Item 1. Business - -----------------
Weyerhaeuser Company (the company) was incorporated in the state of Washington in January 1900 as Weyerhaeuser Timber Company. It is principally engaged in the growing and harvesting of timber and the manufacture, distribution and sale of forest products, real estate development and construction, and other real estate related activities. Its business segments are timberlands and wood products; pulp, paper and packaging; and real estate and related assets.
Information with respect to the description and general development of the company's business, included on pages 30 through 34, Description of the Business of the Company, contained in the company's 1997 Annual Report to Shareholders, is incorporated herein by reference.
Financial information with respect to industry segments, included in Note 19 of Notes to Financial Statements contained in the company's 1997 Annual Report to Shareholders, is incorporated herein by reference.
Timberlands and Wood Products
The company is engaged in the management of 5.2 million acres of company-owned and .2 million acres of leased commercial forestland in the United States (60% in the South and 40% in the Pacific Northwest), most of it highly productive and located extremely well to serve both domestic and international markets. The company has, additionally, long-term license arrangements in Canada covering approximately 23.7 million acres (of which 16.5 million acres are considered to be productive forestland). The combined total timber inventory on these U.S. and Canadian lands is approximately 273 million cunits (a cunit is 100 cubic feet of solid wood), of which approximately 75% is softwood species. The relationship between cubic measurement and the quantity of end products that may be produced from timber varies according to the species, size and quality of timber, and will change through time as the mix of these variables changes. To sustain the timber supply from its fee timberlands, the company is engaged in extensive planting, suppression of nonmerchantable species, precommercial and commercial thinning, fertilization and operational pruning, all of which increase the yield from its fee timberland acreage.
Weyerhaeuser Company and Subsidiaries
PART I
Item 1. Business - Continued - -----------------------------
The company's wood products businesses produce and sell softwood lumber, plywood and veneer; composite panels; oriented strand board; hardwood lumber and plywood; doors; treated products; logs; chips and timber. These products are sold primarily through the company's own sales organizations. Building materials are sold to wholesalers, retailers and industrial users.
Sales volumes by major product class are as follows (millions):
Selected product prices:
Weyerhaeuser Company and Subsidiaries
PART I
Item 1. Business - Continued - -----------------------------
Pulp, Paper and Packaging
The company's pulp, paper and packaging businesses include: Pulp, which manufactures chemical wood pulp for world markets; Newsprint, which manufactures newsprint at the company's North Pacific Paper Corporation mill and markets it to West Coast and Japanese newspaper publishers; Paper, which manufactures and markets a range of both coated and uncoated fine papers through paper merchants and printers; Containerboard Packaging, which manufactures linerboard and corrugating medium, which is primarily used in the production of corrugated packaging, and manufactures and markets industrial and agricultural packaging; Paperboard, which manufactures and markets bleached paperboard, used for production of liquid containers, to West Coast and Pacific Rim customers; Recycling, which operates an extensive wastepaper collection system and markets it to company mills and worldwide customers; and Chemicals, which produces chlorine, caustic and tall oil, which are used principally by the company's pulp, paper and packaging operations.
Sales volumes by major product class are as follows (thousands):
Selected product prices (per ton):
Weyerhaeuser Company and Subsidiaries
PART I
Item 1. Business - Continued - -----------------------------
Real Estate and Related Assets
The company's real estate and related assets businesses are principally engaged in real estate development and construction through the company's real estate subsidiary, Weyerhaeuser Real Estate Company, and in other real estate related activities through the company's financial services subsidiary, Weyerhaeuser Financial Services, Inc. Development and construction consists of developing single-family housing and residential lots for sale, including the development of master-planned communities.
In May 1997, the company's wholly owned subsidiary, Weyerhaeuser Mortgage Company (WMC), was sold. WMC was the principal business within the financial services segment. GNA Corporation, a subsidiary that specialized in the sale of life insurance annuities and mutual funds to the customers of financial institutions, was sold in April 1993.
With the sale of WMC, the financial services segment is no longer material to the results of the company. Beginning with the third quarter, the remaining real estate activities in financial services have been combined with real estate into one segment entitled real estate and related assets.
Volume information:
(1) Includes one-half of joint venture sales.
Weyerhaeuser Company and Subsidiaries
PART I
Item 2.
Item 2. Properties - -------------------
Timberlands and Wood Products
Facilities and annual production are summarized by major product class as follows (millions):
Principal manufacturing facilities are located as follows:
Softwood lumber and plywood Hardwood lumber Alabama, Arkansas, Georgia, Arkansas, Michigan, Oklahoma, Louisiana, Mississippi, Oregon, Pennsylvania, North Carolina, Oklahoma, Oregon, Washington and Wisconsin Washington and Alberta, British Columbia and Hardwood doors Saskatchewan, Canada Wisconsin
Composite panels Georgia, North Carolina, Oregon and Wisconsin
Oriented strand board Michigan, North Carolina, West Virginia and Alberta, Canada
Weyerhaeuser Company and Subsidiaries
PART I
Item 2. Properties - Continued - -------------------------------
Pulp, Paper and Packaging
Facilities and annual production are summarized by major product class as follows (thousands):
Principal manufacturing facilities are located as follows:
Pulp Containerboard Georgia, Mississippi, North North Carolina, Oklahoma and Oregon Carolina, Washington and Alberta, British Columbia and Packaging Saskatchewan, Canada Arizona, California, Colorado, Connecticut, Florida, Georgia, Newsprint Hawaii, Illinois, Indiana, Iowa, Washington Kentucky, Maryland, Michigan, Minnesota, Mississippi, Missouri, Paper Nebraska, New Jersey, New York, Mississippi, North Carolina, North Carolina, Ohio, Oregon, Washington, Wisconsin and Tennessee, Texas, Virginia, Saskatchewan, Canada Washington and Wisconsin
Paperboard Recycling Washington Arizona, California, Colorado, Georgia, Illinois, Iowa, Kansas, Maryland, Minnesota, Nebraska, North Carolina, Oklahoma, Oregon, Tennessee, Texas, Utah, Virginia, Washington and West Virginia
Chemicals Georgia, Mississippi, North Carolina, Oklahoma, Oregon and Washington
Weyerhaeuser Company and Subsidiaries
PART I
Item 2. Properties - Continued - -------------------------------
Real Estate and Related Assets
Single-family housing Commercial development California, Maryland, Nevada, California, Florida, Maryland Texas, Virginia and Washington and Washington
Residential land development Real estate investments Arkansas, California, Florida, Arizona, California, Colorado, Georgia, Maryland, Nevada, North Nevada, Oregon and Washington Carolina, Texas, Virginia and Washington
Mortgage securities California
Weyerhaeuser Company and Subsidiaries
PART I
Item 3.
Item 3. Legal Proceedings - --------------------------
Trial began in May 1992 in a federal income tax refund case that the company filed in July 1989 in the United States Claims Court. The complaint contended that the company overpaid federal income taxes in 1977 through 1983. The alleged overpayments resulted from the disallowance of certain timber casualty losses and certain deductions claimed by the company arising from export transactions. The refund sought was approximately $29 million, plus statutory interest from the dates of the alleged overpayments. The company settled the portion of the case relating to export transactions and received a tax refund of approximately $10 million, plus statutory interest. In September 1994, the United States Court of Federal Claims (successor to the United States Claims Court) issued an opinion on the casualty loss issues which resulted in the allowance of additional tax refunds of approximately $2 million, plus statutory interest. Both the company and the government appealed the decision. On August 2, 1996, the Court of Appeals for the Federal Circuit issued its opinion on the remaining timber casualty loss issues, ruling in favor of the company on both the company's appeal and the government's appeal. The United States Supreme Court denied the government's request for certiorari on January 21, 1997. On October 23, 1997, the United States Court of Federal Claims entered a judgment in favor of the company for refund of taxes in the amount of $9 million plus statutory interest. The company has received a partial refund of $7 million in tax plus statutory interest. The government filed an appeal on the remaining $2 million tax refund plus statutory interest, but such appeal was withdrawn in January 1998. The remaining refund is being processed by the government.
On March 6, 1992, the company filed a complaint in the Superior Court for King County, Washington, against a number of insurance companies. The complaint sought a declaratory judgment that the insurance companies were obligated to defend the company and to pay, on the company's behalf, certain claims relating to alleged environmental damage from toxic substances to sites owned by third parties and the company. The company subsequently agreed to settlements with all but one of the defendants. The remaining defendant provided first layer excess coverage during a three year period. That defendant's liability on groups of sites is being tried in three phases. Two trials against the remaining defendant, affecting nine sites, began in October 1994 and February 1996, respectively, and resulted in verdicts assigning 100 percent clean-up responsibility to the defendant on three sites, partial responsibility on three others and a finding of no liability as to the remaining three. With respect to the remaining sites, a voluntary dismissal was taken on 6 sites, and on the final 10 sites the defendant's offer of judgment was accepted in June 1997. Final judgment for $7.8 million on the sites covered by the two trials was received on December 19, 1997.
The company conducted a review of its 10 major pulp and paper facilities to evaluate the facilities' compliance with federal Prevention of Significant Deterioration (PSD) regulations. The results of the reviews were disclosed to seven state agencies and the Environmental Protection Agency (EPA) during 1994 and 1995. At the Cosmopolis, Washington, Columbus, Mississippi, and Flint River, Georgia, facilities, the state regulatory agencies agreed with the company's conclusions regarding the status of each facility. For the Cosmopolis facility, the Washington Department of Ecology agreed the changes made at the facility did not require PSD review. For the Columbus and Flint River facilities, the states concluded the original PSD permits issued to the facilities require updating. The company will update emissions data for the Columbus and Flint River facilities as part of the Title V permitting process. No penalties were assessed for the issues identified at Columbus and Flint River. Agreements resolving the alleged PSD issues have been reached with the states of Washington, Oklahoma and North Carolina, as noted below. No issues were identified at the company's Rothschild, Wisconsin, facility. In April 1995, EPA Region X issued a Notice of Violation (NOV) to the company and to North Pacific Paper Corporation (NORPAC), a joint venture in which the company currently has a 50 percent ownership interest. The NOV addresses alleged PSD violations at NORPAC's Longview, Washington, newsprint manufacturing facility. A settlement resolving alleged PSD issues at the Longview/NORPAC complex was reached with the State of Washington on January 26, 1996. On November 14, 1995, the company entered into a settlement with the State of Oklahoma to resolve alleged PSD violations at the company's Valliant, Oklahoma, containerboard manufacturing facility. The company also entered into Special Orders by Consent with the State of North Carolina to resolve alleged PSD issues at the New Bern, North Carolina, pulp mill and the Plymouth, North Carolina, pulp and paper complex. No decision has been made by the Lane County Oregon Regional Air Pollution Control Authority concerning alleged PSD and permit violations at the company's Springfield, Oregon, containerboard manufacturing facility.
Weyerhaeuser Company and Subsidiaries
PART I
Item 3. Legal Proceedings - Continued - --------------------------------------
The Washington Department of Ecology issued a $10 thousand penalty to the company because of three accidental chlorine releases which occurred at the company's pulp mill in Longview on March 18, 1996, which has been paid. The EPA is also investigating.
The Washington Department of Ecology has issued a NOV and a $40 thousand penalty because of an accidental spill of an estimated 8,700 gallons of crude sulfate turpentine on January 27, 1997, at the company's pulp and paper operations in Longview. The penalty was paid. The EPA investigated the January incident. EPA and the company are negotiating a possible settlement of an EPA enforcement action.
On June 20, 1996, the Wisconsin Department of Natural Resources (WDNR) issued a NOV for alleged air violations at the Marshfield, Wisconsin, wood products manufacturing facility. No penalty was assessed in the NOV. The NOV was referred to the Wisconsin Department of Justice (WDOJ) for enforcement action on July 2, 1996. The company settled with WDNR in September 1997 and paid a $65 thousand penalty.
On October 2, 1996, the WDNR conducted an inspection of a building demolition project at the company's Marshfield, Wisconsin facility. The WDNR noted several potential non-compliance issues in the work performed by the asbestos abatement subcontractor retained for the project. Upon learning of the issues observed by WDNR, the company removed the asbestos abatement subcontractor from the plantsite. The WDNR and EPA Region V are reviewing the work performed to evaluate whether an enforcement action should be brought against the asbestos abatement subcontractor, the general contractor, and/or the company.
In November 1996, an action was filed against the company in Superior Court for King County, Washington, on behalf of a purported class of all individuals and entities that own property in the United States on which exterior hardboard siding manufactured by the company has been installed since 1980. The action alleges the company has manufactured and distributed defective hardboard siding and has breached express warranties and consumer protection statutes in its sale of hardboard siding. The action seeks compensatory damages, including prejudgment interest, and seeks damages for the cost of replacing siding that rots subsequent to the entry of any judgment. In January 1997, an action was filed, also in Superior Court for King County, Washington, on behalf of a purported class of all individuals, proprietorships, partnerships, corporations, and other business entities in the United States on whose homes, condominiums, apartment complexes or commercial buildings hardboard siding manufactured by the company has been installed. The action alleges the company has breached express and implied warranties in its sale of hardboard siding and also has violated the Consumer Protection Act of the State of Washington. The action seeks damages, prejudgment interest, costs and reasonable attorney fees. In December 1997, the two cases were consolidated for the purpose of discovery and resolution of the class certification issue. Also, in December 1997, the plaintiffs in the first of the two cases filed a motion to change the trial date and for leave to move for class certification. In January 1998, the court denied this motion. This case was settled for approximately $11 thousand and dismissed in March 1998. The second case is currently set for trial in May 1998 without class certification. The company is a defendant in approximately eighteen other hardboard siding cases, two of which purport to be class actions on behalf of purchasers of single- or multi-family residences that contain the company's hardboard siding, one in Nebraska and one in Iowa.
On August 7, 1997, the company entered a plea of guilty to a misdemeanor violation of the Migratory Bird Treaty Act in the U.S. District Court, Western District of Washington, at Tacoma. The misdemeanor violation involved the accidental poisoning of a hawk and an owl in the course of starling pest control at the company's Longview, Washington, pulp mill. The company and the Department of Justice agreed to a disposition of the misdemeanor which involved an undertaking by the company to conduct a starling control research project at its Longview mill.
In December 1997, the Oklahoma Department of Environmental Quality issued a NOV for alleged failure to comply with audit requirements for a bark boiler at the company's Valliant, Oklahoma, containerboard manufacturing facility. No penalty was specified.
Weyerhaueser Company and Subsidiaries
PART I
Item 3. Legal Proceedings - Continued - --------------------------------------
The company is also a party to various proceedings relating to the clean-up of hazardous waste sites under the Comprehensive Environmental Response Compensation and Liability Act, commonly known as "Superfund," and similar state laws. The EPA and/or various state agencies have notified the company that it may be a potentially responsible party with respect to other hazardous waste sites as to which no proceedings have been instituted against the company. The company is also a party to other legal proceedings generally incidental to its business. Although the final outcome of any legal proceeding is subject to a great many variables and cannot be predicted with any degree of certainty, the company presently believes that any ultimate outcome resulting from the legal proceedings discussed herein, or all of them combined, would not have a material effect on the company's current financial position, liquidity or results of operations; however, in any given future reporting period, such legal proceedings could have a material effect on results of operations.
Item 4.
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 fiscal year ended December 28, 1997.
Weyerhaeuser Company and Subsidiaries
PART II
Item 5.
Item 5. Market Price of and Dividends on the Registrant's Common - ---------------------------------------------------------------------- Equity and Related Stockholder Matters - --------------------------------------
Information with respect to market information, stockholders and dividends included in Notes 20 and 21 of Notes to Financial Statements in the company's 1997 Annual Report to Shareholders, is incorporated herein by reference.
Item 6.
Item 6. Selected Financial Data - --------------------------------
Information with respect to selected financial data included in Note 21 of Notes to Financial Statements in the company's 1997 Annual Report to Shareholders, is incorporated herein by reference.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and - -------------------------------------------------------------------------- Results of Operations - ---------------------
Information with respect to Management's Discussion and Analysis included on pages 1 and 18-40 contained in the company's 1997 Annual Report to Shareholders, is incorporated herein by reference.
Item 8.
Item 8. Financial Statements and Supplementary Information - -----------------------------------------------------------
Financial statements and supplementary information, contained in the company's 1997 Annual Report to Shareholders are incorporated herein by reference:
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and - -------------------------------------------------------------------------- Financial Disclosure - --------------------
Not applicable.
Weyerhaeuser Company and Subsidiaries
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant - ------------------------------------------------------------
Information with respect to Directors of the company included on pages 1 through 4 of the Notice of 1998 Annual Meeting of Shareholders and Proxy Statement dated March 9, 1998 is incorporated herein by reference.
The executive officers of the company are as follows:
Item 11.
Item 11. Executive Compensation - --------------------------------
Information with respect to executive compensation included on pages 5 through 16 of the Notice of 1998 Annual Meeting of Shareholders and Proxy Statement dated March 9, 1998 is incorporated herein by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and - ---------------------------------------------------------------------- Management - ----------
Information with respect to security ownership of certain beneficial owners and management included on pages 5 and 6 of the Notice of 1998 Annual Meeting of Shareholders and Proxy Statement dated March 9, 1998 is incorporated herein by reference.
Item 13.
Item 13. Certain Relationships and Related Transactions - --------------------------------------------------------
Information with respect to certain relationships and related transactions included on pages 20 and 21 of the Notice of 1998 Annual Meeting of Shareholders and Proxy Statement dated March 9, 1998 is incorporated herein by reference.
Weyerhaeuser Company and Subsidiaries
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K - --------------------------------------------------------------------------
Financial Statements
The consolidated financial statements of the company, together with the report of independent public accountants, contained in the company's 1997 Annual Report to Shareholders, are incorporated in Part II, Item 8 of this Form 10-K by reference.
All other financial statement schedules have been omitted because they are not applicable or the required information is included in the consolidated financial statements, or the notes thereto, contained in the company's 1997 Annual Report to Shareholders and incorporated herein by reference.
Exhibits:
3 - (i) Articles of Incorporation (ii) Bylaws 10 - Material Contracts (a) Agreement with N. E. Johnson (incorporated by reference to 1992 Form 10-K filed with the Securities and Exchange Commission on March 12, 1993-Commission File Number 1-4825) (b) Agreement with W. R. Corbin (incorporated by reference to 1992 Form 10-K filed with the Securities and Exchange Commission on March 12, 1993-Commission File Number 1-4825) (c) Agreement with R. C. Gozon (incorporated by reference to 1995 Form 10-K filed with the Securities and Exchange Commission on March 15, 1996-Commission File Number 1-4825) (d) Agreement with S. R. Rogel 11 - Statement Re: Computation of Per Share Earnings (incorporated by reference to Note 2 of the 1997 Weyerhaeuser Company Annual Report to Shareholders) 13 - Portions of the 1997 Weyerhaeuser Company Annual Report to Shareholders specifically incorporated by reference herein 22 - Subsidiaries of the Registrant 23 - Consent of Independent Public Accountants 27 - Financial Data Schedules
Reports on Form 8-K
The registrant filed reports on Form 8-K dated January 22, February 24, April 15, May 23, June 19, July 1, July 9, July 11, July 17, September 4, and October 15, 1997 and January 23, 1998, respectively, reporting information under Item 5, Other Events.
Weyerhaeuser Company and Subsidiaries
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 on March 13, 1998.
Weyerhaeuser Company
/s/ Steven R. Rogel --------------------- Steven R. Rogel President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities indicated on March 13, 1998.
/s/ Steven R. Rogel /s/ P. M. Hawley - ------------------------------ --------------------------- Steven R. Rogel Philip M. Hawley President, Principal Executive Director Officer and Director /s/ Martha R. Ingram --------------------------- /s/ George H. Weyerhaeuser Martha R. Ingram - ------------------------------ Director George H. Weyerhaeuser Chairman of the Board and /s/ John Kieckhefer Director --------------------------- John I. Kieckhefer /s/ William C. Stivers Director - ------------------------------ William C. Stivers /s/Donald F. Mazankowski Principal Financial Officer --------------------------- Donald F. Mazankowski /s/ Kenneth J. Stancato Director - ------------------------------ Kenneth J. Stancato /s/ William D. Ruckelshaus Principal Accounting Officer --------------------------- William D. Ruckelshaus /s/ John W. Creighton, Jr. Director - ------------------------------ John W. Creighton, Jr. /s/ Richard H. Sinkfield Director ---------------------------- Richard H. Sinkfield /s/ W. John Driscoll Director - ------------------------------ W. John Driscoll /s/ James N. Sullivan Director ---------------------------- James N. Sullivan Director
Weyerhaeuser Company and Subsidiaries
FINANCIAL STATEMENT SCHEDULES
Report of Independent Public Accountants on Financial Statement Schedules
To Weyerhaeuser Company:
We have audited in accordance with generally accepted auditing standards, the financial statements included in Weyerhaeuser Company's annual report to shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 11, 1998. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed on page 15 is the responsibility of the company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP Seattle, Washington, February 11, 1998
Weyerhaeuser Company and Subsidiaries
FINANCIAL STATEMENT SCHEDULES
Weyerhaeuser Company and Subsidiaries
Exhibits Index
Exhibits:
3 - (i) Articles of Incorporation (ii) Bylaws 10 - Material Contracts (a) Agreement with N. E. Johnson (incorporated by reference to 1992 Form 10-K filed with the Securities and Exchange Commission on March 12, 1993-Commission File Number 1-4825) (b) Agreement with W. R. Corbin (incorporated by reference to 1992 Form 10-K filed with the Securities and Exchange Commission on March 12, 1993-Commission File Number 1-4825) (c) Agreement with R. C. Gozon (incorporated by reference to 1995 Form 10-K filed with the Securities and Exchange Commission on March 15, 1996-Commission File Number 1-4825) (d) Agreement with S. R. Rogel 11 - Statement Re: Computation of Per Share Earnings (incorporated by reference to Note 2 of the 1997 Weyerhaeuser Company Annual Report to Shareholders) 13 - Portions of the 1997 Weyerhaeuser Company Annual Report to Shareholders specifically incorporated by reference herein 22 - Subsidiaries of the Registrant 23 - Consent of Independent Public Accountants 27 - Financial Data Schedules
Weyerhaeuser Company and Subsidiaries
Exhibit 22 Subsidiaries of the Registrant
Weyerhaeuser Company and Subsidiaries
Exhibit 22 Subsidiaries of the Registrant - Continued
Weyerhaeuser Company and Subsidiaries
Exhibit 22 Subsidiaries of the Registrant - Continued
Weyerhaeuser Company and Subsidiaries
Exhibit 23 Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation of our reports included and incorporated by reference in this Form 10-K, into Weyerhaeuser Company's previously filed Registration Statement No. 333-36753 on Form S-3 and Nos. 33-60527, 33-60529, 33-60521, 33-60525, 33-25928, 33-24979, 33-47392, 333-10165, 33-41414, 2-88109, 2-27929, 2-58498, 2-81463 and 333-01565 on Form S-8.
ARTHUR ANDERSEN LLP
Seattle, Washington, March 13, 1998