SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO X SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 29, 1996 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number 1-4825 WEYERHAEUSER COMPANY A Washington Corporation (IRS Employer Identification No. 91-0470860) Tacoma, Washington 98477 Telephone (206) 924-2345 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of Each Class Which Registered - ------------------------------- ------------------------- Common Shares ($1.25 par value) Chicago Stock Exchange New York Stock Exchange Pacific Stock Exchange Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]. As of February 21, 1997, 198,549,288 shares of the registrant's common stock ($1.25 par value) were outstanding and the aggregate market value of the registrant's voting shares held by non-affiliates was approximately $9,182,904,570. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Shareholders for the fiscal year ended December 29, 1996 are incorporated by reference into Parts I, II and IV. Portions of the Notice of 1997 Annual Meeting of Shareholders and Proxy Statement are incorporated by reference into Part III.
Weyerhaeuser Company and Subsidiaries TABLE OF CONTENTS - ---------------------------------------------------------------- <TABLE> <CAPTION> PART I Page ---- <C> <C> <S> Item 1. Business 3 Item 2. Properties 7 Item 3. Legal Proceedings 10 Item 4. Submission of Matters to a Vote of Security Holders 12 PART II Item 5. Market Price of and Dividends on the Registrant's Common Equity and Related Stockholder Matters 13 Item 6. Selected Financial Data 13 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 8. Financial Statements and Supplementary Information 13 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 13 PART III Item 10. Directors and Executive Officers of the Registrant 14 Item 11. Executive Compensation 14 Item 12. Security Ownership of Certain Beneficial Owners and Management 14 Item 13. Certain Relationships and Related Transactions 14 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 15 Signatures 16 Report of Independent Public Accountants on Financial Statement Schedules 17 Schedule II Valuation and Qualifying Accounts 18 </TABLE> 2
Weyerhaeuser Company and Subsidiaries PART I - ----------------------------------------------------------------- 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 growing and harvesting of timber and the manufacture, distribution and sale of forest products, real estate development and construction, and financial services. Its principal business segments include timberlands and wood products; pulp, paper and packaging; real estate; and financial services. Information with respect to the description and general development of the company's business, included on pages 42 through 47, Description of the Business of the Company, contained in the company's 1996 Annual Report to Shareholders, is incorporated herein by reference. Financial information with respect to industry segments, included in Note 18 of Notes to Financial Statements contained in the company's 1996 Annual Report to Shareholders, is incorporated herein by reference. Timberlands and Wood Products The company owns approximately 5.3 million acres of commercial forestland in the United States (61% in the South and 39% 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 22.9 million acres (of which 15 million acres are considered to be productive forestland). The combined total timber inventory on these U.S. and Canadian lands is approximately 266 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. <TABLE> <CAPTION> Inventory Thousands of Acres at December 29, 1996 --------- ------------------------------------------- Millions Fee Long- term License of Cunits Ownership Leases Arrangements Total --------- --------- ---------- ------------ ------- <C> <S> <S> <S> <S> <S> Geographic Area United States West 57 2,077 -- -- 2,077 South 35 3,249 229 -- 3,478 --------- --------- ---------- ------------ ------- Total United States 92 5,326 229 -- 5,555 --------- --------- ---------- ------------ ------- Canada Alberta 91 -- -- 6,704 6,704 British Columbia 10 38 -- 3,800 3,838 Saskatchewan 73 -- -- 12,359 12,359 --------- --------- ---------- ------------ ------- Total Canada 174 38 -- 22,863 22,901 --------- --------- ---------- ------------ ------- TOTAL 266 5,364 229 22,863 28,456 ========= ========= ========== ============ ======= </TABLE> <TABLE> <CAPTION> Thousands of Acres Thousands of Acres Millions of ----------------------- ------------------ Seedlings Stocking Harvested Planted Planted Control Fertilization --------- ------- ----------- -------- ------------- <C> <S> <S> <S> <S> <S> 1996 Activity West 38.0 42.6 21.7 4.0 48.4 South 51.9 45.2 25.5 .5 223.1 --------- ------- ----------- -------- ------------ Total United States 89.9 87.8 47.2 4.5 271.5 ========= ======= =========== ======== ============= </TABLE> 3
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): <TABLE> <CAPTION> 1996 1995 1994 1993 1992 ----- ----- ----- ----- ----- <C> <S> <S> <S> <S> <S> Raw materials - cubic ft. 577 535 564 547 545 Softwood lumber - board ft. 4,745 4,515 4,402 4,230 3,440 Softwood plywood and veneer - sq. ft. (3/8") 2,172 2,324 2,685 2,435 2,227 Composite panels - sq. ft. (3/4") 604 648 660 626 590 Oriented strand board - sq. ft. (3/8") 2,083 1,931 1,803 1,672 1,484 Hardboard - sq. ft. (7/16") 193 201 167 140 133 Hardwood lumber - board ft. 349 293 254 240 218 Engineered wood products - lineal ft. 116 128 71 47 -- Hardwood doors (thousands) 652 648 617 556 514 </TABLE> Selected product prices: <TABLE> <CAPTION> 1996 1995 1994 1993 1992 ------ ------ ------ ------ ------ <C> <S> <S> <S> <S> <S> Export logs (#2 sawlog- bark on) - $/MBF Cascade - Douglas fir $1,330 $1,365 $1,168 $1,224 $ 930 Coastal - Hemlock 611 750 804 831 562 Coastal - Douglas fir 1,246 1,217 1,085 1,104 858 Lumber (common) - $/MBF 2x4 Douglas fir (kiln dried) 422 332 408 418 295 2x4 Douglas fir (green) 386 308 364 383 261 2x4 Southern yellow pine (kiln dried) 422 364 419 397 285 2x4 Spruce-pine-fir (kiln dried) 351 251 343 334 231 Plywood (1/2" CDX) - $/MSF West 307 331 334 321 281 South 256 301 298 282 249 Oriented strand board (7/16"-24/16) North Central price - $/MSF 184 245 265 236 217 </TABLE> 4
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. In 1993, the Personal Care Products business, which manufactured disposable diapers marketed under the private-label brands of many of North America's largest retailers was sold through an initial public offering of stock. Sales volumes by major product class are as follows (thousands): <TABLE> <CAPTION> 1996 1995 1994 1993 1992 ------ ------ ------ ------ ------ <C> <S> <S> <S> <S> <S> Pulp - air-dry metric tons 1,868 2,060 2,068 1,886 1,238 Newsprint - metric tons 629 663 638 609 575 Paper - tons 1,007 1,006 998 990 966 Paperboard - tons 205 230 201 222 238 Containerboard - tons 346 259 254 290 318 Packaging - MSF 42,323 34,342 34,483 31,386 29,414 Recycling - tons 2,011 1,467 985 851 778 Personal care products - standard cases -- -- -- -- 17,017 </TABLE> Selected product prices (per ton): <TABLE> <CAPTION> 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- <C> <S> <S> <S> <S> <S> Pulp - NBKP-air-dry metric-U.S. $579 $883 $566 $445 $551 Paper - uncoated free sheet-U.S. 745 946 617 627 630 Linerboard - 42 lb.-Eastern U.S. 367 505 367 295 343 Newsprint - metric - West Coast U.S. 636 662 460 435 433 OCC 53 128 78 27 30 ONP 18 99 46 16 13 </TABLE> 5
Weyerhaeuser Company and Subsidiaries PART I - ----------------------------------------------------------------- Item 1. Business - Continued - ----------------------------- Real Estate The company, through its real estate subsidiary, Weyerhaeuser Real Estate Company, is engaged primarily in developing single-family housing and residential lots for sale, including the development of master-planned communities. Operations are mainly concentrated in selected metropolitan areas in Southern California, Nevada, Washington, Texas, Maryland and Virginia. Volumes sold: <TABLE> <CAPTION> 1996 1995 1994 1993 1992 ----- ----- ----- ----- ----- <C> <S> <S> <S> <S> <S> Single-family units (1) 2,773 3,114 3,934 3,879 3,917 Multi-family units (1) 234 117 475 1,141 60 Lots (1) 2,522 1,628 2,157 1,372 2,762 Commercial space (thousand sq. ft.) 569 -- 389 88 142 </TABLE> (1) Includes one-half of joint venture sales. Financial Services The company, through its financial services subsidiary, Weyerhaeuser Financial Services, Inc., is involved in a range of financial services. The principal operating unit is Weyerhaeuser Mortgage Company, which has origination offices in 19 states, with a servicing portfolio of $4.4 billion involving approximately 46,000 loans throughout the country. Mortgages are resold in the secondary market through mortgage-backed securities to financial institutions and investors. Through its insurance services organization, it also offers a broad line of property, life and disability insurances. The company has signed an agreement for the sale of its wholly owned subsidiary, Weyerhaeuser Mortgage Company. This sale is expected to close in the second quarter of 1997, subject to regulatory approvals and other contingencies. 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. Republic Federal Savings & Loan Association, a subsidiary that operated in Southern California, was dissolved in 1992. Volume information (millions): <TABLE> <CAPTION> 1996 1995 1994 1993 1992 ------- ------- ------- ------ ------- <C> <S> <S> <S> <S> <S> Loan servicing portfolio $ 4,354 $10,952 $11,300 $ 8,400 $ 9,800 Single-family loan originations 3,436 2,196 2,763 4,405 3,380 </TABLE> 6
Weyerhaeuser Company and Subsidiaries PART I - ----------------------------------------------------------------- Item 2. Properties - ------------------- Timberlands and Wood Products Facilities and annual production are summarized by major product class as follows (millions): <TABLE> <CAPTION> Production Number of Capacity Facilities 1996 1995 1994 1993 1992 ---------- ---------- ----- ----- ----- ----- ----- <C> <S> <S> <S> <S> <S> <S> <S> Logs - cubic ft. -- -- 912 914 671 673 749 Softwood lumber - board ft. 3,765 28 3,695 3,419 3,249 3,135 2,782 Softwood plywood and veneer - sq. ft. (3/8") 1,181 7 1,243 1,292 1,249 1,188 1,125 Composite panels - sq. ft. (3/4") 585 5 535 583 594 564 540 Oriented strand board - sq. ft. (3/8") 2,105 6 1,687 1,654 1,568 1,443 1,234 Hardboard - sq. ft. -(7/16") -- -- 86 124 122 120 118 Hardwood lumber - board ft. 409 11 333 278 229 221 210 Hardwood doors (thousands) 717 1 646 643 597 522 469 </TABLE> Principal manufacturing facilities are located as follows: Softwood lumber and plywood Hardwood lumber Alabama, Arkansas, Georgia, Arkansas, Oklahoma, Oregon, Louisiana, Mississippi, Pennsylvania, Washington and North Carolina, Oklahoma, Oregon, Wisconsin Washington and Alberta, British Columbia and Saskatchewan, Canada Hardwood doors Wisconsin Composite panels Georgia, North Carolina, Oregon and Wisconsin Oriented strand board Michigan, North Carolina, West Virginia and Alberta, Canada 7
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): <TABLE> <CAPTION> Produc- tion Number Capa- of Faci- city lities 1996 1995 1994 1993 1992 -------- -------- ------ ------ ------ ------ ------ <C> <S> <S> <S> <S> <S> <S> <S> Pulp - air-dry metric tons 2,145 8 2,004 2,159 2,041 2,096 1,506 Newsprint - metric tons 700 1 631 687 651 618 588 Paper - tons 1,076 5 1,034 1,060 982 1,007 971 Paperboard - tons 220 1 206 229 189 217 229 Containerboard - tons 2,440 4 2,331 2,329 2,357 2,269 2,240 Packaging - MSF 48,000 45 44,471 36,041 36,020 32,795 31,040 Recycling - tons -- 40 3,428 2,754 2,042 1,847 1,692 Personal care products - standard cases -- -- -- -- -- -- 16,743 </TABLE> Principal manufacturing facilities are located as follows: Pulp Containerboard Georgia, Mississippi, North North Carolina, Oklahoma and Carolina, Washington and Oregon Alberta, British Columbia and Saskatchewan, Canada Packaging Arizona, California, Newsprint Connecticut, Florida, Georgia, Washington Hawaii, Illinois, Indiana, Iowa, Kentucky, Maryland, Michigan, Paper Minnesota, Mississippi, Mississippi, North Carolina, Missouri, Nebraska, New Jersey, Washington, Wisconsin and New York, North Carolina, Ohio, Saskatchewan, Canada Oregon, Tennessee, Texas, Virginia, Washington and Paperboard Wisconsin Washington Recycling Arizona, California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Maryland, Minnesota, Nebraska, North Carolina, Oklahoma, Oregon, Pennsylvania, Tennessee, Texas, Utah, Virginia, Washington, West Virginia and Alberta and British Columbia, Canada Chemicals Georgia, Mississippi, North Carolina, Oklahoma, Washington and Saskatchewan, Canada 8
Weyerhaeuser Company and Subsidiaries PART I - ----------------------------------------------------------------- Item 2. Properties - Continued - ------------------------------- Real Estate The company has six primary facilities that operate in the following product lines and locations: Single-family housing Commercial development California, Maryland, Nevada, California, Florida, Maryland Texas, Virginia and Washington and Washington Residential land development Arkansas, California, Florida, Georgia, Maryland, Nevada, North Carolina, Texas, Virginia and Washington Financial Services The company has four primary facilities that operate in the following product lines and locations: Mortgage banking and insurance Real estate investments Branches in 19 states with major Arizona, California, Colorado, concentrations in California, Nevada, Oregon and Washington Hawaii, Nevada and Texas Mortgage securities California 9
Weyerhaeuser Company and Subsidiaries PART I - ----------------------------------------------------------------- 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 seeks a refund of federal income taxes that the company contends it overpaid in 1977 through 1983. The alleged overpayments are the result of 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 issued an opinion on the casualty loss issues which will result 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 March 6, 1992, the company filed a complaint in the Superior Court for King County, Washington, against a number of insurance companies. The complaint seeks a declaratory judgment that the insurance companies named as defendants are obligated under the terms and conditions of the policies sold by them to the company to defend the company and to pay, on the company's behalf, certain claims asserted against the company. The claims relate to alleged environmental damage to third-party sites and to some of the company's own property to which allegedly toxic material was delivered or on which allegedly toxic material was placed in the past. Since December 1992, the company has 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 phases. Two trials against the remaining defendant, affecting nine sites, began in October 1994 and February 1996 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. The trial court has ruled that the primary policy has been exhausted and imposed an obligation on the remaining defendant to provide a defense on one of the sites, a ruling that may be expanded to include other sites. After voluntary dismissal on 6 sites, trial for the remaining 10 sites has been set for June 1997. The company received from the Lane County, Oregon Regional Air Pollution Control Authority (LRAPA) a draft Notice of Violation which seeks penalties for alleged Prevention of Significant Deterioration (PSD) violations at the company's Springfield, Oregon, particleboard operations. LRAPA informed the company in July 1995 that it will withdraw its draft Notice of Violation (NOV) and will not seek fines or penalties. On September 15, 1995, however, LRAPA issued a revised draft NOV (the Revised Draft NOV), which alleged that the Springfield particleboard facility had violated a condition of its Air Contaminant Discharge Permit. The allegations in the Revised Draft NOV are based upon the same facts and circumstances relied upon by LRAPA in the prior draft NOV. The company has contested LRAPA's issuance of the Revised Draft NOV. On June 8, 1996, the company and LRAPA entered into a Stipulated Final Order (SFO) to resolve all past and ongoing alleged PSD issues, contested matters and alleged violations associated with extended hours of operation at the Springfield particleboard facility. In exchange for a full resolution of all past and ongoing contested matters, the company agreed to pay a total civil penalty of $19.5 thousand, of which $7.5 thousand was paid directly to LRAPA. The remaining $12 thousand civil penalty was suspended. The company also agreed to implement a Supplemental Environmental Project (SEP) consisting of the funding of the preparation of a nitrogen oxides (Nox) emission inventory for Lane County. The emission inventory will be conducted by an outside environmental consultant at a cost not to exceed $40 thousand. The company conducted a review of its 10 major pulp and paper facilities to evaluate the facilities' compliance with federal 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 NOV to the company and to North Pacific Paper Corporation (NORPAC), a joint venture in which the company has an 80 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 LRAPA concerning alleged PSD and permit violations at the company's Springfield, Oregon, containerboard manufacturing facility. 10
Weyerhaeuser Company and Subsidiaries PART I - ----------------------------------------------------------------- Item 3. Legal Proceedings - Continued - -------------------------------------- The Washington Department of Ecology investigated the accidental release of chorine, chlorine dioxide and noncondensable gasses in July 1994 at the company's pulp mill in Longview, and issued a $10 thousand penalty for the chlorine release and a $5 thousand penalty for the noncondensable gasses release which have been paid by the company. In June 1995, EPA issued an Administrative Complaint against the company, seeking penalties of $225 thousand and alleging a failure to timely report the chlorine release. The company settled the matter on January 21, 1997, agreeing to pay a penalty of $68 thousand and to perform supplemental environmental projects in the amount of $110 thousand. On September 25, 1996, the company learned that the EPA has commenced a preliminary criminal investigation of the incident, and in late November learned that the investigation had been discontinued. 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 notice of violation 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 EPA is also investigating. On April 9, 1993, the company entered into a SFO with the Oregon Department of Environmental Quality (DEQ) for alleged air emissions in excess of permit levels and PSD noncompliance at the company's North Bend, Oregon, containerboard facility. The SFO established a compliance schedule for installing control technology. A Supplemental SFO assessed a $247 thousand initial penalty and a $500 per day stipulated penalty until compliance was demonstrated. On November 15, 1995, DEQ issued a letter, indicating that the company had satisfied the requirements of the SFO and Supplemental SFO. No further penalties were assessed against the company. Termination of the SFO will occur after issuance of the federal air operating permit to the North Bend containerboard facility. The North Bend containerboard facility received its federal air operating permit on July 1, 1996. 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. Since the WDNR lacks an administrative mechanism to assess penalties for alleged regulatory non-compliance, it referred the NOV to the Wisconsin Department of Justice for enforcement action on July 2, 1996. The Wisconsin Department of Justice has accepted the referral. 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. On November 2, 1992, an action was filed against the company in the Circuit Court for the First Judicial District of Hinds County, Mississippi, on behalf of a purported class of riparian property owners in Mississippi and Alabama whose properties are located on the Tennessee Tombigbee Waterway, Aliceville Lake, Cedar Creek and the Magoway Creek. The complaint seeks $1 billion in compensatory and punitive damages for diminution in property value, personal injuries and mental anguish allegedly resulting from the discharge of purported hazardous substances, including dioxins and furans, by the company's pulp and paper mill in Columbus, Mississippi, and the alleged fraudulent concealments of such discharge. The complaint also seeks an injunction prohibiting future releases and the removal of hazardous substances allegedly released in the past. On August 20, 1993, a companion action was filed in Greene County, Alabama, on behalf of a similar purported class of riparian owners with essentially the same claims as the Mississippi case. By order dated April 5, 1995, venue of the Alabama action was transferred to Sumter County, Alabama. On January 20, 1995, the court in the Alabama action certified a class of all persons who, as of the date the action commenced, were riparian owners, lessees and licensees of properties located on the Tennessee Tombigbee Waterway in Greene, Sumter, Pickens and Marengo counties, Alabama, and Lowndes and Noxubee counties, Mississippi, to determine whether the company is liable to the members of the class for compensatory and/or punitive damages and to determine the amount of punitive damages, if any, to be awarded to the class as a whole. By order dated April 12, 1995, as orally amended on February 1, 1996, the geographical boundaries of the class were amended to run from below the Columbus mill's wastewater discharge pipe to just above the confluence of the Black Warrior River and the Tennessee Tombigbee Waterway. The class is estimated to range from approximately 1,000 to 1,500 members. In late July, 1996, the company reached an agreement to settle both the Mississippi action and the Alabama action for $2.5 million. The agreement is subject to the approval of the court in the Alabama action. 11
Weyerhaeuser Company and Subsidiaries PART I - ----------------------------------------------------------------- Item 3. Legal Proceedings - Continued - -------------------------------------- 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. The company is a defendant in approximately fifteen other hardboard siding cases, one of which purports to be a class action on behalf of purchasers of single- or multi-family residences in Nebraska that contain the company's hardboard siding. 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. 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 29, 1996. 12
Weyerhaeuser Company and Subsidiaries PART II - ----------------------------------------------------------------- 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 19 and 20 of Notes to Financial Statements in the company's 1996 Annual Report to Shareholders, is incorporated herein by reference. Item 6. Selected Financial Data - -------------------------------- Information with respect to selected financial data included in Note 20 of Notes to Financial Statements in the company's 1996 Annual Report to Shareholders, is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition - ------------------------------------------------------------------- and Results of Operations - ------------------------- On February 24, 1997, the company announced that it expects to take an after-tax charge of approximately $25 million, or 12 cents per common share, against earnings in the 1997 first quarter. This charge will reflect the impact of closure, consolidation or disposal of recycling facilities; the permanent closure of its corrugated medium machine at Longview, Washington; the anticipated sale of its wholly-owned subsidiary, Shemin Nurseries, Inc., a wholesale nursery business based in Danbury, Connecticut; and interest income from the favorable federal income tax decision relating to casualty losses associated with the eruption of Mount St. Helens in 1980. The company also expects to close the sale of its wholly-owned subsidiary, Weyerhaeuser Mortgage Company, in the second quarter of 1997, although it is subject to regulatory approvals and other contingencies. If this transaction closes as presently anticipated, the company expects it to have a material favorable effect on operating results and cash flow in the quarter in which it closes. Additional information with respect to Management's Discussion and Analysis included on pages 1, 8-9, 12-13, 18-19, 24-25, 28-29, 34-35 and 40-52; contained in the company's 1996 Annual Report to Shareholders, is incorporated herein by reference. Item 8. Financial Statements and Supplementary Information - ----------------------------------------------------------- Financial statements and supplementary information, contained in the company's 1996 Annual Report to Shareholders are incorporated herein by reference: <TABLE> <CAPTION> Page(s) in Annual Report to Shareholders ------------ <C> <S> Report of Independent Public Accountants 52 Consolidated Statement of Earnings 53 Consolidated Balance Sheet 54-55 Consolidated Statement of Cash Flows 56-57 Consolidated Statement of Shareholders' Interest 58 Notes to Financial Statements 59-77 Selected Quarterly Financial Information (Unaudited) 75 </TABLE> Item 9. Changes in and Disagreements with Accountants on Accounting - ------------------------------------------------------------------- and Financial Disclosure - ------------------------ Not applicable. 13
Weyerhaeuser Company and Subsidiaries PART III - ----------------------------------------------------------------- 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 1997 Annual Meeting of Shareholders and Proxy Statement dated March 3, 1997 is incorporated herein by reference. The executive officers of the company are as follows: <TABLE> <CAPTION> Name Title Age - ---------------------- ------------------------ --- <C> <S> <S> William R. Corbin Executive Vice President 55 John W. Creighton, Jr. President 64 Richard C. Gozon Executive Vice President 58 Steven R. Hill Senior Vice President 49 Mack L. Hogans Senior Vice President 48 Norman E. Johnson Senior Vice President 63 Thomas M. Luthy Senior Vice President 59 William C. Stivers Senior Vice President 58 </TABLE> Item 11. Executive Compensation - ------------------------------- Information with respect to executive compensation included on pages 5 through 13 of the Notice of 1997 Annual Meeting of Shareholders and Proxy Statement dated March 3, 1997 is incorporated herein by reference. 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 4 and 5 of the Notice of 1997 Annual Meeting of Shareholders and Proxy Statement dated March 3, 1997 is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions - ------------------------------------------------------- Information with respect to certain relationships and related transactions included on page 17 of the Notice of 1997 Annual Meeting of Shareholders and Proxy Statement dated March 3, 1997 is incorporated herein by reference. 14
Weyerhaeuser Company and Subsidiaries PART IV - ----------------------------------------------------------------- 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 1996 Annual Report to Shareholders, are incorporated in Part II, Item 8 of this Form 10-K by reference. <TABLE> <CAPTION> Page Number(s) Financial Statement Schedules in Form 10-K - ----------------------------- -------------- <C> <S> Report of Independent Public Accountants on Financial Statement Schedules 17 Schedule II - Valuation and Qualifying Accounts 18 </TABLE> 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 1996 Annual Report to Shareholders and incorporated herein by reference. Exhibits: - --------- 3 - Articles of Incorporation and Bylaws 10 - Material Contracts (a) Agreement with N. E. Johnson (b) Agreement with W. R. Corbin (c) Agreement with R. C. Gozon 11 - Statement Re: Computation of Per Share Earnings (incorporated by reference to Note 1 of the 1996 Weyerhaeuser Company Annual Report to Shareholders) 13 - Portions of the 1996 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 February 14, April 24, July 17, July 26 and October 15, 1996, and January 22 and February 25, 1997, respectively, reporting information under Item 5, Other Events. 15
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 14, 1997. Weyerhaeuser Company /s/ John W. Creighton, Jr. ------------------------------ John W. Creighton, Jr. 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 14, 1997. /s/ John W. Creighton, Jr. /s/ P. M. Hawley - -------------------------------- --------------------------- John W. Creighton, Jr. 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 Director /s/ John Kieckhefer ---------------------------- John I. Kieckhefer Director /s/ William C. Stivers - -------------------------------- William C. Stivers Principal Financial Officer /s/ William D. Ruckelshaus ---------------------------- William D. Ruckelshaus Director /s/ Kenneth J. Stancato - -------------------------------- Kenneth J. Stancato /s/ Richard H. Sinkfield Principal Accounting Officer ---------------------------- Richard H. Sinkfield Director /s/ William Clapp - -------------------------------- William H. Clapp Director /s/ W. John Driscoll - -------------------------------- W. John Driscoll Director 16
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 6, 1997. 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 6, 1997 17
Weyerhaeuser Company and Subsidiaries FINANCIAL STATEMENT SCHEDULES - ----------------------------------------------------------------- <TABLE> <CAPTION> Schedule II - Valuation and Qualifying Accounts For the three years ended December 29, 1996 Dollar amounts in millions Balance at Deductions Balance at Beginning Charged from End of Description of Period to Income Reserve Period - ----------- ---------- --------- ---------- ---------- <C> <S> <S> <S> <S> Weyerhaeuser Reserve deducted from related asset accounts: Doubtful accounts - Accounts receivable 1996 $ 9 $ 4 $ 6 $ 7 ========== ========= =========== ========== 1995 $ 10 $ 2 $ 3 $ 9 ========== ========= =========== ========== 1994 $ 10 $ 4 $ 4 $ 10 ========== ========= =========== ========== Real Estate and Financial Services Reserves and allowances deducted from related asset accounts: Receivables 1996 $ 7 $ 3 $ 1 $ 9 ========== ========= =========== ========== 1995 $ 4 $ 1 $ (2)(1) $ 7 ========== ========= =========== ========== 1994 $ 7 $ 1 $ 4 $ 4 ========== ========= =========== ========== Mortgage loans receivable 1996 $ 2 $ -- $ (5)(2) $ 7 ========== ========= =========== ========== 1995 $ 8 $ -- $ 6 $ 2 ========== ========= =========== ========== 1994 $ 4 $ 4 $ -- $ 8 ========== ========= =========== ========== Investment in and advances to joint ventures and limited partnerships 1996 $ 38 $ -- $ 11 $ 27 ========== ========= =========== ========== 1995 $ 49 $ -- $ 11 $ 38 ========== ========= =========== ========== 1994 $ 57 $ 2 $ 10 $ 49 ========== ========= =========== ========== </TABLE> (1) Includes allowances transferred in on partnership notes that were consolidated. (2) Includes allowances transferred in from other liabilities. 18
Weyerhaeuser Company and Subsidiaries Exhibit 22 Subsidiaries of the Registrant - ---------------------------------------------------------------------- <TABLE> <CAPTION> Percentage State or Ownership of Country of Immediate Name Incorporation Parent ---- ------------- ------------ <C> <S> <S> Colonvade S.A. Uruguay 100% Columbia & Cowlitz Railway Company Washington 100 DeQueen and Eastern Railroad Company Arkansas 100 Fisher Lumber Company California 100 Golden Triangle Railroad Mississippi 100 Green Arrow Motor Express Company Delaware 100 Gryphon Asset Management, Inc. Delaware 100 J.H. Hamlen & Son, Inc. Arkansas 100 Mississippi & Skuna Valley Railroad Company Mississippi 100 Mountain Tree Farm Company Washington 50 North Pacific Paper Corporation Delaware 80 NORPAC Sales Corporation Guam 100 Pacific Veneer, Ltd. Washington 90 SCA Weyerhaeuser Packaging Holding British Virgin Company Asia Limited Islands 50 Shemin Nurseries, Inc. Delaware 100 Texas, Oklahoma & Eastern Railroad Company Oklahoma 100 United Structures, Inc. California 100 Westwood Shipping Lines, Inc. Washington 100 Weycomp Claims Management Service, Inc. Texas 100 Weyerhaeuser Construction Company Washington 100 Weyerhaeuser Financial Services, Inc. Delaware 100 CMO Finance Corp. Nevada 100 MJ Finance Corporation California 100 Mortgage Securities III Corporation Nevada 100 Mortgage Securities IV Corporation Nevada 100 R4 Participant Corporation Nevada 100 ver Bes' Insurance Company Vermont 100 de Bes' Insurance Ltd. Bermuda 100 Weyerhaeuser Financial Investments, Inc. Nevada 100 Abfall Finance Corp. California 100 Brookview, Inc. Nevada 100 The Giddings Mortgage Investment Company California 100 Gudig Abfall, Inc. California 100 Kachura Finance Corp. California 100 Laurel Real Estate Development, Inc. California 100 McGNT Finance Corp. California 100 Pass-Through Finance Corp. California 100 RFS Development Corporation California 100 RFS Finance Corp. California 100 RFS Insurance Agency California 100 RFS Service Corporation California 100 </TABLE> 19
Weyerhaeuser Company and Subsidiaries Exhibit 22 Subsidiaries of the Registrant - Continued - ---------------------------------------------------------------------- <TABLE> <CAPTION> Percentage State or Ownership of Country of Immediate Name Incorporation Parent ---- ------------- ------------ <C> <S> <S> R. J. Plaza II, Inc. Nevada 100% Trimark Development Company California 100 Trimark Realty Advisors, Inc. California 100 Weyerhaeuser Properties, Inc. Nevada 100 Woodland Hills Properties-W., Inc. Nevada 100 Monthill, Inc. California 100 Placer Business Center, Inc. California 100 Terman Properties, Inc. California 100 WVC II, Inc. Nevada 100 Weyerhaeuser Mortgage Company California 100 Mason-McDuffie Mortgage Corporation Delaware 100 Mason-McDuffie Service Corporation California 100 Southwest Partners, Inc. California 100 Westwood Associates California 100 Westwood Insurance Agency California 100 Westwood Insurance Agency of Arizona, Inc. Arizona 100 WMC Mortgage Co. International California 100 WMC Finance Corp. I California 100 Weyerhaeuser Venture Company Nevada 100 Las Positas Land Co. California 100 WAMCO, Inc. Nevada 100 Weyerhaeuser Realty Investors, Inc. Washington 100 Weyerhaeuser Forestlands International, Inc. Washington 100 Weyerhaeuser International, Inc. Washington 100 Weyerhaeuser Canada Ltd. Canada 100 Saskatoon Chemicals Ltd. Canada 100 Weyerhaeuser Saskatchewan Ltd. Canada 100 Weyerhaeuser China, Ltd. Washington 100 Weyerhaeuser GMBH Germany 100 Weyerhaeuser (Asia) Limited Hong Kong 100 Weyerhaeuser Italia, S.r.l. Italy 100 Weyerhaeuser Japan Ltd. Japan & Delaware 100 Weyerhaeuser Korea Ltd. Korea 100 Weyerhaeuser, S.A. Panama 100 Weyerhaeuser Taiwan Ltd. Delaware 100 Weyerhaeuser International Sales Corp. Guam 100 Weyerhaeuser (Mexico) Inc. Washington 100 Weyerhaeuser Midwest, Inc. Washington 100 Weyerhaeuser Overseas Finance Co. Delaware 100 Weyerhaeuser Real Estate Company Washington 100 Centennial Homes, Inc. Texas 100 Midway Properties, Inc. North Carolina 100 </TABLE> 20
Weyerhaeuser Company and Subsidiaries Exhibit 22 Subsidiaries of the Registrant - Continued - ---------------------------------------------------------------------- <TABLE> <CAPTION> Percentage State or Ownership of Country of Immediate Name Incorporation Parent ---- ------------- ------------ <C> <S> <S> Pardee Construction Company California 100% Marmont Realty Company California 100 Pardee Construction Company of Nevada Nevada 100 Pardee Investment Company California 100 Parvada, Inc. Nevada 100 The Quadrant Corporation Washington 100 Quadrant Real Estate Services, Inc. Washington 100 South Jersey Assets, Inc. New Jersey 100 Scarborough Constructors, Inc. Florida 100 Silverthorn Country Club, Inc. Florida 100 TMI, Inc. Texas 100 Weyerhaeuser Real Estate Company of Nevada Nevada 100 Winchester Homes, Inc. Delaware 100 SC-WHI, Inc. Delaware 100 The Wray Company Arizona 100 </TABLE> 21
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. 33-52789 on Form S-3 and Nos. 33-60527, 33- 60529, 33-60521, 33-60525, 33-25928, 33-24979, 33-47392, 33-10165, 33- 41414, 2-88109, 2-27929, 2-58498, 2-81463 and 333-01565 on Form S-8. ARTHUR ANDERSEN LLP Seattle, Washington, March 14, 1997 22