the event the Company
exercises its covenant defeasance option with respect to the Debt Securities of
any series and the Debt Securities of such series are declared due and payable
because of the occurrence of any Event of Default, the amount of money and
Government Obligations on deposit with the Trustee will be sufficient to pay
amounts due on the Debt Securities of such series at the time of their Stated
Maturity but may not be sufficient to pay amounts due on the Debt Securities of
such series at the time of the acceleration resulting from such Event of
Default. However, the Company will remain liable with respect to such payments.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the
Company and the Trustee with the consent of the Holders of a majority in
principal amount of the Outstanding Debt Securities of each series affected by
such modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each Outstanding Debt
Security affected thereby, (a) change the stated maturity date of the principal
of, or any installment of principal of or interest, if any, on, any Debt
Security, (b) reduce the principal amount of, or premium or rate of interest, if
any, on, any Debt Security, (c) reduce the amount of principal of an original
issue discount Debt Security payable upon acceleration of the maturity thereof,
(d) change the place or currency of payment of principal of, or premium or
interest, if any, on, any Debt Security, (e) impair the right to institute suit
for the enforcement of any payment on or with respect to any Debt Security, (f)
change the provisions for defeasance or covenant defeasance (each as defined
below) made applicable to any Debt Security, or (g) reduce the percentage in
principal amount of Outstanding Debt Securities of any series, the consent of
whose Holders is required for modification or amendment of the Indenture or for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults.
The Holders of a majority in principal amount of the Outstanding Debt
Securities of each series may, on behalf of all Holders of the Debt Securities
of that series, waive, insofar as that series is concerned, compliance by the
Company with certain restrictive provisions of the Indenture. The Holders of a
majority in aggregate principal amount of the Outstanding Debt Securities of
each series may, on behalf of all Holders of the Debt Securities of that series,
waive any past default under the Indenture with respect to the Debt Securities
of that series, except a default in the payment of principal, or premium or
interest, if any, or in respect of a covenant or condition which cannot be
waived without the consent of each Holder of the Debt Securities of that series.
REGARDING THE TRUSTEE
The Company maintains deposit accounts and conducts other banking
transactions with The Chase Manhattan Bank in the ordinary course of the
Company's business. The Chase Manhattan Bank serves as trustee under another
indenture with respect to certain of the Company's other senior debt securities.
PLAN OF DISTRIBUTION
The Company may sell the Offered Securities (i) to or through
underwriters or dealers; (ii) directly to purchasers; or (iii) through agents.
The Prospectus Supplement with respect to the Offered Securities will set forth
the terms of the offering of the Offered Securities, including the name or names
of any underwriters, dealers or agents; the purchase price of the Offered
Securities and the proceeds to the Company from such sale; any underwriting
discounts and commissions or agency fees and other items constituting
underwriters' or agents' compensation; any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers and any
securities exchange on which such Offered Securities may be listed. Any initial
public offering price, discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time.
- 10 -
<PAGE>
If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The Offered Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. The underwriter or underwriters with
respect to a particular underwritten offering of Offered Securities will be
named in the Prospectus Supplement relating to such offering and, if an
underwriting syndicate is used, the managing underwriter or underwriters will be
set forth on the cover of such Prospectus Supplement. Unless otherwise set forth
in the Prospectus Supplement relating thereto, the obligations of the
underwriters to purchase the Offered Securities will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all the
Offered Securities if any are purchased.
If dealers are utilized in the sale of Offered Securities, the Company
will sell such Offered Securities to the dealers as principals. The dealers may
then resell such Offered Securities to the public at varying prices to be
determined by such dealers at the time of resale. The names of the dealers and
the terms of the transaction will be set forth in the Prospectus Supplement
relating thereto.
The Offered Securities may be sold directly by the Company or through
agents designated by the Company from time to time. Any agent involved in the
offer or sale of the Offered Securities in respect to which this Prospectus is
delivered will be named, and any commissions payable by the Company to such
agent will be set forth, in the Prospectus Supplement relating thereto. Unless
otherwise indicated in the Prospectus Supplement, any such agent will be acting
on a best efforts basis for the period of its appointment.
The Offered Securities may be sold directly by the Company to
institutional investors or others, who may be deemed to be underwriters within
the meaning of the Securities Act with respect to any resale thereof. The terms
of any such sales will be described in the Prospectus Supplement relating
thereto.
Agents, dealers and underwriters may be entitled under agreements with
the Company to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which such agents, dealers or underwriters may be required to make
in respect thereof. Agents, dealers and underwriters may be customers of, engage
in transactions with, or perform services for the Company in the ordinary course
of business.
Each series of Offered Securities will be a new issue of securities and
will have no established trading market. Any underwriters to whom Offered
Securities are sold for public offering and sale may make a market in such
Offered Securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice.The Offered Securities
may or may not be listed on a national securities exchange. No assurance can be
given that there will be a market for the Offered Securities.
VALIDITY OF OFFERED SECURITIES
The validity of the Offered Securities will be passed upon for the
Company by Miller, Nash, Wiener, Hager & Carlsen LLP, Portland, Oregon.
EXPERTS
The consolidated financial statements of the Company included in the
Company's annual report on Form 10-K for the year ended December 31, 1996, have
been audited by KPMG Peat Marwick LLP, independent auditors, as set forth in
their report included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report and upon the authority of such firm as experts in
accounting and auditing.
- 11 -
<PAGE>
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No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus Supplement or the
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized. This Prospectus Supplement and the
Prospectus do not constitute an offer to sell or the solicitation of an offer to
buy any securities other than the securities described in this Prospectus
Supplement or an offer to sell or the solicitation of an offer to buy such
securities in any circumstances in which such offer or solicitation is unlawful.
Neither the delivery of this Prospectus Supplement or the Prospectus nor any
sale made hereunder or thereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company since
the date hereof or that the information contained herein or therein is correct
as of any time subsequent to the date of such information.
-----------------
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
Page
<S> <C>
Use of Proceeds..................................................................................................S-2
The Company......................................................................................................S-2
Capitalization...................................................................................................S-3
Selected Consolidated Financial Data.............................................................................S-4
Management's Discussion and Analysis of
Financial Condition and Results of Operations..................................................................S-5
Business.........................................................................................................S-8
Description of the Debentures...................................................................................S-10
Underwriting....................................................................................................S-12
Validity of the Debentures......................................................................................S-13
Prospectus
Available Information..............................................................................................2
Incorporation of Certain Documents by Reference....................................................................3
The Company........................................................................................................3
Use of Proceeds....................................................................................................3
Ratio of Earnings to Fixed Charges.................................................................................4
Description of the Debt Securities.................................................................................4
Plan of Distribution..............................................................................................10
Validity of Offered Securities....................................................................................11
Experts...........................................................................................................11
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</TABLE>
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$200,000,000
Willamette Industries, Inc.
$100,000,000
6.45% Debentures Due
February 1, 2005
$100,000,000
7.00% Debentures Due
February 1, 2018
[LOGO]
PROSPECTUS SUPPLEMENT
January 27, 1998
Salomon Smith Barney
Goldman, Sachs & Co.
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