x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Washington | 91-0470860 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
33663 Weyerhaeuser Way South Federal Way, Washington | 98063-9777 | |
(Address of principal executive offices) | (Zip Code) |
PART I | FINANCIAL INFORMATION | |
ITEM 1. | FINANCIAL STATEMENTS: | |
ITEM 2. | ||
ITEM 3. | ||
ITEM 4. | ||
PART II | OTHER INFORMATION | |
ITEM 1. | ||
ITEM 1A. | ||
ITEM 2. | ||
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | NA |
ITEM 4. | MINE SAFETY DISCLOSURES | NA |
ITEM 5. | OTHER INFORMATION | NA |
ITEM 6. | ||
QUARTER ENDED | YEAR-TO-DATE ENDED | ||||||||||||||
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES | SEPTEMBER 2014 | SEPTEMBER 2013 | SEPTEMBER 2014 | SEPTEMBER 2013 | |||||||||||
Net sales | $ | 1,915 | $ | 1,857 | $ | 5,615 | $ | 5,486 | |||||||
Cost of products sold | 1,504 | 1,479 | 4,364 | 4,304 | |||||||||||
Gross margin | 411 | 378 | 1,251 | 1,182 | |||||||||||
Selling expenses | 28 | 32 | 83 | 96 | |||||||||||
General and administrative expenses | 73 | 98 | 249 | 299 | |||||||||||
Research and development expenses | 5 | 8 | 19 | 23 | |||||||||||
Charges for restructuring, closures and impairments (Note 13) | 10 | 1 | 37 | 7 | |||||||||||
Other operating income, net (Note 14) | (23 | ) | (4 | ) | (163 | ) | (32 | ) | |||||||
Operating income | 318 | 243 | 1,026 | 789 | |||||||||||
Interest income and other | 7 | 21 | 27 | 39 | |||||||||||
Interest expense, net of capitalized interest | (88 | ) | (94 | ) | (254 | ) | (256 | ) | |||||||
Earnings before income taxes | 237 | 170 | 799 | 572 | |||||||||||
Income taxes (Note 15) | (39 | ) | (24 | ) | (148 | ) | (99 | ) | |||||||
Earnings from continuing operations | 198 | 146 | 651 | 473 | |||||||||||
Earnings from discontinued operations, net of income taxes (Note 2) | 966 | 21 | 998 | 36 | |||||||||||
Net earnings | 1,164 | 167 | 1,649 | 509 | |||||||||||
Dividends on preference shares | (11 | ) | (10 | ) | (33 | ) | (12 | ) | |||||||
Net earnings attributable to Weyerhaeuser common shareholders | $ | 1,153 | $ | 157 | $ | 1,616 | $ | 497 | |||||||
Earnings per share attributable to Weyerhaeuser common shareholders, basic (Note 5): | |||||||||||||||
Continuing operations | $ | 0.35 | $ | 0.23 | $ | 1.09 | $ | 0.83 | |||||||
Discontinued operations | 1.82 | 0.04 | 1.76 | 0.06 | |||||||||||
Net earnings per share | $ | 2.17 | $ | 0.27 | $ | 2.85 | $ | 0.89 | |||||||
Earnings per share attributable to Weyerhaeuser common shareholders, diluted (Note 5): | |||||||||||||||
Continuing operations | $ | 0.35 | $ | 0.23 | $ | 1.08 | $ | 0.82 | |||||||
Discontinued operations | 1.80 | 0.04 | 1.75 | 0.06 | |||||||||||
Net earnings per share | $ | 2.15 | $ | 0.27 | $ | 2.83 | $ | 0.88 | |||||||
Dividends paid per share | $ | 0.29 | $ | 0.22 | $ | 0.73 | $ | 0.59 | |||||||
Weighted average shares outstanding (in thousands) (Note 5): | |||||||||||||||
Basic | 531,913 | 582,828 | 567,436 | 560,505 | |||||||||||
Diluted | 536,012 | 587,179 | 571,503 | 565,383 |
QUARTER ENDED | YEAR-TO-DATE ENDED | ||||||||||||||
DOLLAR AMOUNTS IN MILLIONS | SEPTEMBER 2014 | SEPTEMBER 2013 | SEPTEMBER 2014 | SEPTEMBER 2013 | |||||||||||
Consolidated net earnings attributable to Weyerhaeuser common shareholders | $ | 1,153 | $ | 157 | $ | 1,616 | $ | 497 | |||||||
Other comprehensive income (loss): | |||||||||||||||
Foreign currency translation adjustments | (26 | ) | 18 | (27 | ) | (29 | ) | ||||||||
Actuarial gains (losses), net of tax expense (benefit) of ($91), $15, ($58) and $64 | (143 | ) | 31 | (76 | ) | 135 | |||||||||
Prior service costs, net of tax benefit of $13, $0, $43 and $3 | (25 | ) | (4 | ) | (68 | ) | (12 | ) | |||||||
Unrealized gains on available-for-sale securities | — | — | — | 1 | |||||||||||
Total other comprehensive income (loss) | (194 | ) | 45 | (171 | ) | 95 | |||||||||
Comprehensive income attributable to Weyerhaeuser common shareholders | $ | 959 | $ | 202 | $ | 1,445 | $ | 592 |
DOLLAR AMOUNTS IN MILLIONS | SEPTEMBER 30, 2014 | DECEMBER 31, 2013 | |||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,620 | $ | 830 | |||
Receivables, less allowances of $3 and $4 | 583 | 518 | |||||
Receivables for taxes | 23 | 101 | |||||
Inventories (Note 6) | 578 | 542 | |||||
Prepaid expenses | 97 | 117 | |||||
Deferred tax assets | 111 | 130 | |||||
Current assets of discontinued operations (Note 2) | — | 88 | |||||
Total current assets | 3,012 | 2,326 | |||||
Property and equipment, less accumulated depreciation of $6,408 and $6,327 | 2,534 | 2,689 | |||||
Construction in progress | 215 | 112 | |||||
Timber and timberlands at cost, less depletion charged to disposals | 6,546 | 6,580 | |||||
Investments in and advances to equity affiliates | 186 | 190 | |||||
Goodwill | 40 | 42 | |||||
Deferred tax assets | — | 5 | |||||
Other assets | 292 | 324 | |||||
Restricted financial investments held by variable interest entities | 615 | 615 | |||||
Noncurrent assets of discontinued operations (Note 2) | — | 1,694 | |||||
Total assets | $ | 13,440 | $ | 14,577 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Notes payable | $ | — | $ | 2 | |||
Accounts payable | 351 | 343 | |||||
Accrued liabilities (Note 8) | 606 | 629 | |||||
Current liabilities of discontinued operations (Note 2) | — | 154 | |||||
Total current liabilities | 957 | 1,128 | |||||
Long-term debt (Note 9) | 4,891 | 4,891 | |||||
Long-term debt (nonrecourse to the company) held by variable interest entities | 511 | 511 | |||||
Deferred income taxes | 338 | 285 | |||||
Deferred pension and other postretirement benefits | 569 | 516 | |||||
Other liabilities | 318 | 382 | |||||
Noncurrent liabilities of discontinued operations (Note 2) | — | 32 | |||||
Commitments and contingencies (Note 10) | |||||||
Total liabilities | 7,584 | 7,745 | |||||
Equity: | |||||||
Weyerhaeuser shareholders’ interest: | |||||||
Mandatory convertible preference shares, series A: $1.00 par value; $50.00 liquidation; authorized 40,000,000 shares; issued and outstanding: 13,800,000 shares | 14 | 14 | |||||
Common shares: $1.25 par value; authorized 1,360,000,000 shares; issued and outstanding: 525,484,841 and 583,548,428 shares | 657 | 729 | |||||
Other capital | 4,548 | 6,444 | |||||
Retained earnings | 1,494 | 294 | |||||
Cumulative other comprehensive loss (Note 11) | (857 | ) | (686 | ) | |||
Total Weyerhaeuser shareholders’ interest | 5,856 | 6,795 | |||||
Noncontrolling interests | — | 3 | |||||
Noncontrolling interests in discontinued operations (Note 2) | — | 34 | |||||
Total equity | 5,856 | 6,832 | |||||
Total liabilities and equity | $ | 13,440 | $ | 14,577 |
YEAR-TO-DATE ENDED | |||||||
DOLLAR AMOUNTS IN MILLIONS | SEPTEMBER 2014 | SEPTEMBER 2013 | |||||
Cash flows from operations: | |||||||
Net earnings | $ | 1,649 | $ | 509 | |||
Noncash charges (credits) to earnings: | |||||||
Depreciation, depletion and amortization | 375 | 343 | |||||
Deferred income taxes, net | 170 | 73 | |||||
Pension and other postretirement benefits (Note 7) | (104 | ) | 79 | ||||
Share-based compensation expense | 29 | 34 | |||||
Charges for impairment of assets | 1 | 5 | |||||
Net gains on dispositions of assets and operations(1) (Note 2) | (1,048 | ) | (42 | ) | |||
Foreign exchange transaction losses (Note 14) | 15 | 6 | |||||
Change in: | |||||||
Receivables less allowances | (28 | ) | (112 | ) | |||
Receivable for taxes | 77 | 64 | |||||
Inventories | (46 | ) | — | ||||
Real estate and land | (133 | ) | (179 | ) | |||
Prepaid expenses | 6 | (16 | ) | ||||
Accounts payable and accrued liabilities | (76 | ) | 45 | ||||
Deposits on land positions and other assets | 15 | (11 | ) | ||||
Pension and postretirement contributions / benefit payments | (85 | ) | (104 | ) | |||
Other | (33 | ) | (38 | ) | |||
Net cash from operations | 784 | 656 | |||||
Cash flows from investing activities: | |||||||
Property and equipment | (239 | ) | (151 | ) | |||
Timberlands reforestation | (32 | ) | (28 | ) | |||
Acquisition of Longview Timber LLC, net of cash acquired (Note 3) | — | (1,581 | ) | ||||
Net proceeds from Real Estate Divestiture, net of cash divested (Note 2) | 707 | — | |||||
Proceeds from sale of assets | 24 | 15 | |||||
Net proceeds of investments held by special purpose entities | — | 22 | |||||
Other | 25 | 5 | |||||
Cash from investing activities | 485 | (1,718 | ) | ||||
Cash flows from financing activities: | |||||||
Net proceeds from issuance of common shares | — | 897 | |||||
Net proceeds from issuance of preference shares | — | 669 | |||||
Net proceeds from issuance of debt | — | 494 | |||||
Net proceeds from issuance of Weyerhaeuser Real Estate Company (WRECO) debt (Note 2) | 887 | — | |||||
Deposit of WRECO debt proceeds into escrow (Note 2) | (887 | ) | — | ||||
Cash dividends on common shares | (411 | ) | (330 | ) | |||
Cash dividends on preference shares | (22 | ) | — | ||||
Change in book overdrafts | (17 | ) | 8 | ||||
Payments on debt | — | (340 | ) | ||||
Exercises of stock options | 84 | 141 | |||||
Repurchase of common stock (Note 5) | (123 | ) | — | ||||
Other | 5 | 22 | |||||
Cash from financing activities | (484 | ) | 1,561 | ||||
Net change in cash and cash equivalents | 785 | 499 | |||||
Cash and cash equivalents at beginning of period | 835 | 898 | |||||
Cash and cash equivalents at end of period | $ | 1,620 | $ | 1,397 | |||
Cash paid (received) during the period for: | |||||||
Interest, net of amount capitalized of $12 and $15 | $ | 253 | $ | 275 | |||
Income taxes | $ | (40 | ) | $ | (4 | ) | |
Noncash investing and financing activity: | |||||||
Acquisition of Longview Timber LLC, debt assumed (Note 3) | $ | — | $ | 1,070 | |||
Common shares tendered in WRECO divestiture (Note 2) | $ | 1,954 | $ | — |
(1) | Includes gains on timberland exchanges. |
NOTE 1: | ||
NOTE 2: | ||
NOTE 3: | ||
NOTE 4: | ||
NOTE 5: | ||
NOTE 6: | ||
NOTE 7: | ||
NOTE 8: | ||
NOTE 9: | ||
NOTE 10: | ||
NOTE 11: | ||
NOTE 12: | ||
NOTE 13: | ||
NOTE 14: | ||
NOTE 15: |
• | majority-owned domestic and foreign subsidiaries and |
• | variable interest entities in which we are the primary beneficiary. |
• | the distribution of shares of WRECO to our shareholders in exchange for 59 million shares of our common stock; and |
• | the merger of WRECO into a special purpose subsidiary of TRI Pointe, with WRECO surviving the merger and becoming a wholly-owned subsidiary of TRI Pointe. |
DOLLAR AMOUNTS IN MILLIONS | |||
Proceeds: | |||
Common shares tendered (58,813,151 shares at $33.22 per share) | $ | 1,954 | |
Cash | 707 | ||
2,661 | |||
Less: | |||
Net book value of contributed assets | (1,671 | ) | |
Transaction costs, net of reimbursement | (18 | ) | |
(1,689 | ) | ||
Net gain on divestiture | $ | 972 |
QUARTER ENDED | YEAR-TO-DATE ENDED | ||||||||||||||
DOLLAR AMOUNTS IN MILLIONS | SEPTEMBER 2014(1) | SEPTEMBER 2013 | SEPTEMBER 2014 | SEPTEMBER 2013 | |||||||||||
Net sales from discontinued operations | $ | 8 | $ | 324 | $ | 573 | $ | 787 | |||||||
Income (loss) from operations | $ | (1 | ) | $ | 33 | $ | 42 | $ | 56 | ||||||
Income taxes | (5 | ) | (12 | ) | (16 | ) | (20 | ) | |||||||
Net earnings (loss) from operations | (6 | ) | 21 | 26 | 36 | ||||||||||
Net gain on divestiture | 972 | — | 972 | — | |||||||||||
Net earnings from discontinued operations | $ | 966 | $ | 21 | $ | 998 | $ | 36 |
(1) | Discontinued operations in third quarter 2014 covered only seven days. |
DOLLAR AMOUNTS IN MILLIONS | DECEMBER 31, 2013 | ||
Assets | |||
Cash and cash equivalents | $ | 5 | |
Receivables, less discounts and allowances | 51 | ||
Prepaid expenses | 11 | ||
Deferred tax assets | 21 | ||
Total current assets | 88 | ||
Property and equipment, net | 15 | ||
Real estate in process of development and for sale | 851 | ||
Land being processed for development | 596 | ||
Investments in and advances to equity affiliates | 21 | ||
Deferred tax assets | 115 | ||
Other assets | 96 | ||
Total noncurrent assets | 1,694 | ||
Total assets | $ | 1,782 | |
Liabilities | |||
Accounts payable | $ | 41 | |
Accrued liabilities | 113 | ||
Total current liabilities | 154 | ||
Long-term debt (nonrecourse to the company) held by variable interest entities | 5 | ||
Other liabilities | 27 | ||
Total noncurrent liabilities | 32 | ||
Total liabilities | $ | 186 | |
Noncontrolling interests | $ | 34 |
QUARTER ENDED | YEAR-TO-DATE ENDED | ||||||
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES | SEPTEMBER 2013 | SEPTEMBER 2013 | |||||
Net sales | $ | 1,867 | $ | 5,603 | |||
Net earnings from continuing operations attributable to Weyerhaeuser common shareholders | $ | 132 | $ | 478 | |||
Earnings from continuing operations per share attributable to Weyerhaeuser common shareholders, basic and diluted | $ | 0.22 | $ | 0.82 |
• | Timberlands – which includes logs, timber, minerals, oil and gas, and international wood products; |
• | Wood Products – which includes softwood lumber, engineered lumber, structural panels and building materials distribution; and |
• | Cellulose Fibers – which includes pulp, liquid packaging board and an equity interest in a newsprint joint venture. |
QUARTER ENDED | YEAR-TO-DATE ENDED | ||||||||||||||
DOLLAR AMOUNTS IN MILLIONS | SEPTEMBER 2014 | SEPTEMBER 2013 | SEPTEMBER 2014 | SEPTEMBER 2013 | |||||||||||
Sales to unaffiliated customers: | |||||||||||||||
Timberlands | $ | 364 | $ | 353 | $ | 1,138 | $ | 979 | |||||||
Wood Products | 1,048 | 1,030 | 3,023 | 3,083 | |||||||||||
Cellulose Fibers | 503 | 474 | 1,454 | 1,424 | |||||||||||
1,915 | 1,857 | 5,615 | 5,486 | ||||||||||||
Intersegment sales: | |||||||||||||||
Timberlands | 218 | 194 | 642 | 584 | |||||||||||
Wood Products | 20 | 19 | 60 | 55 | |||||||||||
238 | 213 | 702 | 639 | ||||||||||||
Total sales | 2,153 | 2,070 | 6,317 | 6,125 | |||||||||||
Intersegment eliminations | (238 | ) | (213 | ) | (702 | ) | (639 | ) | |||||||
Total | $ | 1,915 | $ | 1,857 | $ | 5,615 | $ | 5,486 | |||||||
Net contribution to earnings: | |||||||||||||||
Timberlands | $ | 136 | $ | 118 | $ | 470 | $ | 336 | |||||||
Wood Products | 105 | 79 | 271 | 393 | |||||||||||
Cellulose Fibers | 59 | 47 | 204 | 135 | |||||||||||
300 | 244 | 945 | 864 | ||||||||||||
Unallocated Items(1) | 25 | 20 | 108 | (36 | ) | ||||||||||
Net contribution to earnings from discontinued operations | 972 | 34 | 1,017 | 58 | |||||||||||
Net contribution to earnings | 1,297 | 298 | 2,070 | 886 | |||||||||||
Interest expense, net of capitalized interest (continuing and discontinued operations) | (89 | ) | (95 | ) | (257 | ) | (258 | ) | |||||||
Income before income taxes (continuing and discontinued operations) | 1,208 | 203 | 1,813 | 628 | |||||||||||
Income taxes (continuing and discontinued operations) | (44 | ) | (36 | ) | (164 | ) | (119 | ) | |||||||
Net earnings | 1,164 | 167 | 1,649 | 509 | |||||||||||
Dividends on preference shares | (11 | ) | (10 | ) | (33 | ) | (12 | ) | |||||||
Net earnings attributable to Weyerhaeuser common shareholders | $ | 1,153 | $ | 157 | $ | 1,616 | $ | 497 |
(1) | Unallocated Items are gains or charges not related to or allocated to an individual operating segment. They include a portion of items such as: share-based compensation, pension and postretirement costs, foreign exchange transaction gains and losses associated with outstanding borrowings and the elimination of intersegment profit in inventory and the LIFO reserve. |
• | $2.17 during third quarter and $2.85 during year-to-date 2014; and |
• | $0.27 during third quarter and $0.89 during year-to-date 2013. |
• | $2.15 during third quarter and $2.83 during year-to-date 2014; and |
• | $0.27 during third quarter and $0.88 during year-to-date 2013. |
• | weighted average number of our outstanding common shares and |
• | the effect of our outstanding dilutive potential common shares. |
• | outstanding stock options, |
• | restricted stock units, |
• | performance share units and |
• | preference shares. |
QUARTER ENDED | YEAR-TO-DATE ENDED | ||||||||||
SHARES IN THOUSANDS | SEPTEMBER 2014 | SEPTEMBER 2013 | SEPTEMBER 2014 | SEPTEMBER 2013 | |||||||
Stock options | — | 4,955 | — | 4,955 | |||||||
Preference shares | 24,988 | 24,865 | 24,988 | 24,865 |
DOLLAR AMOUNTS IN MILLIONS | SEPTEMBER 30, 2014 | DECEMBER 31, 2013 | |||||
LIFO Inventories: | |||||||
Logs and chips | $ | 12 | $ | 15 | |||
Lumber, plywood and panels | 54 | 46 | |||||
Pulp and paperboard | 109 | 97 | |||||
Other products | 10 | 11 | |||||
FIFO or moving average cost inventories: | |||||||
Logs and chips | 32 | 33 | |||||
Lumber, plywood, panels and engineered lumber | 85 | 70 | |||||
Pulp and paperboard | 28 | 30 | |||||
Other products | 96 | 94 | |||||
Materials and supplies | 152 | 146 | |||||
Total | $ | 578 | $ | 542 |
PENSION | |||||||||||||||
QUARTER ENDED | YEAR-TO-DATE ENDED | ||||||||||||||
DOLLAR AMOUNTS IN MILLIONS | SEPTEMBER 2014 | SEPTEMBER 2013 | SEPTEMBER 2014 | SEPTEMBER 2013 | |||||||||||
Service cost(1) | $ | 13 | $ | 16 | $ | 40 | $ | 48 | |||||||
Interest cost | 67 | 61 | 205 | 183 | |||||||||||
Expected return on plan assets | (117 | ) | (109 | ) | (349 | ) | (329 | ) | |||||||
Amortization of actuarial loss | 33 | 55 | 94 | 166 | |||||||||||
Amortization of prior service cost | 1 | 2 | 4 | 5 | |||||||||||
Loss due to curtailment and special termination benefits(2) | 9 | — | 9 | — | |||||||||||
Total net periodic benefit cost (credit) | $ | 6 | $ | 25 | $ | 3 | $ | 73 |
(1) | Service cost includes $2 million for year-to-date ended 2014 and $1 million and $4 million for quarter and year-to-date ended 2013 for employees that were part of the Real Estate Divestiture. These charges are included in our results of discontinued operations. |
(2) | The 2014 curtailment and special termination benefits are related to involuntary terminations, due to restructuring activities, as well as the Real Estate Divestiture. |
OTHER POSTRETIREMENT BENEFITS | |||||||||||||||
QUARTER ENDED | YEAR-TO-DATE ENDED | ||||||||||||||
DOLLAR AMOUNTS IN MILLIONS | SEPTEMBER 2014 | SEPTEMBER 2013 | SEPTEMBER 2014 | SEPTEMBER 2013 | |||||||||||
Service cost | $ | — | $ | — | $ | — | $ | 1 | |||||||
Interest cost | 3 | 3 | 8 | 9 | |||||||||||
Amortization of actuarial loss | 3 | 4 | 9 | 11 | |||||||||||
Amortization of prior service credit | (25 | ) | (5 | ) | (120 | ) | (17 | ) | |||||||
Other | — | — | (4 | ) | 2 | ||||||||||
Total net periodic benefit cost (credit) | $ | (19 | ) | $ | 2 | $ | (107 | ) | $ | 6 |
• | We recognized a $9 million charge in third quarter 2014 for curtailments and special termination benefits. Of this amount, $6 million is included in the net gain on the Real Estate Divestiture and is presented in "Earnings from discontinued operations, net of income taxes" in our Consolidated Statement of Operations. The remaining $3 million is included in "Charges for restructuring, closures and impairments" in our Consolidated Statement of Operations. |
• | The funded status of our U.S. qualified pension plans was reduced by $291 million primarily as a result of a decline in the discount rate used to calculate the projected benefit obligation. The discount rate used to remeasure the pension plans’ liabilities was changed from a rate of 4.9 percent at December 31, 2013 to rates reflective of current bond rates on the remeasurement date. A discount rate of 4.4 percent was used as of July 7, 2014. There was no change to the expected rate of return assumption. The decrease in funded status resulted in a $142 million decrease in "Other assets" and a $149 million increase in "Deferred pension and other postretirement benefits" in our Consolidated Balance Sheet. |
• | Deferred tax liabilities decreased $108 million. |
• | Total equity decreased $183 million for changes in "Cumulative other comprehensive loss", reflecting the net effect of the items discussed above. Amounts deferred in cumulative other comprehensive loss will be amortized into net periodic pension cost (credits) in future periods. |
• | make approximately $44 million of required contributions to our Canadian registered pension plan; |
• | make $3 million of required contributions or benefit payments to our Canadian nonregistered pension plans; |
• | make benefit payments of $20 million for our U.S. nonqualified pension plans; and |
• | make benefit payments of $35 million for our U.S. and Canadian other postretirement plans. |
DOLLAR AMOUNTS IN MILLIONS | SEPTEMBER 30, 2014 | DECEMBER 31, 2013 | |||||
Wages, salaries and severance pay | $ | 152 | $ | 159 | |||
Pension and postretirement | 56 | 57 | |||||
Vacation pay | 47 | 48 | |||||
Income taxes | 2 | 4 | |||||
Taxes – Social Security and real and personal property | 37 | 32 | |||||
Interest | 73 | 104 | |||||
Customer rebates and volume discounts | 42 | 50 | |||||
Deferred income | 83 | 82 | |||||
Other | 114 | 93 | |||||
Total | $ | 606 | $ | 629 |
SEPTEMBER 30, 2014 | DECEMBER 31, 2013 | ||||||||||||||
DOLLAR AMOUNTS IN MILLIONS | CARRYING VALUE | FAIR VALUE (LEVEL 2) | CARRYING VALUE | FAIR VALUE (LEVEL 2) | |||||||||||
Long-term debt (including current maturities) | $ | 4,891 | $ | 5,921 | $ | 4,891 | $ | 5,683 |
• | market approach – based on quoted market prices we received for the same types and issues of our debt; or |
• | income approach – based on the discounted value of the future cash flows using market yields for the same type and comparable issues of debt. |
• | the short-term nature of these instruments, |
• | carrying short-term investments at expected net realizable value and |
• | the allowance for doubtful accounts. |
• | legal proceedings and |
• | environmental matters. |
• | site remediation and |
• | asset retirement obligations. |
• | are a party to various proceedings related to the cleanup of hazardous waste sites and |
• | have been notified that we may be a potentially responsible party related to the cleanup of other hazardous waste sites for which proceedings have not yet been initiated. |
PENSION | OTHER POSTRETIREMENT BENEFITS | ||||||||||||||||||||
DOLLAR AMOUNTS IN MILLIONS | Foreign currency translation adjustments | Actuarial losses | Prior service costs | Actuarial losses | Prior service credits | Unrealized gains on available-for-sale securities | Total | ||||||||||||||
Beginning balance as of December 31, 2013 | $ | 354 | $ | (1,066 | ) | $ | (19 | ) | $ | (111 | ) | $ | 150 | $ | 6 | $ | (686 | ) | |||
Other comprehensive income (loss) before reclassifications | (27 | ) | (237 | ) | 1 | — | 4 | — | (259 | ) | |||||||||||
Income taxes | — | 91 | — | — | 1 | — | 92 | ||||||||||||||
Net other comprehensive income (loss) before reclassifications | (27 | ) | (146 | ) | 1 | — | 5 | — | (167 | ) | |||||||||||
Amounts reclassified from cumulative other comprehensive income (loss)(1) | — | 94 | 4 | 9 | (120 | ) | — | (13 | ) | ||||||||||||
Income taxes | — | (31 | ) | (2 | ) | (2 | ) | 44 | — | 9 | |||||||||||
Net amounts reclassified from cumulative other comprehensive income (loss) | — | 63 | 2 | 7 | (76 | ) | — | (4 | ) | ||||||||||||
Total other comprehensive income (loss) | (27 | ) | (83 | ) | 3 | 7 | (71 | ) | — | (171 | ) | ||||||||||
Ending balance as of September 30, 2014 | $ | 327 | $ | (1,149 | ) | $ | (16 | ) | $ | (104 | ) | $ | 79 | $ | 6 | $ | (857 | ) | |||
(1) Actuarial losses and prior service credits (cost) are included in the computation of net periodic benefit costs (credits). See Note 7: Pension and Other Postretirement Benefit Plans. |
• | vest ratably over four years; |
• | vest or continue to vest in the event of death while employed, disability or retirement at an age of at least 62; |
• | continue to vest upon retirement at an age of at least 62, but a portion of the grant is forfeited if retirement occurs before the one year anniversary of the grant; |
• | continue to vest for one year in the event of involuntary termination when the retirement criteria has not been met; and |
• | stop vesting for all other situations including early retirement prior to age 62. |
OPTIONS | |||
Expected volatility | 31.71 | % | |
Expected dividends | 2.92 | % | |
Expected term (in years) | 4.97 | ||
Risk-free rate | 1.57 | % | |
Weighted average grant date fair value | $ | 6.62 |
• | vest ratably over four years; |
• | immediately vest in the event of death while employed or disability; |
• | continue to vest upon retirement at an age of at least 62, but a portion of the grant is forfeited if retirement occurs before the one year anniversary of the grant; |
• | continue vesting for one year in the event of involuntary termination when the retirement criteria has not been met; and |
• | will be forfeited upon termination of employment in all other situations including early retirement prior to age 62. |
• | vest 50 percent, 25 percent and 25 percent on the second, third and fourth anniversaries of the grant date, respectively, as long as the individual remains employed by the company; |
• | fully vest in the event the participant dies or becomes disabled while employed; |
• | continue to vest upon retirement at an age of at least 62, but a portion of the grant is forfeited if retirement occurs before the one year anniversary of the grant; |
• | continue vesting for one year in the event of involuntary termination when the retirement criteria has not been met; and |
• | will be forfeited upon termination of employment in all other situations including early retirement prior to age 62. |
Performance Share Units | ||||||
Performance period | 1/1/2014 – 12/31/2015 | |||||
Valuation date closing stock price | $ | 30.16 | ||||
Expected dividends | 2.91 | % | ||||
Risk-free rate | 0.03 | % | – | 0.79 | % | |
Expected volatility | 20.74 | % | – | 23.53 | % |
SEPTEMBER 30, 2014 | |||
Expected volatility | 19.03 | % | |
Expected dividends | 3.59 | % | |
Expected term (in years) | 1.47 | ||
Risk-free rate | 0.42 | % | |
Weighted average fair value | $ | 9.24 |
QUARTER ENDED | YEAR-TO-DATE ENDED | ||||||||||||||
DOLLAR AMOUNTS IN MILLIONS | SEPTEMBER 2014 | SEPTEMBER 2013 | SEPTEMBER 2014 | SEPTEMBER 2013 | |||||||||||
Restructuring and closure charges: | |||||||||||||||
Termination benefits | $ | 2 | $ | — | $ | 25 | $ | — | |||||||
Pension and postretirement charges | 3 | — | 3 | — | |||||||||||
Other restructuring and closure costs | 5 | — | 8 | 3 | |||||||||||
Charges for restructuring and closures | 10 | — | 36 | 3 | |||||||||||
Impairments of long-lived assets | — | 1 | 1 | 4 | |||||||||||
Total charges for restructuring, closures and impairments | $ | 10 | $ | 1 | $ | 37 | $ | 7 |
DOLLAR AMOUNTS IN MILLIONS | |||
Accrued severance as of December 31, 2013 | $ | 2 | |
Charges | 25 | ||
Payments | (16 | ) | |
Accrued severance as of September 30, 2014 | $ | 11 |
• | includes both recurring and occasional income and expense items and |
• | can fluctuate from year to year. |
QUARTER ENDED | YEAR-TO-DATE ENDED | ||||||||||||||
DOLLAR AMOUNTS IN MILLIONS | SEPTEMBER 2014 | SEPTEMBER 2013 | SEPTEMBER 2014 | SEPTEMBER 2013 | |||||||||||
Gain on postretirement plan amendment (Note 7) | $ | (23 | ) | $ | — | $ | (113 | ) | $ | — | |||||
Gain on disposition of non-strategic assets | (1 | ) | (1 | ) | (25 | ) | (14 | ) | |||||||
Foreign exchange (gains) losses, net | 13 | (2 | ) | 15 | 6 | ||||||||||
Land management income | (9 | ) | (7 | ) | (25 | ) | (20 | ) | |||||||
Other, net | (3 | ) | 6 | (15 | ) | (4 | ) | ||||||||
Total other operating income, net | $ | (23 | ) | $ | (4 | ) | $ | (163 | ) | $ | (32 | ) |
• | are based on various assumptions we make and |
• | may not be accurate because of risks and uncertainties surrounding the assumptions that we make. |
• | the economy, |
• | regulations, |
• | adverse litigation outcomes and the adequacy of reserves, |
• | changes in accounting principles, |
• | contributions to pension plans, |
• | projected benefit payments, |
• | projected tax rates and credits, and |
• | other related matters. |
• | the effect of general economic conditions, including employment rates, housing starts, interest rate levels, availability of financing for home mortgages and strength of the U.S. dollar; |
• | market demand for our products, which is related to the strength of the various U.S. business segments and U.S. and international economic conditions; |
• | performance of our manufacturing operations, including maintenance requirements; |
• | the level of competition from domestic and foreign producers; |
• | raw material availability and prices; |
• | the effect of weather; |
• | the risk of loss from fires, floods, windstorms, hurricanes, pest infestation and other natural disasters; |
• | energy prices; |
• | the successful execution of our internal plans and strategic initiatives; |
• | transportation availability and costs; |
• | federal tax policies; |
• | the effect of forestry, land use, environmental and other governmental regulations; |
• | legal proceedings; |
• | performance of pension fund investments and related derivatives; |
• | the effect of timing of retirements and changes in the market price of our common stock on charges for share-based compensation; |
• | changes in accounting principles; |
• | our ability to successfully integrate operations of Longview Timber LLC (Longview Timber) and realize expected benefits from the acquisition; and |
• | other factors described under “Risk Factors” in this document and in our annual report on Form 10-K. |
• | economic activity in Europe and Asia, especially Japan and China; |
• | currency exchange rates – particularly the relative value of the U.S. dollar to the euro and Canadian dollar and the relative value of the euro to the yen; and |
• | restrictions on international trade or tariffs imposed on imports. |
• | Sales realizations refer to net selling prices – this includes selling price plus freight, minus normal sales deductions. |
• | Net contribution to earnings can be positive or negative and refers to earnings (loss) attributable to Weyerhaeuser shareholders before interest expense and income taxes. |
QUARTER ENDED | AMOUNT OF CHANGE | YEAR-TO-DATE ENDED | AMOUNT OF CHANGE | ||||||||||||||||||||
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES | SEPTEMBER 2014 | SEPTEMBER 2013 | 2014 VS. 2013 | SEPTEMBER 2014 | SEPTEMBER 2013 | 2014 VS. 2013 | |||||||||||||||||
Net sales | $ | 1,915 | $ | 1,857 | $ | 58 | $ | 5,615 | $ | 5,486 | $ | 129 | |||||||||||
Operating income | $ | 318 | $ | 243 | $ | 75 | $ | 1,026 | $ | 789 | $ | 237 | |||||||||||
Earnings of discontinued operations, net of tax | $ | 966 | $ | 21 | $ | 945 | $ | 998 | $ | 36 | $ | 962 | |||||||||||
Net earnings attributable to Weyerhaeuser common shareholders | $ | 1,153 | $ | 157 | $ | 996 | $ | 1,616 | $ | 497 | $ | 1,119 | |||||||||||
Basic earnings per share attributable to Weyerhaeuser common shareholders | $ | 2.17 | $ | 0.27 | $ | 1.90 | $ | 2.85 | $ | 0.89 | $ | 1.96 | |||||||||||
Diluted earnings per share attributable to Weyerhaeuser common shareholders | $ | 2.15 | $ | 0.27 | $ | 1.88 | $ | 2.83 | $ | 0.88 | $ | 1.95 |
• | Cellulose Fibers segment sales increased $29 million, primarily due to higher sales realizations and volumes for pulp. |
• | Wood Products segment sales increased $18 million, primarily due to higher sales realizations for structural lumber, more complementary products purchased for resale and higher sales realizations and shipment volumes for engineered products, partially offset by lower sales realizations and shipment volumes for oriented strand board (OSB) and lower shipment volumes for structural lumber. |
• | Timberlands segment sales increased $11 million, primarily due to higher domestic log prices and increased sales volume in the West and in our acquired Longview Timber holdings. |
• | a $945 million increase in earnings from discontinued operations, primarily due to a $972 million net gain on the Real Estate Divestiture recognized in 2014; |
• | a $33 million increase in gross margin, primarily due to higher sales realizations in lumber and engineered products, higher sales realizations and sales volumes of pulp and liquid packaging board and higher sales volumes in our legacy Western timberlands; |
• | a $29 million decrease in our selling, general and administrative expenses; and |
• | a $19 million increase in other operating income, primarily due to a $23 million pretax gain recognized in 2014 related to a previously announced postretirement plan amendment. |
• | a $15 million increase in tax expense primarily due to higher earnings in our Taxable REIT Subsidiary (TRS) and |
• | a $14 million decrease in interest income and other primarily due to a $10 million pretax gain recognized in 2013 on the sale of part of our investment in Liaison Technologies Inc. |
• | Timberlands segment sales increased $159 million, primarily due to higher export and domestic log prices and increased sales volume in the West and in our acquired Longview Timber holdings. |
• | Cellulose Fibers segment sales increased $30 million, primarily due to higher sales realizations for pulp. |
• | a $962 million increase in earnings from discontinued operations, primarily due to a $972 million net gain on the Real Estate Divestiture recognized in 2014; |
• | a $178 million increase in gross margin in our Timberlands and Cellulose Fibers segments, primarily due to higher sales realizations and the purchase of Longview Timber; |
• | a $131 million increase in other operating income, primarily due to a $113 million pretax gain recognized in 2014 related to a previously announced postretirement plan amendment; and |
• | a $63 million decrease in our selling, general and administrative expenses. |
• | a $136 million decrease in gross margin in our Wood Products segment, primarily due to lower sales realizations in OSB; |
• | a $49 million increase in tax expense primarily due to higher earnings in our TRS; and |
• | a $30 million increase in charges for restructuring, closure and asset impairments primarily related to our selling, general and administrative cost reduction initiative. |
QUARTER ENDED | AMOUNT OF CHANGE | YEAR-TO-DATE ENDED | AMOUNT OF CHANGE | ||||||||||||||||||||
DOLLAR AMOUNTS IN MILLIONS | SEPTEMBER 2014 | SEPTEMBER 2013 | 2014 VS. 2013 | SEPTEMBER 2014 | SEPTEMBER 2013 | 2014 VS. 2013 | |||||||||||||||||
Net sales to unaffiliated customers: | |||||||||||||||||||||||
Logs: | |||||||||||||||||||||||
West | $ | 227 | $ | 213 | $ | 14 | $ | 745 | $ | 598 | $ | 147 | |||||||||||
South | 69 | 66 | 3 | 191 | 192 | (1 | ) | ||||||||||||||||
Canada | 5 | 6 | (1 | ) | 12 | 15 | (3 | ) | |||||||||||||||
Subtotal logs sales | 301 | 285 | 16 | 948 | 805 | 143 | |||||||||||||||||
Chip sales | 4 | 2 | 2 | 9 | 7 | 2 | |||||||||||||||||
Timberlands exchanges(1) | 17 | 28 | (11 | ) | 49 | 44 | 5 | ||||||||||||||||
Higher and better-use land sales(1) | 4 | 2 | 2 | 14 | 10 | 4 | |||||||||||||||||
Minerals, oil and gas | 10 | 9 | 1 | 25 | 26 | (1 | ) | ||||||||||||||||
Products from international operations(2) | 22 | 24 | (2 | ) | 72 | 68 | 4 | ||||||||||||||||
Other products | 6 | 3 | 3 | 21 | 19 | 2 | |||||||||||||||||
Subtotal net sales to unaffiliated customers | 364 | 353 | 11 | 1,138 | 979 | 159 | |||||||||||||||||
Intersegment sales: | |||||||||||||||||||||||
United States | 141 | 130 | 11 | 427 | 380 | 47 | |||||||||||||||||
Other | 77 | 64 | 13 | 215 | 204 | 11 | |||||||||||||||||
Subtotal intersegment sales | 218 | 194 | 24 | 642 | 584 | 58 | |||||||||||||||||
Total sales | $ | 582 | $ | 547 | $ | 35 | $ | 1,780 | $ | 1,563 | $ | 217 | |||||||||||
Net contribution to earnings | $ | 136 | $ | 118 | $ | 18 | $ | 470 | $ | 336 | $ | 134 |
(1) | Significant dispositions of higher and better-use timberland and some non-strategic timberlands are made through subsidiaries. |
(2) | Includes logs, plywood and hardwood lumber harvested or produced by our international operations in South America. |
• | a $13 million increase due to increased log and chip sales volumes in Canada and |
• | an $11 million increase in the United States due to higher sales volumes including the increase related to acquired Longview Timber holdings and higher log prices in our legacy Western and Southern timberlands. |
• | a $14 million increase due to higher sales volumes in our legacy Western timberlands, |
• | a $6 million increase due to the purchase of Longview Timber and |
• | a $5 million increase due to higher log prices in the South. |
• | a $147 million increase in Western log sales due to higher export and domestic log prices in our legacy Western timberlands and a 24 percent increase in sales volumes including the increase related to acquired Longview Timber holdings and |
• | a $5 million increase due to higher timberlands exchanges and higher and better use land sales. |
• | a $47 million increase in the United States due to higher sales volumes including the increase related to acquired Longview Timber holdings and higher log prices in our legacy Western and Southern timberlands and |
• | an $11 million increase due to increased log and chip sales volumes in Canada. |
• | a $79 million increase due to the purchase of Longview Timber; |
• | a $51 million increase due to higher log prices in our legacy Western timberlands and the South; |
• | a $24 million increase due to higher sales volumes and demand for export logs in our legacy Western timberlands; |
• | a $9 million decrease in selling, general and administrative expenses, excluding Longview Timber; and |
• | an $7 million increase due to higher timberland exchanges and higher and better-use land sales. |
QUARTER ENDED | AMOUNT OF CHANGE | YEAR-TO-DATE ENDED | AMOUNT OF CHANGE | ||||||||||||||
VOLUMES IN THOUSANDS | SEPTEMBER 2014 | SEPTEMBER 2013 | 2014 VS. 2013 | SEPTEMBER 2014 | SEPTEMBER 2013 | 2014 VS. 2013 | |||||||||||
Third party log sales – cubic meters: | |||||||||||||||||
West | 2,223 | 2,037 | 186 | 6,859 | 5,523 | 1,336 | |||||||||||
South | 1,500 | 1,514 | (14 | ) | 4,224 | 4,420 | (196 | ) | |||||||||
Canada | 152 | 141 | 11 | 338 | 383 | (45 | ) | ||||||||||
International | 170 | 100 | 70 | 456 | 245 | 211 | |||||||||||
Total | 4,045 | 3,792 | 253 | 11,877 | 10,571 | 1,306 | |||||||||||
Fee harvest volumes – cubic meters: | |||||||||||||||||
West | 2,656 | 2,305 | 351 | 8,419 | 6,221 | 2,198 | |||||||||||
South | 2,950 | 2,928 | 22 | 8,531 | 8,589 | (58 | ) | ||||||||||
International | 232 | 211 | 21 | 730 | 575 | 155 | |||||||||||
Total | 5,838 | 5,444 | 394 | 17,680 | 15,385 | 2,295 |
QUARTER ENDED | AMOUNT OF CHANGE | YEAR-TO-DATE ENDED | AMOUNT OF CHANGE | ||||||||||||||||||||
DOLLAR AMOUNTS IN MILLIONS | SEPTEMBER 2014 | SEPTEMBER 2013 | 2014 VS. 2013 | SEPTEMBER 2014 | SEPTEMBER 2013 | 2014 VS. 2013 | |||||||||||||||||
Net sales: | |||||||||||||||||||||||
Structural lumber | $ | 500 | $ | 480 | $ | 20 | $ | 1,442 | $ | 1,433 | $ | 9 | |||||||||||
Engineered solid section | 104 | 97 | 7 | 308 | 263 | 45 | |||||||||||||||||
Engineered I-joists | 74 | 68 | 6 | 214 | 184 | 30 | |||||||||||||||||
Oriented strand board | 157 | 188 | (31 | ) | 464 | 648 | (184 | ) | |||||||||||||||
Softwood plywood | 42 | 38 | 4 | 107 | 115 | (8 | ) | ||||||||||||||||
Other products produced | 45 | 42 | 3 | 132 | 129 | 3 | |||||||||||||||||
Complementary products purchased for resale | 126 | 117 | 9 | 356 | 311 | 45 | |||||||||||||||||
Total | $ | 1,048 | $ | 1,030 | $ | 18 | $ | 3,023 | $ | 3,083 | $ | (60 | ) | ||||||||||
Net contribution to earnings | $ | 105 | $ | 79 |