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TIMBERLANDS
WOOD PRODUCTS
CELLULOSE FIBERS
FOR MORE INFORMATION, VISIT: http://investor.weyerhaeuser.com/
MAKING PROGRESS ON OUR JOURNEY TO TRULY GREAT
ANNUAL REPORT AND FORM 10-K
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DEAR SHAREHOLDER:
In 2014, we set out to grow a truly great company for our
shareholders, customers and employees.
As part of that process, we set aggressive operational excellence
targets for each of our businesses. We also accelerated people
development at all levels of the company to ensure we have a
strong bench of talent for the future. And we began the hard
work to embrace new cultural behaviors — acting with urgency,
being accountable, being courageous and keeping it simple
— all without ever compromising the core values that are the
foundation of who we are.
DRIVING SHAREHOLDER VALUE
We are focused on pulling three key levers to drive shareholder
value: portfolio, performance and capital allocation. While there
is still more work to be done, I’m encouraged by the progress
we made in 2014:
Portfolio
• We divested our homebuilding business to become
a focused forest products company.
• We fully integrated Longview Timber into our Timberlands
operations and signifi cantly exceeded the $20 million in
synergies we had targeted from that acquisition.
Performance
• We achieved our 2014 operational excellence targets and
made signifi cant progress toward the multi-year targets
we set for each of our businesses.
• We improved the competitiveness of our operations
by signifi cantly reducing SG&A expenses.
• We improved earnings from our continuing operations by
22 percent (before special items) over the previous year.
Capital Allocation
• We increased our dividend by 32 percent.
• We retired more than $1.9 billion worth of shares in
conjunction with the divesture of our homebuilding
business.
• We authorized a new $700 million share repurchase
program and completed nearly a third by year-end.
• We made strategic investments in our businesses to
improve effi ciency and drive down cost.
Together, these
accomplishments
allowed us to deliver a total
shareholder return of more
than 17 percent for the year.
We also made a number
of changes to our senior
management team in 2014,
and I’m excited about the
expertise and energy our
new leaders are bringing to
their teams as they take on
new challenges and drive
change across the company.
LOOKING AHEAD
In 2015, our priorities remain unchanged. We are relentlessly
focused on achieving the operational excellence targets we’ve
set for all our businesses, which will allow us to fully capitalize
on improving markets. We are continuing to intentionally develop
people to strengthen our bench and build tomorrow’s team. And
we are fi nding ways to challenge and break down old cultural
behaviors to transform Weyerhaeuser into a truly great company.
I couldn’t be prouder of the work our teams have done to drive
change and achieve our goals. We still have a lot of work ahead
of us, but I know we will be successful because of the unmatched
dedication, passion and talent of Weyerhaeuser people at all
levels of the company who are focused on achieving the results
we all expect.
I look forward to sharing the story of our 2015 accomplishments.
Thank you for your support,
Doyle R. Simons
President and Chief Executive Offi cer
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014
or
[
] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
TO
COMMISSION FILE NUMBER 1-4825
WEYERHAEUSER COMPANY
A WASHINGTON CORPORATION
91-0470860
(IRS EMPLOYER IDENTIFICATION NO.)
33663 WEYERHAEUSER WAY SOUTH, FEDERAL WAY, WASHINGTON 98063-9777 TELEPHONE (253) 924-2345
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS
Common Shares ($1.25 par value)
6.375% Mandatory Convertible Preference Shares,
Series A ($1.00 par value)
NAME OF EACH EXCHANGE ON WHICH REGISTERED:
Chicago Stock Exchange
New York Stock Exchange
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. [X] Yes [
] No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. [
] Yes [X] No
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. [X] Yes [
] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). [X] Yes [
] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [
]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer [X] Accelerated filer [
] Non-accelerated filer [
] Smaller reporting company [
]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). [
] Yes [X] No
As of June 30, 2014, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was
$19.1 billion based on the closing sale price as reported on the New York Stock Exchange Composite Price Transactions.
As of January 30, 2015, 524,997,504 shares of the registrant’s common stock ($1.25 par value) were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Notice of 2015 Annual Meeting of Shareholders and Proxy Statement for the company’s Annual Meeting of
Shareholders to be held May 22, 2015, are incorporated by reference into Part II and III.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
TABLE OF CONTENTS
PART I
ITEM 1.
OUR BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
WE CAN TELL YOU MORE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
WHO WE ARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(cid:129) REAL ESTATE INVESTMENT TRUST (REIT) ELECTION . . . . . . . . . . . .1
(cid:129) OUR BUSINESS SEGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
(cid:129) EFFECT OF MARKET CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .1
(cid:129) COMPETITION IN OUR MARKETS . . . . . . . . . . . . . . . . . . . . . . . . . . .2
(cid:129) SALES OUTSIDE THE U.S.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
(cid:129) OUR EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
WHAT WE DO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(cid:129) TIMBERLANDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
(cid:129) WOOD PRODUCTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
(cid:129) CELLULOSE FIBERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . . . . . . . . 14
NATURAL RESOURCE AND ENVIRONMENTAL MATTERS . . . . . . . . . . 15
(cid:129) REGULATIONS AFFECTING FORESTRY PRACTICES . . . . . . . . . . . . . .15
(cid:129) ENDANGERED SPECIES PROTECTIONS . . . . . . . . . . . . . . . . . . . . . .15
(cid:129) FOREST CERTIFICATION STANDARDS . . . . . . . . . . . . . . . . . . . . . . . .16
(cid:129) WHAT THESE REGULATIONS AND CERTIFICATION PROGRAMS
MEAN TO US . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(cid:129) CANADIAN ABORIGINAL RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
(cid:129) POLLUTION-CONTROL REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . .17
(cid:129) ENVIRONMENTAL CLEANUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
(cid:129) REGULATION OF AIR EMISSIONS IN THE U.S.
. . . . . . . . . . . . . . . . .17
(cid:129) REGULATION OF AIR EMISSIONS IN CANADA . . . . . . . . . . . . . . . . . .18
(cid:129) REGULATION OF AIR EMISSIONS IN POLAND AND URUGUAY . . . . . .19
(cid:129) REGULATION OF WATER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
(cid:129) POTENTIAL CHANGES IN POLLUTION REGULATION . . . . . . . . . . . . .19
FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ITEM 1A. RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
RISKS RELATED TO OUR INDUSTRIES AND BUSINESS . . . . . . . . . . 22
(cid:129) MACROECONOMIC CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
(cid:129) COMMODITY PRODUCTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
(cid:129) INDUSTRY SUPPLY OF LOGS, WOOD PRODUCTS AND PULP . . . . . .22
(cid:129) HOMEBUILDING MARKET AND ECONOMIC RISKS . . . . . . . . . . . . . .22
(cid:129) CAPITAL MARKETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
(cid:129) CHANGES IN CREDIT RATINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
(cid:129) SUBSTITUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
(cid:129) CHANGES IN PRODUCT MIX OR PRICING . . . . . . . . . . . . . . . . . . . . .23
(cid:129) INTENSE COMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
(cid:129) MATERIAL DISRUPTION OF MANUFACTURING . . . . . . . . . . . . . . . . .24
(cid:129) STRATEGIC INITIATIVES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
(cid:129) CAPITAL REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
(cid:129) ENVIRONMENTAL LAW AND REGULATIONS . . . . . . . . . . . . . . . . . . .25
(cid:129) CURRENCY EXCHANGE RATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
(cid:129) AVAILABILITY OF RAW MATERIALS AND ENERGY . . . . . . . . . . . . . . .26
(cid:129) PEOPLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
(cid:129) TRANSPORTATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
(cid:129) REIT STATUS AND TAX IMPLICATIONS . . . . . . . . . . . . . . . . . . . . . . .26
(cid:129) LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
(cid:129) IMPORT/EXPORT TAXES AND DUTIES . . . . . . . . . . . . . . . . . . . . . . . .28
(cid:129) NATURAL DISASTERS ON TIMBERLANDS ASSETS . . . . . . . . . . . . . .28
(cid:129) ACQUISITION OF LONGVIEW TIMBER LLC . . . . . . . . . . . . . . . . . . . . .28
(cid:129) TAX DISTRIBUTION OF WRECO . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
(cid:129) CYBERSECURITY RISKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK . . . . . . 29
(cid:129) STOCK-PRICE VOLATILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
(cid:129) PREFERENCE SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
ITEM 1B. UNRESOLVED STAFF COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 30
PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ITEM 2.
ITEM 3.
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ITEM 4. MINE SAFETY DISCLOSURES — NOT APPLICABLE
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ITEM 6.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . 34
WHAT YOU WILL FIND IN THIS MD&A . . . . . . . . . . . . . . . . . . . . . . . . 34
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
ECONOMIC AND MARKET CONDITIONS AFFECTING OUR
OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
FINANCIAL PERFORMANCE SUMMARY . . . . . . . . . . . . . . . . . . . . . . 35
RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(cid:129) CONSOLIDATED RESULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
(cid:129) TIMBERLANDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
(cid:129) WOOD PRODUCTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
(cid:129) CELLULOSE FIBERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
(cid:129) UNALLOCATED ITEMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
(cid:129) INTEREST EXPENSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
(cid:129) INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
LIQUIDITY AND CAPITAL RESOURCES . . . . . . . . . . . . . . . . . . . . . . 42
(cid:129) CASH FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
(cid:129) INVESTING IN OUR BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
(cid:129) FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
OFF-BALANCE SHEET ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . 46
ENVIRONMENTAL MATTERS, LEGAL PROCEEDINGS AND OTHER
CONTINGENCIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ACCOUNTING MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(cid:129) CRITICAL ACCOUNTING POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . .46
(cid:129) PROSPECTIVE ACCOUNTING PRONOUNCEMENTS . . . . . . . . . . . . .48
MARKET RISK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
LONG-TERM DEBT OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 49
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . 50
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
CONSOLIDATED STATEMENT OF OPERATIONS . . . . . . . . . . . . . . . . 51
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME . . . . . 52
CONSOLIDATED BALANCE SHEET . . . . . . . . . . . . . . . . . . . . . . . . . . 53
CONSOLIDATED STATEMENT OF CASH FLOWS . . . . . . . . . . . . . . . 54
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY . . . . . . . . . . 55
INDEX FOR NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . 57
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . 96
ITEM 9A. CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES . . . 96
CHANGES IN INTERNAL CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . 96
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
ITEM 8.
ITEM 9.
ITEM 9B. OTHER INFORMATION — NOT APPLICABLE
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
ITEM 11. EXECUTIVE AND DIRECTOR COMPENSATION . . . . . . . . . . . . . . . 98
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS . . . . . . 98
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . 98
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES . . . . . . . . . . . . . . 98
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES . . . . . . . . . 99
EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
CERTIFICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
OUR BUSINESS
We are one of the world’s largest private owners of
timberlands. We own or control nearly 7 million acres of
timberlands, primarily in the U.S., and manage additional
timberlands under long-term licenses in Canada. We manage
these timberlands on a sustainable basis in compliance with
internationally recognized forestry standards. We are also one
of the largest manufacturers of wood and specialty cellulose
fibers products. Our company is a real estate investment trust
(REIT).
We are committed to operate as a sustainable company and
are listed on the Dow Jones World Sustainability Index. We
focus on increasing energy and resource efficiency, reducing
greenhouse gas emissions, reducing water consumption,
conserving natural resources, and offering products that meet
human needs with superior sustainability attributes. We
operate with world class safety results, understand and
address the needs of the communities in which we operate,
and present ourselves transparently.
In 2014, we generated $7.4 billion in net sales and employed
approximately 12,800 people who serve customers worldwide.
This portion of our Annual Report and Form 10-K provides
detailed information about who we are, what we do and where
we are headed. Unless otherwise specified, current information
reported in this Form 10-K is as of the fiscal year ended
December 31, 2014.
We break out financial information such as revenues, earnings
and assets by the business segments that form our company.
We also discuss the development of our company and the
geographic areas where we do business.
Throughout this Form 10-K, unless specified otherwise,
references to “we,” “our,” “us” and “the company” refer to the
consolidated company.
WE CAN TELL YOU MORE
AVAILABLE INFORMATION
We meet the information-reporting requirements of the
Securities Exchange Act of 1934 by filing periodic reports, proxy
statements and other information with the Securities and
Exchange Commission (SEC). These reports and statements —
information about our company’s business, financial results
and other matters — are available at:
(cid:129)the SEC website — www.sec.gov;
(cid:129)the SEC’s Public Conference Room, 100 F St. N.E.,
Washington, D.C., 20549, (800) SEC-0330; and
(cid:129)our website — www.weyerhaeuser.com.
When we file the information electronically with the SEC, it also
is added to our website.
WHO WE ARE
We started out as Weyerhaeuser Timber Company, incorporated
in the state of Washington in January 1900, when Frederick
Weyerhaeuser and 15 partners bought 900,000 acres of
timberland. Today, we are working to grow a truly great
company for our shareholders, customers and employees. We
grow and harvest trees and manufacture and sell products
made from trees.
REAL ESTATE INVESTMENT TRUST (REIT) ELECTION
Starting with our 2010 fiscal year, we elected to be taxed as a
REIT. We expect to derive most of our REIT income from
investments in timberlands, including the sale of standing
timber through pay-as-cut sales contracts. REIT income can be
distributed to shareholders without first paying corporate level
tax, substantially eliminating the double taxation on income. A
significant portion of our timberland segment earnings receives
this favorable tax treatment. We are, however, subject to
corporate taxes on built-in-gains (the excess of fair market
value over tax basis at January 1, 2010) on sales of real
property (other than standing timber) held by the REIT during
the first 10 years following the REIT conversion. We continue to
be required to pay federal corporate income taxes on earnings
of our Taxable REIT Subsidiary (TRS), which includes our
manufacturing businesses and the portion of our Timberlands
segment income included in the TRS.
OUR BUSINESS SEGMENTS
In the Consolidated Results section of Management’s
Discussion and Analysis of Financial Condition and Results of
Operations, you will find our overall performance results for our
business segments:
(cid:129)Timberlands,
(cid:129)Wood Products and
(cid:129)Cellulose Fibers.
Detailed financial information about our business segments
and our geographic locations is in Note 2: Business Segments
and Note 21: Geographic Areas in the Notes to Consolidated
Financial Statements, as well as in this section and in the
Management’s Discussion and Analysis of Financial Condition
and Results of Operations.
EFFECT OF MARKET CONDITIONS
The health of the U.S. housing market strongly affects our
Wood Products and Timberlands segments. Wood Products
primarily sells into the new residential building and repair and
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
1
remodel markets. Demand for logs from our Timberlands
segment is affected by the production of wood-based building
products as well as export demand. Cellulose Fibers is primarily
affected by global demand and the relative strength of the U.S.
dollar.
COMPETITION IN OUR MARKETS
We operate in highly competitive domestic and foreign markets,
with numerous companies selling similar products. Many of our
products also face competition from substitutes for wood and
wood-fiber products. We compete in our markets primarily
through price, product quality and service levels. We are
relentlessly focused on improving operational excellence to
ensure a competitive cost structure and producing quality
products customers want and are wiling to pay for.
Our business segments’ competitive strategies are as follows:
(cid:129)Timberlands — Extract maximum value from each acre we
own or manage.
(cid:129)Wood Products — Deliver high-quality lumber, structural
panels, engineered wood products and complementary
building products for residential, multi-family, industrial and
light commercial applications at competitive costs.
(cid:129)Cellulose Fibers — Concentrate on value-added pulp products
and low cost manufacturing assets.
SALES OUTSIDE THE U.S.
In 2014, $2.5 billion — 34 percent — of our total consolidated
sales from continuing operations were to customers outside
the U.S. The table below shows sales outside the U.S. for the
last three years.
SALES OUTSIDE THE U.S. IN MILLIONS OF DOLLARS
2014
2013
2012
Exports from the U.S.
$1,892
$1,891
$1,682
Canadian export and domestic sales
Other foreign sales
Total
472
150
488
114
348
92
$2,514
$2,493
$2,122
Percent of total sales
34%
29%
30%
WHAT WE DO
This section provides information about how we:
(cid:129)grow and harvest trees and
(cid:129)manufacture and sell products made from them.
For each of our business segments, we provide details about
what we do, where we do it, how much we sell and where we
are headed.
TIMBERLANDS
Our Timberlands segment manages 6.9 million acres of private
commercial timberlands worldwide. We own 6.2 million of those
acres and have long-term leases on the other 0.7 million acres.
In addition, we have renewable, long-term licenses on Canadian
timberlands. The tables presented in this section include data
from this segment’s business units as of the end of 2014.
WHAT WE DO
Forestry Management
Our Timberlands segment:
(cid:129)grows and harvests trees to be converted into lumber, other
wood and building products and pulp and paper;
(cid:129)exports logs to other countries where they are made into
products;
(cid:129)plants seedlings to reforest harvested areas using the most
effective regeneration method for the site and species (in
parts of Canada natural regeneration is employed);
(cid:129)monitors and cares for the planted trees as they grow to
maturity; and
(cid:129)strives to sustain and maximize the timber supply from our
timberlands while keeping the health of our environment a
key priority.
Our goal is to maximize returns by selling logs and stumpage to
internal and external customers. We focus on solid wood and
use intensive silviculture to improve forest productivity and
returns while managing our forests on a sustainable basis to
meet customer and public expectations.
OUR EMPLOYEES
We have approximately 12,800 employees. This number
includes:
(cid:129)11,930 employed in North America and
(cid:129)870 employed by our operations outside of North America.
Of these employees, approximately 3,550 are members of
unions covered by multi-year collective-bargaining agreements.
More information about these agreements is in Note 9: Pension
and Other Postretirement Benefit Plans in the Notes to
Consolidated Financial Statements.
Sustainable Forestry Practices
We are committed to responsible environmental stewardship
wherever we operate, managing forests to produce financially
mature timber while protecting the ecosystem services they
provide. Our working forests include places with unique
environmental, cultural, historical or recreational value. To
protect their unique qualities, we follow regulatory
requirements, voluntary standards and implement the
Sustainable Forestry Initiative® (SFI) standard. Independent
auditing of all of the forests we own or manage in the
2
United States and Canada certifies that we meet the SFI
standard. Our timberlands in Uruguay are certified under the
Forest Stewardship Council (FSC) standard or the Uruguayan
national forestry management standard which is endorsed by
the Program for the Endorsement of Forest Certification (PEFC).
Timberlands Products
PRODUCTS
Logs
Timberlands
HOW THEY’RE USED
Logs are made into lumber, other wood and
building products and pulp and paper products.
Timberland tracts are sold or exchanged to
improve our timberland portfolio.
Canadian Forestry Operations
In Canada, we manage timberlands under long-term licenses
that provide raw material for our manufacturing facilities in
various provinces. When we harvest trees, we pay the provinces
at stumpage rates set by the government, which generally are
based on prevailing market prices. We transfer logs to our
manufacturing facilities at cost, and do not generate any profit
in the Timberlands segment from the harvest of timber from the
licensed acres in Canada.
Other Values From Our Timberlands
In the United States, we actively manage mineral, oil and gas
leases on our land and use geologic databases to identify and
market opportunities for commercial mineral and geothermal
development. We recognize leasing revenue over the terms of
agreements with customers. Revenue primarily comes from:
(cid:129)royalty payments on oil and gas production;
(cid:129)upfront bonus payments from oil and gas leasing and
exploration activity;
(cid:129)royalty payments on hard minerals (rock, sand and gravel);
(cid:129)geothermal lease and option revenues; and
(cid:129)the sale of mineral assets.
In managing mineral resources, we generate revenue related to
our ownership of the minerals and, separately, related to our
ownership of the surface. The ownership of mineral rights and
surface acres may be held by two separate parties. Materials
that can be mined from the surface, and whose value comes
from factors other than their chemical composition, typically
belong to the surface owner. Examples of surface materials
include rock, sand, gravel, dirt and topsoil. The mineral owner
holds the title to commodities that derive value from their
unique chemical composition. Examples of mineral rights
include oil, gas, coal (even if mined at the surface) and
precious metals. If the two types of rights conflict, then mineral
rights generally are superior to surface rights. A third type of
land right is geothermal, which can belong to either the surface
or mineral owner. We routinely reserve mineral and geothermal
rights when selling surface timberlands acreage.
Timber
Standing timber is sold to third parties.
Minerals, oil and gas
Minerals, oil and gas are sold into construction
and energy markets.
Other products
Other products includes seed and seedlings,
recreational leases, as well as plywood produced
by our international operations in Uruguay.
HOW WE MEASURE OUR PRODUCT
We report Timberlands data in cubic meters. Cubic meters
measure the total volume of wood fiber in a tree or log that we
can sell. Cubic meter volume is determined from the large and
small-end diameters and length and provides a more consistent
and comparative measure of timber and log volume among
operating regions, species, size and seasons of the year than
other units of measure.
We also use multiple units of measure when transacting
business including:
(cid:129)Thousand board feet (MBF) — used in the West to measure
the expected lumber recovery from a tree or log. This
measure does not include taper or recovery of non-lumber
residual products.
(cid:129)Hundred cubic feet (CCF) — used in the West to measure the
volume of a log. The measure does not include any
calculation for expected lumber recovery.
(cid:129)Green tons (GT) — used in the South to measure weight, but
factors used for conversion to product volume can vary by
species, size, location and season.
WHERE WE DO IT
Our timberlands assets are located primarily in North America.
In the U.S. we own and manage sustainable timberlands in nine
states for use in wood products and pulp and paper
manufacturing. We own or lease:
(cid:129)4.0 million acres in the southern U.S. (Alabama, Arkansas,
Louisiana, Mississippi, North Carolina, Oklahoma and Texas);
and
(cid:129)2.6 million acres in the Pacific Northwest (Oregon and
Washington).
We also own and operate nurseries and seed orchards in
Washington, Oregon, South Carolina and Georgia.
Our international operations are located in Uruguay, where we
own 298,000 acres and have long-term leases on 25,000
acres. In Canada, we manage timberlands under long-term
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
3
licenses that provide raw material for our manufacturing
facilities. These licenses are in Alberta, British Columbia,
Ontario (license is managed by partnership) and Saskatchewan.
Our total timber inventory — including timber on owned and
leased land in our U.S. and international operations — is
approximately 345 million cubic meters. The amount of timber
inventory does not translate into an amount of lumber or panel
products because the quantity of end products:
(cid:129)varies according to the species, size and quality of the
timber; and
(cid:129)will change through time as the mix of these variables adjust.
The species, size and grade of the trees affects the relative
value of our timberlands.
We maintain our timber inventory in an integrated resource
inventory and geographic information system (“GIS”). The
resource inventory component of the system is proprietary and
is largely based on internally developed technologies, including
growth and yield models developed by our research and
development organization. The GIS component is based on GIS
software that is viewed as the standard in our industry.
Timber inventory data collection and verification techniques
include the use of industry standard field sampling procedures
as well as proprietary remote sensing technologies in some
geographies where they generate improved estimates. The data
is collected and maintained at the timber stand level.
DISCUSSION OF OPERATIONS BY GEOGRAPHY
Summary of 2014 United States Standing Timber Inventory
MILLIONS OF CUBIC METERS AT
DECEMBER 31, 2014
TOTAL
INVENTORY(1)
Summary of 2014 United States Timberland Locations
GEOGRAPHIC AREA
U.S.:
West
South
Total U.S.
THOUSANDS OF ACRES AT
DECEMBER 31, 2014
FEE
OWNERSHIP
LONG-
TERM
LEASES
TOTAL
ACRES(1)
2,594
3,398
5,992
—
642
642
2,594
4,040
6,634
(1) Acres include all conservation and set aside areas.
We provide a constant year round flow of logs to internal and
third-party customers. We sell grade logs to mills that
manufacture a diverse range of products including lumber,
plywood and veneer. We also sell chips and fiber logs to pulp,
paper and oriented strand board mills. Our timberlands are well
located to take advantage of road, logging and transportation
systems for efficient delivery of logs to these customers.
Western United States
Our Western acres are well situated to serve the wood product
markets in Oregon and Washington. In addition, our location on
the West Coast provides access to higher-value export markets
for Douglas fir and whitewood logs in Japan, China and Korea.
The size and quality of our Western timberlands, coupled with
their proximity to several deep-water port facilities, positions us
to meet the needs of Pacific Rim log markets.
Our lands are composed primarily of Douglas fir, a species
highly valued for its structural strength. Our coastal lands also
contain whitewood and have a higher proportion of whitewood
than our interior holdings. Our management systems range
from research and forestry, to technical planning models,
mechanized harvesting, and marketing and logistics. They
provide us a competitive operating advantage.
153
31
1
11
196
110
29
139
335
On July 23, 2013, we purchased 100 percent of the equity
interests in Longview Timber LLC (Longview Timber) for
$1.58 billion cash and assumed debt of $1.07 billion, for an
aggregate purchase price of $2.65 billion. Longview Timber was
a privately-held Delaware limited liability company engaged in
the ownership and management of approximately
645,000 acres of timberlands in Oregon and Washington. More
information on this transaction can be found in Note 4:
Longview Timber Purchase in the Notes to Consolidated
Financial Statements.
GEOGRAPHIC AREA
West:
Douglas fir/Cedar
Whitewood
Other conifer
Hardwood
South:
Southern yellow pine
Hardwood
Total U.S.
(1) Inventory includes all conservation and set aside areas.
4
2014 Western U.S. Inventory by Species
2014 Southern U.S. Inventory by Species
DOUGLAS FIR/CEDAR
WHITEWOOD
OTHER CONIFER
HARDWOOD
1%
5%
16%
SOUTHERN YELLOW PINE
HARDWOOD
21%
78%
79%
2014 Western U.S. Inventory by Age / Species
2014 Southern U.S. Inventory by Age / Species
S
R
E
T
E
M
C
B
U
C
I
F
O
S
N
O
I
L
L
I
M
50
40
30
20
10
0
AGE
(in years)
0–9
10–19
20–29
30–39
40–49
50–59
60–89
90–134
135+
S
R
E
T
E
M
C
B
U
C
I
F
O
S
N
O
I
L
L
I
M
40
35
30
25
20
15
10
5
0
AGE
(in years)
0–4
5–9
10–14
15–19
20–24
25–29
30+
DOUGLAS FIR/CEDAR
WHITEWOOD
OTHER CONIFER
HARDWOOD
SOUTHERN YELLOW PINE
HARDWOOD
Note: Inventory charted includes all conservation and set aside areas.
Note: Inventory charted includes all conservation and set aside areas.
The average age of timber harvested in 2014 was 52 years.
Most of our U.S. timberland is intensively managed for timber
production, but some areas are conserved for environmental,
historical, recreational or cultural reasons. Some of our older
trees are protected in acreage set aside for conservation, and
some are not yet logged due to harvest rate regulations. While
over the long term our average harvest age will decrease in
accordance with our sustainable forestry practices, we harvest
generally 2 percent of our Western acreage each year.
The average age of timber harvested in 2014 was 31 years for
southern yellow pine. In accordance with our sustainable
forestry practices, we harvest generally 3 percent of our
acreage each year in the South.
International
Summary of 2014 International Standing Timber Inventory
GEOGRAPHIC AREA
MILLIONS OF CUBIC METERS AT
DECEMBER 31, 2014
Southern United States
Our Southern acres predominantly contain southern yellow pine
and encompass timberlands in seven states.
Uruguay:
Pine
We intensively manage our timber plantations using forestry
research and planning systems to optimize grade log
production. We also actively manage our land to capture
revenues from our oil, gas and hard minerals resources. We do
this while providing quality habitat for a range of animals and
birds. We lease more than 93 percent of our acres to the public
and state wildlife agencies for recreational purposes.
Eucalyptus
Total International
TOTAL
INVENTORY
7
3
10
Summary of 2014 International Timberland Locations
GEOGRAPHIC AREA
THOUSANDS OF ACRES AT
DECEMBER 31, 2014
FEE
OWNERSHIP
LONG-
TERM
LEASES
TOTAL
ACRES
Uruguay
298
25
323
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
5
Our timberland acres in Uruguay are split approximately
50 percent loblolly pine and 50 percent eucalyptus. Loblolly
pine comprises more of our timber inventory due to its older
age. On average, the timber in Uruguay is in the second third of
its rotation age. It is entering into that part of the growth
rotation when we will see increased volume accretion. About
96 percent of the area to be planted has been afforested to
date.
2014 International Inventory by Species (Uruguay)
LOBLOLLY PINE
EUCALYPTUS
it to a finished product is recognized at the respective mill in
either the Cellulose Fibers or Wood Products segment.
GEOGRAPHIC AREA
Canada:
Alberta
British Columbia
Ontario(1)
Saskatchewan
Total Canada
THOUSANDS OF ACRES AT
DECEMBER 31, 2014
TOTAL
LICENSE
ARRANGEMENTS
5,306
1,012
2,573
4,970
13,861
30%
(1) License is managed by partnership.
70%
FEE HARVEST VOLUMES IN THOUSANDS
Five-Year Summary of Timberlands Fee Harvest Volumes
2014
2013
2012
2011
2010
Fee harvest
volume – cubic
meters:
West
South
11,173
8,907
7,170
11,676
11,596
11,488
International
990
818
763
6,595
9,738
854
5,569
8,197
349
Total
23,839
21,321
19,421
17,187
14,115
Our Timberlands annual fee harvest volumes represents the
depletion of the timber assets we own. Depletion is a method
of expensing the cost of establishing the fee timber asset base
over the harvest or timber sales volume. The increase in fee
harvest volumes from 2010 through 2014 reflects improving
market conditions. The increase in fee harvest volumes in the
West in 2013 and 2014 also reflects the purchase of Longview
Timber.
Our fee harvest volumes are managed sustainably across all
regions to ensure the preservation of long-term economic value
of the timber and to capture maximum value from the markets.
This is accomplished by ensuring annual harvest schedules
target financially mature timber and reforestation activities align
with the growing of timber through its life cycle to financial
maturity.
In Uruguay, the target rotation ages are 21 to 22 years for pine
and 14 to 17 years for eucalyptus. We manage both species to
a grade (appearance) regime.
We also operate a plywood mill in Uruguay with a production
capacity of 250,000 cubic meters. Production volume reached
216,000 cubic meters in 2014.
In Brazil, we were a managing partner in a joint venture that
operated a hardwood sawmill. We sold our interest in this joint
venture during 2014.
Canada — Licensed Timberlands
We manage timberlands under long-term licenses in Canada
from the provincial government to secure the volume for our
manufacturing facilities in various provinces. The provincial
governments regulate the volume of timber that may be
harvested each year through the Annual Allowable Cut (AAC)
allotment, which is updated every 10 years. As of
December 31, 2014, our AAC allotment was:
(cid:129)Alberta — 3,917 thousand cubic meters,
(cid:129)British Columbia — 682 thousand cubic meters,
(cid:129)Ontario — 146 thousand cubic meters and
(cid:129)Saskatchewan — 755 thousand cubic meters.
When the volume is harvested, we pay the province at
stumpage rates set by the government and generally based on
prevailing market prices. The harvested logs are transferred to
our manufacturing facilities at cost (stumpage plus harvest,
haul and overhead costs less any margin on selling logs to third
parties). Any profit from harvesting the log through to converting
6
Five-Year Summary of Timberlands Fee Harvest Volumes —
Percentage of Grade and Fiber
Five-Year Summary of Net Sales for Timberlands
NET SALES IN MILLIONS OF DOLLARS
PERCENTAGE OF GRADE AND FIBER
2014
2013
2012
2011
2010
West
South
International
Total
2014
2013
2012
2011
2010
Grade
Fiber
Grade
Fiber
Grade
Fiber
Grade
Fiber
89%
11%
59%
41%
63%
37%
73%
27%
90%
10%
57%
43%
60%
40%
69%
31%
90%
10%
59%
41%
67%
33%
71%
29%
90%
10%
58%
42%
55%
45%
70%
30%
92%
8%
55%
45%
65%
35%
70%
30%
HOW MUCH WE SELL
Our net sales to unaffiliated customers over the last two years
were:
(cid:129)$1.5 billion in 2014 — up 11 percent from 2013; and
(cid:129)$1.3 billion in 2013.
Our intersegment sales over the last two years were:
(cid:129)$867 million in 2014 — up 9 percent from 2013; and
(cid:129)$799 million in 2013.
To unaffiliated
customers:
Logs:
West
South
Canada
Total
Chip sales
Timberlands
sales and
exchanges(1)
Higher and
better use
land sales(1)
Minerals, oil
and gas
Products from
international
operations(2)
Other products
Subtotal sales to
unaffiliated
customers
Intersegment
sales:
United States
Other
Subtotal
intersegment
sales
$ 972
$ 828
$ 559
$ 545
$ 414
257
22
256
19
1,251
1,103
12
52
19
32
96
35
9
65
19
32
90
25
233
19
811
18
59
22
31
106
30
196
17
758
19
77
25
53
86
26
1,497
1,343
1,077
1,044
576
291
867
518
281
799
447
236
683
424
222
646
145
17
576
16
109
22
60
65
26
874
409
194
603
Total
$2,364
$2,142
$1,760
$1,690
$1,477
(1) Significant dispositions of higher and better use timberland and some non-strategic
timberlands are made through subsidiaries.
(2) Products include logs, plywood and hardwood lumber harvested or produced by our
international operations. Includes sales of our operations in Uruguay, Brazil (sold in
2014) and China (sold in 2012).
Five-Year Trend for Total Net Sales in Timberlands
NET SALES IN MILLIONS OF DOLLARS
$603
$646
$683
$799
$867
$1,500
$874
$1,044
$1,077
$1,343
$1,497
$1,200
$900
$600
$300
$0
2010
2011
2012
2013
2014
Intersegment Sales
Western Logs
Southern Logs
All Other Products
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
7
Percentage of 2014 Sales Dollars to Unaffiliated Customers
WESTERN LOGS
SOUTHERN LOGS
TIMBERLAND EXCHANGES
MINERALS, OIL AND GAS
PRODUCTS FROM
INTERNATIONAL OPERATIONS(1)
OTHER PRODUCTS
65%
17%
2%
3%
6%
6%
Five-Year Summary of Log Sales Volumes to Unaffiliated
Customers for Timberlands
SALES VOLUMES IN THOUSANDS
2014
2013
2012
2011
2010
Logs – cubic
meters:
West
South
Canada
International
8,980
5,678
592
604
7,708
5,888
511
357
5,898
5,575
531
343
5,267
4,476
4,879
3,357
479
314
507
283
(1) Products include logs, plywood and hardwood lumber harvested or produced by our
international operations in South America.
Total
15,854
14,464
12,347
10,939
8,623
Log Sales Volumes
Logs sold to unaffiliated customers in 2014 increased
1.4 million cubic meters — 10 percent — from 2013.
(cid:129)Sales volumes in the West increased 1.3 million cubic
meters — 17 percent — primarily due to strong export and
domestic demand and the purchase of Longview Timber. Our
western sales to unaffiliated customers generally are higher-
grade logs sold into the export market and domestic-grade
logs sold to West Coast sawmills.
(cid:129)Sales to unaffiliated customers in the South decreased
210 thousand cubic meters — 4 percent — primarily due to
a shift to stumpage sales.
(cid:129)Sales volumes from Canada increased 81 thousand cubic
meters — 16 percent — in 2014. The increase in volume to
unaffiliated customers primarily was due to increased internal
mill demand.
(cid:129)Sales volumes from our international operations increased
247 thousand cubic meters — 69 percent — in 2014. The
increase in volume was primarily due to increased fiber log
sales in Uruguay.
Log Prices
The majority of our log sales to unaffiliated customers involve
sales to domestic sawmills and the export market. Log prices
in the following tables are on a delivered (mill) basis:
Five-Year Summary of Published Domestic Log Prices
(#2 Sawlog Bark On — $/MBF)
SELECTED PRODUCT PRICES
$705
$663
$564
$552
$476
$333
$311
$310
$323
$334
We sell three grades of logs — domestic grade, domestic fiber
and export. Factors that may affect log sales in each of these
categories include:
DOUGLAS FIR
SOUTHERN PINE LARGE
SOURCE: LOGLINES / TIMBER MART-SOUTH
2010
2011
2012
2013
2014
(cid:129)domestic grade log sales — lumber usage, primarily for
housing starts and repair and remodel activity, the needs of
our own mills and the availability of logs from both outside
markets and our own timberlands;
(cid:129)domestic fiber log sales — demand for chips by pulp,
containerboard mills, and OSB mills; and
(cid:129)export log sales — the level of housing starts in Japan and
construction in China.
Our sales volumes include logs purchased in the open market
and all our domestic and export logs that are sold to
unaffiliated customers or transferred at market prices to our
internal mills by the sales and marketing staff within our
Timberlands business units.
8
Five-Year Summary of Export Log Prices (#2 Sawlog Bark
On — $/MBF)
SELECTED PRODUCT PRICES
$750
$753
$491
$480
$687
$408
$838
$869
$607
$555
2010
2011
2012
2013
2014
COASTAL - DOUGLAS FIR — LONGVIEW
COASTAL - HEMLOCK
SOURCE: LOGLINES
Our log prices are affected by the supply of and demand for
grade and fiber logs and are influenced by the same factors
that affect log sales. Export log prices are particularly affected
by the Japanese housing market.
Our average 2014 log realizations in the West increased from
2013 — primarily due to stronger demand for logs in the
domestic market. Our average 2014 log realizations in the
South increased from 2013 — primarily due to strengthening
market conditions in the South.
Minerals and Energy Products
Mineral revenue was down slightly in 2014 as royalty revenue
from natural gas and construction aggregates declined.
WHERE WE’RE HEADED
Our competitive strategies include:
(cid:129)continuing to capitalize on our scale operations, silviculture
expertise and sustainability practices;
(cid:129)maximizing cash flow through operational excellence
initiatives such as merchandising for value, harvest and
transportation efficiencies, and flexing harvest to seasonal
and short term opportunities;
(cid:129)sustaining our export and domestic market access,
infrastructure and strong customer relationships; and
(cid:129)increasing non-timber revenue streams.
WOOD PRODUCTS
We are a large manufacturer and distributor of wood products
primarily in North America and Asia.
WHAT WE DO
Our wood products segment:
(cid:129)provides a family of high-quality softwood lumber, engineered
wood products, structural panels and other specialty
products to the residential, multi-family, industrial, light
commercial and repair and remodel markets;
(cid:129)distributes our products as well as complementary building
products that we purchase from other manufacturers; and
(cid:129)exports our softwood lumber, oriented strand board (OSB)
and engineered wood products primarily to Asia.
Wood Products
PRODUCTS
HOW THEY’RE USED
Structural lumber
Engineered wood products
(cid:129)Solid section
(cid:129)I-joists
Structural panels
(cid:129)OSB
(cid:129)Softwood plywood
Other products
Structural framing for new residential, repair and
remodel, treated applications, industrial and
commercial structures
Floor and roof joists, and headers and beams for
residential, multi-family and commercial
structures
Structural sheathing, subflooring and stair tread
for residential, multi-family and commercial
structures
Complementary building products such as cedar,
decking, siding, insulation and rebar sold in our
distribution facilities
WHERE WE DO IT
We operate manufacturing facilities in the United States and
Canada. We distribute through a combination of Weyerhaeuser
and third-party locations. Information about the locations,
capacities and actual production of our manufacturing facilities
is included below.
Principal Manufacturing Locations
Locations of our principal manufacturing facilities as of
December 31, 2014, by major product group were:
(cid:129)Structural lumber
– U.S. — Alabama, Arkansas, Louisiana, Mississippi,
North Carolina, Oklahoma, Oregon and Washington
– Canada — Alberta and British Columbia
(cid:129)Engineered wood products
– U.S. — Alabama, Louisiana, Oregon and West Virginia
– Canada — British Columbia and Ontario
(cid:129)Oriented strand board
– U.S. — Louisiana, Michigan, North Carolina and
West Virginia
– Canada — Alberta and Saskatchewan
(cid:129)Softwood plywood
– U.S. — Arkansas and Louisiana
We also own or lease 21 distribution centers in the U.S. where
our major products and complementary building products are
sold.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
9
Summary of Wood Products Capacities as of December 31,
2014
Five-Year Summary of Net Sales for Wood Products
NET SALES IN MILLIONS OF DOLLARS
CAPACITIES IN MILLIONS
PRODUCTION
CAPACITY
NUMBER OF
FACILITIES
Structural lumber – board feet
Engineered solid section – cubic feet(1)
Oriented strand board – square feet (3/8”)
Softwood plywood – square feet (3/8”)
4,690
43
3,035
460
18
6
6
2
(1) Three engineered wood products facilities also produce engineered I-Joists to meet
market demand. 2014 production of I-Joists was 182 million lineal feet.
Production capacities listed represent annual production
volume under normal operating conditions and producing a
normal product mix for each individual facility. Production
capacities do not include any capacity for facilities that were
sold or permanently closed as of the end of 2014. We also
operate a facility in Foster, Oregon that produces veneer,
primarily for use in our engineered wood products facilities.
Structural lumber
$1,901
$1,873
$1,400
$1,087
$1,044
2014
2013
2012
2011
2010
Engineered solid
section
Engineered
I-joists
Oriented strand
board
Softwood
plywood
Other products
produced
Complementary
building products
402
277
610
143
176
461
353
247
809
144
171
412
279
190
612
115
167
295
235
161
354
66
142
231
246
171
319
65
125
254
Total
$3,970
$4,009
$3,058
$2,276
$2,224
Five-Year Trend for Total Net Sales in Wood Products
NET SALES IN MILLIONS OF DOLLARS
$4,000
$2,224
$2,276
$3,058
$4,009
$3,970
During 2013, we decided to permanently close our Colbert,
Georgia engineered wood products facility. In 2014, we decided
to reopen our Evergreen, Alabama engineered wood products
facility. Both facilities were previously indefinitely closed.
Five-Year Summary of Wood Products Production
$3,000
$2,000
$1,000
$0
PRODUCTION IN MILLIONS
2010
2011
2012
2013
2014
Percentage of 2014 Net Sales Dollars in Wood Products
STRUCTURAL LUMBER
ENGINEERED SOLID SECTION
ENGINEERED I-JOISTS
ORIENTED STRAND BOARD
SOFTWOOD PLYWOOD
OTHER PRODUCTS
16%
4%
15%
7%
10%
48%
Structural lumber –
board feet
Engineered solid
section – cubic feet(1)
Engineered I-joists –
lineal feet(1)
Oriented strand board –
square feet (3/8”)
Softwood plywood –
square feet (3/8”)(2)
2014
2013
2012
2011
2010
4,152
4,084
3,846
3,528
3,289
20.4
18.0
15.4
13.4
14.5
182
168
147
122
133
2,749
2,723
2,511
2,127
1,721
252
241
214
197
212
(1) Weyerhaeuser engineered I-joist facilities also may produce engineered solid section.
(2) All Weyerhaeuser plywood facilities also produce veneer.
HOW MUCH WE SELL
Revenues of our Wood Products segment come from sales to
wood products dealers, do-it-yourself retailers, builders and
industrial users. Wood Products net sales were $4.0 billion in
2014 and 2013.
10
Wood Products Volume
Five-Year Summary of Published Lumber Prices — $/MBF
The volume of structural lumber, OSB, and engineered wood
products sold in 2014 increased from 2013 due to increased
demand.
Five-Year Summary of Sales Volume for Wood Products
SALES VOLUMES IN MILLIONS
2014
2013
2012
2011
2010
4,463
4,436
4,031
3,586
3,356
20.0
18.2
15.4
12.3
13.1
184
177
152
128
145
2,788
2,772
2,508
1,977
1,547
Structural lumber –
board feet
Engineered solid
section – cubic feet
Engineered I-joists –
lineal feet
Oriented strand board –
square feet (3/8”)
Softwood Plywood –
square feet (3/8”)
SELECTED PUBLISHED PRODUCT PRICES
$348
$322
$299
$263
$301
$285
$254
$219
$295
$279
$255
$249
$413
$393
$355
$336
$426
$397
$350
$344
395
402
340
249
237
2010
2011
2012
2013
2014
Sales volumes include sales of internally produced products and
complementary building products primarily through our distribution business.
Wood Products Prices
2X4 DOUGLAS FIR (KILN DRIED)
2X4 DOUGLAS FIR (GREEN)
2X4 SOUTHERN YELLOW PINE (KILN DRIED)
2X4 SPRUCE-PINE-FIR (MILL)
SOURCE: RANDOM LENGTHS
Prices for commodity wood products — Structural lumber and
Plywood — increased in 2014 from 2013 while OSB decreased.
Five-Year Summary of Published Oriented Strand
Board Prices — $/MSF
In general, the following factors influence prices for wood products:
SELECTED PUBLISHED PRODUCT PRICES
(cid:129)Demand for wood products used in residential and multi-
family construction and the repair and remodel of existing
homes affects prices. Residential construction is influenced
by factors such as population growth and other
demographics, the level of employment, consumer
confidence, consumer income, availability of financing and
interest rate levels, and the supply and pricing of existing
homes on the market. Repair and remodel activity is affected
by the size and age of existing housing inventory and access
to home equity financing and other credit.
(cid:129)The availability of supply of commodity building products such
as structural lumber, OSB and plywood affects prices. A
number of factors can influence supply, including changes in
production capacity and utilization rates, weather, raw
material supply and availability of transportation.
The North American housing market continued to show sustained
improvement in 2014. This improvement led to increased demand
and resulted in improved pricing for commodity wood products,
excluding OSB, in 2014. The following graphs reflect product price
trends for the past five years.
$315
$270
$221
$186
$217
2010
2011
2012
2013
2014
OSB (7/16”) NORTH CENTRAL PRICE
SOURCE: RANDOM LENGTHS
WHERE WE’RE HEADED
Our competitive strategies include:
(cid:129)reduce controllable manufacturing costs through operational
excellence and capital execution;
(cid:129)maintain a value-added product mix;
(cid:129)leverage our brand and reputation as the preferred provider
of quality building products; and
(cid:129)pursue disciplined, profitable sales growth.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
11
CELLULOSE FIBERS
Our cellulose fibers segment is one of the world’s largest
producers of absorbent fluff pulp used in products such as
diapers. We also manufacture liquid packaging board and other
pulp products. We have a 50 percent interest in North Pacific
Paper Corporation (NORPAC) — a joint venture with Nippon
Paper Industries that produces primarily high-brightness
publication papers and newsprint.
WHAT WE DO
Our cellulose fibers segment:
(cid:129)provides cellulose fibers for absorbent products in markets
around the world;
(cid:129)works closely with our customers to develop unique or
specialized applications;
(cid:129)manufactures liquid packaging board used primarily for the
production of containers for liquid products; and
(cid:129)is largely energy self sufficient, with over 80 percent of its
energy derived from black liquor produced at the mills and
biomass.
Cellulose Fibers Products
PRODUCTS
HOW THEY’RE USED
Pulp
(cid:129)Fluff pulp (Southern
softwood kraft fiber)
(cid:129)Softwood papergrade
(cid:129)Specialty chemical
cellulose pulp
pulp
(cid:129)Used in sanitary disposable products that
require bulk, softness and absorbency
(cid:129)Used in products that include printing and
(cid:129)Used in textiles, absorbent products, specialty
writing papers and tissue
packaging, specialty applications and
proprietary high-bulking fibers
Liquid packaging board
Converted into containers to hold liquids such as
milk, juice and tea
Production capacities listed represent annual production
volume under normal operating conditions and producing a
normal product mix for each individual facility.
Five-Year Summary of Cellulose Fibers Production
PRODUCTION IN THOUSANDS
2014
2013
2012
2011
2010
Pulp – air-dry metric tons
1,859
1,815
1,773
1,769
1,774
Liquid packaging board –
tons
292
307
292
307
316
Liquid packaging board production decreased in 2014 primarily
due to a scheduled machine rebuild.
HOW MUCH WE SELL
Revenues of our Cellulose Fibers segment come from sales to
customers who use the products for further manufacturing or
distribution and for direct use. Our net sales were $1.9 billion
in 2014, comparable to $1.9 billion in 2013.
Five-Year Summary of Net Sales for Cellulose Fibers
NET SALES IN MILLIONS OF DOLLARS
2014
2013
2012
2011
2010
Pulp
$1,559
$1,501
$1,433
$1,617
$1,489
Liquid packaging
board
310
326
332
346
337
Other products
67
75
89
95
85
Total
$1,936
$1,902
$1,854
$2,058
$1,911
Used in the manufacture of paper products
Five-Year Trend for Total Net Sales in Cellulose Fibers
Other products
(cid:129)Slush pulp
(cid:129)Wet lap pulp
NET SALES IN MILLIONS OF DOLLARS
$2,000
$1,911
$2,058
$1,854
$1,902
$1,936
WHERE WE DO IT
Our cellulose fibers products are distributed globally through a
direct sales network. Locations of our principal manufacturing
facilities by major product group are:
(cid:129)Pulp Manufacturing
– U.S. — Georgia (2), Mississippi and North Carolina
– Canada — Alberta
$1,500
$1,000
$500
$0
2010
2011
2012
2013
2014
(cid:129)Pulp Converting
– U.S. — Mississippi
– Poland
(cid:129)Liquid packaging board
– U.S. — Washington
Summary of Cellulose Fibers Capacities as of December 31,
2014
CAPACITIES IN THOUSANDS
Pulp – air-dry metric tons
Liquid packaging board – tons
12
PRODUCTION
CAPACITY
NUMBER OF
FACILITIES
1,870
350
5
1
Percentage of 2014 Net Sales Dollars in Cellulose Fibers
PULP
LIQUID PACKAGING BOARD
OTHER
16%
3%
81%
Pulp Volumes
Our sales volumes of cellulose fiber products were 1.8 million
tons in 2014 and 1.9 million tons in 2013.
Factors that affect sales volumes for cellulose fiber products
include:
(cid:129)growth of the world gross domestic product,
(cid:129)demand for absorbent hygiene products and paper and
(cid:129)relative strength of the U.S. dollar.
Five-Year Summary of Sales Volume for Cellulose Fibers
SALES VOLUMES IN THOUSANDS
2014
2013
2012
2011
2010
Pulp – air-dry metric tons
1,826
1,866
1,762
1,756
1,714
Liquid packaging
board – tons
274
305
289
297
311
Liquid packaging board sales volume decreased in 2014
primarily due to lower production.
Pulp Prices
Our average pulp prices in 2014 increased compared with
2013 due to improvement in the market demand and supply
balance.
Five-Year Summary of Published NBSK Pulp Prices —
$/ADMT
SELECTED PUBLISHED PRODUCT PRICES
$960
$977
$872
$941
$1025
2010
2011
2012
2013
2014
NORTHERN BLEACHED KRAFT PULP-AIR DRY METRIC U.S.
SOURCE: RISI (PRICE IS DELIVERED UNITED STATES)
WHERE WE’RE HEADED
Our competitive strategies include:
(cid:129)continued execution of operational excellence initiatives such
as manufacturing reliability, predictive, preventive
maintenance practices, and liquid packaging board cost and
quality improvement;
(cid:129)profitably growing with long-term strategic customers; and
(cid:129)focusing capital investments on cost reduction, green energy
opportunities and product quality.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
13
EXECUTIVE OFFICERS OF THE REGISTRANT
Patricia M. Bedient, 61, has been executive vice president and
chief financial officer since 2007. She was senior vice
president, Finance and Strategic Planning from February 2006
to 2007. She served as vice president, Strategic Planning from
2003, when she joined the company, to 2006. Prior to joining
the company, she was a partner with Arthur Andersen LLP
(Independent Accountant) from 1987 to 2002 and served as
the managing partner for the Seattle office and as the partner
in charge of the firm’s forest products practice from 1999 to
2002. She is on the Board of Directors for Alaska Air Group and
Oregon State University and also serves as Treasurer and a
Board member of Overlake Hospital Medical Center. She is a
CPA and member of the American Institute of CPAs.
Adrian M. Blocker, 58, was appointed senior vice president,
Wood Products effective January 1, 2015. He has served as
senior vice president, Lumber since August 2013. He joined the
company in May 2013 as vice president, Lumber. Prior to
joining the company, he served as CEO of the Wood Products
Council and Chairman. He has held numerous leadership
positions in the industry focused on forest management, fiber
procurement, consumer packaging, strategic planning, business
development and manufacturing, including at West Fraser,
International Paper and Champion International.
Rhonda D. Hunter, 52, has been senior vice president,
Timberlands, since January 2014. Previously, she was vice
president, Southern Timberlands from 2010 to 2014. She held
a number of leadership positions in the Southern Timberlands
organization and has experience in inventory and planning,
regional timberlands management, environmental and work
systems, finance and land acquisition. She joined
Weyerhaeuser in 1987 as an accountant.
Denise M. Merle, 51, has been senior vice president, Human
Resources and Investor Relations since August 2014. She
served as senior vice president, Human Resources beginning
February 2014. Prior to that, she was director, Finance and
Human Resources for the Lumber business from 2013,
director, Compliance & Enterprise Planning from 2009 to 2013,
and director of Internal Audit from 2004 to 2009. She has held
various roles in the company’s paper and packaging
businesses, including finance, capital planning and analysis,
and business development. She joined the company in 1981.
She is a licensed CPA in the state of Washington.
Doyle R. Simons, 51, has been president and chief executive
officer since August 2013 and a director of the company since
June 2012. He was appointed chief executive officer-elect and
an executive officer of the company on June 17, 2013. Prior to
joining the company, he served as chairman and chief executive
officer of Temple-Inland, Inc. (forest products) from 2008 until
February 2012 when it was acquired by International Paper
Company. He held various management positions with Temple-
Inland, including executive vice president from 2005 through
2007 and chief administrative officer from 2003 to 2005. Prior
to joining Temple-Inland in 1992, he practiced real estate and
banking law with Hutcheson and Grundy, L.L.P. He also serves
on the Board of Fiserv, Inc.
Catherine I. Slater, 51, was appointed senior vice president,
Cellulose Fibers effective January 1, 2015. She has served as
senior vice president, Engineered Products and Distribution
since August 2013 and vice president, OSB from 2011 to
2013. Prior to that role, she held a number of other leadership
positions in the company’s Wood Products business, including
vice president for both engineered wood products
manufacturing and veneer technologies. Before joining the
Wood Products team, she held positions in Cellulose Fibers
business, including leadership roles at Flint River and Port
Wentworth pulp mills, and leadership oversight for the
company’s operations in Alberta, Canada, which included pulp,
timberlands, OSB, lumber, and engineered wood products. Prior
to joining the company in 1992, she held several leadership
roles at Procter and Gamble.
Devin W. Stockfish, 41, was appointed senior vice president,
general counsel and corporate secretary in July 2014. He leads
the company’s Law & Corporate Affairs department, with
responsibility for global Legal, Compliance, Government Affairs,
Real Estate Services, Land Title, and Environmental, Health and
Safety functions. He joined the company in March 2013 as
corporate secretary and assistant general counsel. Before
joining the company, he was vice president & associate general
counsel at Univar Inc. where he focused on mergers and
acquisitions, corporate governance and securities law.
Previously, he was an attorney in the law department at
Starbucks Corporation and practiced corporate law at K&L
Gates LLP. Before he began practicing law, Mr. Stockfish was
an engineer with the Boeing Company.
14
NATURAL RESOURCE AND ENVIRONMENTAL
MATTERS
We are subject to a multitude of laws and regulations in the
operation of our businesses. We also participate in voluntary
certification of our timberlands to assure that we sustain their
values including the protection of wildlife and water quality.
Changes in law and regulation, or certification standards, can
significantly affect our business.
REGULATIONS AFFECTING FORESTRY PRACTICES
In the United States, regulations established by federal, state
and local government agencies to protect water quality and
wetlands could affect future harvests and forest management
practices on some of our timberlands. Forest practice laws and
regulations that affect present or future harvest and forest
management activities in certain states include:
(cid:129)limits on the size of clearcuts,
(cid:129)requirements that some timber be left unharvested to protect
water quality and fish and wildlife habitat,
(cid:129)regulations regarding construction and maintenance of forest
roads,
(cid:129)rules requiring reforestation following timber harvest, and
(cid:129)various related permit programs.
Each state in which we own timberlands has developed best
management practices to reduce the effects of forest practices
on water quality and aquatic habitats. Additional and more
stringent regulations may be adopted by various state and local
governments to achieve water-quality standards under the
federal Clean Water Act, protect fish and wildlife habitats, or
achieve other public policy objectives.
In Canada, our forest operations are carried out on public
timberlands under forest licenses with the provinces. All forest
operations are subject to:
(cid:129)forest practices and environmental regulations, and
(cid:129)license requirements established by contract between us and
the relevant province designed to:
– protect environmental values, and
– encourage other stewardship values.
In Canada, 21 member companies of the Forest Products
Association of Canada (FPAC), including Weyerhaeuser’s
Canadian subsidiary, announced in May 2010 the signing of a
Canadian Boreal Forest Agreement (CBFA) with nine
environmental organizations. The CBFA applies to approximately
72 million hectares of public forests licensed to FPAC members
and, when fully implemented, is expected to lead to the
conservation of significant areas of Canada’s boreal forest and
protection of boreal species at risk, in particular woodland
caribou. CBFA signatories continue to work on management
plans with provincial governments, and seek the participation of
aboriginal and local communities in advancing the goals of the
CBFA. Progress under the CBFA is measured and reported on
by an independent auditor.
ENDANGERED SPECIES PROTECTIONS
In the United States, a number of fish and wildlife species that
inhabit geographic areas near or within our timberlands have
been listed as threatened or endangered under the federal
Endangered Species Act (ESA) or similar state laws, such as:
(cid:129)the northern spotted owl, the marbled murrelet, a number of
salmon species, bull trout and steelhead trout in the Pacific
Northwest,
(cid:129)several freshwater mussel and sturgeon species, and
(cid:129)the red-cockaded woodpecker, gopher tortoise, gopher frog
and American burying beetle in the South or Southeast.
Additional species or populations may be listed as threatened
or endangered as a result of pending or future citizen petitions
or petitions initiated by federal or state agencies. In addition,
significant citizen litigation seeks to compel the federal
agencies to designate “critical habitat” for ESA-listed species,
and many cases have resulted in settlements under which
designations will be implemented over time. Such designations
may adversely affect some management activities and options.
Restrictions on timber harvests can result from:
(cid:129)federal and state requirements to protect habitat for
threatened and endangered species,
(cid:129)regulatory actions by federal or state agencies to protect
these species and their habitat, and
(cid:129)citizen suits under the ESA.
Such actions could increase our operating costs and affect
timber supply and prices in general. To date, we do not believe
that these measures have had, and we do not believe that in
2015 they will have, a significant effect on our harvesting
operations. We anticipate that likely future actions will not
disproportionately affect Weyerhaeuser as compared with
comparable operations of U.S. competitors.
In Canada:
(cid:129)The federal Species at Risk Act (SARA) requires protective
measures for species identified as being at risk and for
critical habitat, pursuant to SARA, Environment Canada
continues to identify and assess species deemed to be at
risk and their critical habitat, and
(cid:129)in October 2012, the Canadian Minister of the Environment
released a strategy for the recovery of the boreal population
of woodland caribou under the SARA. The population and
distribution objectives for boreal caribou across Canada are
to (1) maintain the current status of existing, self-sustaining
local caribou populations and (2) stabilize and achieve self-
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
15
sustaining status for non-self-sustaining local caribou
populations. Critical habitat for boreal caribou is identified for
all boreal caribou ranges, except for northern
Saskatchewan’s Boreal Shield range (SK1) where additional
information is required for that population. Species
assessment and recovery plans are developed in
consultation with aboriginal communities and stakeholders.
The identification and protection of habitat and the
implementation of range plans and land use action plans may,
over time, result in additional restrictions on timber harvests
and other forest management practices that could increase
operating costs for operators of timberlands in Canada. To
date, we do not believe that these Canadian measures have
had, and we do not believe that in 2015 they will have, a
significant effect on our harvesting operations. We anticipate
that likely future measures will not disproportionately affect
Weyerhaeuser as compared with similar operations of Canadian
competitors.
FOREST CERTIFICATION STANDARDS
We operate in North America under the Sustainable Forestry
Initiative (SFI®). This is a certification standard designed to
supplement government regulatory programs with voluntary
landowner initiatives to further protect certain public resources
and values. SFI®is an independent standard, overseen by a
governing board consisting of:
(cid:129)conservation organizations,
(cid:129)academia,
(cid:129)the forest industry, and
(cid:129)large and small forest landowners.
Ongoing compliance with SFI®may result in some increases in
our operating costs and curtailment of our timber harvests in
some areas. There also is competition from other private
certification systems, primarily the Forest Stewardship Council
(FSC), coupled with efforts by supporters to further those
systems by persuading customers of forest products to require
products certified to their preferred system. Certain features of
the FSC system could impose additional operating costs on
timberland management. Because of the considerable variation
in FSC standards, and variability in how those standards are
interpreted and applied, if sufficient marketplace demand
develops for products made from raw materials sourced from
other than SFI-certified forests, we could incur substantial
additional costs for operations and be required to reduce
harvest levels.
16
WHAT THESE REGULATIONS AND CERTIFICATION
PROGRAMS MEAN TO US
The regulatory and nonregulatory forest management programs
described above have:
(cid:129)increased our operating costs,
(cid:129)resulted in changes in the value of timber and logs from our
timberlands,
(cid:129)contributed to increases in the prices paid for wood products
and wood chips during periods of high demand,
(cid:129)sometimes made it more difficult for us to respond to rapid
changes in markets, extreme weather or other unexpected
circumstances, and
(cid:129)potentially encouraged further reductions in the use of, or
substitution of other products for, lumber, oriented strand
board, and plywood.
We believe that these kinds of programs have not had, and in
2015 will not have, a significant effect on the total harvest of
timber in the United States or Canada. However, these kinds of
programs may have such an effect in the future. We expect we
will not be disproportionately affected by these programs as
compared with typical owners of comparable timberlands. We
also expect that these programs will not significantly disrupt our
planned operations over large areas or for extended periods.
CANADIAN ABORIGINAL RIGHTS
Many of the Canadian timberlands are subject to the
constitutionally protected treaty or common-law rights of
aboriginal peoples of Canada. Most of British Columbia (B.C.) is
not covered by treaties, and as a result the claims of B.C.’s
aboriginal peoples relating to forest resources have been
largely unresolved. On June 26, 2014 the Supreme Court of
Canada ruled that the Tsilhqot’in Nation holds aboriginal title to
approximately 1,900 square kilometers in B.C. This was the
first time that the court has declared title to exist based on
historical occupation by aboriginal peoples. Many aboriginal
groups continue to be engaged in treaty discussions with the
governments of B.C., other provinces and Canada.
Final or interim resolution of claims brought by aboriginal
groups can be expected to result in:
(cid:129)additional restrictions on the sale or harvest of timber,
(cid:129)potential increase in operating costs, and
(cid:129)impact to timber supply and prices in Canada.
We believe that such claims will not have a significant effect on
our total harvest of timber or production of forest products in
2015, although they may have such an effect in the future. In
2008, FPAC, of which we are a member, signed a Memorandum
of Understanding with the Assembly of First Nations, under
which the parties agree to work together to strengthen
Canada’s forest sector through economic-development
initiatives and business investments, strong environmental
stewardship and the creation of skill-development opportunities
particularly targeted to aboriginal youth.
(cid:129)we may have been named as a potentially responsible party
for sites designated as U.S. Superfund sites.
POLLUTION-CONTROL REGULATIONS
Our operations are subject to various laws and regulations,
including:
(cid:129)federal,
(cid:129)state,
(cid:129)provincial, and
(cid:129)local pollution controls.
These laws and regulations, as well as market demands,
impose controls with regard to:
(cid:129)air, water and land,
(cid:129)solid and hazardous waste management,
(cid:129)waste disposal,
(cid:129)remediation of contaminated sites, and
(cid:129)the chemical content of some of our products.
Compliance with these laws, regulations and demands usually
involves capital expenditures as well as additional operating
costs. We cannot easily quantify the future amounts of capital
expenditures we might have to make to comply with these laws,
regulations and demands or the effects on our operating costs
because in some instances compliance standards have not
been developed or have not become final or definitive. In
addition, it is difficult to isolate the environmental component
of most manufacturing capital projects.
Our capital projects typically are designed to:
(cid:129)enhance safety,
(cid:129)extend the life of a facility,
(cid:129)increase capacity,
(cid:129)increase efficiency,
(cid:129)facilitate raw material changes and handling requirements,
(cid:129)increase the economic value of assets or products, and
(cid:129)comply with regulatory standards.
We had no material capital expenditures relating primarily to
environmental compliance in 2014. Based on our
understanding of current regulatory requirements in the U.S.
and Canada, we expect approximately $23 million of capital
expenditures relating primarily to environmental compliance in
2015.
ENVIRONMENTAL CLEANUP
We are involved in the environmental investigation or
remediation of numerous sites. Of these sites:
(cid:129)we may have the sole obligation to remediate,
(cid:129)we may share that obligation with one or more parties,
(cid:129)several parties may have joint and several obligations to
remediate, or
Our liability with respect to these various sites ranges from
insignificant to substantial. The amount of liability depends on:
(cid:129)the quantity, toxicity and nature of materials at the site, and
(cid:129)the number and economic viability of the other responsible
parties.
We spent approximately $5 million in 2014 and expect to
spend approximately $7 million in 2015 on environmental
remediation of these sites.
It is our policy to accrue for environmental-remediation costs
when we:
(cid:129)determine it is probable that such an obligation exists, and
(cid:129)can reasonably estimate the amount of the obligation.
We currently believe it is reasonably possible that our costs to
remediate all the identified sites may exceed our current
accruals of $29 million. The excess amounts required may be
insignificant or could range, in the aggregate, up to $138
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 we currently are using to determine
how much to accrue. The estimate of the upper range also
uses assumptions less favorable to us among the range of
reasonably possible outcomes.
REGULATION OF AIR EMISSIONS IN THE U.S.
The United States Environmental Protection Agency (EPA) has
promulgated regulations for air emissions from:
(cid:129)pulp and paper manufacturing facilities,
(cid:129)wood products facilities, and
(cid:129)industrial boilers.
These regulations cover:
(cid:129)hazardous air pollutants that require use of maximum
achievable control technology (MACT); and
(cid:129)controls for pollutants that contribute to smog, haze and
more recently, greenhouse gases.
In 2011 and 2013 EPA issued new MACT standards for
industrial boilers and process heaters. In 2012 EPA completed
a technology and residual risk review for MACT standards
applicable to pulping and bleaching operations at pulp and
paper manufacturing facilities. In 2014 EPA issued a revised
New Source Performance Standard for kraft pulp mills. These
latter two rules apply on a project specific basis when certain
thresholds are exceeded; as a result, we cannot predict
whether or when those rules may have a material impact on
future projects. Regarding other recent final actions by the EPA,
we expect to spend $23 million in 2015 to comply with MACT
standards.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
17
The EPA must still promulgate:
(cid:129)technology and residual risk review standards for additional
operations at pulp and paper manufacturing facilities and
(cid:129)supplemental MACT standards for plywood, lumber and
composite wood products facilities.
We cannot currently quantify the amount of capital we will need
in the future to comply with new regulations being developed by
the EPA because final rules have not been promulgated.
In 2010 EPA issued a final greenhouse gas rule limiting the
growth of emissions from new projects meeting certain
thresholds. On June 23, 2014, the US Supreme Court issued a
decision that removed potential applicability of the underlying
2010 regulations based solely on greenhouse gas emissions
and limited application of the rule’s technology requirements to
larger emission sources as a result of new emissions from non-
greenhouse gas pollutants. As a result of this Supreme Court
ruling, EPA is expected to issue new guidance to set thresholds
for when the greenhouse gas technology requirements apply if
the non-greenhouse gas emissions trigger the rule in the first
instance. The impact of the Supreme Court ruling is to end the
potential applicability of the technology requirements for our
smaller manufacturing operations and limit the applicability for
our other operations.
In June 2014 EPA proposed an extensive regulatory program for
existing electric utility generating units to scale back emissions
of greenhouse gas carbon dioxide (CO2) arising from fossil fuel
use to generate electricity. This regulatory program potentially
will have indirect impacts on our operations, such as from
rising purchased electricity prices or from secondary regulation
of cogeneration units that we operate. We are evaluating the
proposal but are not able to predict whether the regulations,
when final and implemented, will have a material impact on our
operations.
We use significant biomass for energy production at our mills.
EPA is currently working on rules regarding regulation of
biomass emissions.
The impact of these greenhouse gas and biomass rules, as
well as recent court decisions, on our operations remains
uncertain.
To address concerns about greenhouse gases as a pollutant,
we:
(cid:129)closely monitor legislative, regulatory and scientific
developments pertaining to climate change;
(cid:129)adopted in 2006, as part of the Company’s sustainability
program, a goal of reducing greenhouse gas emissions by
40 percent by 2020 compared with our emissions in 2000,
assuming a comparable portfolio and regulations;
(cid:129)determined to achieve this goal by increasing energy
efficiency and using more greenhouse gas-neutral, biomass
fuels instead of fossil fuels; and
(cid:129)reduced greenhouse gas emissions by approximately
28 percent considering changes in the asset portfolio
according to 2012 data, compared to our 2000 baseline.
Additional factors that could affect greenhouse gas emissions
in the future include:
(cid:129)policy proposals by state governments regarding regulation of
greenhouse gas emissions,
(cid:129)Congressional legislation regulating greenhouse gas
emissions within the next several years and
(cid:129)establishment of a multistate or federal greenhouse gas
emissions reduction trading systems with potentially
significant implications for all U.S. businesses.
We believe these developments have not had, and in 2015 will
not have, a significant effect on our operations. Although these
measures could have a material adverse effect on our
operations in the future, we expect that we will not be
disproportionately affected by these measures as compared
with owners of comparable operations. We maintain an active
forestry research program to track and understand any potential
effect from actual climate change related parameters that could
affect the forests we own and manage and do not anticipate
any disruptions to our planned operations.
REGULATION OF AIR EMISSIONS IN CANADA
In addition to existing provincial air quality regulations, the
Canadian federal government has proposed an air quality
management system (AQMS) as a comprehensive national
approach for improving air quality in Canada. The federal
proposed AQMS includes:
(cid:129)ambient air quality standards for outdoor air quality
management across the country,
(cid:129)a framework for air zone air management within provinces
and territories that targets specific sources of air emissions,
(cid:129)regional airsheds that facilitate coordinated action across
borders,
(cid:129)industrial sector based emission requirements that set a
national base level of performance for major industries in
Canada, and
(cid:129)improved intergovernmental collaboration to reduce
emissions from the transportation sector.
Environment Canada is developing a “Greenhouse Gas
Emission Framework” that is expected to be proposed in 2015
with implementation in 2020. The framework will put in place a
national, sector-based greenhouse gas reduction program
applicable to a number of industries, including pulp and paper
manufacturing.
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All Canadian provincial governments:
(cid:129)have greenhouse gas reporting requirements,
(cid:129)are working on reduction strategies, and
(cid:129)together with the Canadian federal government, are
considering new or revised emission standards.
In addition, British Columbia has adopted a carbon tax and
Alberta has a mandatory GHG emission reduction regulation.
Our Grande Prairie, Alberta cellulose fiber mill generates and
sells carbon credits.
We believe these measures have not had, and in 2015 will not
have, a significant effect on our operations. Although these
measures could have a material adverse effect on our
operations in the future, we expect that we will not be
disproportionately affected by these measures as compared
with owners of comparable operations. We also expect that
these measures will not significantly disrupt our planned
operations.
REGULATION OF AIR EMISSIONS IN POLAND AND
URUGUAY
The European Union’s “Clean Air Programme” includes new air
quality objectives that Poland and other European Union
countries will implement through 2030. Some provinces in
Uruguay have established air quality monitoring networks and
ambient air objectives have been proposed for the region where
our Los Piques mill is located.
We believe these measures have not had, and in 2015 will not
have, a significant effect on our operations. Although these
measures could have a material adverse effect on our
operations in the future, we expect that we will not be
disproportionately affected by these measures as compared
with owners of comparable operations. We also expect that
these measures will not significantly disrupt our planned
operations.
REGULATION OF WATER
In the U.S., as a result of litigation under the federal Clean
Water Act, additional federal or state permits are now required
in some states for the application of pesticides, including
herbicides, on timberlands. Those permits have entailed
additional costs. In addition, there is continuing litigation in the
federal courts that may result in permit requirements for
pollution discharges from forest roads and other drainage
features on timberland, which would entail additional costs for
forest landowners including Weyerhaeuser. Finally, the federal
regulatory agencies are considering expanding the definition of
waters subject to federal Clean Water Act jurisdiction, which
could increase the scope and number of permits required for
forestry-related activities and entail additional costs for
Weyerhaeuser and other forest landowners in the U.S.
In August 2014 EPA issued a final regulation on thermal cooling
water intakes for the protection of aquatic resources. The final
rule is not expected to have a material impact although the
technology requirements to protect aquatic resources outlined
in the rule may be applied on a case-by-case when water
permits are renewed.
In 2015, Washington State Department of Ecology (WA DOE) is
expected to propose rules to update the Human Health Water
Quality Criteria for the protection of human health. It is unclear
what effect, if any, the WA DOE regulations will have on our
manufacturing operations in Washington State.
In addition:
(cid:129)In 2013, amendments to the Canadian Federal Fisheries Act
came into force. These amendments change the focus from
habitat protection to fisheries protection and increase
penalties.
(cid:129)Uruguay’s national policy for water includes regulation of river
basin planning, management and water use permits.
Wastewater discharge authorization is required for industry,
including our Los Piques mill.
(cid:129)In response to an European Union Water Framework
Directive, in 2015 Polish authorities announced their
intention to develop a water management plan to reduce
total nitrogen and phosphorous loads in municipal waste
water by 75 percent. The plan could impact our Poland
facility, although it is unclear what effect, if any, the water
management plan may have on our operation in Poland until
the plan is complete.
We believe the above developments have not had, and in 2015
will not have, a significant effect on our operations. Although
these measures could have a material adverse effect on our
operations in the future, we expect that we will not be
disproportionately affected by these measures as compared
with owners of comparable operations. We also expect that
these measures will not significantly disrupt our planned
operations.
POTENTIAL CHANGES IN POLLUTION REGULATION
State governments continue to promulgate total maximum daily
load (TMDL) requirements for pollutants in water bodies that do
not meet state or EPA water quality standards. State TMDL
requirements may:
(cid:129)set limits on pollutants that may be discharged to a body of
water; or
(cid:129)set additional requirements, such as best management
practices for nonpoint sources, including timberland
operations, to reduce the amounts of pollutants.
It is not possible to estimate the capital expenditures that may
be required for us to meet pollution allocations across the
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
19
various proposed state TMDL programs until a specific TMDL is
promulgated.
In Canada, various levels of government have been working to
address water issues including use, quality and management.
Recent areas of focus include water allocation, regional
watershed protection, protection of drinking water, water pricing
and a national water quality index.
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FORWARD-LOOKING STATEMENTS
This report contains statements concerning our future results
and performance that are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
These statements:
(cid:129)are based on various assumptions we make, and
(cid:129)may not be accurate because of risks and uncertainties
surrounding the assumptions we make.
These statements reflect our current views with respect to
future events. Factors listed in this section, factors discussed
under “Risk Factors” and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” in
this report, and other factors not included, may cause our
actual results to differ significantly from our forward-looking
statements. There is no guarantee that any of the events
anticipated by our forward-looking statements will occur. Or if
any of the events occur, there is no guarantee what effect it will
have on our operations or financial condition.
We will not update our forward-looking statements after the
date of this report.
FORWARD-LOOKING TERMINOLOGY
Forward-looking statements can be identified by the fact that
they do not relate strictly to historical or current facts. They
often use words such as expects, may, should, will, believes,
anticipates, estimates, projects, intends, plans, targets or
approximately. They may use the positive or negative or
variation of those and similar words.
STATEMENTS
In this report we make forward-looking statements concerning
our plans, strategies, intentions and expectations, including
with respect to estimated taxes and tax rates, future dividends,
future restructuring charges, expected results of litigation and
the sufficiency of litigation reserves, expected uses of cash,
expected capital expenditures, expected economic conditions,
markets for our products, laws and regulations relevant to our
businesses and our expectations relating to pension
contributions and benefit payments.
We base our forward-looking statements on the expected effect
of:
(cid:129)the economy,
(cid:129)laws and regulations,
(cid:129)adverse litigation outcomes and the adequacy of reserves,
(cid:129)changes in accounting principles,
(cid:129)contributions to pension plans,
(cid:129)projected benefit payments,
(cid:129)projected tax treatment, rates and credits, and
(cid:129)other related matters.
RISKS, UNCERTAINTIES AND ASSUMPTIONS
Major risks and uncertainties, and assumptions that we make,
that affect our business and may cause actual results to differ
from these forward-looking statements include, but are not
limited to:
(cid:129)the effect of general economic conditions, including
employment rates, interest rate levels, housing starts,
availability of financing for home mortgages and strength of
the U.S. dollar;
(cid:129)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;
(cid:129)performance of our manufacturing operations, including
maintenance requirements;
(cid:129)potential disruptions in our manufacturing operations;
(cid:129)level of competition from domestic and foreign producers;
(cid:129)raw material availability and prices;
(cid:129)the effect of weather;
(cid:129)the risk of loss from fires, floods, windstorms, hurricanes,
pest infestations and other natural disasters;
(cid:129)energy prices;
(cid:129)the successful execution of our internal plans and strategic
initiatives;
(cid:129)transportation and labor availability and costs;
(cid:129)federal tax policies;
(cid:129)the effect of forestry, land use, environmental and other
governmental regulations;
(cid:129)legal proceedings;
(cid:129)performance of pension fund investments and related
derivatives;
(cid:129)the effect of timing of retirements and changes in the market
price of our common stock on charges for share-based
compensation;
(cid:129)changes in accounting principles;
(cid:129)our ability to successfully realize the expected benefits from
the acquisition of Longview Timber; and
(cid:129)other factors described under Risk Factors.
EXPORTING ISSUES
We are a large exporter. Our business is affected by:
(cid:129)economic activity in Europe and Asia, especially Japan and
China;
(cid:129)currency exchange rates, particularly the relative value of the
U.S. dollar to the euro and the Canadian dollar, and the
relative value of the euro to the yen; and
(cid:129)restrictions on international trade or tariffs imposed on
imports.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
21
RISK FACTORS
We are subject to various risks and events that could adversely
affect our business, our financial condition, our results of
operations and the price of our common stock.
You should consider the following risk factors, in addition to the
information presented elsewhere in this report, particularly in
“Forward-Looking Statements” and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations”
as well as in the filings we make from time to time with the
SEC, in evaluating us, our business and an investment in our
securities.
The risks discussed below are not the only risks we face.
Additional risks not currently known to us or that we currently
deem immaterial also may adversely affect our business.
RISKS RELATED TO OUR INDUSTRIES AND
BUSINESS
MACROECONOMIC CONDITIONS
The industries in which we operate are sensitive to
macroeconomic conditions and consequently are highly
cyclical.
The overall levels of demand for the products we manufacture
and distribute reflect fluctuations in levels of end-user demand,
which consequently impact our sales and profitability. End-user
demand depends in part on general macroeconomic conditions,
both in the U.S. and globally, as well as on local economic
conditions. Current economic conditions in the United States
reflect growth at or below historical trends and general
business uncertainty, but improving confidence. Global
economic conditions reflect issues such as inflation and
slowing growth in emerging countries. The construction and
homebuilding industries continue to slowly recover from the
severe downturn caused by the overall collapse of credit
markets and recession of 2009. However, the recovery has
been uneven and construction activity remains below pre-
recession and trend levels. Our Wood Products segment is
highly dependent on the strength of the homebuilding industry.
Although recovering, the decline in home construction activity
over the past several years resulted in depressed prices of and
demand for wood products and building materials. This resulted
in lower prices and demand for logs and several years of
reduced harvests in our Timberlands segment. The length and
magnitude of industry cycles vary over time and by product, but
generally reflect changes in macroeconomic conditions and
levels of industry capacity. Those conditions have improved
recently for some sectors, but if macroeconomic conditions do
not continue to improve we could experience lower sales
volumes and smaller margins.
22
COMMODITY PRODUCTS
Many of our products are commodities that are widely
available from other producers.
Because commodity products have few distinguishing
properties from producer to producer, competition for these
products is based primarily on price, which is determined by
supply relative to demand and competition from substitute
products. In addition, prices for our products are affected by
many other factors outside of our control. As a result, we have
little influence over the timing and extent of price changes,
which often are volatile. Our profitability with respect to these
products depends, in part, on managing our costs, particularly
raw material and energy costs, which represent significant
components of our operating costs and can fluctuate based
upon factors beyond our control. Both sales and profitability of
our products are subject to volatility due to market forces
beyond our control.
INDUSTRY SUPPLY OF LOGS, WOOD PRODUCTS AND
PULP
Excess supply of products may adversely affect prices and
margins.
Oversupply of products may result from producers introducing
new capacity for manufactured products or increasing harvest
levels in response to favorable short-term pricing trends.
Industry supplies of pulp are also influenced by global
production capacity, which has grown in recent years and is
expected to continue to grow. Continuation of these factors
could adversely affect our sales volumes and margins.
HOMEBUILDING MARKET AND ECONOMIC RISKS
High unemployment, low demand and low levels of consumer
confidence can adversely affect our business and results of
operations.
Several of our businesses are dependent upon the health of
the U.S. housing market. Demand for homes is sensitive to
changes in economic conditions such as the level of
employment, consumer confidence, consumer income, the
availability of financing and interest rate levels. The legacy of
the housing bubble, its collapse and ensuing credit crisis has
been one of tightened credit requirements and a reduced
number of mortgage loans available for financing home
purchases. Credit conditions have begun to ease, but remain
significantly more restrictive than prior to the housing bubble.
Demand for new homes also has been adversely affected by
factors such as unemployment and lower job participation,
limited wage growth and weak consumer confidence.
Additionally, rising student loan debt among younger adults is
limiting access to mortgage financing and home ownership.
Foreclosure rates and distress sales of houses, while still at
elevated levels, have fallen significantly and are less of an
impact compared to the years immediately following the
housing collapse.
Homebuyers’ ability to qualify for and obtain affordable
mortgages could be affected by changes in government
sponsored entities and private mortgage insurance companies
supporting the mortgage market.
The federal government has historically had a significant role in
supporting mortgage lending through its sponsorship of Fannie
Mae and Freddie Mac. As a result of turbulence in credit
markets and the mortgage finance industry in the last few
years, the effect of the federal government’s conservatorship of
these government sponsored entities on the short-term and
long-term demand for new housing remains unclear. The
liquidity provided to the mortgage industry by Fannie Mae and
Freddie Mac, both of which purchase home mortgages and
mortgage-backed securities originated by mortgage lenders, is
critical to the housing market. There have been significant
concerns about the future purpose of Fannie Mae and Freddie
Mac and a number of proposals to curtail their activities over
time are under review. Limitations or restrictions on the
availability of financing by these entities could adversely affect
interest rates and the availability of mortgage financing, which
could reduce demand for housing and adversely affect demand
for our products.
Changes in mortgage interest expense and real estate tax
regulations could harm our future sales and earnings.
Significant costs of homeownership include mortgage interest
expense and real estate taxes, both of which are generally
deductible for an individual’s federal and, in some cases, state
income taxes. Any changes to income tax laws by the federal
government or a state government to eliminate or substantially
reduce these income tax deductions, as has been considered
from time to time, would increase the after-tax cost of owning a
home. Increases in real estate taxes by local governmental
authorities would also increase the cost of homeownership. Any
such increases to the cost of homeownership could adversely
affect the demand for our products.
CAPITAL MARKETS
Deterioration in economic conditions and the credit markets
could adversely affect our access to capital.
Upset financial or credit market conditions can impair the
company’s ability to borrow money or otherwise access credit
markets on terms acceptable to us, which may, among other
impacts, reduce our ability to take advantage of growth and
expansion opportunities. Similarly, our customers may be
unable to borrow money to fund their operations. Similarly,
deteriorating or volatile market conditions could have an
adverse effect on our customers and suppliers and their ability
to purchase our products or sell products to us.
CHANGES IN CREDIT RATINGS
Changes in credit ratings issued by nationally recognized
rating organizations could adversely affect our cost of
financing and have an adverse effect on the market price of
our securities.
Credit rating agencies rate our debt securities on factors that
include our operating results, actions that we take, their view of
the general outlook for our industry and their view of the
general outlook for the economy. Actions taken by the rating
agencies can include maintaining, upgrading or downgrading the
current rating or placing the company on a watch list for
possible future downgrading. Downgrading the credit rating of
our debt securities or placing us on a watch list for possible
future downgrading could limit our access to the credit markets,
increase our cost of financing, and have an adverse effect on
the market price of our securities.
SUBSTITUTION
Some of our products are vulnerable to declines in demand
due to competing technologies or materials.
Our products may compete with nonfiber-based alternatives or
with alternative products in certain market segments. For
example, plastic, wood/plastic or composite materials may be
used by builders as alternatives to the products produced by
our Wood Products businesses such as lumber, veneer,
plywood and oriented strand board. Changes in prices for oil,
chemicals and wood-based fiber can change the competitive
position of our products relative to available alternatives and
could increase substitution of those products for our products.
If use of these alternative products grows, demand for and
pricing of our products could be adversely affected.
CHANGES IN PRODUCT MIX OR PRICING
Our results of operations and financial condition could be
materially adversely affected by changes in product mix or
pricing.
Our results may be adversely affected by a change in our
product mix or pricing. If we are not successful in implementing
previously announced or future price increases, or in our plans
to increase sales of higher-priced, higher-value products, or if
there are delays in acceptance of price increases or failure of
customers to accept higher-priced products our results of
operations and financial condition could be materially and
adversely affected. Price discounting, if required to maintain our
competitive position, could result in lower than anticipated price
realizations.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
23
INTENSE COMPETITION
We face intense competition in our markets, and the failure to
compete effectively could have a material adverse effect on
our business, financial condition and results of operations.
We compete with North American and, for many of our product
lines, global producers, some of which may have greater
financial resources and lower production costs than we do. The
principal basis for competition for many of our products is
selling price. Our ability to maintain satisfactory margins
depends in large part on our ability to control our costs. Our
industries also are particularly sensitive to other factors
including innovation, design, quality and service, with varying
emphasis on these factors depending on the product line. To
the extent that one or more of our competitors become more
successful with respect to any key competitive factor, our ability
to attract and retain customers could be materially adversely
affected. If we are unable to compete effectively, such failure
could have a material adverse effect on our business, financial
condition and results of operations.
Another emerging form of competition is between brands of
sustainably produced products; customer demand for certain
brands could reduce competition among buyers for our
products or cause other adverse effects.
In North America, our forests are third party-certified to the
Sustainable Forestry Initiative (SFI®) standard. Some of our
customers have expressed a preference in certain of our
product lines for products made from raw materials sourced
from forests certified to different standards, including
standards of the Forest Stewardship Council (FSC). If and to the
extent that preference for a standard other than SFI® becomes
a customer requirement, there may be reduced demand and
lower prices for our products relative to competitors who can
supply products sourced from forests certified to competing
certification standards. If we seek to comply with such other
standards, we could incur materially increased costs for our
operations or be required to reduce harvest levels. FSC, in
particular, employs standards that are geographically variable
and could cause a material reduction in the harvest levels of
some of our timberlands, most notably in the Pacific Northwest.
MATERIAL DISRUPTION OF MANUFACTURING
A material disruption at one of our manufacturing facilities
could prevent us from meeting customer demand, reduce our
sales or negatively affect our results of operation and financial
condition.
Any of our manufacturing facilities, or any of our machines
within an otherwise operational facility, could cease operations
unexpectedly due to a number of events, including:
(cid:129)unscheduled maintenance outages,
(cid:129)prolonged power failures,
24
(cid:129)equipment failure,
(cid:129)a chemical spill or release,
(cid:129)explosion of a boiler,
(cid:129)fires, floods, windstorms, earthquakes, hurricanes or other
severe weather conditions or catastrophes,
(cid:129)the effect of drought or reduced rainfall on water supply,
(cid:129)labor difficulties,
(cid:129)disruptions in transportation infrastructure, including roads,
bridges, rail, tunnels, shipping and port facilities,
(cid:129)terrorism or threats of terrorism,
(cid:129)governmental regulations, and
(cid:129)other operational problems.
Any such downtime or facility damage could prevent us from
meeting customer demand for our products or require us to
make unplanned capital expenditures. If one of our facilities or
machines were to incur significant downtime, our ability to meet
our production targets and satisfy customer requirements could
be impaired, resulting in lower sales and income. Although
some risks are not insurable and some coverage is limited, we
purchase insurance protecting our manufacturing facilities from
fires, floods, windstorms, earthquakes, equipment failures and
boiler explosions.
STRATEGIC INITIATIVES
Our business and financial results may be adversely impacted
if we are unable to successfully execute on important
strategic initiatives.
There can be no assurance that we will be able to successfully
implement important strategic initiatives in accordance with our
expectations, which may result in an adverse impact on our
business and financial results. These strategic initiatives are
designed to improve our results of operations and drive long-
term shareholder value, and include, among others: maximizing
cash flow through operational excellence; reducing costs to
achieve industry-leading cost structure; and innovating in
higher-margin products.
CAPITAL REQUIREMENTS
Our operations require substantial capital.
Our businesses require substantial capital for expansion and
for repair or replacement of existing facilities or equipment.
Although we maintain our production equipment with regular
scheduled maintenance, key pieces of equipment may need to
be repaired or replaced periodically. The costs of repairing or
replacing such equipment and the associated downtime of the
affected production line could have a material adverse effect on
our financial condition, results of operations and cash flows.
While we believe our capital resources will be adequate to meet
our current projected operating needs, capital expenditures and
other cash requirements, if for any reason we are unable to
provide for our operating needs, capital expenditures and other
cash requirements on acceptable economic terms, we could
experience a material adverse effect on our business, financial
condition, results of operations and cash flows.
ENVIRONMENTAL LAWS AND REGULATIONS
We could incur substantial costs as a result of compliance
with, violations of, or liabilities under applicable
environmental laws and other laws and regulations.
We are subject to a wide range of general and industry-specific
laws and regulations relating to the protection of the
environment, including those governing:
(cid:129)air emissions,
(cid:129)wastewater discharges,
(cid:129)harvesting and other silvicultural activities,
(cid:129)forestry operations and endangered species habitat
protection,
(cid:129)surface water management,
(cid:129)the storage, management and disposal of hazardous
substances and wastes,
(cid:129)the cleanup of contaminated sites,
(cid:129)landfill operation and closure obligations,
(cid:129)building codes, and
(cid:129)health and safety matters.
We have incurred, and we expect to continue to incur,
significant capital, operating and other expenditures complying
with applicable environmental laws and regulations and as a
result of remedial obligations. We also could incur substantial
costs, such as civil or criminal fines, sanctions and
enforcement actions (including orders limiting our operations or
requiring corrective measures, installation of pollution control
equipment or other remedial actions), cleanup and closure
costs, and third-party claims for property damage and personal
injury as a result of violations of, or liabilities under,
environmental laws and regulations.
As the owner and operator of real estate, we may be liable
under environmental laws for cleanup, closure and other
damages resulting from the presence and release of hazardous
substances on or from our properties or operations. In addition,
surface water management regulations may present liabilities
and are subject to change. The amount and timing of
environmental expenditures is difficult to predict, and in some
cases, our liability may exceed forecasted amounts or the value
of the property itself. The discovery of additional contamination
or the imposition of additional cleanup obligations at our sites
or third-party sites may result in significant additional costs.
Any material liability we incur could adversely affect our
financial condition or preclude us from making capital
expenditures that otherwise would benefit our business.
We also anticipate public policy developments at the state,
federal and international level regarding climate change and
energy access, security and competitiveness. We expect these
developments to address emission of carbon dioxide,
renewable energy and fuel standards, and the monetization of
carbon. Compliance with regulations that implement new public
policy in these areas might require significant expenditures.
These developments may also include mandated changes to
energy use and building codes which could affect our
homebuilding practices. Enactment of new environmental laws
or regulations or changes in existing laws or regulations, or the
interpretation of these laws or regulations, might require
significant expenditures. We also anticipate public policy
developments at the state, federal and international level
regarding taxes and a number of other areas that could require
significant expenditures.
Changes in global or regional climate conditions and
governmental response to such changes at the international,
U.S. federal and state levels may affect our operations or our
planned or future growth activities.
There continue to be numerous international, U.S. federal and
state-level initiatives and proposals to address domestic and
global climate issues. Within the U.S., some of these proposals
would regulate and/or tax the production of carbon dioxide and
other “greenhouse gases” to facilitate the reduction of carbon
compound emissions into the atmosphere and provide tax and
other incentives to produce and use “cleaner” energy. Climate
change impacts, if they occur, and governmental initiatives,
laws and regulations to address potential climate concerns,
could increase our costs and have a long-term adverse impact
on our businesses and results of operations. Future legislation
or regulatory activity in this area remains uncertain, and its
impact on our operations is unclear at this time. However, it is
possible that legislation or government mandates, standards or
regulations intended to mitigate or reduce carbon compound or
greenhouse gas emissions or other climate change impacts
could adversely affect our operations. For example, such
activities could limit harvest levels or result in significantly
higher costs for energy and other raw materials. Because our
manufacturing operations depend upon significant amounts of
energy and raw materials, these initiatives could have an
adverse impact on our results of operations and profitability.
CURRENCY EXCHANGE RATES
We will be affected by changes in currency exchange rates.
We have manufacturing operations in Canada, Poland and
Uruguay. We are also a large exporter and compete with global
producers of products very similar to ours. Therefore, we are
affected by changes in the strength of the U.S. dollar,
particularly relative to the Canadian dollar, euro and yen, and
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
25
the strength of the euro relative to the yen. Changes in
exchange rates could materially and adversely affect our sales
volumes, margins and results of operations.
transportation providers are also subject to events outside of
their control, such as disruption of transportation infrastructure
due to labor issues or natural disasters.
AVAILABILITY OF RAW MATERIALS AND ENERGY
Our business and operations could be materially adversely
affected by changes in the cost or availability of raw materials
and energy.
We rely heavily on certain raw materials (principally wood fiber
and chemicals) and energy sources (principally natural gas,
electricity, coal and fuel oil) in our manufacturing processes.
Our ability to increase earnings has been, and will continue to
be, affected by changes in the costs and availability of such raw
materials and energy sources. We may not be able to fully
offset the effects of higher raw material or energy costs through
hedging arrangements, price increases, productivity
improvements or cost-reduction programs.
PEOPLE
Our business is dependent upon attracting, retaining and
developing key personnel.
We believe that our success depends, to a significant extent,
upon our ability to attract, retain and develop key senior
management and operations management personnel. Our
failure to recruit, retain, and develop key personnel could
adversely affect our financial condition or results of operations.
TRANSPORTATION
We depend on third parties for transportation services and
increases in costs and disruptions in the availability of
transportation could materially adversely affect our business
and operations.
Our business depends on the transportation of a large number
of products, both domestically and internationally. We rely
primarily on third parties for transportation of the products we
manufacture or distribute as well as delivery of our raw
materials. A significant portion of the goods we manufacture
and raw materials we use are transported by marine, rail and
truck, each of which is highly regulated. In addition, each has
historically been subject to periodic disruption due to labor
issues.
If any of our third-party transportation providers were to fail to
deliver the goods we manufacture or distribute in a timely
manner, we may be unable to sell those products at full value,
or at all. Similarly, if any of these providers were to fail to
deliver raw materials to us in a timely manner, we may be
unable to manufacture our products in response to customer
demand. In addition, if any of these third parties were to cease
operations or cease doing business with us, we may be unable
to replace them at reasonable cost. Our third-party
26
Any failure of a third-party transportation provider to deliver raw
materials or finished products in a timely manner could harm
our reputation, negatively affect our customer relationships and
have a material adverse effect on our financial condition and
results of operation.
In addition, an increase in transportation rates or fuel
surcharges could materially adversely affect our sales and
profitability.
REIT STATUS AND TAX IMPLICATIONS
If we fail to remain qualified as a REIT, our taxable income
would be subject to tax at corporate rates and we would not
be able to deduct dividends to shareholders.
In any taxable year in which we fail to qualify as a REIT, unless
we are entitled to relief under the Internal Revenue Code:
(cid:129)We would not be allowed to deduct dividends to shareholders
in computing our taxable income.
(cid:129)We would be subject to federal and state income tax on our
taxable income at applicable corporate rates.
(cid:129)We also would be disqualified from treatment as a REIT for
the four taxable years following the year during which we lost
qualification.
Qualification as a REIT involves the application of highly
technical and complex provisions of the Internal Revenue Code
to our operations and the determination of various factual
matters and circumstances not entirely within our control. There
are only limited judicial or administrative interpretations of
these provisions. Although we operate in a manner consistent
with the REIT qualification rules, we cannot assure you that we
are or will remain so qualified.
Certain of our business activities are subject to corporate-level
income tax and potentially subject to prohibited transactions
tax.
Under the Internal Revenue Code, REITs generally must engage
in the ownership and management of income producing real
estate. For the Company, this generally includes owning and
managing a timberland portfolio for the production and sale of
standing timber. Accordingly, the harvesting and sale of logs,
the development or sale of certain timberlands and other real
estate, the manufacture and sale of wood products and the
manufacture and sale of pulp products are conducted through
one or more of our wholly-owned taxable REIT subsidiaries
(TRSs) because such activities could generate non-qualifying
REIT income and could constitute “prohibited transactions.”
Prohibited transactions are defined by the Internal Revenue
Code generally to be sales or other dispositions of property to
customers in the ordinary course of a trade or business. By
conducting our business in this manner we believe that we
satisfy the REIT requirements of the Internal Revenue Code and
are not subject to the 100 percent tax that could be imposed if
a REIT were to conduct a prohibited transaction. The net
income of our TRSs is subject to corporate-level income tax.
The extent of our use of our TRS may affect the price of our
common shares relative to the share price of other REITs.
We conduct a significant portion of our business activities
through one or more TRSs. Our use of our TRSs enables us to
engage in non-REIT qualifying business activities such as the
sale of logs, production and sale of wood products and pulp
products, and sale of HBU property. Our TRSs are subject to
corporate-level tax. Therefore, we pay income taxes on the
income generated by our TRSs. Under the Code, no more than
25 percent of the value of the gross assets of a REIT may be
represented by securities of one or more TRS. This limitation
may affect our ability to increase the size of our TRSs’
operations. Furthermore, our use of TRSs may cause the
market to value our common shares differently than the shares
of other REITs, which may not use TRSs as extensively as we
use them.
We may be limited in our ability to fund distributions using cash
generated through our taxable REIT subsidiaries.
The ability of the REIT to receive dividends from our TRS is
limited by the rules with which we must comply to maintain our
status as a REIT. In particular, at least 75 percent of gross
income for each taxable year as a REIT must be derived from
passive real estate sources including sales of our standing
timber and other types of qualifying real estate income and no
more than 25 percent of our gross income may consist of
dividends from our TRS and other non-real estate income.
This limitation on our ability to receive dividends from our TRSs
may affect our ability to fund cash distributions to our
shareholders using cash flows from our TRSs. The net income
of our TRSs is not required to be distributed, and income that is
not distributed will not be subject to the REIT income
distribution requirement.
Our cash dividends are not guaranteed and may fluctuate.
Generally, REITs are required to distribute 90 percent of their
ordinary taxable income and 95 percent of their net capital
gains income. Capital gains may be retained by the REIT, but
would be subject to income taxes. If capital gains are retained
rather than distributed, our shareholders would be notified and
they would be deemed to have received a taxable distribution,
with a refundable credit for any federal income tax paid by the
REIT. Accordingly, we believe that we are not required to
distribute material amounts of cash since substantially all of
our taxable income is treated as capital gains income. Our
Board of Directors, in its sole discretion, determines the
amount of quarterly dividends to be provided to our
shareholders based on consideration of a number of factors.
These factors include, but are not limited to, our results of
operations, cash flow and capital requirements, economic
conditions, tax considerations, borrowing capacity and other
factors, including debt covenant restrictions that may impose
limitations on cash payments, future acquisitions and
divestitures, harvest levels, changes in the price and demand
for our products and general market demand for timberlands
including those timberland properties that have higher and
better uses. Consequently, our dividend levels may fluctuate.
We may not be able to complete desired like-kind exchange
transactions for timberlands and real estate we sell.
When we sell timberlands and real estate, we may seek to
match these sales with the acquisition of suitable replacement
timberlands. This allows us “like-kind exchange” treatment for
these transactions under section 1031 and related regulations
of the Code. This matching of sales and purchases may provide
us with tax benefits, most importantly the deferral of built-in
gains tax on the property sold. The inability to obtain like-kind
exchange treatment may result in the payment of taxes with
respect to the property sold, and a corresponding reduction in
earnings and cash available for distribution to shareholders as
dividends.
Changes in tax laws or their interpretation could adversely
affect our shareholders and our results of operations.
Federal and state tax laws are constantly under review by
persons involved in the legislative process, the Internal
Revenue Service, the United States Department of the
Treasury, and state taxing authorities. Changes to tax laws
could adversely affect our shareholders or increase our
effective tax rates. We cannot predict with certainty whether,
when, in what forms, or with what effective dates, the tax laws
applicable to us or our shareholders may be changed.
LEGAL PROCEEDINGS
We are a party to a number of legal proceedings, and adverse
judgments in certain legal proceedings could have a material
adverse effect on our financial condition.
The costs and other effects of pending litigation against us and
related insurance recoveries cannot be determined with
certainty. Although the disclosure in Note 15: Legal
Proceedings, Commitments and Contingencies of Notes to
Consolidated Financial Statements contains management’s
current views of the effect such litigation will have on our
financial results, there can be no assurance that the outcome
of such proceedings will be as expected.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
27
It is possible that there could be adverse judgments against us
in some or all major litigation against us and that we could be
required to take a charge and make cash payments for all or a
portion of any damage award. Any such charge or cash payment
could materially and adversely affect our results of operations
or cash flows for the quarter or year in which we record or pay
it.
IMPORT/EXPORT TAXES AND DUTIES
We may be required to pay significant taxes on our exported
products or countervailing and anti-dumping duties on our
imported products.
International trade disputes occur frequently and can be taken
to an International Trade Court for resolution of unfair trade
practices between countries. As an example, there have been
many disputes and subsequent trade agreements regarding
sales of softwood lumber between Canada and the United
States. The current Softwood Lumber Agreement (SLA) between
Canada and the U.S., originally signed in October 2006, is
scheduled to expire in October 2015. The SLA requires
Canadian softwood lumber facilities, including our mills, to pay
an export tax when the price of lumber is at or below a
threshold price. The export tax could be as high as
22.5 percent if a province exceeds its total allotted export
share. It is also possible that additional countervailing
antidumping duties could be imposed in the future. We may
experience reduced revenues and margins in any business that
is subject to such tariffs or to the terms of the settlements of
such international disputes. To the extent such tariffs increase
prices, they could also reduce the demand for our products.
These tariffs or settlement terms could have a material adverse
effect on our business, financial results and financial condition,
including facility closures or impairments of assets. We cannot
predict whether there will be an extension of the SLA or a new
agreement or, if an extension or new agreement is completed,
its impact on our business.
NATURAL DISASTERS ON TIMBERLANDS ASSETS
Our timberlands assets could be adversely affected by
weather, fire, infestation or natural disasters.
Our timberlands assets may be damaged by adverse weather,
severe wind and rainstorms, fires, pest infestation or other
natural disasters. Because our manufacturing processes
primarily use wood fiber, in many cases from our own
timberlands, in the event of material damage to our
timberlands, our operations could be disrupted or our
production costs could be increased. As is typical in the
forestry industry, we do not insure against losses of timber,
including losses due to these causes.
28
ACQUISITION OF LONGVIEW TIMBER LLC
We may fail to realize the full benefits anticipated as a result
of the acquisition of Longview Timber LLC (Longview Timber).
In 2013 we acquired Longview Timber. There are a number of
risks and uncertainties relating to the acquisition and the
ultimate success of the acquisition will depend, in part, on our
ability to realize the anticipated business opportunities and
growth prospects from combining our businesses with those of
Longview Timber. We may not fully realize our expected
business opportunities and growth prospects. We may need to
make unanticipated capital expenditures or investments in
order to maintain, improve or sustain the operations or assets
of Longview Timber. We may be required to take write-offs or
impairment charges or recognize amortization expenses
resulting from the acquisition and may be subject to
unanticipated or unknown liabilities relating to Longview Timber
and its business. If any of these factors occur, we may not fully
realize our expected business opportunities and growth
prospects.
TAX DISTRIBUTION OF WRECO
We could incur substantial U.S. federal tax liability if the
WRECO transaction were found not to qualify as a tax-free
“reorganization” or the distribution of WRECO shares to
Weyerhaeuser shareholders were found not to qualify as a tax-
free distribution.
In 2014 we closed the divestiture of our home building
business, Weyerhaeuser Real Estate Company (WRECO), via a
“Reverse Morris Trust” transaction pursuant to which a wholly-
owned subsidiary of TRI Pointe Homes, Inc. (TRI Pointe) merged
with and into WRECO, with WRECO surviving the merger and
becoming a wholly-owned subsidiary of TRI Pointe. The Reverse
Morris Trust transaction was structured to qualify as a tax-free
reorganization and the associated distribution of WRECO
shares to Weyerhaeuser shareholders as a tax-free distribution.
If the transaction were determined not to qualify as a tax-free
reorganization, or if the distribution does not qualify as a tax-
free distribution, then Weyerhaeuser or its subsidiaries or
Weyerhaeuser shareholders may be required to pay substantial
U.S. federal income taxes.
If the transaction were determined not to qualify as a tax-free
reorganization or the distribution not to qualify as a tax-free
distribution, or if Weyerhaeuser were required to indemnify TRI
Pointe and WRECO, such taxes and indemnification obligations
could be substantial and could materially and adversely affect
the company’s liquidity, financial condition and results of
operations.
CYBERSECURITY RISKS
We rely on information technology to support our operations
and reporting environments. A security failure of that
technology could impact our ability to operate our businesses
effectively, adversely affect our reported financial results,
impact our reputation and expose us to potential liability or
litigation.
We use information systems to carry out our operational
activities and maintain our business records. Some systems
are internally managed and some are maintained by third-party
service providers. We and our service providers employ what we
believe are adequate security measures. Our ability to conduct
business could be materially and adversely affected if these
systems or resources are compromised, damaged or fail. This
could be a result of a cyber incident, natural disaster, hardware
or software corruption, failure or error, telecommunications
system failure, service provider error or failure, intentional or
unintentional personnel actions or other disruption.
In the ordinary course of our business, we collect and store
sensitive data, including intellectual property, other proprietary
information and personally identifiable information. If this data
is compromised, destroyed or inappropriately disclosed, it could
have a material adverse effect, including damage to our
reputation, loss of customers, significant expenses to address
and resolve the issues, or litigation or other proceedings by
affected individuals, business partners and/or regulators.
RISKS RELATED TO OWNERSHIP OF OUR
COMMON STOCK
STOCK-PRICE VOLATILITY
The market price of our common stock may be influenced by
many factors, some of which are beyond our control, including
those described above under “Risks Related to our Industries
and Business” and the following:
(cid:129)actual or anticipated fluctuations in our operating results or
our competitors’ operating results,
(cid:129)announcements by us or our competitors of new products,
capacity changes, significant contracts, acquisitions or
strategic investments,
(cid:129)our growth rate and our competitors’ growth rates,
(cid:129)general economic conditions,
(cid:129)conditions in the financial markets,
(cid:129)changes in stock market analyst recommendations regarding
us, our competitors or the forest products industry generally,
or lack of analyst coverage of our common stock,
(cid:129)sales of our common stock by our executive officers,
directors and significant stockholders,
(cid:129)sales or repurchases of substantial amounts of common
stock,
(cid:129)changes in accounting principles, and
(cid:129)changes in tax laws and regulations.
In addition, there has been significant volatility in the market
price and trading volume of securities of companies operating
in the forest products industry that often has been unrelated to
the operating performance of particular companies.
Some companies that have had volatile market prices for their
securities have had securities litigation brought against them. If
litigation of this type is brought against us, it could result in
substantial costs and divert management’s attention and
resources.
PREFERENCE SHARES
Our common shares will rank junior to our mandatory
convertible preference shares with respect to dividends and
amounts payable in the event of our liquidation.
Our common shares will rank junior to our mandatory
convertible preference shares with respect to the payment of
dividends and amounts payable in the event of our liquidation,
dissolution or winding-up. This means that, unless full
cumulative dividends have been paid or set aside for payment
on all outstanding mandatory convertible preference shares for
all past dividend periods and the then current dividend period,
no dividends may be declared or paid on our common shares.
Likewise, in the event of our voluntary or involuntary liquidation,
dissolution or winding-up, no distribution of our assets may be
made to holders of our common shares until we have paid to
holders of the mandatory convertible preference shares a
liquidation preference equal to $50.00 per share plus accrued
and unpaid dividends.
Certain provisions in the mandatory convertible preference
shares could delay or prevent an otherwise beneficial
takeover or takeover attempt of us and, therefore, the ability
of holders to exercise their rights associated with a potential
fundamental change.
Certain provisions in our mandatory convertible preference
shares could make it more difficult or more expensive for a
third party to acquire us. For example, if a fundamental change
were to occur on or prior to July 1, 2016, holders of the
mandatory convertible preference shares may have the right to
convert their mandatory convertible preference shares, in whole
or in part, at an increased conversion rate and be entitled to
receive a fundamental change dividend make-whole amount
equal to the present value of all remaining dividend payments
on their mandatory convertible preference shares. These
features of the mandatory convertible preference shares could
increase the cost of acquiring us or otherwise discourage a
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
29
third party from acquiring us or removing incumbent
management.
UNRESOLVED STAFF COMMENTS
There are no unresolved comments that were received from the
SEC staff relating to our periodic or current reports under the
Securities Exchange Act of 1934.
PROPERTIES
Details about our facilities, production capacities and locations
are found in the Our Business — What We Do section of this
report.
(cid:129)For details about our Timberlands properties, go to Our
Business/What We Do/Timberlands/Where We Do It.
(cid:129)For details about our Wood Products properties, go to Our
Business/What We Do/Wood Products/Where We Do It.
(cid:129)For details about our Cellulose Fibers properties, go to Our
Business/What We Do/Cellulose Fibers/Where We Do It.
LEGAL PROCEEDINGS
See Note 15: Legal Proceedings, Commitments and
Contingencies in the Notes to Consolidated Financial
Statements for a summary of legal proceedings.
30
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
Our common stock trades on the following exchanges under the symbol WY:
(cid:129)New York Stock Exchange and
(cid:129)Chicago Stock Exchange
As of December 31, 2014, there were 8,248 holders of record of our common shares. Dividend-per-share data and the range of
closing market prices for our common stock for each of the four quarters in 2014 and 2013 are included in Note 22: Selected
Quarterly Financial Information (unaudited) in the Notes to Consolidated Financial Statements.
INFORMATION ABOUT SECURITIES AUTHORIZED FOR ISSUANCE UNDER OUR EQUITY COMPENSATION PLAN
Equity compensation plans approved by security holders(1)
Equity compensation plans not approved by security holders
Total
NUMBER OF
SECURITIES TO BE
ISSUED UPON
EXERCISE OF
OUTSTANDING
OPTIONS,
WARRANTS AND
RIGHTS
14,818,428
N/A
14,818,428
WEIGHTED
AVERAGE EXERCISE
PRICE OF
OUTSTANDING
OPTIONS,
WARRANTS AND
RIGHTS
$20.70
N/A
$20.70
NUMBER OF
SECURITIES
REMAINING AVAILABLE
FOR FUTURE ISSUANCE
UNDER EQUITY
COMPENSATION PLANS
(EXCLUDING
SECURITIES TO BE
ISSUED UPON EXERCISE)
19,466,670
N/A
19,466,670
(1) Includes 1,227,170 restricted stock units and 890,094 performance share units. Because there is no exercise price associated with restricted stock units and performance share units,
excluding these stock units the weighted average exercise price calculation would be $24.15.
INFORMATION ABOUT COMMON STOCK REPURCHASES DURING 2014
MAXIMUM
NUMBER (OR
APPROXIMATE
DOLLAR
VALUE) OF
SHARES (OR
UNITS) THAT
MAY YET BE
PURCHASED
UNDER THE
PLANS OR
PROGRAMS
TOTAL NUMBER OF
SHARES (OR
UNITS)
PURCHASED AS
PART OF PUBLICLY
ANNOUNCED
PLANS OF
PROGRAMS
TOTAL NUMBER OF
SHARES (OR
UNITS)
PURCHASED
AVERAGE
PRICE PAID
PER SHARE
(OR UNIT)
—
1,473,721
2,377,709
3,851,430
1,221,751
627,158
362,654
2,211,563
6,062,993
N/A
$34.13
$33.33
$33.63
$32.55
$34.02
$35.36
$33.43
$33.56
—
$700,000,000
1,473,721
$649,708,324
2,377,709
$570,463,481
3,851,430
$570,463,481
1,221,751
$530,693,879
627,158
$509,360,679
362,654
$496,538,566
2,211,563
$496,538,566
6,062,993
$496,538,566
Common Stock Repurchases During Third Quarter:
July
August
September
Total repurchases during third quarter
Common Stock Repurchases During Fourth Quarter:
October
November
December
Total repurchases during fourth quarter
Total common stock repurchases during 2014
(1) On August 13, 2014, our Board of Directors approved the 2014 stock repurchase program under which we are authorized to repurchase up to $700 million of outstanding shares. The
2014 stock repurchase program replaced the prior 2011 stock repurchase program. During 2014, we repurchased $203 million under the 2014 stock repurchase program. All common
stock purchases under the stock repurchase program were made in open-market transactions.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
31
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN
Weyerhaeuser Company, S&P 500 and S&P Global Timber & Forestry Index
$350
$300
$250
$200
$150
$100
$50
$0
2009
2010
2011
2012
2013
2014
WEYERHAEUSER
S&P 500
S&P GLOBAL TIMBER & FORESTRY INDEX
PERFORMANCE GRAPH ASSUMPTIONS
(cid:129)Assumes $100 invested on December 31, 2009 in Weyerhaeuser common stock, the S&P 500 Index and the S&P Global
Timber & Forestry Index.
(cid:129)Total return assumes dividends received are reinvested at month end.
(cid:129)Measurement dates are the last trading day of the calendar year shown.
32
SELECTED FINANCIAL DATA
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES
PER COMMON SHARE
Diluted earnings from continuing operations attributable to
Weyerhaeuser common shareholders
Diluted earnings from discontinued operations attributable to
Weyerhaeuser common shareholders(1)
Diluted net earnings attributable to Weyerhaeuser common shareholders
Dividends paid per common share
Weyerhaeuser shareholders’ interest (end of year)
FINANCIAL POSITION
Total assets
Total long-term debt
Weyerhaeuser shareholders’ interest
2014
$
1.40
1.78
3.18
1.02
10.11
$
$
$
2014
$ 13,457
$
$
4,891
5,304
2013
0.82
0.13
0.95
0.81
11.64
2013
14,577
4,891
6,795
2012
2011
0.58
0.13
0.71
0.62
7.50
2012
12,592
4,291
4,070
0.50
0.11
0.61
0.60
7.95
2011
12,634
4,478
4,263
2010
3.78
0.21
3.99
26.61
8.60
2010
13,464
5,060
4,612
Percent earned on average Weyerhaeuser shareholders’ interest
29.5%
9.9%
9.2%
7.5%
29.6%
OPERATING RESULTS
Net sales
Earnings from continuing operations
Discontinued operations, net of income taxes(1)
Net earnings
Net loss (earnings) attributable to noncontrolling interest
Net earnings attributable to Weyerhaeuser
Dividends on preference shares
$
$
2014
7,403
828
998
1,826
—
1,826
(44)
Net earnings attributable to Weyerhaeuser common shareholders
$
1,782
CASH FLOWS
Net cash from operations
Cash from investing activities
Cash from financing activities
Net change in cash and cash equivalents
STATISTICS (UNAUDITED)
Number of employees
Number of common shareholder accounts at year-end
Number of common shares outstanding at year-end (thousands)
Weighted average common shares outstanding – diluted (thousands)
2014
1,088
$
361
(704)
$
745
2014
12,800
8,248
524,474
560,899
2013
7,254
491
72
563
—
563
(23)
540
2013
1,004
(1,829)
762
(63)
2013
13,700
8,859
583,548
571,239
2012
5,989
312
72
384
1
385
—
385
2012
581
(192)
(444)
(55)
2011
5,378
270
61
331
—
331
—
331
2011
291
122
(927)
(514)
2012
13,200
9,227
542,393
542,310
2011
12,800
9,724
536,425
539,879
2010
5,032
1,214
69
1,283
(2)
1,281
—
1,281
2010
689
164
(1,255)
(402)
2010
14,250
10,050
535,976
321,096
(1) See Note 3: Discontinued Operations in the Notes to Consolidated Financial Statements.
To implement our decision to be taxed as a REIT, we distributed to our shareholders our accumulated earnings and profits, determined under federal income tax provisions, as a “Special
Dividend.” On September 1, 2010, we paid a dividend of $5.6 billion which included the Special Dividend and the regular quarterly dividend of approximately $11 million. At the election of each
shareholder, the Special Dividend was paid in cash or Weyerhaeuser common shares. The number of common shares issued was approximately 324 million. The stock portion of the Special
Dividend was treated as the issuance of new shares for accounting purposes and affects our earnings per share only for periods after the distribution. Prior periods are not restated. The required
treatment results in earnings per share that is less than would have been the case had the common shares not been issued.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
33
Cellulose Fibers is primarily affected by global supply and
demand factors and the relative strength of the U.S. dollar. The
severe winter weather in the first half of 2014 caused an
inventory decline which took most of the year to correct,
consequently prices for cellulose fibers were higher in 2014
than 2013. The U.S. dollar gained strength in 2014 as the euro
declined 12 percent relative to the U.S. dollar due to slowing
growth in Eurozone economies.
MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF
OPERATIONS (MD&A)
WHAT YOU WILL FIND IN THIS MD&A
Our MD&A includes the following major sections:
(cid:129)economic and market conditions affecting our operations;
(cid:129)financial performance summary;
(cid:129)results of our operations — consolidated and by segment;
(cid:129)liquidity and capital resources — where we discuss our
cash flows;
(cid:129)off-balance sheet arrangements;
(cid:129)environmental matters, legal proceedings and other
contingencies; and
(cid:129)accounting matters — where we discuss critical accounting
policies and areas requiring judgments and estimates.
ECONOMIC AND MARKET CONDITIONS
AFFECTING OUR OPERATIONS
The strength of the U.S. housing market strongly affects our
Wood Products and Timberlands segments. As published by the
U.S. Census Bureau, total U.S. housing starts for 2014 were
slightly above 1,000,000 units, with single-family units
accounting for 648,000 of the total. This represents a
5 percent increase in single-family starts from 2013, which was
618,000 units. Multi-family construction also increased in
2014 to 358,000 units compared with 305,000 in 2013. While
a significant improvement, current housing demand remains
well below 1,000,000 single-family starts, the lowest level
during the 15-year period of 1992-2007.
Wood Products primarily sells into the new residential building
and repair and remodel markets. Demand for wood products
has continued to modestly improve in 2014 resulting in prices
similar to those in 2013 for most lumber and plywood products.
The significant exception was oriented strand board (OSB)
where 2014 prices were 31 percent below 2013 as measured
by Random Lengths North Central Price.
Demand for logs from our Timberlands segment is affected by
the production of wood-based building products as well as
export demand in our Western holdings. In the South, Southern
pine log prices were slightly higher in 2014 due to the modest
improvement in the housing market while Western log prices,
helped by demand from China and Japan, increased more
substantially in 2014.
34
FINANCIAL PERFORMANCE SUMMARY
Net Sales by Segment
NET SALES BY SEGMENT IN MILLIONS OF DOLLARS
$5,000
$4,000
$3,000
$2,000
$1,000
$0
$4,009
$3,970
$3,058
$1,343
$1,497
$1,077
$1,854
$1,902
$1,936
TIMBERLANDS
WOOD PRODUCTS
CELLULOSE FIBERS
2012
2013
2014
Contribution to Pretax Earnings by Segment
CONTRIBUTION TO EARNINGS BY SEGMENT IN MILLIONS OF DOLLARS
$613
$470
$322
$750
$500
$250
$0
$441
$327
$120
$223
$200
$291
TIMBERLANDS
WOOD PRODUCTS
CELLULOSE FIBERS
2012
2013
2014
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
35
Net Earnings Attributable to Weyerhaeuser Common
Shareholders
Our net earnings attributable to Weyerhaeuser common
shareholders increased $1,242 million primarily due to:
(cid:129)a $926 million increase in earnings from discontinued
operations, primarily due to a $972 million net gain on the
Real Estate Divestiture recognized in 2014;
(cid:129)a $333 million decrease in charges for restructuring, closure
and asset impairments primarily related to a noncash
impairment charge relating to a large master-planned
community in north of Las Vegas, Nevada which was retained
by Weyerhaeuser in the divestiture of Weyerhaeuser Real
Estate Company (WRECO);
(cid:129)a $206 million increase in gross margin in our Timberlands
and Cellulose Fibers segments, primarily due to higher sales
realizations and owning Longview Timber for a full year;
(cid:129)a $166 million increase in other operating income, primarily
due to a $151 million pretax gain recognized in 2014 related
to a previously announced postretirement plan amendment;
and
(cid:129)a $79 million decrease in our selling, general and
administrative expenses.
These increases were partially offset by:
(cid:129)a $356 million change in income taxes from a benefit in
2013 to an expense in 2014 primarily related to a previously
unrecognized tax benefit recorded in 2013 and higher
earnings in our Taxable REIT Subsidiary (TRS) in 2014; and
(cid:129)a $140 million decrease in gross margin in our Wood
Products segment, primarily due to lower sales realizations in
OSB.
COMPARING 2013 WITH 2012
Net Sales
Net sales increased $1,265 million — 21 percent — primarily
due to:
(cid:129)Wood Products segment sales increased $951 million,
primarily due to higher sales realizations and higher sales
volumes across all major product lines.
(cid:129)Timberlands segment sales increased $266 million, primarily
due to higher export and domestic log prices, increased
sales volumes and the purchase of Longview Timber.
(cid:129)Cellulose Fibers segment sales increased $48 million
primarily due to increased sales volumes.
RESULTS OF OPERATIONS
In reviewing our results of operations, it is important to
understand these terms:
(cid:129)Sales realizations refer to net selling prices — this includes
selling price plus freight minus normal sales deductions.
(cid:129)Net contribution to earnings refers to earnings (loss)
attributable to Weyerhaeuser shareholders before interest
expense and income taxes.
CONSOLIDATED RESULTS
HOW WE DID IN 2014
Summary of Financial Results
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES
2014
2013
2012
AMOUNT OF CHANGE
2014
vs.
2013
2013
vs.
2012
Net sales
$7,403
$7,254
$5,989
$ 149
$1,265
Operating income
$1,320
$ 634
$ 618
$ 686
$
16
$ 998
$
72
$
72
$ 926
$ —
$1,782
$ 540
$ 385
$1,242
$ 155
$ 3.20
$ 0.95
$ 0.71
$ 2.25
$ 0.24
$ 3.18
$ 0.95
$ 0.71
$ 2.23
$ 0.24
Earnings from
discontinued
operations, net of
tax
Net earnings
attributable to
Weyerhaeuser
common
shareholders
Basic earnings per
share attributable to
Weyerhaeuser
common
shareholders
Diluted earnings per
share attributable to
Weyerhaeuser
common
shareholders
COMPARING 2014 WITH 2013
Net Sales
Net sales increased $149 million — 2 percent — primarily due
to:
(cid:129)Timberlands segment sales increased $154 million, primarily
due to higher log prices and increased sales volumes in the
West, including our acquired Longview Timber holdings.
(cid:129)Cellulose Fibers segment sales increased $34 million,
primarily due to higher sales realizations for pulp.
These increases were partially offset by a $39 million decrease
in our Wood Products segment sales, primarily due to lower
sales realizations for OSB. This decrease in sales was partially
offset by higher sales realizations and volumes for engineered
wood products and lumber and increased sales from
complementary building products.
36
Net Earnings Attributable to Weyerhaeuser Common
Shareholders
Our net earnings attributable to Weyerhaeuser common
shareholders increased $155 million — 40 percent — primarily
due to:
(cid:129)a $509 million increase in gross margin in our Wood
Products and Timberlands segments, primarily due to higher
sales realizations and sales volumes; and
(cid:129)a $181 million change in income taxes from an expense in
2012 to a benefit in 2013 primarily related to a previously
unrecognized tax benefit recorded in 2013.
These increases were partially offset by:
(cid:129)a $351 million increase in charges for restructuring, closure
and asset impairments primarily related to a noncash
impairment charge relating to a large master-planned
community in north of Las Vegas, Nevada which was retained
by Weyerhaeuser in the divestiture of WRECO;
(cid:129)a $143 million decrease in other operating income, primarily
due to a $103 million pretax gain recognized in 2012 related
to a previously announced postretirement plan amendment;
and
(cid:129)a $31 million increase in our selling, general and
administrative expenses in 2013.
TIMBERLANDS
HOW WE DID IN 2014
We report sales volume and annual production data for our
Timberlands segment in Our Business/What We Do/
Timberlands.
Here is a comparison of net sales to unaffiliated customers,
intersegment sales, and net contribution to earnings for the
last three years:
Net Sales and Net Contribution to Earnings for Timberlands
DOLLAR AMOUNTS IN MILLIONS
Net sales to unaffiliated
customers:
Logs:
West
South
Canada
Total
Chip sales
Timberlands exchanges(1)
Higher and better-use land
sales(1)
Minerals, oil and gas
Products from international
operations(2)
Other products
Subtotal sales to unaffiliated
customers
Intersegment sales:
United States
Other
Subtotal intersegment sales
2014
2013
2012
AMOUNT OF CHANGE
2014
vs.
2013
2013
vs.
2012
$ 972 $ 828 $ 559
$144
$269
257
256
233
22
19
19
1,251
1,103
811
12
52
19
32
96
35
9
65
19
32
90
25
18
59
22
31
106
30
1,497
1,343
1,077
576
291
867
518
281
799
447
236
683
1
3
148
3
(13)
—
—
6
10
154
58
10
68
$222
$143
23
—
292
(9)
6
(3)
1
(16)
(5)
266
71
45
116
$382
$148
Total
$2,364 $2,142 $1,760
Net contribution to earnings
$ 613 $ 470 $ 322
(1) Significant disposition 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, primarily in South America.
On July 23, 2013, we purchased 100 percent of the equity
interests in Longview Timber LLC (Longview Timber) for cash
and assumed debt. The sales and net contribution to earnings
of our acquired entity from the acquisition date forward are
included in the West results of our Timberlands segment.
Longview Timber was and continues to be a supplier to our
Wood Products segment and those sales are shown in
intersegment sales. More information on this transaction can
be found in Note 4: Longview Timber Purchase in the Notes to
Consolidated Financial Statements.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
37
These increases were partially offset by:
(cid:129)a $16 million decrease in sales from our International
operations primarily due to a shift toward internal sales of
manufactured products; and
(cid:129)a $9 million decrease in chip sales.
Intersegment Sales
Intersegment sales increased $116 million — 17 percent —
primarily due to:
(cid:129)a $71 million increase in the United States, primarily due to
higher log prices and increased sales volume including the
increase related to acquired Longview Timber holdings; and
(cid:129)a $45 million increase due to higher log prices in Canada.
Net contribution to earnings
Net contribution to earnings increased $148 million —
46 percent — primarily due to:
(cid:129)a $104 million increase due to higher sales volumes and
demand for export and domestic logs in our legacy Western
timberlands. Harvest levels increased 5 percent in our legacy
Western timberlands;
(cid:129)a $49 million increase due to higher log prices in our legacy
Western timberlands and the South; and
(cid:129)a $36 million increase due to the purchase of Longview
Timber.
These increases were partially offset by:
(cid:129)a $30 million increase in operating costs in our legacy
Western timberlands primarily due to a higher mix of higher
cost logs from internal and outside purchases and increased
silviculture costs; and
(cid:129)$14 million increase in selling, general and administrative
costs, excluding Longview Timber.
COMPARING 2014 WITH 2013
Net Sales — Unaffiliated Customers
Net sales to unaffiliated customers increased $154 million —
11 percent — primarily due to a $144 million increase in
Western log sales due to higher log prices from our legacy
Western timberlands and a 17 percent increase in sales
volumes including the increase related to the acquired Longview
Timber holdings.
Intersegment Sales
Intersegment sales increased $68 million — 9 percent —
primarily due to:
(cid:129)a $58 million increase in the United States primarily 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
(cid:129)a $10 million increase due to increased log and chip sales
volumes in Canada.
Net contribution to earnings
Net contribution to earnings increased $143 million —
30 percent — primarily due to:
(cid:129)an $87 million increase as a result of owning Longview
Timber for a full year;
(cid:129)a $59 million increase due to higher log prices in our legacy
Western timberlands and the South;
(cid:129)a $20 million increase due to higher sales volumes in our
legacy Western timberlands; and
(cid:129)a $12 million decrease in selling, general and administrative
expenses, excluding Longview Timber.
These increases were partially offset by a $40 million increase
in operating costs in our legacy Western timberlands due to
increased log purchases.
COMPARING 2013 WITH 2012
Net Sales — Unaffiliated Customers
Net sales to unaffiliated customers increased $266 million —
25 percent — primarily due to:
(cid:129)Western log sales increased $269 million due to higher
export and domestic log prices and a 31 percent increase in
sales volume as a result of increased export and domestic
demand and the increase related to acquired Longview
Timber holdings; and
(cid:129)Southern log sales increased $23 million due to higher log
prices and a 6 percent increase in sales volume as the result
of increased thinning activity.
38
WOOD PRODUCTS
HOW WE DID IN 2014
We report sales volume and annual production data for our
Wood Products segment in Our Business/What We Do/Wood
Products.
Net Sales and Net Contribution to Earnings for Wood Products
Net Contribution to Earnings
Net contribution to earnings decreased $114 million —
26 percent — primarily due to:
(cid:129)a $204 million decrease in sales realizations in OSB and
(cid:129)a $47 million increase in log costs.
These decreases were partially offset by:
DOLLAR AMOUNTS IN MILLIONS
2014
2013
2012
AMOUNT OF CHANGE
2014
vs.
2013
2013
vs.
2012
(cid:129)a $40 million decrease in lumber manufacturing costs
primarily due to aggressive cost control;
(cid:129)a $35 million increase in sales realizations in engineered
wood products and lumber;
Net sales:
Structural
lumber
Engineered solid
section
Engineered
I-joists
Oriented strand
board
Softwood
plywood
Other products
produced
Complementary
building products
Net sales from
continuing
operations
Net contribution to
earnings
$1,901
$1,873
$1,400
$ 28
$473
402
353
279
277
247
190
49
30
74
57
610
809
612
(199)
197
143
144
115
(1)
176
171
167
461
412
295
5
49
29
4
117
$3,970
$4,009
$3,058
$ (39)
$951
$ 327
$ 441
$ 120
$(114)
$321
COMPARING 2014 WITH 2013
Net Sales
Net sales decreased $39 million — 1 percent — primarily due
to a 25 percent decrease in OSB average sales realizations.
This decrease was partially offset by:
(cid:129)an increase of 10 percent in shipment volumes and a
4 percent increase in average sales realizations in
engineered solid section,
(cid:129)an increase of 12 percent of complementary building
products,
(cid:129)an increase of 8 percent in average sales realizations and a
4 percent increase in shipment volumes in engineered I-joists
and
(cid:129)an increase of 1 percent in average sales realizations and a
1 percent increase in shipment volumes in structural lumber.
(cid:129)a $31 million increase in margins in our distribution
business;
(cid:129)a $15 million decrease in selling, general and administrative
expenses;
(cid:129)a $10 million increase in shipment volumes primarily in
engineered wood products and our distribution business; and
(cid:129)a $9 million impairment in 2013 related to the decision to
permanently close an engineered wood products facility.
COMPARING 2013 WITH 2012
Net Sales
Net sales and revenues increased $951 million —
31 percent — primarily due to:
(cid:129)Structural lumber shipment volumes increased 10 percent
and average sales realizations increased 22 percent.
(cid:129)OSB shipment volumes increased 11 percent and average
sales realizations increased 20 percent.
(cid:129)Engineered solid section shipment volumes increased
18 percent and average sales realizations increased
7 percent.
(cid:129)Engineered I-joist shipment volumes increased 16 percent
and average sales realizations increased 11 percent.
(cid:129)Softwood plywood shipment volumes increased 18 percent
and average sales realizations increased 6 percent.
(cid:129)Complementary building products increased 40 percent.
Net Contribution to Earnings
Net contribution to earnings increased $321 million primarily
due to:
(cid:129)a $454 million increase, primarily due to higher sales
realizations across all major product lines;
(cid:129)a $58 million increase in sales volumes across all major
products; and
(cid:129)a $14 million increase in other products improvements.
These increases were partially offset by:
(cid:129)an $88 million increase in log cost due to continued strong
lumber demand and increasing log prices;
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
39
(cid:129)a $51 million increase in freight expense due to higher
shipment volumes;
(cid:129)a $38 million increase in manufacturing costs due to higher
raw material, maintenance and labor costs; and
(cid:129)a $27 million increase in selling, general and administrative
costs.
These increases were partially offset by:
(cid:129)a $13 million increase in energy cost primarily due to
reduced electricity sales and higher fuel prices and
(cid:129)a $13 million increase in maintenance costs due to a
scheduled machine rebuild in our liquid packaging board
facility and pulp planned maintenance outages.
CELLULOSE FIBERS
HOW WE DID IN 2014
We report sales volume and annual production data for our
Cellulose Fibers segment in Our Business/What We Do/
Cellulose Fibers.
Here is a comparison of net sales and net contribution to
earnings for the last three years:
Net Sales and Net Contribution to Earnings for Cellulose
Fibers
DOLLAR AMOUNTS IN MILLIONS
COMPARING 2013 WITH 2012
Net Sales
Net sales increased $48 million — 3 percent — primarily due
to:
(cid:129)Increased sales volumes of 6 percent for pulp, resulting from
increased demand, which was partially offset by decreased
pulp sales realizations of $9 per ton — 1 percent.
(cid:129)Liquid packaging board sales realizations decreased $82 per
ton — 7 percent — resulting primarily from mix of products.
AMOUNT OF CHANGE
Net Contribution to Earnings
2014
2013
2012
2014
vs.
2013
2013
vs.
2012
Net contribution to earnings decreased $23 million —
10 percent — primarily due to:
(cid:129)a $25 million decrease in liquid packaging sales realizations
and
(cid:129)a $17 million decrease in pulp sales realizations.
These decreases were partially offset by a $16 million
decrease in chemical and energy costs.
UNALLOCATED ITEMS
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 financing, and the elimination of
intersegment profit in inventory and the LIFO reserve.
Liquid
packaging
board
Other
products
Net sales:
Pulp
$1,559
$1,501
$1,433
310
326
332
$ 58
(16)
$ 68
(6)
67
75
89
(8)
(14)
Total
$1,936
$1,902
$1,854
Net contribution
to earnings
$ 291
$ 200
$ 223
$ 34
$ 91
$ 48
$(23)
COMPARING 2014 WITH 2013
Net Sales
Net sales increased $34 million — 2 percent — primarily due
to increased sales realizations for pulp of $50 per ton —
6 percent and liquid packing board of $61 per ton — 6 percent.
This was partially offset by decreased sales volumes for pulp of
2 percent and liquid packaging board of 10 percent.
Net Contribution to Earnings
Net contribution to earnings increased $91 million —
46 percent — primarily due to:
(cid:129)a $108 million increase in pulp and liquid packaging board
sales realizations and
(cid:129)a $14 million decrease in Canadian operating costs due to
the strengthening U.S. dollar.
40
Net Contribution to Earnings for Unallocated Items
DOLLAR AMOUNTS IN MILLIONS
of Operations. See Note 8: Equity Affiliates in the Notes to
Consolidated Financial Statements for more information.
2014
2013
2012
AMOUNT OF CHANGE
2014
vs.
2013
2013
vs.
2012
$ (24)
$ (38)
$(44)
$ 14
$
(9)
(8)
(16)
(1)
6
8
Other Unallocated Items in 2012 included a gain of $103
million related to a postretirement plan amendment which is
recorded in “Unallocated pension and postretirement credits
(costs)” above. See Note 9: Pension and Other Postretirement
Benefit Plans in the Notes to Consolidated Financial
Statements for more information.
196
(40)
(29)
236
(11)
INTEREST EXPENSE
Unallocated corporate
function expenses
Unallocated share-
based compensation
Unallocated pension
and postretirement
credits (costs)
Foreign exchange
gains (losses)
Elimination of
intersegment profit in
inventory and LIFO
Operating income
(loss)
Interest income and
other
Net contribution to
earnings
(27)
(7)
7
(20)
(14)
(10)
15
(16)
(25)
31
Other
(38)
(392)
60
(470)
(38)
354
558
(452)
(432)
88
38
48
39
(10)
9
$126
$(422)
$ 1
$548
$(423)
Unallocated Items in 2014 include:
(cid:129)$151 million pretax gain related to a previously announced
postretirement plan amendment which is recorded in
“Unallocated pension and postretirement credits (costs)”
above. See Note 9: Pension and Other Postretirement Benefit
Plans in the Notes to Consolidated Financial Statements for
more information.
(cid:129)$39 million in charges related to our selling, general and
administrative cost reduction initiative which is recorded in
“Other” above.
(cid:129)$22 million pretax gain on the sale of a landfill in Washington
State, which is recorded in “Other” above and “Other
operating income, net” in our Consolidated Statement of
Operations. See Note 19: Other Operating Income, Net in the
Notes to Consolidated Financial Statements for more
information.
Unallocated Items in 2013 include:
(cid:129)$356 million impairment of Coyote Springs, which is
recorded in “Other” above and “Charges for restructuring,
closures and impairments” in our Consolidated Statement of
Operations. See Note 18: Charges for Restructuring,
Closures and Asset Impairments in the Notes to
Consolidated Financial Statements for more information.
(cid:129)$10 million pretax gain on the sale of part of our investment
in Liaison Technologies Inc., which is recorded in “Interest
income and other” above and in our Consolidated Statement
Our net interest expense incurred for the last three years was:
(cid:129)$344 million in 2014,
(cid:129)$369 million in 2013 and
(cid:129)$344 million in 2012.
Increases (reductions) in our amount of outstanding debt were:
(cid:129)$0 million in 2014,
(cid:129)$600 million in 2013 and
(cid:129)$(187) million in 2012.
In connection with repayments, included in our net interest
expense, we recognized $25 million in pretax losses on early
extinguishment of debt in 2013.
Interest expense in 2013 includes $11 million in fees related
to a bridge loan we did not draw from in the acquisition of
Longview Timber that was expensed. Excluding this item and
loss on early extinguishment of debt, interest expense is higher
due to debt issued in 2013.
INCOME TAXES
Our provision (benefit) for income taxes for our continuing
operations over the last three years was:
(cid:129)$185 million in 2014,
(cid:129)$(171) million in 2013 and
(cid:129)$10 million in 2012.
During 2013, we recorded the following tax benefits or charges:
(cid:129)a $193 million tax benefit related to unrecognized tax
benefits and
(cid:129)a $21 million tax charge related to the repatriation of
Canadian earnings.
During 2012, we recorded the following tax benefits or charges:
(cid:129)a $36 million tax charge related to a previously announced
postretirement plan amendment and
(cid:129)a $12 million tax benefit related to income tax settlements.
As a REIT, we generally are not subject to corporate level tax on
income of the REIT that is distributed to shareholders. We will,
however, be subject to corporate taxes on built-in-gains (the
excess of fair market value over tax basis at January 1, 2010)
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
41
on sales of real property (other than standing timber) held by
the REIT during the first 10 years following the REIT conversion.
We also will continue to be required to pay federal corporate
income taxes on earnings of our TRS, which includes our
manufacturing businesses and the portion of our timberlands
segment income included in the TRS.
The table below summarizes the historical tax characteristics of
distributions to shareholders for the years ended December 31:
AMOUNTS PER SHARE
Preference – capital gain distribution
$3.19
$1.66
$ —
Common – capital gain distribution
$1.02
$0.81
$0.62
2014
2013
2012
COMPARING 2013 WITH 2012
Net cash provided by operations increased $423 million in
2013 as compared with 2012, primarily due to a
$1,228 million increase in cash received from customers. This
inflow was partially offset by:
(cid:129)cash paid to employees and suppliers increased
$715 million as sales and production increased in our Wood
Products and Timberlands segments. Receivables, primarily
in our Wood Products segment, increased significantly in
2013 compared to 2012 as sales increased; and
(cid:129)net cash outflows related to discontinued operations
increased $75 million.
LIQUIDITY AND CAPITAL RESOURCES
During 2014, we:
Pension Contributions and Benefit Payments Made and
Expected
We are committed to maintaining a sound, conservative capital
structure that enables us to:
(cid:129)protect the interests of our shareholders and lenders and
(cid:129)have access at all times to major financial markets.
CASH FROM OPERATIONS
Cash from operations includes:
(cid:129)cash received from customers;
(cid:129)cash paid to employees and suppliers;
(cid:129)cash paid for interest on our debt; and
(cid:129)cash paid or received for taxes.
Consolidated net cash provided by our operations was:
(cid:129)$1,088 million in 2014,
(cid:129)$1,004 million in 2013 and
(cid:129)$581 million in 2012.
COMPARING 2014 WITH 2013
(cid:129)contributed $43 million for our Canadian registered plan in
accordance with minimum funding rules and respective
provincial regulations;
(cid:129)contributed to or made benefit payments for our Canadian
nonregistered pension plans of $3 million;
(cid:129)made benefit payments of $24 million for our U.S.
nonqualified pension plans; and
(cid:129)made benefit payments of $31 million for our U.S. and
Canadian other postretirement plans.
There was no minimum required contribution for our U.S.
qualified plan for 2014, nor were any contributions made to this
plan in 2014.
During 2015, based on estimated year-end assets and
projections of plan liabilities, we expect to:
(cid:129)be required to contribute approximately $38 million for our
Canadian registered plan;
(cid:129)be required to contribute or make benefit payments for our
Canadian nonregistered plans of $3 million;
Net cash provided by operations increased $84 million in 2014
as compared with 2013, primarily due to:
(cid:129)make benefit payments of $19 million for our U.S.
nonqualified pension plans; and
(cid:129)Cash received from customers increased $180 million as
sales increased in our Timberlands and Cellulose Fibers
segments.
(cid:129)Net cash inflows related to income taxes increased $70
million. We received income tax refunds of $52 million in
2014 and paid $18 million in 2013.
(cid:129)Cash paid for interest decreased $43 million, primarily due to
interest received related to tax refunds in 2014 and
refinancing of debt in 2013.
These inflows were partially offset by a $189 million increase in
cash paid to employees and suppliers primarily due to
increased production and the acquisition of Longview Timber.
(cid:129)make benefit payments of $26 million for our U.S. and
Canadian other postretirement plans.
We do not anticipate a contribution being required to our U.S.
qualified pension plan for 2015.
INVESTING IN OUR BUSINESS
Cash from investing activities includes:
(cid:129)acquisitions of property, equipment, timberlands and
reforestation;
(cid:129)investments in or distribution from equity affiliates;
(cid:129)proceeds from sale of assets and operations; and
(cid:129)purchases and redemptions of short-term investments.
42
Consolidated net cash provided by (used in) investing activities
was:
Three-Year Summary of Capital Spending by Business
Segment
(cid:129)$361 million in 2014,
(cid:129)$(1,829) million in 2013 and
(cid:129)$(192) million in 2012.
COMPARING 2014 WITH 2013
Net cash from investing activities changed $2,190 million to an
inflow in 2014 as compared with an outflow in 2013, primarily
due to:
(cid:129)the acquisition of Longview Timber in 2013;
(cid:129)net proceeds from the Real Estate Divestiture, net of cash
divested in 2014; and
(cid:129)higher capital spending in 2014.
COMPARING 2013 WITH 2012
Net cash used in investing activities increased $1,637 million
in 2014 as compared with 2013, primarily due to the
acquisition of Longview Timber in 2013.
LONGVIEW TIMBER PURCHASE
On July 23, 2013, we purchased 100 percent of the equity
interests in Longview Timber LLC (Longview Timber) for
$1.58 billion cash and assumed debt of $1.07 billion, for an
aggregate purchase price of $2.65 billion. More information can
be found in Note 4: Longview Timber Purchase in the Notes to
Consolidated Financial Statements and the “Cash from
financing activities” section below.
REAL ESTATE DIVESTITURE
At the close of the Real Estate Divestiture in July 2014, WRECO
used $744 million of the debt proceeds to repay intercompany
debt and interest to Weyerhaeuser Company. The newly issued
debt, remaining proceeds and other WRECO assets and
liabilities, including $5 million cash on hand, were acquired by
TRI Pointe Homes, Inc. (TRI Pointe) when WRECO became a
wholly-owned subsidiary of TRI Pointe at the closing of the
transaction. Additionally, $32 million related to the adjustment
amount payable pursuant to the terms of the transaction
agreement was paid to TRI Pointe. Our net cash proceeds in
connection with the Real Estate Divestiture totaled $707
million. More information can be found in Note 3: Discontinued
Operations and the “Cash from Financing Activities” section
below.
DOLLAR AMOUNTS IN MILLIONS
Timberlands
Wood Products
Cellulose Fibers
Unallocated Items
Discontinued operations
Total
2014
2013
2012
$ 74
$ 73
$ 60
190
123
4
4
113
92
5
10
56
160
5
4
$395
$293
$285
We anticipate that our net capital expenditures for 2015 —
excluding acquisitions — will be approximately $480 million to
$500 million. However, that amount could change due to:
(cid:129)future economic conditions,
(cid:129)environmental regulations,
(cid:129)weather and
(cid:129)timing of equipment purchases.
NOTE RECEIVABLE
In 2014, we received $25 million in full payment of a note
receivable and interest of $7 million made in connection with
the divestiture of our hardwoods operations in 2011, which is
recorded in “Other” in the “Cash flows from investing activities”
in our Consolidated Statement of Cash Flows.
VARIABLE INTEREST ENTITIES
In 2013, we repaid a $162 million note and received
$184 million related to one of our timber monetization special-
purpose entities (SPEs) undertaken in 2003. Net proceeds
were $22 million. More information about these entities, which
were formed in connection with the sale of nonstrategic
timberlands in 2003, can be found in Note 10: Variable Interest
Entities in the Notes to Consolidated Financial Statements and
our annual report on Form 10-K for 2003.
EQUITY AFFILIATES
In 2013, we sold part of our investment in Liaison Technologies
Inc. and received $10 million in cash, which is recorded in
“Other” in the “Cash flows from investing activities” in our
Consolidated Statement of Cash Flows. See Note 8: Equity
Affiliates in the Notes to Consolidated Financial Statements for
more information.
PROCEEDS FROM THE SALE OF NONSTRATEGIC ASSETS
Proceeds received from the sale of various nonstrategic assets
over the last three years were:
(cid:129)$28 million in 2014,
(cid:129)$20 million in 2013 and
(cid:129)$80 million in 2012.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
43
FINANCING
Cash from financing activities includes:
(cid:129)issuances and payments of long-term debt,
(cid:129)borrowings and payments under revolving lines of credit,
(cid:129)changes in book overdrafts,
(cid:129)proceeds from stock offerings and option exercises and
(cid:129)payments of cash dividends and repurchasing stock.
Consolidated net cash provided by (used in) financing activities
was:
(cid:129)$(704) million in 2014,
(cid:129)$762 million in 2013 and
(cid:129)$(444) million in 2012.
COMPARING 2014 WITH 2013
Net cash provided by financing activities changed
$1,466 million to an outflow in 2014 as compared with an
inflow in 2013, primarily due to the issuance of common and
preference shares and debt in 2013. This was partially offset
by a decrease in payments on debt and share repurchases in
2014. We had no payments on debt in 2014 and $1,567
million in 2013. We repurchased $203 million of shares in
2014 and none in 2013.
COMPARING 2013 WITH 2012
Net cash provided by financing activities changed
$1,206 million to an inflow in 2013 as compared with an
outflow in 2012, primarily due to the issuance of common and
preference shares and debt in 2013. This was partially offset
by an increase in payments on debt.
LONGVIEW TIMBER PURCHASE
In order to finance our purchase of Longview Timber, see
Note 4: Longview Timber Purchase in the Notes to Consolidated
Financial Statements for more information, we issued the
following:
(cid:129)29 million common shares on June 24, 2013, at the price of
$27.75 per share for net proceeds of $781 million;
(cid:129)4.4 million common shares on July 8, 2013, at the price of
$27.75 per share for net proceeds of $116 million, in
connection with the exercise of an overallotment option; and
(cid:129)13.8 million of our 6.375 percent Mandatory Convertible
Preference Shares, Series A, par value $1.00 and liquidation
preference of $50.00 per share on June 24, 2013, for net
proceeds of $669 million.
We paid $11 million in fees related to a bridge loan in 2013,
which is recorded in “Other” in the “Cash flows from financing
activities” in our Consolidated Statement of Cash Flows. As of
the close of the Longview Timber purchase, we did not draw
from the loan and these fees were expensed in 2013.
44
In order to repay the debt that we assumed in the acquisition of
Longview Timber, in 2013 we issued $500 million of
4.625 percent notes due September 15, 2023. The net
proceeds after deducting the discount, underwriting fees and
issuance costs were $494 million. We also entered into a
$550 million 7-year senior unsecured term loan credit facility
maturing in September 2020 and borrowed $550 million.
Borrowings are at LIBOR plus a spread or at other interest rates
mutually agreed upon between the borrower and the lending
banks.
On October 15, 2013, we repaid the $1,118 million carrying
value of the debt that we assumed in the acquisition of
Longview Timber and related fees, expenses and premiums
using the proceeds from the notes issued and the borrowings
from our term loan credit facility borrowed in 2013. A pretax
charge of $25 million was included in our net interest expense
in 2013, for early retirement premiums, unamortized debt
issuance costs and other miscellaneous charges in connection
with the early extinguishment of debt. See Note 4: Longview
Timber Purchase in the Notes to Consolidated Financial
Statements for more information.
DEBT
Our consolidated long-term debt was:
(cid:129)$4.9 billion as of December 31, 2014;
(cid:129)$4.9 billion as of December 31, 2013; and
(cid:129)$4.3 billion as of December 31, 2012.
Long-term debt proceeds were $1,050 million in 2013.
During 2014, our wholly-owned subsidiary, WRECO, issued $450
million of unsecured and unsubordinated senior debt obligations
bearing an interest rate of 4.375 percent due June 15, 2019
and $450 million of unsecured and unsubordinated senior debt
obligations bearing an interest rate of 5.875 percent due
June 15, 2024. The net proceeds were deposited into an
escrow account. Upon closure of the transaction, the newly
issued debt and remaining proceeds were acquired by TRI
Pointe, along with other WRECO assets and liabilities.
There were no long-term debt proceeds in 2012.
Long-term debt we retired according to its scheduled maturity
was:
(cid:129)$409 million in 2013 and
(cid:129)$187 million in 2012.
There were no long-term debt retirements in 2014.
We retired $1,158 million of long-term debt in 2013 prior to its
scheduled maturity. The loss recognized on early
extinguishment of debt and included in our net interest expense
was $25 million.
There are no debt maturities in the next twelve months.
CREDIT RATINGS
See Note 3: Discontinued Operations and Note 13: Long-Term
Debt in the Notes to Consolidated Financial Statements for
more information.
On January 21, 2015, Standard & Poor’s upgraded our long-
term issuer credit ratings from BBB- to BBB and short-term
issuer credit ratings from A-3 to A-2.
REVOLVING CREDIT FACILITIES
During September 2013, Weyerhaeuser Company and WRECO
entered into a new $1 billion 5-year senior unsecured revolving
credit facility that expires in September 2018. This replaced a
$1 billion revolving credit facility that was set to expire June
2015. As of June 16, 2014, WRECO terminated its
participation as a borrower in the facility.
There were no net proceeds from the issuance of debt or from
borrowings (repayments) under our available credit facility in
2014, 2013 or 2012.
Debt covenants:
As of December 31, 2014, Weyerhaeuser Company:
(cid:129)had no borrowings outstanding under our credit facility and
(cid:129)were in compliance with the credit facility covenants.
Weyerhaeuser Company Covenants:
Key covenants related to Weyerhaeuser Company include the
requirement to maintain:
(cid:129)a minimum defined net worth of $3.0 billion;
(cid:129)a defined debt-to-total-capital ratio of 65 percent or less; and
(cid:129)ownership of, or long-term leases on, no less than four
million acres of timberlands.
Weyerhaeuser Company’s defined net worth is comprised of:
(cid:129)total Weyerhaeuser shareholders’ interest,
(cid:129)excluding accumulated comprehensive income (loss) related
to pension and postretirement benefits,
(cid:129)minus Weyerhaeuser Company’s investment in our
unrestricted subsidiaries.
Total Weyerhaeuser Company capitalization is comprised of:
(cid:129)total Weyerhaeuser Company debt
(cid:129)plus total defined net worth.
As of December 31, 2014, Weyerhaeuser Company had:
(cid:129)a defined net worth of $7.0 billion and
(cid:129)a defined debt-to-total-capital ratio of 41.3 percent.
There are no other significant financial debt covenants related
to our third party debt. See Note 12: Lines of Credit in the
Notes to Consolidated Financial Statements for more
information.
On June 12, 2014, Moody’s Investors Service changed their
outlook on our senior unsecured notes to positive. On April 22,
2013, Moody’s Investors Service upgraded our senior
unsecured note rating to Baa3 from Ba1 and changed their
outlook to stable.
OPTION EXERCISES
Our cash proceeds from the exercise of stock options were:
(cid:129)$119 million in 2014,
(cid:129)$162 million in 2013 and
(cid:129)$112 million in 2012.
Our average stock price was $31.89, $29.69 and $23.14 in
2014, 2013 and 2012, respectively.
PAYING DIVIDENDS AND REPURCHASING STOCK
We paid cash dividends on commons shares of:
(cid:129)$563 million in 2014,
(cid:129)$458 million in 2013 and
(cid:129)$334 million in 2012.
Changes in the amount of dividends we paid were primarily due
to:
(cid:129)an increase in our quarterly dividend from 15 cents per share
to 17 cents per share in November 2012;
(cid:129)an increase in our quarterly dividend from 17 cents per share
to 20 cents per share in April 2013;
(cid:129)an increase in our quarterly dividend from 20 cents per share
to 22 cents per share in August 2013; and
(cid:129)an increase in our quarterly dividend from 22 cents per share
to 29 cents per share in August 2014.
We paid cash dividends on preference shares of $44 million in
2014.
Our dividends declared on preference shares were:
(cid:129)85.88 cents per share in August 2013 and
(cid:129)79.69 cents per share in October 2013 and February, April,
August and October 2014.
On February 13, 2015, our Board of Directors declared a
dividend of 29 cents per share, payable on March 13, 2015, to
shareholders of record at the close of business February 27,
2015. Additionally, our Board of Directors declared a dividend
of 79.69 cents per share on our 6.375 percent Mandatory
Convertible Preference Shares, Series A, payable on April 1,
2015, to shareholders of record at the close of business
March 15, 2015.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
45
On August 13, 2014, our Board of Directors approved the 2014
stock repurchase program under which we are authorized to
repurchase up to $700 million of outstanding shares. The
2014 stock repurchase program replaced the prior 2011 stock
repurchase program. During 2014, we repurchased
6,062,993 shares of common stock for $203 million under the
2014 stock repurchase program. All common stock purchases
under the stock repurchase program were made in open-market
transactions. As of December 31, 2014, we had remaining
authorization of $497 million for future share repurchases.
OUR CONTRACTUAL OBLIGATIONS AND COMMERCIAL
COMMITMENTS
More details about our contractual obligations and commercial
commitments are in Note 9: Pension and Other Postretirement
Benefit Plans, Note 13: Long-Term Debt, Note 15: Legal
Proceedings, Commitments and Contingencies and Note 20:
Income Taxes in the Notes to Consolidated Financial
Statements.
OFF-BALANCE SHEET ARRANGEMENTS
Off-balance sheet arrangements have not had — and are not
reasonably likely to have — a material effect on our current or
future financial condition, results of operations or cash flows.
Note 10: Variable Interest Entities and Note 12: Lines of Credit
in the Notes to Consolidated Financial Statements contain our
disclosures of:
(cid:129)surety bonds,
(cid:129)letters of credit and guarantees and
(cid:129)information regarding variable interest entities.
ENVIRONMENTAL MATTERS, LEGAL
PROCEEDINGS AND OTHER CONTINGENCIES
See Note 15: Legal Proceedings, Commitments and
Contingencies in the Notes to Consolidated Financial
Statements.
Significant Contractual Obligations as of December 31, 2014
DOLLAR AMOUNTS IN MILLIONS
ACCOUNTING MATTERS
CRITICAL ACCOUNTING POLICIES
Our critical accounting policies involve a higher degree of
judgment and estimates. They also have a high degree of
complexity.
In accounting, we base our judgments and estimates on:
(cid:129)historical experience and
(cid:129)assumptions we believe are appropriate and reasonable
under current circumstances.
Actual results, however, may differ from the estimated amounts
we have recorded.
—
Our most critical accounting policies relate to our:
(cid:129)pension and postretirement benefit plans;
(cid:129)potential impairments of long-lived assets; and
(cid:129)legal, environmental and product liability reserves.
Details about our other significant accounting policies — what
we use and how we estimate — are in Note 1: Summary of
Significant Accounting Policies in the Notes to Consolidated
Financial Statements.
PAYMENTS DUE BY PERIOD
TOTAL
LESS
THAN 1
YEAR
1–3
YEARS
3–5
YEARS
MORE
THAN 5
YEARS
$4,896
$ —
$ 281
$ 562
$4,053
3,698
204
72
13
320
28
35
12
535
158
14
—
640
41
22
—
57
—
595
28
2,143
107
7
1
123
8
—
45
—
Long-term debt
obligations
Interest(1)
Operating lease
obligations
Purchase
obligations(2)
Harvest
commitments(3)
Employee-related
obligations(4)
Liabilities related
to unrecognized
tax benefits(5)
Total
$9,432
$553
$1,041
$1,238
$6,434
(1) Amounts presented for interest payments assume that all long-term debt obligations
outstanding as of December 31, 2014 will remain outstanding until maturity, and interest
rates on variable-rate debt in effect as of December 31, 2014 will remain in effect until
maturity.
(2) Purchase obligations include agreements to purchase goods or services that are
enforceable and legally binding on the company and that specify all significant terms,
including: fixed or minimum quantities to be purchased; fixed, minimum or variable price
provisions; and the approximate timing of the transaction. Purchase obligations exclude
arrangements that the company can cancel without penalty.
(3) Harvest commitments are purchased at market value and can be resold at market value
in the future.
(4) The timing of certain of these payments will be triggered by retirements or other events.
These payments can include workers’ compensation, deferred compensation and banked
vacation, among other obligations. When the timing of payment is uncertain, the
amounts are included in the total column only. Minimum pension funding is required by
established funding standards and estimates are not made beyond 2016. Estimated
payments of contractually obligated postretirement benefits are not included due to the
uncertainty of payment timing.
(5) We have recognized total liabilities related to unrecognized tax benefits of $14 million as
of December 31, 2014, including interest of $3 million. The timing of payments related
to these obligations is uncertain; however, none of this amount is expected to be paid
within the next year.
46
PENSION AND POSTRETIREMENT BENEFIT PLANS
We sponsor several pension and postretirement benefit plans
for our employees. Key assumptions we use in accounting for
the plans include our:
(cid:129)expected long-term rate of return on plan assets,
(cid:129)discount rates,
(cid:129)anticipated trends in health care costs,
(cid:129)assumed increases in salaries and
(cid:129)mortality rates.
At the end of every year, we review our assumptions with
external advisers and make adjustments as appropriate. Actual
experience that differs from our assumptions or any changes in
our assumptions could have a significant effect on our financial
position, results of operations and cash flows.
Other factors that affect our accounting for the plans include:
(cid:129)actual pension fund performance,
(cid:129)level of lump sum distributions,
(cid:129)plan changes and amendments,
(cid:129)changes in plan participation or coverage and
(cid:129)portfolio changes and restructuring.
This section provides more information about our:
(cid:129)expected long-term rate of return and
(cid:129)discount rates.
Expected Long-Term Rate of Return on Plan Assets
Plan assets are assets of the pension plan trusts that fund the
benefits provided under the pension plans. The expected long-
term rate of return is our estimate of the long-term rate of
return that our plan assets will earn. Our expected long-term
rate of return is important in determining the net income or
expense we recognize for our plans.
Over the 30 years it has been in place, our U.S. pension trust
investment strategy has achieved a 14.6 percent net
compound annual return rate.
After considering available information at the end of 2014, we
continue to assume an expected long-term rate of return of
9.0 percent. Factors we considered include:
(cid:129)the net compounded annual return of 10.6 percent achieved
by our U.S. pension trust investment strategy the past 5
years and
(cid:129)current and expected valuation levels in the global equity and
credit markets.
Our expected long-term rate of return is important in
determining the net income or expense we recognize for our
plans. Every 0.5 percent decrease in our expected long-term
rate of return would increase expense or reduce a credit by
approximately:
(cid:129)$23 million for our U.S. qualified pension plans and
(cid:129)$4 million for our Canadian registered pension plans.
Likewise, every 0.5 percent increase in our expected long-term
rate of return would decrease expense or increase a credit by
those same amounts.
The actual return on plan assets in any given year may vary
from our expected long-term rate of return. Actual returns on
plan assets affect the funded status of the plans. Differences
between actual returns on plan assets and the expected long-
term rate of return are reflected as adjustments to cumulative
other comprehensive income (loss), a component of total
equity.
Discount Rates
Our discount rates as of December 31, 2014, are:
(cid:129)4.1 percent for our U.S. pension plans — compared with
4.9 percent at December 31, 2013;
(cid:129)3.6 percent for our U.S. postretirement plans — compared
with 4.0 percent at December 31, 2013;
(cid:129)3.9 percent for our Canadian pension plans — compared
with 4.7 percent at December 31, 2013; and
(cid:129)3.8 percent for our Canadian postretirement plans —
compared with 4.6 percent at December 31, 2013.
We review our discount rates annually and revise them as
needed. The discount rates are selected at the measurement
date by matching current spot rates of high-quality corporate
bonds with maturities similar to the timing of expected cash
outflows for benefits.
Pension and postretirement benefit expenses for 2015 will be
based on the 4.1 percent and 3.6 percent assumed discount
rates for U.S. plans and 3.9 percent and 3.8 percent assumed
discount rates for the Canadian plans.
Our discount rates are important in determining the cost of our
plans. A 0.5 percent decrease in our discount rate would
increase expense or reduce a credit by approximately:
(cid:129)$28 million for our U.S. qualified pension plans and
(cid:129)$5 million for our Canadian registered pension plans.
Likewise, every 0.5 percent increase in our expected long-term
rate of return would decrease expense or increase a credit by
those same amounts.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
47
exposures and proceedings can be significant and the ultimate
negative outcomes could be material to our operating results or
cash flow in any given quarter or year. See Note 15: Legal
Proceedings, Commitments and Contingencies in the Notes to
Consolidated Financial Statements for more information.
PROSPECTIVE ACCOUNTING PRONOUNCEMENTS
A summary of prospective accounting pronouncements is in
Note 1: Summary of Significant Accounting Policies in the Notes
to Consolidated Financial Statements.
LONG-LIVED ASSETS
We review the carrying value of our long-lived assets whenever
events or changes in circumstances indicate that the carrying
value of the assets may not be recoverable through future
operations. The carrying value is the amount assigned to long-
lived assets in our financial statements.
An impairment occurs when the carrying value of long-lived
assets will not be recovered from future cash flows and is more
than fair market value. Fair market value is the estimated
amount we would receive if we were to sell the assets.
In determining fair market value and whether impairment has
occurred, we are required to estimate:
(cid:129)future cash flows,
(cid:129)residual values and
(cid:129)fair values of the assets.
Key assumptions we use in developing the estimates include:
(cid:129)probability of alternative outcomes,
(cid:129)product pricing,
(cid:129)raw material costs,
(cid:129)product sales and
(cid:129)discount rate.
CONTINGENT LIABILITIES
We are subject to lawsuits, investigations and other claims
related to environmental, product and other matters, and are
required to assess the likelihood of any adverse judgments or
outcomes to these matters, as well as potential ranges of
probable losses.
We record contingent liabilities when:
(cid:129)it becomes probable that we will have to make payments and
(cid:129)the amount of loss can be reasonably estimated.
Assessing probability of loss and estimating probable losses
requires analysis of multiple factors, including:
(cid:129)historical experience,
(cid:129)judgments about the potential actions of third party claimants
and courts and
(cid:129)recommendations of legal counsel.
In addition to contingent liabilities recorded for probable losses,
we disclose contingent liabilities when there is a reasonable
possibility that an ultimate loss may occur.
While we do our best in developing our projections, recorded
contingent liabilities are based on the best information
available and actual losses in any future period are inherently
uncertain. If estimated probable future losses or actual losses
exceed our recorded liability for such claims, we would record
additional charges in other (income) expense, net. These
48
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
LONG-TERM DEBT OBLIGATIONS
The following summary of our long-term debt obligations includes:
(cid:129)scheduled principal repayments for the next five years and after,
(cid:129)weighted average interest rates for debt maturing in each of the next five years and after and
(cid:129)estimated fair values of outstanding obligations.
We estimate the fair value of long-term debt based on quoted market prices we received for the same types and issues of our
debt or on the discounted value of the future cash flows using market yields for the same type and comparable issues of debt.
Changes in market rates of interest affect the fair value of our fixed-rate debt.
SUMMARY OF LONG-TERM DEBT OBLIGATIONS AS OF DECEMBER 31, 2014
DOLLAR AMOUNTS IN MILLIONS
Fixed-rate debt
Average interest rate
Variable-rate debt
Average interest rate
2015
$ —
2016
$ —
2017
$ 281
2018
$ 62
2019
$ 500
THEREAFTER
TOTAL
FAIR VALUE
$ 3,503
$ 4,346
$ 5,382
—%
—%
6.95%
7.00%
7.38%
7.09%
7.12%
$ —
$ —
$ —
$ —
$ —
$
550
$
550
$
—%
—%
—%
—%
—%
1.98%
1.98%
N/A
540
N/A
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
49
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Weyerhaeuser Company:
We have audited the accompanying consolidated balance sheets of Weyerhaeuser Company and subsidiaries as of December 31,
2014 and 2013, and the related consolidated statements of operations, comprehensive income, cash flows, and changes in
equity for each of the years in the three-year period ended December 31, 2014. These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Weyerhaeuser Company and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and
their cash flows for each of the years in the three-year period ended December 31, 2014, in conformity with U.S. generally
accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
Weyerhaeuser Company’s internal control over financial reporting as of December 31, 2014, based on criteria established in
Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated February 13, 2015 expressed an unqualified opinion on the effectiveness of the
Company’s internal control over financial reporting.
/s/ KPMG LLP
Seattle, Washington
February 13, 2015
50
Net earnings attributable to Weyerhaeuser common shareholders
$
1,782
Basic earnings per share attributable to Weyerhaeuser common shareholders (Note 5):
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2014
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES
Net sales
Costs of products sold
Gross margin
Selling expenses
General and administrative expenses
Research and development expenses
Charges for restructuring, closures and impairments (Note 18)
Other operating income, net (Note 19)
Operating income
Interest income and other
Interest expense, net of capitalized interest
Earnings from continuing operations before income taxes
Income taxes (Note 20)
Earnings from continuing operations
Earnings from discontinued operations, net of income taxes (Note 3)
Net earnings
Net loss attributable to noncontrolling interests
Net earnings attributable to Weyerhaeuser
Dividends on preference shares
Continuing operations
Discontinued operations
Net earnings per share
Diluted earnings per share attributable to Weyerhaeuser common shareholders (Note 5):
Continuing operations
Discontinued operations
Net earnings per share
Dividends paid per common share
Weighted average shares outstanding (in thousands) (Note 5):
Basic
Diluted
See accompanying Notes to Consolidated Financial Statements.
2014
2013
2012
$
7,403
$
7,254
$ 5,989
5,763
1,640
112
338
27
44
(201)
1,320
37
(344)
1,013
(185)
828
998
1,826
—
1,826
(44)
$
$
$
$
$
1.41
1.79
3.20
1.40
1.78
3.18
1.02
5,716
1,538
125
404
33
377
(35)
634
55
(369)
320
171
491
72
563
—
563
(23)
540
0.82
0.13
0.95
0.82
0.13
0.95
0.81
$
$
$
$
$
$
4,993
996
116
382
32
26
(178)
618
48
(344)
322
(10)
312
72
384
1
385
—
385
0.58
0.13
0.71
0.58
0.13
0.71
0.62
$
$
$
$
$
$
556,705
566,329
539,140
560,899
571,239
542,310
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
51
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2014
DOLLAR AMOUNTS IN MILLIONS
Comprehensive income:
Consolidated net earnings
Other comprehensive income (loss):
Foreign currency translation adjustments
Changes in unamortized net pension and other postretirement benefit gain (loss), net of tax expense (benefit) of ($323) in
2014, $480 in 2013 and ($191) in 2012
2014
2013
2012
$1,826
$ 563
$ 384
(50)
(554)
(59)
902
2
(258)
Changes in unamortized prior service credit (cost), net of tax expense (benefit) of ($64) in 2014, $23 in 2013 and ($51) in
2012
(103)
27
(123)
Unrealized gains on available-for-sale securities
Total comprehensive income
Comprehensive loss attributable to noncontrolling interests
—
2
1,119
1,435
—
—
Total comprehensive income attributable to Weyerhaeuser shareholders
$1,119
$1,435
$
—
5
1
6
See accompanying Notes to Consolidated Financial Statements.
52
CONSOLIDATED BALANCE SHEET
ASSETS
DOLLAR AMOUNTS IN MILLIONS
Current assets:
Cash and cash equivalents
Receivables, less discounts and allowances of $3 and $4
Receivables for taxes
Inventories (Note 6)
Prepaid expenses
Deferred tax assets (Note 20)
Current assets of discontinued operations (Note 3)
Total current assets
Property and equipment, less accumulated depreciation of $6,324 and $6,327 (Note 7)
Construction in progress
Timber and timberlands at cost, less depletion charged to disposals
Investments in and advances to equity affiliates (Note 8)
Goodwill
Deferred tax assets (Note 20)
Other assets
Restricted financial investments held by variable interest entities (Note 10)
Noncurrent assets of discontinued operations (Note 3)
Total assets
LIABILITIES AND EQUITY
Current liabilities:
Notes payable
Accounts payable
Accrued liabilities (Note 11)
Current liabilities of discontinued operations (Note 3)
Total current liabilities
Long-term debt (Notes 13 and 14)
Long-term debt (nonrecourse to the company) held by variable interest entities (Note 10)
Deferred income taxes (Note 20)
Deferred pension and other postretirement benefits (Note 9)
Other liabilities
Noncurrent liabilities of discontinued operations (Note 3)
Commitments and contingencies (Note 15)
Total liabilities
Equity:
Weyerhaeuser shareholders’ interest (Notes 16 and 17):
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
Common shares: $1.25 par value; authorized 1,360,000,000 shares; issued and outstanding: 524,474,315 and
583,548,428 shares (Notes 3)
Other capital (Notes 3)
Retained earnings
Cumulative other comprehensive loss
Total Weyerhaeuser shareholders’ interest
Noncontrolling interests
Noncontrolling interests in discontinued operations (Note 3)
Total equity
Total liabilities and equity
See accompanying Notes to Consolidated Financial Statements.
DECEMBER 31,
2014
DECEMBER 31,
2013
$ 1,580
$
525
25
595
80
228
—
3,033
2,623
131
6,530
188
40
8
289
615
—
$13,457
$
—
331
587
—
918
4,891
511
206
1,319
308
—
830
518
101
542
117
130
88
2,326
2,689
112
6,580
190
42
5
324
615
1,694
$14,577
$
2
343
629
154
1,128
4,891
511
285
516
382
32
8,153
7,745
14
656
4,519
1,508
(1,393)
5,304
—
—
14
729
6,444
294
(686)
6,795
3
34
5,304
$13,457
6,832
$14,577
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
53
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2014
DOLLAR AMOUNTS IN MILLIONS
Cash flows from operations:
Net earnings
Noncash charges (credits) to income:
Depreciation, depletion and amortization
Deferred income taxes, net (Note 20)
Pension and other postretirement benefits (Note 9)
Share-based compensation expense (Note 17)
Charges for impairment of assets (Note 18)
Net gains on dispositions of assets and operations(1) (Note 3)
Foreign exchange transaction (gains) losses (Note 19)
Change in, net of acquisition:
Receivables less allowances
Receivable for taxes
Inventories
Real estate and land
Prepaid expenses
Accounts payable and accrued liabilities
Deposits on land positions and other assets
Pension and postretirement contributions / benefit payments
Other
Net cash from operations
Cash flows from investing activities:
Property and equipment
Timberlands reforestation
Acquisition of Longview Timber LLC, net of cash acquired (Note 4)
Net proceeds from Real Estate Divestiture, net of cash divested (Note 3)
Proceeds from sale of assets and operations
Net proceeds of investments held by special purpose entities (Note 10)
Other
Cash from investing activities
Cash flows from financing activities:
Net proceeds from issuance of common shares (Note 4)
Net proceeds from issuance of preference shares (Note 4)
Net proceeds from issuance of debt (Note 13)
Net proceeds from issuance of Weyerhaeuser Real Estate Company (WRECO) debt (Note 3)
Deposit of WRECO debt proceeds into escrow (Note 3)
Cash dividends on common shares
Cash dividends on preference shares
Change in book overdrafts
Payments on debt (Note 13)
Exercises of stock options
Repurchase of common stock (Note 16)
Other
Cash from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Cash paid (received) during the year for:
Interest, net of amounts capitalized of $13 in 2014, $21 in 2013 and $18 in 2012
Income taxes
Noncash investing and financing activity:
Acquisition of Longview Timber LLC, debt assumed (Note 4)
Common shares tendered in WRECO divestiture (Note 3)
(1) Includes gain on timberland exchanges.
See accompanying Notes to Consolidated Financial Statements.
54
2014
2013
2012
$ 1,826
$
563
$ 384
472
(29)
101
42
372
(58)
7
(27)
(6)
(13)
(166)
(26)
(51)
(18)
(137)
(22)
1,004
(261)
(32)
(1,581)
—
20
22
3
(1,829)
897
669
1,044
—
—
(458)
(23)
7
(1,567)
162
—
31
762
(63)
898
835
456
109
(19)
37
24
(69)
(6)
(33)
(73)
(54)
(75)
(16)
18
4
(145)
39
581
(256)
(29)
—
—
80
13
—
(192)
—
—
—
—
—
(334)
—
(32)
(187)
112
—
(3)
(444)
(55)
953
$ 898
500
205
(152)
40
2
(1,050)
27
29
76
(66)
(133)
17
(98)
15
(101)
(49)
1,088
(354)
(41)
—
707
28
—
21
361
—
—
—
887
(887)
(563)
(44)
(17)
—
119
(203)
4
(704)
745
835
$ 1,580
$
$
319
(37)
$
$
$
366
8
$ 351
$ (13)
—
$
$ 1,954
$ 1,070
—
$
$ —
$ —
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2014
DOLLAR AMOUNTS IN MILLIONS
Mandatory convertible preference shares, series A:
Balance at beginning of year
New issuance
Conversion to common shares
Balance at end of year
Common shares:
Balance at beginning of year
New issuance
Shares tendered (Note 3)
Issued for exercise of stock options
Share repurchases
Balance at end of year
Other capital:
Balance at beginning of year
New issuance
Shares tendered (Note 3)
Exercise of stock options
Repurchase of common shares
Share-based compensation
Other transactions, net
Balance at end of year
Retained earnings:
Balance at beginning of year
Net earnings attributable to Weyerhaeuser
Dividends on common shares (Note 16)
Cash dividends on preference shares (Note 16)
Balance at end of year
Cumulative other comprehensive loss:
Balance at beginning of year
Annual changes – net of tax:
Foreign currency translation adjustments
Changes in unamortized net pension and other postretirement benefit loss (Note 9)
Changes in unamortized prior service credit (cost) (Note 9)
Unrealized gains on available-for-sale securities
Balance at end of year
Total Weyerhaeuser shareholders’ interest:
Balance at end of year
Noncontrolling interests:
Balance at beginning of year
Net loss attributable to noncontrolling interests
New consolidations, de-consolidations and other transactions
Balance at end of year
Total equity:
Balance at end of year
See accompanying Notes to Consolidated Financial Statements.
2014
2013
2012
$
$
14
—
—
14
$
$
—
14
—
14
$ —
—
—
—
$
$
729
$
678
$ 671
—
(73)
7
(7)
42
—
9
—
—
—
7
—
$
656
$
729
$ 678
$ 6,444
$ 4,731
$ 4,595
—
1,509
(1,881)
112
(196)
35
5
—
152
—
42
10
—
—
105
—
34
(3)
$ 4,519
$ 6,444
$ 4,731
$
294
$
219
$ 176
1,826
(568)
(44)
563
(465)
(23)
385
(342)
—
$ 1,508
$
294
$ 219
$ (686)
$(1,558)
$(1,179)
(50)
(554)
(103)
—
(59)
902
27
2
2
(258)
(123)
—
$(1,393)
$ (686)
$(1,558)
$ 5,304
$ 6,795
$ 4,070
$
$
37
—
(37)
$
—
$
43
—
(6)
37
$
$
4
(1)
40
43
$ 5,304
$ 6,832
$ 4,113
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
55
INDEX FOR NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1:
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES . . . . . . . .
NOTE 2:
BUSINESS SEGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NOTE 3:
DISCONTINUED OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .
NOTE 4:
LONGVIEW TIMBER PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . .
NOTE 5:
NET EARNINGS PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NOTE 6:
INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NOTE 7:
PROPERTY AND EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NOTE 8:
EQUITY AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NOTE 9:
PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS . . . .
NOTE 10: VARIABLE INTEREST ENTITIES . . . . . . . . . . . . . . . . . . . . . . . . . .
NOTE 11: ACCRUED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NOTE 12: LINES OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NOTE 13: LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NOTE 14: FAIR VALUE OF FINANCIAL INSTRUMENTS . . . . . . . . . . . . . . . .
NOTE 15: LEGAL PROCEEDINGS, COMMITMENTS AND
CONTINGENCIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NOTE 16: SHAREHOLDERS’ INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NOTE 17: SHARE-BASED COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . .
NOTE 18: CHARGES FOR RESTRUCTURING, CLOSURES AND ASSET
IMPAIRMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NOTE 19: OTHER OPERATING INCOME, NET . . . . . . . . . . . . . . . . . . . . . . . .
NOTE 20:
INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NOTE 21: GEOGRAPHIC AREAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NOTE 22: SELECTED QUARTERLY FINANCIAL INFORMATION
(unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
57
61
63
64
65
66
66
67
67
79
79
80
80
81
81
83
84
90
91
91
94
95
56
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2014
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Our significant accounting policies describe:
(cid:129)our election to be taxed as a real estate investment trust,
(cid:129)how we report our results,
(cid:129)changes in how we report our results and
(cid:129)how we account for various items.
OUR ELECTION TO BE TAXED AS A REAL ESTATE
INVESTMENT TRUST (REIT)
Starting with our 2010 fiscal year, we elected to be taxed as a
REIT. We expect to derive most of our REIT income from
investments in timberlands, including the sale of standing
timber through pay-as-cut sales contracts. REIT income can be
distributed to shareholders without first paying corporate level
tax, substantially eliminating the double taxation on income. A
significant portion of our timberland segment earnings receives
this favorable tax treatment. We are, however, subject to
corporate taxes on built-in-gains (the excess of fair market
value over tax basis at January 1, 2010) on sales of real
property (other than standing timber) held by the REIT during
the first 10 years following the REIT conversion. We continue to
be required to pay federal corporate income taxes on earnings
of our Taxable REIT Subsidiary (TRS), which includes our
manufacturing businesses and the portion of our Timberlands
segment income included in the TRS.
HOW WE REPORT OUR RESULTS
Our report includes:
(cid:129)consolidated financial statements,
(cid:129)our business segments,
(cid:129)foreign currency translation,
(cid:129)estimates, and
(cid:129)fair value measurements.
CONSOLIDATED FINANCIAL STATEMENTS
Our consolidated financial statements provide an overall view of
our results and financial condition. They include our accounts
and the accounts of entities that we control, including:
(cid:129)majority-owned domestic and foreign subsidiaries and
(cid:129)variable interest entities in which we are the primary
beneficiary.
They do not include our intercompany transactions and
accounts, which are eliminated, and noncontrolling interests
are presented as a separate component of equity.
We account for investments in and advances to unconsolidated
equity affiliates using the equity method, with taxes provided on
undistributed earnings. This means that we record earnings and
accrue taxes in the period that the earnings are recorded by our
unconsolidated equity affiliates.
Throughout these Notes to Consolidated Financial Statements,
unless specified otherwise, references to “Weyerhaeuser,”
“we” and “our” refer to the consolidated company.
OUR BUSINESS SEGMENTS
We are principally engaged in:
(cid:129)growing and harvesting timber; and
(cid:129)manufacturing, distributing and selling products made from
trees.
Our business segments are organized based primarily on
products and services.
Our Business Segments and Products
SEGMENT
Timberlands
Wood Products
PRODUCTS AND SERVICES
Logs, timber, minerals, oil and gas and
international wood products
Softwood lumber, engineered wood products,
structural panels and building materials
distribution
Cellulose Fibers
Pulp, liquid packaging board and an equity
interest in a newsprint joint venture
We also transfer raw materials, semifinished materials and end
products among our business segments. Because of this
intracompany activity, accounting for our business segments
involves:
(cid:129)pricing products transferred between our business segments
at current market values and
(cid:129)allocating joint conversion and common facility costs
according to usage by our business segment product lines.
Gains or charges not related to or allocated to an individual
operating segment are held in Unallocated Items. This includes
a portion of items such as: share-based compensation; pension
and postretirement costs; foreign exchange transaction gains
and losses associated with financing; and the elimination of
intersegment profit in inventory and the LIFO reserve.
FOREIGN CURRENCY TRANSLATION
Local currencies are the functional currencies for most of our
operations outside the U.S. We translate foreign currencies into
U.S. dollars in two ways:
(cid:129)assets and liabilities — at the exchange rates in effect as of
our balance sheet date; and
(cid:129)revenues and expenses — at average monthly exchange
rates throughout the year.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
57
ESTIMATES
We prepare our financial statements according to U.S. generally
accepted accounting principles (U.S. GAAP). This requires us to
make estimates and assumptions during our reporting periods
and at the date of our financial statements. The estimates and
assumptions affect our:
CHANGES IN HOW WE REPORT OUR RESULTS
Changes in how we report our results come from:
(cid:129)accounting changes made upon our adoption of new
accounting guidance and
(cid:129)our reclassification of certain balances and results from prior
years to make them consistent with our current reporting.
(cid:129)reported amounts of assets, liabilities and equity;
(cid:129)disclosure of contingent assets and liabilities; and
(cid:129)reported amounts of revenues and expenses.
While we do our best in preparing these estimates, actual
results can and do differ from those estimates and
assumptions.
FAIR VALUE MEASUREMENTS
We use a fair value hierarchy in accounting for certain
nonfinancial assets and liabilities including:
(cid:129)long-lived assets (asset groups) measured at fair value for an
impairment assessment,
(cid:129)reporting units measured at fair value in the first step of a
goodwill impairment test,
(cid:129)nonfinancial assets and nonfinancial liabilities measured at
fair value in the second step of a goodwill impairment
assessment,
(cid:129)assets acquired and liabilities assumed in a business
acquisition and
(cid:129)asset retirement obligations initially measured at fair value.
The fair value hierarchy is based on inputs to valuation
techniques that are used to measure fair value that are either
observable or unobservable. Observable inputs reflect
assumptions market participants would use in pricing an asset
or liability based on market data obtained from independent
sources while unobservable inputs reflect a reporting entity’s
pricing based upon its own market assumptions.
The fair value hierarchy consists of the following three levels:
(cid:129)Level 1 — Inputs are quoted prices in active markets for
identical assets or liabilities.
(cid:129)Level 2 — Inputs are:
– quoted prices for similar assets or liabilities in an active
market;
– quoted prices for identical or similar assets or liabilities in
markets that are not active; or
– inputs other than quoted prices that are observable and
market-corroborated inputs, which are derived principally
from or corroborated by observable market data.
(cid:129)Level 3 — Inputs are derived from valuation techniques in
which one or more significant inputs or value drivers are
unobservable.
58
RECLASSIFICATIONS
We have reclassified certain balances and results from the
prior years to be consistent with our 2014 reporting. This
makes year-to-year comparisons easier. Our reclassifications
had no effect on net earnings or Weyerhaeuser shareholders’
interest. Our reclassifications present the results of operations
discontinued in 2014 separately on our Consolidated
Statement of Operations, Consolidated Balance Sheet and in
the related footnotes. Note 3: Discontinued Operations
provides more information about our discontinued operations.
NEW ACCOUNTING PRONOUNCEMENTS
In March 2013, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update (ASU) 2013-05,
which provides guidance on a parent’s accounting for the
cumulative translation adjustment upon derecognition of a
subsidiary or group of assets within a foreign entity. This new
guidance requires that the parent release any related
cumulative translation adjustment into net income only if the
sale or transfer results in the complete or substantially
complete liquidation of the foreign entity in which the subsidiary
or group of assets had resided. Our prospective adoption of
this guidance in first quarter 2014 did not have a material
effect on our results of operations, financial position or cash
flows.
In July 2013, FASB issued ASU 2013-11, which provides
guidance on the presentation of unrecognized tax benefits,
reflecting the manner in which an entity would settle at the
reporting date any additional income taxes that would result
from the disallowance of a tax position when net operating loss
carryforwards, similar tax losses or tax credit carryforwards
exist. Our prospective adoption of this guidance in first quarter
2014 did not have a material effect on our results of
operations, financial position or cash flows.
In April 2014, FASB issued ASU 2014-08, an amendment to
the current model of the classification and presentation of
discontinued operations and asset disposals that changes the
definition of a discontinued operation to include only disposals
of components of an entity that represent a strategic shift that
has (or will have) a material effect on an entity’s financial
results. The new standard is effective for all disposals or
classifications as assets held for sale for fiscal periods starting
after December 15, 2014 and early adoption is permitted. We
expect to adopt ASU 2014-08 on January 1, 2015 and have
determined that its adoption will not have a material impact on
our consolidated financial statements and related disclosures
at that time.
In May 2014, FASB issued ASU 2014-09, a comprehensive new
revenue recognition model that requires an entity to recognize
revenue to depict the transfer of goods or services to
customers at an amount that reflects the consideration it
expects to receive in exchange for those goods or services. The
new standard is effective for us on January 1, 2017 and early
adoption is not permitted. We may use either the retrospective
or cumulative effect transition method. We are evaluating the
impact that ASU 2014-09 will have on our consolidated
financial statements and related disclosures. We have not yet
selected a transition method nor determined the effect of the
standard on our ongoing financial reporting.
HOW WE ACCOUNT FOR VARIOUS ITEMS
This section provides information about how we account for
certain key items related to:
(cid:129)capital investments,
(cid:129)financing our business and
(cid:129)operations.
ITEMS RELATED TO CAPITAL INVESTMENTS
Key items related to accounting for capital investments pertain
to property and equipment, timber and timberlands, impairment
of long-lived assets and goodwill.
Property and Equipment
We maintain property accounts on an individual asset basis.
Here is how we handle major items:
(cid:129)Improvements to and replacements of major units of property
are capitalized.
(cid:129)Maintenance, repairs and minor replacements are expensed.
(cid:129)Depreciation is calculated using a straight-line method at
rates based on estimated service lives.
(cid:129)Logging roads are generally amortized — as timber is
harvested — at rates based on the volume of timber
estimated to be removed.
(cid:129)Cost and accumulated depreciation of property sold or retired
are removed from the accounts and the gain or loss is
included in earnings.
Key activities affecting how we account for timber and
timberlands include:
(cid:129)reforestation,
(cid:129)depletion and
(cid:129)forest management in Canada.
Reforestation. Generally, we capitalize initial site preparation
and planting costs as reforestation. We transfer reforestation
to a merchantable timber classification when the timber is
considered harvestable. That generally occurs after:
(cid:129)15 years in the South and
(cid:129)30 years in the West.
Generally, we expense costs after the first planting as they are
incurred or over the period of expected benefit. These costs
include:
(cid:129)fertilization,
(cid:129)vegetation and insect control,
(cid:129)pruning and precommercial thinning,
(cid:129)property taxes and
(cid:129)interest.
Accounting practices for these costs do not change when
timber becomes merchantable and harvesting starts.
Depletion. To determine depletion rates, we divide the net
carrying value of timber by the related volume of timber
estimated to be available over the growth cycle. To determine
the growth cycle volume of timber, we consider:
(cid:129)regulatory and environmental constraints,
(cid:129)our management strategies,
(cid:129)inventory data improvements,
(cid:129)growth rate revisions and recalibrations and
(cid:129)known dispositions and inoperable acres.
We include the cost of timber harvested in the carrying values
of raw materials and product inventories. As these inventories
are sold to third parties, we include them in the cost of
products sold.
Forest management in Canada. We managed timberlands
under long-term licenses in various Canadian provinces that
are:
(cid:129)granted by the provincial governments;
(cid:129)granted for initial periods of 15 to 25 years; and
(cid:129)renewable provided we meet reforestation, operating and
management guidelines.
Calculation of the fees we pay on the timber we harvest:
Timber and Timberlands
We carry timber and timberlands at cost less depletion charged
to disposals. Depletion refers to the carrying value of timber
that is harvested, lost as a result of casualty, or sold.
(cid:129)varies from province to province,
(cid:129)is tied to product market pricing and
(cid:129)depends upon the allocation of land management
responsibilities in the license.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
59
Impairment of Long-Lived Assets
We review long-lived assets — including certain identifiable
intangibles — for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets
may not be recoverable. Impaired assets held for use are
written down to fair value. Impaired assets held for sale are
written down to fair value less cost to sell. We determine fair
value based on:
(cid:129)appraisals,
(cid:129)market pricing of comparable assets,
(cid:129)discounted value of estimated cash flows from the asset and
(cid:129)replacement values of comparable assets.
Goodwill
Goodwill is the purchase price minus the fair value of net
assets acquired when we buy another entity. We assess
goodwill for impairment:
(cid:129)using a fair-value-based approach and
(cid:129)at least annually — at the beginning of the fourth quarter.
In 2014 the fair value of the reporting unit with goodwill
substantially exceeded its carrying value.
book cash balances as of December 31, 2014 and
December 31, 2013.
Concentration of Risk
We disclose customers that represent a concentration of credit
risk. As of December 31, 2014, one customer accounted for
approximately 13 percent of our accounts receivable balance.
ITEMS RELATED TO OPERATIONS
Key items related to operations include revenue recognition,
inventories, shipping and handling costs, income taxes, share-
based compensation, pension and other postretirement plans,
and environmental remediation.
Revenue Recognition
Operations generally recognize revenue upon shipment to
customers. For certain export sales, revenue is recognized
when title transfers at the foreign port.
For timberland sales, we recognize revenue when title and
possession have been transferred to the buyer and all other
criteria for sale and profit recognition have been satisfied.
ITEMS RELATED TO FINANCING OUR BUSINESS
Key items related to financing our business include financial
instruments, cash and cash equivalents, accounts payable and
concentration of risk.
Financial Instruments
We estimate the fair value of financial instruments where
appropriate. The assumptions we use — including the discount
rate and estimates of cash flows — can significantly affect our
fair-value amounts. Our fair values are estimates and may not
match the amounts we would realize upon sale or settlement of
our financial positions.
Inventories
We state inventories at the lower of cost or market. Cost
includes labor, materials and production overhead. LIFO — the
last-in, first-out method — applies to major inventory products
held at our U.S. domestic locations. We began to use the LIFO
method for domestic products in the 1940s as required to
conform with the tax method elected. Subsequent acquisitions
of entities added new products under the FIFO — the first-in,
first-out method — or moving average cost methods that have
continued under those methods. The FIFO or moving average
cost methods applies to the balance of our domestic raw
material and product inventories as well as for all material and
supply inventories and all foreign inventories.
Cash and Cash Equivalents
Shipping and Handling Costs
Cash equivalents are investments with original maturities of 90
days or less. We state cash equivalents at cost, which
approximates market.
We classify shipping and handling costs in the costs of
products sold in our Consolidated Statement of Operations.
Accounts Payable
Our banking system replenishes our major bank accounts daily
as checks we have issued are presented for payment. As a
result, we have negative book cash balances due to
outstanding checks that have not yet been paid by the bank.
These negative balances are included in accounts payable on
our Consolidated Balance Sheet. Changes in these negative
cash balances are reported as financing activities in our
Consolidated Statement of Cash Flows. We had no negative
60
Income Taxes
We account for income taxes under the asset and liability
method. Unrecognized tax benefits represent potential future
funding obligations to taxing authorities if uncertain tax
positions the company has taken on previously filed tax returns
are not sustained. In accordance with the company’s
accounting policy, accrued interest and penalties related to
unrecognized tax benefits are recognized as a component of
income tax expense.
We recognize deferred tax assets and liabilities to reflect:
(cid:129)future tax consequences due to differences between the
carrying amounts for financial purposes and the tax bases of
certain items and
(cid:129)operating loss and tax credit carryforwards.
To measure deferred tax assets and liabilities, we:
(cid:129)determine when the differences between the carrying
amounts and tax bases of affected items are expected to be
recovered or resolved and
(cid:129)use enacted tax rates expected to apply to taxable income in
those years.
Share-Based Compensation
We generally measure the fair value of share-based awards on
the dates they are granted or modified. These measurements
establish the cost of the share-based awards for accounting
purposes. We then recognize the cost of share-based awards in
our Consolidated Statement of Operations over each
employee’s required service period. Note 17: Share-Based
Compensation provides more information about our share-
based compensation.
Pension and Other Postretirement Benefit Plans
We recognize the overfunded or underfunded status of our
defined benefit pension and other postretirement plans on our
Consolidated Balance Sheet and recognize changes in the
funded status through comprehensive income (loss) in the year
in which the changes occur.
Actuarial valuations determine the amount of the pension and
other postretirement benefit obligations and the net periodic
benefit cost we recognize. The net periodic benefit cost
includes:
(cid:129)cost of benefits provided in exchange for employees’ services
rendered during the year;
(cid:129)interest cost of the obligations;
(cid:129)expected long-term return on fund assets;
(cid:129)gains or losses on plan settlements and curtailments;
(cid:129)amortization of prior service costs and plan amendments
over the average remaining service period of the active
employee group covered by the plans or the average
remaining life expectancy in situations where the plan
participants affected by the plan amendment are inactive;
and
(cid:129)amortization of cumulative unrecognized net actuarial gains
and losses — generally in excess of 10 percent of the
greater of the benefit obligation or market-related value of
plan assets at the beginning of the year — over the average
remaining service period of the active employee group
covered by the plans or the average remaining life expectancy
in situations where the plan participants are inactive.
Pension plans. We have pension plans covering most of our
employees. Determination of benefits differs for salaried, hourly
and union employees:
(cid:129)Salaried employee benefits are based on each employee’s
highest monthly earnings for five consecutive years during
the final 10 years before retirement.
(cid:129)Hourly and union employee benefits generally are stated
amounts for each year of service.
(cid:129)Union employee benefits are set through collective-bargaining
agreements.
We contribute to our U.S. and Canadian pension plans
according to established funding standards. The funding
standards for the plans are:
(cid:129)U.S. pension plans — according to the Employee Retirement
Income Security Act of 1974; and
(cid:129)Canadian pension plans — according to the applicable
provincial pension act and the Income Tax Act.
Postretirement benefits other than pensions. We provide
certain postretirement health care and life insurance benefits
for some retired employees. In some cases, we pay a portion of
the cost of the benefit. Note 9: Pension and Other
Postretirement Benefit Plans provides additional information
about changes made in our postretirement benefit plans during
2014 and 2013.
Environmental Remediation
We accrue losses associated with environmental remediation
obligations when such losses are probable and reasonably
estimable. Future expenditures for environmental remediation
obligations are not discounted to their present value.
Recoveries of environmental remediation costs from other
parties are recorded as assets when the recovery is deemed
probable and does not exceed the amount of losses previously
recorded.
NOTE 2: BUSINESS SEGMENTS
Our business segments and how we account for those
segments are discussed in Note 1: Summary of Significant
Accounting Policies. This note provides key financial data by
business segment.
DISCONTINUED OPERATIONS
We have disposed of Weyerhaeuser Real Estate Company
(WRECO) that is excluded from the segment results below. See
Note 3: Discontinued Operations for information regarding our
discontinued operations and the segments affected.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
61
KEY FINANCIAL DATA BY BUSINESS SEGMENT
Sales and Contribution (Charge) to Earnings
DOLLAR AMOUNTS IN MILLIONS
Sales to unaffiliated customers
2014
2013
2012
Intersegment sales
2014
2013
2012
Contribution (charge) to earnings from continuing operations
2014
2013
2012
TIMBERLANDS
WOOD
PRODUCTS
CELLULOSE
FIBERS
UNALLOCATED
ITEMS(1)
AND INTERSEGMENT
ELIMINATIONS
CONSOLIDATED
$1,497
$1,343
$1,077
$ 867
$ 799
$ 683
$ 613
$ 470
$ 322
$3,970
$4,009
$3,058
$
$
$
80
71
74
$ 327
$ 441
$ 120
$1,936
$1,902
$1,854
$ —
$ —
$ —
$ 291
$ 200
$ 223
$ —
$ —
$ —
$(947)
$(870)
$(757)
$ 126
$(422)
$
2
$7,403
$7,254
$5,989
$ —
$ —
$ —
$1,357
$ 689
$ 667
(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 financing, and the elimination of intersegment profit in inventory and the LIFO reserve.
Management evaluates segment performance based on the contributions to earnings of the respective segments. An analysis
and reconciliation of our business segment information to the consolidated financial statements follows:
Reconciliation of Contribution to Earnings to Net Earnings Attributable to Weyerhaeuser
DOLLAR AMOUNTS IN MILLIONS
Net contribution to earnings from continuing operations
Net contribution to earnings from discontinued operations
Total contribution to earnings
Interest expense, net of capitalized interest (continuing and discontinued operations)
Income before income taxes (continuing and discontinued operations)
Income taxes (continuing and discontinued operations)
Net earnings attributable to Weyerhaeuser
2014
2013
2012
$1,357
$ 689
$ 667
1,017
2,374
116
805
121
788
(347)
(371)
(348)
2,027
(201)
434
129
440
(55)
$1,826
$ 563
$ 385
62
Additional Financial Information
DOLLAR AMOUNTS IN MILLIONS
Depreciation, depletion and amortization
2014
2013
2012
Net pension and postretirement cost (credit)(1)
2014
2013
2012
Charges for restructuring, closures and impairments(2)
2014
2013
2012
Equity in income (loss) of equity affiliates and unconsolidated entities
2014
2013
2012
Capital expenditures
2014
2013
2012
Investments in and advances to equity affiliates and unconsolidated entities
2014
2013
2012
Total assets(3)(4)
2014
2013
2012
TIMBERLANDS
WOOD
PRODUCTS
CELLULOSE
FIBERS
UNALLOCATED
ITEMS
CONSOLIDATED
$ 207
$ 166
$ 142
$ 119
$ 123
$ 133
$
$
$
$
$
$
10
10
8
1
2
2
$ —
$ —
$ —
$
$
$
74
73
60
$ —
$ —
$ —
$7,327
$7,578
$4,697
$
$
$
$
$
$
24
28
25
2
13
6
$ —
$ —
$ —
$ 190
$ 113
$
56
$ —
$ —
$ —
$1,430
$1,326
$1,319
$ 155
$ 156
$ 150
$
$
$
11
18
14
$ —
$ —
$ —
$
$
$
(1)
3
5
$ 123
$
92
$ 160
$ 188
$ 190
$ 191
$2,214
$2,299
$2,386
$
$
$
$
$
$
$
12
13
19
(45)
40
29
41
$ 362
$
$
$
$
$
$
$
18
(1)
8
(3)
4
5
5
$ —
$ —
$
1
$2,486
$3,374
$4,190
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
493
458
444
—
96
76
44
377
26
(2)
11
2
391
283
281
188
190
192
$13,457
$14,577
$12,592
(1) Net pension and postretirement cost (credit) excludes special items, as well as the recognition of curtailments, settlements and special termination benefits due to closures, restructuring
or divestitures. See Note 9: Pension and Other Postretirement Benefit Plans for more information.
(2) See Note 18: Charges for Restructuring, Closures and Asset Impairments for more information
(3) Timberlands total assets increased primarily due to the acquisition of Longview Timber. See Note 4: Longview Timber Purchase for more information.
(4) Unallocated Items total assets includes assets of discontinued operations in 2013 and 2012.
NOTE 3: DISCONTINUED OPERATIONS
We have made certain reclassifications in our consolidated
financial statements to reflect discontinued operations related
to WRECO which was previously reported under the Real Estate
segment and Unallocated Items.
(cid:129)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.
Collectively, these transactions are referred to as the “Real
Estate Divestiture”.
OPERATIONS INCLUDED IN DISCONTINUED OPERATIONS
Divestiture of WRECO
On July 7, 2014, we completed the following set of transactions
resulting in our homebuilding and real estate development
business becoming wholly-owned by TRI Pointe Homes, Inc. (TRI
Pointe):
(cid:129)the distribution of shares of WRECO to our shareholders in
exchange for 59 million shares of our common stock; and
During June 2014, our wholly-owned subsidiary, WRECO, issued
$900 million of unsecured and unsubordinated senior debt
obligations. The net proceeds after deducting the discount,
underwriting fees and issuance costs were $870 million. At the
close of the Real Estate Divestiture in July 2014, WRECO used
$744 million of the debt proceeds to repay intercompany debt
and interest to Weyerhaeuser Company. The newly issued debt,
remaining proceeds and other WRECO assets and liabilities,
including $5 million cash on hand, were acquired by TRI Pointe
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
63
when WRECO became a wholly-owned subsidiary of TRI Pointe
at the closing of the transaction. Additionally, $32 million
related to the adjustment amount payable pursuant to the
terms of the transaction agreement was paid to TRI Pointe. Our
net cash proceeds in connection with the Real Estate
Divestiture totaled $707 million.
Prior to the distribution of WRECO shares to our shareholders,
WRECO was a wholly-owned subsidiary. Concurrent with the
distribution to shareholders, WRECO ceased being a subsidiary.
CARRYING VALUE OF ASSETS AND LIABILITES OF
DISCONTINUED OPERATIONS
The following table shows carrying values for assets and
liabilities classified as discontinued operations as of
December 31, 2013.
Carrying Value of Assets and Liabilities of Discontinued
Operations
DOLLAR AMOUNTS IN MILLIONS
The following table presents the components of the net gain on
divestiture:
Assets
DOLLAR AMOUNTS IN MILLIONS
Receivables, less discounts and allowances
Cash and cash equivalents
$
December 31,
2013
Proceeds:
Common shares tendered (58,813,151 shares at $33.22 per
share)
Cash
Less:
Net book value of contributed assets
Transaction costs, net of reimbursement
Gain on WRECO divestiture
707
2,661
(1,671)
(18)
(1,689)
$
972
The net gain on the Real Estate Divestiture of $972 million is
not taxable and was recognized in 2014 in discontinued
operations.
NET EARNINGS FROM DISCONTINUED OPERATIONS
Sales and Net Earnings from Discontinued Operations
DOLLAR AMOUNTS IN MILLIONS
Net sales from discontinued operations
$573
$1,275
$1,070
2014(1)
2013
2012
Income from discontinued operations
Income taxes
Net income from operations
Net gain on divestiture
Net earnings from discontinued
operations
42
(16)
26
972
$998
$
114
(42)
72
—
72
117
(45)
72
—
72
$
(1) Discontinued operations in 2014 covered only 188 days.
Results of discontinued operations exclude certain general
corporate overhead costs that have been allocated to and are
included in contribution to earnings for the operating segments.
64
2014
Prepaid expenses
Deferred tax assets
$ 1,954
Total current assets
Property and equipment, net
Real estate in process of development and for sale
Land being processed for development
Investments in and advances to equity affiliates
Deferred tax assets
Other assets
Total noncurrent assets
Total assets
Liabilities
Accounts payable
Accrued liabilities
Total current liabilities
Long-term debt (nonrecourse to the company) held by
variable interest entities
Other liabilities
Total noncurrent liabilities
Total liabilities
Noncontrolling interests
5
51
11
21
88
15
851
596
21
115
96
1,694
$1,782
$
41
113
154
5
27
32
$ 186
$
34
NOTE 4: LONGVIEW TIMBER PURCHASE
On July 23, 2013, we purchased 100 percent of the equity
interests in Longview Timber LLC (Longview Timber) for
$1.58 billion cash and assumed debt of $1.07 billion, for an
aggregate purchase price of $2.65 billion. Longview Timber was
a privately-held Delaware limited liability company engaged in
the ownership and management of approximately 645,000
acres of timberlands in Oregon and Washington. We believe
Longview Timber has productive lands with favorable age class
distribution that will provide us with optionality for harvest.
Earnings, assets and liabilities from this business are reported
as part of the Timberlands segment beginning in third quarter
2013.
Summarized Unaudited Pro Forma Information that Presents
Combined Amounts as if this Acquisition Occurred at the
Beginning of 2012
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES
Net sales
Net earnings from continuing operations attributable
to Weyerhaeuser common shareholders
Net earnings from continuing operations per share
attributable to Weyerhaeuser common shareholders,
basic
Net earnings from continuing operations per share
attributable to Weyerhaeuser common shareholders,
diluted
2013
2012
$7,371
$6,166
$ 485
$ 276
$ 0.84
$ 0.48
$ 0.83
$ 0.47
Estimated Fair Values of Identifiable Assets Acquired and
Liabilities Assumed as of the Acquisition Date
DOLLAR AMOUNTS IN MILLIONS
Current assets
Property and equipment
Timber and timberlands
Other assets
Total assets acquired
Current liabilities
Long-term debt
Other liabilities
Total liabilities assumed
Net assets acquired
July 23,
2013
$
46
39
2,654
2
2,741
10
1,122
5
1,137
$1,604
Measurement
Period
Adjustments
December 31,
2013
$—
$
1
2
—
3
—
—
3
3
$—
46
40
2,656
2
2,744
10
1,122
8
1,140
$1,604
The initial allocations of purchase price were recorded at the
estimated fair value of assets acquired and liabilities assumed
based upon the best information available to management. The
purchase price allocation was finalized in the fourth quarter
2013. The measurement period adjustments reflect additional
information obtained to record the fair value of certain assets
acquired and liabilities assumed based on facts and
circumstances existing as of the acquisition date.
In order to finance our purchase of Longview Timber, we issued
the following:
(cid:129)29 million common shares on June 24, 2013, at the price of
$27.75 per share for net proceeds of $781 million;
(cid:129)4.4 million common shares on July 8, 2013, at the price of
$27.75 per share for net proceeds of $116 million, in
connection with the exercise of an overallotment option; and
(cid:129)13.8 million of our 6.375 percent Mandatory Convertible
Preference Shares, Series A, par value $1.00 and liquidation
preference of $50.00 per share on June 24, 2013, for net
proceeds of $669 million. See Note 16: Shareholders’
Interest for more information.
For issuances of shares, excess of par value is recorded in
“Other capital” in our Consolidated Balance Sheet.
Proceeds were used to finance the acquisition and pay related
fees and expenses. We paid $11 million in fees related to a
bridge loan in 2013. As of the close of the Longview Timber
purchase, we did not draw from the loan and these fees were
expensed in 2013, which is recorded in “Interest expense” in
our Consolidated Statement of Operations.
We obtained additional debt financing in 2013 which was used
to repay all of the assumed debt in 2013. See Note 13: Long-
term Debt.
NOTE 5: NET EARNINGS PER SHARE
Our basic earnings per share attributable to Weyerhaeuser
common shareholders for the last three years were:
(cid:129)$3.20 in 2014,
(cid:129)$0.95 in 2013 and
(cid:129)$0.71 in 2012.
Our diluted earnings per share attributable to Weyerhaeuser
common shareholders for the last three years were:
(cid:129)$3.18 in 2014,
(cid:129)$0.95 in 2013 and
(cid:129)$0.71 in 2012.
This note discloses:
(cid:129)how we calculate basic and diluted net earnings per share
and
(cid:129)shares excluded from dilutive effect.
HOW WE CALCULATE BASIC AND DILUTED NET EARNINGS
PER SHARE
“Basic earnings” per share is net earnings available to common
shareholders divided by the weighted average number of our
outstanding common shares, including stock equivalent units
where there is no circumstance under which those shares
would not be issued.
“Diluted earnings” per share is net earnings available to
common shareholders divided by the sum of the:
(cid:129)weighted average number of our outstanding common shares
and
(cid:129)the effect of our outstanding dilutive potential common
shares.
Dilutive potential common shares may include:
(cid:129)outstanding stock options,
(cid:129)restricted stock units,
(cid:129)performance share units and
(cid:129)preference shares.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
65
We use the treasury stock method to calculate the effect of our
outstanding stock options, restricted stock units and
performance share units. Share-based payment awards that are
contingently issuable upon the achievement of specified
performance or market conditions are included in our diluted
earnings per share calculation in the period in which the
conditions are satisfied.
We use the if-converted method to calculate the effect of our
outstanding preference shares. In applying the if-converted
method, conversion is not assumed for purposes of computing
diluted earnings per share if the effect would be antidilutive.
Preference shares are antidilutive whenever the amount of the
dividend declared in or accumulated for the current period per
common share obtainable on conversion exceeds diluted
earnings per share exclusive of the preference shares.
Preference shares are evaluated for participation on a quarterly
basis to determine whether two-class presentation is required.
Preference shares are considered to be participating as of the
financial reporting period end to the extent they would
participate in dividends paid to common shareholders.
Preference shares are not considered participating for the years
ended December 31, 2014 and 2013. Under the provisions of
the two-class method, basic and diluted earnings per share
would be presented for both preference and common
shareholders.
SHARES EXCLUDED FROM DILUTIVE EFFECT
The following shares were not included in the computation of
diluted earnings per share because they were either antidilutive
or the required performance or market conditions were not met.
Some or all of these shares may be dilutive potential common
shares in future periods.
We issued 13.8 million 6.375 percent Mandatory Convertible
Preference Shares, Series A on June 24, 2013. We do not
include these shares in our calculation of diluted earnings per
share because they are antidilutive. See Note 4: Longview
Timber Purchase.
Potential Shares Not Included in the Computation of Diluted
Earnings per Share
Shares in thousands
Stock options
Preference Shares
2014
2013
2012
—
4,618
3,519
24,988
24,865
—
NOTE 6: INVENTORIES
Inventories include raw materials, work-in-process and finished
goods.
66
Inventories as of the End of Our Last Two Years
DOLLAR AMOUNTS IN MILLIONS
DECEMBER 31,
2014
DECEMBER 31,
2013
LIFO inventories:
Logs and chips
Lumber, plywood and panels
Pulp and paperboard
Other products
FIFO or moving average cost
inventories:
Logs and chips
Lumber, plywood, panels and
engineered wood products
Pulp and paperboard
Other products
Materials and supplies
Total
$
9
55
122
11
38
80
35
96
149
$595
$ 15
46
97
11
33
70
30
94
146
$542
If we used FIFO for all inventories, our stated inventories would
have been $120 million and $112 million higher as of
December 31, 2014 and December 31, 2013, respectively.
HOW WE ACCOUNT FOR OUR INVENTORIES
The Inventories section of Note 1: Summary of Significant
Accounting Policies provides details about how we account for
our inventories.
NOTE 7: PROPERTY AND EQUIPMENT
Property and equipment includes land, buildings and
improvements, machinery and equipment, roads and other items.
Carrying Value of Property and Equipment and Estimated
Service Lives
DOLLAR AMOUNTS IN MILLIONS
RANGE OF LIVES
DECEMBER 31,
2014
DECEMBER 31,
2013
Property and
equipment, at
cost:
Land
Buildings and
improvements
Machinery and
equipment
Roads
Other
Total cost
Allowance for
depreciation and
amortization
Property and
equipment, net
N/A
10–40
2–25
10–20
3–10
$
127
1,220
$ 129
1,262
6,706
6,712
609
285
8,947
(6,324)
594
319
9,016
(6,327)
$ 2,623
$ 2,689
SERVICE LIVES AND DEPRECIATION
Operating Results of Equity Affiliates
Buildings and improvements for property and equipment have
estimated lives that are generally at either the high end or low
end of the range from 10 years to 40 years, depending on the
type and performance of construction.
The maximum service lives for machinery and equipment varies
among our operations:
(cid:129)Timberlands — 15 years;
(cid:129)Wood products manufacturing facilities — 20 years; and
(cid:129)Pulp mills — 25 years.
Depreciation expense, excluding discontinued operations, was:
(cid:129)$332 million in 2014,
(cid:129)$332 million in 2013 and
(cid:129)$332 million in 2012.
NOTE 8: EQUITY AFFILIATES
We have investments in unconsolidated equity affiliates over
which we have significant influence that we account for using
the equity method with taxes provided on undistributed
earnings. We record earnings and accrue taxes in the period
that the earnings are recorded by the affiliates.
Details About Our Equity Affiliates
As of December 31, 2014, we hold a 50 percent ownership
interest in North Pacific Paper Corporation (NORPAC). NORPAC
owns and operates a newsprint manufacturing facility in
Longview, Washington.
During 2014, Catchlight Energy was dissolved. We received no
proceeds from the dissolution.
During 2013, we sold part of our investment in Liaison
Technologies Inc. and recognized an $10 million pretax gain,
which is recorded in “Interest income and other” in our
Consolidated Statement of Operations. Our remaining
investment is accounted for under the cost method.
Unconsolidated Financial Information of Equity Affiliates
Aggregated assets, liabilities and operating results of the
entities that we accounted for as equity affiliates are provided
below.
Assets and Liabilities of Equity Affiliates
DOLLAR AMOUNTS IN MILLIONS
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
DECEMBER 31,
2014
DECEMBER 31,
2013
$123
$413
$ 30
$109
$119
$468
$ 44
$141
DOLLAR AMOUNTS IN MILLIONS
Net sales
Operating income (loss)
Net income (loss)
2014
$501
$ (2)
$ —
2013
$534
$
3
$ 3
2012
$553
$ 3
$ (7)
Doing Business with Affiliates
We provide goods and services to NORPAC, including raw
materials and support services. The amounts paid to
Weyerhaeuser by NORPAC for goods and services were:
(cid:129)$195 million in 2014,
(cid:129)$203 million in 2013 and
(cid:129)$221 million in 2012.
In addition, we manage cash for NORPAC under a services
agreement. Weyerhaeuser holds the cash and records a
payable balance to NORPAC, which is included in accounts
payable in the accompanying Consolidated Balance Sheet. We
had the following payable balances to NORPAC:
(cid:129)$75 million at December 31, 2014; and
(cid:129)$93 million at December 31, 2013.
NOTE 9: PENSION AND OTHER POSTRETIREMENT
BENEFIT PLANS
We sponsor several retirement programs for our employees.
This note provides details about:
(cid:129)types of plans we sponsor,
(cid:129)significant transactions and events affecting plans we
sponsor,
(cid:129)funded status of plans we sponsor,
(cid:129)pension assets,
(cid:129)activity of plans we sponsor and
(cid:129)actuarial assumptions.
TYPES OF PLANS WE SPONSOR
The plans we sponsor in the U.S. and Canada differ according
to each country’s requirements.
In the U.S., our pension plans are:
(cid:129)qualified — plans that qualify under the Internal Revenue
Code; and
(cid:129)nonqualified — plans for select employees that provide
additional benefits not qualified under the Internal Revenue
Code.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
67
In Canada, our pension plans are:
(cid:129)registered — plans that are registered under the Income Tax
Act and applicable provincial pension acts; and
(cid:129)nonregistered — plans for select employees that provide
additional benefits that may not be registered under the
Income Tax Act or provincial pension acts.
We also offer retiree medical and life insurance plans in the
U.S. and Canada. These plans are referred to as other
postretirement benefit plans in the following disclosures.
During fourth quarter 2013, we ratified amendments to the
Weyerhaeuser Company Limited Retirement Plan for Non-Union
Employees and the Retirement Plan for Non-Union Employees of
Weyerhaeuser Company Limited at Grand Prairie, Alberta and
Grande Cache, Alberta that (1) closes these plans to new hires
and rehires effective January 1, 2014 and (2) changes the early
retirement reduction for current employees enrolled in these
plans, effective for future years of service beginning January 1,
2016. These changes were announced to participants in
December 2013.
Employee Eligibility and Accounting
The Pension and Other Postretirement Benefit Plans section of
Note 1: Summary of Significant Accounting Policies provides
information about employee eligibility for pension plans and
postretirement health care and life insurance benefits, as well
as how we account for the plans and benefits. See “Effects of
Significant Transactions and Events” below for changes to
eligibility in the pension and other postretirement benefit plans.
Measurement Date
We measure the fair value of pension plan assets and pension
and other postretirement benefit obligations as of the end of
our fiscal year. The fair value of pension plan assets are
estimated at the end of the year and are revised in the first half
of the following year when the information needed to finalize
fair values is received. Additionally, we receive updated census
data that is used to estimate our projected benefit obligation.
As a result of the Real Estate Divestiture as well as our selling,
general and administrative cost reduction initiative, we
remeasured our U.S. qualified pension plan during third quarter
2014. There were no significant events that triggered
remeasurement in 2013.
EFFECTS OF SIGNIFICANT TRANSACTIONS AND EVENTS
The information that is provided in this note is affected by the
following transactions and events.
Amendments of Pension and Other Postretirement Benefit
Plans for Salaried Employees
Pension Benefit Plan Amendments
During fourth quarter 2013, we ratified an amendment to the
Weyerhaeuser Pension Plan that closes the plan to newly hired
and rehired salaried or non union employees effective
January 1, 2014. Certain union employee groups adopted
similar amendments effective at other dates. Beginning at the
effective date, new hires and rehires into groups affected by
these amendments will receive a company contribution for
retirement in their 401(k) plan. The change was announced in
December 2013.
68
Postretirement Medical and Life Insurance Benefit Plan
Amendments
During fourth quarter 2014, the decision was ratified to
reinstate or modify available options for U.S. and Canadian
postretirement benefits for certain retirees. As a result, our
postretirement obligation increased by $45 million.
During fourth quarter 2013, the decision was ratified to
eliminate Company funding of the Post-Medicare Health
Reimbursement Account (HRA) for certain salaried retirees after
2014. This change was communicated to affected retirees
during January 2014. As a result, we recognized a pretax gain
of $151 million in 2014 from this plan amendment.
Midyear Remeasurement of Assets and Liabilities
Our pension plans are typically remeasured as of fiscal year-end
unless a significant event occurs that requires remeasurement.
As a result of the Real Estate Divestiture as well as our selling,
general and administrative cost reduction initiative, we
remeasured our U.S. qualified pension plan during third quarter
2014.
The net effect of the remeasurement was as follows:
(cid:129)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.
(cid:129)The funded status of our U.S. qualified pension plan was
reduced by $291 million primarily as a result of a decline in
the discount rate used to calculate the projected benefit
obligation and also due to asset performance and
curtailment and special terminations. 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.
(cid:129)Deferred tax liabilities decreased $108 million.
(cid:129)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.
FUNDED STATUS OF PLANS WE SPONSOR
The funded status of the plans we sponsor is determined by
comparing the projected benefit obligation with the fair value of
plan assets at the end of the year.
Changes in Projected Benefit Obligations of Our Pension and
Other Postretirement Benefit Plans
DOLLAR AMOUNTS IN MILLIONS
PENSION
OTHER
POSTRETIREMENT
BENEFITS
2014
2013
2014
2013
$5,834
$6,575
$321
$433
53
271
—
1,006
(87)
64
244
—
(666)
(66)
1
10
13
4
(7)
1
12
16
(23)
(5)
(391)
(317)
(44)
(50)
1
7
4
—
—
—
2
—
3
(66)
—
3
$6,698
$5,834
$303
$321
Reconciliation of projected
benefit obligation:
Projected benefit obligation
beginning of year
Service cost
Interest cost
Plan participants’
contributions
Actuarial (gains) losses
Foreign currency exchange
rate changes
Benefits paid (includes lump
sum settlements)
Plan amendments and other
Special/contractual
termination benefits
Plan transfer/Acquisitions
Projected benefit obligation
at end of year
Changes in Fair Value of Plan Assets
DOLLAR AMOUNTS IN MILLIONS
PENSION
OTHER
POSTRETIREMENT
BENEFITS
2014
2013
$5,614
$5,022
2014
$ —
2013
$ —
53
55
368
(75)
70
—
4
808
(57)
103
—
—
—
—
—
31
13
—
—
—
—
34
16
—
(391)
(317)
(44)
(50)
$5,643
$5,614
$ —
$ —
Fair value of plan assets at
beginning of year (estimated)
Adjustment for final fair value
of plan assets
Actual return on plan assets
Foreign currency exchange rate
changes
Employer contributions and
benefit payments
Plan participants’ contributions
Plan transfer/Acquisitions
Benefits paid (includes lump
sum settlements)
Fair value of plan assets at end
of year (estimated)
Funded Status of Our Pension and Other Postretirement
Benefit Plans
DOLLAR AMOUNTS IN MILLIONS
PENSION
OTHER
POSTRETIREMENT
BENEFITS
2014
2013
2014
2013
Noncurrent assets
$
8
$ 35
$ —
$ —
Current liabilities
(21)
(22)
(26)
(35)
Noncurrent liabilities
(1,042)
(233)
(277)
(283)
Funded status
$(1,055)
$(220)
$(303)
$(318)
Changes in actuarial assumptions had a negative effect on the
funded status of the pension and postretirement plans as of
the end of 2014. The primary actuarial assumption changes
were driven by a change in the discount rates as well as
adoption of the updated mortality tables for the U.S. pension
and postretirement plans. The Company elected to implement
the mortality assumption published by the Society of Actuaries
in October 2014, effective December 31, 2014. The updated
mortality tables accounted for $387 million of the increase to
the pension liabilities as well as $11 million of the increase to
the postretirement liabilities as of December 31, 2014. The
discount rates decreased from 4.90 percent at the end of 2013
to 4.10 percent at the end of 2014 for the U.S. pension plans,
and decreased from 4.0 percent at the end of 2013 to 3.60
percent at the end of 2014 for U.S. postretirement. The
discount rates decreased from 4.70 percent at the end of 2013
to 3.90 percent at the end of 2014 for the Canadian pension
plans, and decreased from 4.60 percent at the end of 2013 to
3.80 percent at the end of 2014 for Canadian postretirement.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
69
Our qualified and registered pension plans and a portion of our
nonregistered pension plans are funded. We contribute to these
plans according to established funding standards. The
nonqualified pension plan, a portion of the nonregistered
pension plans, and the other postretirement benefit plans are
unfunded. For the unfunded plans, we pay benefits to retirees
from our general assets as they come due.
The values reported for our pension plan assets at the end of
2014 and 2013 were estimated. Additional information
regarding the year-end values generally becomes available to us
during the first half of the following year. We increased the fair
value of plan assets by $53 million to reflect final valuations as
of December 31, 2013.
During 2014, we contributed $43 million for our Canadian
registered plans, we made contributions and benefit payments
of $3 million for our Canadian nonregistered pension plans and
made benefit payments of $24 million for our nonqualified
pension plans.
The asset or liability on our Consolidated Balance Sheet
representing the funded status of the plans is different from
the cumulative income or expense that we have recorded
related to these plans. These differences are actuarial gains
and losses and prior service costs and credits that are deferred
and will be amortized into our periodic benefit costs in future
periods. These unamortized amounts are recorded in
“Cumulative Other Comprehensive Loss”, which is a component
of total equity on our Consolidated Balance Sheet. The
Cumulative Other Comprehensive Income (Loss) section of
Note 16: Shareholder’s Interest details changes in the
amounts included in cumulative other comprehensive income
(loss) by component.
Accumulated Benefit Obligations Greater Than Plan Assets
As of December 31, 2014, pension plans with accumulated
benefit obligations greater than plan assets had:
(cid:129)$6.6 billion in projected benefit obligations,
(cid:129)$6.5 billion in accumulated benefit obligations and
(cid:129)assets with a fair value of $5.6 billion.
As of December 31, 2013, pension plans with accumulated
benefit obligations greater than plan assets had:
(cid:129)$971 million in projected benefit obligations,
(cid:129)$948 million in accumulated benefit obligations and
(cid:129)assets with a fair value of $726 million.
The accumulated benefit obligation for all of our defined benefit
pension plans was:
(cid:129)$6.5 billion at December 31, 2014; and
(cid:129)$5.7 billion at December 31, 2013.
70
PENSION ASSETS
Our Investment Policies and Strategies
Our investment policies and strategies guide and direct how we
manage funds for the benefit plans we sponsor. These funds
include our:
(cid:129)U.S. Pension Trust — funds our U.S. qualified pension plans;
(cid:129)Canadian Pension Trust — funds our Canadian registered
pension plans; and
(cid:129)Retirement Compensation Arrangements — fund a portion of
our Canadian nonregistered pension plans.
U.S. and Canadian Pension Trusts
Our U.S. pension trust holds the funds for our U.S. qualified
pension plans, while our Canadian pension trust holds the
funds for our Canadian registered pension plans.
Our strategy within the trusts is to invest:
(cid:129)directly in a diversified mix of nontraditional investments; and
(cid:129)indirectly through derivatives to promote effective use of
capital, increase returns and manage associated risk.
Consistent with past practice and in accordance with
investment guidelines established by the company’s
investment committee, the investment managers of the
company’s pension plan asset portfolios utilize a diversified set
of investment strategies.
Our direct investments include:
(cid:129)cash and short-term investments,
(cid:129)hedge funds,
(cid:129)private equity,
(cid:129)real estate fund investments and
(cid:129)common and preferred stocks.
Our indirect investments include:
(cid:129)equity index derivatives,
(cid:129)fixed income derivatives and
(cid:129)swaps and other derivative instruments.
The overall return for our pension trusts includes:
(cid:129)returns earned on our direct investments and
(cid:129)returns earned on the derivatives we use.
Cash and short-term investments generally consist of highly
liquid money market and government securities and are
primarily held to fund benefit payments, capital calls and
margin requirements.
Hedge fund investments generally consist of privately-offered
managed pools primarily structured as limited liability entities,
with the general members or partners of such limited liability
entities serving as portfolio manager and thus being
responsible for the fund’s underlying investment decisions.
Generally, these funds have varying degrees of liquidity and
redemption provisions. Underlying investments within these
funds may include long and short public and private equities,
corporate, mortgage and sovereign debt, options, swaps,
forwards and other derivative positions. These funds may also
use varying degrees of leverage.
Private equity investments consist of investments in private
equity, mezzanine, distressed, co-investments and other
structures. Private equity funds generally participate in buyouts
and venture capital of limited liability entities through unlisted
equity and debt instruments. These funds may also employ
borrowing at the underlying entity level. Mezzanine and
distressed funds generally follow strategies of investing in the
debt of public or private companies with additional participation
through warrants or other equity type options.
Real estate fund investments in real property may be initiated
through private transactions between principals or public
market vehicles such as real estate investment trusts and are
generally held in limited liability entities.
Common and preferred stocks are equity instruments that
generally have resulted from transactions related to private
equity investment holdings.
Swaps and other derivative instruments generally are
comprised of swaps, futures, forwards or options. In
accordance with our investment risk and return objectives,
some of these instruments are utilized to achieve target equity
and bond asset exposure or to reduce exposure to certain
market risks or to help manage the liquidity of our investments.
The resulting asset mix achieved is intended to allow the
assets to perform comparably with established benchmarks.
Others, mainly total return swaps with limited exchange of
principal, are designed to gain exposure to the return
characteristics of specific financial strategies.
All swap, forward and option contracts are executed in a
diversified manner through a number of financial institutions
and in accordance with our investment guidelines.
Retirement Compensation Arrangements
Retirement Compensation Arrangements fund a portion of our
Canadian nonregistered pension plans.
Under Retirement Compensation Arrangements, our
contributions are split:
(cid:129)50 percent to our investments in a portfolio of equities; and
(cid:129)50 percent to a noninterest-bearing refundable tax account
held by the Canada Revenue Agency — as required by
Canadian tax rules.
The Canadian tax rules requirement means that — on average,
over time — approximately 50 percent of our Canadian
nonregistered pension plans’ assets do not earn returns.
Managing Risk
Investments and contracts, in general, are subject to risk,
including market price, liquidity, currency, interest rate and
credit risks. We have established governance practices to
manage certain risks. The following provides an overview of
these risks and describes actions we take to mitigate the
potential adverse effects of these risks on the performance of
our pension plan assets. Generally, we manage these risks
through:
(cid:129)selection and diversification of managers and strategies,
(cid:129)use of limited-liability vehicles,
(cid:129)diversification and
(cid:129)constraining risk profiles to predefined limits on the
percentage of pension trust assets that can be invested in
certain categories.
Market price risk is the risk that the future value of a financial
instrument will fluctuate as a result of changes in its market
price, whether caused by factors specific to the individual
investment, its issuer, or any other market factor that may
affect its price. We attempt to mitigate market price risk on the
company’s pension plan asset portfolios by investing in a
diversified set of assets whose returns exhibit low correlation
to those of traditional asset classes and each other. In
addition, we and our investment advisers monitor the
investments on a regular basis to ensure the decision to invest
in particular assets continues to be suitable, including
performing ongoing qualitative and quantitative assessments
and comprehensive investment and operational due diligence.
Special attention is paid to organizational changes made by the
underlying fund managers and to changes in policy relative to
their investment objectives, valuation, hedging strategy, degree
of diversification, leverage, alignment of fund principles and
investors, risk governance and costs.
Liquidity risk is the risk that the pension trusts will encounter
difficulty in meeting obligations associated with their financial
liabilities. Our financial obligations as they relate to the pension
plans may consist of distributions and redemptions payable to
pension plan participants, payments to counterparties and fees
to service providers. As established, pension plan assets
primarily consist of investments in limited liability pools for
which there is no active secondary market. As a result, the
investments may be illiquid. Further, hedge funds are subject to
potential restrictions that may affect the timing of the
realization of pending redemptions. Private equity funds are
subject to distribution and funding schedules that are set by
the private equity funds’ respective managers and market
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
71
activity. To mitigate liquidity risk on the company’s pension plan
asset portfolios, the hedge fund portfolios have been diversified
across manager’s strategies and funds that possess varying
liquidity provisions and the private equity portfolios have been
diversified across different vintage years and strategies. In
addition, the investment committee regularly reviews cash flows
of the pension trusts and sets appropriate guidelines to
address liquidity needs.
Currency risk arises from holding pension plan assets
denominated in a currency other than the currency in which its
liabilities are settled. Such risk is managed generally through
notional contracts designed to hedge the net exposure to non-
functional currencies.
Interest rate risk is the risk that a change in interest rates will
adversely affect the fair value of fixed income securities. The
pension trust’s primary exposure to interest rate risk is indirect
and through their investments in limited liability pools. Such
indirect exposure is managed by the respective fund managers
in conjunction with their investment level decisions and
predefined investment mandates.
Credit risk relates to the extent to which failures by
counterparties to discharge their obligations could reduce the
amount of future cash flows on hand at the balance sheet date.
The pension trusts’ exposure to counterparty credit risk is
reflected in settlement receivables from derivative contracts
within the pension plan assets. In evaluating credit risk, we will
often be dependent upon information provided by the
counterparty or a rating agency, which may be inaccurate. We
decrease exposure to credit risk by only dealing with highly-
rated financial counterparties, and as of year-end, our
counterparties each had a credit rating of at least A from
Standard and Poor’s.
We further manage this risk through:
(cid:129)diversification of counterparties,
(cid:129)predefined settlement and margining provisions and
(cid:129)documented agreements.
We expect that none of our counterparties will fail to meet its
obligations. Also, no principal is at risk as a result of these
types of investments. Only the amount of unsettled net
receivables is at risk.
We are also exposed to credit risk indirectly through
counterparty relationships struck by the underlying managers of
investments in limited liability pools. This indirect exposure is
mitigated through a due diligence process, which focuses on
monitoring each investment fund to ensure the decision to
invest in or maintain exposure to a fund continues to be
suitable for the pension plans’ asset portfolios.
While we do not target specific direct investment or derivative
allocations, we have established guidelines on the percentage
72
of pension trust assets that can be invested in certain
categories to provide diversification by investment type fund
and investment managers, as well as to manage overall
liquidity.
Assets within our qualified and registered pension plans in our
U.S. and Canadian pension trusts were invested as follows:
Fixed income
Hedge funds
Private equity and related funds
Real estate and related funds
Common and preferred stock and
equity index instruments
Accrued liabilities
Total
DECEMBER 31,
2014
DECEMBER 31,
2013
12.2%
60.6
25.3
1.4
0.7
(0.2)
100.0%
11.4%
57.5
28.6
1.8
0.9
(0.2)
100.0%
Assets within our nonregistered plans that we are allowed to
manage were invested as follows:
Equities
Cash and cash equivalents
Total
Valuation of Our Plan Assets
DECEMBER 31,
2014
DECEMBER 31,
2013
52.8%
47.2
100.0%
55.5%
44.5
100.0%
The pension assets are stated at fair value based upon the
amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants at the reporting date. We do not value pension
investments based upon a forced or distressed sale scenario.
Instead, we consider both observable and unobservable inputs
that reflect assumptions applied by market participants when
setting the exit price of an asset or liability in an orderly
transaction within the principal market of that asset or liability.
We value the pension plan assets based upon the observability
of exit pricing inputs and classify pension plan assets based
upon the lowest level input that is significant to the fair value
measurement of the pension plan assets in their entirety. The
fair value hierarchy we follow is outlined below;
Level 1: Inputs are unadjusted quoted prices for identical
assets and liabilities traded in an active market.
Level 2: Inputs are quoted prices in non-active markets for
which pricing inputs are observable either directly or indirectly
at the reporting date.
Level 3: Inputs are derived from valuation techniques in which
one or more significant inputs or value drivers are
unobservable.
The pension assets are comprised of cash and short-term
investments, derivative contracts, common and preferred stock
and fund units. The fund units are typically limited liability
interests in hedge funds, private equity funds, real estate funds
and cash funds. Each of these assets participates in its own
unique principal market.
Cash and short-term investments, when held directly, are
valued at cost.
Common and preferred stocks are valued at exit prices quoted
in the public markets.
Derivative contracts held by our pension trusts are not publicly
traded and each derivative contract is specifically negotiated
with a unique financial counterparty and references either
illiquid fund units or a unique number of synthetic units of a
publicly reported market index. The derivative contracts are
valued based upon valuation statements received from the
financial counterparties.
Fund units are valued based upon the net asset values of the
funds which we believe represent the per-unit prices at which
new investors are permitted to invest and the prices at which
existing investors are permitted to exit. To the degree net asset
values as of the end of the year have not been received, we
use the most recently reported net asset values and adjust for
market events and cash flows that have occurred between the
interim date and the end of the year to estimate the fair values
as of the end of the year.
Assets that do not have readily available quoted prices in an
active market require a higher degree of judgment to value and
have a higher degree of risk that the value that could have been
realized upon sale as of the valuation date could be different
from the reported value than assets with observable pricing
inputs. It is possible that the full extent of market price,
liquidity, currency, interest rate, or credit risks may not be fully
factored into the fair values of our pension plan assets that use
significant unobservable inputs. Approximately $4.8 billion, or
85.8 percent, of our pension plan assets were classified as
Level 3 assets as of December 31, 2014.
We estimate the fair value of pension plan assets based upon
the information available during the year-end reporting process.
In some cases, primarily private equity funds, the information
available consists of net asset values as of an interim date,
cash flows between the interim date and the end of the year,
and market events. When the difference is significant, we
revise the year-end estimated fair value of pension plan assets
to incorporate year-end net asset values received after we have
filed our annual report on Form 10-K. We increased the fair
value of pension assets in the second quarter of 2014 by
$53 million, or 1.0 percent.
The net pension plan assets, when categorized in accordance
with this fair value hierarchy, are as follows:
DOLLAR AMOUNTS IN MILLIONS
2014
Level 1
Level 2
Level 3
Total
Pension trust investments:
Fixed income instruments
Hedge funds
Private equity and related
funds
Real estate and related
funds
Common and preferred
stock and equity index
instruments
Total pension trust
investments
Accrued liabilities, net
Pension trust net assets
Canadian nonregistered plan
assets:
Cash
Investments
Total Canadian
nonregistered plan assets
Total plan assets
$646
103
—
—
25
$ 36
$
3
$ 685
(22)
3
—
12
3,333
1,422
3,414
1,425
82
—
82
37
$774
$ 29
$4,840
$5,643
$
7
6
$ —
$ —
—
—
$ 13
$ —
$ —
(13)
$5,630
$
$
7
6
13
$5,643
DOLLAR AMOUNTS IN MILLIONS
2013
Level 1
Level 2
Level 3
Total
Pension trust investments:
Fixed income instruments
$567
$68
$
3
$ 638
Hedge funds
Private equity and related
funds
Real estate and related
funds
Common and preferred
stock and equity index
instruments
Total pension trust
investments
Accrued liabilities, net
Pension trust net
investments
Canadian nonregistered plan
assets:
Cash
Investments
Total Canadian
nonregistered plan assets
Total plan assets
—
—
—
23
(7)
(2)
—
29
3,225
1,606
3,218
1,604
101
101
—
52
$590
$88
$4,935
$5,613
$
8
6
$ 14
$ —
—
$ —
$ —
—
$ —
(13)
$5,600
$
$
8
6
14
$5,614
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
73
A reconciliation of the beginning and ending balances of the
pension plan assets measured at fair value using significant
unobservable inputs (Level 3) is presented below:
DOLLAR AMOUNTS IN MILLIONS
This table shows the aggregate notional amount of the
derivatives held by our pension trusts — which fund our
qualified and registered plans — at the end of the last two
years.
INVESTMENTS
DOLLAR AMOUNTS IN MILLIONS
Hedge
funds
$2,767
Private equity
and related
funds
Real estate
and related
funds
Fixed
Income
Total
$1,577
$ 91
$ 4
$ 4,439
90
(19)
—
235
138
23
(1)
435
Balance as of
December 31,
2012
Net realized
gains
(losses)
Net change
in unrealized
appreciation
(depreciation)
Purchases
Sales
Settlements
Balance as of
December 31,
2013
Net realized
gains
(losses)
Net change
in unrealized
appreciation
(depreciation)
Purchases
Sales
Issuances
Settlements
Transfers,
Out(1)
Balance as of
December 31,
2014
164
275
743
(645)
(79)
188
(387)
—
3,225
1,606
186
128
76
(130)
541
(540)
52
(132)
(75)
177
(359)
—
—
—
29
(23)
—
101
8
(4)
5
(28)
—
—
—
—
—
—
3
—
—
—
—
—
—
—
960
(1,055)
(79)
4,935
322
(58)
723
(927)
52
(132)
(75)
$3,333
$1,422
$ 82
$ 3
$ 4,840
(1) One hedge fund completed an initial public offering during 2014; as such the security
was transferred from Level 3 to Level 1 in 2014.
This table shows the fair value of the derivatives held by our
pension trusts — which fund our qualified and registered
plans — at the end of the last two years.
DOLLAR AMOUNTS IN MILLIONS
Equity index instruments
Forward contracts
Swaps
Total
DECEMBER 31,
2014
DECEMBER 31,
2013
$ 13
(32)
436
$417
$ 29
(9)
405
$425
74
Equity index instruments
Forward contracts
Swaps
Total
DECEMBER 31,
2014
DECEMBER 31,
2013
$ 361
535
1,824
$2,720
$ 399
638
1,568
$2,605
ACTIVITY OF PLANS WE SPONSOR
Net Periodic Benefit Cost (Credit)
DOLLAR AMOUNTS IN MILLIONS
PENSION
OTHER POSTRETIREMENT
BENEFITS
2014
2013
2012
2014
2013
2012
Net periodic
benefit cost
(credit):
Service cost(1)
$ 53
$ 64
$ 53
$
1
$ 1
$
1
Interest cost
271
244
262
(467)
(439)
(422)
125
221
175
10
—
12
12
—
14
15
—
13
5
9
7
—
7
(161)
(23)
(127)
—
—
—
—
—
—
—
(4)
—
4
$
(4)
$ 97
$ 75
$(142)
$ 4
$ (94)
Expected return
on plan assets
Amortization of
actuarial loss
Amortization of
prior service
cost (credit)(2)(3)
Recognition of
curtailments,
settlements
and special
termination
benefits due to
closures,
restructuring or
divestitures(1)
Other
Net periodic
benefit cost
(credit)
(1) Service cost includes $2 million in 2014, $4 million in 2013 and $3 million in 2012 for
employees that were part of the Real Estate Divestiture. These charges are included in
our results of discontinued operations. Curtailment and special termination benefits are
related to involuntary terminations, due to restructuring activities, as well as the Real
Estate Divestiture.
(2) During fourth quarter 2011, we ratified amendments to our postretirement medical and
life insurance benefit plans for U.S. salaried employees that reduced or eliminated
certain benefits that were available to both past and present employees. The company
recognized a gain of $103 million in 2012 due to these benefit changes. This gain is
included in other operating income and reflected in the amortization of prior service
credit in the table above. The benefit related to the fourth quarter 2011 amendments
was fully recognized in first and second quarter 2012.
(3) During fourth quarter 2013, the decision was ratified to eliminate Company funding of
the Post-Medicare Health Reimbursement Account (HRA) for certain salaried retirees
after 2014. This change was communicated to affected retirees during January 2014. As
a result, we recognized a pretax gain of $151 million in 2014 from this plan amendment.
Estimated Projected Benefit Payments for the Next 10 Years
DOLLAR AMOUNTS IN MILLIONS
2015
2016
2017
2018
2019
2020-2024
PENSION
OTHER
POSTRETIREMENT
BENEFITS
$ 348
$ 354
$ 361
$ 370
$ 379
$1,979
$26
$25
$24
$23
$22
$98
ACTUARIAL ASSUMPTIONS
We use actuarial assumptions to estimate our benefit
obligations and our net periodic benefit costs.
Rates We Use in Estimating Our Benefit Obligations
We use assumptions to estimate our benefit obligations that
include:
(cid:129)discount rates in the U.S. and Canada, including discount
rates used to value lump sum distributions;
(cid:129)rates of compensation increases for our salaried and hourly
employees in the U.S. and Canada; and
(cid:129)estimated percentages of eligible retirees who will elect lump
sum payments of benefits.
Estimated Amortization from Cumulative Other Comprehensive
Loss in 2015
Amortization of the net actuarial loss and prior service cost
(credit) of our pension and postretirement benefit plans will
affect our other comprehensive income in 2015. The net effect
of the estimated amortization will be an increase in net periodic
benefit costs or a decrease in net periodic benefit credits in
2015.
DOLLAR AMOUNTS IN MILLIONS
Net actuarial loss
Prior service cost (credit)
Net effect cost
OTHER
POSTRETIREMENT
BENEFITS
$10
(9)
TOTAL
$188
(5)
$ 1
$183
PENSION
$178
4
$182
Expected Pension Funding
Established funding standards govern the funding requirements
for our qualified and registered pension plans. We fund the
benefit payments of our nonqualified and nonregistered plans
as benefit payments come due.
During 2015, based on estimated year-end asset values and
projections of plan liabilities, we expect to:
(cid:129)be required to contribute approximately $38 million for our
Canadian registered plan;
(cid:129)be required to contribute or make benefit payments for our
Canadian nonregistered plans of $3 million; and
(cid:129)make benefit payments of approximately $19 million for our
U.S. nonqualified pension plans.
We do not anticipate a contribution being required for our U.S.
qualified pension plan for 2015.
Expected Postretirement Benefit Funding
Our retiree medical and life insurance plans are unfunded.
Benefits for these plans are paid from our general assets as
they come due. We expect to make benefit payments of
$26 million for our U.S. and Canadian other postretirement
benefit plans in 2015, including $9 million expected to be
required to cover benefit payments under collectively bargained
contractual obligations.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
75
Discount Rates and Rates of Compensation Increase Used in Estimating Our Pension and Other Postretirement Benefit
Obligation
Discount rates:
United States
Canada
Lump sum distributions (US salaried and nonqualified plans
only)(1)
Rate of compensation increase:
Salaried:
United States
Canada
Hourly:
United States
Canada
Election of lump sum or installment distributions (US salaried
and nonqualified plans only)
PENSION
OTHER POSTRETIREMENT
BENEFITS
DECEMBER 31,
2014
DECEMBER 31,
2013
DECEMBER 31,
2014
DECEMBER 31,
2013
4.10%
3.90%
4.90%
4.70%
PPA Table
PPA Table
2.50% for 2014, 2015
and 3.50% thereafter
2.50% for 2013, 2014
and 3.50% thereafter
2.50% for 2014, 2015
and 3.50% thereafter
2.50% for 2013, 2014
and 3.50% thereafter
3.00%
3.25%
60.00%
3.00%
3.25%
60.00%
3.60%
3.80%
N/A
N/A
N/A
3.00%
N/A
N/A
4.00%
4.60%
N/A
N/A
N/A
3.00%
N/A
N/A
(1) The PPA Phased Table: Interest and mortality assumptions as mandated by Pension Protection Act of 2006 including the phase out of the prior interest rate basis in 2013.
Estimating Our Net Periodic Benefit Costs
The assumptions we use to estimate our net periodic benefit costs include:
(cid:129)discount rates in the U.S. and Canada, including discount rates used to value lump sum distributions;
(cid:129)expected returns on our plan assets;
(cid:129)rates of compensation increases for our salaried and hourly employees in the U.S. and Canada; and
(cid:129)estimated percentages of eligible retirees who will elect lump sum payments of benefits.
76
This table shows the discount rates, expected returns on our plan assets and rates of compensation increases we used the last
three years to estimate our net periodic benefit costs.
Rates Used to Estimate Our Net Periodic Benefit Costs
PENSION
OTHER
POSTRETIREMENT
BENEFITS
2014
2013
2012
2014
2013
2012
4.90% for the
first half of 2014
and 4.40% for the
second half of 2014
PPA Table
3.70%
4.50%
4.00%
3.00%
4.10%
PPA phased
Table
PPA phased
Table
N/A
N/A
N/A
4.70%
4.10%
4.90%
4.60%
4.00%
4.80%
9.00%
3.50%
9.00%
3.50%
9.00%
3.50%
2.50% for 2014
and 3.50% thereafter
2.50% for 2013
and 3.50% thereafter
2.50% for 2014
and 3.50% thereafter
2.50% for 2013
and 3.50% thereafter
2.00% for
2012
and 3.50%
thereafter
2.10% for
2012
and 3.50%
thereafter
3.00%
3.25%
60.00%
3.00%
3.25%
3.00%
3.25%
56.00%
60.00%
N/A
N/A
3.00%
N/A
N/A
N/A
N/A
3.00%
N/A
N/A
N/A
N/A
3.00%
N/A
N/A
Discount rates:
United States
Salaried – lump sum distributions
(U.S. salaried and nonqualified plan
only)(1)
Canada
Expected return on plan assets:
Qualified/registered plans
Nonregistered plans (Canada only)
Rate of compensation increase:
Salaried:
United States
Canada
Hourly:
United States
Canada
Election of lump sum distributions (U.S.
salaried and nonqualified plans only)
(1) PPA Phased Table: Interest and mortality assumptions as mandated by Pension Protection Act of 2006 including the phase out of the prior interest rate basis in 2013.
Expected Return on Plan Assets
We estimate the expected long-term return on assets for our:
(cid:129)qualified and registered pension plans and
(cid:129)nonregistered plans.
Qualified and Registered Pension Plans. Our expected long-
term rate of return for plan assets as of December 31, 2014,
is comprised of:
(cid:129) a 7.3 percent assumed return from direct investments and
(cid:129) a 1.7 percent assumed return from derivatives.
Determining our expected return:
(cid:129)requires a high degree of judgment,
(cid:129)uses our historical fund returns as a base and
(cid:129)places added weight on more recent pension plan asset
performance.
Over the 30 years it has been in place, our U.S. pension trust
investment strategy has achieved a 14.6 percent net
compound annual return rate. The past 5 years, our net
compounded annual return was 10.6 percent.
Nonregistered plans. Canadian tax rules require that
50 percent of the assets for nonregistered plans go to a
noninterest-bearing refundable tax account. As a result, the
return we earn investing the other 50 percent is spread over
100 percent of the assets.
Our expected long-term annual rate of return on the equity
portion of this portfolio — the portion we are allowed to invest
and manage — is 7 percent. We base that expected rate of
return on:
(cid:129)historical experience and
(cid:129)future return expectations.
Our expected overall annual return on assets that fund our
nonregistered plans is 3.5 percent.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
77
Actual Returns on Assets Held by Our Pension Trusts
Effect of a 1 Percent Change in Health Care Costs
Based on valuations received as of year-end, our total actual
return on assets held by our pension trusts was a gain of
approximately $368 million in 2014. These trusts fund our
qualified, registered and a portion of our nonregistered pension
plans.
DOLLAR AMOUNTS IN MILLIONS
AS OF DECEMBER 31, 2014 (DOLLAR AMOUNTS IN MILLIONS)
Effect on total service and interest cost
components
Effect on accumulated postretirement
benefit obligation
1% INCREASE
1% DECREASE
less than $1
less than $(1)
$14
$(12)
Direct investments
Derivatives
Total
2014
2013
2012
UNION-ADMINISTERED MULTIEMPLOYER BENEFIT PLANS
$258
$568
$324
110
240
166
$368
$808
$490
We contribute to multiemployer defined benefit plans under the
terms of collective-bargaining agreements that cover some of
our union-represented employees.
HEALTH CARE COSTS
Rising costs of health care affect the costs of our other
postretirement plans.
Health Care Cost Trend Rates
We use assumptions about health care cost trend rates to
estimate the cost of benefits we provide. In 2014, the
assumed weighted health care cost trend rate was:
(cid:129)6.4 percent in the U.S. and
(cid:129)5.7 percent in Canada.
This table shows the assumptions we use in estimating the
annual cost increase for health care benefits we provide.
Assumptions We Use in Estimating Health Care Benefit Costs
Weighted health care cost
trend rate assumed for next
year
Rate to which cost trend rate
is assumed to decline
(ultimate trend rate)
Year that the rate reaches
the ultimate trend rate
2014
2013
U.S.
CANADA
U.S.
CANADA
6.30%
5.60%
6.40%
5.70%
4.50%
4.30%
4.50%
4.30%
2029
2028
2029
2028
The assumed health care cost trend rate can significantly
influence projected postretirement benefit plan payments.
Some of the benefits are defined dollar amounts and are
unaffected by changes in health care costs. To determine the
health care cost trend rate, we look at historical market
experience, current environment and future expectations. The
following table demonstrates the effect a 1 percent change in
assumed health care cost trend rates would have with all other
assumptions remaining constant.
78
The U.S. plans are established to provide retirement income for
eligible employees who meet certain age and service
requirements at retirement. The benefits are generally based
on:
(cid:129)a percentage of the employer contributions paid into the plan
on the eligible employee’s behalf or
(cid:129)a formula considering an eligible employee’s service, the
total contributions paid on their behalf plus a benefit based
on the value of an eligible employee’s account.
The Canadian plan is a negotiated cost defined benefit plan.
The plan is established to provide retirement income for
members based on their number of years of service in the
industry, and the benefit rate that applied to that service.
The risks of participating in these multiemployer plans are
different from single-employer plans in the following aspects:
(cid:129)Assets contributed to the multiemployer plan by one
employer may be used to provide benefits to employees of
other participating employers.
(cid:129)If a participating employer stops contributing to the plan, the
unfunded obligations of the plan may be borne by the
remaining participating employers.
(cid:129)If we choose to stop participating in some of the
multiemployer plans, we may be required to pay those plans
an amount based on the underfunded status of the plan,
referred to as a withdrawal liability.
As of December 31, 2014, these plans covered approximately
1,200 of our employees.
Our contributions were:
(cid:129)$4 million in 2014,
(cid:129)$4 million in 2013 and
(cid:129)$4 million in 2012.
There have been no significant changes that affect the
comparability of the 2014, 2013 and 2012 contributions. None
of our contributions exceeded more than 5 percent of any
plan’s total contributions during 2014, 2013 or 2012.
DEFINED CONTRIBUTION PLANS
We sponsor various defined contribution plans for our U.S. and
Canadian salaried and hourly employees. Our contributions to
these plans were:
(cid:129)$20 million in 2014,
(cid:129)$20 million in 2013 and
(cid:129)$19 million in 2012.
NOTE 10: VARIABLE INTEREST ENTITIES
This note provides details about special-purpose entities
(SPEs).
SPECIAL-PURPOSE ENTITIES
From 2002 through 2004, we sold certain nonstrategic
timberlands in five separate transactions. We are the primary
beneficiary and consolidate the assets and liabilities of certain
monetization and buyer-sponsored SPEs involved in these
transactions. We have an equity interest in the monetization
SPEs, but no ownership interest in the buyer-sponsored SPEs.
The following disclosures refer to assets of buyer-sponsored
SPEs and liabilities of monetization SPEs. However, because
these SPEs are distinct legal entities:
(cid:129)Assets of the SPEs are not available to satisfy our liabilities
or obligations.
(cid:129)Liabilities of the SPEs are not our liabilities or obligations.
In 2013, we repaid a $162 million note and received
$184 million related to one of our timber monetization SPEs
undertaken in 2003. Net proceeds were $22 million. In 2012,
we repaid a $97 million note and received $110 million related
to one of our timber monetization SPEs undertaken in 2002.
Net proceeds were $13 million.
Our Consolidated Statement of Operations includes:
(cid:129)Interest expense on SPE notes of:
– $29 million in 2014,
– $29 million in 2013 and
– $32 million in 2012.
(cid:129)Interest income on SPE investments of:
– $34 million in 2014,
– $34 million in 2013 and
– $34 million in 2012.
Sales proceeds paid to buyer-sponsored SPEs were invested in
restricted financial investments with a balance of $615 million
as of both December 31, 2014, and December 31, 2013. The
weighted average interest rate was 5.5 percent during 2014
and 5.1 percent during 2013. Maturities of the financial
investments at the end of 2014 were:
(cid:129)$253 million in 2019 and
(cid:129)$362 million in 2020.
The long-term notes of our monetization SPEs were
$511 million as of both December 31, 2014, and
December 31, 2013. The weighted average interest rate was
5.6 percent during 2014 and 5.3 percent in 2013. Maturities of
the notes at the end of 2014 were:
(cid:129)$209 million in 2019 and
(cid:129)$302 million in 2020.
Financial investments consist of bank guarantees backed by
bank notes for three of the SPE transactions. Interest earned
from each financial investment is used to pay interest accrued
on the corresponding SPE’s note. Any shortfall between interest
earned and interest accrued reduces our equity in the
monetization SPEs.
Upon dissolution of the SPEs and payment of all obligations of
the entities, we would receive any net equity remaining in the
monetization SPEs and would be required to report deferred tax
gains on our income tax return. In the event that proceeds from
the financial investments are insufficient to settle all of the
liabilities of the SPEs, we are not obligated to contribute any
funds to any of the SPEs. As of December 31, 2014, our net
equity in the three SPEs was approximately $105 million and
the deferred tax liability was estimated to be approximately
$180 million.
NOTE 11: ACCRUED LIABILITIES
Accrued liabilities were comprised of the following:
DOLLAR AMOUNTS IN MILLIONS
Wages, salaries and severance pay
$161
$159
DECEMBER 31,
2014
DECEMBER 31,
2013
Pension and postretirement
Vacation pay
Income taxes
Taxes – Social Security and real and
personal property
Interest
Customer rebates and volume
discounts
Deferred income
Other
Total
47
47
4
24
105
46
75
78
57
48
4
32
104
50
82
93
$587
$629
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
79
NOTE 12: LINES OF CREDIT
This note provides details about our:
(cid:129)lines of credit and
(cid:129)other letters of credit and surety bonds.
Long-Term Debt by Types and Interest Rates (Includes Current
Portion)
DOLLAR AMOUNTS IN MILLIONS
6.95% debentures due 2017
$ 281
$ 281
DECEMBER 31,
2014
DECEMBER 31,
2013
OUR LINES OF CREDIT
During September 2013, we entered into a new $1 billion
5-year senior unsecured revolving credit facility that expires in
September 2018. This replaces a $1 billion revolving credit
facility that was set to expire June 2015. As of June 16, 2014,
WRECO terminated its participation as a borrower in the facility.
Borrowings are at LIBOR plus a spread or at other interest rates
mutually agreed upon between the borrower and the lending
banks. As of December 31, 2014, there were no borrowings
outstanding under the facility and we were in compliance with
the credit facility covenants.
OTHER LETTERS OF CREDIT AND SURETY BONDS
The amounts of other letters of credit and surety bonds we
have entered into as of the end of our last two years are
included in the following table:
DOLLAR AMOUNTS IN MILLIONS
7.00% debentures due 2018
7.375% notes due 2019
Variable rate term loan credit facility
due 2020
9.00% debentures due 2021
7.125% debentures due 2023
4.625% notes due 2023
8.50% debentures due 2025
7.95% debentures due 2025
7.70% debentures due 2026
7.35% debentures due 2026
7.85% debentures due 2026
6.95% debentures due 2027
7.375% debentures due 2032
6.875% debentures due 2033
Industrial revenue bonds, rates from
6.7% to 6.8%, due 2022
DECEMBER 31,
2014
DECEMBER 31,
2013
Other
62
500
550
150
191
500
300
136
150
62
100
300
1,250
275
88
1
4,896
(5)
$4,891
$ —
62
500
550
150
191
500
300
136
150
62
100
300
1,250
275
88
1
4,896
(5)
$4,891
$ —
Letters of credit
Surety bonds
$ 44
$231
$ 39
$169
Our compensating balance requirements for our letters of credit
were $14 million as of December 31, 2014.
NOTE 13: LONG-TERM DEBT
This note provides details about:
(cid:129)long-term debt and the portion due within one year and
(cid:129)long-term debt maturities.
Our long-term debt includes notes, debentures, revenue bonds
and other borrowings. The following table lists our long-term
debt, which includes Weyerhaeuser Company debt, by types
and interest rates at the end of our last two years and includes
the current portion.
80
Less unamortized discounts
Total
Portion due within one year
In order to repay the debt that we assumed in the acquisition of
Longview Timber, in 2013 we issued $500 million of
4.625 percent notes due September 15, 2023. The net
proceeds after deducting the discount, underwriting fees and
issuance costs were $495 million. We also entered into a
$550 million 7-year senior unsecured term loan credit facility
maturing in September 2020 and borrowed $550 million.
Borrowings are at LIBOR plus a spread or at other interest rates
mutually agreed upon between the borrower and the lending
banks.
On October 15, 2013, we repaid the $1,118 million carrying
value of the debt that we assumed in the acquisition of
Longview Timber and related fees, expenses and premiums
using the proceeds from the notes issued and the borrowings
from our term loan credit facility borrowed in 2013. A pretax
charge of $25 million was included in our net interest expense
in 2013, for early retirement premiums, unamortized debt
issuance costs and other miscellaneous charges in connection
with the early extinguishment of debt. See Note 4: Longview
Timber Purchase for more information.
In addition to the Longview Timber debt and repaying debt that
was scheduled to mature, we repaid approximately $40 million
of long-term debt in 2013.
Amounts of Long-Term Debt Due Annually for the Next Five
Years and the Total Amount Due After 2019
FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS
We believe that our other financial instruments, including cash
and cash equivalents, short-term investments, receivables, and
payables, have net carrying values that approximate their fair
values with only insignificant differences. This is primarily due
to:
DOLLAR AMOUNTS IN MILLIONS
Long-term debt maturities:
2015
2016
2017
2018
2019
Thereafter
NOTE 14: FAIR VALUE OF FINANCIAL INSTRUMENTS
This note provides information about the fair value of our:
(cid:129)debt and
(cid:129)other financial instruments.
FAIR VALUE OF DEBT
DECEMBER 31,
2014
(cid:129)the short-term nature of these instruments,
(cid:129)carrying short-term investments at expected net realizable
value and
$ —
$ —
$ 281
$
62
$ 500
$4,053
(cid:129)the allowance for doubtful accounts.
NOTE 15: LEGAL PROCEEDINGS, COMMITMENTS AND
CONTINGENCIES
This note provides details about our:
(cid:129)legal proceedings,
(cid:129)environmental matters and
(cid:129)commitments and other contingencies.
LEGAL PROCEEDINGS
We are party to various legal proceedings arising in the ordinary
course of business. We are not currently a party to any legal
proceeding that management believes could have a material
adverse effect on our long-term consolidated financial position,
results of operations or cash flows.
The estimated fair values and carrying values of our long-term
debt consisted of the following:
DOLLAR AMOUNTS IN MILLIONS
ENVIRONMENTAL MATTERS
Our environmental matters include:
DECEMBER 31, 2014
DECEMBER 31, 2013
CARRYING
VALUE
FAIR VALUE
(LEVEL 2)
CARRYING
VALUE
FAIR VALUE
(LEVEL 2)
(cid:129)site remediation and
(cid:129)asset retirement obligations.
Long-term debt (including
current maturities)
$4,891
$5,922
$4,891
$5,683
Site Remediation
To estimate the fair value of long-term debt, we used the
following valuation approaches:
(cid:129)market approach — based on quoted market prices we
received for the same types and issues of our debt; or
(cid:129)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 inputs to these valuations are based on market data
obtained from independent sources or information derived
principally from observable market data.
The difference between the fair value and the carrying value
represents the theoretical net premium or discount we would
pay or receive to retire all debt at the measurement date.
Under the Comprehensive Environmental Response,
Compensation and Liability Act — commonly known as the
Superfund — and similar state laws, we:
(cid:129)are a party to various proceedings related to the cleanup of
hazardous waste sites and
(cid:129)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.
Our established reserves. We have established reserves for
estimated remediation costs on the active Superfund sites and
other sites for which we are responsible. These reserves are
recorded in “Accrued liabilities” and “Other liabilities” in our
Consolidated Balance Sheet.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
81
Changes in the Reserve for Environmental Remediation
Changes in the Reserve for Asset Retirement Obligations
DOLLAR AMOUNTS IN MILLIONS
Reserve balance as of December 31, 2013
Reserve charges and adjustments, net
Payments
Reserve balance as of December 31, 2014
Total active sites as of December 31, 2014
DOLLAR AMOUNTS IN MILLIONS
Reserve balance as of December 31, 2013
Reserve charges and adjustments, net
Payments
Other adjustments(1)
Reserve balance as of December 31, 2014
(1) Primarily related to the sale of a landfill in Washington State.
$30
4
(5)
$29
49
$ 54
10
(10)
(14)
$ 40
We change our accrual to reflect:
(cid:129)new information on any site concerning implementation of
remediation alternatives,
(cid:129)updates on prior cost estimates and new sites and
(cid:129)costs incurred to remediate sites.
Estimates. We believe it is reasonably possible, based on
currently available information and analysis, that remediation
costs for all identified sites may exceed our existing reserves
by up to $108 million.
This estimate, in which those additional costs may be incurred
over several years, is the upper end of the range of reasonably
possible additional costs. The estimate:
(cid:129)is much less certain than the estimates on which our
accruals currently are based, and
(cid:129)uses assumptions that are less favorable to us among the
range of reasonably possible outcomes.
In estimating our current accruals and the possible range of
additional future costs, we:
(cid:129)assumed we will not bear the entire cost of remediation of
every site,
(cid:129)took into account the ability of other potentially responsible
parties to participate, and
(cid:129)considered each party’s financial condition and probable
contribution on a per-site basis.
We have not recorded any amounts for potential recoveries
from insurance carriers.
Asset Retirement Obligations
We have obligations associated with the retirement of tangible
long-lived assets consisting primarily of reforestation
obligations related to forest management licenses in Canada
and obligations to close and cap landfills. Some of our sites
have asbestos containing materials. We have met our current
legal obligation to identify and manage these materials. In
situations where we cannot reasonably determine when
asbestos containing materials might be removed from the
sites, we have not recorded an accrual because the fair value
of the obligation cannot be reasonably estimated. These
obligations are recorded in “Accrued liabilities” and “Other
liabilities” in our Consolidated Balance Sheet.
82
COMMITMENTS AND OTHER CONTINGENCIES
Our commitments and contingencies include:
(cid:129)guarantees of debt and performance,
(cid:129)purchase obligations for goods and services and
(cid:129)operating leases.
Guarantees
We have guaranteed the performance of the buyer/lessee of a
timberlands lease we sold in 2005. Future payments on the
lease — which expires in 2023 — are $16 million.
Purchase Obligations
Our purchase obligations as of December 31, 2014 were:
DOLLAR AMOUNTS IN MILLIONS
2015
2016
2017
2018
2019
Thereafter
DECEMBER 31,
2014
$35
$16
$ 6
$ 6
$ 2
$ 7
Purchase obligations for goods or services are agreements
that:
(cid:129)are enforceable and legally binding,
(cid:129)specify all significant terms and
(cid:129)cannot be canceled without penalty.
The terms include:
(cid:129)fixed or minimum quantities to be purchased,
(cid:129)fixed, minimum or variable price provisions, and
(cid:129)an approximate timing for the transaction.
Our purchase obligations include items such as:
(cid:129)stumpage and log purchases,
(cid:129)energy and
(cid:129)other service and supply contracts.
Operating Leases
Our rent expense was:
DOLLAR AMOUNTS IN MILLIONS
Rent expense
We have operating leases for:
2014
2013
2012
$32
$38
$36
(cid:129)various equipment, including logging equipment, lift trucks,
automobiles and office equipment; and
(cid:129)office and wholesale space.
Commitments
Our operating lease commitments as of December 31, 2014
were:
DOLLAR AMOUNTS IN MILLIONS
2015
2016
2017
2018
2019
Thereafter
DECEMBER 31,
2014
$ 28
$ 21
$ 20
$ 16
$ 12
$107
NOTE 16: SHAREHOLDERS’ INTEREST
This note provides details about:
(cid:129)preferred and preference shares,
(cid:129)common shares,
(cid:129)share-repurchase programs and
(cid:129)cumulative other comprehensive income (loss).
PREFERRED AND PREFERENCE SHARES
We had no preferred shares outstanding at the end of 2014 or
2013. However, we have authorization to issue 7 million
preferred shares with a par value of $1 per share.
As part of our purchase of Longview Timber, we issued
13.8 million of our 6.375 percent Mandatory Convertible
Preference Shares, Series A, par value $1.00 and liquidation
preference of $50.00 per share on June 24, 2013, for net
proceeds of $669 million, which remained outstanding at year-
end 2014. Dividends will be payable on a cumulative basis
when, as and if declared by our Board of Directors, at an
annual rate of 6.375 percent on the liquidation preference. We
may pay declared dividends in cash or, subject to certain
limitations, in common shares or by delivery of any combination
of cash and common shares on January 1, April 1, July 1 and
October 1 of each year, commencing on October 1, 2013,
through, and including, July 1, 2016. These shares will
automatically convert on July 1, 2016 into between 1.5090 and
1.8107 of our common shares, subject to anti-dilution
adjustments. At any time prior to that date, holders may elect
to convert each share into common shares at the minimum
conversion rate of 1.5090 common shares, subject to anti-
dilution adjustments. See Note 4: Longview Timber Purchase
for more information.
We may issue preferred or preference shares at one time or
through a series of offerings. The shares may have varying
rights and preferences that can include:
(cid:129)dividend rates,
(cid:129)redemption rights,
(cid:129)conversion terms,
(cid:129)sinking-fund provisions,
(cid:129)values in liquidation and
(cid:129)voting rights.
When issued, outstanding preferred and preference shares rank
senior to outstanding common shares. That means preferred
and preference shares would receive dividends and assets
available on liquidation before any payments are made to
common shares.
COMMON SHARES
The number of common shares we have outstanding changes
when:
(cid:129)new shares are issued,
(cid:129)stock options are exercised,
(cid:129)restricted stock units or performance share units vest,
(cid:129)stock-equivalent units are paid out,
(cid:129)shares are tendered,
(cid:129)shares are repurchased or
(cid:129)shares are canceled.
Reconciliation of Our Common Share Activity
IN THOUSANDS
2014
2013
2012
Outstanding at beginning of year
583,548
542,393
536,425
New issuance (Note 4)
—
33,350
Shares tendered (Note 3)
(58,813)
—
—
—
Stock options exercised
5,134
7,209
5,404
Issued for restricted stock units
Issued for performance shares
Issued for Directors’ stock-equivalent
units
451
217
—
Repurchased
(6,063)
462
134
—
—
523
—
41
—
Outstanding at end of year
524,474
583,548
542,393
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
83
OUR SHARE REPURCHASE PROGRAMS
On August 13, 2014, our Board of Directors approved the 2014
stock repurchase program under which we are authorized to
repurchase up to $700 million of outstanding shares. The
2014 stock repurchase program replaced the prior 2011 stock
repurchase program. During 2014, we repurchased 6,062,993
shares of common stock for $203 million under the 2014 stock
repurchase program. All common stock purchases under the
stock repurchase program were made in open-market
transactions. As of December 31, 2014, we had remaining
authorization of $497 million for future share repurchases.
CUMULATIVE OTHER COMPREHENSIVE INCOME (LOSS)
Changes in amounts included in our cumulative other comprehensive income (loss) by component are:
DOLLAR AMOUNTS IN MILLIONS
PENSION
OTHER
POSTRETIREMENT
BENEFITS
FOREIGN
CURRENCY
TRANSLATION
ADJUSTMENTS
ACTUARIAL
LOSSES
PRIOR
SERVICE
COSTS
ACTUARIAL
LOSSES
PRIOR
SERVICE
CREDITS
UNREALIZED
GAINS ON
AVAILABLE-
FOR-SALE
SECURITIES
TOTAL
$413
(59)
—
(59)
—
—
—
(59)
354
(50)
—
(50)
—
—
—
(50)
$304
$(1,942)
$(23)
$(137)
$ 127
$ 4
$(1,558)
1,123
(394)
729
221
(74)
147
876
(1,066)
(1,008)
369
(639)
125
(43)
82
(557)
—
—
—
7
(3)
4
4
(19)
1
—
1
5
(2)
3
4
24
(7)
17
14
(5)
9
26
(111)
(6)
1
(5)
66
(27)
39
(23)
7
(16)
23
150
(12)
7
(5)
12
(161)
(4)
8
3
59
(102)
(107)
$(1,623)
$(15)
$(108)
$ 43
2
—
2
—
—
—
2
6
—
—
—
—
—
—
1,156
(428)
728
219
(75)
144
872
(686)
(1,075)
377
(698)
(19)
10
(9)
—
$ 6
(707)
$(1,393)
Beginning balance as of December 31, 2012
Other comprehensive income (loss) before
reclassifications
Income taxes
Net other comprehensive income (loss) before
reclassifications
Amounts reclassified from cumulative other
comprehensive income (loss)(1)
Income taxes
Net amounts reclassified from cumulative other
comprehensive income (loss)
Total other comprehensive income (loss)
Beginning balance as of December 31, 2013
Other comprehensive income (loss) before
reclassifications
Income taxes
Net other comprehensive income (loss) before
reclassifications
Amounts reclassified from cumulative other
comprehensive income (loss)(1)
Income taxes
Net amounts reclassified from cumulative other
comprehensive income (loss)
Total other comprehensive income (loss)
Ending balance as of December 31, 2014
(1) Actuarial losses and prior service credits (costs) are included in the computation of net periodic benefit costs (credits). See Note: 9 Pension and Other Postretirement Benefit Plans.
NOTE 17: SHARE-BASED COMPENSATION
Share-based compensation expense was:
(cid:129)$40 million in 2014,
(cid:129)$42 million in 2013 and
(cid:129)$37 million in 2012.
The amounts above contain awards to employees that were
part of the Real Estate Divestiture and are included in our
results of discontinued operations. These amounts are:
(cid:129)$5 million in 2013 and
(cid:129)$4 million in 2012.
This note provides details about:
(cid:129)our Long-Term Incentive Compensation Plan (2013 Plan),
(cid:129)how we account for share-based awards,
(cid:129)tax benefits of share-based awards,
(cid:129)types of share-based compensation and
(cid:129)unrecognized share-based compensation.
(cid:129)$3 million in 2014,
84
OUR LONG-TERM INCENTIVE COMPENSATION PLAN
Our long-term incentive plans provide for share-based awards
that include:
(cid:129)stock options,
(cid:129)stock appreciation rights,
(cid:129)restricted stock,
(cid:129)restricted stock units,
(cid:129)performance shares and
(cid:129)performance share units.
We may issue future grants of up to 19,466,670 shares under
the 2013 Plan. We also have the right to reissue forfeited and
expired grants.
For stock options and stock appreciation rights:
(cid:129)An individual participant may receive a grant of up to 2 million
shares in any one calendar year.
(cid:129)The exercise price is required to be the market price on the
date of the grant.
For restricted stock, restricted stock units, performance shares,
performance share units or other equity grants:
(cid:129)An individual participant may receive a grant of up to 1 million
shares annually.
(cid:129)No participant may be granted awards that exceed $10
million earned in a 12 month period.
The Compensation Committee of our Board of Directors (the
Committee) annually establishes an overall pool of stock
awards available for grants based on performance.
For stock-settled awards, we:
(cid:129)issue new stock into the marketplace and
(cid:129)generally do not repurchase shares in connection with
issuing new awards.
Our common shares would increase by approximately 34 million
shares if all share-based awards were exercised or vested.
These include:
(cid:129)all options, restricted stock units, and performance share
units outstanding at December 31, 2014 under the 2013
Plan and 2004 Plan; and
(cid:129)all remaining options, restricted stock units, and performance
share units that could be granted under the 2013 Plan.
HOW WE ACCOUNT FOR SHARE-BASED AWARDS
We:
(cid:129)use a fair-value-based measurement for share-based awards,
and
(cid:129)recognize the cost of share-based awards in our consolidated
financial statements.
We recognize the cost of share-based awards in our
Consolidated Statement of Operations over the required service
period — generally the period from the date of the grant to the
date when it is vested. Special situations include:
(cid:129)Awards that vest upon retirement — the required service
period ends on the date an employee is eligible for
retirement, including early retirement.
(cid:129)Awards that continue to vest following job elimination or the
sale of a business — the required service period ends on the
date the employment from the company is terminated.
In these special situations, compensation expense from share-
based awards is recognized over a period that is shorter than
the stated vesting period.
TAX BENEFITS OF SHARE-BASED AWARDS
Our total income tax benefit from share-based awards — as
recognized in our Consolidated Statement of Operations — for
the last three years was:
(cid:129)$11 million in 2014,
(cid:129)$10 million in 2013, and
(cid:129)$9 million in 2012.
The amounts above contain income tax benefit from share-
based awards to employees that were part of the Real Estate
Divestiture and are included in our results of discontinued
operations. These amounts are:
(cid:129)$1 million in 2014,
(cid:129)$2 million in 2013 and
(cid:129)$1 million in 2012.
Tax benefits for share-based awards are accrued as stock
compensation expense is recognized in the Consolidated
Statement of Operations. Tax benefits on share-based awards
are realized when:
(cid:129)restricted shares and restricted share units vest,
(cid:129)performance shares and performance share units vest,
(cid:129)stock options are exercised and
(cid:129)stock appreciation rights are exercised.
When actual tax benefits realized exceed the tax benefits
accrued for share-based awards, we realize an excess tax
benefit. We report the excess tax benefit as financing cash
inflows rather than operating cash inflows. We had excess tax
benefits of:
(cid:129)$10 million in 2014,
(cid:129)$13 million in 2013 and
(cid:129)$5 million in 2012.
The amounts above contain excess tax benefits from share-
based awards to employees that were part of the Real Estate
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
85
Divestiture and are included in our results of discontinued
operations. These amounts are:
(cid:129)$2 million in 2014,
(cid:129)$2 million in 2013 and
(cid:129)$1 million in 2012.
TYPES OF SHARE-BASED COMPENSATION
Our share-based compensation is in the form of:
(cid:129)stock options,
(cid:129)restricted stock units,
(cid:129)performance share units,
(cid:129)stock appreciation rights and
(cid:129)deferred compensation stock equivalent units.
STOCK OPTIONS
Stock options entitle award recipients to purchase shares of
our common stock at a fixed exercise price. We grant stock
options with an exercise price equal to the market price of our
stock on the date of the grant.
The Details
Our stock options generally:
(cid:129)vest over four years of continuous service and
(cid:129)must be exercised within 10 years of the grant-date.
The vesting and post-termination vesting terms for stock
options granted in 2014, 2013 and 2012 were as follows:
(cid:129)vest ratably over four years;
(cid:129)vest or continue to vest in the event of death while employed,
disability or retirement at an age of at least 62;
(cid:129)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;
(cid:129)continue to vest for one year in the event of involuntary
termination when the retirement criteria has not been met;
and
(cid:129)stop vesting for all other situations including early retirement
prior to age 62.
Our Accounting
We use a Black-Scholes option valuation model to estimate the
fair value of every stock option award on its grant-date.
In our estimates, we use:
(cid:129)historical data — for option exercise time and employee
terminations;
(cid:129)a Monte-Carlo simulation — for how long we expect granted
options to be outstanding; and
86
(cid:129)the U.S. Treasury yield curve — for the risk-free rate. We use
a yield curve over a period matching the expected term of the
grant.
The expected volatility in our valuation model is based on:
(cid:129)implied volatilities from traded options on our stock,
(cid:129)historical volatility of our stock and
(cid:129)other factors.
Weighted Average Assumptions Used in Estimating Value of
Stock Options Granted
Expected volatility
Expected dividends
Expected term (in years)
Risk-free rate
Weighted average grant-date fair
value
2014
GRANTS
2013
GRANTS
2012
GRANTS
31.71%
38.00%
40.41%
2.92%
4.97
1.57%
2.23%
4.97
0.92%
2.94%
5.33
1.01%
$ 6.62
$ 8.40
$ 5.72
Share-based compensation expense for stock options is
generally recognized over the vesting period. There are
exceptions for stock options awarded to employees who:
(cid:129)are eligible for retirement;
(cid:129)will become eligible for retirement during the vesting period;
or
(cid:129)whose employment is terminated during the vesting period
due to job elimination or the sale of a business.
In these cases, we record the share-based compensation
expense over a required service period that is less than the
stated vesting period.
Activity
The following table shows our option unit activity for 2014.
WEIGHTED
AVERAGE
REMAINING
CONTRACTUAL
TERM
(IN YEARS)
AGGREGATE
INTRINSIC
VALUE (IN
MILLIONS)
OPTIONS
(IN
THOUSANDS)
WEIGHTED
AVERAGE
EXERCISE
PRICE
17,055
$23.12
2,463
(5,294)
(1,939)
$30.14
$22.50
$26.98
12,285
$24.19
5.27
$144
8,267
$22.32
3.81
$112
Outstanding at
December 31,
2013
Granted
Exercised
Forfeited or
expired(1)
Outstanding at
December 31,
2014(2)
Exercisable at
December 31,
2014
(1) Approximately 1,601 thousand stock options were cancelled as a result of the Real
Estate Divestiture. See Note 3: Discontinued Operations for more information.
(2) As of December 31, 2014, there were approximately 998 thousand stock options that
had met the requisite service period and will be released as identified in the grant terms.
The total intrinsic value of stock options exercised was:
Activity
(cid:129)$55 million in 2014,
(cid:129)$61 million in 2013 and
(cid:129)$28 million in 2012.
The total grant-date fair value of stock options vested was:
(cid:129)$16 million in 2014,
(cid:129)$14 million in 2013 and
(cid:129)$15 million in 2012.
RESTRICTED STOCK UNITS
Through the Plan, we award restricted stock units — grants that
entitle the holder to shares of our stock as the award vests.
The Details
Our restricted stock units granted in 2014, 2013 and 2012
generally:
(cid:129)vest ratably over four years;
(cid:129)immediately vest in the event of death while employed or
disability;
(cid:129)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;
(cid:129)continue vesting for one year in the event of involuntary
termination when the retirement has not been met; and
(cid:129)will be forfeited upon termination of employment in all other
situations including early retirement prior to age 62.
Our Accounting
The fair value of our restricted stock units is the market price of
our stock on the grant-date of the awards.
We generally record share-based compensation expense for
restricted stock units over the four-year vesting period.
Generally for restricted stock units that continue to vest
following the termination of employment, we record the share-
based compensation expense over a required service period
that is less than the stated vesting period.
The following table shows our restricted stock unit activity for
2014.
Nonvested at December 31, 2013
Granted
Vested
Forfeited(1)
Nonvested at December 31, 2014(2)
STOCK UNITS
(IN THOUSANDS)
1,547
686
(628)
(378)
1,227
WEIGHTED
AVERAGE
GRANT-DATE
FAIR VALUE
$25.83
$30.14
$24.94
$27.90
$28.06
(1) Approximately 280 thousand restricted stock units were cancelled as a result of the Real
Estate Divestiture. See Note 3: Discontinued Operations for more information.
(2) As of December 31, 2014, there were approximately 212 thousand restricted stock units
that had met the requisite service period and will be released as identified in the grant
terms.
The weighted average grant-date fair value for restricted stock
units was:
(cid:129)$30.54 in 2013 and
(cid:129)$20.42 in 2012.
The total grant-date fair value of restricted stock units vested
was:
(cid:129)$16 million in 2014,
(cid:129)$14 million in 2013 and
(cid:129)$19 million in 2012.
Nonvested restricted stock units accrue dividends that are paid
out when restricted stock units vest. Any restricted stock units
forfeited will not receive dividends.
As restricted stock units vest, a portion of the shares awarded
is withheld to cover employee taxes. As a result, the number of
stock units vested and the number of common shares issued
will differ.
PERFORMANCE SHARE UNITS
As part of a new long-term incentive compensation strategy
intended to tie executive compensation more closely to
company performance, we granted a target number of
performance share units to executives in 2014, 2013, 2012
and 2011. Performance share units will be paid in the form of
shares of Weyerhaeuser stock — to the extent earned through
company performance against financial goals — over a four-
year vesting period.
The Details
The final number of shares awarded will range from 0 percent
to 150 percent of each grant’s target, depending upon actual
company performance.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
87
The ultimate number of performance share units earned is
based on two measures:
(cid:129)Weyerhaeuser’s cash flow during the first year determined
the initial number of units earned and
(cid:129)Weyerhaeuser’s relative total shareholder return (TSR)
ranking in the S&P 500 during the first two years is used to
adjust the initial number of units earned up or down by
20 percent.
At the end of the two-year performance period and over a
further two-year vesting period, performance share units would
be paid in shares of our stock. Performance share units
granted and that are earned vest as follows:
(cid:129)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;
(cid:129)fully vest in the event the participant dies or becomes
disabled while employed;
(cid:129)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;
(cid:129)continue vesting for one year in the event of involuntary
termination when the retirement has not been met; and
(cid:129)will be forfeited upon termination of employment in all other
situations including early retirement prior to age 62.
Our Accounting
Since the award contains a market condition, the effect of the
market condition is reflected in the grant-date fair value which
is estimated using a Monte Carlo simulation model. This model
estimates the TSR ranking of the company among the S&P 500
index over the two-year performance period. Compensation
expense is based on the estimated probable number of earned
awards and recognized over the four-year vesting period on an
accelerated basis. Generally, compensation expense would be
reversed if the performance condition is not met unless the
requisite service period has been achieved.
Weighted Average Assumptions Used in Estimating the Value
of Performance Share Units
2014 GRANTS
2013 GRANTS
2012 GRANTS
1/1/2014 –
12/31/2015
1/1/2013 –
12/31/2014
1/1/2012 –
12/31/2013
Activity
The following table shows our performance share unit activity
for 2014.
Nonvested at December 31, 2013
Granted at target
Vested
Forfeited(1)
Performance adjustment
Nonvested at December 31, 2014(2)
GRANTS (IN
THOUSANDS)
1,102
321
(311)
(206)
(16)
890
WEIGHTED
AVERAGE
GRANT-DATE
FAIR VALUE
$26.83
$30.62
$23.32
$26.07
$31.15
$29.46
(1) Approximately 44 thousand performance share units were cancelled as a result of the
Real Estate Divestiture. See Note 3: Discontinued Operations for more information.
(2) As of December 31, 2014, there were approximately 393 thousand performance share
units that had met the requisite service period and will be released as identified in the
grant terms.
The total grant-date fair value of performance share units
vested was:
(cid:129)$7 million in 2014 and
(cid:129)$5 million in 2013.
There were no performance share units vesting in 2012.
For 2014 grants, the company exceeded the cash flow target,
resulting in an initial number of shares earned equal to
114 percent of target.
For 2013 grants, the company exceeded the cash flow target,
resulting in an initial number of shares earned equal to
150 percent of target. Because the company’s two-year TSR
ranking was between the 25th and 50th percentile, the initial
number of performance shares granted decreased 15 percent.
For 2012 grants, the company exceeded the cash flow target,
resulting in an initial number of shares earned equal to
122 percent of target. Because the company’s two-year TSR
ranking was between the 50th and 75th percentile, the initial
number of performance shares granted increased 17 percent.
As performance share units vest, a portion of the shares
awarded is withheld to cover participant taxes. As a result, the
number of stock units vested and the number of common
shares issued will differ.
Performance
period
Valuation date
closing stock
price
Expected
dividends
$
30.16
$
30.48
$
20.56
STOCK APPRECIATION RIGHTS
2.91%
2.23%
2.92%
Through the Plan, we grant cash-settled stock appreciation
rights as part of certain compensation awards.
Risk-free rate
0.03% – 0.79%
0.09% – 0.46%
0.08% – 0.32%
Volatility
20.74% – 23.53%
22.09% – 29.57%
34.66% – 34.86%
The Details
$
30.62
$
31.59
$
21.71
Stock appreciation rights are similar to stock options.
Employees benefit when the market price of our stock is higher
on the exercise date than it was on the date the stock
Weighted
average grant-
date fair value
88
appreciation rights were granted. The differences are that the
employee:
(cid:129)receives the benefit as a cash award and
(cid:129)does not purchase the underlying stock.
The vesting conditions and exceptions are the same as for 10-
year stock options. Details are in the Stock Options section
earlier in this note.
Stock appreciation rights are generally issued to employees
outside of the U.S.
Our Accounting
We use a Black-Scholes option-valuation model to estimate the
fair value of a stock appreciation right on its grant-date and
every subsequent reporting date that the right is outstanding.
Stock appreciation rights are liability-classified awards and the
fair value is remeasured at every reporting date.
The process used to develop our valuation assumptions is the
same as for the 10-year stock options we grant. Details are in
the Stock Options section earlier in this note.
Weighted Average Assumptions Used to Re-measure Value of
Stock Appreciation Rights at Year-End
Expected volatility
Expected dividends
Expected term (in years)
Risk-free rate
2014
GRANTS
2013
GRANTS
2012
GRANTS
18.20%
24.02%
29.07%
3.21%
1.32
0.45%
2.81%
1.16
0.19%
2.44%
1.71
0.27%
Weighted average fair value
$ 12.70
$ 8.68
$ 7.25
Activity
The following table shows our stock appreciation rights activity
for 2014.
WEIGHTED
AVERAGE
EXERCISE
PRICE
AVERAGE
REMAINING
CONTRACTUAL
TERM
(IN YEARS)
AGGREGATE
INTRINSIC
VALUE (IN
MILLIONS)
RIGHTS (IN
THOUSANDS)
Outstanding at
December 31,
2013
Granted
Exercised
Forfeited or
expired
Outstanding at
December 31,
2014
Exercisable at
December 31,
2014
695
$22.96
74
(322)
$30.16
$24.21
(30)
$28.80
417
$22.85
4.44
327
$21.70
3.39
$5
$5
The total liabilities paid for stock appreciation rights was:
(cid:129)$2 million in 2014,
(cid:129)$4 million in 2013 and
(cid:129)$1 million in 2012.
UNRECOGNIZED SHARE-BASED COMPENSATION
As of December 31, 2014, our unrecognized share-based
compensation cost for all types of share-based awards
included:
(cid:129)$39 million related to non-vested equity-classified share-
based compensation arrangements — expected to be
recognized over a weighted average period of approximately
2.3 years; and
(cid:129)$1 million related to non-vested liability-classified stock
appreciation rights — expected to vest over a weighted
average period of approximately 2.3 years.
DEFERRED COMPENSATION STOCK EQUIVALENT UNITS
Certain employees and our board of directors may defer
compensation into stock-equivalent units.
The Details
The plan works differently for employees and directors.
Eligible employees:
(cid:129)may choose to defer all or part of their bonus into stock-
equivalent units;
(cid:129)may choose to defer part of their salary, except for executive
officers; and
(cid:129)receive a 15 percent premium if the deferral is for at least
five years.
Our directors:
(cid:129)receive a portion of their annual retainer fee in the form of
restricted stock units, which vest over one year and may be
deferred into stock-equivalent units;
(cid:129)may choose to defer some or all of the remainder of their
annual retainer fee into stock-equivalent units; and
(cid:129)do not receive a premium for their deferrals.
Employees and directors also choose when the deferrals will be
paid out although no deferrals may be paid until after the
separation from service of the employee or director.
Our Accounting
We settle all deferred compensation accounts in cash for our
employees. Our directors receive shares of common stock as
payment for stock-equivalent units. In addition, we credit all
stock-equivalent accounts with dividend equivalents.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
89
During 2012, the directors’ deferred compensation plan was
amended to allow the directors to elect to receive payments of
amounts deferred into stock-equivalent units in cash or stock
for elections made prior to December 31, 2011. Deferrals
made beginning January 1, 2012, into stock-equivalent units
will be paid in common shares. Elections to receive these
deferred amounts in stock resulted in the issuance of 71,056
in 2014, 52,720 in 2013 and 40,899 shares in 2012. The
number of common shares to be issued in the future to
directors who elected common share payments is 605,987.
Stock-equivalent units are:
(cid:129)liability-classified awards and
(cid:129)re-measured to fair value at every reporting date.
The fair value of a stock-equivalent unit is equal to the market
price of our stock.
Activity
The number of stock-equivalent units outstanding in our
deferred compensation accounts was:
(cid:129)944,966 as of December 31, 2014;
(cid:129)915,160 as of December 31, 2013; and
(cid:129)971,650 as of December 31, 2012.
Other restructuring and closure costs include lease termination
charges, dismantling and demolition of plant and equipment,
gain or loss on disposition of assets, environmental cleanup
costs and incremental costs to wind down operating facilities.
ACCRUED TERMINATION BENEFITS
Changes in accrued severance related to restructuring during
2014 were as follows:
DOLLAR AMOUNTS IN MILLIONS
Accrued severance as of December 31, 2013
Charges
Payments
Accrued severance as of December 31, 2014
ASSET IMPAIRMENTS
$ 2
27
(19)
$ 10
The Impairment of Long-Lived Assets and Goodwill sections of
Note 1: Summary of Significant Accounting Policies provide
details about how we account for these impairments. Additional
information can also be found in our Critical Accounting
Policies.
Long-Lived Assets
NOTE 18: CHARGES FOR RESTRUCTURING, CLOSURES
AND ASSET IMPAIRMENTS
Items Included in Our Restructuring, Closure and Asset
Impairment Charges
Our long-lived asset impairments were primarily related to the
following:
(cid:129)2013 — charges include:
– $356 million impairment of the Coyote Springs
DOLLAR AMOUNTS IN MILLIONS
Restructuring and closure charges:
2014
2013
2012
Termination benefits
$27
$
1
$ —
Pension and postretirement charges
Other restructuring and closure costs
Charges for restructuring and closures
Impairment of long-lived assets
3
12
42
2
—
4
5
372
—
6
6
20
Total charges for restructuring, closures and
impairments
$44
$377
$26
RESTRUCTURING AND CLOSURES
During 2014, our restructuring and closure charges were
primarily related to our selling, general and administrative cost
reduction initiative to support achieving our competitive
performance goals. We do not expect additional material
charges related to this initiative in 2015. During 2013 and
2012, our restructuring and closure charges were primarily
related to various Wood Products operations we closed or
curtailed and restructuring our corporate staff functions to
support achieving our competitive performance goals.
90
Property. Under the terms of the TRI Pointe transaction,
certain assets and liabilities of WRECO and its subsidiaries
were excluded from the transaction and retained by
Weyerhaeuser, including assets and liabilities relating to
the Coyote Springs Property. During fourth quarter 2013,
following the announcement of the TRI Pointe transaction,
WRECO and Weyerhaeuser began exploring strategic
alternatives for the Coyote Springs Property and
determined that Weyerhaeuser’s strategy for development
of the Coyote Springs Property will likely differ from
WRECO’s current development plan. WRECO’s
development plan was long-term in nature with
development and net cash flows covering at least 15-20
years. The undiscounted cash flows for the Coyote Springs
Property under the WRECO development plan remained
above the carrying value of the property. Weyerhaeuser
Company’s strategy is to cease holding the Coyote Springs
Property for development and to initiate activities in the
near-term to market the assets to potential third-party
buyers. The undiscounted cash flows under the
Weyerhaeuser Company asset sale strategy were below
the carrying value of the property. Consequently, we
recorded a noncash charge of $356 million in fourth
quarter 2013 for the impairment of the Coyote Springs
Property in Unallocated Items. The fair value of the
property was primarily based on an independent appraisal
that was determined using both other observable inputs
(Level 2) related to other market transactions and
significant unobservable inputs (Level 3) such as the
timing and amounts of future cash flows related to the
development of the property, timing and amounts of
proceeds from acreage sales, access to water for use on
the property and discount rates applicable to the future
cash flows. The property is recorded in “Property and
equipment, net” and “Other assets” in our Consolidated
Balance Sheet.
– $9 million related to the decision to permanently close our
Colbert, Georgia engineered wood products facility in our
Wood Products segment that was previously indefinitely
closed. The fair value of the facility was determined using
significant unobservable inputs (Level 3) based on
liquidation values.
(cid:129)2012 — charges are primarily related to unutilized assets
held in Unallocated Items that were sold or are currently held
for sale. The fair values of the assets were determined using
significant other observable inputs (Level 2) based on market
quotes and significant unobservable inputs (Level 3) based
on discounted cash flow models.
NOTE 19: OTHER OPERATING INCOME, NET
Other operating income, net:
(cid:129)includes both recurring and occasional income and expense
items and
(cid:129)can fluctuate from year to year.
Various Income and Expense Items Included in Other
Operating Income, Net
Land management income includes income from recreational
activities, land permits, grazing rights, firewood sales and other
miscellaneous income related to land management activities.
NOTE 20: INCOME TAXES
This note provides details about our income taxes applicable to
continuing operations:
(cid:129)earnings before income taxes,
(cid:129)provision for income taxes,
(cid:129)effective income tax rate,
(cid:129)deferred tax assets and liabilities and
(cid:129)unrecognized tax benefits.
Income taxes related to discontinued operations are discussed
in Note 3: Discontinued Operations.
EARNINGS BEFORE INCOME TAXES
Domestic and Foreign Earnings (Loss) From Continuing
Operations Before Income Taxes
DOLLAR AMOUNTS IN MILLIONS
Domestic earnings
Foreign earnings (loss)
Total
2014
2013
2012
$ 970
$198
$333
43
122
(11)
$1,013
$320
$322
PROVISION FOR INCOME TAXES
Provision (Benefit) for Income Taxes From Continuing
Operations
DOLLAR AMOUNTS IN MILLIONS
DOLLAR AMOUNTS IN MILLIONS
Gain on postretirement plan amendment
(Note 9)
Gain on disposition of non-strategic assets
Foreign exchange (gains) losses, net
Land management income
Litigation expense, net
Other, net
Total
2014
2013
2012
$(151)
$ —
$(103)
(27)
27
(34)
9
(25)
(19)
7
(28)
16
(11)
(28)
(6)
(27)
12
(26)
$(201)
$(35)
$(178)
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
2014
2013
2012
$ (26)
$ (80)
$(78)
12
3
(18)
(21)
(11)
(119)
178
(79)
6
12
6
21
196
(52)
(11)
26
(63)
6
1
66
73
Gain on disposition of non-strategic assets in 2014 included a
$22 million pretax gain on the sale of a landfill in Washington
State.
Foreign exchange (gains) losses result from changes in
exchange rates primarily related to our U.S. dollar denominated
debt that is held by our Canadian subsidiary.
Total income tax provision (benefit)
$185
$(171)
$ 10
Included in our income tax provision for 2012 are
recomputations of prior year taxes, resulting in reclassifications
between foreign and domestic for both current and deferred
taxes as a result of final tax proceedings between countries.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
91
EFFECTIVE INCOME TAX RATE
Items Included in Our Deferred Income Tax Assets (Liabilities)
Effective Income Tax Rate Applicable to Continuing
Operations
DOLLAR AMOUNTS IN MILLIONS
2014
$ 354
14
2013
$ 112
2012
$113
Postretirement benefits
Pension
7
3
Real estate impairments
DOLLAR AMOUNTS IN MILLIONS
U.S. federal statutory income tax
State income taxes, net of federal tax
benefit
REIT income not subject to federal income
tax
Foreign taxes
Provision for unrecognized tax benefits
Repatriation of Canadian earnings
State income tax settlement
Domestic production activities deduction
Other, net
(161)
(101)
(94)
(2)
(4)
—
—
—
(16)
(8)
(193)
21
—
(13)
4
8
(6)
—
(10)
—
(4)
Total income tax provision (benefit)
$ 185
$ (171)
$ 10
Effective income tax rate
18.3%
(53.4)%
3.1%
DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets and liabilities reflect temporary differences
between pretax book income and taxable income. Deferred tax
assets represent tax benefits that have already been recorded
for book purposes but will be recorded for tax purposes in the
future. Deferred tax liabilities represent income that has been
recorded for book purposes but will be reported as taxable
income in the future.
Balance Sheet Classification of Deferred Income Tax Assets
(Liabilities) Related to Continuing Operations
DECEMBER 31,
2014
DECEMBER 31,
2013
$ 101
369
—
56
86
100
223
935
(72)
863
(523)
(180)
(130)
(833)
$ 102
57
121
59
110
80
260
789
(89)
700
(540)
(180)
(130)
(850)
State tax credits
Net operating loss carryforwards
Cellulosic biofuel producers credit
Other
Gross deferred tax assets
Valuation allowance
Net deferred tax assets
Property, plant and equipment
Timber installment notes
Other
Deferred tax liabilities
Net deferred tax asset (liability)
$ 30
$(150)
OTHER INFORMATION ABOUT OUR DEFERRED INCOME TAX
ASSETS (LIABILITIES)
Other information about our deferred income tax assets
(liabilities) include:
(cid:129)net operating loss and credit carryforwards,
(cid:129)valuation allowances and
(cid:129)reinvestment of undistributed earnings.
DOLLAR AMOUNTS IN MILLIONS
Net current deferred tax asset
Net noncurrent deferred tax asset
Net noncurrent deferred tax liability
Net deferred tax asset (liability)
92
DECEMBER 31,
2014
DECEMBER 31,
2013
$ 228
8
(206)
$ 30
$ 130
5
(285)
$(150)
Net Operating Loss and Credit Carryforwards
Our state and foreign net operating loss carryforwards as of the
end of 2014 are as follows:
(cid:129)$586 million, which expire from 2015 through 2034; and
(cid:129)$1 million, which do not expire.
Our federal, state and foreign credit carryforwards as of the end
of 2014 are as follows:
(cid:129)$148 million, which expire from 2015 through 2034; and
(cid:129)$31 million, which do not expire.
Valuation Allowances
With the exception of the valuation allowance discussed below,
we believe it is more likely than not that we will have sufficient
future taxable income to realize our deferred tax assets.
Our valuation allowance on our deferred tax assets was
$72 million as of the end of 2014. This primarily related to
foreign and state net operating losses and state and provincial
credits.
The total changes in our valuation allowance over the last year
was a net decrease of $17 million. This net decrease resulted
primarily from the disposition of foreign entities with net
operating losses and the expiration of foreign and state net
operating losses and credits.
Reinvestment of Undistributed Earnings
The balance of our foreign undistributed earnings was
approximately $27 million at the end of 2014 and is permanently
reinvested; therefore, it is not subject to U.S. income tax.
Generally, such earnings become subject to U.S. tax upon the
remittance of dividends and under certain other circumstances. It
is not practicable to estimate the amount of deferred tax liability
related to investments in our foreign subsidiaries.
HOW WE ACCOUNT FOR INCOME TAXES
The Income Taxes section of Note 1: Summary of Significant
Accounting Policies provides details about how we account for
our income taxes.
UNRECOGNIZED TAX BENEFITS
Unrecognized tax benefits represent potential future obligations
to taxing authorities if uncertain tax positions we have taken on
previously filed tax returns are not sustained. The total amount
of unrecognized tax benefits as of December 31, 2014 and
2013, are $11 million and $26 million, respectively, which does
not include related interest of $3 million and $4 million,
respectively. These amounts represent the gross amount of
exposure in individual jurisdictions and do not reflect any
additional benefits expected to be realized if such positions
were not sustained, such as the federal deduction that could be
realized if an unrecognized state deduction was not sustained.
Reconciliation of the Beginning and Ending Amount of
Unrecognized Tax Benefits
DOLLAR AMOUNTS IN MILLIONS
Balance at beginning of year
Reductions for tax positions of prior
years
Lapse of statute
Balance at end of year
DECEMBER 31,
2014
DECEMBER 31,
2013
$ 26
—
(15)
$ 11
$ 177
(148)
(3)
$ 26
The net liability recorded in our Consolidated Balance Sheet
related to unrecognized tax benefits was $4 million as of
December 31, 2014, which includes interest of $3 million and
is net of $6 million in payments made in advance of
settlements and $4 million in credits and loss carryovers
available to offset the liability. The net liability as of
December 31, 2013, was $24 million, which includes interest
of $4 million and is net of $6 million in payments made in
advance of settlements.
The net liability recorded for tax positions across all
jurisdictions that, if sustained, would affect our effective tax
rate was $12 million as of December 31, 2014, and
$16 million as of December 31, 2013, which includes interest
of $3 million and $4 million, respectively.
During fourth quarter 2013, we received a final examination
report from the IRS regarding our years under exam. As a
result, we recognized a benefit for the reduction of our
unrecognized tax benefits primarily relating to alternative fuel
mixture credits. In addition, we recognized a benefit for a
reduction of interest accrued primarily related to the U.S./
Canada Competent Authority settlement.
In accordance with our accounting policy, we accrue interest
and penalties related to unrecognized tax benefits as a
component of income tax expense.
As of December 31, 2014, no U.S. federal income tax returns
are under examination, with years 2011 forward subject to
examination. No state jurisdictions are under examination, with
years 2009 forward subject to examination. We are undergoing
and are subject to examinations in various foreign jurisdictions
for tax years 2005 forward. We expect that the outcome of any
examination will not have a material effect on our consolidated
financial statements; however, audit outcomes and the timing
of audit settlements are subject to significant uncertainty.
In the next 12 months, we estimate a decrease of up to
$6 million in unrecognized tax benefits due to resolution of
examinations.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
93
NOTE 21: GEOGRAPHIC AREAS
LONG-LIVED ASSETS
This note provides selected key financial data according to the
geographical locations of our customers. The selected key
financial data includes:
Our long-lived assets — used in the generation of revenues in
the different geographical areas — are nearly all in the U.S. and
Canada. Our long-lived assets include:
(cid:129)goodwill,
(cid:129)timber and timberlands and
(cid:129)property and equipment, including construction in progress.
Long-Lived Assets by Geographic Area
DOLLAR AMOUNTS IN MILLIONS
DECEMBER 31,
2014
DECEMBER 31,
2013
DECEMBER 31,
2012
$8,069
$8,116
$5,523
579
676
652
670
728
672
Long-lived assets:
U.S.(1)
Canada
Other foreign
countries
Total
$9,324
$9,438
$6,923
(1) Includes assets of discontinued operations in 2013 and 2012.
Long-lived assets in the U.S. increased primarily due to the
acquisition of Longview Timber. See Note 4: Longview Timber
Purchase for more information.
(cid:129)sales to unaffiliated customers,
(cid:129)export sales from the U.S., and
(cid:129)long-lived assets.
SALES
Our sales to unaffiliated customers outside the U.S. are
primarily to customers in Canada, China, Japan and Europe.
Our export sales include:
(cid:129)pulp, liquid packaging board, logs, lumber and wood chips to
Japan;
(cid:129)pulp, logs and lumber to other Pacific Rim countries; and
(cid:129)pulp and plywood to Europe.
Sales by Geographic Area
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2014
(DOLLAR AMOUNTS IN MILLIONS)
Sales to unaffiliated customers:
U.S.
Japan
Europe
China
Canada
South America
Other foreign countries
Total
Export sales from the U.S.:
Japan
China
Other
Total
2014
2013
2012
$4,889
$4,761
$3,867
682
328
477
424
87
516
758
298
453
418
80
486
639
300
360
302
74
447
$7,403
$7,254
$5,989
$ 620
$ 676
$ 583
416
856
411
804
329
770
$1,892
$1,891
$1,682
94
NOTE 22: SELECTED QUARTERLY FINANCIAL INFORMATION (unaudited)
Quarterly financial data provides a review of our results and performance throughout the year. Our earnings per share for the full
year do not always equal the sum of the four quarterly earnings-per share amounts because of common share activity during the
year.
Key Quarterly Financial Data for the Last Two Years
DOLLAR AMOUNTS IN MILLIONS EXCEPT PER-SHARE FIGURES
2014:
Net sales
Operating income
Earnings from continuing operations before income
taxes
Net earnings
Net earnings attributable to Weyerhaeuser common
shareholders
Basic net earnings per share attributable to
Weyerhaeuser common shareholders
Diluted net earnings per share attributable to
Weyerhaeuser common shareholders
Dividends paid per share
Market prices — high/low
2013:
Net sales
Operating income (loss)
Earnings (loss) from continuing operations before
income taxes
Net earnings
Net earnings attributable to Weyerhaeuser common
shareholders
Basic net earnings per share attributable to
Weyerhaeuser common shareholders
Diluted net earnings per share attributable to
Weyerhaeuser common shareholders
Dividends paid per share
Market prices — high/low
First
Quarter
1,736
308
234
194
183
0.31
0.31
0.22
$
$
$
$
$
$
$
$
Second
Quarter
1,964
400
328
291
280
0.48
0.47
0.22
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Third
Quarter(1)
Fourth
Quarter(2)
Full Year
1,915
318
237
1,164
1,153
2.17
2.15
0.29
$
$
$
$
$
$
$
$
1,788
294
214
177
166
0.32
0.31
0.29
$
$
$
$
$
$
$
$
7,403
1,320
1,013
1,826
1,782
3.20
3.18
1.02
$31.59 - $28.63
$33.26 - $27.48
$34.60 - $31.09
$36.88 - $31.61
$36.88 - $27.48
$
$
$
$
$
$
$
$
1,755
253
181
144
144
0.26
0.26
0.17
$
$
$
$
$
$
$
$
1,874
293
221
198
196
0.35
0.35
0.20
$
$
$
$
$
$
$
$
1,857
243
170
167
157
0.27
0.27
0.22
$
$
$
$
$
$
$
$
1,768
(155)
(252)
54
43
0.07
0.07
0.22
$
$
$
$
$
$
$
$
7,254
634
320
563
540
0.95
0.95
0.81
$31.74 - $28.36
$33.24 - $26.38
$29.86 - $26.64
$32.00 - $28.01
$33.24 - $26.38
(1) Third Quarter 2014 includes a $972 million net gain on the Real Estate Divestiture recognized in 2014. See Note 3: Discontinued Operations for more information.
(2) Fourth Quarter 2013 includes a $356 million noncash impairment charge. See Note 18: Charges for Restructuring, Closures and Asset Impairments for more information.
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
95
MANAGEMENT’S REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining
adequate internal control over financial reporting as is defined
in the Securities and Exchange Act of 1934 rules.
Management, under our supervision, conducted an evaluation
of the effectiveness of the company’s internal control over
financial reporting based on the framework in Internal
Control — Integrated Framework (1992) issued by the
Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on our evaluation under the
framework in Internal Control — Integrated Framework (1992),
management concluded that the company’s internal control
over financial reporting was effective as of December 31,
2014. The effectiveness of the company’s internal control over
financial reporting as of December 31, 2014, has been audited
by KPMG LLP, an independent registered public accounting
firm, as stated in their report, which is included herein.
CHANGES IN AND
DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
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 annual report on Form 10-K. 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 by an issuer in the reports
that it files or submits under the Act is accumulated and
communicated to the issuer’s management, including its
principal executive and principal financial officers, to allow
timely decisions regarding required disclosure.
Based on their evaluation, the company’s principal executive
officer and principal financial officer have concluded that the
company’s disclosure controls and procedures are effective to
ensure that information required to be disclosed complies with
the SEC’s rules and forms.
CHANGES IN INTERNAL CONTROL
No changes occurred in the company’s internal control over
financial reporting during the period that have materially
affected, or are reasonably likely to materially affect, the
company’s internal control over financial reporting.
96
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Weyerhaeuser Company:
We have audited Weyerhaeuser Company’s internal control over financial reporting as of December 31, 2014, based on criteria
established in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Weyerhaeuser Company’s management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures
as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Weyerhaeuser Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2014, based on criteria established in Internal Control — Integrated Framework (1992) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Weyerhaeuser Company and subsidiaries as of December 31, 2014 and 2013, and the related
consolidated statements of operations, comprehensive income, cash flows, and changes in equity for each of the years in the
three-year period ended December 31, 2014, and our report dated February 13, 2015 expressed an unqualified opinion on those
consolidated financial statements.
/s/ KPMG LLP
Seattle, Washington
February 13, 2015
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
97
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
Information with regard to certain relationships and related
transactions contained in the Notice of the 2015 Annual
Meeting and Proxy Statement for the company’s Annual
Meeting of Shareholders to be held May 22, 2015 under the
headings “Review, Approval or Ratification of Transactions with
Related Persons” and “Board of Directors and Committee
Information” is incorporated herein by reference.
PRINCIPAL ACCOUNTING FEES
AND SERVICES
Information with respect to principal accounting fees and
services in the Notice of the 2015 Annual Meeting and Proxy
Statement for the company’s Annual Meeting of Shareholders
to be held May 22, 2015 under the heading “Ratification of
Selection of Independent Registered Public Accounting Firm” is
incorporated herein by reference.
DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE
GOVERNANCE
A list of our executive officers and biographical information are
found in the Our Business — Executive Officers of the
Registrant section of this report. Information with respect to
directors of the company and other governance matters, as
required by this item is included in the Notice of the 2015
Annual Meeting and Proxy Statement for the company’s Annual
Meeting of Shareholders to be held May 22, 2015 under the
headings “Nominees for Election,” “Board of Directors and
Committee Information,” “Section 16(a) Beneficial Ownership
Reporting Compliance” and “Potential Payment upon
Termination or Change in Control — Change in Control,” and
“— Severance,” and is incorporated herein by reference.
EXECUTIVE AND DIRECTOR
COMPENSATION
Information with respect to executive and director
compensation contained in the Notice of the 2015 Annual
Meeting and Proxy Statement for the company’s Annual
Meeting of Shareholders to be held May 22, 2015, under the
headings “Board of Directors and Committee Information —
Directors’ Compensation,” “Compensation Discussion and
Analysis,” “Compensation Committee Report,” “Compensation
Committee Interlocks and Insider Participation,” “Summary
Compensation Table,” “Grants of Plan-Based Awards,”
“Outstanding Equity Awards at Fiscal Year-End,” “Option
Exercises and Stock Vested in Fiscal 2014,” “Pension
Benefits,” “Nonqualified Deferred Compensation,” and
“Potential Payments Upon Termination or Change of Control” is
incorporated herein by reference.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Information with respect to security ownership of certain
beneficial owners and management contained in the Notice of
the 2015 Annual Meeting and Proxy Statement for the
company’s Annual Meeting of Shareholders to be held May 22,
2015 under the heading “Beneficial Ownership of Common
Shares” is incorporated herein by reference.
98
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
All financial statement schedules have been omitted because they are not applicable or the required information is included in the
consolidated financial statements, or the notes thereto, in Financial Statements and Supplementary Data above.
EXHIBITS
2
3
4
—
Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
(a) Stock Purchase Agreement, dated as of June 14, 2013, by and among Longview Timber Holdings, Corp., the securityholders listed on the
signature pages thereto, Weyerhaeuser Columbia Holding Co., LLC and Weyerhaeuser Company (incorporated by reference to Current
Report on Form 8-K filed with the Securities and Exchange Commission June 17, 2013 — Commission File Number 1-4825)
(b) Transaction Agreement, dated as of November 3, 2013, among Weyerhaeuser Company, Weyerhaeuser Real Estate Company, TRI Pointe
Homes, Inc. and Topaz Acquisition, Inc. (incorporated by reference to Current Report on Form 8-K filed with the Securities and Exchange
Commission November 4, 2013 — Commission File Number 1-4825)
—
Articles of Incorporation
(a) Articles of Incorporation (incorporated by reference to Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission
May 6, 2011 — Commission File Number 1-4825 and Current Report on Form 8-K filed with the Securities and Exchange Commission
June 20, 2013 — Commission File Number 1-4825)
(b) Bylaws (incorporated by reference to Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission May 6, 2011 —
Commission File Number 1-4825)
—
Instruments Defining the Rights of Security Holders, Including Indentures
(a)
Indenture dated as of April 1, 1986 between Weyerhaeuser Company and The Bank of New York Mellon Trust Company, N.A. (as successor
to JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank and Chemical Bank), a national banking association, as Trustee
(incorporated by reference from the Registration Statement on Form S-3, Registration No. 333-36753).
(b) First Supplemental Indenture dated as of February 15, 1991 between Weyerhaeuser Company and The Bank of New York Mellon Trust
Company, N.A. (as successor to JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank and Chemical Bank), a national
banking association, as Trustee (incorporated by reference from the Registration Statement on Form S-3, Registration No. 33-52982).
(c) Second Supplemental Indenture dated as of February 1, 1993 between Weyerhaeuser Company and The Bank of New York Mellon Trust
Company, N.A. (as successor to JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank and Chemical Bank), a national
banking association, as Trustee (incorporated by reference from the Registration Statement on Form S-3, Registration No. 33-59974).
(d) Third Supplemental Indenture dated as of October 22, 2001 between Weyerhaeuser Company and The Bank of New York Mellon Trust
Company, N.A. (as successor to JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank and Chemical Bank), a national
banking association, as Trustee (incorporated by reference from the Registration Statement on Form S-3, Registration No. 333-72356).
(e) Fourth Supplemental Indenture dated as of March 12, 2002 between Weyerhaeuser Company and The Bank of New York Mellon Trust
Company, N.A. (as successor to JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank and Chemical Bank), a national
banking association, as Trustee (incorporated by reference from the Registration Statement on Form S-4, Registration No. 333-82376).
10
—
Material Contracts
(a) Form of Executive Change of Control Agreement *
(b) Form of Executive Severance Agreement *
(c) Weyerhaeuser Company 2013 Long-Term Incentive Plan (incorporated by reference to Form 8-K filed with the Securities and Exchange
Commission February 19, 2013 — Commission File Number 1-4825) *
(d) Form of Weyerhaeuser Company 2013 Long-Term Incentive Plan Stock Option Award Terms and Conditions (incorporated by reference to
Current Report on Form 8-K filed with the Securities and Exchange Commission April 16, 2013 — Commission File Number 1-4825) *
(e) Form of Weyerhaeuser Company 2013 Long-Term Incentive Plan Performance Share Award Terms and Conditions (incorporated by reference
to Current Report on Form 8-K filed with the Securities and Exchange Commission April 16, 2013 — Commission File Number 1-4825) *
Form of Weyerhaeuser Company 2013 Long-Term Incentive Plan Performance Share Award Terms and Conditions (incorporated by reference
to Current Report on Form 8-K filed with the Securities and Exchange CommissionDecember 22, 2014 — Commission File Number 1-4825) *
(f)
(g) Form of Weyerhaeuser Company 2013 Long Term Incentive Plan Restricted Stock Unit Award Terms and Conditions (incorporated by
reference to Current Report on Form 8-K filed with the Securities and Exchange Commission April 16, 2013 — Commission File
Number 1-4825) *
(h) Form of Weyerhaeuser Company 2004 Long-Term Incentive Plan Stock Option Award 2013 Terms and Conditions (incorporated by reference
(j)
(i)
to Form 8-K filed with the Securities and Exchange Commission February 11, 2013 — Commission File Number 1-4825) *
Form of Weyerhaeuser Company 2004 Long-Term Incentive Plan Performance Share Award 2013 Terms and Conditions (incorporated by
reference to Form 8-K filed with the Securities and Exchange Commission February 11, 2013 — Commission File Number 1-4825) *
Form of Weyerhaeuser Company 2004 Long-Term Incentive Plan Restricted Stock Award 2013 Terms and Conditions (incorporated by
reference to Form 8-K filed with the Securities and Exchange Commission February 11, 2013 — Commission File Number 1-4825) *
(k) Weyerhaeuser Company Annual Incentive Plan for Salaried Employees (Amended and Restated Effective January 1, 2015) (incorporated by
reference to Current Report on Form 8-K filed with the Securities and Exchange Commission December 22, 2014 — Commission File
Number 1-4825) *
(l) Weyerhaeuser Company 2015 Deferred Compensation Plan (incorporated by reference to Form 8-K filed with the Securities and Exchange
Commission December 22, 2014 — Commission File Number 1-4825) *
(m) Weyerhaeuser Company Salaried Employees Supplemental Retirement Plan (incorporated by reference to 2004 Form 10-K filed with the
Securities and Exchange Commission January 27, 2009 — Commission File Number 1-4825) *
(n) 2011 Fee Deferral Plan for Directors of Weyerhaeuser Company (Amended and Restated Effective January 1, 2012) (incorporated by
reference to Current Report on Form 8-K filed with the Securities and Exchange Commission January 4, 2012 — Commission File
Number 1-4825) *
(o) Revolving Credit Facility Agreement among Weyerhaeuser Company, Weyerhaeuser Real Estate Company, JP Morgan Chase Bank, N.A. as
administrative agent, Citibank, N.A., as syndication agent, CoBank, ACB, PNC Bank, National Association, The Bank of Tokyo-Mitsubishi
UFJ, Ltd, and Wells Fargo Bank, N.A., as documentation agents, and the lenders, swing-line banks and initial fronting banks named therein
(incorporated by reference to Current Report on Form 8-K filed with the Securities and Exchange Commission September 12, 2013 —
Commission File Number 1-4825).
(p) Credit Agreement among Weyerhaeuser Company, CoBank, ACB as administrative agent, and the lenders party thereto (incorporated by
reference to Current Report on Form 8-K filed with the Securities and Exchange Commission September 16, 2013 — Commission File
Number 1-4825)
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
99
12
14
21
23
31
32
—
—
—
—
—
—
(q) Form of Tax Sharing Agreement to be entered into by and among Weyerhaeuser Company, Weyerhaeuser Real Estate Company and TRI
Pointe Homes, Inc. (incorporated by reference to Current Report on Form 8-K filed with the Securities and Exchange Commission
November 4, 2013 — Commission File Number 1-4825)
Statements regarding computation of ratios
Code of Business Conduct and Ethics (incorporated by reference to Form 8-K filed with the Securities and Exchange Commission April 20,
2010 — Commission File Number 1-4825)
Subsidiaries of the Registrant
Consent of Independent Registered Public Accounting Firm
Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended
Certification pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18
of the United States Code (18 U.S.C. 1350)
101.INS —
101.SCH —
101.CAL —
101.DEF —
101.LAB —
101.PRE —
XBRL Instance Document
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
* Denotes a management contract or compensatory plan or arrangement.
100
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized February 13, 2015.
WEYERHAEUSER COMPANY
/s/ DOYLE R. SIMONS
Doyle R. Simons
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant in the capacities indicated February 13, 2015.
/S/ DOYLE R. SIMONS
Doyle R. Simons
Principal Executive Officer
and Director
/S/ PATRICIA M. BEDIENT
Patricia M. Bedient
Principal Financial Officer
/S/ JEANNE M. HILLMAN
Jeanne M. Hillman
Principal Accounting Officer
/S/ DAVID P. BOZEMAN
David P. Bozeman
Director
/S/ DEBRA A. CAFARO
Debra A. Cafaro
Director
/S/ MARK A. EMMERT
Mark A. Emmert
Director
/S/ JOHN I. KIECKHEFER
John I. Kieckhefer
Director
/S/ WAYNE W. MURDY
Wayne W. Murdy
Director
/S/ NICOLE W. PIASECKI
Nicole W. Piasecki
Director
/S/ RICHARD H. SINKFIELD
Richard H. Sinkfield
Director
/S/ D. MICHAEL STEUERT
D. Michael Steuert
Director
/S/ KIM WILLIAMS
Kim Williams
Director
/S/ CHARLES R. WILLIAMSON
Charles R. Williamson
Chairman of the Board and Director
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
101
CERTIFICATIONS
EXHIBIT 31
Certification Pursuant to Rule 13a-14(a)
Under the Securities Exchange Act of 1934
I, Doyle R. Simons, certify that:
1.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
I have reviewed this annual report on Form 10-K of Weyerhaeuser Company.
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report.
4.
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
b)
c)
d)
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which that are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
b)
Date: February 13, 2015
/S/ DOYLE R. SIMONS
Doyle R. Simons
President and Chief Executive Officer
5.
102
I, Patricia M. Bedient, certify that:
1.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
I have reviewed this annual report on Form 10-K of Weyerhaeuser Company.
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report.
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
4.
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
b)
c)
d)
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which that are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
b)
Date: February 13, 2015
/S/ PATRICIA M. BEDIENT
Patricia M. Bedient
Executive Vice President and Chief Financial Officer
WEYERHAEUSER COMPANY > 2014 ANNUAL REPORT AND FORM 10-K
103
EXHIBIT 32
Certification Pursuant to Rule 13a-14(b)
Under the Securities Exchange Act of 1934 and
Section 1350, Chapter 63 of Title 18, United States Code
Pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and Section 1350, Chapter 63 of Title 18, United States
Code, each of the undersigned officers of Weyerhaeuser Company, a Washington corporation (the “Company”), hereby certifies
that:
The Company’s Annual Report on Form 10-K dated February 13, 2015 (the “Form 10-K”) fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-K fairly presents, in all
material respects, the financial condition and results of operations of the Company.
/s/ DOYLE R. SIMONS
Doyle R. Simons
President and Chief Executive Officer
Dated: February 13, 2015
/s/ PATRICIA M. BEDIENT
Patricia M. Bedient
Executive Vice President and Chief Financial Officer
Dated: February 13, 2015
The foregoing certification is being furnished solely pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and
Section 1350, Chapter 63 of Title 18, United States Code and is not being filed as part of the Form 10-K or as a separate
disclosure document.
104
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ABOUT WEYERHAEUSER
Weyerhaeuser Company began
operations in 1900 and is one of
the world’s largest private owners of
timberlands. We also manufacture
wood and cellulose fi bers products.
We employ approximately 12,800
people who serve customers worldwide.
We are listed on the Dow Jones World
Sustainability Index. Our company is
a real estate investment trust.
Corporate mailing address
and telephone
Weyerhaeuser Company
PO Box 9777
Federal Way, Washington
98063-9777
253.924.2345
Weyerhaeuser online
www.weyerhaeuser.com
Annual meeting
May 22, 2015
George Hunt Walker
Weyerhaeuser Building
Federal Way, Washington
TRANSFER AGENT AND REGISTRAR
Computershare
211 Quality Circle, Suite 210
College Station, TX 77845
Computershare, our transfer agent,
maintains the records for our registered
shareholders and can help you with a
variety of shareholder-related services
at no charge, including:
• change of name or address,
• consolidation of accounts,
• duplicate mailings,
• dividend reinvestment and direct stock
purchase plan enrollment,
• lost stock certifi cates,
• transfer of stock to another person, and
• additional administrative services.
Access your investor statements online
24 hours a day, seven days a week at
www.computershare.com/investor.
To fi nd out more about the services
and programs available to you, please
contact Computershare directly to access
your account by internet, telephone or
mail — whichever is most convenient for you.
Proxy material will be mailed on or about
April 8, 2015, to each holder of record
of common shares on March 27, 2015,
(the record date).
Contact us by telephone
Shareholders in the United States
800.561.4405
800.231.5469 TDD for hearing-impaired
WEYERHAEUSER CONTACT INFORMATION
Investor Relations contact
Denise M. Merle
Senior Vice President, Human Resources
and Investor Relations
253.924.2255
Elizabeth L. Baum
Director, Investor Relations
253.924.2058
Shareholder Services contact
Jacqueline W. Hawn
Assistant Corporate Secretary and
Manager, Shareholder Services
253.924.5631
Corporatesecretary@weyerhaeuser.com
Ordering company reports
To order a free copy of our 2014 Annual
Report and Form 10-K and other company
publications, visit: www.weyerhaeuser.com/
Company/CorporateAffairs/Contact/
OrderAPublication
Production notes
This report is printed on 80 lb. Finch
Opaque cover, and 50 lb. Finch Opaque
text. The entire report can be recycled in
most high-grade offi ce paper recycling
programs. Thank you for recycling.
Stock exchanges and symbols
Weyerhaeuser Company common stock
is listed on the New York Stock Exchange
and the Chicago Stock Exchange. Our
NYSE symbol for the common shares
is WY.
Foreign shareholders
201.680.6578
201.680.6610 TDD for hearing-impaired
Contact us online
www.computershare.com/investor
Contact us by mail
Weyerhaeuser Company
c/o Computershare
PO Box 30170
College Station, TX 77842-3170
Printed with
inks containing
soy and/or
vegetable oils
FPO
Place RRDs
SFI logo
with number
01042
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W
E
Y
E
R
H
A
E
U
S
E
R
2
0
1
4
A
N
N
U
A
L
R
E
P
O
R
T
A
N
D
F
O
R
M
1
0
K
-
FOR MORE INFORMATION, VISIT: http://investor.weyerhaeuser.com/
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