EX-99.2 5 y59199exv99w2.htm EX-99.2: UNAUDITED COMBINED BALANCE SHEETS EX-99.2
Exhibit 99.2
WEYERHAEUSER CONTAINERBOARD,
PACKAGING AND RECYCLING BUSINESS
Combined Financial Statements
March 30, 2008 and December 30, 2007
(With Report of Independent Registered Public Accounting Firm Thereon)

 

 

INDEX TO FINANCIAL STATEMENTS
         
    Page  
Weyerhaeuser Containerboard, Packaging and Recycling Business
        
 
        
Report of Independent Registered Public Accounting Firm
     F-2  
 
        
Combined Balance Sheets as of March 30, 2008 and December 30, 2007
     F-3  
 
        
Combined Statements of Operations for the thirteen weeks ended March 30, 2008 and April 1, 2007
     F-4  
 
        
Combined Statements of Business Unit Equity for the thirteen weeks ended March 30, 2008 and April 1, 2007
     F-5  
 
        
Combined Statements of Cash Flows for the thirteen weeks ended March 30, 2008 and April 1, 2007
     F-6  
 
        
Notes to Combined Financial Statements
     F-7  

F-1

 

Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Weyerhaeuser Company:
We have reviewed the combined balance sheet of Weyerhaeuser Containerboard, Packaging and Recycling Business (a Business Unit of Weyerhaeuser Company) as of March 30, 2008, and the related combined statements of operations, business unit equity, and cash flows for the thirteen-week periods ended March 30, 2008 and April 1, 2007. These combined financial statements are the responsibility of the Company’s management.
We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to the combined financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the combined balance sheet of Weyerhaeuser Containerboard, Packaging and Recycling Business (a Business Unit of Weyerhaeuser Company) as of December 30, 2007, and the related combined statements of operations, business unit equity and cash flows for the year then ended (not presented herein); and in our report dated March 19, 2008, we expressed an unqualified opinion on those combined financial statements. In our opinion, the information set forth in the accompanying combined balance sheet as of December 30, 2007, is fairly stated, in all material respects, in relation to the combined balance sheet from which it has been derived.
/s/ KPMG LLP
Seattle, Washington
May 8, 2008

F-2

 

WEYERHAEUSER CONTAINERBOARD, PACKAGING AND RECYCLING BUSINESS
(a Business Unit of Weyerhaeuser Company)
Combined Balance Sheets
(Dollar amounts in millions)
(Unaudited)
                 
    March 30,     December 30,  
    2008     2007  
Assets
                
Current assets:
                
Cash
   $ 6     $ 3  
Receivables, less allowances of $7 and $7
     630       640  
Inventories (note 3)
     454       435  
Prepaid expenses
     11       11  
Deferred income taxes
     19       19  
 
            
Total current assets
     1,120       1,108  
Property, plant and equipment less accumulated depreciation of $3,366 and $3,282
     2,561       2,601  
Construction in progress
     165       150  
Goodwill
     1,253       1,253  
Deferred pension and other assets
     63       63  
 
            
Total assets
   $ 5,162     $ 5,175  
 
            
Liabilities and Business Unit Equity
                
Current liabilities:
                
Accounts payable and accrued liabilities
   $ 402     $ 440  
 
            
Total current liabilities
     402       440  
Environmental and landfill reserves (note 5)
     8       7  
Other liabilities
     12       10  
Deferred income taxes
     682       687  
 
            
Total liabilities
     1,104       1,144  
Contingencies and commitments (note 5)
                
Business Unit equity
     4,058       4,031  
 
            
Total liabilities and Business Unit equity
   $ 5,162     $ 5,175  
 
            
See accompanying notes to combined financial statements.

F-3

 

WEYERHAEUSER CONTAINERBOARD, PACKAGING AND RECYCLING BUSINESS
(a Business Unit of Weyerhaeuser Company)
Combined Statements of Operations
(Dollar amounts in millions)
(Unaudited)
                 
    Thirteen weeks     Thirteen weeks  
    ended     ended  
    March 30,     April 1,  
    2008     2007  
Sales (a)
   $ 1,298     $ 1,233  
Costs and expenses:
                
Cost of products sold (b)
     1,045       999  
Depreciation and amortization
     72       76  
Selling, general and administrative including allocated Weyerhaeuser Company costs
     91       89  
Charges for closure of facilities
     8       2  
Other operating income
     (10 )     (2 )
 
            
Total costs and expenses
     1,206       1,164  
 
            
Operating income
     92       69  
Income tax expense
     31       23  
 
            
Net earnings
   $ 61     $ 46  
 
            
 
(a)   Includes sales of $1 and $8 to related parties.
 
(b)   Includes purchases of $74 and $70 from related parties.
See accompanying notes to combined financial statements.

F-4

 

WEYERHAEUSER CONTAINERBOARD, PACKAGING AND RECYCLING BUSINESS
(a Business Unit of Weyerhaeuser Company)
Combined Statements of Business Unit Equity
(Dollar amounts in millions)
(Unaudited)
                 
    Thirteen weeks     Thirteen weeks  
    ended     ended  
    March 30,     April 1,  
    2008     2007  
Balance, beginning
   $ 4,031     $ 4,083  
Comprehensive income:
                
Net earnings
     61       46  
Foreign currency translation adjustment
     1       (1 )
Net change in cash flow hedge fair value adjustments, net of tax expense of $7 and $7
     11       11  
 
            
Comprehensive income
     73       56  
Net payments from (to) Weyerhaeuser
     (43 )     17  
Net non-cash distributions to Weyerhaeuser
     (3 )     —  
 
            
Balance, ending
   $ 4,058     $ 4,156  
 
            
See accompanying notes to combined financial statements.

F-5

 

WEYERHAEUSER CONTAINERBOARD, PACKAGING AND RECYCLING BUSINESS
(a Business Unit of Weyerhaeuser Company)
Combined Statements of Cash Flows
(Dollar amounts in millions)
(Unaudited)
                 
    Thirteen weeks     Thirteen weeks  
    ended     ended  
    March 30,     April 1,  
    2008     2007  
Cash provided by (used in):
                
Operations:
                
Net earnings
   $ 61     $ 46  
Items not involving cash:
                
Depreciation and amortization
     72       76  
Deferred income taxes, net
     (10 )     (5 )
Charges for closures of facilities
     8       2  
Gain on disposition of assets
     (1 )     —  
Changes in non-cash operating working capital:
                
Receivables
     10       (49 )
Inventories
     (19 )     (15 )
Prepaid expenses
     —       2  
Deferred pension and other assets
     —       1  
Accounts payable and accrued liabilities
     (45 )     (41 )
Other liabilities
     3       1  
 
            
Net cash provided by operating activities
     79       18  
Investments:
                
Additions to property, plant and equipment
     (34 )     (38 )
Proceeds from sale of property, plant and equipment
     1       1  
 
            
Net cash used in investing activities
     (33 )     (37 )
Financing:
                
Net payments (to) from Weyerhaeuser
     (43 )     17  
 
            
Net cash provided by (used in) financing activities
     (43 )     17  
 
            
Change in cash
     3       (2 )
Cash, beginning
     3       4  
 
            
Cash, ending
   $ 6     $ 2  
 
            
See accompanying notes to combined financial statements.

F-6

 

WEYERHAEUSER CONTAINERBOARD, PACKAGING AND RECYCLING BUSINESS
(a Business Unit of Weyerhaeuser Company)
Notes to Combined Financial Statements
(Dollar amounts in millions)
(Unaudited)
1. Basis of Presentation:
These combined financial statements include the accounts of the containerboard, packaging, and recycling operations of Weyerhaeuser Company (“WY”). All significant transactions and balances between operations within the Business Unit have been eliminated.
The accompanying unaudited combined financial statements and notes to combined financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the Business Unit’s financial position, results of operations, and cash flows for the interim periods presented. Except as otherwise disclosed in the notes to the combined financial statements, such adjustments are of a normal, recurring nature. The combined financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission pertaining to interim financial statements; as such certain disclosures normally provided in accordance with accounting principles generally accepted in the United States have been omitted. These combined financial statements should be read in conjunction with the audited combined financial statements of the Business Unit for the year ended December 30, 2007.
Financial statements historically have not been prepared for the Business Unit. The accompanying combined financial statements have been derived from historical accounting records of WY. The historical operating results and cash flows of the Business Unit may not be indicative of what they would have been had the Business Unit been a stand-alone entity, nor are they necessarily indicative of what the Business Unit’s operating results and cash flows may be in the future. The combined statements of operations for the Business Unit include allocations of certain costs from WY directly related to the operations of the Business Unit.
In March 2008, WY entered into an agreement to sell the Business Unit to International Paper, a publicly traded global paper and packaging company, for $6 billion in cash. All costs incurred by WY in conjunction with this transaction are not included in these carve out financial statements as they are considered costs of WY and not directly related to the financial position, results of operations, and cash flows of the Business Unit.
2. Accounting Pronouncements:
Prospective accounting pronouncements:
Fair value measurements—In September 2006, the FASB issued Statement No. 157, Fair Value Measurements. Statement 157 provides a common definition of fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure about such fair value measurements. Statement 157 will apply prospectively to nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis as of the beginning of 2009 and applies to all other fair value measurements as of the beginning of 2008. The provisions of Statement 157 adopted at the beginning of 2008 did not have a material effect on the Business Unit’s combined financial statements. The primary items that will be affected by the remaining provisions of Statement 157 are the Business Unit’s annual goodwill impairment test and long-lived asset impairment tests. While it is unable to forecast the amount of impairment charges that might be recognized in future periods, the Business Unit does not expect Statement 157 to materially change the fair value amounts that will be calculated in the future relative to the fair value amounts that would be calculated if Statement 157 were not adopted.
Business combinations and noncontrolling interests—In December 2007, the FASB issued Statement No. 141 (revised 2007), Business Combinations and Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51. Statement 141R will change how business combinations are accounted for and will affect financial statements both on the acquisition date and in subsequent periods. Statement 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. Statement 141R and Statement 160 are effective for fiscal years beginning on or after December 15, 2008. Statement 141R will be applied prospectively. Statement 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements of Statement 160 will be applied prospectively. Early adoption is prohibited for both standards. The Business Unit is currently evaluating the requirements of Statement 141R and Statement 160 and has not yet determined the effect on its financial statements.

F-7

 

WEYERHAEUSER CONTAINERBOARD, PACKAGING AND RECYCLING BUSINESS
(a Business Unit of Weyerhaeuser Company)
Notes to Combined Financial Statements—(Continued)
(Dollar amounts in millions)
(Unaudited)
Disclosures about derivative instruments and hedging activities—In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities. Statement 161 requires companies to disclose the fair value of derivative instruments and their gains or losses in tabular format and information about credit-risk-related contingent features in derivative agreements, counterparty credit risk, and strategies and objectives for using derivative instruments. Statement 161 requires prospective adoption for interim periods and fiscal years beginning after November 15, 2008. The Business Unit is currently evaluating the requirements of Statement 161 and has not yet determined the effect on its financial statements.
3. Inventories:
                 
    March 30,     December 30,  
    2008     2007  
Containerboard
   $ 174     $ 170  
Packaging
     80       74  
Chips, logs and fiber
     36       36  
Materials and supplies
     164       155  
 
            
 
   $ 454     $ 435  
 
            
4. Employee benefit plans:
The Business Unit participates in several retirement programs for its employees which are sponsored by WY. This includes pension plans that are qualified under the Internal Revenue Code (“qualified”) as well as a plan that provides benefits in addition to those provided under the qualified plans for a select group of employees, which is not qualified under the Internal Revenue Code (“unqualified”). WY also provides benefits under a postretirement health care and life insurance plan to eligible salaried employees. Benefits provided under the postretirement health care and life insurance plan are currently funded by the general assets of WY. The measurement date for all plans sponsored by WY is the end of the fiscal year.
Other than one U.S. pension plan (“Albany Plan”) and one Mexican pension plan (“Mexico Plan”), management determined that it was not practical to allocate a portion of WY’s pension assets or to prepare detailed employee benefit plan disclosures for the stand-alone combined financial statements of the Business Unit in a manner that would be consistent with the level of detail provided in WY’s consolidated financial statements.
The Business Unit recognized net pension income of $13 million and post retirement benefits expense of $5 million for total income of $8 million during the thirteen-weeks ended March 30, 2008, compared to a total expense of $2 million during the thirteen-week period ended April 1, 2007.

F-8

 

WEYERHAEUSER CONTAINERBOARD, PACKAGING AND RECYCLING BUSINESS
(a Business Unit of Weyerhaeuser Company)
Notes to Combined Financial Statements—(Continued)
(Dollar amounts in millions)
(Unaudited)
The components of net periodic benefit income for the Albany Plan and Mexico Plan are as follows:
                 
    Thirteen weeks     Thirteen weeks  
    ended     ended  
    March 30,     April 1,  
    2008     2007  
Service cost
   $ —     $ —  
Interest cost
     1       1  
Expected return on plan assets
     (2 )     (2 )
 
            
 
   $ (1 )   $ (1 )
 
            
5. Legal proceedings, commitments and contingencies:
(a)   Legal proceedings
 
    The Business Unit is subject to claims and other litigation matters that have arisen in the ordinary course of business. Although the final outcome of any legal proceeding is subject to a great many variables and cannot be predicted with any degree of certainty, management currently believes that the ultimate outcome of these legal proceedings will not have a material adverse effect on the Business Unit’s results of operations, cash flows or financial position.
 
(b)   Environmental matters
 
    The Business Unit is a party to various proceedings relating to the cleanup of hazardous waste sites under the Comprehensive Environmental Response Compensation and Liability Act, commonly known as “Superfund,” and similar state laws. The EPA and/or various state agencies have notified the Business Unit that it may be a potentially responsible party with respect to other hazardous waste sites as to which no proceedings have been instituted against the Business Unit. As of March 30, 2008, the Business Unit has established reserves totaling $2 million for estimated remediation costs on the three active sites across its operations. Environmental remediation reserves totaled $1 million at the end of 2007. Based on currently available information and analysis, the Business Unit believes that it is reasonably possible that costs associated with all identified sites may exceed current accruals by up to $3 million, which may be incurred over several years. This estimate of the upper end of the range of reasonably possible additional costs is much less certain than the estimates upon which accruals are currently based, and utilizes assumptions less favorable to the Business Unit among the range of reasonably possible outcomes. In estimating both its current accruals for environmental remediation and the possible range of additional future costs, the Business Unit has assumed that it will not bear the entire cost of remediation of every site to the exclusion of other known potentially responsible parties who may be jointly and severally liable. The ability of other potentially responsible parties to participate has been taken into account, generally based on each party’s financial condition and probable contribution on a per-site basis. No amounts have been recorded for potential recoveries from insurance carriers.

F-9