TITLE OF EACH CLASS | NAME OF EACH EXCHANGE ON WHICH REGISTERED: | |
Common Shares ($1.25 par value) | New York Stock Exchange | |
Securities registered pursuant to Section 12(g) of the Act: None |
PART I | PAGE | |
ITEM 1. | ||
ITEM 1A. | ||
ITEM 1B. | ||
ITEM 2. | ||
ITEM 3. | ||
ITEM 4. | MINE SAFETY DISCLOSURES — NOT APPLICABLE | |
PART II | ||
ITEM 5. | ||
ITEM 6. | ||
ITEM 7. | ||
ITEM 7A. | ||
ITEM 8. | ||
ITEM 9. | ||
ITEM 9A. | ||
ITEM 9B. | OTHER INFORMATION — NOT APPLICABLE | |
PART III | ||
ITEM 10. | ||
ITEM 11. | ||
ITEM 12. | ||
ITEM 13. | ||
ITEM 14. | ||
PART IV | ||
ITEM 15. | ||
ITEM 15. | ||
WE CAN TELL YOU MORE |
• | the SEC website — www.sec.gov; |
• | the SEC’s Public Conference Room, 100 F St. N.E., Washington, D.C., 20549, (800) SEC-0330; and |
• | our website (free of charge) — www.weyerhaeuser.com. |
WHO WE ARE |
• | Timberlands; |
• | Real Estate, Energy and Natural Resources (Real Estate & ENR); and |
• | Wood Products. |
• | Timberlands — Deliver maximum timber value from every acre we own or manage. |
• | Real Estate & ENR — Deliver premiums to timberland value by identifying and monetizing higher and better use lands and capturing the full value of surface and subsurface assets. |
• | Wood Products — Manufacture high-quality lumber, structural panels, and engineered wood products, as well as deliver complementary building products for residential, multi-family, industrial and light commercial applications at competitive costs. |
WHAT WE DO |
• | grow and harvest trees, |
• | maximize the value of every acre we own and |
• | manufacture and sell wood products. |
• | plants seedlings to reforest harvested areas using the most effective regeneration method for the site and species (natural regeneration is employed and managed in parts of Canada and the northern U.S.); |
• | manages our timberlands as the trees grow to maturity; |
• | harvests trees to be converted into lumber, wood products, pellets, pulp and paper; |
• | manages the health of our forests to sustainably maximize harvest volumes, minimize risks, and protect unique environmental, cultural, historical and recreational value; and |
• | offers recreational access. |
PRODUCTS | HOW THEY’RE USED | |
Delivered logs: • Grade logs • Fiber logs | Grade logs are made into lumber, plywood, veneer and other products used in residential homes, commercial structures, furniture, industrial and decorative applications. Fiber logs are sold to pulp, paper, and oriented strand board mills to make products used for printing, writing, packaging, homebuilding and consumer products, as well as into renewable energy and pellets. | |
Timber | Standing timber is sold to third parties through stumpage sales. | |
Recreational leases | Timberlands are leased or permitted for recreational purposes. | |
Other products | Seed and seedlings grown in the U.S and chips. We previously produced plywood at our mill in Uruguay (1). | |
(1) Our Uruguayan operations were divested on September 1, 2017. Refer to Note 4: Discontinued Operations and Other Divestitures in the Notes to Consolidated Financial Statements for further information on this divestiture. |
• | Thousand board feet (MBF) — used in the West to measure the expected lumber recovery from a tree or log; and |
• | Green tons (GT) — used in the South to measure weight; factors used for conversion to product volume can vary by species, size, location and season. |
• | 2.9 million acres in the western U.S. (Oregon and Washington); |
• | 6.9 million acres in the southern U.S. (Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Texas and Virginia); and |
• | 2.4 million acres in the northern U.S. (Maine, Michigan, Montana, New Hampshire, Vermont, West Virginia and Wisconsin). |
GEOGRAPHIC AREA | MILLIONS OF TONS AT DECEMBER 31, 2018 | |
TOTAL INVENTORY(1) | ||
U.S.: | ||
West | ||
Douglas fir/Cedar | 160 | |
Whitewood | 33 | |
Hardwood | 14 | |
Total West | 207 | |
South | ||
Southern yellow pine | 263 | |
Hardwood | 84 | |
Total South | 347 | |
North | ||
Conifer | 32 | |
Hardwood | 40 | |
Total North | 72 | |
Total Company | 626 | |
(1) Inventory includes all conservation and non-harvestable areas. |
GEOGRAPHIC AREA | THOUSANDS OF ACRES AT DECEMBER 31, 2018 | |||||
FEE OWNERSHIP | LONG-TERM CONTRACTS | TOTAL ACRES(1) | ||||
U.S.: | ||||||
West | ||||||
Oregon | 1,596 | — | 1,596 | |||
Washington | 1,314 | — | 1,314 | |||
Total West | 2,910 | — | 2,910 | |||
South | ||||||
Alabama | 388 | 228 | 616 | |||
Arkansas | 1,211 | 18 | 1,229 | |||
Florida | 226 | 85 | 311 | |||
Georgia | 618 | 50 | 668 | |||
Louisiana | 1,023 | 351 | 1,374 | |||
Mississippi | 1,131 | 75 | 1,206 | |||
North Carolina | 563 | — | 563 | |||
Oklahoma | 494 | — | 494 | |||
South Carolina | 278 | — | 278 | |||
Texas | 29 | 2 | 31 | |||
Virginia | 123 | — | 123 | |||
Total South | 6,084 | 809 | 6,893 | |||
North | ||||||
Maine | 838 | — | 838 | |||
Michigan | 556 | — | 556 | |||
Montana | 658 | — | 658 | |||
New Hampshire | 24 | — | 24 | |||
Vermont | 86 | — | 86 | |||
West Virginia | 256 | — | 256 | |||
Wisconsin | 4 | — | 4 | |||
Total North | 2,422 | — | 2,422 | |||
Total Company | 11,416 | 809 | 12,225 | |||
(1) Acres include all conservation and non-harvestable areas. |
• | forestry research and planning systems to optimize log production, |
• | customized silviculture prescriptions which increase productivity across our acreage and |
• | innovative planting and harvesting techniques on varying Southern terrain. |
• | Alberta — 2,914 thousand tons, |
• | British Columbia — 547 thousand tons, |
• | Ontario — 154 thousand tons and |
• | Saskatchewan — 634 thousand tons. |
GEOGRAPHIC AREA | THOUSANDS OF ACRES AT DECEMBER 31, 2018 | |
TOTAL ACRES UNDER LICENSE ARRANGEMENTS | ||
Province: | ||
Alberta | 5,398 | |
British Columbia | 1,014 | |
Ontario(1) | 2,574 | |
Saskatchewan(1) | 4,987 | |
Total Canada | 13,973 | |
(1) License is managed by partnership. |
FEE HARVEST VOLUMES IN THOUSANDS OF TONS(1) | ||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||
Fee harvest volume – tons: | ||||||||||
West | 9,571 | 10,083 | 11,083 | 10,563 | 10,580 | |||||
South | 26,708 | 27,149 | 26,343 | 14,113 | 14,276 | |||||
North | 2,129 | 2,205 | 2,044 | — | — | |||||
Uruguay(2) | — | 822 | 1,119 | 980 | 1,091 | |||||
Other(3) | — | 1,384 | 701 | — | — | |||||
Total | 38,408 | 41,643 | 41,290 | 25,656 | 25,947 | |||||
(1) In February 2016, we merged with Plum Creek Timber Company, Inc. (Plum Creek). Refer to Note 5: Merger With Plum Creek in the Notes to Consolidated Financial Statements for further information on this merger. (2) Our Uruguayan operations were divested on September 1, 2017. Refer to Note 4: Discontinued Operations and Other Divestitures in the Notes to Consolidated Financial Statements for further information on this divestiture. (3) Other includes volumes managed for the Twin Creeks Venture. Our management agreement for the Twin Creeks Venture began in April 2016 and terminated in December 2017. For additional information see Note 9: Related Parties in Notes to Consolidated Financial Statements. |
PERCENTAGE OF GRADE AND FIBER(1) | |||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||
West | Grade | 90 | % | 89 | % | 87 | % | 87 | % | 89 | % |
Fiber | 10 | % | 11 | % | 13 | % | 13 | % | 11 | % | |
South | Grade | 51 | % | 52 | % | 52 | % | 59 | % | 59 | % |
Fiber | 49 | % | 48 | % | 48 | % | 41 | % | 41 | % | |
North | Grade | 46 | % | 49 | % | 47 | % | — | % | — | % |
Fiber | 54 | % | 51 | % | 53 | % | — | % | — | % | |
Uruguay (2) | Grade | — | % | 69 | % | 66 | % | 65 | % | 63 | % |
Fiber | — | % | 31 | % | 34 | % | 35 | % | 37 | % | |
Other (3) | Grade | — | % | 47 | % | 45 | % | — | % | — | % |
Fiber | — | % | 53 | % | 55 | % | — | % | — | % | |
Total | Grade | 62 | % | 63 | % | 64 | % | 73 | % | 73 | % |
Fiber | 38 | % | 37 | % | 36 | % | 27 | % | 27 | % | |
(1) In February 2016, we merged with Plum Creek. Refer to Note 5: Merger With Plum Creek in the Notes to Consolidated Financial Statements for further information on this merger. (2) Our Uruguayan operations were divested on September 1, 2017. Refer to Note 4: Discontinued Operations and Other Divestitures in the Notes to Consolidated Financial Statements for further information on this divestiture. (3) Other includes volumes managed for the Twin Creeks Venture. Our management agreement for the Twin Creeks Venture began in April 2016 and terminated in December 2017. For additional information see Note 9: Related Parties in Notes to Consolidated Financial Statements. |
• | $1.9 billion in 2018 and |
• | $1.9 billion in 2017. |
• | $802 million in 2018 and |
• | $762 million in 2017. |
NET SALES IN MILLIONS OF DOLLARS(1) | |||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||
To unaffiliated customers: | |||||||||||||||
Delivered Logs: | |||||||||||||||
West | $ | 987 | $ | 915 | $ | 865 | $ | 830 | $ | 972 | |||||
South | 625 | 616 | 566 | 241 | 257 | ||||||||||
North | 99 | 95 | 91 | — | — | ||||||||||
Other(2) | 41 | 59 | 38 | 24 | 22 | ||||||||||
Total | 1,752 | 1,685 | 1,560 | 1,095 | 1,251 | ||||||||||
Stumpage and pay-as-cut timber | 59 | 73 | 85 | 37 | 18 | ||||||||||
Uruguay operations(3) | — | 63 | 79 | 87 | 88 | ||||||||||
Recreational lease revenue | 59 | 59 | 44 | 25 | 22 | ||||||||||
Other products(4) | 45 | 62 | 37 | 29 | 36 | ||||||||||
Subtotal sales to unaffiliated customers | 1,915 | 1,942 | 1,805 | 1,273 | 1,415 | ||||||||||
Intersegment sales: | |||||||||||||||
United States | 537 | 520 | 590 | 559 | 576 | ||||||||||
Canada | 265 | 242 | 250 | 271 | 291 | ||||||||||
Subtotal intersegment sales | 802 | 762 | 840 | 830 | 867 | ||||||||||
Total | $ | 2,717 | $ | 2,704 | $ | 2,645 | $ | 2,103 | $ | 2,282 | |||||
(1) In February 2016, we merged with Plum Creek. Refer to Note 5: Merger With Plum Creek in the Notes to Consolidated Financial Statements for further information on this merger. (2) Other delivered logs include sales to unaffiliated customers in Canada and sales from timberlands managed for the Twin Creeks Venture. Our management agreement for the Twin Creeks Venture began in April 2016 and terminated in December 2017. For additional information see Note 9: Related Parties in Notes to Consolidated Financial Statements. (3) Sales from our Uruguay operations include plywood and hardwood lumber. Our Uruguayan operations were divested on September 1, 2017. Refer to Note 4: Discontinued Operations and Other Divestitures in the Notes to Consolidated Financial Statements for further information on this divestiture. (4) Other products include sales of seeds and seedlings from our nursery operations, chips and sales from our operations in Brazil (operations sold in 2014). |
• | 28,250 thousand tons in 2018 and |
• | 29,420 thousand tons in 2017. |
• | 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; |
• | domestic fiber log sales — demand for chips by pulp, containerboard mills, pellet mills and OSB mills; and |
• | export log sales — the level of housing starts in Japan and construction in China. |
SALES VOLUME IN THOUSANDS(1) | ||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||
Logs – tons: | ||||||||||
West | 7,858 | 8,202 | 8,713 | 8,212 | 8,504 | |||||
South | 18,008 | 17,895 | 15,967 | 6,480 | 6,941 | |||||
North | 1,628 | 1,574 | 1,500 | — | — | |||||
Uruguay (2) | — | 291 | 470 | 714 | 667 | |||||
Other (3) | 756 | 1,458 | 943 | 551 | 474 | |||||
Total | 28,250 | 29,420 | 27,593 | 15,957 | 16,586 | |||||
(1) In February 2016, we merged with Plum Creek. Refer to Note 5: Merger With Plum Creek in the Notes to Consolidated Financial Statements for further information on this merger. (2) Our Uruguayan operations were divested on September 1, 2017. Refer to Note 4: Discontinued Operations and Other Divestitures in the Notes to Consolidated Financial Statements for further information on this divestiture. (3) Other includes our Canadian operations and managed Twin Creeks Venture. Our management agreement for the Twin Creeks Venture began in April 2016 and terminated in December 2017. For additional information see Note 9: Related Parties in Notes to Consolidated Financial Statements. |
• | continuing to capitalize on our scale of operations, silviculture and supply chain expertise and sustainability practices; |
• | improving cash flow through operational excellence initiatives including merchandising for value, harvest and transportation efficiencies as well as focused silviculture investments to improve forest productivity; |
• | leveraging our export and domestic market access, infrastructure and strong customer relationships; |
• | increasing our recreational lease revenue; and |
• | continuing to maximize the value of our timberlands portfolio by managing the acres with the highest and best use in mind. |
• | rentals and royalties from the exploration, extraction, production and sale of aggregates and industrial minerals, oil and natural gas, coal and wind energy production; |
• | rental payments from, or sale of, communication, energy and transportation rights of way; and |
• | the occasional sale of mineral assets. |
SOURCES | ACTIVITIES | ||
Real Estate | Select timberland tracts are sold for recreational, conservation, commercial or residential purposes. | ||
Energy and Natural Resources | • Rights are sold to explore and extract construction aggregates (rock, sand and gravel), coal, industrial materials and oil and natural gas for sale into energy markets. • Ground leases and easements are granted to wind and solar developers to generate renewable electricity from our timberlands. • Rights are granted to access and utilize timberland acreage for communications, pipeline, powerline and transportation rights of way. | ||
• | $306 million in 2018 and |
• | $280 million in 2017. |
NET SALES IN MILLIONS OF DOLLARS | |||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||
Net Sales: | |||||||||||||||
Real Estate | $ | 229 | $ | 208 | $ | 172 | $ | 75 | $ | 72 | |||||
Energy and Natural Resources | 78 | 73 | 54 | 26 | 32 | ||||||||||
Total | $ | 307 | $ | 281 | $ | 226 | $ | 101 | $ | 104 |
REAL ESTATE SALES STATISTICS | |||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||
Acres sold | 131,575 | 97,235 | 82,687 | 27,390 | 24,583 | ||||||||||
Average price per acre | $ | 1,701 | $ | 2,079 | $ | 2,072 | $ | 2,490 | $ | 2,428 |
• | continuing to apply the AVO process to identify opportunities to capture a premium to timber value; |
• | maintaining a flexible, low-cost execution model by continuing to leverage strategic relationships with outside real estate brokers; |
• | capturing the full value of our oil and natural gas, aggregates and industrial minerals, and wind renewable energy resources; and |
• | delivering the most value from every acre. |
• | provides high-quality structural lumber, oriented strand board (OSB), engineered wood products and other specialty products to the residential, multi-family, industrial, light commercial and repair and remodel markets; |
• | distributes our products as well as complementary building products that we purchase from other manufacturers; and |
• | exports our structural lumber and engineered wood products, primarily to Asia. |
PRODUCTS | HOW THEY’RE USED |
Structural lumber | Structural framing for new residential, repair and remodel, treated applications, industrial and commercial structures |
Oriented strand board | Structural sheathing, subflooring and stair tread for residential, multi-family and commercial structures |
Engineered wood products • Solid section • I-joists • Softwood plywood • Medium density fiberboard | Structural elements for residential, multi-family and commercial structures such as floor and roof joists, headers, beams, subflooring, and sheathing. Medium density fiberboard products are used for store fixtures, molding, doors, and cabinet components. |
Other products | Wood chips and other byproducts |
Complementary building products | Complementary building products such as cedar, decking, siding, insulation and rebar sold in our distribution facilities |
CAPACITIES IN MILLIONS | |||||
PRODUCTION CAPACITY | NUMBER OF FACILITIES | FACILITY LOCATION | |||
Structural lumber – board feet | 5,025 | 19 | Alabama, Arkansas, Louisiana (2), Mississippi (3), Montana, North Carolina (3), Oklahoma, Oregon (2), Washington (2), Alberta (2), British Columbia | ||
Oriented strand board – square feet (3/8”) | 3,035 | 6 | Louisiana, Michigan, North Carolina, West Virginia, Alberta, Saskatchewan | ||
Engineered solid section – cubic feet(1) | 43 | 6 | Alabama, Louisiana, Oregon, West Virginia, British Columbia, Ontario | ||
Softwood plywood – square feet (3/8”) | 610 | 3 | Arkansas, Louisiana, Montana | ||
Medium density fiberboard – square feet (3/4") | 265 | 1 | Montana | ||
(1) This represents total press capacity. Three facilities also produce I-Joist to meet market demand. In 2018, approximately 25 percent of the total press production was converted into 191 lineal feet of I-Joist. |
PRODUCTION IN MILLIONS | ||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||
Structural lumber – board feet | 4,541 | 4,509 | 4,516 | 4,252 | 4,152 | |||||
Oriented strand board – square feet (3/8”) | 2,837 | 2,995 | 2,910 | 2,847 | 2,749 | |||||
Engineered solid section – cubic feet(1) | 24.3 | 25.1 | 22.8 | 20.9 | 20.4 | |||||
Engineered I-joists – lineal feet(1) | 191 | 213 | 184 | 185 | 182 | |||||
Softwood plywood – square feet (3/8”)(2) | 404 | 370 | 396 | 248 | 252 | |||||
Medium density fiberboard – square feet (3/4") | 220 | 232 | 209 | — | — | |||||
(1) Weyerhaeuser engineered solid section facilities also may produce engineered I-joists. (2) All Weyerhaeuser plywood facilities also produce veneer. |
NET SALES IN MILLIONS OF DOLLARS | |||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||
Structural lumber | $ | 2,258 | $ | 2,058 | $ | 1,839 | $ | 1,741 | $ | 1,901 | |||||
Oriented strand board | 891 | 904 | 707 | 595 | 610 | ||||||||||
Engineered solid section | 521 | 500 | 450 | 428 | 402 | ||||||||||
Engineered I-joists | 336 | 336 | 290 | 284 | 277 | ||||||||||
Softwood plywood | 200 | 176 | 174 | 129 | 143 | ||||||||||
Medium density fiberboard | 177 | 183 | 158 | — | — | ||||||||||
Other products produced (1) | 288 | 276 | 201 | 189 | 176 | ||||||||||
Complementary building products | 584 | 541 | 515 | 506 | 461 | ||||||||||
Total | $ | 5,255 | $ | 4,974 | $ | 4,334 | $ | 3,872 | $ | 3,970 | |||||
(1) Includes wood chips and other byproducts. |
SALES VOLUME(1) IN MILLIONS | ||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||
Structural lumber – board feet | 4,684 | 4,658 | 4,723 | 4,588 | 4,463 | |||||
Oriented strand board – square feet (3/8”) | 2,827 | 2,971 | 2,934 | 2,972 | 2,788 | |||||
Engineered solid section – cubic feet | 24.3 | 25.1 | 23.3 | 21.3 | 20.0 | |||||
Engineered I-joists – lineal feet | 204 | 220 | 195 | 188 | 184 | |||||
Softwood Plywood – square feet (3/8”) | 459 | 453 | 481 | 381 | 395 | |||||
Medium density fiberboard – square feet (3/4") | 212 | 222 | 206 | — | — | |||||
(1) Sales volume includes sales of internally produced products and complementary building products sold primarily through our distribution centers. |
• | Demand for wood products used in residential and multi-family construction and the repair and remodel of existing homes affects prices. Residential and multi-family construction is influenced by factors such as population growth and other demographics, availability of labor and lots, 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. |
• | The 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. |
• | Achieve industry leading controllable manufacturing costs through operational excellence and disciplined capital execution; |
• | strong alignment with fiber supply; |
• | leverage our brand and reputation as the preferred provider of quality building products; and |
• | pursue disciplined, profitable sales growth in target markets. |
EXECUTIVE OFFICERS OF THE REGISTRANT |
NATURAL RESOURCE AND ENVIRONMENTAL MATTERS |
• | limits on the size of clearcuts, |
• | requirements that some timber be left unharvested to protect water quality and fish and wildlife habitat, |
• | regulations regarding construction and maintenance of forest roads, |
• | rules requiring reforestation following timber harvest and |
• | various related permit programs. |
• | forest practices and environmental regulations and |
• | license requirements established by contract between us and the relevant province designed to: |
• | the northern spotted owl, the marbled murrelet, a number of salmon species, bull trout and steelhead trout in the Pacific Northwest; |
• | several freshwater mussel and sturgeon species; and |
• | the red-cockaded woodpecker, gopher tortoise, dusky gopher frog, American burying beetle and Northern long-eared bat in the South or Southeast. |
• | federal and state requirements to protect habitat for threatened and endangered species; |
• | regulatory actions by federal or state agencies to protect these species and their habitat; and |
• | citizen suits under the ESA. |
• | The federal Species at Risk Act (SARA) requires protective measures for species identified as being at risk and for their critical habitat. Pursuant to SARA, Environment Canada continues to identify and assess species deemed to be at risk and their critical habitat. |
• | 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-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. |
• | In 2017, the Provinces were required to update the federal government on any progress associated with their draft caribou range plans. These draft plans will be further evaluated in 2019, and any additional information on potential effects to forest harvest operations will be released. |
• | conservation organizations, |
• | academia, |
• | the forest industry and |
• | large and small forest landowners. |
• | increased our operating costs; |
• | resulted in changes in the value of timber and logs from our timberlands; |
• | contributed to increases in the prices paid for wood products and wood chips during periods of high demand; |
• | sometimes made it more difficult for us to respond to rapid changes in markets, extreme weather or other unexpected circumstances; and |
• | potentially encouraged further reductions in the use of, or substitution of other products for, lumber, oriented strand board, engineered wood products and plywood. |
• | additional restrictions on the sale or harvest of timber, |
• | potential increase in operating costs and |
• | effect on timber supply and prices in Canada. |
• | air, water and land; |
• | solid and hazardous waste management; |
• | waste disposal; |
• | remediation of contaminated sites; and |
• | the chemical content of some of our products. |
• | enhance safety, |
• | extend the life of a facility, |
• | lower costs and improve efficiency, |
• | improve reliability, |
• | increase capacity, |
• | facilitate raw material changes and handling requirements, |
• | increase the economic value of assets or products, and |
• | comply with regulatory standards. |
• | we may have the sole obligation to remediate, |
• | we may share that obligation with one or more parties, |
• | several parties may have joint and several obligations to remediate and |
• | we may have been named as a potentially responsible party for contaminated sites, including those designated as U.S. Superfund sites. |
• | quantity, toxicity and nature of materials at the site; and |
• | number and economic viability of the other responsible parties. |
• | determine it is probable that such an obligation exists and |
• | can reasonably estimate the amount of the obligation. |
• | wood products facilities and |
• | industrial boilers. |
• | hazardous air pollutants that require use of maximum achievable control technology (MACT); and |
• | controls and/or monitoring for pollutants that contribute to smog, haze and more recently, greenhouse gases. |
• | closely monitor legislative, regulatory and scientific developments pertaining to climate change; |
• | 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; |
• | determined to achieve this goal by increasing energy efficiency and using more greenhouse gas-neutral, biomass fuels instead of fossil fuels; and |
• | reduced greenhouse gas emissions by approximately 44 percent considering changes in the asset portfolio according to 2017 data, compared to our 2000 baseline. |
• | policy proposals by federal or state governments regarding regulation of greenhouse gas emissions, |
• | Congressional legislation regulating or taxing greenhouse gas emissions within the next several years and |
• | establishment of a multistate or federal greenhouse gas emissions reduction trading system with potentially significant implications for all U.S. businesses. |
• | ambient air quality standards for outdoor air quality management across the country; |
• | a framework for air zone air management within provinces and territories that targets specific sources of air emissions; |
• | regional airsheds that facilitate coordinated action across borders; |
• | industrial sector based emission requirements that set a national base level of performance for major industries in Canada; and |
• | improved intergovernmental collaboration to reduce emissions from the transportation sector. |
• | have greenhouse gas reporting requirements, |
• | are working on reduction strategies and |
• | together with the Canadian federal government, are considering new or revised emission standards. |
• | limits on pollutants that may be discharged to a body of water; or |
• | additional requirements, such as best management practices for nonpoint sources, including timberland operations, to reduce the amounts of pollutants. |
FORWARD-LOOKING STATEMENTS |
• | the effect of general economic conditions, including employment rates, interest rate levels, housing starts, general availability of financing for home mortgages and the relative strength of the U.S. dollar; |
• | market demand for the company's products, including market demand for our timberland properties with higher and better uses, which is related to, among other factors, the strength of the various U.S. business segments and U.S. and international economic conditions; |
• | changes in currency exchange rates, particularly the relative value of the U.S. dollar to the Japanese yen, the Chinese yuan, and the Canadian dollar, and the relative value of the euro to the yen; |
• | restrictions on international trade and tariffs imposed on imports or exports; |
• | the availability and cost of shipping and transportation; |
• | economic activity in Asia, especially Japan and China; |
• | performance of our manufacturing operations, including maintenance and capital requirements; |
• | potential disruptions in our manufacturing operations; |
• | the level of competition from domestic and foreign producers; |
• | the successful execution of our internal plans and strategic initiatives, including restructuring and cost reduction initiatives; |
• | the successful and timely execution and integration of our strategic acquisitions, including our ability to realize expected benefits and synergies, and the successful and timely execution of our strategic divestitures, each of which is subject to a number of risks and conditions beyond our control including, but not limited to, timing and required regulatory approvals; |
• | raw material availability and prices; |
• | the effect of weather; |
• | changes in global or regional climate conditions and governmental response to such changes; |
• | the risk of loss from fires, floods, windstorms, hurricanes, pest infestation and other natural disasters; |
• | energy prices; |
• | transportation and labor availability and costs; |
• | federal tax policies; |
• | the effect of forestry, land use, environmental and other governmental regulations; |
• | legal proceedings; |
• | performance of pension fund investments and related derivatives; |
• | the effect of timing of employee retirements and changes in the market price of our common stock on charges for share-based compensation; |
• | the accuracy of our estimates of costs and expenses related to contingent liabilities; |
• | changes in accounting principles; and |
• | other factors described in this report under Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations. |
RISKS RELATED TO OUR INDUSTRY |
RISKS RELATED TO OUR BUSINESS |
• | unscheduled maintenance outages; |
• | prolonged power failures; |
• | equipment failure; |
• | chemical spill or release; |
• | explosion of a boiler; |
• | fires, floods, windstorms, earthquakes, hurricanes or other severe weather conditions or catastrophes, affecting the production of goods or the supply of raw materials (including fiber); |
• | the effect of drought or reduced rainfall on water supply; |
• | labor difficulties; |
• | disruptions in transportation or transportation infrastructure, including roads, bridges, rail, tunnels, shipping and port facilities; |
• | terrorism or threats of terrorism; |
• | cyber attack; |
• | governmental regulations; and |
• | other operational problems. |
RISKS RELATED TO CAPITAL MARKETS |
RISKS RELATED TO LEGAL, REGULATORY AND TAX |
• | air emissions, |
• | wastewater discharges, |
• | harvesting and other silvicultural activities, |
• | forestry operations and endangered species habitat protection, |
• | surface water management, |
• | the storage, usage, management and disposal of hazardous substances and wastes, |
• | the cleanup of contaminated sites, |
• | landfill operation and closure obligations, |
• | building codes, and |
• | health and safety matters. |
• | We would not be allowed to deduct dividends to shareholders in computing our taxable income. |
• | We would be subject to federal and state income tax on our taxable income at applicable corporate rates. |
• | We also would be disqualified from treatment as a REIT for the four taxable years following the year during which we lost qualification. |
OTHER RISKS |
• | actual or anticipated fluctuations in our operating results or our competitors' operating results; |
• | announcements by us or our competitors of new products, capacity changes, significant contracts, acquisitions or strategic investments; |
• | our growth rate and our competitors’ growth rates; |
• | general economic conditions; |
• | conditions in the financial markets; |
• | market interest rates and the relative yields on other financial instruments; |
• | general perceptions and expectations regarding housing markets, interest rates, commodity prices, and currencies; |
• | 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; |
• | sales of our common stock by our executive officers, directors and significant shareholders; |
• | sales or repurchases of substantial amounts of common stock; |
• | changes in accounting principles; and |
• | changes in tax laws and regulations. |
• | For details about our Timberlands properties, go to Our Business/What We Do/Timberlands/Where We Do It. |
• | For details about our Real Estate, Energy and Natural Resources properties, go to Our Business/What We Do/Real Estate, Energy and Natural Resources/Where We Do It. |
• | For details about our Wood Products properties, go to Our Business/What We Do/Wood Products/Where We Do It. |
NUMBER OF SECURITIES TO BE ISSUED UPON EXERCISE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS | WEIGHTED AVERAGE EXERCISE PRICE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS | NUMBER OF SECURITIES REMAINING AVAILABLE FOR FUTURE ISSUANCE UNDER EQUITY COMPENSATION PLANS (EXCLUDING SECURITIES TO BE ISSUED UPON EXERCISE) | |||||
Equity compensation plans approved by security holders(1) | 9,180,693 | $ | 19.01 | 20,554,887 | |||
Equity compensation plans not approved by security holders | N/A | N/A | N/A | ||||
Total | 9,180,693 | $ | 19.01 | 20,554,887 | |||
(1) Includes 1,592,843 restricted stock units and 1,040,582 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 $26.66. |
COMMON SHARE REPURCHASE DURING FOURTH QUARTER 2018 | TOTAL NUMBER OF SHARES PURCHASED | AVERAGE PRICE PAID PER SHARE | TOTAL NUMBER OF SHARES PURCHASED AS PART OF PUBLICLY ANNOUNCED PLANS OR PROGRAMS | APPROXIMATE DOLLAR VALUE OF SHARES THAT MAY YET BE PURCHASED UNDER THE PLANS OR PROGRAMS(1) | ||||||
October 1 - October 31 | 394,223 | $ | 26.13 | 394,223 | $ | 199,311,977 | ||||
November 1 - November 30 | 1,475,848 | 27.10 | 1,475,848 | 159,313,972 | ||||||
December 1 - December 31 | 954,418 | 25.86 | 954,418 | 134,633,963 | ||||||
Total | 2,824,489 | $ | 26.55 | 2,824,489 | $ | 134,633,963 | ||||
(1) During fourth quarter 2018, we repurchased 2.8 million shares of common stock for $75 million (including transaction fees) under the 2016 Share Repurchase Authorization. The 2016 Share Repurchase Authorization was approved in November 2015 by our Board of Directors and authorized management to repurchase up to $2.5 billion of outstanding shares subsequent to the closing of our merger with Plum Creek. Transaction fees incurred for repurchases are not counted as use of funds authorized for repurchase under the 2016 Share Repurchase Authorization. All common stock purchases under the stock repurchase program were made in open-market transactions. |
• | Assumes $100 invested on December 31, 2013, in Weyerhaeuser common stock, the S&P 500 Index and the S&P Global Timber & Forestry Index. |
• | Total return assumes dividends received are reinvested at month end. |
• | Measurement dates are the last trading day of the calendar year shown. |
PER COMMON SHARE | |||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||
Diluted earnings from continuing operations attributable to Weyerhaeuser common shareholders | $ | 0.99 | $ | 0.77 | $ | 0.55 | $ | 0.71 | $ | 1.02 | |||||
Diluted earnings from discontinued operations attributable to Weyerhaeuser common shareholders | $ | — | $ | — | $ | 0.84 | $ | 0.18 | $ | 2.16 | |||||
Diluted net earnings attributable to Weyerhaeuser common shareholders | $ | 0.99 | $ | 0.77 | $ | 1.39 | $ | 0.89 | $ | 3.18 | |||||
Dividends paid | $ | 1.32 | $ | 1.25 | $ | 1.24 | $ | 1.20 | $ | 1.02 | |||||
Weyerhaeuser shareholders’ interest (end of year) | $ | 12.12 | $ | 11.78 | $ | 12.26 | $ | 9.54 | $ | 10.11 | |||||
FINANCIAL POSITION | |||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||
Total assets | $ | 17,249 | $ | 18,059 | $ | 19,243 | $ | 12,470 | $ | 13,247 | |||||
Total long-term debt, including current portion, and borrowings on line of credit (1) | $ | 6,344 | $ | 5,992 | $ | 6,610 | $ | 4,787 | $ | 4,873 | |||||
Weyerhaeuser shareholders’ interest | $ | 9,046 | $ | 8,899 | $ | 9,180 | $ | 4,869 | $ | 5,304 | |||||
Percent earned on average year-end Weyerhaeuser shareholders’ interest | 8.3 | % | 6.4 | % | 14.3 | % | 9.1 | % | 29.5 | % | |||||
OPERATING RESULTS | |||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||
Net sales | $ | 7,476 | 7,196 | 6,365 | 5,246 | 5,489 | |||||||||
Earnings from continuing operations | 748 | 582 | 415 | 411 | 616 | ||||||||||
Discontinued operations, net of income taxes | — | — | 612 | 95 | 1,210 | ||||||||||
Net earnings | 748 | 582 | 1,027 | 506 | 1,826 | ||||||||||
Dividends on preference shares | — | — | (22 | ) | (44 | ) | (44 | ) | |||||||
Net earnings attributable to Weyerhaeuser common shareholders | $ | 748 | $ | 582 | $ | 1,005 | $ | 462 | $ | 1,782 | |||||
CASH FLOWS | |||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||
Net cash from operations | $ | 1,112 | $ | 1,201 | $ | 735 | $ | 1,075 | $ | 1,109 | |||||
Net cash from investing activities | (440 | ) | 367 | 2,559 | (487 | ) | 361 | ||||||||
Net cash from financing activities | (1,162 | ) | (1,420 | ) | (3,630 | ) | (1,156 | ) | (725 | ) | |||||
Net change in cash and cash equivalents | $ | (490 | ) | $ | 148 | $ | (336 | ) | $ | (568 | ) | $ | 745 | ||
STATISTICS (UNAUDITED) | |||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||
Number of employees | 9,300 | 9,300 | 10,400 | 12,600 | 12,800 | ||||||||||
Number of common shareholder accounts at year-end | 14,525 | 15,138 | 15,504 | 7,700 | 8,248 | ||||||||||
Number of common shares outstanding at year-end (thousands) | 746,391 | 755,223 | 748,528 | 510,483 | 524,474 | ||||||||||
Weighted average common shares outstanding – diluted (thousands) | 756,827 | 756,666 | 722,401 | 519,618 | 560,899 | ||||||||||
(1) Does not include nonrecourse debt held by our Variable Interest Entities (VIEs). See Note 9: Related Parties in the Notes to Consolidated Financial Statements for further information on our VIEs and the related nonrecourse debt. |
WHAT YOU WILL FIND IN THIS MD&A |
• | economic and market conditions affecting our operations; |
• | financial performance summary; |
• | discussion of the softwood lumber agreement; |
• | results of our operations — consolidated and by segment; |
• | liquidity and capital resources — where we discuss our cash flows; |
• | off-balance sheet arrangements; |
• | environmental matters, legal proceedings and other contingencies; and |
• | accounting matters — where we discuss critical accounting policies and areas requiring judgments and estimates. |
ECONOMIC AND MARKET CONDITIONS AFFECTING OUR OPERATIONS |
FINANCIAL PERFORMANCE SUMMARY |
SOFTWOOD LUMBER AGREEMENT |
RESULTS OF OPERATIONS |
• | Sales realizations refer to net selling prices — this includes selling price plus freight minus normal sales deductions; |
• | Net contribution to earnings refers to earnings (loss) attributable to Weyerhaeuser shareholders before interest expense and income taxes. |
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES | |||||||||||||||
AMOUNT OF CHANGE | |||||||||||||||
2018 | 2017 | 2016 | 2018 vs. 2017 | 2017 vs. 2016 | |||||||||||
Net sales | $ | 7,476 | $ | 7,196 | $ | 6,365 | $ | 280 | $ | 831 | |||||
Costs of sales | $ | 5,592 | $ | 5,298 | $ | 4,980 | $ | 294 | $ | 318 | |||||
Operating income | $ | 1,394 | $ | 1,131 | $ | 822 | $ | 263 | $ | 309 | |||||
Earnings from discontinued operations, net of tax | $ | — | $ | — | $ | 612 | $ | — | $ | (612 | ) | ||||
Net earnings attributable to Weyerhaeuser common shareholders | $ | 748 | $ | 582 | $ | 1,005 | $ | 166 | $ | (423 | ) | ||||
Basic earnings per share attributable to Weyerhaeuser common shareholders | $ | 0.99 | $ | 0.77 | $ | 1.40 | $ | 0.22 | $ | (0.63 | ) | ||||
Diluted earnings per share attributable to Weyerhaeuser common shareholders | $ | 0.99 | $ | 0.77 | $ | 1.39 | $ | 0.22 | $ | (0.62 | ) |
• | Wood Products segment net sales to unaffiliated customers increased $281 million, primarily attributable to increased sales realizations across all product lines; and |
• | Real Estate & ENR segment net sales to unaffiliated customers increased $26 million primarily attributable to increased acres sold. |
• | $290 million decrease in charges for product remediation; and |
• | $147 million decrease in charges related to a noncash pretax impairment in 2017, with no similar charges in 2018. This impairment was a result of our agreement to sell our Uruguayan operations, as announced during June 2017 (refer to Note 18: Charges for Integration and Restructuring, Closures and Asset Impairments in the Notes to Consolidated Financial Statements). |
• | $99 million gain recorded in fourth quarter 2017 that did not occur in 2018 as a result of the sale of land in our Southern timberlands region to Twin Creeks (refer to Note 9: Related Parties in the Notes to Consolidated Financial Statements for further details); |
• | $37 million decrease in environmental remediation insurance recoveries received; and |
• | $14 million decreased consolidated gross margin, as described above. |
• | a $263 million increase to operating income, as described above; |
• | a $75 million decrease in income tax expense; and |
• | an $18 million decrease in interest expense, net of capitalized interest. |
• | Wood Products net sales to unaffiliated customers increased $640 million primarily attributable to increased sales realizations across all product lines, as well as increased sales volumes within our oriented strand board, engineered I-joists, medium density fiberboard, and our engineered solid section product lines. Additionally, upon completion of the sales of our former Cellulose Fibers businesses, chips previously sold to Cellulose Fibers are now sales to unaffiliated customers. Refer to Note 4: Discontinued Operations and Other Divestitures in the Notes to Consolidated Financial Statements for further details regarding these divestitures. |
• | Timberlands net sales to unaffiliated customers increased $137 million, which is primarily attributable to increased Southern and Other (includes our Canadian operations and timberlands included in the Twin Creeks Venture) delivered log sales volumes, as well as, an increase in Western log sales prices. |
• | Real Estate & ENR net sales to unaffiliated customers increased $54 million attributable to an increase in timberlands acres sold in Real Estate and an increase in royalties. |
• | an increase to consolidated gross margin of $513 million, as described above; |
• | an increase in other operating income, net of $75 million, which is primarily attributable to: |
– | a $99 million gain recorded in fourth quarter 2017 as a result of the sale of land in our Southern timberlands region to Twin Creeks (refer to Note 9: Related Parties in the Notes to Consolidated Financial Statements for further details); |
– | a $44 million decrease in gains on disposition of nonstrategic assets, primarily attributable to a $36 million pretax gain recognized in the first quarter of 2016 on the sale of our Federal Way, Washington headquarters campus (refer to Note 20: Other Operating Costs (Income), Net in the Notes to Consolidated Financial Statements for further information). |
• | the addition of $290 million in charges (recoveries) for product remediation, net in 2017, as there were no similar charges during 2016. Refer to Note 19: Charges (Recoveries) for Product Remediation, Net in the Notes to Consolidated Financial Statements for further information. |
• | a $24 million increase in charges for integration and restructuring, closures and asset impairments, which is primarily attributable to a $147 million noncash impairment charge recognized during second quarter 2017 in relation to the divestiture of our Uruguayan operations. This was partially offset by a $112 million decrease in charges related to our merger with Plum Creek. Refer to Note 18: Charges for Integration and Restructurings, Closures and Asset Impairments in the Notes to Consolidated Financial Statements for further details regarding the impairment as well as the Plum Creek merger related costs. |
DOLLAR AMOUNTS IN MILLIONS | |||||||||||||||
AMOUNT OF CHANGE | |||||||||||||||
2018 | 2017 | 2016 | 2018 vs. 2017 | 2017 vs. 2016 | |||||||||||
Net sales to unaffiliated customers: | |||||||||||||||
Delivered logs(1): | |||||||||||||||
West | $ | 987 | $ | 915 | $ | 865 | $ | 72 | $ | 50 | |||||
South | 625 | 616 | 566 | 9 | 50 | ||||||||||
North | 99 | 95 | 91 | 4 | 4 | ||||||||||
Other | 41 | 59 | 38 | (18 | ) | 21 | |||||||||
Total | 1,752 | 1,685 | 1,560 | 67 | 125 | ||||||||||
Stumpage and pay-as-cut timber | 59 | 73 | 85 | (14 | ) | (12 | ) | ||||||||
Uruguay operations(2) | — | 63 | 79 | (63 | ) | (16 | ) | ||||||||
Recreational and other lease revenue | 59 | 59 | 44 | — | 15 | ||||||||||
Other products(3) | 45 | 62 | 37 | (17 | ) | 25 | |||||||||
Subtotal sales to unaffiliated customers | 1,915 | 1,942 | 1,805 | (27 | ) | 137 | |||||||||
Intersegment sales: | |||||||||||||||
United States | 537 | 520 | 590 | 17 | (70 | ) | |||||||||
Other | 265 | 242 | 250 | 23 | (8 | ) | |||||||||
Subtotal intersegment sales | 802 | 762 | 840 | 40 | (78 | ) | |||||||||
Total segment sales | 2,717 | 2,704 | 2,645 | 13 | 59 | ||||||||||
Costs of sales | $ | 2,052 | $ | 2,043 | $ | 2,054 | $ | 9 | $ | (11 | ) | ||||
Operating income and Net contribution to earnings | $ | 583 | $ | 532 | $ | 499 | $ | 51 | $ | 33 | |||||
(1) The Western region includes Oregon and Washington. The Southern region includes Alabama, Arkansas, Georgia, Florida, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Texas and Virginia. The Northern region includes Maine, Michigan, Montana, New Hampshire, Vermont, West Virginia and Wisconsin. Other includes our Canadian operations and the timberlands of the Twin Creeks Venture that we managed. (Our management agreement for the Twin Creeks Venture began in April 2016 and terminated in December 2017. For additional information see Note 9: Related Parties in the Notes to Consolidated Financial Statements. (2) Sales from our former Uruguayan operations included plywood and hardwood lumber. Our Uruguayan operations were divested on September 1, 2017. Refer to Note 4: Discontinued Operations and Other Divestitures in the Notes to Consolidated Financial Statements for further information on this divestiture. (3) Other products sales include sales of seeds and seedlings from our nursery operations and chips. |
• | $63 million decreased net sales resulting from the divestiture of our Uruguayan operations in third quarter 2017; |
• | $18 million decreased net sales primarily attributable to lower sales volumes resulting from the termination of our management agreement for the Twin Creeks Venture in fourth quarter 2017; and |
• | $17 million decreased net sales from Other products sold. |
• | a $50 million increase in Southern log sales attributable to a 12 percent increase in delivered logs sales volumes, partially offset by a 3 percent decrease in Southern log prices; |
• | a $50 million increase in Western log sales attributable to a 12 percent increase in Western log prices, partially offset by a 6 percent decrease in delivered logs sales volumes; |
• | a $25 million increase in Other products, primarily attributable to increased chips sales to unaffiliated customers (prior to our 2016 divestitures of our Cellulose Fibers businesses, chips sales were primarily intersegment sales); and |
• | a $21 million increase in Other delivered logs, primarily due to a 55 percent increase in delivered logs sales volumes. |
• | a $23 million decrease due to the divestiture of our Uruguayan operations in third quarter 2017. Refer to Note 4: Discontinued Operations and Other Divestitures in the Notes to Consolidated Financial Statements for further details; and |
• | a $16 million decrease in the West, attributable to a decrease in delivered logs sales volumes. |
• | a $99 million gain recorded in fourth quarter 2017 as a result of the sale of land in our Southern timberlands region to Twin Creeks (refer to Note 9: Related Parties in the Notes to Consolidated Financial Statements for further details); and |
• | a $70 million increase in gross margin, as explained above. |
DOLLAR AMOUNTS IN MILLIONS | |||||||||||||||
AMOUNT OF CHANGE | |||||||||||||||
2018 | 2017 | 2016 | 2018 vs. 2017 | 2017 vs. 2016 | |||||||||||
Net sales to unaffiliated buyers: | |||||||||||||||
Real estate | $ | 229 | $ | 208 | $ | 172 | $ | 21 | $ | 36 | |||||
Energy and natural resources | 77 | 72 | 54 | 5 | 18 | ||||||||||
Subtotal sales to unaffiliated buyers | 306 | 280 | 226 | 26 | 54 | ||||||||||
Intersegment sales | 1 | 1 | 1 | — | — | ||||||||||
Total segment sales | $ | 307 | $ | 281 | $ | 227 | $ | 26 | $ | 54 | |||||
Costs of sales | $ | 155 | $ | 110 | $ | 134 | $ | 45 | $ | (24 | ) | ||||
Operating income | $ | 126 | $ | 145 | $ | 53 | $ | (19 | ) | $ | 92 | ||||
Interest income and other | 1 | 1 | 2 | — | (1 | ) | |||||||||
Net contribution to earnings | $ | 127 | $ | 146 | $ | 55 | $ | (19 | ) | $ | 91 |
• | the general state of the economy, |
• | demand in local real estate markets, |
• | the ability to obtain entitlements, |
• | the ability of buyers to obtain financing, |
• | the number of competing properties listed for sale, |
• | the seasonal nature of sales (particularly in the northern states), |
• | the plans of adjacent landowners, |
• | our expectations of future price appreciation, |
• | the timing of harvesting activities, and |
• | the availability of government and not-for-profit funding (especially for conservation sales). |
• | a $36 million increase in net real estate sales primarily attributable to an 18 percent increase in volume of timberlands acres sold; and |
• | a $18 million increase in net energy and natural resources sales primarily attributable to the increased operations acquired during our merger with Plum Creek. Our 2017 operations include a full twelve months of combined operations as compared to ten months of combined operations in 2016. The increase is further attributable to increases in royalties. |
DOLLAR AMOUNTS IN MILLIONS | |||||||||||||||
AMOUNT OF CHANGE | |||||||||||||||
2018 | 2017 | 2016 | 2018 vs. 2017 | 2017 vs. 2016 | |||||||||||
Net sales: | |||||||||||||||
Structural lumber | $ | 2,258 | $ | 2,058 | $ | 1,839 | $ | 200 | $ | 219 | |||||
Oriented strand board | 891 | 904 | 707 | (13 | ) | $ | 197 | ||||||||
Engineered solid section | 521 | 500 | 450 | 21 | 50 | ||||||||||
Engineered I-joists | 336 | 336 | 290 | — | 46 | ||||||||||
Softwood plywood | 200 | 176 | 174 | 24 | 2 | ||||||||||
Medium density fiberboard | 177 | 183 | 158 | (6 | ) | 25 | |||||||||
Other products produced (1) | 288 | 276 | 201 | 12 | 75 | ||||||||||
Complementary building products | 584 | 541 | 515 | 43 | 26 | ||||||||||
Total segment sales | $ | 5,255 | $ | 4,974 | $ | 4,334 | $ | 281 | $ | 640 | |||||
Costs of sales | $ | 4,186 | $ | 3,880 | $ | 3,688 | $ | 306 | $ | 192 | |||||
Operating income and Net contribution to earnings | $ | 838 | $ | 569 | $ | 512 | $ | 269 | $ | 57 | |||||
(1) Includes wood chips and other byproducts. |
• | $200 million increased structural lumber sales attributable to a 9 percent increase in average sales realizations and a 1 percent increase in sales volumes; |
• | $43 million increased complementary building products sales due to higher realizations; |
• | $24 million increased softwood plywood sales due to a 12 percent increase in realizations; |
• | $21 million increased engineered solid section attributable to an 8 percent increase in average sales realizations, partially offset by a 3 percent decrease in sales volumes; and |
• | $12 million increased other products produced due to a 4 percent increase in chip sales. |
• | a $219 million increase in structural lumber sales, attributable to a 13 percent increase in average sales realizations, partially offset by a 1 percent decrease in sales volumes; |
• | a $197 million increase in oriented strand board sales, attributable to a 26 percent increase in average sales realizations as well as a 1 percent increase in sales volumes; |
• | a $75 million increase in other products produced, primarily attributable to increased chip sales. Chips were previously sold to our former Cellulose Fibers segment and were therefore considered intersegment sales until the sale of our Cellulose Fibers businesses which occurred in the second half of 2016. Upon completion of these divestitures, chips sold to those businesses were considered sales to unaffiliated customers. (Refer to Note 4: Discontinued Operations and Other Divestitures in the Notes to Consolidated Financial Statements for further details regarding these divestitures.); |
• | a $50 million increase in engineered solid section, primarily attributable to an 8 percent increase in sales volumes as well as a 3 percent increase in average sales realizations; and |
• | a $46 million increase in engineered I-joists, primarily attributable to a 13 percent increase in sales volume as well as a 3 percent increase in average sales realizations. |
• | the $290 million addition of charges (recoveries) for product remediation, net in 2017, as there were no similar charges during 2016 (refer to Note 19: Charges (Recoveries) for Product Remediation, Net in the Notes to Consolidated Financial Statements for further information). |
• | a $68 million decrease in intersegment sales in 2017 compared to 2016, which is primarily attributable to decreased intersegment chip sales. Prior to our divestitures of our former Cellulose Fibers business, which occurred in the second half of 2016, chips sold to these businesses were considered intersegment sales. Upon completion of these divestitures, chips sold to our former Cellulose Fibers businesses were considered sales to unaffiliated customers. |
• | a $7 million increase in other operating costs, net, related to countervailing and anti-dumping duties. Refer to Softwood Lumber Agreement for further information regarding these regulations. |
• | a $6 million impairment on nonstrategic assets recognized during third quarter 2017. Refer to Note 18: Charges for Integration and Restructuring, Closures and Asset Impairments in the Notes to Consolidated Financial Statements for further detail. |
• | share-based compensation, |
• | pension and postretirement costs, |
• | elimination of intersegment profit in inventory and LIFO, |
• | foreign exchange transaction gains and losses resulting from changes in exchange rates primarily related to our U.S. dollar denominated cash and debt balances that are held by our Canadian subsidiary, |
• | interest income and other, and |
• | legacy obligations, such as environmental remediation and workers compensation. |
DOLLAR AMOUNTS IN MILLIONS | |||||||||||||||
AMOUNT OF CHANGE | |||||||||||||||
2018 | 2017 | 2016 | 2018 vs. 2017 | 2017 vs. 2016 | |||||||||||
Unallocated corporate function and variable compensation expense | $ | (84 | ) | $ | (73 | ) | $ | (87 | ) | $ | (11 | ) | $ | 14 | |
Liability classified share-based compensation | 10 | (9 | ) | (3 | ) | 19 | (6 | ) | |||||||
Foreign exchange gain (loss) | 3 | 1 | 6 | 2 | (5 | ) | |||||||||
Elimination of intersegment profit in inventory and LIFO | 6 | (20 | ) | (18 | ) | 26 | (2 | ) | |||||||
Charges for integration and restructuring, closures and asset impairments | — | (34 | ) | (148 | ) | 34 | 114 | ||||||||
Other | (88 | ) | 20 | 8 | (108 | ) | 12 | ||||||||
Operating income (loss) | $ | (153 | ) | $ | (115 | ) | $ | (242 | ) | $ | (38 | ) | $ | 127 | |
Non-operating pension and other postretirement benefit credits (costs) | (272 | ) | (62 | ) | 48 | (210 | ) | (110 | ) | ||||||
Interest income and other | 59 | 39 | 63 | 20 | (24 | ) | |||||||||
Net contribution to earnings | $ | (366 | ) | $ | (138 | ) | $ | (131 | ) | $ | (228 | ) | $ | (7 | ) |
• | an increase in non-operating pension and other postretirement benefit credits (costs) primarily due to a pension settlement charge related to our U.S. qualified pension plan (refer to Note 10: Pension and Other Postretirement Benefit Plans in the Notes to Consolidated Financial Statements ) — $200 million; and |
• | an increase in other related to charges during first quarter 2018 for environmental remediation (refer to Note 15: Legal Proceedings, Commitments and Contingencies in the Notes to Consolidated Financial Statements) — $28 million. |
• | an increase in expense related to non-operating pension and other postretirement benefit credits (costs) due to a decrease in the expected return on our plan assets as well as an increase in the amortization of actuarial losses — $110 million; |
• | a benefit in other primarily related to environmental remediation insurance recoveries received in 2017 — $42 million; and |
• | decreased charges recognized in 2017 related to our merger with Plum Creek (refer to Note 18: Charges for Integration and Restructuring, Closures and Asset Impairments in the Notes to Consolidated Financial Statements) — $112 million. |
• | charges recognized in 2016 related to our merger with Plum Creek (refer to Note 18: Charges for Integration and Restructuring, Closures and Asset Impairments in the Notes to Consolidated Financial Statements) — $146 million; |
• | an increase in unallocated corporate function expenses primarily as a result of retaining costs allocated to our former Cellulose Fibers segment — $23 million; and |
• | a gain related to the sale of our Federal Way, Washington headquarters campus, which is recorded in other operating costs (income), net in our Consolidated Statement of Operations – $36 million. |
• | $375 million in 2018, |
• | $393 million in 2017 and |
• | $431 million in 2016. |
AMOUNTS PER SHARE | |||||||||
2018 | 2017 | 2016 | |||||||
Preference - capital gain distribution | $ | — | $ | — | $ | 1.59 | |||
Common - capital gain distribution | $ | 1.32 | $ | 1.25 | $ | 1.24 |
AMOUNTS PER SHARE | |||||||||
2018 | 2017 | 2016 | |||||||
Preference - AMT | $ | — | $ | — | $ | 0.0120 | |||
Common - AMT | $ | — | $ | 0.0097 | $ | 0.0094 |
• | $59 million in 2018, |
• | $134 million in 2017 and |
• | $89 million in 2016. |
LIQUIDITY AND CAPITAL RESOURCES |
• | protect the interests of our shareholders and lenders and |
• | have access to major financial markets. |
• | $1,112 million in 2018, |
• | $1,201 million in 2017 and |
• | $735 million in 2016 (includes continuing and discontinued operations). |
• | a decrease in cash paid for income taxes of $316 million, which is primarily attributable to taxes paid in connection with our divestitures of our former Cellulose Fibers businesses during 2016; |
• | a decrease in cash paid for interest of $65 million corresponding with our decreased average indebtedness during 2017 compared to 2016; and |
• | increased cash flows from our business segments. |
• | decreased operating cash flows from discontinued operations of $196 million; and |
• | an increase of $192 million in cash used for product remediation efforts (refer to Note 19: Charges (Recoveries) for Product Remediation, Net in the Notes to Consolidated Financial Statements). |
• | acquisitions of property, equipment, timberlands and reforestation and |
• | proceeds from sale of assets and operations. |
• | $(440) million in 2018, |
• | $367 million in 2017 and |
• | $2,559 million in 2016 (includes continuing and discontinued operations). |
• | $403 million decrease in proceeds received from the divestiture of our Uruguay operations in 2017 as there was no similar transaction in 2018 (refer to Note 4: Discontinued Operations and Other Divestitures in the Notes to Consolidated Financial Statements for further details); |
• | $203 million decrease in proceeds received from the sale of Southern timberlands, as there was no similar transaction in 2018 (refer to Note 9: Related Parties in the Notes to Consolidated Financial Statements for further details); |
• | $108 million decrease in proceeds received from our redeemed 21 percent ownership interest in the Twin Creeks Venture, as there was no similar transaction in 2018 (refer to Note 9: Related Parties in the Notes to Consolidated Financial Statements for further details); |
• | $57 million cash outflow for acquisitions of timberlands during 2018; and |
• | $22 million decrease in proceeds received from sales of nonstrategic assets. |
• | a $2.1 billion decrease in net proceeds from the disposition of discontinued and other operations, primarily attributable to the proceeds received from the divestitures of our Cellulose Fibers businesses in 2016 — $2.5 billion — compared to the proceeds received for the divestiture of our Uruguayan operations in 2017 —$403 million (refer to Note 4: Discontinued Operations and Other Divestitures in the Notes to Consolidated Financial Statements for further details); |
• | a decrease of $440 million in proceeds received for our contribution of timberlands to Twin Creeks Venture in 2016 (refer to Note 9: Related Parties in the Notes to Consolidated Financial Statements for further details); and |
• | a decrease of $78 million in proceeds from sales of nonstrategic assets. |
• | $311 million in combined proceeds from the sale of land in our Southern timberlands region to Twin Creeks as well as the redemption of our ownership interest in Twin Creeks, both of which occurred during fourth quarter 2017 (refer to Note 9: Related Parties in the Notes to Consolidated Financial Statements for further details); and |
• | a $91 million decrease in capital expenditures primarily attributable to the divestiture of our Cellulose Fibers business in 2016. |
DOLLAR AMOUNTS IN MILLIONS | |||||||||
2018 | 2017 | 2016 | |||||||
Timberlands | $ | 117 | $ | 115 | $ | 116 | |||
Real Estate & ENR | — | 2 | 1 | ||||||
Wood Products | 306 | 299 | 297 | ||||||
Unallocated Items | 4 | 3 | 11 | ||||||
Discontinued operations | — | — | 85 | ||||||
Total | $ | 427 | $ | 419 | $ | 510 |
• | future economic conditions, |
• | environmental regulations, |
• | changes in the composition of our business, |
• | weather and |
• | timing of equipment purchases. |
• | issuances and payments of debt, |
• | borrowings and payments under revolving lines of credit, |
• | proceeds from stock offerings and option exercises and |
• | payments for cash dividends and repurchasing stock. |
• | $1,162 million in 2018, |
• | $1,420 million in 2017 and |
• | $3,630 million in 2016 (includes continuing and discontinued operations). |
• | $769 million decrease in cash paid for long-term debt; and |
• | $425 million increase in net cash received related to borrowings on our line of credit. No borrowings on our line of credit were paid in 2018. |
• | $366 million cash used to repurchase common shares in 2018 with no similar activity in 2017; |
• | $225 million cash proceeds from issuance of long-term debt received in 2017 with no similar activity in 2018; |
• | $209 million payments on debt held by variable interest entities in 2018; |
• | $76 million decreased cash received from exercise of stock options; and |
• | $54 million increased cash used for payment of dividends. |
• | a decrease of $2,003 million related to cash used to repurchase common shares during 2016; and |
• | a decrease of $1,592 million in cash used for payments on long-term debt. |
• | $5.9 billion as of December 31, 2018, |
• | $6.0 billion as of December 31, 2017, and |
• | $6.6 billion as of December 31, 2016. |
• | We prepaid a $550 million variable-rate term loan during July 2017, which was originally set to mature in 2020 (2020 term loan). The 2020 term loan was repaid using available cash of $325 million as well as borrowing proceeds from a new $225 million variable-rate term loan set to mature in 2026. |
• | We paid our $281 million 6.95 percent debenture during August 2017. |
• | a minimum total adjusted shareholders' equity of $3.0 billion and |
• | a defined debt-to-total-capital ratio of 65 percent or less. |
• | total Weyerhaeuser shareholders’ equity, |
• | excluding accumulated comprehensive income (loss), |
• | minus Weyerhaeuser Company’s investment in our unrestricted subsidiaries. |
• | total Weyerhaeuser Company debt |
• | plus total adjusted shareholders' equity. |
• | a defined total adjusted shareholders' equity of $9.9 billion and |
• | a defined debt-to-total-capital ratio of 39.09 percent. |
• | $52 million in 2018, |
• | $128 million in 2017 and |
• | $61 million in 2016. |
• | $995 million in 2018, |
• | $941 million in 2017 and |
• | $932 million in 2016. |
• | an increase in our quarterly dividend from 32 cents per share to 34 cents per share in third quarter 2018; and |
• | an increase in our quarterly dividend from 31 cents per share to 32 cents per share in fourth quarter 2017. |
DOLLAR AMOUNTS IN MILLIONS | |||||||||||||||
PAYMENTS DUE BY PERIOD | |||||||||||||||
TOTAL | LESS THAN 1 YEAR | 1–3 YEARS | 3–5 YEARS | MORE THAN 5 YEARS | |||||||||||
Long-term debt obligations, including current portion (Note 13)(1) | $ | 5,893 | $ | 500 | $ | 719 | $ | 1,876 | $ | 2,798 | |||||
Borrowings on line of credit (Note 12)(2) | 425 | — | — | — | — | ||||||||||
Interest(3) | 2,684 | 357 | 634 | 551 | 1,142 | ||||||||||
Operating lease obligations | 210 | 35 | 55 | 42 | 78 | ||||||||||
Purchase obligations(4) | 440 | 135 | 147 | 79 | 79 | ||||||||||
Employee-related obligations(5) | 367 | 127 | 42 | 28 | 73 | ||||||||||
Liabilities related to unrecognized tax benefits (Note 21)(6) | 3 | — | — | — | — | ||||||||||
Total | $ | 10,022 | $ | 1,154 | $ | 1,597 | $ | 2,576 | $ | 4,170 | |||||
(1) Does not include nonrecourse debt held by our Variable Interest Entities (VIEs). See Note 9: Related Parties in the Notes to Consolidated Financial Statements for further information on our VIEs and the related nonrecourse debt. (2) Our line of credit expires in 2022, at which time all outstanding amounts must be repaid. The timing of the repayment of the current outstanding balance is uncertain. See Note 12: Lines of Credit in the Notes to Consolidated Financial Statements for further information on our line of credit. (3) Amounts presented for interest payments assume that all long-term debt obligations outstanding as of December 31, 2018, will remain outstanding until maturity, and interest rates on variable-rate debt in effect as of December 31, 2018, will remain in effect until maturity. (4) 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. (5) 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 2019. Estimated payments of contractually obligated postretirement benefits are not included due to the uncertainty of payment timing. (6) We have recognized total liabilities related to unrecognized tax benefits of $3 million as of December 31, 2018. The timing of payments related to these obligations is uncertain; however, none of this amount is expected to be paid within the next year. |
OFF-BALANCE SHEET ARRANGEMENTS |
• | surety bonds, |
• | letters of credit and guarantees and |
• | information regarding variable interest entities. |
ENVIRONMENTAL MATTERS, LEGAL PROCEEDINGS AND OTHER CONTINGENCIES |
ACCOUNTING MATTERS |
• | historical experience and |
• | assumptions we believe are appropriate and reasonable under current circumstances. |
• | pension and postretirement benefit plans; |
• | potential impairments of long-lived assets; and |
• | legal, environmental and product liability reserves. |
• | fair value of our plan assets, |
• | expected long-term rate of return on plan assets and |
• | discount rates. |
• | Level 1: Inputs are unadjusted quoted prices for identical assets or 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. |
• | cash and short-term investments are valued at cost, which approximates market; |
• | fixed income investments are valued at exit prices quoted in the public market; |
• | hedge funds, private equity funds and related fund units are valued based on the net asset value of the funds; and |
• | derivative instruments are valued based upon valuation statements received from each derivative’s counterparty. |
• | historical returns for a portfolio of assets similar to our expected allocation and |
• | expected future performance of similar asset classes. |
• | $14 million for our U.S. qualified pension plans and |
• | $4 million for our Canadian registered pension plans. |
• | 4.4 percent for our U.S. pension plans — compared with 3.7 percent at December 31, 2017; |
• | 4.2 percent for our U.S. postretirement plans — compared with 3.5 percent at December 31, 2017; |
• | 3.7 percent for our Canadian pension plans — compared with 3.5 percent at December 31, 2017; and |
• | 3.7 percent for our Canadian postretirement plans — compared with 3.4 percent at December 31, 2017. |
• | $15 million for our U.S. qualified pension plans and |
• | $5 million for our Canadian registered pension plans. |
• | it becomes probable that we will have to make payments and |
• | the amount of loss can be reasonably estimated. |
• | historical experience, |
• | evaluations of relevant legal and environmental regulations, |
• | judgments about the potential actions of third-party claimants and courts and |
• | consideration of potential environmental remediation methods. |
PERFORMANCE MEASURES |
DOLLAR AMOUNTS IN MILLIONS | |||||||||
2018 | 2017 | 2016 | |||||||
Timberlands | $ | 902 | $ | 936 | $ | 865 | |||
Real Estate & ENR | 264 | 241 | 189 | ||||||
Wood Products | 987 | 1,017 | 641 | ||||||
2,153 | 2,194 | 1,695 | |||||||
Unallocated Items | (121 | ) | (114 | ) | (112 | ) | |||
Total | $ | 2,032 | $ | 2,080 | $ | 1,583 |
DOLLAR AMOUNTS IN MILLIONS | |||||||||||||||
TIMBERLANDS | REAL ESTATE & ENR | WOOD PRODUCTS | UNALLOCATED ITEMS | TOTAL | |||||||||||
Net earnings | $ | 748 | |||||||||||||
Interest expense, net of capitalized interest | 375 | ||||||||||||||
Income taxes(1) | 59 | ||||||||||||||
Net contribution to earnings | $ | 583 | $ | 127 | $ | 838 | $ | (366 | ) | $ | 1,182 | ||||
Non-operating pension and other postretirement benefit costs (credits)(2) | — | — | — | 272 | 272 | ||||||||||
Interest income and other(3) | — | (1 | ) | — | (59 | ) | (60 | ) | |||||||
Operating income | 583 | 126 | 838 | (153 | ) | 1,394 | |||||||||
Depreciation, depletion and amortization | 319 | 14 | 149 | 4 | 486 | ||||||||||
Basis of real estate sold | — | 124 | — | — | 124 | ||||||||||
Special items included in operating income(4) | — | — | — | 28 | 28 | ||||||||||
Adjusted EBITDA | $ | 902 | $ | 264 | $ | 987 | $ | (121 | ) | $ | 2,032 | ||||
(1) Income taxes include special items consisting of a $41 million tax benefit related to our pension contribution and a $21 million tax adjustment charge. (2) Non-operating pension and other postretirement benefit costs (credits) include a pretax special item of a $200 million noncash settlement charge related to our U.S. qualified pension plan lump sum offer. (3) Interest income and other includes a pretax special item of a $13 million gain on sale of a nonstrategic asset. (4) Operating income for Unallocated Items includes a pretax special item consisting of a $28 million environmental remediation expense. |
DOLLAR AMOUNTS IN MILLIONS | |||||||||||||||
TIMBERLANDS | REAL ESTATE & ENR | WOOD PRODUCTS | UNALLOCATED ITEMS | TOTAL | |||||||||||
Net earnings | $ | 582 | |||||||||||||
Interest expense, net of capitalized interest | 393 | ||||||||||||||
Income taxes | 134 | ||||||||||||||
Net contribution to earnings | $ | 532 | $ | 146 | $ | 569 | $ | (138 | ) | $ | 1,109 | ||||
Non-operating pension and other postretirement benefit costs (credits) | — | — | — | 62 | 62 | ||||||||||
Interest income and other | — | (1 | ) | — | (39 | ) | (40 | ) | |||||||
Operating income | 532 | 145 | 569 | (115 | ) | 1,131 | |||||||||
Depreciation, depletion and amortization | 356 | 15 | 145 | 5 | 521 | ||||||||||
Basis of real estate sold | — | 81 | — | — | 81 | ||||||||||
Unallocated pension service costs | — | — | — | 4 | 4 | ||||||||||
Special items included in operating income(1)(2)(3) | 48 | — | 303 | (8 | ) | 343 | |||||||||
Adjusted EBITDA | $ | 936 | $ | 241 | $ | 1,017 | $ | (114 | ) | $ | 2,080 | ||||
(1) Operating income for Timberlands includes pretax special items consisting of a $147 million noncash impairment charge of the Uruguay operations and a $99 million gain on a sale of Southern timberlands. (2) Operating income for Wood Products includes pretax special items consisting of $290 million of product remediation charges, $7 million for countervailing and antidumping duties on softwood lumber, and a $6 million impairment on a nonstrategic asset. (3) Operating income for Unallocated Items includes pretax special items consisting of $42 million for environmental remediation insurance recoveries and $34 million for Plum Creek merger-related costs. |
DOLLAR AMOUNTS IN MILLIONS | |||||||||||||||
TIMBERLANDS | REAL ESTATE & ENR | WOOD PRODUCTS | UNALLOCATED ITEMS | TOTAL | |||||||||||
Net earnings | $ | 1,027 | |||||||||||||
Earnings from discontinued operations, net of taxes | (612 | ) | |||||||||||||
Interest expense, net of capitalized interest | 431 | ||||||||||||||
Income taxes | 89 | ||||||||||||||
Net contribution to earnings | $ | 499 | $ | 55 | $ | 512 | $ | (131 | ) | $ | 935 | ||||
Non-operating pension and other postretirement benefit costs (credits) | — | — | — | (48 | ) | (48 | ) | ||||||||
Interest income and other | — | (2 | ) | — | (63 | ) | (65 | ) | |||||||
Operating income | 499 | 53 | 512 | (242 | ) | 822 | |||||||||
Depreciation, depletion and amortization | 366 | 13 | 129 | 4 | 512 | ||||||||||
Basis of real estate sold | — | 109 | — | — | 109 | ||||||||||
Unallocated pension service costs | — | — | — | 5 | 5 | ||||||||||
Special items included in operating income(1)(2) | — | 14 | — | 121 | 135 | ||||||||||
Adjusted EBITDA | $ | 865 | $ | 189 | $ | 641 | $ | (112 | ) | $ | 1,583 | ||||
(1) Operating income for Real Estate & ENR includes pretax special items related to an asset impairment charge recorded for development projects. (2) Operating income for Unallocated Items includes pretax special items consisting of: $146 million Plum Creek merger-related costs, $36 million gain on sale of nonstrategic assets and $11 million of legal expense. |
LONG-TERM DEBT OBLIGATIONS |
• | scheduled principal repayments for the next five years and after, |
• | weighted average interest rates for debt maturing in each of the next five years and after and |
• | estimated fair values of outstanding obligations. |
DOLLAR AMOUNTS IN MILLIONS | ||||||||||||||||||||||||
2019 | 2020 | 2021 | 2022 | 2023 | THEREAFTER | TOTAL(1)(2) | FAIR VALUE | |||||||||||||||||
Fixed-rate debt | $ | 500 | $ | — | $ | 719 | $ | — | $ | 1,876 | $ | 2,573 | $ | 5,668 | $ | 6,345 | ||||||||
Average interest rate | 7.38 | % | — | % | 5.57 | % | — | % | 4.91 | % | 7.47 | % | 6.37 | % | N/A | |||||||||
Variable-rate debt(3) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 225 | $ | 225 | $ | 225 | ||||||||
Average interest rate | — | % | — | % | — | % | — | % | — | % | 4.12 | % | 4.12 | % | N/A | |||||||||
(1) Excludes $26 million of unamortized discounts, unamortized debt expense and fair value adjustments (related to Plum Creek merger). (2) Does not include nonrecourse debt held by our Variable Interest Entities (VIEs). See Note 9: Related Parties in the Notes to Consolidated Financial Statements for further information on our VIEs and the related nonrecourse debt. (3) Excludes borrowings under our line of credit of $425 million as of December 31, 2018. Our line of credit expires in 2022, at which time all outstanding amounts must be repaid. The timing of the repayment of the current outstanding balance is uncertain. See Note 12: Lines of Credit in the Notes to Consolidated Financial Statements for further information on our line of credit. |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
CONSOLIDATED STATEMENT OF OPERATIONS |
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES | |||||||||
2018 | 2017 | 2016 | |||||||
Net sales | $ | 7,476 | $ | 7,196 | $ | 6,365 | |||
Costs of sales | 5,592 | 5,298 | 4,980 | ||||||
Gross margin | 1,884 | 1,898 | 1,385 | ||||||
Selling expenses | 88 | 87 | 89 | ||||||
General and administrative expenses | 318 | 310 | 338 | ||||||
Research and development expenses | 8 | 14 | 19 | ||||||
Charges for integration and restructuring, closures and asset impairments (Note 18) | 2 | 194 | 170 | ||||||
Charges (recoveries) for product remediation, net (Note 19) | — | 290 | — | ||||||
Other operating costs (income), net (Note 20) | 74 | (128 | ) | (53 | ) | ||||
Operating income | 1,394 | 1,131 | 822 | ||||||
Non-operating pension and other postretirement benefit (costs) credits | (272 | ) | (62 | ) | 48 | ||||
Interest income and other | 60 | 40 | 65 | ||||||
Interest expense, net of capitalized interest | (375 | ) | (393 | ) | (431 | ) | |||
Earnings from continuing operations before income taxes | 807 | 716 | 504 | ||||||
Income taxes (Note 21) | (59 | ) | (134 | ) | (89 | ) | |||
Earnings from continuing operations | 748 | 582 | 415 | ||||||
Earnings from discontinued operations, net of income taxes (Note 4) | — | — | 612 | ||||||
Net earnings | 748 | 582 | 1,027 | ||||||
Dividends on preference shares | — | — | (22 | ) | |||||
Net earnings attributable to Weyerhaeuser common shareholders | $ | 748 | $ | 582 | $ | 1,005 | |||
Basic earnings per share attributable to Weyerhaeuser common shareholders (Note 6): | |||||||||
Continuing operations | $ | 0.99 | $ | 0.77 | $ | 0.55 | |||
Discontinued operations | — | — | 0.85 | ||||||
Net earnings per share | $ | 0.99 | $ | 0.77 | $ | 1.40 | |||
Diluted earnings per share attributable to Weyerhaeuser common shareholders (Note 6): | |||||||||
Continuing operations | $ | 0.99 | $ | 0.77 | $ | 0.55 | |||
Discontinued operations | — | — | 0.84 | ||||||
Net earnings per share | $ | 0.99 | $ | 0.77 | $ | 1.39 | |||
Weighted average shares outstanding (in thousands) (Note 6): | |||||||||
Basic | 754,556 | 753,085 | 718,560 | ||||||
Diluted | 756,827 | 756,666 | 722,401 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME |
DOLLAR AMOUNTS IN MILLIONS | |||||||||
2018 | 2017 | 2016 | |||||||
Comprehensive income: | |||||||||
Net earnings | $ | 748 | $ | 582 | $ | 1,027 | |||
Other comprehensive income (loss): | |||||||||
Foreign currency translation adjustments | (54 | ) | 32 | 25 | |||||
Changes in unamortized actuarial loss, net of tax expense (benefit) of $235 in 2018, ($2) in 2017 and ($151) in 2016 | 733 | (132 | ) | (269 | ) | ||||
Changes in unamortized net prior service credit, net of tax benefit of $3 in 2018, $2 in 2017 and $0 in 2016 | (7 | ) | (5 | ) | (4 | ) | |||
Unrealized gains on available-for-sale securities | — | 2 | 1 | ||||||
Total comprehensive income | $ | 1,420 | $ | 479 | $ | 780 |
CONSOLIDATED BALANCE SHEET |
DOLLAR AMOUNTS IN MILLIONS | ||||||
DECEMBER 31, 2018 | DECEMBER 31, 2017 | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 334 | $ | 824 | ||
Receivables, less discounts and allowances of $1 and $1 | 337 | 396 | ||||
Receivables for taxes | 137 | 14 | ||||
Inventories (Note 7) | 389 | 383 | ||||
Prepaid expenses and other current assets | 152 | 98 | ||||
Current restricted financial investments held by variable interest entities (Note 9) | 253 | — | ||||
Total current assets | 1,602 | 1,715 | ||||
Property and equipment, less accumulated depreciation of $3,376 and $3,338 (Note 8) | 1,857 | 1,618 | ||||
Construction in progress | 136 | 225 | ||||
Timber and timberlands at cost, less depletion | 12,671 | 12,954 | ||||
Minerals and mineral rights, less depletion | 294 | 308 | ||||
Deferred tax assets (Note 21) | 15 | 268 | ||||
Other assets | 312 | 356 | ||||
Restricted financial investments held by variable interest entities (Note 9) | 362 | 615 | ||||
Total assets | $ | 17,249 | $ | 18,059 | ||
LIABILITIES AND EQUITY | ||||||
Current liabilities: | ||||||
$ | 500 | $ | 62 | |||
Current debt (nonrecourse to the company) held by variable interest entities (Note 9) | 302 | 209 | ||||
425 | — | |||||
Accounts payable | 222 | 249 | ||||
Accrued liabilities (Note 11) | 490 | 645 | ||||
Total current liabilities | 1,939 | 1,165 | ||||
5,419 | 5,930 | |||||
Long-term debt (nonrecourse to the company) held by variable interest entities (Note 9) | — | 302 | ||||
Deferred tax liabilities | 43 | — | ||||
Deferred pension and other postretirement benefits (Note 10) | 527 | 1,487 | ||||
Other liabilities | 275 | 276 | ||||
Commitments and contingencies (Note 15) | ||||||
Total liabilities | 8,203 | 9,160 | ||||
Equity: | ||||||
Common shares: $1.25 par value; authorized 1,360 million shares; issued and outstanding: 746,391 thousand shares at December 31, 2018 and 755,223 thousand shares at December 31, 2017 | 933 | 944 | ||||
Other capital | 8,172 | 8,439 | ||||
Retained earnings | 1,093 | 1,078 | ||||
Accumulated other comprehensive loss (Note 16) | (1,152 | ) | (1,562 | ) | ||
Total equity | 9,046 | 8,899 | ||||
Total liabilities and equity | $ | 17,249 | $ | 18,059 |
CONSOLIDATED STATEMENT OF CASH FLOWS |
DOLLAR AMOUNTS IN MILLIONS | |||||||||
2018 | 2017 | 2016 | |||||||
Cash flows from operations: | |||||||||
Net earnings | $ | 748 | $ | 582 | $ | 1,027 | |||
Noncash charges (credits) to income: | |||||||||
Depreciation, depletion and amortization | 486 | 521 | 565 | ||||||
Basis of real estate sold | 124 | 81 | 109 | ||||||
Deferred income taxes, net | 72 | 44 | (159 | ) | |||||
Pension and other postretirement benefits | 309 | 97 | 5 | ||||||
Share-based compensation expense (Note 17) | 42 | 40 | 60 | ||||||
Charges for impairment of assets | 1 | 154 | 37 | ||||||
Net gains on disposition of discontinued and other operations (Note 4) | — | (1 | ) | (789 | ) | ||||
Net gains on sale of nonstrategic assets | (16 | ) | (16 | ) | (73 | ) | |||
Net gains on sale of southern timberlands (Note 9) | — | (99 | ) | — | |||||
Change in, net of acquisition: | |||||||||
Receivables, less allowances | 62 | (35 | ) | (54 | ) | ||||
Receivable and payable for taxes | (103 | ) | (50 | ) | 106 | ||||
Inventories | (14 | ) | (39 | ) | 61 | ||||
Prepaid expenses and other current assets | (18 | ) | (12 | ) | 5 | ||||
Accounts payable and accrued liabilities | (154 | ) | 106 | 11 | |||||
Pension and postretirement contributions / benefit payments | (381 | ) | (78 | ) | (99 | ) | |||
Other | (46 | ) | (94 | ) | (77 | ) | |||
Net cash from operations | 1,112 | 1,201 | 735 | ||||||
Cash flows from investing activities: | |||||||||
Capital expenditures for property and equipment | (368 | ) | (358 | ) | (451 | ) | |||
Capital expenditures for timberlands reforestation | (59 | ) | (61 | ) | (59 | ) | |||
Proceeds from disposition of discontinued and other operations (Note 4) | — | 403 | 2,486 | ||||||
Proceeds from sale of nonstrategic assets | 4 | 26 | 104 | ||||||
Proceeds from sale of southern timberlands (Note 9) | — | 203 | — | ||||||
Proceeds from redemption of ownership in related party (Note 9) | — | 108 | — | ||||||
Proceeds from contribution of timberlands to related party (Note 9) | — | — | 440 | ||||||
Other | (17 | ) | 46 | 39 | |||||
Net cash from investing activities | (440 | ) | 367 | 2,559 | |||||
Cash flows from financing activities: | |||||||||
Cash dividends on common shares | (995 | ) | (941 | ) | (932 | ) | |||
Cash dividends on preference shares | — | — | (22 | ) | |||||
Proceeds from issuance of long-term debt (Note 13) | — | 225 | 1,698 | ||||||
Payments on long-term debt (Note 13) | (62 | ) | (831 | ) | (2,423 | ) | |||
Proceeds from borrowings on line of credit (Note 12) | 425 | 100 | — | ||||||
Payments on line of credit (Note 12) | — | (100 | ) | — | |||||
Payments on debt held by variable interest entities (Note 9) | (209 | ) | — | — | |||||
Proceeds from exercise of stock options | 52 | 128 | 61 | ||||||
Repurchase of common shares (Note 16) | (366 | ) | — | (2,003 | ) | ||||
Other | (7 | ) | (1 | ) | (9 | ) | |||
Net cash from financing activities | (1,162 | ) | (1,420 | ) | (3,630 | ) | |||
Net change in cash and cash equivalents | $ | (490 | ) | $ | 148 | $ | (336 | ) | |
Cash and cash equivalents from continuing operations at beginning of year | $ | 824 | $ | 676 | $ | 1,011 | |||
Cash and cash equivalents from discontinued operations at beginning of year | $ | — | $ | — | $ | 1 | |||
Cash and cash equivalents at beginning of year | $ | 824 | $ | 676 | $ | 1,012 | |||
Cash and cash equivalents from continuing operations at end of year | $ | 334 | $ | 824 | $ | 676 | |||
Cash and cash equivalents from discontinued operations at end of year | $ | — | $ | — | $ | — | |||
Cash and cash equivalents at end of year | $ | 334 | $ | 824 | $ | 676 | |||
Cash paid (received) during the year for: | |||||||||
Interest, net of amounts capitalized of $9 in 2018, $9 in 2017, and $8 in 2016 | $ | 358 | $ | 381 | $ | 446 | |||
Income taxes | $ | 95 | $ | 169 | $ | 485 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY |
DOLLAR AMOUNTS IN MILLIONS | |||||||||
2018 | 2017 | 2016 | |||||||
Mandatory convertible preference shares, series A: | |||||||||
Balance at beginning of year | $ | — | $ | — | $ | 14 | |||
Conversion to common shares (Note 16) | — | — | (14 | ) | |||||
Balance at end of year | $ | — | $ | — | $ | — | |||
Common shares: | |||||||||
Balance at beginning of year | $ | 944 | $ | 936 | $ | 638 | |||
Preference shares converted to common shares (Note 16) | — | — | 29 | ||||||
Issued for exercise of stock options | 3 | 7 | 3 | ||||||
Repurchases of common shares (Note 16) | (15 | ) | — | (85 | ) | ||||
Release of vested restricted stock units | 1 | 1 | 2 | ||||||
Plum Creek acquisition | — | — | 349 | ||||||
Balance at end of year | $ | 933 | $ | 944 | $ | 936 | |||
Other capital: | |||||||||
Balance at beginning of year | $ | 8,439 | $ | 8,282 | $ | 4,080 | |||
Issued for exercise of stock options | 49 | 128 | 61 | ||||||
Repurchase of common shares (Note 16) | (351 | ) | — | (1,918 | ) | ||||
Share-based compensation | 42 | 35 | 35 | ||||||
Plum Creek acquisition | — | — | 6,046 | ||||||
Other transactions, net | (7 | ) | (6 | ) | (22 | ) | |||
Balance at end of year | $ | 8,172 | $ | 8,439 | $ | 8,282 | |||
Retained earnings: | |||||||||
Balance at beginning of year | $ | 1,078 | $ | 1,421 | $ | 1,349 | |||
Net earnings | 748 | 582 | 1,027 | ||||||
Dividends on common shares | (995 | ) | (944 | ) | (933 | ) | |||
Adjustments related to new accounting pronouncements (Note 1) | 262 | 19 | — | ||||||
Cash dividends on preference shares | — | — | (22 | ) | |||||
Balance at end of year | $ | 1,093 | $ | 1,078 | $ | 1,421 | |||
Accumulated other comprehensive loss: | |||||||||
Balance at beginning of year | $ | (1,562 | ) | $ | (1,459 | ) | $ | (1,212 | ) |
Annual changes – net of tax: | |||||||||
Foreign currency translation adjustments | (54 | ) | 32 | 25 | |||||
Changes in unamortized actuarial loss, net of tax (Note 10) | 733 | (132 | ) | (269 | ) | ||||
Changes in unamortized net prior service credit, net of tax (Note 10) | (7 | ) | (5 | ) | (4 | ) | |||
Unrealized gains on available-for-sale securities | — | 2 | 1 | ||||||
Adjustments related to new accounting pronouncements (Note 16) | (262 | ) | — | — | |||||
Balance at end of year | $ | (1,152 | ) | $ | (1,562 | ) | $ | (1,459 | ) |
Total equity: | |||||||||
Balance at end of year | $ | 9,046 | $ | 8,899 | $ | 9,180 | |||
Dividends paid per common share | $ | 1.32 | $ | 1.25 | $ | 1.24 |
INDEX FOR NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 1: | ||
NOTE 2: | ||
NOTE 3: | ||
NOTE 4: | ||
NOTE 5: | ||
NOTE 6: | ||
NOTE 7: | ||
NOTE 8: | ||
NOTE 9: | ||
NOTE 10: | ||
NOTE 11: | ||
NOTE 12: | ||
NOTE 13: | ||
NOTE 14: | ||
NOTE 15: | ||
NOTE 16: | ||
NOTE 17: | ||
NOTE 18: | ||
NOTE 19: | ||
NOTE 20: | ||
NOTE 21: | ||
NOTE 22: | ||
NOTE 23: |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
• | our election to be taxed as a real estate investment trust, |
• | how we report our results, |
• | changes in how we report our results and |
• | how we account for various items. |
• | consolidated financial statements, |
• | our business segments, |
• | estimates, |
• | fair value measurements and |
• | foreign currency translation. |
• | majority-owned domestic and foreign subsidiaries and |
• | variable interest entities in which we are the primary beneficiary. |
• | growing and harvesting timber; |
• | manufacturing, distributing and selling products made from trees; |
• | maximizing the value of every acre we own through the sale of higher and better use (HBU) properties; and |
• | monetizing reserves of minerals, oil, gas, coal, and other natural resources on our timberlands. |
SEGMENT | PRODUCTS AND SERVICES |
Timberlands | Logs, timber and leased recreational access |
Real Estate & ENR | Sales of timberlands, rights to explore for and extract hard minerals, construction materials, oil and gas production, wind, solar and coal |
Wood Products | Softwood lumber, engineered wood products, structural panels, medium density fiberboard and building materials distribution |
• | reported amounts of assets, liabilities and equity; |
• | disclosure of contingent assets and liabilities; and |
• | reported amounts of revenues and expenses. |
• | long-lived assets (asset groups) measured at fair value for an impairment assessment; |
• | pension plan assets measured at fair value; and |
• | asset retirement obligations initially measured at fair value. |
• | Level 1: Inputs are unadjusted quoted prices for identical assets or 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. |
• | assets and liabilities — at the exchange rates in effect as of our balance sheet date; and |
• | revenues and expenses — at average monthly exchange rates throughout the year. |
• | reclassification of certain balances and results from prior years to make them consistent with our current reporting and |
• | accounting changes made upon our adoption of new accounting guidance |
• | capital investments, |
• | financing our business and |
• | operations. |
• | Improvements to and replacements of major units of property are capitalized. |
• | Maintenance, repairs and minor replacements are expensed. |
• | Depreciation is calculated using a straight-line method at rates based on estimated service lives. |
• | We capitalize costs associated with logging roads that we intend to utilize for a period longer than one year. These roads are then amortized over an estimated service life. |
• | Cost and accumulated depreciation of property sold or retired are removed from the accounts and the gain or loss is included in earnings. |
• | reforestation, |
• | depletion and |
• | forest management in Canada. |
• | fertilization, |
• | vegetation and insect control, |
• | pruning and precommercial thinning, |
• | property taxes and |
• | interest. |
• | regulatory and environmental constraints, |
• | our management strategies, |
• | inventory data improvements, |
• | growth rate revisions and recalibrations and |
• | known dispositions and inoperable acres. |
• | future silviculture or sustainable forest management costs associated with existing stands |
• | future reforestation costs associated with a stand's final harvest; and |
• | future volume in connection with the replanting of a stand subsequent to its final harvest |
• | granted by the provincial governments; |
• | granted for initial periods of 15 to 25 years; and |
• | renewable provided we meet reforestation, operating and management guidelines. |
• | varies from province to province, |
• | is tied to product market pricing and |
• | depends upon the allocation of land management responsibilities in the license. |
• | appraisals, |
• | market pricing of comparable assets, |
• | discounted value of estimated cash flows from the asset and |
• | replacement values of comparable assets. |
• | future tax consequences due to differences between the carrying amounts for financial reporting purposes and the tax bases of certain items and |
• | operating loss and tax credit carryforwards. |
• | determine when the differences between the carrying amounts and tax bases of affected items are expected to be recovered or resolved and |
• | use enacted tax rates expected to apply to taxable income in those years. |
• | cost of benefits provided in exchange for employees’ services rendered during the year; |
• | interest cost of the obligations; |
• | expected long-term return on plan assets; |
• | gains or losses on plan settlements and curtailments; |
• | 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 |
• | 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. |
• | Salaried employee benefits are based on each employee’s highest monthly earnings for five consecutive years during the final 10 years before retirement. |
• | Hourly and union employee benefits generally are stated amounts for each year of service. |
• | Union employee benefits are set through collective-bargaining agreements. |
• | U.S. pension plans — according to the Employee Retirement Income Security Act of 1974; and |
• | Canadian pension plans — according to the applicable provincial pension act and the Income Tax Act. |
DOLLAR AMOUNTS IN MILLIONS | |||||||||||||||
TIMBERLANDS | REAL ESTATE & ENR | WOOD PRODUCTS | UNALLOCATED ITEMS(1) AND INTERSEGMENT ELIMINATIONS | CONSOLIDATED | |||||||||||
Sales to unaffiliated customers | |||||||||||||||
2018 | $ | 1,915 | $ | 306 | $ | 5,255 | $ | — | $ | 7,476 | |||||
2017 | $ | 1,942 | $ | 280 | $ | 4,974 | $ | — | $ | 7,196 | |||||
2016 | $ | 1,805 | $ | 226 | $ | 4,334 | $ | — | $ | 6,365 | |||||
Intersegment sales | |||||||||||||||
2018 | $ | 802 | $ | 1 | $ | — | $ | (803 | ) | $ | — | ||||
2017 | $ | 762 | $ | 1 | $ | — | $ | (763 | ) | $ | — | ||||
2016 | $ | 840 | $ | 1 | $ | 68 | $ | (909 | ) | $ | — | ||||
Contribution (charge) to earnings from continuing operations | |||||||||||||||
2018 | $ | 583 | $ | 127 | $ | 838 | $ | (366 | ) | $ | 1,182 | ||||
2017 | $ | 532 | $ | 146 | $ | 569 | $ | (138 | ) | $ | 1,109 | ||||
2016 | $ | 499 | $ | 55 | $ | 512 | $ | (131 | ) | $ | 935 | ||||
(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 expense, pension and postretirement costs, foreign exchange transaction gains and losses, interest income and other, and the elimination of intersegment profit in inventory and LIFO. |
DOLLAR AMOUNTS IN MILLIONS | |||||||||
2018 | 2017 | 2016 | |||||||
Net contribution to earnings from continuing operations | $ | 1,182 | $ | 1,109 | $ | 935 | |||
Net contribution to earnings from discontinued operations | — | — | 957 | ||||||
Total contribution to earnings | 1,182 | 1,109 | 1,892 | ||||||
Interest expense, net of capitalized interest(1) | (375 | ) | (393 | ) | (436 | ) | |||
Income before income taxes(1) | 807 | 716 | 1,456 | ||||||
Income taxes(1) | (59 | ) | (134 | ) | (429 | ) | |||
Net earnings | $ | 748 | $ | 582 | $ | 1,027 | |||
(1) Results shown for 2016 include amounts for both continuing and discontinued operations. Refer to Note 4: Discontinued Operations and Other Divestitures for further information. |
DOLLAR AMOUNTS IN MILLIONS | |||||||||||||||
TIMBERLANDS | REAL ESTATE & ENR | WOOD PRODUCTS | UNALLOCATED ITEMS | CONSOLIDATED | |||||||||||
Depreciation, depletion and amortization | |||||||||||||||
2018 | $ | 319 | $ | 14 | $ | 149 | $ | 4 | $ | 486 | |||||
2017 | $ | 356 | $ | 15 | $ | 145 | $ | 5 | $ | 521 | |||||
2016 | $ | 366 | $ | 13 | $ | 129 | $ | 4 | $ | 512 | |||||
Charges for integration and restructuring, closures and asset impairments(1) | |||||||||||||||
2018 | $ | — | $ | — | $ | 2 | $ | — | $ | 2 | |||||
2017 | $ | 147 | $ | — | $ | 13 | $ | 34 | $ | 194 | |||||
2016 | $ | — | $ | 15 | $ | 7 | $ | 148 | $ | 170 | |||||
Capital expenditures | |||||||||||||||
2018 | $ | 117 | $ | — | $ | 306 | $ | 4 | $ | 427 | |||||
2017 | $ | 115 | $ | 2 | $ | 299 | $ | 3 | $ | 419 | |||||
2016 | $ | 116 | $ | 1 | $ | 297 | $ | 11 | $ | 425 | |||||
(1) See Note 18: Charges for Integration and Restructuring, Closures and Asset Impairments for more information. |
DOLLAR AMOUNTS IN MILLIONS | ||||||||||||
TIMBERLANDS and REAL ESTATE & ENR(1) | WOOD PRODUCTS | UNALLOCATED ITEMS | CONSOLIDATED | |||||||||
Total assets | ||||||||||||
2018 | $ | 13,838 | $ | 2,234 | $ | 1,177 | $ | 17,249 | ||||
2017 | $ | 14,122 | $ | 2,145 | $ | 1,792 | $ | 18,059 | ||||
(1) Assets attributable to the Real Estate & ENR business segment are combined with total assets for the Timberlands segment as we do not produce separate balance sheets internally. |
DOLLAR AMOUNTS IN MILLIONS | |||||||||
2018 | 2017 | 2016 | |||||||
Net Sales to Unaffiliated Customers: | |||||||||
Timberlands Segment | |||||||||
Delivered logs(1): | |||||||||
West | |||||||||
Domestic sales | 503 | 473 | 410 | ||||||
Export sales | 484 | 442 | 455 | ||||||
Subtotal West | 987 | 915 | 865 | ||||||
South | 625 | 616 | 566 | ||||||
North | 99 | 95 | 91 | ||||||
Other | 41 | 59 | 38 | ||||||
Subtotal delivered logs sales | 1,752 | 1,685 | 1,560 | ||||||
Stumpage and pay-as-cut timber | 59 | 73 | 85 | ||||||
Recreational and other lease revenue | 59 | 59 | 44 | ||||||
Other (2) | 45 | 125 | 116 | ||||||
Net Sales attributable to Timberlands Segment | 1,915 | 1,942 | 1,805 | ||||||
Real Estate & ENR Segment | |||||||||
Real estate | 229 | 208 | 172 | ||||||
Energy and natural resources | 77 | 72 | 54 | ||||||
Net sales attributable to Real Estate & ENR Segment | 306 | 280 | 226 | ||||||
Wood Products Segment | |||||||||
Structural lumber | 2,258 | 2,058 | 1,839 | ||||||
Oriented strand board | 891 | 904 | 707 | ||||||
Engineered solid section | 521 | 500 | 450 | ||||||
Engineered I-joists | 336 | 336 | 290 | ||||||
Softwood plywood | 200 | 176 | 174 | ||||||
Medium density fiberboard | 177 | 183 | 158 | ||||||
Complementary building products | 584 | 541 | 515 | ||||||
Other(3) | 288 | 276 | 201 | ||||||
Net sales attributable to Wood Products Segment | 5,255 | 4,974 | 4,334 | ||||||
Total | $ | 7,476 | $ | 7,196 | $ | 6,365 | |||
(1) The West region includes Washington and Oregon. The South region includes Virginia, North Carolina, South Carolina, Florida, Georgia, Alabama, Mississippi, Louisiana, Arkansas, Texas and Oklahoma. The North region includes West Virginia, Maine, New Hampshire, Vermont, Michigan, Wisconsin and Montana. Other includes our Canadian operations and former Twin Creeks Venture (terminated in December 2017). (2) Other Timberlands sales include sales of seeds and seedlings, chips, as well as sales from our former Uruguayan operations (sold during third quarter 2017). Our former Uruguayan operations included logs, plywood and hardwood lumber harvested or produced. Refer to Note 4: Discontinued Operations and Other Divestitures for further information. (3) Includes chips and other byproducts. |
• | sale of our Cellulose Fibers liquid packaging board business to Nippon Paper Industries Co., Ltd for $285 million in cash proceeds, which closed on August 31, 2016; |
• | sale of our Cellulose Fibers printing papers joint venture to One Rock Capital Partners, LLC for $42 million in cash proceeds, which closed on November 1, 2016; and |
• | sale of our Cellulose Fibers pulp business to International Paper for $2.2 billion in cash proceeds, which closed on December 1, 2016. |
DOLLAR AMOUNTS IN MILLIONS | |||
2016 | |||
Proceeds, net of cash and cash equivalents disposed of | $ | 2,486 | |
Less: | |||
Net book value of assets and liabilities disposed of | (1,678 | ) | |
Transaction costs, net of reimbursement | (19 | ) | |
(1,697 | ) | ||
Pretax gain on Cellulose Fibers divestitures | 789 | ||
Income taxes | (243 | ) | |
Net gain on Cellulose Fibers divestitures | $ | 546 |
DOLLAR AMOUNTS IN MILLIONS | |||
2016(1) | |||
Total net sales | $ | 1,537 | |
Costs of sales | 1,283 | ||
Gross margin | 254 | ||
Selling expenses | 12 | ||
General and administrative expenses | 29 | ||
Research and development expenses | 5 | ||
Charges for integration and restructuring, closures and asset impairments(2) | 63 | ||
Other operating income, net | (27 | ) | |
Operating income | 172 | ||
Equity loss from joint venture | (4 | ) | |
Interest expense, net of capitalized interest | (5 | ) | |
Earnings from discontinued operations before income taxes | 163 | ||
Income taxes | (97 | ) | |
Net earnings from operations | 66 | ||
Net gain on divestiture of Cellulose Fibers | 546 | ||
Net earnings from discontinued operations | $ | 612 | |
(1) Discontinued operations in 2016 includes 335 days of the pulp business, 305 days of our printing papers joint venture operations, and 244 days of the liquid packaging board business. (2) Charges for integration and restructuring, closures and asset impairments consist of costs related to our strategic evaluation of the Cellulose Fibers businesses and transaction-related costs. |
DOLLAR AMOUNTS IN MILLIONS | |||
2016(1) | |||
Net cash provided by operating activities | $ | 196 | |
Net cash provided by investing activities | $ | 2,356 | |
(1) Discontinued operations in 2016 includes 335 days of the pulp business, 305 days of our printing papers joint venture operations, and 244 days of the liquid packaging board business, and the cash flows associated with the CF divestitures. |
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES | |||
2016 | |||
Net sales | $ | 6,525 | |
Net earnings from continuing operations attributable to Weyerhaeuser common shareholders | $ | 519 | |
Net earnings from continuing operations per share attributable to Weyerhaeuser common shareholders, basic | $ | 0.69 | |
Net earnings from continuing operations per share attributable to Weyerhaeuser common shareholders, diluted | $ | 0.68 |
• | $0.99 in 2018, |
• | $0.77 in 2017 and |
• | $1.40 in 2016. |
• | $0.99 in 2018, |
• | $0.77 in 2017 and |
• | $1.39 in 2016. |
• | weighted average number of our outstanding common shares and |
• | the effect of our outstanding dilutive potential common shares. |
• | outstanding stock options, |
• | restricted stock units and |
• | performance share units. |
SHARES IN THOUSANDS | ||||||
2018 | 2017 | 2016 | ||||
Weighted average number of outstanding shares - basic | 754,556 | 753,085 | 718,560 | |||
Dilutive potential common shares: | ||||||
Stock options | 1,310 | 2,571 | 2,672 | |||
Restricted stock units | 566 | 582 | 756 | |||
Performance share units | 395 | 428 | 413 | |||
Total effect of outstanding dilutive potential common shares | 2,271 | 3,581 | 3,841 | |||
Weighted average number of outstanding common shares - dilutive | 756,827 | 756,666 | 722,401 |
SHARES IN THOUSANDS | ||||||
2018 | 2017 | 2016 | ||||
Stock options | 2,402 | 1,351 | 1,462 | |||
Performance share units | 1,080 | 799 | 384 |
DOLLAR AMOUNTS IN MILLIONS | ||||||
DECEMBER 31, 2018 | DECEMBER 31, 2017 | |||||
LIFO inventories: | ||||||
Logs | $ | 11 | $ | 17 | ||
Lumber, plywood, panels, and fiberboard | 75 | 66 | ||||
Other products | 10 | 10 | ||||
FIFO or moving average cost inventories: | ||||||
Logs | 35 | 38 | ||||
Lumber, plywood, panels, fiberboard and engineered wood products | 86 | 91 | ||||
Other products | 83 | 77 | ||||
Materials and supplies | 89 | 84 | ||||
Total | $ | 389 | $ | 383 |
DOLLAR AMOUNTS IN MILLIONS | |||||||
RANGE OF LIVES | DECEMBER 31, 2018 | DECEMBER 31, 2017 | |||||
Property and equipment, at cost: | |||||||
Land | N/A | $ | 87 | $ | 88 | ||
Buildings and improvements | 15-40 | 942 | 867 | ||||
Machinery and equipment | 5-25 | 3,240 | 3,037 | ||||
Roads | 10-35 | 785 | 782 | ||||
Other | 3-10 | 179 | 182 | ||||
Total cost | 5,233 | 4,956 | |||||
Accumulated depreciation and amortization | (3,376 | ) | (3,338 | ) | |||
Property and equipment, net | $ | 1,857 | $ | 1,618 |
• | $197 million in 2018, |
• | $206 million in 2017 and |
• | $198 million in 2016 (excluding discontinued operations). |
• | Real Estate Development Ventures, |
• | our Twin Creeks Venture, and |
• | special-purpose entities (SPEs). |
DOLLAR AMOUNTS IN MILLIONS | |||
Balance at December 31, 2016 | $ | 426 | |
Lease payments to Twin Creeks Venture | (8 | ) | |
Distributions from Twin Creeks Venture | 2 | ||
Recognition of contributed timberlands | (420 | ) | |
Balance at December 31, 2017 | $ | — |
• | Our receipt of $440 million proceeds from the contribution of timberlands to the venture was recorded as a noncurrent liability. |
• | The contributed timberlands continued to be reported within the "Timber and timberlands at cost, less depletion charged to disposals" on our balance sheet as of December 31, 2016. |
• | No gain or loss was recognized related to the formation or redemption in our Consolidated Statement of Operations. |
• | Our balance sheet as of December 31, 2016 did not reflect our 21 percent ownership interest in the Twin Creeks Venture. |
• | Assets of the SPEs are not available to satisfy our liabilities or obligations. |
• | Liabilities of the SPEs are not our liabilities or obligations. |
• | Assets from our buyer-sponsored SPEs, which consist of: |
• | Liabilities from our monetization SPEs, which consist of: |
• | Interest income on buyer-sponsored SPE investments of: |
• | Interest expense on monetization SPE notes of: |
DOLLAR AMOUNTS IN MILLIONS | ||||||||||||
PENSION | OTHER POSTRETIREMENT BENEFITS | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Funded status: | ||||||||||||
Fair value of plan assets | $ | 4,930 | $ | 5,514 | $ | 18 | $ | — | ||||
Projected benefit obligations | (5,263 | ) | (6,795 | ) | (166 | ) | (200 | ) | ||||
Funded status | $ | (333 | ) | $ | (1,281 | ) | $ | (148 | ) | $ | (200 | ) |
Presentation on our Consolidated Balance Sheet: | ||||||||||||
Noncurrent assets | $ | 74 | $ | 45 | $ | — | $ | — | ||||
Current liabilities | (18 | ) | (21 | ) | (10 | ) | (19 | ) | ||||
Noncurrent liabilities | (389 | ) | (1,305 | ) | (138 | ) | (181 | ) | ||||
Funded status | $ | (333 | ) | $ | (1,281 | ) | $ | (148 | ) | $ | (200 | ) |
DOLLAR AMOUNTS IN MILLIONS | ||||||||||||
PENSION | OTHER POSTRETIREMENT BENEFITS | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Fair value of plan assets at beginning of year (estimated) | $ | 5,514 | $ | 5,351 | $ | — | $ | — | ||||
Adjustment for final fair value of plan assets | 44 | 18 | — | — | ||||||||
Actual return on plan assets | 123 | 553 | — | — | ||||||||
Foreign currency translation | (73 | ) | 59 | — | — | |||||||
Employer contributions and benefit payments | 345 | 57 | 36 | 20 | ||||||||
Plan participants’ contributions | — | — | 4 | 6 | ||||||||
Plan transfers | 1 | 3 | — | — | ||||||||
Benefits paid (includes lump sum settlements) | (1,024 | ) | (527 | ) | (22 | ) | (26 | ) | ||||
Fair value of plan assets at end of year (estimated) | $ | 4,930 | $ | 5,514 | $ | 18 | $ | — |
DOLLAR AMOUNTS IN MILLIONS | ||||||||||||
PENSION | OTHER POSTRETIREMENT BENEFITS | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Reconciliation of projected benefit obligation: | ||||||||||||
Projected benefit obligation beginning of year | $ | 6,795 | $ | 6,469 | $ | 200 | $ | 225 | ||||
Service cost | 37 | 35 | — | — | ||||||||
Interest cost | 236 | 264 | 7 | 8 | ||||||||
Plan participants’ contributions | — | — | 4 | 6 | ||||||||
Actuarial (gains) losses | (718 | ) | 489 | (18 | ) | (18 | ) | |||||
Foreign currency translation | (69 | ) | 59 | (5 | ) | 5 | ||||||
Benefits paid (includes lump sum settlements) | (1,024 | ) | (527 | ) | (22 | ) | (26 | ) | ||||
Plan amendments and other | 5 | 3 | — | — | ||||||||
Plan transfers | 1 | 3 | — | — | ||||||||
Projected benefit obligation at end of year | $ | 5,263 | $ | 6,795 | $ | 166 | $ | 200 |
• | $4.5 billion in projected benefit obligations, |
• | $4.4 billion in accumulated benefit obligations and |
• | assets with a fair value of $4.1 billion. |
• | $5.9 billion in projected benefit obligations, |
• | $5.9 billion in accumulated benefit obligations and |
• | assets with a fair value of $4.6 billion. |
• | $5.2 billion at December 31, 2018, and |
• | $6.7 billion at December 31, 2017. |
• | U.S. Pension Trust — funds our U.S. qualified pension plans; |
• | Canadian Pension Trust — funds our Canadian registered pension plans; and |
• | Retirement Compensation Arrangements — fund a portion of our Canadian nonregistered pension plans. |
DECEMBER 31, 2018 | DECEMBER 31, 2017 | |||
Cash and short-term investments | 5.8 | % | 10.6 | % |
Fixed income investments: | ||||
Corporate | 21.5 | — | ||
Government | 8.6 | — | ||
Hedge funds and related investments | 36.9 | 58.8 | ||
Private equity and related investments | 21.9 | 22.2 | ||
Derivative instruments, net | 5.6 | 8.7 | ||
Accrued liabilities | (0.3 | ) | (0.3 | ) |
Total | 100.0 | % | 100.0 | % |
• | Level 1: Inputs are unadjusted quoted prices for identical assets or 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. |
DOLLAR AMOUNTS IN MILLIONS | |||||||||||||||
2018 | LEVEL 1 | LEVEL 2 | LEVEL 3 | NAV | TOTAL | ||||||||||
Pension trust investments: | |||||||||||||||
Cash and short-term investments | $ | 275 | $ | 12 | $ | — | $ | — | $ | 287 | |||||
Common and preferred stock | — | — | — | — | — | ||||||||||
Fixed income investments: | |||||||||||||||
Corporate | — | 1,054 | — | — | 1,054 | ||||||||||
Government | — | 426 | — | — | 426 | ||||||||||
Hedge fund and related investments | — | — | 3 | 1,811 | 1,814 | ||||||||||
Private equity and related investments | — | — | 65 | 1,014 | 1,079 | ||||||||||
Derivative instruments | — | 15 | 262 | — | 277 | ||||||||||
Total pension trust investments | 275 | 1,507 | 330 | 2,825 | 4,937 | ||||||||||
Accrued liabilities, net | (17 | ) | |||||||||||||
Pension trust net assets | 4,920 | ||||||||||||||
Canadian nonregistered plan assets: | |||||||||||||||
Cash and short-term investments | 5 | — | — | — | 5 | ||||||||||
Common and preferred stock | 5 | — | — | — | 5 | ||||||||||
Total Canadian nonregistered plan assets | 10 | — | — | — | 10 | ||||||||||
Total plan assets | $ | 4,930 |
DOLLAR AMOUNTS IN MILLIONS | |||||||||||||||
2017 | LEVEL 1 | LEVEL 2 | LEVEL 3 | NAV | TOTAL | ||||||||||
Pension trust investments: | |||||||||||||||
Cash and short-term investments | $ | 580 | $ | 2 | $ | — | $ | — | $ | 582 | |||||
Common and preferred stock | 1 | — | — | — | 1 | ||||||||||
Hedge fund and related investments | 59 | — | 10 | 3,168 | 3,237 | ||||||||||
Private equity and related investments | — | — | 102 | 1,120 | 1,222 | ||||||||||
Derivative instruments | — | 31 | 445 | — | 476 | ||||||||||
Total pension trust investments | 640 | 33 | 557 | 4,288 | 5,518 | ||||||||||
Accrued liabilities, net | (16 | ) | |||||||||||||
Pension trust net investments | 5,502 | ||||||||||||||
Canadian nonregistered plan assets: | |||||||||||||||
Cash and short-term investments | 6 | — | — | — | 6 | ||||||||||
Common and preferred stock | 6 | — | — | — | 6 | ||||||||||
Total Canadian nonregistered plan assets | 12 | — | — | — | 12 | ||||||||||
Total plan assets | $ | 5,514 |
DOLLAR AMOUNTS IN MILLIONS | ||||||||||||
INVESTMENTS | ||||||||||||
Hedge funds and related investments | Private equity and related investments | Derivative instruments, net | Total | |||||||||
Balance as of December 31, 2016 | $ | 4 | $ | 75 | $ | 376 | $ | 455 | ||||
Net realized gains (losses) | (1 | ) | (30 | ) | 15 | (16 | ) | |||||
Net change in unrealized gains (losses) | 2 | 41 | 67 | 110 | ||||||||
Purchases | — | 14 | — | 14 | ||||||||
Sales | (1 | ) | — | — | (1 | ) | ||||||
Settlements | — | — | (13 | ) | (13 | ) | ||||||
Transfers into Level 3 | 6 | 19 | — | 25 | ||||||||
Transfers out of Level 3 | — | (17 | ) | — | (17 | ) | ||||||
Balance as of December 31, 2017 | 10 | 102 | 445 | 557 | ||||||||
Net realized gains (losses) | — | — | 238 | 238 | ||||||||
Net change in unrealized gains (losses) | 1 | (5 | ) | (184 | ) | (188 | ) | |||||
Purchases | — | 5 | — | 5 | ||||||||
Sales | — | (2 | ) | — | (2 | ) | ||||||
Settlements | — | — | (237 | ) | (237 | ) | ||||||
Transfers into Level 3 | — | 18 | — | 18 | ||||||||
Transfers out of Level 3 | (8 | ) | (53 | ) | — | (61 | ) | |||||
Balance as of December 31, 2018 | $ | 3 | $ | 65 | $ | 262 | $ | 330 |
DOLLAR AMOUNTS IN MILLIONS | ||||||||||||
FAIR VALUE | NOTIONAL | |||||||||||
DECEMBER 31, 2018 | DECEMBER 31, 2017 | DECEMBER 31, 2018 | DECEMBER 31, 2017 | |||||||||
Equity and fixed income index derivatives, net | $ | — | $ | 19 | $ | — | $ | 501 | ||||
Foreign currency derivatives, net | — | 12 | 13 | 1,413 | ||||||||
Futures contracts, net | 15 | — | 1,073 | — | ||||||||
Total return swaps, net | 262 | 445 | 558 | 1,443 | ||||||||
Total | $ | 277 | $ | 476 | $ | 1,644 | $ | 3,357 |
PENSION | ||||
DECEMBER 31, 2018 | DECEMBER 31, 2017 | |||
Discount rates: | ||||
United States | 4.40 | % | 3.70 | % |
Canada | 3.70 | % | 3.50 | % |
Lump sum distributions(1)(2) | PPA Table | PPA Table | ||
Rate of compensation increase: | ||||
Salaried: | ||||
United States | 13.00% to 2.00% decreasing with participant age | 13.00% to 2.00% decreasing with participant age | ||
Canada | 3.25 | % | 3.25 | % |
Hourly: | ||||
United States | 13.00% to 2.30% decreasing with participant age | 13.00% to 2.30% decreasing with participant age | ||
Canada | 3.00 | % | 3.00 | % |
Lump sum or installment distributions election(2) | 60.00 | % | 60.00 | % |
(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. (2) U.S. qualified salaried and nonqualified plans only. |
PENSION | ||||||
2018 | 2017 | 2016 | ||||
Discount rates: | ||||||
United States | 3.70 | % | 4.30 | % | 4.50 | % |
Canada | 3.50 | % | 3.70 | % | 4.00 | % |
Lump sum distributions(1)(2) | PPA Table | PPA Table | PPA Table | |||
Expected return on plan assets: | ||||||
Qualified/registered plans(3) | 8.00 | % | 8.00 | % | 9.00% for all plans except 7.00% for plans assumed from Plum Creek | |
Nonregistered plans | 3.50 | % | 3.50 | % | 3.50 | % |
Rate of compensation increase: | ||||||
Salaried: | ||||||
United States | 13.00% to 2.00% decreasing with participant age | 13.00% to 2.00% decreasing with participant age | 13.00% to 2.00% decreasing with participant age | |||
Canada | 3.25 | % | 3.50 | % | 3.50 | % |
Hourly: | ||||||
United States | 13.00% to 2.30% decreasing with participant age | 13.00% to 2.30% decreasing with participant age | 13.00% to 2.30% decreasing with participant age | |||
Canada | 3.00 | % | 3.25 | % | 3.25 | % |
Lump sum distributions election(2) | 60.00 | % | 60.00 | % | 60.00 | % |
(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. (2) U.S. qualified salaried and nonqualified plans only. (3) Beginning in 2017 we used an assumed expected return on plan assets of 8.00 percent for qualified and registered pension plans. |
• | 8.4 percent for U.S. Pre-Medicare |
• | 4.5 percent for U.S. Health Reimbursement Account (HRA) |
• | 5.1 percent for Canada |
2018 | 2017 | |||||||
U.S. | CANADA | U.S. | CANADA | |||||
Weighted health care cost trend rate assumed for next year | 7.80% for Pre-Medicare and 4.50% for HRA | 4.90 | % | 8.40% for Pre-Medicare and 4.50% for HRA | 5.10 | % | ||
Rate that the cost trend rate gradually declines to | 4.50 | % | 4.00 | % | 4.50 | % | 4.30 | % |
Year the cost trend rate is reached | 2037 | 2039 | 2037 | 2028 |
AS OF DECEMBER 31, 2018 (DOLLAR AMOUNTS IN MILLIONS) | ||||||
1% INCREASE | 1% DECREASE | |||||
Effect on total service and interest cost components | Less than $1 | Less than $(1) | ||||
Effect on accumulated postretirement benefit obligation | $ | 5 | $ | (4 | ) |
DOLLAR AMOUNTS IN MILLIONS | ||||||||||||||||||
PENSION | OTHER POSTRETIREMENT BENEFITS | |||||||||||||||||
2018 | 2017 | 2016 | 2018 | 2017 | 2016 | |||||||||||||
Net periodic benefit cost (credit): | ||||||||||||||||||
Service cost(1) | $ | 37 | $ | 35 | $ | 48 | $ | — | $ | — | $ | — | ||||||
Interest cost | 236 | 264 | 277 | 7 | 8 | 8 | ||||||||||||
Expected return on plan assets | (399 | ) | (409 | ) | (495 | ) | — | — | — | |||||||||
Amortization of actuarial loss | 225 | 195 | 156 | 8 | 8 | 9 | ||||||||||||
Amortization of prior service cost (credit) | 3 | 4 | 4 | (8 | ) | (8 | ) | (7 | ) | |||||||||
Accelerated pension costs for Plum Creek merger-related change-in-control provisions | — | — | 5 | — | — | — | ||||||||||||
Settlement charge | 200 | — | — | — | — | — | ||||||||||||
Net periodic benefit cost (credit) | $ | 302 | $ | 89 | $ | (5 | ) | $ | 7 | $ | 8 | $ | 10 | |||||
(1) Service cost includes $13 million in 2016 for employees that were part of our Cellulose Fibers divestitures. These charges are included in our results of discontinued operations. Curtailment and special termination benefits are related to involuntary terminations due to restructuring activities. |
DOLLAR AMOUNTS IN MILLIONS | |||||||||
PENSION | OTHER POSTRETIREMENT BENEFITS | TOTAL | |||||||
Net actuarial loss | $ | 108 | $ | 7 | $ | 115 | |||
Prior service cost (credit) | 4 | (1 | ) | 3 | |||||
Net effect cost | $ | 112 | $ | 6 | $ | 118 |
• | be required to contribute approximately $17 million for our Canadian registered plan; |
• | be required to contribute or make benefit payments for our Canadian nonregistered plans of $3 million; and |
• | make benefit payments of approximately $16 million for our U.S. nonqualified pension plans. |
DOLLAR AMOUNTS IN MILLIONS | ||||||
PENSION (1) | OTHER POSTRETIREMENT BENEFITS | |||||
2019 | $ | 272 | $ | 17 | ||
2020 | 233 | 16 | ||||
2021 | 231 | 15 | ||||
2022 | 232 | 14 | ||||
2023 | 234 | 14 | ||||
2024-2028 | 1,161 | 57 | ||||
(1) Estimated payments exclude future payments transferred in conjunction with our January 2019 group annuity contract purchase. |
• | $22 million in 2018, |
• | $21 million in 2017 and |
• | $27 million in 2016. |
DOLLAR AMOUNTS IN MILLIONS | ||||||
DECEMBER 31, 2018 | DECEMBER 31, 2017 | |||||
Accrued compensation and employee benefit costs | $ | 192 | $ | 223 | ||
Accrued taxes payable | 30 | 43 | ||||
Customer rebates, volume discounts and deferred income | 99 | 96 | ||||
Interest | 109 | 111 | ||||
Product remediation accrual (Note 19) | 2 | 98 | ||||
Other | 58 | 74 | ||||
Total | $ | 490 | $ | 645 |
DOLLAR AMOUNTS IN MILLIONS | ||||||
DECEMBER 31, 2018 | DECEMBER 31, 2017 | |||||
Letters of credit | $ | 38 | $ | 37 | ||
Surety bonds | $ | 123 | $ | 134 |
• | term loans issued and extinguished and |
• | long-term debt and long-term debt maturities. |
DOLLAR AMOUNTS IN MILLIONS | ||||||
DECEMBER 31, 2018 | DECEMBER 31, 2017 | |||||
7.00% debentures due 2018 | — | 62 | ||||
7.375% notes due 2019 | 500 | 500 | ||||
9.00% debentures due 2021 | 150 | 150 | ||||
4.70% debentures due 2021 | 588 | 597 | ||||
7.125% debentures due 2023 | 191 | 191 | ||||
5.207% debentures due 2023 | 881 | 885 | ||||
4.625% notes due 2023 | 500 | 500 | ||||
3.25% debentures due 2023 | 324 | 324 | ||||
8.50% debentures due 2025 | 300 | 300 | ||||
7.95% debentures due 2025 | 136 | 136 | ||||
7.70% debentures due 2026 | 150 | 150 | ||||
7.35% debentures due 2026 | 62 | 62 | ||||
7.85% debentures due 2026 | 100 | 100 | ||||
Variable rate term loan credit facility matures 2026 | 225 | 225 | ||||
6.95% debentures due 2027 | 300 | 300 | ||||
7.375% debentures due 2032 | 1,250 | 1,250 | ||||
6.875% debentures due 2033 | 275 | 275 | ||||
Other | 1 | 1 | ||||
5,933 | 6,008 | |||||
Less unamortized discounts | (5 | ) | (5 | ) | ||
Less unamortized debt expense | (9 | ) | (11 | ) | ||
Total | $ | 5,919 | $ | 5,992 | ||
Portion due within one year | $ | 500 | $ | 62 |
DOLLAR AMOUNTS IN MILLIONS (1) | |||
2019 | $ | 500 | |
2020 | — | ||
2021 | 719 | ||
2022 | — | ||
2023 | 1,876 | ||
Thereafter | 2,798 | ||
(1) Excludes $26 million of unamortized discounts, capitalized debt expense and fair value adjustments (related to Plum Creek merger). |
DOLLAR AMOUNTS IN MILLIONS | ||||||||||||
DECEMBER 31, 2018 | DECEMBER 31, 2017 | |||||||||||
CARRYING VALUE | FAIR VALUE (LEVEL 2) | CARRYING VALUE | FAIR VALUE (LEVEL 2) | |||||||||
Long-term debt (including current maturities) and line of credit: | ||||||||||||
Fixed rate | $ | 5,694 | $ | 6,345 | $ | 5,768 | $ | 6,823 | ||||
Variable rate | 650 | 650 | 224 | 225 | ||||||||
Total Debt | $ | 6,344 | $ | 6,995 | $ | 5,992 | $ | 7,048 |
• | legal proceedings, |
• | environmental matters and |
• | commitments and other contingencies. |
• | are a party to various proceedings related to the cleanup of hazardous waste sites and |
• | have been notified that we may be a potentially responsible party related to the cleanup of other hazardous waste sites for which proceedings have not yet been initiated. |
DOLLAR AMOUNTS IN MILLIONS | |||
Reserve balance as of December 31, 2017 | $ | 48 | |
Reserve charges and adjustments, net | 27 | ||
Payments | (13 | ) | |
Reserve balance as of December 31, 2018 | $ | 62 |
• | new information on any site concerning implementation of remediation alternatives, |
• | updates on prior cost estimates and new sites and |
• | costs incurred to remediate sites. |
• | is much less certain than the estimates on which our accruals currently are based and |
• | uses assumptions that are less favorable to us among the range of reasonably possible outcomes. |
• | assumed we will not bear the entire cost of remediation of every site, |
• | took into account the ability of other potentially responsible parties to participate and |
• | considered each party’s financial condition and probable contribution on a per-site basis. |
DOLLAR AMOUNTS IN MILLIONS | |||
Reserve balance as of December 31, 2017 | $ | 32 | |
Reserve charges and adjustments, net | 11 | ||
Payments | (12 | ) | |
Other adjustments(1) | (2 | ) | |
Reserve balance as of December 31, 2018 | $ | 29 | |
(1) Primarily related to a foreign currency remeasurement gain for our Canadian reforestation obligation. |
• | guarantees of debt and performance, |
• | operating leases and |
• | product remediation contingency. |
• | $47 million in 2018, |
• | $39 million in 2017 and |
• | $37 million in 2016 (excluding discontinued operations). |
• | various equipment, including logging equipment, lift trucks, automobiles and office equipment and |
• | office and warehouse space. |
DOLLAR AMOUNTS IN MILLIONS | |||
2019 | $ | 35 | |
2020 | 29 | ||
2021 | 26 | ||
2022 | 24 | ||
2023 | 18 | ||
Thereafter | 78 |
• | preferred and preference shares, |
• | common shares, |
• | share-repurchase programs and |
• | accumulated other comprehensive loss |
• | new shares are issued, |
• | stock options are exercised, |
• | restricted stock units or performance share units vest, |
• | stock-equivalent units are paid out, |
• | shares are tendered, |
• | shares are repurchased or |
• | shares are canceled. |
SHARES IN THOUSANDS | ||||||
2018 | 2017 | 2016 | ||||
Outstanding at beginning of year | 755,223 | 748,528 | 510,483 | |||
Issuance from merger with Plum Creek (Note 5) | — | — | 278,887 | |||
Stock options exercised | 2,026 | 5,970 | 2,571 | |||
Issued for restricted stock units | 466 | 605 | 840 | |||
Issued for performance shares | 86 | 120 | 219 | |||
Preference shares converted to common | — | — | 23,345 | |||
Repurchased | (11,410 | ) | — | (67,817 | ) | |
Outstanding at end of year | 746,391 | 755,223 | 748,528 |
DOLLAR AMOUNTS IN MILLIONS | |||||||||||||||||||||
PENSION | OTHER POSTRETIREMENT BENEFITS | ||||||||||||||||||||
Foreign currency translation adjustments | Actuarial loss | Prior service cost | Actuarial loss | Prior service credit | Unrealized gains on available-for-sale securities | Total | |||||||||||||||
Ending balance as of December 31, 2016 | $ | 232 | $ | (1,651 | ) | $ | (9 | ) | $ | (67 | ) | $ | 29 | $ | 7 | $ | (1,459 | ) | |||
Other comprehensive income (loss) before reclassifications (1) | 32 | (280 | ) | (2 | ) | 14 | — | 2 | (234 | ) | |||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) to earnings(1)(2) | — | 129 | 3 | 5 | (6 | ) | — | 131 | |||||||||||||
Total other comprehensive income (loss) | 32 | (151 | ) | 1 | 19 | (6 | ) | 2 | (103 | ) | |||||||||||
Ending balance as of December 31, 2017 | 264 | (1,802 | ) | (8 | ) | (48 | ) | 23 | 9 | (1,562 | ) | ||||||||||
Other comprehensive income (loss) before reclassifications (1) | (54 | ) | 393 | (5 | ) | 12 | 1 | — | 347 | ||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) to earnings(1)(2)(3) | — | 322 | 3 | 6 | (6 | ) | — | 325 | |||||||||||||
Total other comprehensive income (loss) | (54 | ) | 715 | (2 | ) | 18 | (5 | ) | — | 672 | |||||||||||
Reclassification of certain tax effects due to tax law changes(4) | — | (245 | ) | (1 | ) | (12 | ) | 5 | — | (253 | ) | ||||||||||
Reclassification of accumulated unrealized gains on available-for-sale securities(5) | — | — | — | — | — | (9 | ) | (9 | ) | ||||||||||||
Net amounts reclassified from accumulated other comprehensive loss to retained earnings | — | (245 | ) | (1 | ) | (12 | ) | 5 | (9 | ) | (262 | ) | |||||||||
Ending balance as of December 31, 2018 | 210 | (1,332 | ) | (11 | ) | (42 | ) | 23 | — | (1,152 | ) | ||||||||||
(1) Amounts are presented net of tax. (2) Amounts of actuarial loss and prior service (cost) credit are components of net periodic benefit cost (credit). See Note: 10: Pension and Other Postretirement Benefit Plans. (3) Amounts include a settlement charge totaling $200 million related to our U.S. qualified pension plan for the year ended December 31, 2018. See Note: 10: Pension and Other Postretirement Benefit Plans for further detail. (4) We reclassified certain tax effects from tax law changes of $253 million from "Accumulated other comprehensive loss" to "Retained earnings" on our Consolidated Balance Sheet in accordance with ASU 2018-02. See Note 1: Summary of Significant Accounting Policies. (5) We reclassified accumulated unrealized gains from available-for-sale securities of $9 million from "Accumulated other comprehensive loss" to "Retained earnings" on our Consolidated Balance Sheet in accordance with ASU 2016-01. See Note 1: Summary of Significant Accounting Policies. |
• | our Long-Term Incentive Compensation Plan (2013 Plan), |
• | share-based compensation resulting from our merger with Plum Creek, |
• | how we account for share-based awards, |
• | tax benefits of share-based awards, |
• | types of share-based compensation, |
• | unrecognized share-based compensation and |
• | deferred compensation stock equivalent units. |
• | $42 million in 2018, |
• | $40 million in 2017 and |
• | $60 million in 2016. |
• | restricted stock, |
• | restricted stock units (RSUs), |
• | performance shares, |
• | performance share units (PSUs), |
• | stock options and |
• | stock appreciation rights (SARs). |
• | An individual participant may receive a grant of up to 1 million shares annually. |
• | No participant may be granted awards that exceed $10 million earned in a 12-month period. |
• | An individual participant may receive a grant of up to 2 million shares in any one calendar year. |
• | The exercise price is required to be the market price on the date of the grant. |
• | issue new stock into the marketplace and |
• | generally do not repurchase shares in connection with issuing new awards. |
• | all options, RSUs and PSUs outstanding at December 31, 2018, under the 2013 Plan and 2004 Plan; and |
• | all remaining options, RSUs and PSUs that could be granted under the 2013 Plan. |
• | use a fair-value-based measurement for share-based awards and |
• | recognize the cost of share-based awards in our consolidated financial statements. |
• | Awards that vest upon retirement — the required service period ends on the date an employee is eligible for retirement, including early retirement. |
• | 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. |
• | $5 million in 2018, |
• | $6 million in 2017 and |
• | $12 million in 2016. |
• | restricted shares and RSUs vest, |
• | performance shares and PSUs vest, |
• | stock options are exercised and |
• | SARs are exercised. |
• | restricted stock units, |
• | performance share units, |
• | stock options and |
• | stock appreciation rights. |
• | vest ratably over four years; |
• | immediately vest in the event of death while employed or disability; |
• | continue to vest upon retirement at an age of at least 62, but a portion of the grant is forfeited if retirement occurs before the one year anniversary of the grant; |
• | continue vesting for one year in the event of involuntary termination when the retirement has not been met; and |
• | will be forfeited upon termination of employment in all other situations including early retirement prior to age 62. |
RESTRICTED STOCK UNITS (IN THOUSANDS) | WEIGHTED AVERAGE GRANT-DATE FAIR VALUE | ||||
Nonvested at December 31, 2017 | 1,515 | $ | 29.12 | ||
Granted | 710 | 34.19 | |||
Vested | (560 | ) | 28.81 | ||
Forfeited | (72 | ) | $ | 30.19 | |
Nonvested at December 31, 2018(1) | 1,593 | $ | 31.41 | ||
(1) As of December 31, 2018, there were approximately 336 thousand RSUs that had met the requisite service period and will be released as identified in the grant terms. |
• | $34.19 in 2018, |
• | $32.83 in 2017 and |
• | $30.25 in 2016. |
• | $16 million in 2018, |
• | $18 million in 2017 and |
• | $36 million in 2016. |
• | our relative total shareholder return (TSR) ranking measured against the S&P 500 over a three-year period and |
• | our relative TSR ranking measured against an industry peer group of companies over a three-year period. |
• | our relative total shareholder return (TSR) ranking measured against the S&P 500 over a three-year period, |
• | our relative TSR ranking measured against an industry peer group of companies over a three-year period and |
• | achievement of Plum Creek merger cost synergy targets. |
• | vest 100 percent on the third anniversary of the grant date as long as the individual remains employed by the company; |
• | fully vest in the event the participant dies or becomes disabled while employed; |
• | continue to vest upon retirement at an age of at least 62, but a portion of the grant is forfeited if retirement occurs before the one year anniversary of the grant; |
• | continue vesting for one year in the event of involuntary termination when the retirement criteria has not been met and the employee has met the second anniversary of the grant date; and |
• | will be forfeited upon termination of employment in all other situations including early retirement prior to age 62. |
2018 GRANTS | 2017 GRANTS | 2016 GRANTS | |||||||
Performance period | 1/1/2018-12/31/2020 | 1/1/2017 – 12/31/2019 | 1/1/2016 – 12/31/2018 | ||||||
Expected dividends | 3.81% | 3.74% | 3.92% - 5.37% | ||||||
Risk-free rate | 1.75% - 2.34% | 0.68% - 1.55% | 0.45% - 0.97% | ||||||
Volatility | 17.30% - 21.52% | 22.71% - 24.07% | 21.87% - 28.09% | ||||||
Weighted average grant-date fair value | $ | 35.49 | $ | 37.93 | $ | 22.58 |
GRANTS (IN THOUSANDS) | WEIGHTED AVERAGE GRANT-DATE FAIR VALUE | ||||
Nonvested at December 31, 2017 | 965 | $ | 30.87 | ||
Granted at target | 343 | 35.49 | |||
Vested | (112 | ) | 32.79 | ||
Forfeited | (26 | ) | 37.93 | ||
Performance adjustment | (128 | ) | $ | 34.74 | |
Nonvested at December 31, 2018(1) | 1,042 | $ | 31.52 | ||
(1) As of December 31, 2018, there were approximately 232 thousand PSUs that had met the requisite service period and will be released as identified in the grant terms. |
• | $4 million in 2018, |
• | $4 million in 2017 and |
• | $8 million in 2016. |
• | vest over four years of continuous service, |
• | must be exercised within 10 years of the grant-date and |
• | use a Black-Scholes option valuation model to estimate the fair value of every stock option award on its grant-date. |
OPTIONS (IN THOUSANDS) | WEIGHTED AVERAGE EXERCISE PRICE | WEIGHTED AVERAGE REMAINING CONTRACTUAL TERM (IN YEARS) | AGGREGATE INTRINSIC VALUE (IN MILLIONS) | ||||||
Outstanding at December 31, 2017 | 8,487 | $ | 26.47 | ||||||
Exercised | (2,025 | ) | $ | 25.68 | |||||
Forfeited or expired | (96 | ) | $ | 25.02 | |||||
Outstanding at December 31, 2018(1) | 6,366 | $ | 26.75 | 5.33 | $ | 4 | |||
Exercisable at December 31, 2018 | 4,732 | $ | 27.14 | 4.78 | $ | 4 | |||
(1) As of December 31, 2018, there were approximately 573 thousand stock options that had met the requisite service period and will be released as identified in the grant terms. |
• | $22 million in 2018, |
• | $68 million in 2017 and |
• | $18 million in 2016. |
• | may choose to defer all or part of their bonus into stock-equivalent units; |
• | may choose to defer part of their salary, except for executive officers; and |
• | receive a 15 percent premium if the deferral is for at least five years. |
• | receive a portion of their annual retainer fee in the form of RSUs, which vest over one year and may be deferred into stock-equivalent units; |
• | may choose to defer some or all of the remainder of their annual retainer fee into stock-equivalent units; and |
• | do not receive a premium for their deferrals. |
• | liability-classified awards and |
• | re-measured to fair value at every reporting date. |
• | 788 thousand as of December 31, 2018, |
• | 804 thousand as of December 31, 2017 and |
• | 1,004 thousand as of December 31, 2016. |
DOLLAR AMOUNTS IN MILLIONS | |||||||||
2018 | 2017 | 2016 | |||||||
Integration and restructuring charges related to our merger with Plum Creek: | |||||||||
Termination benefits | $ | — | $ | 11 | $ | 54 | |||
Acceleration of share-based compensation related to qualifying terminations (Note 17) | — | — | 21 | ||||||
Acceleration of pension benefits related to qualifying terminations (Note 10) | — | — | 5 | ||||||
Professional services | — | 16 | 52 | ||||||
Other integration and restructuring costs | — | 7 | 14 | ||||||
Total integration and restructuring charges related to our merger with Plum Creek | — | 34 | 146 | ||||||
Charges related to closures and other restructuring activities | 1 | 6 | 8 | ||||||
Impairment of long-lived assets | 1 | 154 | 16 | ||||||
Total charges for integration and restructuring, closures and asset impairments | $ | 2 | $ | 194 | $ | 170 |
• | 2017 — In second quarter 2017, we recognized an impairment charge to the timberlands and manufacturing assets of our Uruguayan operations. On June 2, 2017, our Board of Directors approved an agreement to sell all of the Company's equity in the Uruguayan operations to a consortium led by BTG Pactual's Timberland Investment Group (TIG). As a result of this agreement, the related assets met the criteria to be classified as held for sale at June 30, 2017. This designation required us to record the related assets at fair value, less an amount of estimated selling costs, and thus recognize a $147 million noncash pretax impairment charge. This amount was recorded in the Timberlands segment. The fair value of the related assets was primarily based on the agreed upon cash purchase price of $403 million. On September 1, 2017, we announced the completion of the sale. Refer to Note 4: Discontinued Operations and Other Divestitures for further details on the Uruguayan operations sale. |
• | 2016 — We recognized a $15 million impairment charge in Real Estate & ENR which represents the fair value less direct selling costs of certain development projects that we planned to sell that had a book value greater than fair value. The fair values of the projects were determined using significant unobservable inputs (Level 3) based on broker opinion of value reports. |
• | includes both recurring and occasional income and expense items and |
• | can fluctuate from year to year. |
DOLLAR AMOUNTS IN MILLIONS | |||||||||
2018 | 2017 | 2016 | |||||||
Gain on disposition of nonstrategic assets (1) | $ | (5 | ) | $ | (16 | ) | $ | (60 | ) |
Foreign exchange losses (gains), net (2) | (3 | ) | (1 | ) | (6 | ) | |||
Litigation expense, net | 35 | 20 | 24 | ||||||
Gain on sale of timberlands (3) | — | (99 | ) | — | |||||
Environmental remediation insurance recoveries | (5 | ) | (42 | ) | — | ||||
Other, net(4) | 52 | 10 | (11 | ) | |||||
Total other operating costs (income), net | $ | 74 | $ | (128 | ) | $ | (53 | ) | |
(1) Gain on disposition of nonstrategic assets in 2016 included a $36 million pretax gain recognized in first quarter 2016 on the sale of our Federal Way, Washington headquarters campus. (2) Foreign exchange gains and losses result from changes in exchange rates primarily related to our U.S. dollar denominated cash and debt balances that are held by our Canadian subsidiary. (3) Gain on sale of 100,000 acres sold to Twin Creeks during Q4 2017. Refer to Note 9: Related Parties for further information. (4) "Other, net" includes environmental remediation charges. See Note 15: Legal Proceedings, Commitments and Contingencies for more information. |
• | earnings before income taxes, |
• | provision for income taxes, |
• | effective income tax rate, |
• | deferred tax assets and liabilities, |
• | unrecognized tax benefits and |
• | our ongoing IRS tax matter. |
DOLLAR AMOUNTS IN MILLIONS | |||||||||
2018 | 2017 | 2016 | |||||||
Domestic earnings | $ | 556 | $ | 643 | $ | 353 | |||
Foreign earnings | 251 | 73 | 151 | ||||||
Total earnings before income taxes | $ | 807 | $ | 716 | $ | 504 |
DOLLAR AMOUNTS IN MILLIONS | |||||||||
2018 | 2017 | 2016 | |||||||
Current: | |||||||||
Federal | $ | (69 | ) | $ | 10 | $ | 1 | ||
State | (5 | ) | — | 1 | |||||
Foreign | 61 | 82 | 11 | ||||||
Total current | (13 | ) | 92 | 13 | |||||
Deferred: | |||||||||
Federal | 45 | 61 | 37 | ||||||
State | 12 | (18 | ) | (3 | ) | ||||
Foreign | 15 | (1 | ) | 42 | |||||
Total deferred | 72 | 42 | 76 | ||||||
Total income tax provision (benefit) | $ | 59 | $ | 134 | $ | 89 |
DOLLAR AMOUNTS IN MILLIONS | |||||||||
2018 | 2017 | 2016 | |||||||
U.S. federal statutory income tax | $ | 170 | $ | 250 | $ | 177 | |||
State income taxes, net of federal tax benefit | 8 | (2 | ) | (3 | ) | ||||
REIT income not subject to federal income tax | (116 | ) | (198 | ) | (99 | ) | |||
SDT settlement | 21 | — | — | ||||||
Tax effect of U.S. corporate rate change | — | 74 | — | ||||||
Voluntary pension contribution | (41 | ) | — | — | |||||
Foreign taxes | 15 | 54 | (4 | ) | |||||
Repatriation of Canadian earnings | — | (22 | ) | 24 | |||||
Other, net | 2 | (22 | ) | (6 | ) | ||||
Total income tax provision (benefit) | $ | 59 | $ | 134 | $ | 89 | |||
Effective income tax rate | 7.3 | % | 18.8 | % | 17.6 | % |
DOLLAR AMOUNTS IN MILLIONS | ||||||
DECEMBER 31, 2018 | DECEMBER 31, 2017 | |||||
Net noncurrent deferred tax asset | $ | 15 | $ | 268 | ||
Net noncurrent deferred tax liability | (43 | ) | — | |||
Net deferred tax asset (liability) | $ | (28 | ) | $ | 268 |
DOLLAR AMOUNTS IN MILLIONS | ||||||
DECEMBER 31, 2018 | DECEMBER 31, 2017 | |||||
Deferred tax assets: | ||||||
Postretirement benefits | $ | 37 | $ | 50 | ||
Pension | 75 | 306 | ||||
State tax credits | 51 | 56 | ||||
Other reserves | 13 | 38 | ||||
Depletion | 41 | 40 | ||||
Excess interest | 30 | — | ||||
Incentive compensation | 20 | 23 | ||||
Workers compensation | 18 | 19 | ||||
Net operating loss carryforwards | 19 | 18 | ||||
Other | 83 | 70 | ||||
Gross deferred tax assets | 387 | 620 | ||||
Valuation allowance | (61 | ) | (63 | ) | ||
Net deferred tax assets | 326 | 557 | ||||
Deferred tax liabilities: | ||||||
Property, plant and equipment | (197 | ) | (154 | ) | ||
Timber installment notes | (116 | ) | (116 | ) | ||
Other | (41 | ) | (19 | ) | ||
Net deferred tax liabilities | (354 | ) | (289 | ) | ||
Net deferred tax asset (liability) | (28 | ) | 268 |
• | net operating loss and credit carryforwards, |
• | valuation allowances and |
• | reinvestment of undistributed earnings. |
• | U.S. REIT - $223 million, which expire from 2031 through 2036; |
• | State - $361 million, which expire from 2019 through 2037; and |
• | Foreign - none currently recorded. |
DOLLAR AMOUNTS IN MILLIONS | ||||||
DECEMBER 31, 2018 | DECEMBER 31, 2017 | |||||
Balance at beginning of year | $ | 4 | $ | 6 | ||
Lapse of statute | (1 | ) | (2 | ) | ||
Balance at end of year | $ | 3 | $ | 4 |
• | sales to unaffiliated customers, |
• | export sales from the U.S. and |
• | long-lived assets. |
DOLLAR AMOUNTS IN MILLIONS | |||||||||
2018 | 2017 | 2016 | |||||||
Sales to unaffiliated customers: | |||||||||
U.S. | $ | 6,365 | $ | 6,168 | $ | 5,451 | |||
Canada | 519 | 472 | 341 | ||||||
Japan | 410 | 352 | 369 | ||||||
China | 120 | 107 | 108 | ||||||
Other foreign countries | 62 | 97 | 96 | ||||||
Total | $ | 7,476 | $ | 7,196 | $ | 6,365 | |||
Export sales from the U.S.: | |||||||||
Japan | $ | 338 | $ | 295 | $ | 314 | |||
China | 113 | 102 | 103 | ||||||
Other foreign countries | 153 | 148 | 98 | ||||||
Total | $ | 604 | $ | 545 | $ | 515 |
• | property and equipment, including construction in progress, |
• | timber and timberlands, |
• | minerals and mineral rights and |
• | goodwill. |
DOLLAR AMOUNTS IN MILLIONS | |||||||||
DECEMBER 31, 2018 | DECEMBER 31, 2017 | DECEMBER 31, 2016 | |||||||
U.S. | $ | 14,778 | $ | 14,922 | $ | 15,700 | |||
Canada | 220 | 223 | 206 | ||||||
Other foreign countries | — | — | 527 | ||||||
Total(1) | $ | 14,998 | $ | 15,145 | $ | 16,433 | |||
(1) Amounts for December 31, 2016, include assets from discontinued operations. |
DOLLAR AMOUNTS IN MILLIONS EXCEPT PER-SHARE FIGURES | |||||||||||||||
FIRST QUARTER | SECOND QUARTER | THIRD QUARTER | FOURTH QUARTER | FULL YEAR | |||||||||||
2018: | |||||||||||||||
Net sales | $ | 1,865 | $ | 2,065 | $ | 1,910 | $ | 1,636 | $ | 7,476 | |||||
Operating income from continuing operations | 404 | 476 | 337 | 177 | 1,394 | ||||||||||
Earnings (loss) from continuing operations before income taxes | 299 | 382 | 240 | (114 | ) | 807 | |||||||||
Net earnings (loss) | 269 | 317 | 255 | (93 | ) | 748 | |||||||||
Basic and diluted net earnings (loss) per share | 0.35 | 0.42 | 0.34 | (0.12 | ) | 0.99 | |||||||||
Dividends paid per share | 0.32 | 0.32 | 0.34 | 0.34 | 1.32 | ||||||||||
2017: | |||||||||||||||
Net sales | $ | 1,693 | $ | 1,808 | $ | 1,872 | $ | 1,823 | $ | 7,196 | |||||
Operating income from continuing operations | 293 | 157 | 205 | 476 | 1,131 | ||||||||||
Earnings (loss) from continuing operations before income taxes | 181 | 58 | 103 | 374 | 716 | ||||||||||
Net earnings (loss) | 157 | 24 | 130 | 271 | 582 | ||||||||||
Basic and diluted net earnings (loss) per share | 0.21 | 0.03 | 0.17 | 0.36 | 0.77 | ||||||||||
Dividends paid per share | 0.31 | 0.31 | 0.31 | 0.32 | 1.25 |
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES |
CHANGES IN INTERNAL CONTROL |
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
EXHIBITS |
2 | — | Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession | |
(a) | Agreement and Plan of Merger, dated as of November 6, 2015, between Weyerhaeuser Company and Plum Creek Timber Company, Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on November 9, 2015 - Commission File Number 1-4825) | ||
(b) | Asset Purchase Agreement, dated as of May 1, 2016, by and between Weyerhaeuser NR Company and International Paper Company (incorporated by reference to Exhibit 2.2 to the Quarterly Report on Form 10-Q filed on August 5, 2016 - Commission File Number 1-4825) | ||
3 | — | Articles of Incorporation | |
(a) | Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q filed on May 6, 2011 - Commission File Number 1-4825, and to Exhibit 3.1 to the Current Report on Form 8-K filed on June 20, 2013 - Commission File Number 1-4825) | ||
(b) | Bylaws (incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q filed on October 26, 2018 - Commission File Number 1-4825) | ||
4 | — | 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. 333-52982)** | ||
(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. 333-59974)** | ||
(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 to Exhibit 4(d) to 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 to Exhibit 4.8 from the Registration Statement on Form S-4/A, Registration No. 333-82376) | ||
(f) | Indenture dated as of March 15, 1983 between Weyerhaeuser Company (as successor to Willamette Industries, Inc.) and The Bank of New York Mellon Trust Company, N.A. (as successor to JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank), as Trustee (incorporated by reference to Exhibit 4(f) to the Annual Report on Form 10-K for the annual period ended December 31, 2017 – Commission File Number 1-4825) | ||
(g) | Indenture dated as of January 30, 1993 between Weyerhaeuser Company (as successor to Willamette Industries, Inc.) and The Bank of New York Mellon Trust Company, N.A. (as successor to JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank), as Trustee (incorporated by reference to Exhibit 4(g) to the Annual Report on Form 10-K for the annual period ended December 31, 2017 – Commission File Number 1-4825) | ||
(h) | First Supplemental Trust Indenture dated as of March 12, 2002 between Weyerhaeuser Company (as successor to Willamette Industries, Inc.) and The Bank of New York Mellon Trust Company, N.A. (as successor to JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank), as Trustee (incorporated by reference to Exhibit 4(h) to the Annual Report on Form 10-K for the annual period ended December 31, 2017 – Commission File Number 1-4825) | ||
(i) | Indenture dated as of January 15, 1996 between Weyerhaeuser Company Limited (as successor to MacMillan Bloedel Limited) and The Bank of New York Mellon Trust Company, N.A. (as successor to Harris Trust Company of New York, formerly known as Bank of Montreal Trust Company), as Trustee (incorporated by reference to Exhibit 4(i) to the Annual Report on Form 10-K for the annual period ended December 31, 2017 – Commission File Number 1-4825) |
(j) | First Supplemental Indenture dated as of November 1, 1999 between Weyerhaeuser Company Limited and The Bank of New York Mellon Trust Company, N.A. (as successor to Harris Trust Company of New York, formerly Bank of Montreal Trust Company), as Trustee (incorporated by reference to Exhibit 4(j) to the Annual Report on Form 10-K for the annual period ended December 31, 2017 – Commission File Number 1-4825) | ||
(k) | Note Indenture dated November 14, 2005 by and among Plum Creek Timberlands, L.P., as Issuer, Weyerhaeuser Company, as successor to Plum Creek Timber Company, Inc., as Guarantor, and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on February 19, 2016 - Commission File Number 1-4825) | ||
(l) | Supplemental Indenture No. 1 dated as of February 19, 2016 by and among Plum Creek Timberlands, L.P., as Issuer, Weyerhaeuser Company, as Guarantor, and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on February 19, 2016 - Commission File Number 1-4825) | ||
(m) | Supplemental Indenture No. 2 dated September 28, 2016 by and between Weyerhaeuser Company, as successor Issuer, and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on September 30, 2016 - Commission File Number 1-4825) | ||
(n) | Officer’s Certificate dated November 15, 2010 executed by Plum Creek Timberlands, L.P., as Issuer (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed on February 19, 2016 - Commission File Number 1-4825) | ||
(o) | Officer’s Certificate dated November 26, 2012 executed by Plum Creek Timberlands, L.P., as Issuer (incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K filed on February 19, 2016 - Commission File Number 1-4825) | ||
(p) | Assumption and Amendment Agreement and Installment Note dated as of April 28, 2016 by and among Plum Creek Timberlands, L.P., Weyerhaeuser Company and MeadWestvaco Timber Note Holding Company II, L.L.C. (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on May 4, 2016 - Commission File Number 1-4825) | ||
10 | — | Material Contracts | |
(a) | Form of Weyerhaeuser Executive Change of Control Agreement (incorporated by reference to Exhibit 10(a) to the Annual Report on Form 10-K for the annual period ended December 31, 2016 - Commission File Number 1-4825)* | ||
(b) | Form of Executive Severance Agreement (incorporated by reference to Exhibit 10(b) to the Annual Report on Form 10-K for the annual period ended December 31, 2016 - Commission File Number 1-4825)* | ||
(c) | Severance Agreement with Devin W. Stockfish effective January 1, 2019 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed on October 26, 2018 - Commission File Number 1-4825)* | ||
(d) | Executive Employment Agreement with Doyle Simons dated February 17, 2016 (incorporated by reference to Exhibit 10(v) to the Annual Report on Form 10-K for the annual period ended December 31, 2015 - Commission File Number 1-4825)* | ||
(e) | Retention Agreement with Russell S. Hagen dated August 24, 2018 (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed on October 26, 2018 - Commission File Number 1-4825)* | ||
(f) | Restricted Stock Unit Agreement with Adrian M. Blocker dated August 24, 2018 (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q filed on October 26, 2018 - Commission File Number 1-4825)* | ||
(g) | Weyerhaeuser Company 2013 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on February 19, 2013 - Commission File Number 1-4825)* | ||
(h) | Form of Weyerhaeuser Company 2013 Long-Term Incentive Plan Stock Option Award Terms and Conditions (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on April 16, 2013 - Commission File Number 1-4825)* | ||
(i) | Form of Weyerhaeuser Company 2013 Long Term Incentive Plan Performance Share Unit Award Terms and Conditions for Plan Year 2016 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on January 22, 2016 - Commission File Number 1-4825)* | ||
(j) | Form of Weyerhaeuser Company 2013 Long Term Incentive Plan Performance Share Unit Award Terms and Conditions for Plan Years 2017, 2018 and 2019 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on January 26, 2017 - Commission File Number 1-4825)* | ||
(k) | Form of Weyerhaeuser Company 2013 Long-Term Incentive Plan Restricted Stock Unit Award Terms and Conditions for Plan Years 2016, 2017, 2018 and 2019 (incorporated by reference to Exhibit 10(i) to the Annual Report on Form 10-K for the annual period ended December 31, 2017 – Commission File Number 1-4825)* | ||
(l) | Form of Weyerhaeuser Company 2004 Long-Term Incentive Plan Stock Option Award Terms and Conditions (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on February 11, 2013 - Commission File Number 1-4825)* | ||
(m) | Weyerhaeuser Company 2004 Long-Term Incentive Compensation Plan, as Amended and Restated (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed on December 29, 2010 - Commission File Number 1-4825)* | ||
(n) | Form of Plum Creek Executive Stock Option, Restricted Stock Unit and Value Management Award Agreement For Plan Year 2009 (incorporated by reference to Exhibit 10(u) to the Annual Report on Form 10-K for the annual period ended December 31, 2016 - Commission File Number 1-4825)* | ||
(o) | Form of Plum Creek Executive Stock Option, Restricted Stock Unit and Value Management Award Agreement For Plan Year 2010 (incorporated by reference to Exhibit 10(v) to the Annual Report on Form 10-K for the annual period ended December 31, 2016 - Commission File Number 1-4825)* | ||
(p) | Form of Plum Creek Executive Stock Option, Restricted Stock Unit and Value Management Award Agreement For Plan Year 2011 (incorporated by reference to Exhibit 10(w) to the Annual Report on Form 10-K for the annual period ended December 31, 2016 - Commission File Number 1-4825)* | ||
(q) | Form of Plum Creek Executive Restricted Stock Unit and Value Management Award Agreement for Plan Year 2015 (incorporated by reference to Exhibit 10(z) to the Annual Report on Form 10-K for the annual period ended December 31, 2016 - Commission File Number 1-4825)* |
(r) | Form of Plum Creek Executive Restricted Stock Unit Agreement for Plan Year 2016 (incorporated by reference to Exhibit 10(aa) to the Annual Report on Form 10-K for the annual period ended December 31, 2016 - Commission File Number 1-4825)* | ||
(s) | 2012 Plum Creek Timber Company, Inc. Stock Incentive Plan (incorporated by reference to Exhibit 99.1 from the Registration Statement on Form S-8, Registration No. 333-209617)* | ||
(t) | Amended and Restated Plum Creek Timber Company, Inc. Stock Incentive Plan (incorporated by reference to Exhibit 99.2 from the Registration Statement on Form S-8, Registration No. 333-209617)* | ||
(u) | Plum Creek Supplemental Pension Plan (incorporated by reference to Exhibit 10(dd) to the Annual Report on Form 10-K for the annual period ended December 31, 2016 - Commission File Number 1-4825)* | ||
(v) | Plum Creek Pension Plan (incorporated by reference to Exhibit 10(ee) to the Annual Report on Form 10-K for the period ended December 31, 2016 - Commission File Number 1-4825)* | ||
(w) | Plum Creek Supplemental Benefits Plan (incorporated by reference to Exhibit 10(ff) to the Annual Report on Form 10-K for the annual period ended December 31, 2016 - Commission File Number 1-4825)* | ||
(x) | Weyerhaeuser Company Amended and Restated Annual Incentive Plan for Salaried Employees (as Amended Effective May 19, 2016) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on May 25, 2016 - Commission File Number 1-4825)* | ||
(y) | Weyerhaeuser Company 2015 Deferred Compensation Plan (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on December 22, 2014 - Commission File Number 1-4825)* | ||
(z) | Weyerhaeuser Company Salaried Employees Supplemental Retirement Plan (incorporated by reference to Exhibit 10(p) to the Annual Report on Form 10-K for the annual period ended December 31, 2004 - Commission File Number 1-4825)* | ||
(aa) | 2011 Fee Deferral Plan for Directors of Weyerhaeuser Company (Amended and Restated Effective January 1, 2016) (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed on May 6, 2016 - Commission File Number 1-4825)* | ||
(bb) | Form of Weyerhaeuser Company 2013 Long-Term Incentive Plan Director Restricted Stock Unit Award Terms and Conditions (incorporated by reference to Exhibit 10(z) to the Annual Report on Form 10-K for the annual period ended December 31, 2017 – Commission File Number 1-4825)* | ||
(cc) | Revolving Credit Facility Agreement dated as of March 6, 2017, among Weyerhaeuser Company, as Borrower, the lenders party thereto, JPMorgan Chase Bank, N.A., as Co-Administrative Agent, and Wells Fargo Bank, National Association, as Co-Administrative Agent and Paying Agent. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on March 10, 2017 - Commission File Number 1-4825) | ||
(dd) | Term Loan Agreement dated July 24, 2017, by and among Weyerhaeuser Company, Northwest Farm Credit Services, PCA, as administrative agent, and the lender party thereto (incorporated by reference to Exhibit 10 to the Quarterly Report on Form 10-Q filed on July 28, 2017- Commission File Number 1-4825) | ||
(ee) | 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 Exhibit 10.5 to the Current Report on Form 8-K filed on November 4, 2013 - Commission File Number 1-4825) | ||
(ff) | First Amendment to Tax Sharing Agreement dated as of July 7, 2015 by and among Weyerhaeuser Company, TRI Pointe Holdings, Inc. (f/k/a Weyerhaeuser Real Estate Company) and TRI Pointe Homes, Inc. (incorporated by reference to Exhibit 10 to the Quarterly Report on Form 10-Q filed on July 31, 2015 - Commission File Number 1-4825) | ||
(gg) | Redemption Agreement dated as of August 30, 2016 by and among Southern Diversified Timber, LLC, Weyerhaeuser NR Company, TCG Member, LLC, Plum Creek Timber Operations I, L.L.C., TCG/Southern Diversified Manager, LLC, Southern Diversified, LLC, Campbell Opportunity Fund VI, L.P., and Campbell Opportunity Fund VI-A, L.P. (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed on October 28, 2016 - Commission File Number 1-4825) | ||
(hh) | |||
14 | — | Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 to the Current Report on Form 8-K filed on August 22, 2016 - Commission File Number 1-4825) | |
21 | — | ||
23 | — | ||
31 | — | ||
32 | — | ||
101.INS | — | XBRL Instance Document | |
101.SCH | — | XBRL Taxonomy Extension Schema Document | |
101.CAL | — | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | — | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | — | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | — | XBRL Taxonomy Extension Presentation Linkbase Document |
SIGNATURES |
WEYERHAEUSER COMPANY |
/s/ DEVIN W. STOCKFISH |
Devin W. Stockfish |
President and Chief Executive Officer |
/s/ DEVIN W. STOCKFISH | /s/ RUSSELL S. HAGEN | |
Devin W. Stockfish Principal Executive Officer and Director | Russell S. Hagen Principal Financial Officer | |
/s/ JEANNE M. HILLMAN | /s/ RICK R. HOLLEY | |
Jeanne M. Hillman Principal Accounting Officer | Rick R. Holley Chairman of the Board and Director | |
/s/ MARK A. EMMERT | /s/ SARA GROOTWASSINK LEWIS | |
Mark A. Emmert Director | Sara Grootwassink Lewis Director | |
/s/ JOHN F. MORGAN SR. | /s/ NICOLE W. PIASECKI | |
John F. Morgan Sr. Director | Nicole W. Piasecki Director | |
/s/ MARC F. RACICOT | /s/ LAWRENCE A. SELZER | |
Marc F. Racicot Director | Lawrence A. Selzer Director | |
/s/ D. MICHAEL STEUERT | /s/ KIM WILLIAMS | |
D. Michael Steuert Director | Kim Williams Director | |
/s/ CHARLES R. WILLIAMSON | ||
Charles R. Williamson Director | ||
1. | GAC Issuance and GAC Issuance True-Up Premium. Insurer agrees to issue the Contract as follows: |
a. | Specimen GAC Form Issuance. On the Scheduled GAC Issuance Date, subject to Insurer’s receipt of the Premium Due Date Transfers and any GAC Issuance True-Up Premium due to Insurer and subject to the terms of paragraphs 1.b. and 1.c., Insurer irrevocably agrees to issue the Contract with an effective date that is the Premium Due Date and in accordance with this Commitment Agreement and the Contract, irrevocably commits to make payments owed to Payees under the Contract on and after the Annuity Start Date; provided that, if the parties are unable to complete the take over of administration services regarding payments under the Contract pursuant to paragraph 6 prior to the Annuity Start Date, Insurer shall make a bulk payment to the Plan Trust (or in such other manner as the parties agree) equal to the Aggregate Monthly Payment as defined in the Contract) for each month until administration is transferred to Insurer pursuant to paragraph 6. The Contract will be in substantially the form of the specimen group annuity contract (the “Specimen GAC Form”) attached hereto as Schedule 1 with such updates agreed upon pursuant to and in accordance with paragraph 2. |
b. | Form of Annuities and Payments under the Contract. The type, description and forms of annuities (e.g., single life annuity, joint and survivor annuity), payments under the Contract and other terms of the Contract will be consistent with the terms of Insurer’s proposal dated January 18, 2019 (the “Proposal”) as updated to reflect (i) any modifications contemplated in Insurer’s Final Annuity Quote Sheet dated January 23, 2019 (the “Final Annuity Quote Sheet”) and (ii) any modifications mutually agreed to between the parties after the Commitment Agreement Date and before the 35th Business Day prior to the Scheduled GAC Issuance Date. Subject to Insurer’s receipt of the Premium Due Date Transfers, Insurer will make payments to Payees commencing on the Annuity Start Date in accordance with the Proposal and the Final Annuity Quote Sheet until the Contract has been issued and, for the avoidance of doubt, will make such payments even if the Contract has not been issued by Insurer as of the Annuity Start Date. The original annuity exhibit to the Contract will be consistent with the Payees (including annuitants, contingent annuitants, alternate payees and beneficiaries) on the Tab titled DG2 of the Base File. |
c. | Necessary Data. As a condition to Insurer’s issuing of the Contract, the Company will deliver or cause to be delivered to Insurer the data necessary for Insurer to prepare the annuity exhibit and the information necessary for Insurer to draft provisions of the Contract and administer the payments thereunder, including but not limited to, information such as factor tables and sample calculations. If there are any delays in the delivery of the foregoing information based on the delivery dates set forth in Schedule 7 or such other delivery dates as may be designated by Insurer, Insurer may refer any Payee who contacts Insurer to the Company Contact for assistance and Insurer may, in its sole discretion, delay the mailing of Welcome Kits and annuity certificates. Insurer may exclude from the annuity exhibit any Payee for which Insurer has not been provided each of the following: (i) name, (ii) gender, (iii) date of birth and (iv) social security or federal taxpayer identification number. Notwithstanding the foregoing, if the (1) name, (2) gender, (3) date of birth or (4) social security or federal taxpayer identification number for a Payee that is provided in accordance with this paragraph 1.d.ii is determined to be incorrect after the Scheduled GAC Issuance Date, any adjustments or amendments to the Contract shall be made solely in accordance with the terms of the Contract. |
d. | GAC Issuance True-Up Premium. Schedule 8 provides a description of the methodologies and procedures by which Insurer will calculate the GAC Issuance True-Up Premium. Insurer and the Company will cooperate in good faith so that Insurer can calculate the GAC Issuance True-Up Premium, subject to the following acknowledgements, limitations and conditions: |
i. | GAC Issuance Data. To the extent that the Company discovers or has any Data Corrections after the Commitment Agreement Date and prior to the date that is 35 Business Days prior to the Scheduled GAC Issuance Date (the “GAC Issuance Data Notice Date”), the Company will provide written notice of such Data Correction as promptly as reasonably practicable to Insurer. Insurer will only be responsible for incorporating into the calculation of the GAC Issuance True-Up Premium those Data Corrections that have been notified to Insurer by the Company on or prior to the GAC Issuance Data Notice Date together with any other Data Corrections identified by Insurer (the “GAC Issuance Data”). Such incorporation is subject to Insurer’s agreement with such Data Corrections and any limitations on incorporating such Data Corrections into the GAC Issuance True-Up Premium set forth in Schedule 8. |
ii. | GAC Issuance Annuity Exhibit. Twenty Business Days prior to the Scheduled GAC Issuance Date, Insurer will deliver to the Company a proposed annuity exhibit utilizing and consistent with the Base File and the GAC Issuance Data. Fifteen Business Days prior to the Scheduled GAC Issuance Date, the Company will respond to Insurer with any questions on the annuity exhibit. Insurer and the Company will cooperate in good faith to resolve any discrepancies on or prior to the eleventh Business Day prior to the Scheduled GAC Issuance Date and Insurer will reflect in the annuity exhibit any changes that have been agreed to on or prior to such eleventh Business Day. Insurer may exclude from the annuity exhibit any Payee for which Insurer has not been provided each of the following: (1) name, (2) gender, (3) date of birth and (4) social security or federal taxpayer identification number. |
2. | Negotiation of Modified GAC Form. After the Commitment Agreement Date, Insurer, the Company and the Independent Fiduciary will each use commercially reasonable efforts to revise the Specimen GAC Form to reflect such revisions that were mutually agreed to by the parties prior to the Commitment Agreement Date and will use commercially reasonable efforts to negotiate any additional revisions to the Specimen GAC Form (the “Modified GAC Form”) and related forms of annuity certificates, subject to the following acknowledgements, limitations and conditions: |
a. | Regulatory Approvals. Insurer will use reasonable best efforts to obtain regulatory approvals, to the extent required by applicable law, of the Modified GAC Form prior to the Scheduled GAC Issuance Date, and in the event that any approval, to the extent required by applicable law, is not granted, or if the Contract is disapproved, Insurer, the Independent Fiduciary and the Company will cooperate in good faith to mutually agree on modifications to the Contract to address the requests of the Washington State Office of the Insurance Commissioner, if any, and, to the extent possible, to preserve the provisions included in the Modified GAC Form. Insurer will use reasonable best efforts to obtain regulatory approvals, to the extent required by applicable law, of customized annuity certificates prior to the annuity certificate mailing date set forth in paragraph 5.b. |
b. | Contract Issuance. Following the negotiation of the Modified GAC Form and the receipt of any related regulatory approvals for all negotiated changes to the Specimen GAC Form in accordance with paragraph 2.a., subject to Insurer’s receipt of the Premium Due Date Transfers and any GAC Issuance True-Up Premium due to Insurer, Insurer will issue the Contract on the Scheduled GAC Issuance Date using the Modified GAC Form in lieu of the Specimen GAC Form, subject to and in accordance with paragraphs 1.a., 1.b. and 1.c.. Such Contract will have an effective date that is the Premium Due Date. |
3. | Premium Due Date Transfers. So long as the conditions to closing set forth in paragraph 8 have been satisfied, the Independent Fiduciary will irrevocably direct the Plan Trustee to pay Insurer, per the instructions set forth in Schedule 11, $[***] (the “Premium Amount”) on the Premium Due Date by: |
(x) | assigning, transferring and delivering to Insurer, by the Cut-Off Time, all rights, title and interests in and to each Eligible Asset, and |
(y) | paying to Insurer an amount in Cash equal to [***]. |
a. | Schedule 2 Updates. On the second Business Day after the Commitment Agreement Date, Insurer will deliver to the Company an updated Schedule 2 that reflects the Asset Market Value of each Schedule 2 Asset [***]. If the Company, Insurer and Independent Fiduciary, despite using commercially good faith efforts, cannot resolve any dispute with respect to any such information on or prior to the Premium Due Date, then Insurer’s determination will control for purposes of the Premium Due Date Transfers but the Company or the Independent Fiduciary may immediately commence an arbitration dispute pursuant to Schedule 4 with respect to any such information. On the Premium Due Date, Insurer will, if needed, update Schedule 2 to reflect [***]. Insurer will, if needed, further update Schedule 2 to reflect [***]. |
b. | [***]. On and as of the Business Day prior to the Premium Due Date, Insurer will provide to the Company [***] information in the form of Schedule 5 [***]. Prior to the Premium Due Date, the Company will confirm to Insurer in writing that such information is accurate and complete or will provide any additions, deletions or corrections to such information. If the Company and Insurer have a dispute with respect to any such information and, despite using commercially good faith efforts, cannot resolve such dispute on or prior to the Business Day prior to the Premium Due Date, then Insurer’s [***] information will control for purposes of the Premium Due Date Transfers but the Company may immediately commence an arbitration dispute pursuant to Schedule 4 with respect to any such information. |
c. | [***]. By written notice to the other party on or before the fifth Business Day following the Premium Due Date, the Company or Insurer may identify [***] and the parties will work in good faith for seven Business Days following the receipt of such notice to agree on [***]. If the parties agree that [***] within such seven Business Days following the receipt of such notice, then, on or before the date that is three Business Days following such agreement, the Independent Fiduciary will irrevocably direct the Plan Trustee to promptly pay or cause to be paid to Insurer an amount, in Cash, per instructions on Schedule 11, equal to [***], and, simultaneously with receipt of such payment, Insurer will return [***] to the Plan Trust |
d. | [***]. By written notice to the other party on or before the fifth Business Day following the Premium Due Date, the Company or Insurer may identify [***], and the parties will work in good faith for seven Business Days following the receipt of such notice to agree [***]. If the parties agree that [***] within such seven Business Days following the receipt of such notice, then, on or before the date that is three Business Days following such agreement, the Independent Fiduciary will irrevocably direct the Plan Trustee to promptly pay or cause to be paid to Insurer an amount, in Cash, per instructions in Schedule 11, equal to [***]. Simultaneously with such payment, the Company and Insurer will [***]. If Company Insurer and the Independent Fiduciary cannot resolve any dispute with respect to any [***], then [***]. |
e. | Interest Payments. Any payment made to Insurer pursuant to paragraph 3.c or 3.d shall also include an amount, in Cash, equal to the interest on such payment calculated at an annual rate equal to [***], from the Premium Due Date through but excluding the date of such payment. |
f. | Additional Actions with respect to Assets. The Independent Fiduciary will irrevocably direct the Plan Trustee to promptly give or cause to be given all notices that are required, under applicable law and the terms of each Eligible Asset, in connection with the sale, assignment, transfer and delivery of the Eligible Assets on the Premium Due Date. The Independent Fiduciary will irrevocably direct the Plan Trustee to and Insurer will promptly execute, deliver, record or file or cause to be executed, delivered, recorded or filed any and all releases, affidavits, waivers, notices or other documents that the Company or Insurer may reasonably request in order to implement the transfer of the Eligible Assets to Insurer. |
g. | Risk of Loss on Transferred Assets; Gains on Transferred Assets. Insurer acknowledges and agrees that, if the Premium Due Date Transfers occur, then, from and after the Commitment Agreement Date, Insurer bears any and all risks associated with each Transferred Asset. |
h. | Available Assets. The Company will cause the Plan Trust to have sufficient Cash or other assets (whether by means of a Cash contribution or otherwise) to enable the Plan Trustee to pay all amounts that it is directed to pay to Insurer by the Independent Fiduciary pursuant to this Commitment Agreement. |
i. | Dedicated Separate Account. Insurer will deposit the Premium Amount into the dedicated separate account that supports the Contract. |
4. | Public Announcements. |
a. | Press Releases. The Company and Insurer have the right to issue a transaction announcement or press release regarding the transactions contemplated by this Commitment Agreement, a copy of which will be provided to the other party for review no less than two Business Days prior to the issuance thereof, and the party issuing the transaction announcement or press release will consider in good faith any comments made by the other party; provided, however, that, if the Company has not issued a transaction announcement or press release, Insurer will not issue a transaction announcement or press release without the prior written consent of the Company; provided, further, that nothing contained in this paragraph 4.a. will prevent Insurer from (i) communicating with Payees, including through communications posted to Insurer’s website or (ii) discussing or disclosing the transactions contemplated |
b. | SEC Filings. If the Company concludes that disclosure of this Commitment Agreement is required by the rules of the Securities and Exchange Commission (“SEC”), (i) the Company and Insurer will cooperate to make a request by the Company to the SEC for confidential treatment of information relating to the pricing of the Contract and such other information as the Company and Insurer mutually conclude is competitively sensitive from the perspective of the Company or Insurer or otherwise merits confidential treatment and (ii) the Company will include Insurer in any material correspondence (written or oral) with the SEC regarding such application for confidential treatment, and the Company and Insurer will otherwise reasonably cooperate in connection with such request, including by the Company proposing to redact confidential portions of documents as to which the SEC staff seeks disclosure. |
c. | No Insurer Communications. Except to the extent the Company has provided prior written consent, from the Commitment Agreement Date until the issuance of any annuity certificate by Insurer to an annuitant, other than as provided for in this Commitment Agreement, (i) Insurer will cause the employees of its retirement services business unit not to initiate any contact or communication with any participant or beneficiary of the Plan in connection with any transactions other than those transactions contemplated by this Commitment Agreement and (ii) Insurer will not, and will cause all of its affiliates not to, provide any of their respective insurance agents, wholesalers, retailers or other representatives with any contact information of such participants and beneficiaries of the Plan obtained from the Company or any of its representatives in connection with the transactions contemplated by this Commitment Agreement, except for those representatives of Insurer or any of their respective affiliates who need to know such information for purposes of the transactions contemplated by this Commitment Agreement and agree to comply with the requirements of this Commitment Agreement. However, this paragraph 4.c. will not restrict employees of Insurer’s retirement services business unit from contacting any participant or beneficiary of the Plan in connection with, or to facilitate, Insurer’s performance of its obligations under the Contract, the annuity certificates or this Commitment Agreement. Until the mailing of the Welcome Kit by Insurer to annuitants, other than as provided for in this Commitment Agreement, if any participant or beneficiary of the Plan contacts an employee of Insurer’s retirement services business unit, Insurer and the Company will cooperate to coordinate on a response to such participant or beneficiary of the Plan. |
5. | Welcome Kits and Annuity Certificates. |
a. | Welcome Kits. On or before April 15, 2019 (or such other date agreed to by the parties) (the “Welcome Kit Mailing Date”), Insurer will mail a welcome kit to each annuitant under the Contract (the “Welcome Kit”). Insurer will send a preliminary draft of the Welcome Kit to the Company and the Independent Fiduciary as soon as practicable and Insurer will consider in good faith any comments made by the Company or the Independent Fiduciary on the “Frequently Asked Questions” section of the Welcome Kit on or before the fifth Business Day after it receives the preliminary draft of the Welcome Kit from Insurer. |
b. | Annuity Certificates. Insurer will mail an annuity certificate to each applicable Payee on or before the later of (i) 20 Business Days after the Contract is issued and (ii) 120 Business Days after the date on |
6. | Administration and Transfer. |
a. | Administrative Transition. The Company will provide or cause to be provided to Insurer the information needed to administer the payments under the Contract and will complete or cause to be completed all processes set forth in Schedule 7. The Company and Insurer will use commercially reasonable efforts to take or cause to be taken all actions and do or cause to be done all things necessary to coordinate the takeover by Insurer of all administration responsibilities necessary to effectively provide recordkeeping and administration services regarding payments under the Contract commencing on the Annuity Start Date. The Company will provide Insurer with final census data in good order on or before January 30, 2019 in order for Insurer to provide recordkeeping and administration services regarding payments under the Contract commencing on the Annuity Start Date. Insurer will conduct a data integrity review of all data elements (including if any potential Payee was deceased prior to the date of the Premium Due Date Transfers) in accordance with Insurer’s standard verification practices and procedures. The Company agrees to cooperate with Insurer in the takeover of such recordkeeping and administration services, including ensuring that any third-party service provider provides Insurer with any information or records relating to the Plan benefits and the Payees in its possession. The Company will make subject matter experts available to promptly address any questions Insurer may have regarding the benefit provisions, including but not limited to forms of annuity, eligibility conditions, administrative practices and calculation methodology. Insurer shall perform all of its obligations contemplated under this Agreement and the Contract in material compliance with all applicable laws. |
b. | Call Center and Company Contact. Insurer will maintain, at its cost and expense, a toll-free phone number and/or a website (the “Call Center”) which will be available starting from the Welcome Kit Mailing Date for Payees to contact Insurer with questions related to the Contract and the annuity certificates. For a period of five years following the Premium Due Date, the Company will maintain, at its cost and expense, a point of contact (the “Company Contact”) to which Insurer may refer Payees who pose questions related to their Plan benefits. In the event that a Payee contacts the Company with questions related to the Contract and the annuity certificates, the Company may refer the Payee to the Call Center. In the event that a Payee contacts Insurer with questions related to their Plan benefits, Insurer may refer the Payee to the Company Contact. |
7. | Representations and Warranties. |
a. | Insurer Representations and Warranties. Insurer hereby represents and warrants to the Company and the Independent Fiduciary as of the Commitment Agreement Date and as of the Premium Due Date that: |
i. | Due Organization, Good Standing and Corporate Power. Insurer is a life insurance company, duly organized, validly existing and in good standing under the laws of the State of Iowa. Insurer is duly qualified or licensed to do business and is in good standing in each jurisdiction in which its performance of its obligations in the Commitment Agreement and the Contract makes such qualification or licensing necessary, except in such jurisdictions where the failure to be in good standing or so qualified or licensed would not be material. Insurer has all requisite corporate power and legal authority to enter into and carry out its obligations under this Commitment Agreement and the Contract and to consummate the transactions contemplated to be undertaken by Insurer in this Commitment Agreement and the Contract. |
ii. | Authorization of Commitment Agreement and Enforceability. Insurer has received all necessary corporate approvals and no other action on the part of Insurer is necessary to authorize the execution, delivery and performance of this Commitment Agreement and the Contract, and the consummation of the transactions contemplated to be undertaken by Insurer in this Commitment Agreement and the Contract. This Commitment Agreement has been duly executed and delivered by Insurer, and is a valid and binding obligation of Insurer, enforceable against Insurer in accordance with its terms, subject to the applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (“Enforceability Exceptions”). |
iii. | No Conflict. The execution, delivery and performance of this Commitment Agreement and the Contract by Insurer, and the consummation by Insurer of the transactions contemplated to be undertaken by Insurer in this Commitment Agreement do not (1) violate or conflict with any provision of its certificates or articles of incorporation, bylaws, code of regulations, or the comparable governing documents, (2) except for the filings and approvals of state insurance governmental authorities in the states listed on Schedule 10, violate or conflict with any law or order of any governmental authority applicable to Insurer, (3) require any governmental or governmental agency approval other than any filing made or approval received as of the Commitment Agreement Date and filings with and approvals of state insurance governmental authorities in the states listed on Schedule 10 or (4) require any consent of or other action by any person under, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, or cause or permit termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit under, any provision of any contract to which Insurer is a party, except where the occurrence of any of the foregoing would not have a material adverse effect on Insurer’s ability to consummate the transactions and perform its obligations contemplated by this Commitment Agreement. No filing or approval is required to issue the annuity certificates in accordance with the Contract, other than any filing made or approval |
iv. | Compliance with Laws. The business of insurance conducted by Insurer has been and is being conducted in material compliance with applicable laws, and none of the licenses, permits or governmental approvals required for the continued conduct of the business of Insurer as such business is currently being conducted will lapse, terminate, expire or otherwise be impaired as a result of the consummation of the transactions contemplated to be undertaken by Insurer in this Commitment Agreement, except as, in either case, would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the ability of Insurer to perform its obligations under this Commitment Agreement. |
v. | Accuracy of Information. To Insurer’s Knowledge (x) all material information provided by Insurer to the Company or the Independent Fiduciary (other than any component incorporated into the calculation of the Premium Amount or the GAC Issuance True-Up Premium not calculated, determined or provided by Insurer, including the Base File, and any information provided by Insurer based on any such component) in connection with the transactions contemplated by this Commitment Agreement was, as of the date indicated on such information, true and correct in all material respects and (y) no change has occurred since the date indicated on such information that Insurer has not publicly disclosed or disclosed to the recipient of such information that would cause such information, taken as a whole, to be materially false or misleading. |
vi. | Relationship to the Plan. Insurer is not (1) a trustee of the Plan, (2) a plan administrator (within the meaning of ERISA § 3(16)(A) and the Code § 414(g)) with respect to the Plan) or (3) an employer any of whose employees are covered by the Plan. Schedule 6 sets forth a true and complete list of (x) Insurer and Insurer’s affiliates that are investment managers within the meaning of ERISA § 3(38)(B) and (y) without duplication of clause (x), Insurer and Insurer’s affiliates that are registered as investment advisers under the Investment Advisers Act of 1940; provided, however, that solely with respect to the representation and warranty as to Schedule 6 to be made by Insurer on and as of the Premium Due Date, Insurer may update Schedule 6 through the Premium Due Date by providing a written update to the Company so that the information included therein is current on and as of the Premium Due Date. BlackRock Financial Management, Inc. (“BlackRock”) is not an affiliate of Insurer. |
vii. | No Post-Closing Liability. Following receipt by Insurer of the Premium Due Date Transfers, the Plan, the Company and the Independent Fiduciary and their respective affiliates and representatives will not have any liability to pay any annuity payment under the Contract. |
viii. | The Contract. The Contract, when executed, will be duly executed and delivered by Insurer and will be a valid and binding obligation of Insurer and enforceable against Insurer by the Company and each Payee in accordance with its terms, subject to the Enforceability Exceptions. At all times, the right to a benefit and all other provisions under the Contract, in accordance with the Contract’s terms, will be enforceable by the sole choice of the Payee to whom the benefit is owed under the Contract, subject to the Enforceability Exceptions. In the event that the Company, as the contract holder, ceases to exist, notifies Insurer that it will cease to perform its obligations under the Contract, or no longer has obligations under the Contract, the Contract will remain a valid and |
ix. | Litigation. As of the Commitment Agreement Date, there is no action pending or, to Insurer’s Knowledge, threatened against Insurer that in any manner challenges or seeks to prevent, enjoin or materially alter or delay the transactions contemplated by this Commitment Agreement or that could reasonably be expected to materially impair or restrict Insurer’s ability to consummate the transactions contemplated by this Commitment Agreement and to perform its obligations hereunder. |
x. | No Commissions. No fees, commissions or payments are or will be owed by Insurer to any individual or entity in connection with the transactions contemplated in this Commitment Agreement and the Contract for which any other party, or its respective affiliates or representatives, could be liable. |
xi. | RBC Ratio. As of the Commitment Agreement Date, Insurer’s most recent Projected RBC Ratio is [***], and, to Insurer’s Knowledge, no event (including a change to financial market metrics) has occurred between the date of Insurer’s most recent Projected RBC Ratio and the Commitment Agreement Date that would be expected to cause Insurer’s Projected RBC Ratio to [***]. |
x. | Sophisticated Investor. Insurer is a sophisticated investor with experience in the purchase of publicly traded debt of the type to be included in the Transferred Assets. Insurer has had access to such information as it deems necessary in order to make its decision to acquire the Transferred Assets from the Plan. Insurer acknowledges and agrees that neither the Company, the Independent Fiduciary, nor the Plan has given any investment advice or rendered any opinion to Insurer as to whether the acquisition of the Transferred Assets is prudent. |
b. | Company Representations and Warranties. The Company is acting solely in its non-fiduciary, settlor and Plan sponsor capacity in regard to the transactions contemplated by this Commitment Agreement and hereby represents and warrants to Insurer and the Independent Fiduciary as of the Commitment Agreement Date and as of the Premium Due Date that: |
i. | Due Organization, Good Standing and Corporate Power. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Washington. The Company is duly qualified or licensed to do business and is in good standing in each jurisdiction in which its performance of its obligations in the Commitment Agreement and the Contract makes such qualification or licensing necessary, except in such jurisdictions where the failure to be in good standing or so qualified or licensed would not be material. The Company has all requisite corporate power and legal authority to enter into and carry out its obligations under this Commitment Agreement and the Contract and to consummate the transactions contemplated to be undertaken by the Company in this Commitment Agreement and the Contract. |
ii. | Authorization of Commitment Agreement and Enforceability. The Company has received all necessary corporate approvals and no other action on the part of the Company is necessary to authorize the execution, delivery and performance of this Commitment Agreement and the Contract, and the consummation of the transactions contemplated to be undertaken by the Company in this Commitment Agreement and the Contract. This Commitment Agreement and the |
iii. | No Conflict. The execution, delivery and performance of this Commitment Agreement and the Contract by the Company, and the consummation by the Company of the transactions contemplated to be undertaken by the Company in this Commitment Agreement do not (1) violate or conflict with any provision of the Plan and any documents and instruments governing the Plan as contemplated under ERISA § 404(a)(1)(D) (the “Plan Governing Documents”), the certificates or articles of incorporation, bylaws, code of regulations, or the comparable governing documents of the Company, (2) violate or conflict with any law or order of any governmental authority applicable to the Company or the Plan Governing Documents, (3) require any governmental or governmental agency approval or (4) require any consent of or other action by any person under, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, or cause or permit termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit under, any provision of any contract to which the Company is a party, except where the occurrence of any of the foregoing would not have a material adverse effect on the Company’s ability to consummate the transactions and perform its obligations contemplated by this Commitment Agreement. |
iv. | Accuracy of Information. Notwithstanding anything to the contrary in the Company NDA, to the Company’s Knowledge, (1) the mortality experience data file(s) provided by or on behalf of the Company to Insurer identified on Schedule 9 did not contain any misstatements or omissions that were, in the aggregate, material, and (2) the data in respect of benefit amounts, forms of annuities, date of birth, date of death, state of residence, gender, plan indicator, lump-sum indicator, hourly/salaried indicator, status (beneficiary in pay or participant), years of service and any other relevant information, in each case, with respect to the Payees that was furnished by or on behalf of the Company to Insurer, was not generated using any materially incorrect systematic assumptions or material omissions. |
v. | Compliance with ERISA. The Plan and Plan Trust are maintained under and subject to ERISA and, to the Company’s Knowledge, are in compliance with ERISA in all material respects. To the Company’s Knowledge, no event has occurred that is reasonably likely to result in the Plan losing its status as qualified by the Code for preferential tax treatment under Code §§ 401(a) and 501(a). All Plan amendments necessary to effect the transactions contemplated by this Commitment Agreement and the Contract have been duly executed and, to the extent that they require authorization by the Company, have been, or will be by the Premium Due Date, duly authorized and made by the Company. |
vi. | Plan Investments. Neither Insurer nor any of Insurer’s affiliates is a fiduciary of the Plan who either (A) has or exercises any discretionary authority or control with respect to the investment of Plan Assets that are or will be involved in the transactions contemplated by the Commitment Agreement or the Contract or (B) renders investment advice (within the meaning of ERISA § 3(21)(A)(ii) or Code § 4975(e)(3)(B)) with respect to such assets. There are no commingled investment vehicles that hold Plan Assets, the units of which are or will be Plan Assets involved in the transactions |
vii. | Independent Fiduciary. The Independent Fiduciary has been duly appointed as independent fiduciary of the Plan with respect to the purchase of one or more group annuity contracts to (1) be the sole fiduciary responsible for selecting one or more insurers to provide annuities in accordance and compliance with the ERISA Requirements, (2) determine whether the transactions contemplated by this Commitment Agreement and the Contract satisfy ERISA, (3) represent the interests of the Plan and its participants and beneficiaries in connection with the negotiation of a commitment agreement and, to the extent set forth in the IF Engagement Letter, the terms of any agreements with Insurer, including the Contract and the annuity certificates, (4) direct the Plan Trustee on behalf of the Plan to transfer the Premium Due Date Transfers in connection with the consummation of the transactions contemplated by this Commitment Agreement and any amounts required pursuant to paragraphs 1.d.iv., 3.c. and 3.d. and (5) take all other actions on behalf of the Plan necessary to effectuate the foregoing to the extent set forth in the IF Engagement Letter. |
viii. | Plan Trustee is Directed Trustee. The Plan Trustee has been duly appointed as the directed trustee of the Plan Trust and is obligated to follow the Independent Fiduciary’s directions to effectuate and consummate the transactions contemplated by this Commitment Agreement and the IF Engagement Letter consistent with the Plan Trust Agreement. |
ix. | Litigation. There is no action pending or, to the Company’s Knowledge, threatened against the Company or the Plan that in any manner challenges or seeks to prevent, enjoin or materially alter or delay the transactions contemplated by this Commitment Agreement or that could reasonably be expected to materially impair or restrict such party’s ability to consummate the transactions contemplated by this Commitment Agreement and to perform its obligations hereunder. |
x. | No Commissions. No fees, commissions or payments are or will be owed by the Company to any individual or entity in connection with the transactions contemplated in this Commitment Agreement and the Contract for which any other party, or its respective affiliates or representatives, could be liable. |
c. | Independent Fiduciary Representations and Warranties. The Independent Fiduciary hereby represents and warrants to the Company and Insurer as of the Commitment Agreement Date and as of the Premium Due Date and, with respect to paragraph 7.c.v. only, as of any other date on which the Plan Trustee pays |
i. | Due Organization, Good Standing and Corporate Power. The Independent Fiduciary is a trust company, duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts. The Independent Fiduciary is duly qualified or licensed to do business and is in good standing in each jurisdiction in which its performance of its obligations in the Commitment Agreement makes such qualification or licensing necessary, except in such jurisdictions where the failure to be in good standing or so qualified or licensed would not be material. The Independent Fiduciary has all requisite corporate power and legal authority to enter into and carry out its obligations under this Commitment Agreement and to consummate the transactions contemplated to be undertaken by the Independent Fiduciary in this Commitment Agreement. |
ii. | Authorization of Commitment Agreement and Enforceability. The Independent Fiduciary has received all necessary corporate approvals and no other action on the part of the Independent Fiduciary is necessary to authorize the execution, delivery and performance of this Commitment Agreement, and the consummation of the transactions contemplated to be undertaken by the Independent Fiduciary in this Commitment Agreement. This Commitment Agreement has been duly executed and delivered by the Independent Fiduciary and is a valid and binding obligation of the Independent Fiduciary, enforceable against the Independent Fiduciary, in accordance with its terms, subject to the Enforceability Exceptions. |
iii. | No Conflict. The execution, delivery and performance of this Commitment Agreement by the Independent Fiduciary, and the consummation by the Independent Fiduciary of the transactions contemplated to be undertaken by the Independent Fiduciary in this Commitment Agreement do not (1) violate or conflict with any provision of its certificates or articles of incorporation, bylaws, code of regulations, or the comparable governing documents, (2) violate or conflict with any law or order of any governmental authority applicable to the Independent Fiduciary, (3) require any governmental or governmental agency approval, (4) violate or conflict with any law or order of any governmental authority applicable to any provision of the Plan Governing Documents or (5) require any consent of or other action by any person under, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, or cause or permit termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit under, any provision of any contract to which the Independent Fiduciary is a party, except where the occurrence of any of the foregoing would not have a material adverse effect on the Independent Fiduciary’s ability to consummate the transactions and perform its obligations contemplated by this Commitment Agreement. |
iv. | Independent Fiduciary Compliance with ERISA. |
1. | The Independent Fiduciary meets the requirements of, and in the transactions contemplated by this Commitment Agreement and the Contract is acting as, an “investment manager” under ERISA § 3(38), and further constitutes a “qualified professional asset manager” under the U.S. Department of Labor Prohibited Transaction Class Exemption 84-14 solely with respect to the transfer of assets to Insurer in connection with the transactions contemplated by this |
2. | The Independent Fiduciary has accepted, and has not rescinded or terminated, its designation as the sole fiduciary of the Plan with authority to select one or more insurers to issue one or more group annuity contracts in the IF Engagement Letter (a true and correct copy of which has been provided to Insurer, except that the fees to be paid to the Independent Fiduciary and indemnification provisions have been redacted), and the Independent Fiduciary reaffirms its fiduciary status as set forth in the IF Engagement Letter. |
3. | The Independent Fiduciary has accepted, and has not rescinded or terminated, appointment as independent fiduciary of the Plan with respect to the purchase of one or more group annuity contracts to (a) be the sole fiduciary responsible for selecting one or more insurers to provide annuities in accordance and compliance with the ERISA Requirements, (b) determine whether the transactions contemplated by this Commitment Agreement and the Contract satisfy the ERISA Requirements, (c) represent the interests of the Plan and its participants and beneficiaries in connection with the negotiation of a commitment agreement and, to the extent set forth in the IF Engagement Letter, the terms of any agreements with Insurer, including the Contract and the annuity certificates, (d) direct the Plan Trustee on behalf of the Plan to transfer the Premium Due Date Transfers in connection with the consummation of the transactions contemplated by this Commitment Agreement and the Contract and any amounts required pursuant to paragraphs 1.d.iv., 3.c. and 3.d. and (e) take all other actions on behalf of the Plan necessary to effectuate the foregoing to the extent set forth in the IF Engagement Letter. |
4. | The Independent Fiduciary is fully qualified and has the requisite expertise together with its reliance on its consultant, Mercer Health & Benefits LLC (“Mercer”), and its counsel, K&L Gates LLP, to serve as an independent fiduciary in connection with the transactions contemplated by this Commitment Agreement and Contract, and it is independent of the Company and Insurer within the meaning of 29 C.F.R. § 2570.31(j). The Independent Fiduciary has ensured that Mercer has established commercially reasonable ethical walls between the personnel working on the transactions contemplated in the Commitment Agreement and the Contract and the personnel working on other matters involving the Company, Insurer or any of their respective affiliates. |
i. | ERISA Related Determinations. |
1. | The Independent Fiduciary has selected Insurer to issue the Contract as set forth in this Commitment Agreement and such selection, the transactions contemplated by this Commitment Agreement, including the purchase of the Contract, the Plan’s use of assets for the purchase of the Contract as contemplated by this Commitment Agreement and the Contract (including its terms) each satisfies the ERISA Requirements. The Independent Fiduciary has delivered a certification confirming the foregoing, executed by a duly authorized officer of the Independent Fiduciary, to the Annuity Committee. |
2. | The transactions contemplated by this Commitment Agreement and the purchase of the Contract do not result in a Non-Exempt Prohibited Transaction, provided that the |
3. | The Plan Trust (I) will receive no less than “adequate consideration” for the Transferred Assets and (II) will pay no more than “adequate consideration” for the Contract, in each case within the meaning of “adequate consideration” under ERISA § 408(b)(17)(B) and Code § 4975(f)(10). |
ii. | Litigation. There is no action pending or, to the Independent Fiduciary’s Knowledge, threatened against the Independent Fiduciary that in any manner challenges or seeks to prevent, enjoin or materially alter or delay the transactions contemplated by this Commitment Agreement or that could reasonably be expected to materially impair or restrict such party’s ability to consummate the transactions contemplated by this Commitment Agreement and to perform its obligations hereunder. |
iii. | No Commissions. No fees, commissions or payments are or will be owed by the Independent Fiduciary to any individual or entity in connection with the transactions contemplated in this Commitment Agreement and the Contract for which any other party, or its respective affiliates or representatives, could be liable. |
8. | Conditions to Closing. The parties’ obligations to consummate the transactions contemplated by this Commitment Agreement in connection with the Premium Due Date Transfers, including the Independent Fiduciary’s obligation to direct the Plan Trustee to consummate the transactions contemplated by this Commitment Agreement, are subject to the conditions that: |
a. | The Independent Fiduciary will have confirmed that the transactions contemplated by this Commitment Agreement continue to satisfy the ERISA Requirements because an Independent Fiduciary MAC has not occurred or, if an Independent Fiduciary MAC has occurred, it is not continuing on the Premium Due Date; |
b. | No court or government agency has taken any action after the Commitment Agreement Date that would (i) cause the consummation of the transactions contemplated by this Commitment Agreement to violate the law or (ii) cause the Plan to fail to remain qualified under Code Section 401(a); and |
c. | Each of the representations and warranties of each of the other parties set forth in paragraph 7 shall be true and correct in all material respects as of the Commitment Agreement Date and as of the Premium Due Date. |
9. | Definitions. For purposes of this Commitment Agreement, the following defined terms will have the following meanings: |
a. | “Annuity Committee” means the named fiduciary under the Plan with authority to appoint an independent fiduciary in connection with an annuity purchase transaction. |
b. | “AAA” is defined in Schedule 4. |
c. | “Annuity Start Date” means May 1, 2019. |
d. | “Approved Firm” is defined in Schedule 4. |
e. | “Asset Market Value” means (i) the close-of-market Fair Market Value of a Schedule 2 Asset as of the close of business on the Business Day prior to the Commitment Agreement Date, plus (ii) accrued interest on such Schedule 2 Asset as of the close of business on the Business Day prior to the Commitment Agreement Date. [***]. [***]. |
f. | “Authorized Persons” is defined in paragraph 12.d. |
g. | “Base File” means the data file titled “[***]”, provided on behalf of the Company to Insurer via email with a link to a secure website at 3:11 p.m. eastern time on January 7, 2019. |
h. | “BlackRock” is defined in paragraph 7.8.vi. |
i. | “Business Day” means any day other than a Saturday, a Sunday or a day on which banks located in New York, New York are authorized or required by law to close. |
j. | “Call Center” is defined in paragraph 6.b. |
k. | “Cash” means a wire transfer, through the Federal Reserve System, of currency of the United States of America. |
l. | “Check Register” is defined in Schedule 7. |
m. | “Code” means the Internal Revenue Code of 1986 and the applicable Treasury Regulations issued thereunder. |
n. | “Commitment Agreement” is defined in the preamble. |
o. | “Commitment Agreement Date” is defined in the preamble. |
p. | “Company” is defined in the preamble. |
q. | “Company Contact” is defined in paragraph 6.b. |
r. | “Contract” is defined in the preamble. |
s. | “Cut-Off Time” means 1:00 p.m. eastern time on the Premium Due Date. |
t. | “Data Corrections” is defined in Schedule 8. |
u. | “Data Load File” is defined in Schedule 7. |
v. | “Data Load File Sign-Off” is defined in Schedule 7. |
w. | “Eligible Asset” means a Schedule 2 Asset (i) that [***], and (ii) to which the Plan Trust has valid title, free and clear of all Liens, other than Permitted Liens on the Premium Due Date at the time of transfer. |
x. | “Enforceability Exceptions” is defined in paragraph 8.a.ii. |
y. | “ERISA” means Employee Retirement Income Security Act of 1974, as amended, and any federal agency regulations promulgated thereunder that are currently in effect and applicable. |
z. | “ERISA Requirements” means all of the applicable requirements of ERISA and applicable guidance promulgated thereunder, including Interpretive Bulletin 95-1. |
aa. | “Fair Market Value” means the fair market value as of the applicable date for a Schedule 2 Asset in an amount equal to the fair market value as of such date for such Schedule 2 Asset as indicated (i) by the primary pricing source set forth in the table below that corresponds to the applicable asset class of such Schedule 2 Asset, (ii) if such primary pricing source is not available or no fair market value is indicated by such primary pricing source for such Schedule 2 Asset, by the secondary pricing source set forth in the table below that corresponds to the applicable asset class of such Schedule 2 Asset, or (iii) if neither such primary nor secondary pricing source is available or no fair market value is indicated by either such source for such Schedule 2 Asset, by the tertiary pricing source, if any, set forth in the table below that |
Asset Class | Primary Pricing Source | Secondary Pricing Source | Tertiary Pricing Source |
[***] | [***] | [***] | [***] |
[***] | [***] | [***] | [***] |
[***] | [***] | [***] | [***] |
[***] | [***] | [***] | [***] |
[***] | [***] | [***] | [***] |
bb. | “Final Annuity Quote Sheet” is defined in paragraph 1.b. |
cc. | “Final Production Data File” is defined in Schedule 7. |
dd. | “GAC Issuance Data” is defined in paragraph 1.d.i. |
ee. | “GAC Issuance Data Notice Date” is defined in paragraph 1.d.i. |
ff. | “GAC Issuance True-Up Premium” is defined in Schedule 8. |
gg. | [***]. |
hh. | “IF Engagement Letter” means the Engagement Letter dated December 6, 2018 between the Annuity Committee and the Independent Fiduciary appointing Independent Fiduciary to act as an independent fiduciary in connection with an annuity purchase. |
ii. | “Indemnified Party” is defined in paragraph 10. |
jj. | “Independent Fiduciary” is defined in the preamble. |
kk. | “Independent Fiduciary MAC” means (i) the occurrence of a material adverse change, as determined in the Independent Fiduciary’s sole discretion, in or directly affecting Insurer after the Commitment Agreement Date that would cause the selection of Insurer and the purchase of the Contract to fail to satisfy the ERISA Requirements, or (ii) the occurrence of a change in ERISA Requirements after the Commitment Agreement Date that would cause the selection of Insurer and the Plan’s purchase of the Contract to fail to satisfy ERISA Requirements. |
ll. | [***]. |
mm. | “Insurer” is defined in the Preamble. |
nn. | “Interim Asset Cash Flows” means, with respect to the Transferred Assets, the aggregate amount paid by the issuer of each asset to the record owner as of any day during the period from and including the Commitment Agreement Date and to but excluding the date that the Premium Due Date Transfers occur, (i) with respect to any coupon, plus (ii) with respect to cash flows received on such assets, including but not limited to principal payments, principal redemptions and tender offers but not including coupons described in clause (i). Interim Asset Cash Flows will not include any payments made with respect to any Transferred Assets that were due prior to the Commitment Agreement Date and any other cash flows not principal- or interest-related (such as class action payment receipt and litigation payment) relevant to events occurring prior to the Commitment Agreement Date. For purposes of paragraph 3.b, which relates to “Schedule 2 Assets” instead of “Transferred Assets,” the reference in this definition to “Transferred Assets” shall instead refer to “Schedule 2 Assets.” [***]. |
oo. | “Knowledge” means actual knowledge after making appropriate inquiry. |
pp. | “Lien” means any lien, mortgage, security interest, pledge, deposit, encumbrance, restrictive covenant or other similar restriction. |
qq. | “Mid Price” means, for any applicable pricing source set forth in the definition of Fair Market Value, the mid price as provided by the pricing source. |
rr. | [***]. |
ss. | “Modified GAC Form” is defined in paragraph 2. |
tt. | “NDA” is defined in paragraph 11.b. |
uu. | “Non-Exempt Prohibited Transaction” means a transaction prohibited by ERISA § 406 or Code § 4975, for which no statutory exemption or U.S. Department of Labor class exemption is available. |
vv. | “Payee” means any payee under the Contract, including annuitants, contingent annuitants, alternate payees and beneficiaries, as applicable. |
ww. | “Permitted Liens” means: |
i. | any Liens created by operation of law in respect of restrictions on transfer of securities (other than restrictions relating to the transfer of a Transferred Asset on the Premium Due Date in violation of applicable law); or |
ii. | with respect to any Transferred Asset, any transfer restrictions or other limitations on assignment, transfer or the alienability of rights under any indenture, debenture or other similar governing agreement to which such assets are subject (other than restrictions relating to the transfer of such an asset on the Premium Due Date in violation of any such restriction). |
xx. | “Plan” is defined in the preamble. |
yy. | “Plan Asset” means an asset of the Plan within the meaning of ERISA. |
zz. | “Plan Governing Documents” is defined in paragraph 8.b.iii. |
aaa. | “Plan Trust” means the Weyerhaeuser Company Master Retirement Trust. |
bbb. | “Plan Trustee” means The Bank of New York Mellon in its capacity as trustee for the Plan Trust. |
ccc. | “Preliminary Production Data File” is defined in Schedule 7. |
ddd. | “Premium Amount” is defined in paragraph 3. |
eee. | “Premium Due Date” means [***]. |
fff. | “Premium Due Date Transfers” is defined in paragraph 3. |
ggg. | “Projected RBC Ratio” means, as of the day of determination, the projection of the RBC Ratio as of [***]. |
hhh. | “Proposal” is defined in paragraph 1.b. |
iii. | “RBC Ratio” means the company action level risk-based capital ratio of Insurer, which will be calculated in a manner consistent with the requirements and methodologies prescribed under Iowa law, as applied by Insurer in the ordinary course of its business, consistent with its historic practice. |
jjj. | “Schedule 2 Asset” means each asset listed from time to time on Schedule 2, [***]. |
kkk. | “Scheduled GAC Issuance Date” means on or before the date that is [***] Business Days after the Commitment Agreement Date or, if applicable, and, if later, by the date that is five Business Days following the final resolution of any arbitration disputes in accordance with Schedule 4, or such later date agreed upon by the Company and Insurer. |
lll. | “SEC” is defined in paragraph 4.b. |
mmm. | “Specimen GAC Form” is defined in paragraph 1.a. |
nnn. | “Transferred Asset” means each Eligible Asset transferred to and received by Insurer by the Cut-Off Time on the Premium Due Date. Until valid title to an Eligible Asset has transferred to Insurer, such asset is not a Transferred Asset. |
ooo. | “Transferred Asset Market Value” means (i) the close-of-market Fair Market Value of a Transferred Asset as of the close of business on the Business Day prior to the Commitment Agreement Date, plus (ii) accrued interest on such Transferred Asset as of the close of business on the Business Day prior to the Commitment Agreement Date. |
ppp. | “Transferred Asset Valuation” means the sum of the Transferred Asset Market Value for each Transferred Asset. |
qqq. | “Update File” is defined in Schedule 7. |
rrr. | “Welcome Kit” is defined in paragraph 5.a. |
sss. | “Welcome Kit Mailing Date” is defined in paragraph 5.a. |
10. | Indemnification by Insurer. |
11. | Miscellaneous. |
a. | This Commitment Agreement, together with the Schedules to this Commitment Agreement, which are incorporated by reference and made a part of this Commitment Agreement as if fully set forth herein, and the NDA together constitute the sole and entire agreement of the parties to this Commitment Agreement with respect to the subject matter contained herein and therein. [***]. The parties each hereby acknowledge that they jointly and equally participated in the drafting of this Commitment Agreement and all other agreements contemplated hereby, and no presumption will be made that any provision of this Commitment Agreement will be construed against any party by reason of such role in the drafting of this Commitment Agreement or any other agreement contemplated hereby. No amendment of any of the provisions hereof shall be effective unless set forth in writing and signed by each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No failure to exercise, or delay in exercising, any right, remedy, power, or privilege arising from this Commitment Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power, or privilege. |
b. | Notwithstanding anything to the contrary in the Mutual Non-Disclosure Agreement, dated as of October 31, 2018, among the Company, [***] (the “NDA”), (i) nothing in this Commitment Agreement or the NDA shall be construed to prohibit Insurer, the Company, the Plan, or the Independent Fiduciary from [***], and (ii) Insurer will not be required to return or destroy any Confidential Information (as defined in the NDA) and will not be restricted in its use or disclosure of any Confidential Information related to Payees, annuity payments under the Contract or the pricing or underwriting of the Contract, received from another party, provided, that Insurer will use such Confidential Information only in compliance with all applicable laws relating to privacy of personally identifying information and only for purposes of performing its obligations under this Commitment Agreement and the Contract. |
c. | This Commitment Agreement shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction). Any legal suit, action, or proceeding arising out of or relating to this Commitment Agreement or the transactions contemplated hereby may be instituted in the courts of the State of New York in each case located in the city of New York and County of New York, and each party hereby irrevocably submits to the non-exclusive jurisdiction of such courts in any suit, action, or proceeding. The parties agree that irreparable damage may occur if any provisions of this Commitment Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to seek equitable relief, including injunctive relief or specific performance of the terms hereof, in addition to any other remedy to which they are entitled at law or in equity. To the fullest extent permitted by law, none of the parties will be liable to any other party for any punitive or exemplary damages of any nature in respect of matters arising out of this Commitment Agreement. |
d. | Notices. All notices, requests and other communications to any party hereunder shall be in writing (including electronic transmission) and shall be given: |
i. | if to Insurer: |
ii. | if to the Company: |
iii. | If to Independent Fiduciary: |
e. | Insurer will comply, and will ensure that all of its affiliates, agents, and subcontractors comply, with all applicable laws and regulations governing the confidential information of all Payees, including those laws |
f. | Insurer, the Company and the Independent Fiduciary shall not assign or transfer this Commitment Agreement or any of its rights or obligations hereunder without the prior written consent of the other parties. Any assignment or transfer in violation of this paragraph 11.f. will be null and void from the outset, without any effect whatsoever. |
g. | This Commitment Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. |
Weyerhaeuser Company | Athene Annuity and Life Company |
By: /s/ Russell Hagen | By: /s/ Sean Brennan |
Print Name: Russell Hagen | Print Name: Sean Brennan |
Title: SVP, CFO | Title: Head of Pension Risk Transfer |
STATE STREET GLOBAL ADVISORS TRUST COMPANY, acting solely in its capacity as Independent Fiduciary of the Plan | |
By: /s/ Denise Sisk | |
Print Name: Denise Sisk | |
Title: Managing Director |
Contract-Holder: | Plan: |
[ABC Company] | [Pension Plan of ABC Company] |
Trust: [XYZ Trust] | |
Group Annuity Contract No.: [123456] | Jurisdiction: [Ohio] |
Effective date: [12/01/2017] | Contribution Amount as of Effective Date: $[999,999] |
Contribution Adjustment Amount: [None, as of 12/01/2017] | |
Total Contribution Amount as of | |
[Date]: $[999,999] | |
Pages Attached: 1-[], Cash and Transferred Assets Exhibit and Annuity Exhibits | |
[ABC Company | ATHENE ANNUITY AND LIFE COMPANY |
123 Anywhere St. | 7700 Mills Civic Parkway |
Small Town, VA 12345] | West Des Moines, Iowa 50266-3862 |
By: | By: |
[Name] | |
Print Name: | Title: [President] |
Title: | By: |
[Name] | |
Date: | Title: [Secretary] |
Date: |
PROVISION I | DEFINITIONS, SEPARATE ACCOUNT OPPERATIONS, AND | 1 | |
TERMINATION OF CONTRACT | |||
1.1 | Definitions | 1 | |
1.2 | Agreement to Pay Contribution Amount; Deposit into the Separate Account | 5 | |
1.3 | Agreement to Make Annuity Payments | 6 | |
1.4 | The Separate Account that Supports this Contract | 6 | |
1.5 | Investments Held in Separate Account | 6 | |
1.6 | Insulation of Separate Account Assets | 7 | |
1.7 | Expenses; Establishing Reserves; Withdrawal of Assets from the Separate Account | 7 | |
1.8 | Process for Making Annuity Payments | 8 | |
1.9 | Rights of Covered Lives and Contingent Lives | 8 | |
1.10 | Termination of Contract | 8 | |
1.11 | Small Account Conversion | 8 | |
PROVISION II | PAYMENT TERMS AND CONDITIONS FOR FORMS OF ANNUITIES | 9 | |
2.1 | Covered Lives, Contingent Lives, and Beneficiaries | 9 | |
2.2 | Annuity Forms | 9 | |
2.3 | No Assignment by Covered Lives and Contingent Lives | 20 | |
2.4 | Proof of Continued Existence for Life Annuities; Escheatment | 20 | |
2.5 | Misstatements | 21 | |
2.6 | Overpayments and Underpayments | 21 | |
2.7 | Concerning Designations | 22 | |
2.8 | Concerning Qualified Domestic Relations Orders | 23 | |
2.9 | Payments to Representatives | 24 | |
2.10 | Certificates | 24 | |
PROVISION III | GENERAL TERMS | 24 | |
3.1 | General Understanding | 24 | |
3.2 | Confidentiality | 24 | |
3.3 | Communications | 25 | |
3.4 | Currency; Payments | 25 | |
3.5 | Reliance on Records; Correction of Errors | 25 | |
3.6 | Contract-Holder | 26 | |
3.7 | No Implied Waiver | 26 | |
3.8 | Changes | 26 | |
3.9 | Limitation on Payments | 27 | |
3.10 | Consideration; Entire Contracts - Construction | 27 | |
3.11 | Third Party Beneficiaries | 27 |
Covered Life | Covered Life Social | Covered Life | Covered Life Date | Covered Life | [Lump Sum Death | [Month of | [COLA |
Security Number | Gender | of Birth | Amount | Benefit Amount] | Increase] | Percentage] |
1. | Availability of Arbitration. Arbitration is available as a means of dispute resolution only to the extent the Commitment Agreement explicitly states that the Company or Independent Fiduciary may commence arbitration in accordance with this schedule. Absent such explicit authorization, arbitration is not available. |
2. | Rules and Procedures. Where this Commitment Agreement explicitly states that arbitration is available as a means of dispute resolution for a dispute between the parties, such dispute shall be resolved by arbitration conducted by one arbitrator, in accordance with Commercial Arbitration Rules and Expedited Procedures for Large, Complex Commercial Disputes of the American Arbitration Association ("AAA"), as such rules and procedures are in effect at the time of the arbitration, except as they may be modified herein or by mutual agreement of the parties. |
3. | Location. The seat of the arbitration shall be New York City, New York, at a mutually agreed upon location, or in the absence of agreement at the New York City offices of the AAA. |
4. | Arbitrator. The parties shall jointly engage a mutually agreed upon firm to serve as the arbitrator (such firm, the "Approved Firm"), within five Business Days after a dispute notice is delivered by either party to the other party to resolve any arbitration dispute. If the parties are unable to engage an Approved Firm within such time period on such terms, then the AAA shall appoint an arbitrator within three Business Days thereafter. |
5. | Damages. The arbitrator shall resolve any arbitration dispute within the range of difference between (a) any amounts or values as calculated or determined by Insurer and (b) any amounts or values as calculated or determined by the Company. The arbitrator will have no authority to award any other damages other than as provided for herein. |
6. | Judgment. Any arbitration award shall be final and binding on the parties. The parties shall undertake to carry out any award without delay and waive their respective rights to any form of recourse based on grounds other than personal conflict of interest of the arbitrator that was undisclosed at the time of the arbitrator's appointment. Judgment upon the award may be entered by any court having jurisdiction thereof or having jurisdiction over the parties, as applicable, or their respective assets. |
7. | Costs. The Company and Insurer shall share the fees and disbursements of the arbitrator equally (i.e., on a 50%/50% basis). The parties shall each bear their own costs and expenses incurred in connection with prosecuting and/or defending any arbitration dispute. |
8. | [***]. |
9. | Amended Schedules. If applicable, the parties will promptly amend the schedules hereto to reflect any arbitration decision. |
[***] | [***] | |||
[***] | [***] | [***] | [***] | [***] |
[***] [***] | [***] | [***] | [***] [***] | [***] [***] |
Deliverable | Delivery Date | Action by the Company/Plan | Action by Insurer |
Preliminary Production Data File | January 30, 2019 | Delivery Preliminary Production Data File | Receive and reconcile Preliminary Production Data File to begin data cleanse and data mapping |
Check Register (as of February 1, 2019) | January 30, 2019 | Deliver Check Register | Receive Check Register |
Final Production Data File | March 15, 2019 | Deliver Final Production Data File | Receive Final Production Data File |
Check Register (as of April 1, 2019) | March 19, 2019 | Deliver Check Register | Receive Check Register |
Update File | April 1, 2019 | Deliver Update File | Receive Update File |
Update File | April 22, 2019 | Delivery Update File | Receive Update File |
[***] | |
[***] | |
[***] | [***] |
[***] | [***] |
[***] | [***] |
[***] | [***] |
[***] | [***] |
[***] | |
[***] | [***] |
[***] | [***] |
[***] | [***] |
[***] | |
[***] | [***] |
[***] | [***] |
[***] | [***] |
[***] | [***] |
[***] | [***] |
[***] | [***] |
Name | State or Country of Incorporation |
Weyerhaeuser Timber Operations I, L.L.C. | Delaware |
Weyerhaeuser NR Company | Washington |
B&C Water Resources, LLC | Delaware |
D&E Water Resources, LLC | Delaware |
Greenway Properties, LLC | Maine |
Highland Mineral Resources, LLC | Delaware |
King Road Aggregates LLC | Delaware |
ver Bes' Insurance Company | Vermont |
Weyerhaeuser Asset Management LLC | Delaware |
Weyerhaeuser Realty Investors, Inc. | Washington |
Weyerhaeuser International, Inc. | Washington |
Weyerhaeuser (Asia) Limited | Hong Kong |
Weyerhaeuser China, Ltd. | Washington |
Weyerhaeuser Company Limited | Canada |
317298 Saskatchewan Ltd. | Saskatchewan |
Weyerhaeuser (Carlisle) Ltd. | Barbados |
Camarin Limited | Barbados |
Weyerhaeuser Japan Ltd. | Japan |
Weyerhaeuser Japan Ltd. | Delaware |
WREDCO I LLC | Delaware |
WREDCO II LLC | Delaware |
Weyerhaeuser SC Company | Washington |
Weyerhaeuser Services, Inc. | Delaware |
Weyerhaeuser WPF LLC | Washington |
WY Carolina Holdings LLC | Delaware |
WY Georgia Holdings 2004 LLC | Delaware |
WY Tennessee Holdings LLC | Delaware |
1. | I have reviewed this annual report on Form 10-K of Weyerhaeuser Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact 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; |
4. | 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; |
b) | 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; |
c) | 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 |
d) | 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. |
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 |
b) | 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. |
Date: | February 15, 2019 |
/s/ DEVIN W. STOCKFISH | |
Devin W. Stockfish President and Chief Executive Officer |
1. | I have reviewed this annual report on Form 10-K of Weyerhaeuser Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact 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; |
4. | 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; |
b) | 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; |
c) | 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 |
d) | 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. |
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 |
b) | 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. |
Date: | February 15, 2019 |
/s/ RUSSELL S. HAGEN | |
Russell S. Hagen Senior Vice President and Chief Financial Officer |
/s/ DEVIN W. STOCKFISH | |
Devin W. Stockfish | |
President and Chief Executive Officer | |
Date: | February 15, 2019 |
/s/ RUSSELL S. HAGEN | |
Russell S. Hagen | |
Senior Vice President and Chief Financial Officer | |
Date: | February 15, 2019 |
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