SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
Commission File Number 1-4825
WEYERHAEUSER COMPANY
Federal Way, Washington 98063-9777 Telephone (253) 924-2345
Securities registered pursuant to Section 12(b) of the Act:
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.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
The number of shares outstanding of the registrant’s class of common stock, as of August 1, 2003, was 219,173,048 common shares ($1.25 par value).
TABLE OF CONTENTS
WEYERHAEUSER COMPANY AND SUBSIDIARIES
Index to Form 10-Q FilingFor the twenty-six weeks ended June 29, 2003
The financial information included in this report has been prepared in conformity with accounting practices and methods reflected in the financial statements included in the annual report (Form 10-K) filed with the Securities and Exchange Commission for the year ended December 29, 2002. Though not examined by independent public auditors, the financial information reflects, in the opinion of management, all adjustments necessary to present a fair statement of results for the interim periods indicated. The results of operations for the twenty-six week period ended June 29, 2003, should not be regarded as necessarily indicative of the results that may be expected for the full year.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized.
August 12, 2003
See accompanying notes to financial statements.
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Note 1: Basis of Presentation
The consolidated financial statements include the accounts of Weyerhaeuser Company and all of its majority-owned domestic and foreign subsidiaries. Investments in and advances to equity affiliates which are not majority owned or controlled are accounted for using the equity method with taxes provided on undistributed earnings. Significant intercompany transactions and accounts are eliminated.
Certain of the consolidated financial statements and notes to financial statements are presented in two groupings: (1) Weyerhaeuser, principally engaged in the growing and harvesting of timber and the manufacture, distribution and sale of forest products, and (2) Real Estate and Related Assets, principally engaged in real estate development and construction and other real estate related activities. The term “company” refers to Weyerhaeuser Company and all of its majority-owned domestic and foreign subsidiaries. The term “Weyerhaeuser” excludes Real Estate and Related Assets.
The consolidated financial statements are unaudited; however, the consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary to a fair presentation of the company’s financial position, results of operations, and cash flows for the interim periods presented. Except as disclosed in the Notes to Financial Statements, such adjustments are of a normal, recurring nature. The consolidated financial statements have been prepared pursuant to rules and regulations of the Securities and Exchange Commission pertaining to interim financial statements. Certain disclosures normally provided in financial statements prepared under accounting principles generally accepted in the United States have been omitted in accordance with those rules and regulations. These consolidated financial statements should be read in conjunction with the consolidated financial statements included in the company’s Annual Report on Form 10-K for the year ended December 29, 2002.
Certain reclassifications have been made to conform comparative data to the current format.
Note 2: New Accounting Pronouncements
The company adopted the provisions of Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations, as of the beginning of 2003. Statement 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The cumulative effect of adopting the accounting principle, after taxes of $6 million, was a charge of $11 million, or 5 cents per share. The effect on results reported for the twenty-six-week period ended June 30, 2002, would not have been material had the provisions of Statement 143 been in place during the comparable period.
The company adopted the provisions of Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities, effective January 1, 2003. Statement No. 146 requires companies to recognize certain costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Adoption of Statement No. 146 did not have a material effect on the company’s financial position, results of operations, or cash flows.
The Financial Accounting Standards Board issued Interpretation No. 46,Consolidation of Variable Interest Entities, in January 2003. The Interpretation addresses consolidation of certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The consolidation provisions of the Interpretation apply to variable interest entities created, and to variable interest entities in which the company obtains an interest, after January 31, 2003. The company also will be required to apply the consolidation provisions of the Interpretation as of the beginning of the third quarter of 2003 to variable interest entities in which its interest was acquired prior to February 1, 2003. Implementation of Interpretation No. 46 has not had, and is not expected to have, a material effect on the company’s financial position, results of operations, or cash flows.
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Note 3: Stock-Based Employee Compensation
The company uses the intrinsic-value method for stock-based compensation to employees prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. The company has consistently defined the past year as the service period for purposes of applying the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation. As a result, stock-based employee compensation expense is reflected as of the option grant dates in the following table for purposes of illustrating the effect on net earnings and earnings per share as if the company had applied the fair value recognition provisions of Statement No. 123.
Note 4: Net Earnings Per Share
Basic net earnings per share are based on the weighted average number of common and exchangeable shares outstanding during the respective periods. Diluted net earnings per share are based on the weighted average number of common and exchangeable shares outstanding and stock options outstanding at the beginning of or granted during the period.
Options to purchase 11,863,368 shares as of June 29, 2003, and 202,650 shares as of June 30, 2002, were not included in the computation of diluted earnings per share for the thirteen and twenty-six week periods then ended because the option exercise prices were greater than the average market prices of common shares during those periods.
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Note 5: Comprehensive Income
The company’s comprehensive income is as follows:
Note 6: Equity Affiliates
Weyerhaeuser
Weyerhaeuser’s investments in affiliated companies that are not majority owned or controlled are accounted for using the equity method. Weyerhaeuser’s significant equity affiliates as of June 29, 2003, are:
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Unconsolidated financial information for affiliated companies, which are accounted for by the equity method is as follows:
The company provides goods and services to these affiliates, which vary by entity, in the form of raw materials, management and marketing services, support services and shipping services. Additionally, the company purchases finished product from certain of these entities. The aggregate total of these transactions is not material to the company’s results of operations.
Real Estate and Related Assets
Investments in unconsolidated entities that are not majority owned or controlled are accounted for using the equity method with taxes provided on undistributed earnings as appropriate.
Unconsolidated financial information for unconsolidated entities, which are accounted for by the equity method, is as follows:
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Note 7: Goodwill
The changes in the carrying amount of goodwill for the twenty-six weeks ended June 29, 2003, are as follows:
The company acquired the remaining 50 percent interest in Wilton Connor LLC at the beginning of 2003 for cash paid of $4 million and the payment of Wilton Connor debt of $4 million. Goodwill of $34 million associated with the company’s purchase of its initial 50 percent interest in 1998 was reclassified from investments in and advances to equity affiliates to goodwill.
Note 8: Inventories
Note 9: Accrued Liabilities
Note 10: Debt
Weyerhaeuser Company had short-term bank credit lines of $1.3 billion under a 364-day revolving facility at December 29, 2002. The 364-day revolving line of credit was renewed during the twenty-six weeks ended June 29, 2003, in the amount of $1.2 billion and expires in March 2004. Both Weyerhaeuser Company and Weyerhaeuser Real Estate Company (WRECO) can borrow against this facility. WRECO can borrow up to $600 million under the $1.2 billion facility.
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In addition, Weyerhaeuser Company has a revolving credit facility agreement entered into with a group of banks that expires in March 2007 and that provides for borrowings up to a total amount of $1.3 billion, all of which is available to Weyerhaeuser Company. Borrowings are at LIBOR plus a spread or other such interest rates mutually agreed to between the borrower and lending banks.
Of the total committed bank facilities of $2.5 billion, $1.8 billion was available as of June 29, 2003, for incremental borrowings.
In February 2002, the company issued bridge financing in connection with its acquisition of Willamette Industries, Inc. (Willamette). Fees related to the commitments on financing that had been secured for the acquisition were recorded as deferred finance costs. In March 2002, the company replaced the bridge financing with $5.5 billion of notes payable. The $35 million unamortized portion of the deferred costs associated with the bridge financing was written off and is classified in interest expense incurred in the statement of earnings for the twenty-six weeks ended June 30, 2002.
Note 11: Legal Proceedings, Commitments and Contingencies
Legal Proceedings
Hardboard Siding Claims. The company announced in June 2000 it had entered into a proposed nationwide settlement of its hardboard siding class action cases and, as a result, took a charge of $130 million before taxes to cover the estimated cost of the settlement and related claims. The court approved the settlement in December 2000. An appeal from the settlement was denied in March 2002 and the settlement is now binding on all parties. In the third quarter of 2001, the company reassessed the adequacy of the reserve and increased the reserve by an additional $43 million. The company incurred claims and related costs in the amount of $2 million and $4 million in the second quarter of 2003 and 2002, respectively, and charged these costs against the reserve. As of June 29, 2003, the company had approximately $90 million in reserves remaining for hardboard siding claims. While the company believes that the reserve balances established for these matters are adequate, the company is unable to estimate at this time the amount of additional charges, if any, that may be required for these matters in the future.
The settlement class consists of all persons who own or owned structures in the United States on which the company’s hardboard siding had been installed from January 1, 1981, through December 31, 1999. This is a claims-based settlement, which means that the claims will be paid as submitted over a nine-year period. An independent adjuster will review each claim submitted and determine whether it qualifies for payment under the terms of the settlement agreement. The following table presents an analysis of the claims activity related to the hardboard siding class action cases:
The company negotiated settlements with its insurance carriers for recovery of $52 million of costs related to these claims. As of June 29, 2003, the company had received the full $52 million in recoveries from its insurance carriers.
At the end of the second quarter of 2003, the company is a defendant in state trial court in eight cases that are outside of the settlement involving primarily multi-family structures and residential developments. The company anticipates that other individuals and entities that have opted out of the settlement may file lawsuits against the company. In January 2002, a jury returned a verdict in favor of the company in a lawsuit involving hardboard siding manufactured by the company and installed by a developer in a residential development located in Modesto, California. The verdict has been appealed and is not included in the eight cases mentioned at the state court level.
Antitrust Litigation. In May 1999, two civil antitrust lawsuits were filed against the company in U.S. District Court, Eastern District of Pennsylvania. Both suits name as defendants several other major containerboard and packaging producers. The complaint in the first case alleges the defendants conspired to fix the price of linerboard and that the alleged conspiracy had the effect of increasing the price of corrugated containers. The suit requested class certification for purchasers of corrugated containers during the period from October 1993 through November 1995. The complaint in the second case alleges that the
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company conspired to manipulate the price of linerboard and thereby the price of corrugated sheets. The suit requested class certification for purchasers of corrugated sheets during the period October 1993 through November 1995. Both suits seek damages, including treble damages, under the antitrust laws. No specific damage amounts have been claimed. In September 2001, the district court certified both classes. On appeal, the Third Circuit Court of Appeals affirmed the trial court’s certification of the two classes. In April 2003, the U.S. Supreme Court declined to review the class certification issue and as a result class members were given until June 9, 2003, to opt out of the class. Approximately 155 members of the classes have opted out and filed lawsuits against the company. In the class action cases, pretrial discovery is underway and trial has been set for April 2004. The company has not recorded a reserve for this matter and is unable to estimate at this time the amount of charges, if any, that may be required for this matter in the future.
In December 2000, a lawsuit was filed against the company in U.S. District Court in Oregon alleging that from 1996 to present the company had monopoly power or attempted to gain monopoly power in the Pacific Northwest market for alder logs and finished alder lumber. In August 2001, the complaint was amended to add an additional plaintiff. Prior to trial, one of the plaintiffs withdrew from the litigation. In April 2003, the jury returned a verdict in favor of one of the plaintiffs in the amount of $26 million which was automatically trebled to $79 million under the antitrust laws. The company took a pre-tax charge of $79 million in its first quarter 2003 results. The company’s motion for a judgment notwithstanding the verdict was denied in July 2003. The company has appealed the matter to the United States Court of Appeals for the Ninth Circuit. While the company believes that the reserve balance established for this matter is adequate, the company is unable to estimate at this time the amount of additional charges, if any, that may be required for this matter in the future.
In April 2003, two separate lawsuits were filed in U.S. District Court in Oregon alleging that the company violated antitrust laws by monopolizing the markets for alder sawlogs and finished alder lumber. In June 2003, amended complaints were filed in both matters. The first suit was brought by four separate corporations located in Oregon and Washington who allege that between 1999 to the present they suffered damages and asked the court to award treble damages of $101 million. Plaintiffs’ request for a temporary restraining order prohibiting the company from certain alder log buying practices was denied by the court. The complaint also requests divestiture of a number of alder sawmills in Oregon, Washington and British Columbia. In July 2003, the company filed a motion to dismiss based on the insufficiencies in the pleadings. The second suit was brought by Coast Mountain Hardwoods, Inc., a Canadian company that sold its assets to the company in 2000. The suit alleges that the company’s practices caused Coast Mountain to be in a financially weak position so that it would sell its assets for less than their true value. The complaint requests treble damages in the amount of $516 million and also includes fraud and other allegations for which $108 million in damages are being sought. Request for divestiture of the company’s Northwest Hardwoods Division, a portion of its alder sawmills in British Columbia, Oregon and Washington and certain forest licenses acquired in Canada have been dropped from the complaint. The company disagrees with the assertions that have been made and plans to vigorously defend itself. The company has not recorded a reserve related to these two lawsuits and is unable to estimate at this time the amount of charges, if any, that may be required for these lawsuits in the future.
In June 2003, an alder antitrust complaint was filed in U.S. District Court in Oregon by Washington Alder, an alder sawmill located in Washington. The complaint alleges monopolization of the alder log and lumber markets from 1998 to present and requests $32 million after trebled damages. The company has not recorded a reserve related to this lawsuit and is unable to estimate at this time the amount of charges, if any, that may be required for this lawsuit in the future.
Paragon Trade Brands, Inc., Litigation. In May 1999, the Equity Committee (Committee) in the Paragon Trade Brands, Inc. (Paragon) bankruptcy proceeding filed a motion in U.S. Bankruptcy Court for the Northern District of Georgia for authority to prosecute claims against the company in the name of the debtor’s estate. Specifically, the Committee asserted that the company breached certain warranties in agreements entered into between Paragon and the company in connection with Paragon’s public offering of common stock in January 1993. The Committee seeks to recover damages sustained by Paragon as a result of two patent infringement cases, one brought by Procter & Gamble and the other by Kimberly-Clark. In September 1999, the court authorized the Committee to commence an adversary proceeding against the company. The Committee commenced this proceeding in October 1999, seeking damages in excess of $420 million against the company. Pursuant to a reorganization of Paragon, the litigation claims representative for the bankruptcy estate became the plaintiff in the proceeding. On June 26, 2002, the Bankruptcy Court issued an oral opinion granting the plaintiff’s motion for partial summary judgment, holding the company liable to plaintiff for breaches of warranty and denying the company’s motion for summary judgment. On October 30, 2002, the Bankruptcy Court issued a written order confirming the June oral opinion. In November 2002, the company filed a motion for reconsideration with the Bankruptcy Court. In June 2003, the judge issued an oral ruling denying the motion for reconsideration and set an October 2003 trial date for the determination of the damages. The company is seeking an early review of the Bankruptcy Court’s summary judgment in favor of the plaintiffs on the issue of liability with the U.S. District Court. Review of the decision is discretionary with the U.S. District Court at this stage of the proceedings. The company has not established a reserve for this matter and is unable to estimate at this time the amount of charges, if any, that may be required in the future.
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Other Litigation. The company is a party to other matters generally incidental to its business in addition to the matters described above.
Summary. Although the final outcome of any legal proceeding is subject to a great many variables and cannot be predicted with any degree of certainty, management currently believes that adequate reserves have been established for probable losses from litigation when the amount could be reasonably determined. Management further believes that the ultimate outcome of these legal proceedings could be material to operating results in any given quarter or year, but will not have a material adverse effect on the company’s long-term results of operations, liquidity or financial position.
Countervailing and Anti-dumping Duties
In April of 2001, the Coalition for Fair Lumber Imports (Coalition) filed two petitions with the U.S. Department of Commerce (Department) and the International Trade Commission (ITC), claiming that production of softwood lumber in Canada was being subsidized by Canada and that imports from Canada were being “dumped” into the U.S. market and sold at less than fair value. The Coalition asked that countervailing duty (CVD) and anti-dumping tariffs be imposed on softwood lumber imported from Canada.
In March 2002, the Department confirmed its preliminary finding that certain Canadian provinces were subsidizing logs by failing to collect full market price for stumpage. The Department established a final CVD rate of 18.79 percent. In the anti-dumping proceedings, the Department found that the six Canadian manufacturers examined, including the company, were engaged in sales at less than fair value and set cash deposit rates ranging from 2.18 percent to 12.44 percent. The company’s deposit rate was set at 12.39 percent. Because of statutory limitations that affected timing, the bonds covering duties following the preliminary determinations were released by the U.S. The resulting reversal of accrued expenses was included in earnings during 2002.
In May 2002, the ITC confirmed its earlier ruling that U.S. industry is threatened by subsidized and dumped imports. As a result, the company has made cash deposits relating to the CVD and anti-dumping actions at the rate of approximately $25 to $30 million a quarter. Following is a summary of the CVD and anti-dumping amounts recorded in the company’s statement of earnings:
Beginning in June 2003, and annually thereafter for a total of five years, the Department will conduct reviews to determine whether the company had engaged in dumping and whether Canada continued to subsidize softwood logs and, if so, the dumping margin and CVD to impose. Beginning in the second quarter of 2007, both the countervailing duty and anti-dumping orders will be automatically reviewed in a “sunset” proceeding to determine whether dumping or a countervailing subsidy will continue or recur.
The company is appealing under the North American Free Trade Agreement (NAFTA). A panel to review the Department’s finding in the anti-dumping proceeding held hearings in March and a panel to review the CVD proceeding held hearings in mid-April. A panel to review the ITC determination of injury held hearings in June. Decisions of the NAFTA panels on the anti-dumping and CVD proceedings are expected shortly. With the support of provincial governments, the federal government of Canada also moved for appellate review by panels under the World Trade Organization (WTO) and those reviews are currently in process. One WTO panel has issued an opinion finding that cross-border comparisons to determine and measure subsidies are not proper. In addition, the WTO appeals body has affirmed a panel ruling against the United States, that the so-called “Byrd Amendment,” which gives U.S. firms cash from anti-dumping and countervailing duties applied on foreign imports, is inconsistent with U.S. international obligations. The U.S. administration has recommended that the law be changed to comply with that ruling. When and whether Congress will implement that recommendation is uncertain.
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It is difficult to predict the net effect final duties will have on the company. In the event that the CVD and anti-dumping margins are determined to be improper, the charges incurred for these duties may be reversed and the company could receive reimbursement for amounts paid to date. In the event that final rates differ from the depository rates, ultimate charges may be higher or lower than those recorded to date. The company is unable to estimate at this time the amount of additional charges or reversals that may be necessary for this matter in the future.
Environmental Matters
In April 1999, Willamette’s Johnsonburg, Pennsylvania, pulp and paper mill received a notice of violation (NOV) from the U.S. Environmental Protection Agency (EPA) for alleged violations of the Clean Air Act (CAA). Management has met with federal and state officials to resolve the matters alleged in the NOV and will continue to work with officials to narrow issues in dispute. Management believes that it is reasonably possible that a settlement will be reached at a future date that may involve payment of a penalty of up to approximately $1 million and the installation of pollution control equipment.
The company is also a party to various proceedings relating to the cleanup 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 has established reserves for remediation costs on all of the approximately 80 active sites across its operations as of the end of the second quarter of 2003 totaling $50 million, down from $54 million at the end of 2002. The reserve levels reflect the incorporation of new information on all sites concerning remediation alternatives, updates on prior cost estimates and new sites, less the costs incurred to remediate these sites during this period. The company accrued remediation costs of $9 million in the first twenty-six weeks of 2003. The company incurred remediation costs of $4 million in the first twenty-six weeks of both 2003 and 2002, and charged these costs against the reserve. Additionally, as discussed in Note 2, the company adopted the provisions of Statement 143 in the first quarter of 2003. Because the asset retirement obligations associated with landfills are accounted for separately, the company reduced its remediation cost accrual $9 million as of the date that it adopted the provisions of Statement 143. Based on currently available information and analysis, the company believes that it is reasonably possible that costs associated with all identified sites may exceed current accruals by amounts that may prove insignificant or that could range, in the aggregate, up to approximately $100 million over several years. This estimate of the upper end of the range of reasonably possible additional costs is much less certain than the estimates upon which accruals are currently based, and utilizes assumptions less favorable to the company among the range of reasonably possible outcomes. In estimating both its current accruals for environmental remediation and the possible range of additional future costs, the company has assumed that it will not bear the entire cost of remediation of every site to the exclusion of other known potentially responsible parties who may be jointly and severally liable. The ability of other potentially responsible parties to participate has been taken into account, generally based on each party’s financial condition and probable contribution on a per-site basis. No amounts have been recorded for potential recoveries from insurance carriers.
Guarantees
Weyerhaeuser Company has guaranteed approximately $44 million of debt of unconsolidated entities and other parties. Approximately $3 million of the guarantees expire in 2003, $31 million expire in 2004, and the remaining guarantees expire in 2007.
Weyerhaeuser Real Estate Company (WRECO) has guaranteed approximately $2 million of debt of unconsolidated entities and other parties, performance under an operating lease with future lease payments of approximately $27 million, and $55 million of mortgages sold with recourse. In each case, WRECO would be required to perform if the obligor were to default. The debt guarantees expire in periods through 2017 and the lease guarantees expire in 2041. The mortgage guarantees expire as the underlying loans mature through 2019.
Warranties
WRECO provides warranties on home sales closed that vary depending on state and local laws. The reserves for these warranties are determined by applying the provisions of Statement of Financial Accounting Standards No. 5, Accounting for Contingencies. The liability was approximately $7 million at June 29, 2003, and December 29, 2002.
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Note 12: Charges for Integration and Restructuring
Weyerhaeuser incurred the following charges for the integration of Willamette and Weyerhaeuser’s overall cost-reduction efforts:
As of June 29, 2003, Weyerhaeuser accrued liabilities include approximately $12 million of severance accruals related to integration charges recognized from 2002 through June 29, 2003, which are associated with the termination of the employment of approximately 400 employees.
Note 13: Charges for Closure of Facilities
Weyerhaeuser incurred the following charges for the closure of facilities:
During 2003, Weyerhaeuser recognized closure costs in connection with the announced closures of three Wood Products facilities and one fine paper machine. Activities associated with the 2003 closures are expected to be completed by June 2004 and Weyerhaeuser does not expect to incur any additional amounts related to these closures.
The charge recognized during the twenty-six weeks ended June 30, 2002, is associated with the closures of an oriented strand board facility and six packaging facilities.
Changes in accrued severance during the twenty-six weeks ended June 29, 2003, were as follows:
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Note 14: Other Operating Costs, Net
Other operating costs, net, is an aggregation of both recurring and occasional income and expense items and, as a result, can fluctuate from period to period. Weyerhaeuser’s other operating costs, net, includes the following pretax charges (credits):
In 1999, American Cemwood Corporation (Cemwood), a subsidiary of MacMillan Bloedel Limited, which had been acquired by the company, settled a class action suit involving claims alleging the failure of its cement fiber roofing products. The settlement provided an opportunity for the company to recover a portion of the settlement amount, depending on the outcome of a lawsuit filed by the class against Cemwood’s insurance companies. As a result of a settlement with the insurance companies, Weyerhaeuser recognized a net pretax benefit of $25 million in the thirteen weeks ended June 29, 2003. The company has an unresolved claim outstanding against a reinsurer.
Foreign exchange transaction gains and losses result from changes in exchange rates, primarily related to Weyerhaeuser’s Canadian and New Zealand operations.
Note 15: Sale of Timberlands
Weyerhaeuser sold approximately 100,000 acres of western Washington timberlands in May 2003 for cash and a note receivable (the Note) with a value of approximately $170 million on the date of the sale. Weyerhaeuser recognized a gain of $80 million after taxes on the sale of the timberlands. The Note is backed by an irrevocable standby letter of credit from a bank. Weyerhaeuser is exposed to credit-related gains or losses in the event of nonperformance by the bank, but does not expect the bank to fail to meet its obligations. The Note matures in May 2013 and is extendable for five-year periods up to May 2033.
Weyerhaeuser transferred the Note to a qualifying special purpose entity (SPE) in a manner that qualifies as a sale for accounting purposes in May 2003 for cash of $151 million and a beneficial interest in the SPE. The gain on the sale of the Note was immaterial. Because the SPE is a separate and distinct legal entity from Weyerhaeuser, the assets of the SPE are not available to satisfy the liabilities and obligations of the company. The company does not consolidate the SPE.
The company estimates the fair value of its beneficial interest in the SPE using a discounted cash flow model. The key assumption used to estimate fair value was a discount rate of 4.38 percent.
In addition, Weyerhaeuser recognized an additional gain of $15 million after taxes during the second quarter of 2003 when a contingency lapsed on a portion of the 115,000 acres of western Washington timberlands that was sold in December 2002.
Note 16: Business Segments
The company is principally engaged in the growing and harvesting of timber; the manufacture, distribution and sale of forest
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products; and real estate development and construction. The company’s principal business segments are:
During the first quarter of 2003, the company changed the structure of its internal organization. As a result, the company’s timberlands, distribution and converting facilities located outside North America, which were formerly reported in Timberlands, are now reported in Corporate and Other. Comparative information has been restated to conform to the new presentation.
An analysis and reconciliation of the company’s business segment information to the respective information in the consolidated financial statements is as follows:
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Forward-Looking Statements
Some information included in this report contains statements concerning the company’s future results and performance that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Some of these forward-looking statements can be identified by the use of forward-looking terminology such as “believes,” “will,” “expects,” “may,” “should,” “approximately,” “anticipates,” “indicates,” “plans,” and “estimates,” and the negative or other variations of those terms with comparable terminology or by discussions of strategy, plans or intentions. In particular, some of these forward-looking statements deal with litigation reserves, the expected sales and contribution to earnings in the third quarter of 2003 of the company’s business segments, anticipated pricing in certain of the company’s markets, expected repayment of company debt and return to historic debt ratios, anticipated capital expenditures, the effect of pending litigation on the company’s financial position, liquidity or results of operations, expected working capital, projected effects of reduction in returns and assumed discount rates on pension expense, expected contributions to pension plans, the anticipated impact of the Canadian Species at Risk Act and similar matters. The accuracy of such statements is subject to a number of risks, uncertainties and assumptions that may cause actual results to differ materially from those projected, including, but not limited to:
The company is also a large exporter and is affected by changes in economic activity in Europe and Asia, particularly Japan, and by changes in currency exchange rates, particularly the relative value of the U.S. dollar to the Euro and the Canadian dollar, and restrictions on international trade or tariffs imposed on imports, including the countervailing and anti-dumping duties imposed on the company’s softwood lumber shipments from Canada to the United States. These and other factors could cause or contribute to actual results differing materially from such forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will occur, or if any of them occurs, what effect they will have on the company’s results of operations or financial condition. The company expressly declines any obligation to publicly revise any forward-looking statements that have been made to reflect the occurrence of events after the date of this report.
Results of Operations
The term “company” refers to Weyerhaeuser Company and all of its majority-owned domestic and foreign subsidiaries. The term “Weyerhaeuser” excludes Real Estate and Related Assets.
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Consolidated Results
Consolidated net sales and earnings were:
Net sales and revenues increased $631 million, or 7 percent, in the first half of 2003 as compared to the same period in 2002. A significant portion of the increase in net sales and revenues is attributable to the timing of the company’s acquisition of Willamette, which was consolidated as of February 11, 2002. The first half of 2002 includes sales made by the former Willamette facilities beginning as of the acquisition date, while the first half of 2003 includes such sales for the entire period. Net sales and revenues for the second quarter of 2003 were relatively flat when compared to the second quarter of 2002. The factors that affected net sales and revenues are discussed below in the segment analyses.
Items that Affected Results
A summary of items that affected the quarterly and year-to-date comparisons of operating income and net earnings follows:
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Other factors that affected the quarterly and year-to-date comparison of operating income and net earnings are discussed below in the segment analyses.
Timberlands
Third party sales volume for Timberlands raw materials and log production volume for the thirteen and twenty-six week periods ended June 29, 2003, and June 30, 2002, are as follows:
Net sales and revenues increased $32 million, or 16 percent, for the thirteen-week period ended June 29, 2003, compared to the same period in 2002. The volume of logs sold to export and domestic markets was up 13 percent and 2 percent, respectively, in the thirteen weeks ended June 29, 2003, as compared to the thirteen weeks ended June 30, 2002. Price realizations, which include freight and are net of normal sales deductions, declined in the West, but increased in the South.
Net sales and revenues increased $95 million, or 26 percent, in the first half of 2003 as compared to the first half of 2002. Weyerhaeuser’s domestic timberland holdings increased approximately 30 percent as a result of the Willamette acquisition. The results for the first half of 2002 reflected sales of raw materials from the former Willamette timberlands only after February 11, 2002, while 2003 sales include a full period of sales from the former Willamette timberlands. The volume of logs sold to export and domestic markets was up 11 percent and 18 percent, respectively, in the first half of 2003, compared to the first half of 2002. Price realizations, which include freight and are net of normal sales deductions, declined in the West, but increased in the South.
Contribution to earnings increased $138 million and $180 million for the thirteen and twenty-six weeks ended June 29, 2003, respectively, compared to the thirteen and twenty-six weeks ended June 30, 2002. Items that affected the quarter-to-quarter comparison of Timberlands’ contribution to earnings include the following:
Timberlands’ contribution to earnings in the third quarter of 2003 is expected to be lower than the second quarter of 2003 due to normal reductions in harvest levels during the fire season.
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Wood Products
Net sales and revenues decreased $91 million, or 4 percent, for the thirteen-week period ended June 29, 2003, compared to the same period in 2002. The significant changes in net sales and revenues included:
Net sales and revenues decreased $20 million, or 1 percent, in the first half of 2003, compared to the first half of 2002. The 2003 results include sales made by former Willamette facilities for the full period, while 2002 results include sales made by the former Willamette facilities after February 11, 2002. The significant changes in net sales and revenues included:
Contribution (charge) to earnings for Wood Products was ($53) million in the thirteen weeks ended June 29, 2003, and $64 million in the thirteen weeks ended June 30, 2002. The year-to-date contribution (charge) to earnings was ($203) million for 2003 and $73 million for 2002. The following affected the comparison of Wood Products’ contribution (charge) to earnings:
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Prices for structural softwood lumber, plywood and oriented strand board improved seasonally late in the second quarter of 2003. The company expects price improvements for OSB and plywood to hold in the third quarter of 2003, and to result in improved earnings for Wood Products in the third quarter of 2003. The company expects price improvements in structural softwood lumber to abate somewhat as industry capacity adjusts to meet the seasonal demand. The company expects the segment’s earnings to continue to be adversely affected by CVD and anti-dumping duties on softwood lumber that Weyerhaeuser produces in Canada and exports to the United States. These charges have been incurred at a rate of approximately $25 million to $30 million per quarter beginning with the quarter ended September 29, 2002. The company plans to continue analyzing facilities in the Wood Products system for rationalization opportunities.
Third party sales and total production volumes for the major products in the Wood Products segment for the thirteen and twenty-six week periods ended June 29, 2003, and June 30, 2002, are as follows:
Pulp and Paper
Net sales and revenues increased $7 million, or 1 percent, for the thirteen-week period ended June 29, 2003, compared to the same period in 2002. The significant changes in net sales and revenues included:
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Net sales and revenues increased $233 million, or 14 percent, for the twenty-six week period ended June 29, 2003, compared to the twenty-six weeks ended June 30, 2002. The increase is primarily due to the fact that 2003 results include sales made by former Willamette facilities for the full period, while 2002 results include sales made by the former Willamette facilities only after February 11, 2002. The significant changes in net sales and revenues included:
Charges to earnings decreased $8 million in the second quarter of 2003, as compared to the same period of 2002. Contribution to earnings increased by $17 million in the twenty-six week period ended June 29, 2003, over the comparable period of 2002. The effect of the favorable sales variances were partially offset by the following:
The company expects third quarter 2003 earnings to be lower than the second quarter primarily due to pricing pressures on both pulp and fine paper. Declining market demand for uncoated freesheet coupled with an increase in productivity at the company’s fine paper mills is causing the company to assess the need for further rationalization of its fine paper system.
Third party sales and total production volumes for major Pulp and Paper products follow:
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Containerboard, Packaging and Recycling
Net sales and revenues decreased $9 million, or 1 percent, in the thirteen weeks ended June 29, 2003, as compared to the thirteen weeks ended June 30, 2002. The decrease in net sales and revenues was primarily due to a decrease in packaging sales. Packaging unit shipments decreased approximately 1.0 billion square feet, or 5 percent, in the second quarter of 2003, compared to the same period in 2002. The decline in unit shipments was partially due to the closure of five plants in 2002 along with weak market conditions. Prices realized for packaging, which include freight and are net of normal sales deductions, partially offset the decline in unit shipments. Unit selling prices for corrugated containers increased $2 per thousand square feet, or 4 percent, in the thirteen weeks ended June 29, 2003, compared to the second quarter of 2002.
Net sales and revenues increased $161 million, or 8 percent, in the twenty-six weeks ended June 29, 2003, as compared to the twenty-six weeks ended June 30, 2002. The increase is primarily due to the fact that 2003 includes sales by the former Willamette facilities for the full twenty-six weeks, while the twenty-six weeks ended June 30, 2002, include sales by the former Willamette facilities only after February 11, 2002. The increase in net sales and revenues was primarily due to an increase in packaging sales. Packaging unit shipments increased approximately 1.3 billion square feet, or 4 percent, in the first half of 2003, compared to the same period in 2002. Price realizations for packaging, which include freight and are net of normal sales deductions, increased $1 per thousand square feet, or 3 percent, in the 2003 period as compared to the twenty-six weeks ended June 30, 2002.
Contribution to earnings increased $33 million, or 44 percent, in the thirteen weeks ended June 29, 2003, compared to the thirteen weeks ended June 30, 2002. Contribution to earnings increased $55 million, or 41 percent, in the twenty-six weeks ended June 29, 2003, compared to the twenty-six weeks ended June 30, 2002. While pricing and shipment volumes played a role in the changes in earnings between the periods, other factors affecting the business results were as follows:
Containerboard, Packaging and Recycling’s contribution to earnings in the third quarter of 2003 is expected to be lower than the second quarter due to weak market conditions. Weak market demand for corrugated packaging coupled with an increase in productivity at the company’s containerboard mills makes inventory management a key operating priority. The company plans to continue analyzing facilities in its integrated Containerboard, Packaging and Recycling system for rationalization opportunities.
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Third party sales and total production volumes for Containerboard, Packaging and Recycling follow:
Net sales and revenues and contribution to earnings increased $11 million and $12 million, respectively, in the thirteen weeks ended June 29, 2003, compared to the same period in 2002. Sales in markets where the company operates remained strong during 2003. Net sales and revenues attributable to single-family home sales were $355 million and $350 million in the thirteen weeks ended June 29, 2003, and June 30, 2002, respectively. The segment closed 1,003 single-family home sales during the thirteen weeks ended June 29, 2003, as compared to 1,070 single-family home sales in the same period in 2002. The average sales price for single-family homes was approximately $354,000 in the thirteen weeks ended June 29, 2003, and approximately $327,000 in the thirteen weeks ended June 30, 2002. Results for the thirteen weeks ended June 29, 2003, included a $12 million pretax gain on a commercial property sale in Southern California.
Net sales and revenues increased $60 million and contribution to earnings increased $16 million in the first half of 2003, compared to the first half of 2002. Net sales and revenues attributable to single-family home sales were $727 million and $694 million in the twenty-six weeks ended June 29, 2003, and June 30, 2002, respectively. The segment closed 2,013 single-family home sales during the first half of 2003, as compared to 2,089 single-family home sales closed in the same period in 2002. The average sales price for single-family homes was approximately $361,000 in the twenty-six weeks ended June 29, 2003, and approximately $332,000 in the twenty-six weeks ended June 30, 2002. Results for the first half of 2003 included pretax gains of $30 million for the sales of commercial property and an apartment complex.
Customer traffic was strong in the first half of 2003, and the backlog of homes sold, but not closed, is slightly above six months as of June 29, 2003. The segment’s contribution to earnings in the third quarter of 2003 is expected to be higher than the second quarter due to increased closings of single-family homes.
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Corporate and Other
Corporate and Other includes marine transportation (Westwood Shipping Lines, a wholly owned subsidiary); timberlands, distribution and converting facilities located outside North America; and general corporate support activities. Corporate and Other’s contribution (charge) to earnings includes the following:
Interest Expense
Interest expense incurred by Weyerhaeuser in the first half of 2003, was $413 million, compared to $400 million in the same period of 2002. Interest expense increased principally because of debt issued during the first quarter of 2002 to finance the Willamette acquisition. In addition, a charge of $35 million was recognized in the first quarter of 2002 related to the write off of debt issuance costs when bridge loans for the acquisition of Willamette were replaced with permanent financing. Weyerhaeuser expects to repay additional debt and to return to historic debt ratios within five years from the time of the Willamette acquisition.
Income Taxes
The company reduced its effective income tax rate to 34.0 percent during the second quarter of 2003 from the 34.5 percent rate that was used in the thirteen weeks ended March 30, 2003, to reflect a revision in the company’s estimate of the effective rate for the 2003 annual period. The change in the effective rate had an immaterial effect on income taxes recognized in the second quarter of 2003. The effective income tax rate for the 2002 periods was 35.0 percent. The company’s effective income tax rate is affected by the benefits of tax credits and the export sales incentive.
Cumulative Effect of a Change in Accounting Principle
The company adopted the provisions of Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations, as of the beginning of 2003. The cumulative effect of adopting the accounting principle was $11 million, or 5 cents per share, after taxes. The effect on results reported for the twenty-six weeks ended June 30, 2002, would not have been material had the provisions of Statement 143 been in place during the comparable period.
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Natural Resources and Environmental Matters
The Canadian Species at Risk Act (SARA) was proclaimed in June 2003. Some provisions of SARA take effect immediately and others will be phased into effect in future months. SARA applies to federal lands in Canada, and to wildlife species listed as being at risk and their critical habitat. It aims to prevent Canadian species, subspecies and distinct populations from becoming extirpated or extinct, and to encourage the recovery of endangered or threatened species, and the management of other species to prevent them from becoming at risk. It is not anticipated that SARA will result in additional restrictions on timber harvests or other forest management practices, increase operating costs, or affect timber supply and prices in 2003 or 2004, although it may have such an effect in the future.
Liquidity and Capital Resources
General
The company is committed to the maintenance of a sound capital structure. This commitment is based upon two considerations: the obligation to protect the underlying interests of its shareholders and lenders and the desire to have access, at all times, to all major financial markets.
The important elements of the policy governing the company’s capital structure are as follows:
Operations
Consolidated net cash provided by operations was $314 million and $329 million in the twenty-six weeks ended June 29, 2003, and June 30, 2002, respectively. Elements that affected net cash provided by operations for the comparative periods follow:
Investing
Weyerhaeuser’s capital expenditures for the twenty-six weeks ended June 29, 2003, excluding acquisitions and Real Estate and Related Assets, were $319 million, compared to $466 million in the same period of 2002. Capital spending by segment for the twenty-six weeks ended June 29, 2003, was $27 million for Timberlands; $69 million for Wood Products; $154 million for Pulp and Paper; $48 million for Containerboard, Packaging and Recycling; and $21 million for Corporate and Other. Weyerhaeuser currently anticipates capital expenditures, excluding acquisitions and Real Estate and Related Assets, to approximate $750 million for the year; however, this expenditure level could increase or decrease as a consequence of future economic conditions.
Weyerhaeuser received net cash proceeds of $151 million from the sale of western Washington timberlands and the related note receivable in the second quarter of 2003. See Note 15 of Notes to Financial Statements.
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The company expended $6.1 billion, net of cash acquired, during the first quarter of 2002, to purchase the outstanding shares of Willamette stock.
Financing
Weyerhaeuser’s interest-bearing debt at June 29, 2003, was relatively flat when compared to the outstanding balance at December 29, 2002. Borrowings increased during the first quarter of 2003, primarily to finance a seasonal increase in working capital. Available cash generated by operations and the sale of timberlands in western Washington were used to pay down debt in the second quarter of 2003. Proceeds from new borrowings and payment on long-term debt were $267 million and $265 million, respectively, in the twenty-six weeks ended June 29, 2003.
Weyerhaeuser’s debt-to-total-capital ratio, excluding Real Estate and Related Assets, was 55.1 percent as of June 29, 2003, compared to 55.6 percent at the end of 2002. Debt reduction is the company’s highest priority, and Weyerhaeuser expects to return to historic debt ratios within five years from the time of the Willamette acquisition. For purposes of computing this ratio, debt includes Weyerhaeuser’s interest-bearing debt and capital lease obligations and total capital consists of debt, shareholders’ interest, deferred taxes and minority interest in subsidiaries, net of Weyerhaeuser’s investments in Real Estate and Related Assets subsidiaries.
Weyerhaeuser Company and WRECO have established 364-day and multi-year revolving lines of credit in the maximum aggregate amount of $2.5 billion as of June 29, 2003. The multi-year revolving line of credit expires in March 2007. WRECO can borrow up to $600 million under the 364-day facility. Neither of the entities is a guarantor of the borrowing of the other under either of these credit facilities. As of June 29, 2003, $1.8 billion was available under these bank facilities for incremental borrowings.
Critical Accounting Policies
Pension and Postretirement Benefit Plans
The company sponsors several qualified and nonqualified pension and postretirement benefit plans for its employees. Key assumptions used to determine the amounts recorded in the company’s financial statements include the discount rate, the expected return on plan assets, anticipated trends in health care costs, assumed increases in salaries, mortality rates, and other factors. These assumptions are reviewed with external advisors at the end of each fiscal year and are updated as appropriate. Actual experience that differs from the assumptions could have a significant effect on the company’s financial position or results from operations. Other factors that affect the level of net periodic benefit income or expense that is recognized in a given year include actual pension fund performance, plan changes, and changes in plan participation or coverage.
The company’s expected rate of return on plan assets reflects the assumption that its plan assets will continue to outperform a benchmark rate of return, assuming a portfolio of investments comprised of 60 percent equities, 35 percent bonds and 5 percent cash. Over the last 18 years, actual returns on the company’s plan assets have exceeded the benchmark rate of return by 5.8 percentage points. As of December 29, 2002, the company reduced its expected rate of return on pension plan assets assumption from 10.5 percent to 9.5 percent to reflect the assumptions that the long-term benchmark return will be 6.5 percent and that the company’s pension plan assets will outperform the benchmark by 3.0 percent. Each 1.0 percent reduction in the expected return on plan assets would decrease the 2003 pension plan income by approximately $35 million for the company’s U.S. qualified pension plans (and would thereby generate a pension expense) and would increase the 2003 pension plan expense by approximately $5 million for the company’s Canadian pension plans.
The discount rate is based on rates of interest on long-term corporate bonds. As of December 29, 2002, the company reduced the discount rate from 7.25 percent for U.S. plans and 7.0 percent for Canadian plans to 6.75 percent for U.S. plans and 6.5 percent for Canadian plans to reflect decreases in the benchmark rates of interest. Pension and postretirement benefit income and expenses for 2003 are based on the 6.75 percent assumed discount rate for U.S. plans and 6.5 percent assumed discount rate for Canadian plans. Future discount rates may differ. Each 0.5 percent reduction in the assumed discount rate is expected to decrease pension income approximately $7 million for the company’s U.S. qualified pension plans and increase pension expense by approximately $5 million for the company’s Canadian pension plans.
A contribution of approximately $2 million was made during June 2003 to complete the termination of the MacMillan Bloedel salaried pension plan. Based upon information currently available, the company expects it will not be required to make additional cash contributions to its U.S. pension plans in 2003. The company expects to contribute approximately $13
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million to its Canadian pension plans in 2003 with an additional $10 million during 2003 or early 2004 for the wind up of the pension plan at Sturgeon Falls.
Long-Lived Assets and Goodwill
The company reviews the carrying value of its long-lived assets and goodwill when events and changes in circumstances indicate that the carrying value of the asset may not be recoverable through future operations. To determine whether the carrying value of an asset group is impaired, the company must estimate the cash flows that could be generated under a range of possible outcomes and the likelihood of the outcomes. If the carrying value of an asset group is not recoverable through the weighted average cash flows under the possible outcomes, it is considered impaired. An impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its estimated fair value. Estimated fair value is based on market comparisons, when available, or discounted cash flows under the possible outcomes.
The valuation of goodwill is assessed annually. If goodwill is considered impaired, the company is required to estimate the fair values of the assets and liabilities of the reporting unit carrying the goodwill, similar to the fair value allocation under the purchase method of accounting for a business combination. The excess of the fair value of the reporting unit over the fair value of the assets and liabilities of the reporting unit equals the implied value of goodwill. An impairment charge is recognized to the extent the carrying value of goodwill of the reporting unit exceeds its implied fair value.
The company has grown substantially through acquisitions in recent years. A large portion of the net book value of the company’s property and equipment and timber and timberlands represent amounts allocated to those assets as part of the allocation of the purchase price of recent acquisitions. In other words, a large portion of the company’s long-term assets are valued at relatively current amounts. In addition, the company had goodwill of $3.2 billion as of June 29, 2003, which represented approximately 11 percent of the company’s consolidated assets.
The amount and timing of impairment charges for these assets require estimates of future cash flows, residual values and fair values of the related assets, and the probability of alternative outcomes. In addition, the company must make assumptions regarding product pricing, raw material costs, volumes of product sold, and discount rates to analyze the future cash flows for goodwill impairment assessments. Management believes that the estimates of future cash flows and fair values are reasonable; however, changes in estimates of such cash flows, changes in the likelihood of alternative outcomes, and changes in estimates of fair value could affect the evaluations.
Legal, Environmental and Product Liability Reserves
Contingent liabilities, principally for legal, environmental and product liability matters, are recorded when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Liabilities accrued for legal matters require judgments regarding projected outcomes and range of loss based on historical experience and recommendations of legal counsel. However, litigation is inherently unpredictable and excessive verdicts do occur. As an example of changes that can occur in the estimates of contingent liabilities, the company recognized a $79 million charge before taxes in the first quarter of 2003 as a result of the jury verdict that was returned in the alder antitrust case in April 2003 (see Note 11 of Notes to Financial Statements).
Liabilities for environmental matters require evaluations of relevant environmental regulations and estimates of future remediation alternatives and costs. The company determines these estimates after a detailed evaluation of each site. In establishing its accruals for environmental remediation, the company has assumed that it will not bear the entire cost of remediation of every site to the exclusion of other known potentially responsible parties who may be jointly and severally liable. The ability of other potentially responsible parties to participate has been taken into account, based generally on each party’s financial condition and probable contribution on a per-site basis. The company does not record amounts for recoveries from insurance carriers until a binding agreement has been reached between the company and the carrier.
Additionally, as discussed in Note 11 of the Notes to Financial Statements, reserves for future claims settlements relating to hardboard siding cases require judgments regarding projections of future claims rates and amounts.
Depletion
Depletion, or costs attributed to timber harvested, is recorded as trees are harvested. Depletion rates are adjusted annually. Depletion rates are computed by dividing the original cost of the timber less previously recorded depletion by the total timber volume that is estimated to be harvested over the harvest cycle. The length of the harvest cycle varies by geographic region and species of timber. The depletion rate calculations do not include an estimate for future silviculture costs associated with
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existing stands, future reforestation costs associated with a stand’s final harvest, or future volume in connection with the replanting of a stand subsequent to its final harvest.
Significant estimates and judgments are required to determine the volume of timber available for harvest over the harvest cycle. Some of the factors affecting the estimates are changes in weather patterns, the effect of fertilizer and pesticide applications, changes in environmental regulations and restrictions that may limit the company’s ability to harvest certain timberlands, changes in harvest plans, the scientific advancement in seedling and growing technology, and changes in harvest cycles.
Quantitative and Qualitative Disclosures About Market Risk
No changes occurred during the twenty-six weeks ended June 29, 2003, that had a material effect on the information relating to quantitative and qualitative disclosures about market risk that was provided in the company’s Annual Report on Form 10-K for the year ended December 29, 2002.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The company’s principal executive officer and principal financial officer have evaluated the effectiveness of the company’s disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Disclosure controls are controls and other procedures that are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s (SEC) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Based on their evaluation, the company’s principal executive officer and principal financial officer believe the controls and procedures in place are effective to ensure that information required to be disclosed complies with the SEC’s rules and forms.
Changes in Internal Controls
There were no changes in the company’s internal controls, or in other factors that could significantly affect these controls, subsequent to the date of their evaluation by the principal executive officer and principal financial officer.
Part II. Other Information
Item 1. Legal Proceedings
See discussion in Note 11 to Financial Statements.
Item 2. Changes in Securities not applicable
Item 3. Defaults upon Senior Securities not applicable
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Item 4. Submission of Matters to a Vote of Security Holders
Matters voted upon and votes cast at the annual meeting of shareholders of Weyerhaeuser Company held on Tuesday, April 15, 2003, were:
The reelection of Richard Haskayne, Robert Herbold, Donald Mazankowski and Nicole Piasecki to the board of directors.
The terms of Martha Ingram, John Kieckhefer, Arnold Langbo, Clayton Yeutter, Steven Rogel, William Ruckelshaus, Richard Sinkfield and James Sullivan continued after the annual meeting.
Item 5. Other Information not applicable
Item 6. Exhibits and Reports on Form 8-K
Exhibits
Reports on Form 8-K
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EXHIBITS INDEX
Exhibits: