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Weyerhaeuser Company 10-K 2008 Documents found in this filing:
Table of ContentsWeyerhaeuser 2007 Annual Report and Form 10-K
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 30, 2007 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.) FEDERAL WAY, WASHINGTON 98063-9777 TELEPHONE (253) 924-2345 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ] 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 29, 2007, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was $16,643,213,266 based on the closing sale price as reported on the New York Stock Exchange Composite Price Transactions. As of February 1, 2008, 209,554,028 shares of the registrant’s common stock ($1.25 par value) were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Notice of 2008 Annual Meeting of Shareholders and Proxy Statement for the company’s Annual Meeting of Shareholders to be held April 17, 2008, are incorporated by reference into Part II and III.
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OUR BUSINESS We are an integrated forest products company. We grow and harvest trees, build homes and make wood and paper products essential to everyday lives. Our goal is to do this safely, profitably and responsibly. Our business has offices or operations in 13 countries and has customers worldwide. We manage 22 million acres of forests, and in 2007, we generated $16.3 billion in net sales and revenues. 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 end of 2007, or is for the fiscal year, ended December 30, 2007. 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. We report our financial results and condition in two groups:
Throughout this Form 10-K, unless specified otherwise, references to “we”, “our”, and “us” refer to the consolidated company, including both Weyerhaeuser and Real Estate.
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:
When we file the information electronically with the SEC, it is also added to our internet site.
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:
Detailed financial information about our business segments and our geographic locations is in Note 2: Business Segments and Note 24: Geographic Areas of Notes to Consolidated Financial Statements as well as further in this section and in the Management’s Discussion and Analysis of Financial Condition and Results of Operations. OUR HISTORY 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. In the 107 years since then, we have worked to be the best forest products company in the world. Our innovations and accomplishments through the years include:
COMPETITION IN OUR MARKETS Our major markets – both domestic and foreign – are highly competitive, with numerous companies selling similar products. Many of our products also compete against substitutes for wood and wood-fiber products. In real estate development and other related activities, we compete against numerous regional and national firms. We compete in our markets primarily through price, product quality and service levels.
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Our business segments compete based on the following strategies:
Our Fine Paper segment was divested in a 2007 transaction with Domtar, Inc. SALES OUTSIDE THE U.S. In 2007, 18 percent – or $3.1 billion – of our total consolidated sales and revenues including sales from discontinued operations were to customers outside the U.S. That included:
In 2006, 17 percent – or $3.8 billion – of our total consolidated sales and revenues, including sales from discontinued operations, were to customers outside the U.S. That included:
SHAPING OUR BUSINESS We strategically manage our portfolio to enhance shareholder returns. This ongoing process includes making key acquisitions to complement existing product lines or achieving greater scale in key operations. It also means that we exit businesses that do not fit our long-term strategic direction and divest ourselves of nonstrategic assets. Key acquisition in recent years have included:
In March 2007, we completed the following set of transactions:
Collectively, these transactions are referred to as the “Domtar Transaction.” In June 2007, we sold our Canadian wood products distribution centers. Other recent dispositions have included:
We continue to reinvest in our businesses through a variety of capital projects. In 2007 our capital expenditures – excluding acquisitions and our Real Estate business segment – totaled $706 million. We expect these investments will:
We are also focused on:
OUR EMPLOYEES We have approximately 37,900 employees. This number includes:
Of these employees, approximately 12,000 are members of unions covered by multi-year collective bargaining agreements.
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This section provides information about how we grow and harvest trees, manufacture and sell products made from them, and build and sell homes. 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 business segment manages 6.4 million acres of private commercial forestland in the U.S. We own 5.7 million of those acres and lease the other 700,000 acres. In addition, we have renewable, long-term licenses on 15.1 million acres of forestland located in five Canadian provinces. Information in the tables below includes data from all of the segment’s business units as of the end of 2007. WHAT WE DO We grow and harvest trees for use as lumber and other wood and building products. We also export logs to other countries where they are made into products. After harvest, we typically plant seedlings to reforest the harvested areas using the most effective regeneration method for the site and species. We monitor and care for the new trees as they grow to maturity. We seek to sustain and maximize the timber supply from our forestlands while keeping the health of our environment a key priority. We are recognized as a leading forest manager. The goal of our Timberlands business is to maximize returns by selling logs and stumpage to internal and external customers. We focus on solid softwood and use intensive silviculture to improve forest productivity and returns while managing the forests on a sustainable basis to meet both customer and public expectations. We capture additional value from our land and timber through the lease or sale of minerals, oil, gas, recreation and communications sites; sales of higher-and-better-use property; and the sale of other nontimber products.
Timberlands Products and Revenues
WHERE WE DO IT We manage a balanced portfolio of timberlands assets located primarily in North America. In the U.S. we own and manage sustainable forests in nine states for use in wood products manufacturing. We own or lease:
In addition, we have renewable, long-term licenses on 15.1 million acres of forestland located in five Canadian provinces. In Canada, forests generally are owned and administered by provincial governments. We also own and manage forestlands in the Southern Hemisphere. The results of these international operations are reported in the Corporate and Other segment. Our worldwide timber inventory is approximately 268 million cunits. One cunit equals 100 cubic feet of solid wood. The amount of timber inventory does not translate into an amount of lumber or panel products because the quantity of end products:
As a result, there is no standard for converting cubic feet of solid wood into board feet of lumber or square feet of panel products.
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Summary of 2007 Timber Inventory and Timberland Locations
Our Timberlands annual fee depletion represents the harvest of the timber assets that we own. Depletion is a method of expensing the fee timber asset based on the harvest or timber sales volume. The decline in fee depletion from 2004 through 2006 reflects the disposition of our B.C. Coastal operations in May 2005, and the decline in fee depletion from 2006 to 2007 reflects the Domtar Transaction in March 2007. The 2007 harvest volume by region was 55 percent in the South and 45 percent in the West. Five-Year Summary of Timberlands Production(1)(2)
HOW MUCH WE SELL Our net sales to unaffiliated customers declined 10 percent in 2007 to slightly under $1 billion, with 2006 slightly exceeding $1 billion. Five-Year Summary of Net Sales for Timberlands(1)(2)
Five-Year Trend for Total Net Sales in Timberlands(1)(2)
Percentage of 2007 Net Sales in Timberlands
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Log Sales Volumes Logs sold to unaffiliated customers in 2007 declined 355,000 cunits, or 10 percent, from 2006. Sales volumes from Canada dropped 177,000 in 2007. This reduction in volume was due primarily to the Domtar Transaction in March 2007. Other factors that may affect our log sales volume include the following:
All of our domestic and export logs are sold to unaffiliated customers or transferred at market prices to our internal mills by sales and marketing staff within our Timberlands business units. Five-Year Summary of Log Sales Volumes to Unaffiliated Customers for Timberlands(1)(2)
Log Prices Average log price realizations in 2007 were down as compared with 2006, primarily due to lower export and domestic log prices. Our log prices are affected by the supply of and demand for grade and fiber logs, which are influenced by all of the factors described above. Five-Year Summary of Selected Published Export Log Prices (#2 Sawlog Bark On – $/MBF)
WHERE WE’RE HEADED Our strategies for achieving continued success include:
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WOOD PRODUCTS We are one of the largest manufacturers and distributors of wood products in North America. WHAT WE DO
Wood Products
WHERE WE DO IT We have 71 manufacturing facilities in the U.S. 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 Broken out by major products, locations of our principal manufacturing facilities are:
Summary of 2007 Wood Products Capacities
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Five-Year Summary of Wood Products Production(1)(2)
HOW MUCH WE SELL Revenues of our Wood Products business segment come from sales to wood products dealers, do-it-yourself retailers, builders, and industrial users. We provide products and services to the residential construction market under the iLevel™ and Trus-Joist™ brands. In 2007 our net sales were $5.7 billion compared with $7.9 billion in 2006. Five-Year Summary of Net Sales for Wood Products(1)( 2)
Five-Year Trend for Total Net Sales in Wood Products(1)(2)
Percentage of 2007 Net Sales in Wood Products
Wood Products Volume The volume of wood products sold in 2007 declined from 2006 primarily because of the reduction in production capacity through the sale or closure of a number of facilities and production curtailments in response to market conditions in 2006 and 2007. The sales and closures include:
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Five-Year Summary of Sales Volume for Wood Products(1)(2)
Wood Products Prices Prices for wood products in 2007 declined from 2006. The following factors influence prices for wood products:
Five-Year Summary of Selected Published Lumber Prices – $/MBF
Five-Year Summary of Selected Published Oriented Strand Board Prices – $/MSF
Five-Year Summary of Selected Published Plywood Prices ( 1/2” CDX) – $/MSF
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WHERE WE’RE HEADED Our strategies for achieving continued success vary by business.
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CELLULOSE FIBERS Our cellulose fibers (pulp) products are distributed through a global direct sales network, and liquid packaging products are sold directly to carton and food product packaging converters in North America and Asia. We also have a 50 percent interest in North Pacific Paper Corporation (NORPAC) – a joint venture with Nippon Paper Industries that produces newsprint and high brightness publication papers. WHAT WE DO
Cellulose Fibers Products
WHERE WE DO IT We have four pulp mills in strategic locations in the southern part of the U.S. and one pulp mill in Canada. Our liquid packaging mill and our NORPAC joint venture newsprint manufacturing facility are located in Washington state. Principal Manufacturing Locations Broken out by major product, locations of our principal manufacturing facilities are:
Summary of 2007 Cellulose Fibers Capacities
Five-Year Summary of Cellulose Fibers Production(1)(2)
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. In 2007, our net sales were approximately $1.8 billion compared with $2.0 billion in 2006. Five-Year Summary of Net Sales for Cellulose Fibers(1)(2)
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Five-Year Trend for Total Net Sales in Cellulose Fibers(1)(2)
Percentage of 2007 Net Sales in Cellulose Fibers
Pulp Volumes Our sales volume of cellulose fiber products in 2007 was 2.1 million tons – a decrease of 21 percent compared with 2006 due to the divesture of five production facilities during the year. Factors that affect sales volumes for cellulose fiber products include:
Five-Year Summary of Sales Volume for Cellulose Fibers(1)(2)
Pulp Prices Our pulp prices in 2007 increased compared with 2006 due to:
Five-Year Summary of Selected Published Pulp Prices – $/TON
WHERE WE’RE HEADED Our strategies for achieving continued success include:
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FINE PAPER On March 7, 2007, the company’s fine paper operations and related assets were divested in the Domtar Transaction. As a result, the 52 week period ended December 30, 2007, includes nine weeks of fine paper operations. Subsequent to the first quarter of 2007, we no longer have results of operations for the Fine Paper segment. Five-Year Summary of Net Sales for Fine Paper(1)
Five-Year Summary of Sales Volume for Fine Paper(1)
Five-Year Summary of Fine Paper Production(1)
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CONTAINERBOARD, PACKAGING AND RECYCLING Our Containerboard, Packaging and Recycling business segment manufactures a wide range of packaging products and services. We also operate an extensive wastepaper collection system through which we collect and broker recovered paper (recycled fiber) to company mills and worldwide customers. WHAT WE DO We use a vertically integrated, full fiber-cycle strategy in delivering packaging products and services. This means that we:
We participate in the fresh produce markets and, as a result, a portion of our business is seasonal. Containerboard, Packaging and Recycling Products
WHERE WE DO IT Our plants and facilities are located throughout the U.S. and Mexico near major customer locations and our products are sold globally. Our operations include 106 manufacturing facilities and 10 specialty packaging plants. Information about the locations, capacities and actual production of our manufacturing facilities is included below.
Principal Manufacturing Locations Broken out by major products, locations of our principal manufacturing facilities are:
Summary of 2007 Containerboard, Packaging and Recycling Capacities
Five-year Summary of Containerboard, Packaging and Recycling Production(1)
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HOW MUCH WE SELL Our capability, expertise and performance have made us one of the world’s largest developers, producers and suppliers of packaging products and services. In 2007, our net sales were $5.2 billion compared with $4.9 billion in 2006. Five-Year Summary of Net Sales for Containerboard, Packaging and Recycling(1)
Five-Year Trend for Total Net Sales in Containerboard, Packaging and Recycling(1)
Percentage Breakdown of 2007 Net Sales in Containerboard, Packaging and Recycling
Containerboard, Packaging and Recycling Volumes We are the second-largest producer of corrugated packaging products in North America.
Factors that affect sales volumes of containerboard, packaging and recycling products and services include:
Our volume of containerboard sales increased in 2007 as a result of a rise in export sales, compensating for the decline in packaging volume. Our packaging sales declined in 2007 because of the closure of eight plants and the sale of two others in 2006 and due to the effect of cold weather and E. coli on produce markets during the first quarter of 2007. Our sales volume in the kraft bag market increased in 2007 as the start-up of a new facility in the second quarter of 2007 more than offset the closure of another bag plant in 2006. Five-Year Summary of Sales Volume for Containerboard, Packaging and Recycling(1)
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Containerboard, Packaging and Recycling Prices The factors that affect selling prices for our containerboard, packaging and recycling products and services vary.
Five-year Summary of Selected Published Containerboard, Packaging and Recycling Prices – $/TON
WHERE WE’RE HEADED During 2007, this segment continued to refine its business model implemented in 2006: shifting from a plant-focused management model to a customer-focused, integrated supply-chain model. Our strategies for achieving continued success include:
Our research and development activity in this segment is focused in two primary areas; recyclable products that would replace waxed corrugated package products, and radio-frequency identification (RFID) for corrugated packages. We are commercializing our line of recyclable wax-replacement products called Clima Series™ and have demonstrated success in applying RFID tags to corrugated boxes. The proposed banning of plastic grocery bags in several major municipalities offers the potential to further expand the kraft bag market. Strategic Review On May 4, 2007 we announced that our board of directors had authorized a process to consider a broad range of strategic alternatives for our Containerboard, Packaging and Recycling business. Alternatives range from continuing to hold and operate the assets to a possible sale or business combination. As of the date of this filing, this strategic review is ongoing.
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REAL ESTATE Our Real Estate business segment includes our wholly-owned subsidiary, Weyerhaeuser Real Estate Company (WRECO), and other real estate-related activities. WRECO’s operations are concentrated in select, high-growth metropolitan areas in the U.S. WHAT WE DO The Real Estate segment is focused on:
Real Estate Products and Activities
WHERE WE DO IT Our operations are concentrated in the U.S., including select, metropolitan areas:
HOW MUCH WE SELL We are one of the top 20 homebuilding companies in the U.S. as measured by annual single-family home closings. Our revenues decreased from $3.3 billion in 2006 to $2.4 billion in 2007, primarily due to a 24 percent decline in single-family closings. The decline is the result of a general housing-market downturn, caused by excess supply and slow demand. This was worsened by the changing mortgage market which resulted in tightened credit standards. The following factors affect revenues from our Real Estate business segment:
Five-Year Summary of Revenue for Real Estate(1)(2)
Five-Year Trend for Total Net Sales in Real Estate(1)(2)
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Percentage Breakdown of 2007 Net Sales in Real Estate
Five-Year Summary of Single-Family Unit Statistics(1)(2)
WHERE WE’RE HEADED Our strategies for achieving continued success include:
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CORPORATE AND OTHER Our Corporate and Other segment includes:
We may also record one time gains or charges in the Corporate and Other segment related to dispositions or events that are not related to an individual operating segment. WHAT WE DO International operations in this segment generally are conducted by wholly owned subsidiaries or joint ventures for which we are the managing partner. Our international assets consist principally of forest plantations, forest licenses and converting assets. Our transportation operations provide services to our manufacturing operations and to third parties. WHERE WE DO IT Our international operations are primarily located in Australia, Uruguay and Brazil. As part of our strategic restructuring of our international holdings, we took the following actions in our international operations during the last three years, we:
See Note 7: Equity Affiliates in Notes to Consolidated Financial Statements for more information related to our joint ventures. Our transportation operations include our marine operations that operate between North America and Asia and our railroad operations located in the western and southern U.S. HOW MUCH WE SELL Sales and revenues for our Corporate and Other segment comes primarily from our international operations and marine transportation. In 2007, our net sales were $444 million compared with $484 million in 2006. The decline in revenues is primarily due to the sale of the Irish composite panel operation in November 2006.
Factors that affect revenues in our international operations include:
Factors that affect revenues in our transportation operations include:
Five-Year Summary of Revenue for Corporate and Other(1)(2)
Five-Year Trend for Total Net Sales in Corporate and Other(1)(2)
WHERE WE’RE HEADED Our strategies for achieving continued success in our international operations include:
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NATURAL RESOURCE AND ENVIRONMENTAL MATTERS Growing and harvesting timber is subject to numerous laws and regulations to protect the environment, nontimber resources such as wildlife and water, and other social values. Changes in those laws and regulations can significantly affect local or regional timber harvest levels and market values of timber-based raw materials. ENDANGERED SPECIES PROTECTIONS In the U.S., 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. Some of these listed species include the northern spotted owl, the marbled murrelet, a number of salmon species, bull trout and steelhead trout in the Pacific Northwest and the red-cockaded woodpecker, gopher tortoise and American burying beetle in the Southeast. Additional species or populations may be listed as a result of pending or future citizen petitions or may be initiated by federal or state agencies. Federal and state requirements to protect habitat for threatened and endangered species have resulted in restrictions on timber harvest on some timberlands, including some of our timberlands. Additional listings of fish and wildlife species as endangered, threatened or sensitive under the ESA and similar state laws as well as regulatory actions taken by federal or state agencies to protect habitat for these species may, in the future, result in additional restrictions on our timber harvests and other forest management practices. They also could increase our operating costs and affect timber supply and prices in general. REGULATIONS AFFECTING FORESTRY PRACTICES In the U.S., regulations established by the federal, state and local governments or agencies to protect water quality and wetlands could affect our future harvests and forest management practices on some of our timberlands. Forest practice acts in some states in the U.S. increasingly affect present or future harvest and forest management activities. For example, in some states, these acts limit the size of clearcuts, require some timber to be left unharvested to protect water quality and fish and wildlife habitat, regulate construction and maintenance of forest roads, require reforestation following timber harvest and contain procedures for state agencies to review and approve proposed forest practice activities. Some states and local governments regulate certain forest practices through various 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 hab-itats. 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. FOREST CERTIFICATION STANDARDS We operate in the U.S. under the Sustainable Forestry Initiative®. This is a certification standard designed to supplement government regulatory programs with voluntary landowner initiatives to further protect certain public resources and values. The Sustainable Forestry Initiative® is an independent standard, overseen by a governing board consisting of conservation organizations, academia, the forest industry, and large and small forest landowners. Compliance with the Sustainable Forestry Initiative® may result in some increases in our operating costs and curtailment of our timber harvests in some areas. WHAT THESE REGULATIONS AND CERTIFICATION PROGRAMS MEAN TO US The regulatory and nonregulatory forest management programs described above have increased our operating costs, resulted in changes in the value of timber and logs from our timberlands, and contributed to increases in the prices paid for wood products and wood chips during periods of high demand. These kinds of programs also can make it more difficult for us to respond to rapid changes in markets, extreme weather or other unexpected circumstances. One additional effect may be further reductions in the usage of or substitution of other products for lumber and plywood. We believe that these kinds of programs have not had, and in 2008 will not have, a significant effect on the total harvest of timber in the U.S. or any major U.S. region. 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. REGULATIONS AND FOREST CERTIFICATION IN CANADA Our forest operations in Canada are carried out on public forestlands under forest licenses. All forest operations are subject to forest practices and environmental regulations, and operations under licenses also are subject to contractual requirements between us and the relevant province designed to protect environmental and other social values. In Canada, the federal Species at Risk Act (SARA) was enacted in 2002. SARA enacted protective measures for species identified as being at risk and for critical habitat. To date, SARA has not had a significant effect on our operations; however, it is anticipated that SARA will, over time, result in some additional restrictions on timber harvests and other forest management practices and increase
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some operating costs for operators of forestlands in Canada. For these reasons, SARA is expected to affect timber supply and prices in the future. In Canada, we participate in the Canadian Standards Association Sustainable Forest Management System standard, a voluntary certification system that further protects certain public resources and values. Compliance with this standard will result in some increases in our operating costs and curtailment of our timber harvests in some areas in Canada. CANADIAN ABORIGINAL RIGHTS Many of the Canadian forestlands also are subject to the constitutionally protected treaty or common-law rights of the aboriginal peoples of Canada in the British Columbia province. 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 are largely unresolved, although many aboriginal groups are actively engaged in treaty discussions with the governments of B.C. and Canada. Final or interim resolution of claims brought by aboriginal groups is expected to result in additional restrictions on the sale or harvest of timber and may increase operating costs and affect 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 2008, although they may have such an effect in the future. POLLUTION CONTROL REGULATIONS Our operations also are subject to federal, state and provincial, and local pollution controls with regard to air, water and land; solid and hazardous waste management; disposal and remediation laws; and regulations in all areas in which we have operations. We also are subject to market demands with respect to chemical content of some of our products and our use of recycled fiber. 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, when we make changes in operations to comply with regulatory standards, we frequently are making changes for other purposes as well. These purposes might include the extension of facility life, increase in capacity, changes in raw material requirements, or increase in economic value of assets or products. It is difficult to isolate the environmental component of most manufacturing capital projects, but we estimate that our capital expenditures for environmental compliance were approximately $14 million in 2007 (approximately 2 percent of total capital expenditures, excluding acquisitions and Real Estate). Based on our understanding of current regulatory requirements in the U.S. and Canada, we expect that capital expenditures for environmental compliance will be approximately $24 million in 2008 (approximately 4 percent of expected total capital expenditures, excluding acquisitions and Real Estate). ENVIRONMENTAL CLEANUP We are involved in the environmental investigation or remediation of numerous sites, which we presently own or formerly owned. Of these sites, we may have the sole obligation to remediate or may share that obligation with one or more parties. In some instances several parties have joint and several obligations to remediate. Some sites are Superfund sites where we have been named as a potentially responsible party. Our liability with respect to these various sites ranges from insignificant to substantial. The amount of liability depends on the quantity, toxicity and nature of materials at the site and depends on the number and economic viability of the other responsible parties. We spent approximately $10 million in 2007 and expect to spend approximately $10 million in 2008 on environmental remediation of these sites. It is our policy to accrue for environmental remediation costs when we determine it is probable that such an obligation exists and 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 $27 million. The excess amounts required may be insignificant or could range, in the aggregate, up to approximately $37 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 (U.S. EPA) has promulgated regulations for air emissions from pulp and paper manufacturing facilities. These regulations cover hazardous air pollutants that require use of maximum achievable control technology (MACT) and controls for pollutants that contribute to smog and haze. Due to a recent D.C. Circuit Court decision, the U.S. EPA MACT standards for air emissions from industrial boilers and certain wood products emissions units were vacated. The U.S. EPA must promulgate new MACT standards for these sources. We anticipate that we might spend as much as $20 million over the next few years to comply with the MACT standards. We cannot currently quantify the amount of capital we will need in the future to comply with new regulations being developed by the U.S. EPA or Canadian environmental
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agencies because final rules have not been promulgated. However, at this time we anticipate that compliance with the new regulations will not result in capital expenditures in any year that are material in relation to our annual capital expenditures. We recently adopted a goal of reducing greenhouse gas (GHG) emissions by 40 percent by 2020 compared with our emissions in 2000, assuming a comparable portfolio and regulations. We intend to achieve this goal by increasing energy efficiency and by using systems that enable substitution of greenhouse gas-neutral, biomass fuels for high-priced fossil fuels. As each of our power and recovery boilers reaches its design life span over the next 14 years, we may replace the boiler with a state-of-the-art system. During 2007, we completed the divestment of our fine paper operations and related assets in the Domtar Transaction. The transaction removed several high greenhouse gas-emitting operations from the company’s portfolio of manufacturing. In accord with generally accepted, voluntary GHG accounting standards, we adjusted our baseline year 2000 values and subsequent year greenhouse gas inventory values to reflect these changes. We continue with our planned replacements of recovery and power boiler units in accord with our budgeted capital expenditure programs. These replacements will allow an increase in the amount of energy obtained from the biomass byproducts created in the pulping process. We also anticipate being able to reduce the purchase of electric power by up to 50 percent through improvements in energy efficiency and by increasing the use of combined heat and power technology. In April 2007, the U.S. Supreme Court ruled that greenhouse gases are pollutants that can be subject to regulation under the U.S. Clean Air Act. As a result of this ruling, the U.S. EPA may regulate greenhouse gas emissions. Some U.S. state governments also have released policy proposals that indicate they may regulate GHG emissions in the future. It is not yet known when and to what extent these U.S. federal and state policy activities may come into force or how any future federal and state greenhouse gas regulatory programs may relate to each other. A multistate and federal greenhouse gas emissions reduction trading system may be put in place in the future with potentially significant implications for U.S. businesses. We believe these measures have not had, and in 2008 will not have, a significant effect on Weyerhaeuser’s U.S. operations although they may have such an effect in the future. We expect we will not be disproportionately affected by these measures as compared with typical owners of comparable operations. We also expect that these measures will not significantly disrupt our planned operations.
REGULATION OF AIR EMISSIONS IN CANADA We also are actively participating in negotiations between the Forest Products Association of Canada and Natural Resources Canada to define industry obligations for complying with Canada’s national plan for reducing greenhouse gas emissions over the next several years. During 2007, we continued our work with international, national and regional policy makers in their efforts to develop technically sound and economically viable policies, practices and procedures for measuring, reporting and managing greenhouse gas emissions. In April 2007, the Canadian federal government proposed a regulatory framework for air emissions that adopts some aspects of the Kyoto Protocol. The federal framework calls for mandatory reductions in greenhouse gas emissions for heavy industrial emissions producers, among other measures, to be put in place by 2010. Canadian provincial governments also are working on emissions-reduction strategies. It is not yet known what strategies or requirements will come into force or how any provincial and federal plans that may be put into place will relate to each other. A Canadian emissions trading system may be put in place in the future with potentially significant implications for Canadian businesses. We believe these measures have not had, and in 2008 will not have, a significant effect on Weyerhaeuser’s Canadian operations although they may have such an effect in the future. We expect we will not be disproportionately affected by these measures as compared with typical owners of comparable operations. We also expect that these measures will not significantly disrupt our planned operations. POTENTIAL CHANGES IN POLLUTION REGULATION The U.S. EPA has repealed the regulations promulgated in 2000 that would have required states to develop total maximum daily load (TMDL) allocations for pollutants in water bodies determined to be water-quality-impaired. However, states continue to promulgate TMDL requirements. The state TMDL requirements may set limits on pollutants that may be discharged to a body of water or 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 the company to meet pollution allocations across the various proposed state TMDL programs until a specific TMDL is promulgated.
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FORWARD-LOOKING STATEMENTS This report contains statements concerning our future results and performance that are forward-looking statements according to the Private Securities Litigation Reform Act of 1995. These statements:
Factors listed in this section – as well as other factors not included – may cause our actual results to differ from our forward-looking statements. There is no guarantee that any of the events anticipated by our forward-looking statements will occur. If any of the events occurs, 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 Some forward-looking statements discuss our plans, strategies and intentions. They use words such as expects, may, will, believes, should, approximately, anticipates, estimates, and plans. In addition, these words may use the positive or negative or a variation of those terms. STATEMENTS We make forward-looking statements of our expectations regarding:
In addition, we also base our forward-looking statements on the expected effect of:
RISKS, UNCERTAINTIES AND ASSUMPTIONS The major risks and uncertainties – and assumptions that we make – that affect our business include, but are not limited to:
EXPORTING ISSUES We are a large exporter, affected by changes in:
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RISK FACTORS We are subject to certain risks and events that, if one or more of them occur, could adversely affect our business, our financial condition and our results of operations and the trading price of our common stock. You should consider the following risk factors, in addition to the other information presented in this report and the matters described in “Forward-Looking Statements,” as well as the other reports and registration statements we file from time to time with the SEC, in evaluating us, our business, and an investment in our securities. The risks 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 The industries in which we operate are highly cyclical. Fluctuations in the prices of and the demand for our products could result in smaller profit margins and lower sales volumes. Our businesses are highly cyclical. Historically, economic and market shifts, fluctuations in capacity and changes in foreign currency exchange rates and mortgage interest rates have created cyclical changes in prices, sales volume and margins for our products. The length and magnitude of industry cycles have varied over time and by product but generally reflect changes in macroeconomic conditions and levels of industry capacity. 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. The overall levels of demand for the products we manufacture and distribute, and consequently our sales and profitability, reflect fluctuations in levels of end-user demand, which depend in part on general macroeconomic conditions in North America and worldwide, and local economic conditions, and competition from substitute products. Changes in the following are some of the factors that may adversely affect our businesses and the results of operations:
Industry supply of logs, pulp, paper, packaging and wood products also is subject to fluctuation, as changing industry conditions may cause producers to idle or permanently close individual machines or entire mills or to decrease harvesting levels. In addition, to avoid substantial cash costs in connection with idling or closing a mill, some producers choose to continue to operate at a loss, which could prolong weak prices due to oversupply. Oversupply also may result from producers introducing new capacity or increasing harvest levels in response to favorable short-term pricing trends. Industry supply of pulp, paper and containerboard also are influenced by overseas production capacity, which has grown in recent years and is expected to continue to grow. While the weakness of the U.S. dollar has mitigated the levels of imports in recent years, imports of pulp, paper and containerboard from overseas may increase, resulting in lower prices. Prices for our products are affected by many factors outside of our control, and we will have little influence over the timing and extent of price changes, which often are volatile. Because market conditions beyond our control determine the prices for our commodity products, the price for any one or more of these products may fall below our cash production costs, requiring us either to incur cash losses on product sales or cease production at one or more of our manufacturing facilities or curtail harvest levels. Our profitability with respect to these products depends 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, as described below. If the prices of or demand for our products declines, if our raw material or energy costs increase, or both, our sales and profitability could be materially and adversely affected. 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 packaging may be used as an alternative to our corrugated packaging business products; and 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. Changes in prices for oil, chemicals and wood-based
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fiber can change the competitive position of our products relative to available alternatives and could increase substitution of those products for our products. As the use of these alternatives grows, demand for our products may further decline. CHANGES IN PRODUCT MIX OR PRICING Our results of operation and financial condition could be materially adversely affected by changes in product mix or pricing. Our results may be affected by a change in our sales mix. Our outlook assumes a certain volume and product mix of sales. If actual results vary from this projected volume and product mix of sales, our operations and our results could be negatively affected. Our outlook also assumes we will be successful in implementing previously announced price increases as well as future price increases. Delays in acceptance of price increases could negatively affect our results. Moreover, price discounting, if required to maintain our competitive position, could result in lower than anticipated price realizations. 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 is selling price. Our ability to maintain satisfactory margins depends in large part on our ability to control our costs. Our industries are also 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. We cannot assure you that we will be able to compete effectively and maintain current levels of sales and profitability. If we are unable to compete effectively, such failure could have a material adverse effect on our business, financial condition and results of operations. 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. We depend on third parties for transportation services and increases in costs and 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 and/or distribute as well as delivery of our raw materials. In particular, a significant portion of the goods we manufacture and raw materials we use are transported by railroad or trucks, which are highly regulated. 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. 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. 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:
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Any such downtime or facility damage could prevent us from meeting customer demand for our products and/or require us to make unplanned capital expenditures. If one of these machines or facilities 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. Our operations require substantial capital. Capital expenditures for expansion or replacement of existing facilities or equipment may be substantial. Although we maintain our production equipment with regular periodic and scheduled maintenance, we cannot assure you that key pieces of equipment in our various production processes will not need to be repaired or replaced and major equipment may need to be 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. Based on our current operations, we believe our cash flow from operations and other capital resources will be adequate to meet our operating needs, capital expenditures and other cash requirements for the foreseeable future. If for any reason we are unable to provide for our operating needs, capital expenditures and other cash requirements on 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 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:
In particular, the pulp and paper industry in the U.S. is subject to Cluster Rules and Boiler Maximum Achievable Control Technology Rules that further regulate effluent and air emissions. These laws and regulations will require us to obtain authorizations from and comply with the authorization requirements of the appropriate governmental authorities, which have considerable discretion over the terms and timing of permits. 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. 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. 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.
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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 “Legal Proceedings” and Note 16 of “Notes to Consolidated Financial Statements” contains management’s current views, when possible, 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. For example, in 1999, the Equity Committee in the Paragon Trade Brands Inc. bankruptcy proceeding sued us for breach of warranties in agreements between us and Paragon relating to Paragon’s initial public stock offering. The bankruptcy court held us liable for breaches of warranty and imposed damages of approximately $470 million. The U.S. District Court overturned the decision and directed the Bankruptcy Court to enter judgment in favor of the Company, but the litigation claims representative has appealed the decision to the 11th Circuit Court of Appeals. We believe that we will prevail on the appeal and we have not established a reserve for this litigation because we believe that the requirements for establishing a reserve under Statement of Financial Accounting Standards No. 5, [Accounting for Contingencies] (Statement 5) have not been met. However, it is possible in the future that there could be a charge for all or a portion of any damage award. There also have been several lawsuits filed against us alleging that we violated U.S. antitrust laws. Several lawsuits have been filed since 2000 in U.S. District Court in Oregon alleging we had monopoly power or attempted to gain monopoly power for alder logs and finished alder lumber in the Pacific Northwest market (the Alder Cases). In 2006, a series of lawsuits against us and other manufacturers of oriented strand board (OSB) were consolidated into one case in the U.S. District Court in Pennsylvania on behalf of purchasers of OSB. The lawsuit alleges that the manufacturers conspired to fix and raise OSB prices and caused the purchasers of OSB to pay artificially inflated prices. In the event liability is found in an antitrust case, the damages proved at trial are trebled. Jury verdicts and damages imposed against us in two of the Alder Cases were vacated as a result of a ruling by the U.S. Supreme Court in our favor in one of the Alder Cases and we have settled three of these cases, but one case is still pending. In the OSB case, the U.S. District Court has issued a number of rulings approving class action status for various classes of direct and indirect purchasers for the period June 2002 through February 2006. We have not established a reserve for any of these cases and intend to contest these cases vigorously. We are not able to estimate the amount of charges, if any, that may be required in the future. It is possible that there could be adverse judgments against us in some or all of these cases and that we could be required to take a charge for all or a portion of any damage award. Any such charge could materially and adversely affect our results of operations for the quarter or year in which we record it. We will be affected by changes in currency exchange rates. We have manufacturing operations in Canada, Mexico, Australia, Uruguay and Brazil, and we are also a large exporter and, as a result, are affected by changes in currency exchange rates, particularly the value of the U.S. dollar relative to the euro and the Canadian dollar. We may be required to pay significant export taxes or countervailing and anti-dumping duties for exported products. We may experience reduced revenues and margins on some of our businesses as a result of export taxes or countervailing and anti-dumping duty applications. For example, in 2001, a group of companies filed petitions with the U.S. Department of Commerce and the International Trade Commission claiming that production of softwood lumber in Canada was being subsidized by Canada and that imports into the U.S. from Canada were being sold in U.S. markets at less than their fair value. We have softwood lumber facilities in Canada that export lumber into the U.S. We paid a total of $370 million in deposits for countervailing duty and anti-dumping tariffs from 2002 through 2006 related to those lumber exports. The U.S. and Canadian governments reached a settlement of the dispute in 2006. As a result of the settlement, we received a refund of $344 million in the fourth quarter of 2006. However, our Canadian softwood lumber facilities will have 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. Similar types of actions have been initiated from time to time against us and other U.S. producers of products such as paper, corrugated containerboard sheets or lumber by countries such as China, Korea and Mexico. It is possible that countervailing duty and antidumping tariffs, or similar types of tariffs could be imposed on us 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. 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.
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Changes in credit ratings issued by nationally recognized statistical 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 would likely increase our cost of financing and have an adverse effect on the market price of our securities. Our business and operations could be adversely affected by weather, fire, infestation or natural disasters. Our timberlands assets may be damaged by adverse weather, 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.
RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK The price of our common stock may be volatile. 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:
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 would divert management’s attention and resources.
RISKS RELATED TO THE DOMTAR TRANSACTION On March 7, 2007, we completed a transaction combining our fine paper business and related assets with Domtar Inc., a Canadian corporation, to form a new company, Domtar Corporation (Domtar). The transaction was structured in a manner that was tax-free to us and our shareholders. In connection with the transaction, we entered into a tax-sharing agreement with Domtar that requires Domtar, its subsidiaries and its affiliates, for a two-year period following closing of the transaction to avoid taking certain actions that might adversely affect the tax-free status of the transaction. To the extent that the tax-free status of the transaction is lost because of actions taken by Domtar, Domtar is generally required to indemnify us for any resulting tax-related losses incurred by us or our shareholders. In the event that conduct by Domtar affects the tax-free status of the transaction and Domtar is unable to meet its obligation to indemnify us and our shareholders, Weyerhaeuser and its shareholders could incur significant tax obligations.
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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 is found in the Our Business — What We Do section of this report.
Production capacities listed represent annual production volume under normal operating conditions and producing a normal product mix for each individual facility. Production capacities are based on a 52-week fiscal year and do not include any capacity for facilities that were sold or closed as of year-end 2007.
LEGAL PROCEEDINGS See Note 16: Legal Proceedings, Commitments and Contingencies of Notes to Consolidated Financial Statements for a summary of legal proceedings. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year ended December 30, 2007.
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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:
Our exchangeable shares trade on the Toronto Stock Exchange under the symbol WYL.
As of December 30, 2007, there were approximately 10,489 holders of record of our common shares and 1,037 holders of record of our exchangeable shares. Dividend-per-share data and the range of closing market prices for our common stock for each of the four quarters in 2007 and 2006 are included in Note 25 of “Notes to Consolidated Financial Statements.”
INFORMATION ABOUT SECURITIES AUTHORIZED FOR ISSUANCE UNDER OUR EQUITY COMPENSATION PLAN
INFORMATION ABOUT COMMON STOCK REPURCHASES DURING 2007(1)
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COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN Weyerhaeuser Company, S&P 500 and Performance Peer Group
PERFORMANCE GRAPH ASSUMPTIONS
In 2006, we adopted a new peer group for performance comparisons. Recent consolidation in the forest products industry has decreased the number of our direct peers in the sector, and shareholders measure our performance against a broader set of peers. The Compensation Committee of the board of directors selected a broader-sized range of basic materials companies that typically have been used by shareholders as benchmarks for our performance. The performance peer group currently includes Alcoa, Alcan, Air Products & Chemicals, Ball Corp., Bowater, Celanese AG, Domtar Inc., Dow Chemical, DuPont, Eastman Chemical, International Paper, Smurfit-Stone, Louisiana-Pacific, MeadWestvaco, Monsanto, Nucor, Owens-Illinois, Phelps Dodge, Praxair, PPG Industries, Rohm & Haas, Temple-Inland and U.S. Steel.
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SELECTED FINANCIAL DATA DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES
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