Blackmon, Amanda
From: Nathan Siria
Permits;
Weyerhaeuser Dierks is pleased to submit the 5182-WR-1 permit renewal application package. If you have any questions, please don’t hesitate to contact FTN (Ray Wieda, Nathan Siria, or Chris Ratliff – 501-225-7779) or Weyerhaeuser (Shelly Boykin - 870-286-4224).
Nathan Siria FTN Associates, Ltd. 3 Innwood Circle, Suite 220 Little Rock, AR 72211 Office (501) 225-7779 Cell (501) 529-3052 [email protected] www.ftn-assoc.com
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ATTACHMENT 1 Permit Application Arkansas Department of Environmental Quality No-Discharge Section Permit Application Waste Storage/Land Application
Permit No.: AFIN: SIC Code: NAICS Code: (Office Use Only) (Office Use Only)
1. Permit Action and Type (Please check one of the following): Operator Type: Corporation (State of Incorporation:______)Washington Limited Liability Company (State of LLC:______)
Partnership Sole Proprietorship/Private Other ______
New Permit Renewal Modification of Permit, Describe: ______Biosolids Industrial Waste Oil and Gas Waste Treated Effluent Residuals
Water Treatment Residuals Water Based Drilling Fluids ■ Other ______Wet Deck Water and Stormwater______
2. Permittee Legal Name and Mailing Address: (Must Match Arkansas’s Secretary of State) Owner Name: Weyerhaeuser NR Company
Address: PO Box 38 Phone Number: (870) 286-4224
City: Dierks State: Arkansas Zip Code: 71833
Contact Person: (Mr. / Mrs. / Ms.) Ms. Shelly Boykin Email: [email protected]
Title: Environmental Manager Phone Number: (870) 286-4235 Cell Number:
3. Facility Location (physical address is required; NO P.O. BOX): Facility Name: Weyerhaeuser NR Company - Dierks Mill
Address (911 Address): 120 Main Ave. Phone Number: (870) 286-4224
City: Dierks State: Arkansas Zip Code: 71833
1/4 Sec.: SE Section: 30 Township: 7S Range: 28W
Latitude: __34__Deg __17___Min _14____Sec. Longitude____94 Deg __00___Min __32___Sec. Source Datum: NAD83
County: Howard Nearest Town: Dierks
Nearest Stream: Holly Creek Distance: 2,000 (ft) Stream Segment: 1C
4. Consultant Information: Name: Raymond Wieda, PE Consulting Firm: FTN Associates, Ltd.
Email: [email protected] Phone Number: (501) 225-7779
Address: 3 Innwood Circle, Suite 220 Cell Number:
City: Little Rock State: Arkansas Zip Code: 72211
ATTACHMENT 2 Waste Management Plan
WASTE MANAGEMENT PLAN NO DISCHARGE – LAND APPLICATION PERMIT No. 5182-WR-1
WEYERHAEUSER NR COMPANY DIERKS MILL AFIN NO. 31-00016
MARCH 28, 2019
WASTE MANAGEMENT PLAN NO DISCHARGE – LAND APPLICATION PERMIT No. 5182-W
WEYERHAEUSER NR COMPANY DIERKS MILL AFIN NO. 31-00016
Prepared for
Weyerhaeuser NR Company Dierks Mill 120 Main Avenue Dierks, AR 71833
Prepared by
FTN Associates, Ltd. 3 Innwood Circle, Suite 220 Little Rock, AR 72211-2492
FTN No. 06543-0002-017
March 28, 2019
March 28, 2019
TABLE OF CONTENTS
ENGINEER’S CERTIFICATION ...... i 1.0 INTRODUCTION ...... 1-1 2.0 PROCESS DESCRIPTION ...... 2-1 3.0 STORAGE FACILITIES ...... 3-1 4.0 WASTE TRANSPORT AND APPLICATION METHODS ...... 4-1 5.0 WASTEWATER CHARACTERISTICS ...... 5-1 6.0 SITE MANAGEMENT PLAN ...... 6-1 6.1 Site Management Guidelines ...... 6-1 6.2 Wastewater Application Rate Calculations ...... 6-5 6.3 Soils Analysis...... 6-6 6.4 Nearest Stream ...... 6-7 6.5 Cover Crop ...... 6-7 6.6 Field Slope ...... 6-8 7.0 LAND APPLICATION SITE ...... 7-1
LIST OF APPENDICES
APPENDIX A: Site Maps APPENDIX B: Calculations and Data Summary APPENDIX C: Soil and Water Laboratory Analytical Reports
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LIST OF TABLES
Table 5.1 Irrigation water characteristics ...... 5-1
Table 6.1 Calculated Loading Rates ...... 6-3 Table 6.2 Soil Characteristics ...... 6-6 Table 6.3 Mass loading rates...... 6-5 Table 6.4 Analytical results from soil samples ...... 6-7
LIST OF FIGURES
Figure 1.1 USGS topographic map ...... 1-3 Figure 1.2 County map ...... 1-4 Figure 1.3 Land uses in the project area ...... 1-5
Figure 2.1 System flow schematic diagram ...... 2-3
Figure 3.1 Storage facilities layout...... 3-2
Figure 6.1 Water application worksheet...... 6-2
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1.0 INTRODUCTION
The Dierks facility is located on Highway 70 at the west end of Dierks, Arkansas, in Howard County. The Plant operations site is located on approximately 536 acres of land, on which the major structures include an office, shop, lumber production plant, disposal areas, and reservoir. Tractor-trailers deliver timber to the mill where logs are either processed immediately or stored onsite. Major parts of the mill property are devoted to the storage, sorting, and transportation of logs. Logs are delivered to the merchandiser and/or Crane Area and are processed into sawlogs and pulpwood (wood not suitable for lumber). Sawlogs are sent to the sawmill and pulpwood is chipped for offsite shipment to pulp mills. Bark is stored on site or shipped offsite to customers as mulch, or disposed of at an onsite landfill. Sawlogs that enter the sawmill are debarked and cut into lumber. Lumber is dried in continuous dry kilns (CDKs) and sent to the planer for processing into finished lumber. Sawmill wood waste is collected and stored on concrete pads where it is then either shipped offsite or placed in an onsite landfill. Wood ash from the CDKs is disposed onsite. Demolition of the former plywood facility has been completed. The concrete slab from the plywood facility remains in place. Part of the slab has been converted into covered storage for equipment and parts. When logs are received by the Dierks Mill they are stored in the log storage area (wet deck of crane area), where they are sprayed regularly to prevent them from drying and splitting. Runoff from the wet deck is stored in the Spray Pond and is reused at the wet deck. With the occurrence of large storm events, overflow from the spray pond flows over a concrete overflow structure into Retention Pond 004, where it is held before being pumped and distributed over the land application area or is discharged to Holly Creek from Outfall 004.
The Arkansas Department of Environmental Quality (ADEQ) has regulations that restrict the discharge of wastewater from any industrial process. FTN Associates, Ltd. (FTN) has updated this Waste Management Plan (the Plan) based on the latest soil and water data. The
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facility will continue to land apply the Pond 004 water to a forested or grassed area that is located adjacent to the plant. The land applied water will irrigate the forested land while also serving to provide better control of water levels in the pond system. This Plan provides details for this spraying system and the conditions under which it will be utilized. The Weyerhaeuser Dierks Mill is located in the southeast quarter of Section 30, Township 7 South, Range 28 West, in Howard County, Arkansas, with the entrance gate located at latitude 34o 07' 01.69" and longitude 94o 00' 56.19". Figures 1.1 and 1.2 (USGS topographic map and county map [Full size map included in Appendix A], respectively) illustrate the location of the facility, the nearest potentially affected stream (which runs through the property), and the location of the community of Dierks. Figure 1.3 illustrates the designated land uses for lands surrounding the mill (USGS MLRC 2006).
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Figure 1.1. USGS topographic map.
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Figure 1.2. County map.
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Figure 1.3. Land uses in the project area.
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2.0 PROCESS DESCRIPTION
Sources that contribute makeup water to the system include water used on the wet deck in the log storage areas and stormwater that falls on the wet deck, spray pond, and Retention Pond 004. These sources are shown schematically on Figure 2.1. During the wet-weather months, too much water can be collected, requiring that some water be eliminated from the system. Because this water is used on the wet deck, any stormwater would be considered a process wastewater and is permitted under AR0002917. The beneficial reuse of water from the pond is an integral part of the Dierks Mill operations. Runoff from the wet deck flows into the Spray Pond, where it is stored pending recirculation back to the wet deck. When the Spray Pond becomes full, overflow is guided through a concrete overflow structure into Retention Pond 004. Retention Pond 004 discharges to Holly Creek through National Pollutant Discharge Elimination System (NPDES) permitted Outfall 004. The NPDES permit allows discharge through Outfall 004 only if the flow in Holly Creek is 10 cubic feet per second (cfs) or greater, and discharge though Outfall 004 is limited to 2.23 cfs. Weyerhaeuser may land apply water to avoid discharge through Outfall 004 when flow conditions in Holly Creek cannot be met. In addition to helping Weyerhaeuser manage Retention Pond 004 water, land application proves irrigation for the trees and other vegetation in the area. In previous years, the Dierks Mill utilized a land application system composed of a network of permanently-installed sprinklers. The sprinklers were supplied by a pump house located at Retention Pond 004. The sprinkler system is currently out of service due to recent construction activities relating to expansion of the mill. Therefore, the system will require the installation of new sprinkler heads, piping, and valves if Weyerhaeuser continues to use this method of land application. Other possible options for land application are listed below:
Temporary sprinklers; Water tanker trucks with spray bars/nozzles, splash plates, etc.; Water tanker trucks with a means of soil incorporation/subsurface injection; and
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Mobile sprinklers (such as traveling gun).
Regardless of the application method, the water will be land applied in accordance with the procedures outlined in Section 6 of the Plan.
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2.1. System schematic flow diagram.
Figure
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3.0 STORAGE FACILITIES
Retention ponds are used to store stormwater for reuse on the wet deck logs or for land application. The spray pond is used to store excess water prior to wet deck recirculation, and Retention Pond 004 is used to store overflow water from the spray pond prior to land application. Figure 3.1 displays the layout of the storage facilities. Both ponds are considered an integral part of the mill operations. The ponds are excavated to a depth of 8 to 10 ft below grade. Any debris solids resulting from the storage of water from the wet deck spray operations or stormwater are collected in Retention Pond 004. Water collected in the wet deck spray pond is reused to wet the logs on the wet deck. However, excess water due to storm events is land-applied as beneficial use and to help reduce discharges from Outfall 004. Retention Pond 004 will overflow when the depth of water measured at the stilling well in the land application pump house reaches 89 inches. Land application water has been used to irrigate timber lands and help control pond levels. Land application cannot be done during storm events, so water levels must be reduced during dry periods to provide adequate storage during the rainfall events. The water depth in Retention Pond 004 is typically pumped down no further than a depth of 16 inches. The volumes of the spray pond and Retention Pond 004 are approximately 1.7 million gallons and 7.5 million gallons, respectively. The ponds are situated near the wetdeck operation and the land application area on the Weyerhaeuser Dierks property and are approximately located at latitude 34o 06' 56.24" and longitude 94o 00' 16.09". The storage ponds lie within the 100-year floodway, which has a base flow elevation of approximately 415.6 ft above mean sea level. The ponds are constructed with tops of pond dikes at 422 ft above mean sea level. Federal Emergency Management Agency (FEMA) Flood Insurance Rate Maps (FIRMs) for Howard County are included in Appendix A.
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3.1. Storage facilities layout.
Figure
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4.0 WASTE TRANSPORT AND APPLICATION METHODS
Water from Retention Pond 004 can be pumped from the pond to the land application area. Two 50-horsepower, 1,760-rpm, vertical stack pumps are kept in the land application pump house located at the southeast corner of Retention Pond 004. The pumps can be operated manually depending on the depth of water measured in a stilling well in the pump house, soil moisture, and weather conditions. Water may be pumped from Retention Pond 004, through the pump house, into the land application area. A 6-inch pipe connects the pumps to the main line that carries the wastewater from the pump house to the land application area. The land application area consists of approximately 22.9 acres of vegetated area lying to the northeast of Retention Pond 004 and the pump house. Valves may be installed on the pumped line that can be used to control sprinkler heads that may be placed within the land application area. The flow rate of water through the sprinkler heads is solely controlled by the capacity of the pumps and valves within the land application area. If water tanker trucks are used for land application, a record of tanker truck loads will be maintained in order to manage the amount of water applied. The amount of water applied to the site will be controlled by the procedures outlined in Section 6.1. A schematic diagram of the land application process layout can be found in Appendix A.
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5.0 WASTEWATER CHARACTERISTICS
Results of the laboratory analysis of the wastewater are provided in Table 5.1. A grab sample was taken of the wastewater directly from the pond surface. Since the ponds have a detention time that is greater than 24 hours, the samples are considered to be representative of the wastewater to be land-applied. The analytical water data are based on samples collected in 2014 and 2019. The sample was taken from the southeast corner of Retention Pond 004 at the location of the pump intake.
Table 5.1. Irrigation water characteristics.
Parameter 2019 pH 7.3 Electrical Conductivity (umhos/cm) 72.2 Biochemical Oxygen Demand (BOD - mg/L) 7.44 TSS (mg/L) 362 Oil and Grease (mg/L) < 4.65 Ammonia as N (mg/L) 0.072 TKN 2.55 Nitrate as N < 0.200 Nitrite as N < 0.304 SAR 0.238 Fecal Coliform 140 MPN/10mL Aluminum (mg/L) 40.9 Arsenic (mg/L) 0.00896 Cadmium (mg/L) < 0.0002 Calcium - Dissolved 6.23 Copper (mg/L) 0.0143 Iron (mg/L) 17.5 Lead (mg/L) 0.0125 Magnesium - Dissolved 1.43 Phosphorus (mg/L) 0.531 Potassium (mg/L) 8.36 Mercury (mg/L) < 0.200 Molybdenum (mg/L) 0.00298 Nickel (mg/L) 0.0123 Selenium (mg/L) 0.0253 Zinc (mg/L) 0.058 Residue 702 PCBs (ug/L) <0.2
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6.0 SITE MANAGEMENT PLAN
6.1 Site Management Guidelines The land application area to receive the wastewater from Retention Pond 004 is an approximately 22.9-acre tract of land (owned by the Weyerhaeuser Dierks Mill) lying northeast of Retention Pond 004. The main goals of the land application are:
To help manage discharges of stormwater and wet deck spray water from Retention Pond 004 through NPDES Outfall 004, Provide irrigation water to the timber lands, and The prevention of direct runoff of wastewater or contaminated stormwater from the application areas.
To accomplish these goals, Weyerhaeuser Dierks personnel will use the following guidelines in the application of the water:
1. Water will not be applied during rainfall events, when there is greater than 50% chance of precipitation on the day of application, or in areas where water is ponded. 2. The system will be operated when the water level measured in the pumping well for Retention Pond 004 is between 16 and 89 inches. 3. Zones in which the water is applied will be rotated to evenly apply wastewater to the land application area. 4. Water will be applied to the land application area during periods of low soil moisture. The water spray will be shut off if ponded or free-flowing water appears on the surface. A form (as shown on Figure 6.1) will be used to track the application of water and the rotation of zones. 5. Loading rates for various parameters are shown in Table 6.1(as of March 2019, Weyerhaeuser has not land applied since 2014). Plant Available Nitrogen (PAN) shall be calculated each year using similar equations. The waste must be applied at a rate (DT/acre) that provides a quantity of PAN (lbs N/acre) that is equal to or less than the nitrogen uptake rate of the cover crop (lbs/acre) (See Section 6).
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Figure 6.1. Water application worksheet.
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Table 6.1. Calculated Loading Rates.
Pond 4 Water Section 503 Parameter 04/24/14 10/07/14 lbs/acre/year Standards Total Solids (mg/L) 22 -- 150 -- Volatile Solids 96 -- 657 -- Electrical Conductivity -- 86.3 -- -- Chemical Oxygen Demand (COD) -- 150 1026 -- TSS (mg/L) -- 80 547 -- Oil and Grease (mg/L) 5 4.71 32 -- SAR -- 0.571 4 -- Calcium. Dissolved -- 4.02 27 -- Magnesium. Dissolved -- 1.31 9 -- Sodium. Dissolved -- 5.5 38 -- pH 6.6 6.32 -- -- Ammonia as N (mg/L) 0.150 0.100 1 -- Calcium (mg/L) -- 4.88 33 -- Phosphorus (mg/L) 0.26 0.42 3 -- Potassium (mg/L) 7.4 8.49 58 -- Sodium (mg/L) -- 5.69 39 -- Magnesium (mg/L) -- 1.57 11 -- Total Nitrogen (mg/L) 38.7 0.0 0 -- PAN (lbs/acre/year) 0.0 0.0 0 -- Arsenic (mg/L) 0.05 0.00431 0.029 1.8 Cadmium (mg/L) 0.004 0.0005 0.003 1.7 Copper (mg/L) 0.006 0.00458 0.031 66.0 Lead (mg/L) 0.04 0.00306 0.021 13.0 Mercury (mg/L) 0.0002 0.00765 0.052 0.8 Molybdenum (mg/L) -- 0.0013 0.009 -- Nickel (mg/L) 0.01 0.00255 0.017 18.0 Selenium (mg/L) 0.07 0.001 0.007 4.0 Zinc (mg/L) 0.014 0.0125 0.085 125.0 Residue -- 206 1409 --
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6. Land application fields shall possess adequate vegetation to ensure the nitrogen uptake rate of the cover crop used to calculate the permit limit. Fields shall be maintained at a minimum of 80% vegetative cover. Wastewater application shall not occur on land without vegetative cover unless the waste is either subsurface injected or incorporated into the soil. 7. No runoff or no discharge requirements: Discharge from this site is prohibited. Wastewater shall not be discharged from this operation to the waters of the State or onto the land in any manner that may result in runoff to waters of the State or ponding on the land [Title 40 Code of Federal Regulations Part 257.3-3]. Surface-applied waste must be evenly distributed over the application area. Land application is prohibited when the soils are saturated; frozen; covered with ice or snow; during precipitation events; or when precipitation is imminent (50% chance of precipitation predicted by the nearest National Weather Service station). 8. Maximum allowable slope for the land application area: The average slope for surface applying water from Retention Pond 004 is less than 6%. See additional information in Section 6.6. 9. Proper Operation and Maintenance:
Weyerhaeuser will properly operate and maintain the land application system and controls (and related appurtenances or application vehicles). Proper operation and maintenance includes adequate laboratory controls and appropriate quality assurance procedures. Weyerhaeuser will provide adequate and trained operating staff that are duly qualified to carry out the operation, maintenance, and testing functions required to ensure compliance with the conditions of the permit.
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6.2 Wastewater Application Rate Calculations Using the previously-installed sprinkler system for reference, approximately 28 gallons per minute per sprinkler head can be sprayed on average. That is a maximum of approximately 40,000 gallons per day per head. Approximately 0.81 million gallons per acre is estimated to be applied to the land application area per year. The 0.81 million gallons per acre per year amounts to approximately 30 inches of water applied to the area per year. This value represents the highest hydraulic loading rate. Given this hydraulic loading, and based on the analytical results, Table 6.2 provides a mass loading rate for heavy metals and nutrients. This table also compares the anticipated maximum loadings to those values that are listed in Section 503 regulations. While the Section 503 regulations are not directly applicable to this wastewater, they do provide a means of comparison. The total nitrogen that exists in the water, including the organic nitrogen, ammonia nitrogen, and nitrate+nitrite as nitrogen, amounts to about 3.1 mg/L or 16 lbs/acre. Calculations of the wastewater application rate and the mass loading rate for heavy metals and nutrients can be found in Appendix B.
Table 6.2. Mass loading rates (Estimated Maximum).
2019 Concentration Annual Loading Section 503 Parameter (mg/L) (lbs/acre/year) Standards Nitrogen 3.1 21 N/A *Total Solids 22 149 N/A *Volatile Solids 96 652 N/A Phosphorus 0.531 3.6 N/A Arsenic 0.00896 0.061 1.8 Cadmium < 0.0002 < 0.0014 1.7 Chromium <0.003 < 0.020 133 Copper 0.0143 0.10 66 Lead 0.0125 0.085 13 Mercury <0.2 <1.36 0.76 Nickel 0.0123 0.084 18 Potassium 8.36 57 N/A Selenium < 0.0253 < 0.17 4 Zinc 0.058 0.39 125 *Result from sample collected in 2014
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6.3 Soils Analysis Weyerhaeuser collected a composite soil sample from the land application area in March 2019 (Table 6.3). The results from these samples are included as Table 6.4.
Table 6.3. Soil Characteristics.
Land Application Site Soils 10/7/2014 Parameters Units Results Electrical Conductivity mmhos/cm 37.1 Cation Exchange Capacity meq/100g 34.9 pH SU 6.4 Sodium Adsorption Ratio unitless 0.00473 Calcium (SAR Extraction) mg/Kg 19 Magnesium (SAR Extraction) mg/Kg < 10.0 Sodium (SAR Extraction) mg/L < 10.0 Sodium (CEC Extractable) mg/Kg 8020 Sodium (SAR Extracted-Dry Weight) mg/Kg < 10.0 Aluminum mg/Kg 5140 Calcium (SAR Calculation) meq/L 0.950 Magnesium (SAR Calculation) meq/L < 0.833 Sodium (SAR Calculation) meq/L < 0.435 Nitrate as Nitrogen mg/Kg 0.334 Phosphorus mg/Kg 148 Potassium mg/Kg 568 Arsenic mg/Kg 2.43 Cadmium mg/Kg < 0.142 Copper mg/Kg 5.51 Lead mg/Kg 9.78 Iron mg/Kg 9910 Mercury mg/Kg < 0.0251 Molybdenum mg/Kg 0.403 Nickel mg/Kg 4.8 Selenium mg/Kg < 0.424 Zinc mg/Kg 22.8 Total Solids % 79 Saturated Water Percentage % 35.8
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Table 6.4. Analytical results from soil samples.
Parameter Units Land Application Soil (2019) pH su 6.4 Cation-Exchange Capacity Meq/100g 34.9 Arsenic lb/acre 4.86 Cadmium lb/acre < 0.284 *Chromium lb/acre 32 Copper lb/acre 11 Lead lb/acre 19.6 Nickel lb/acre 9.6 Molybdenum lb/acre 0.806 Phosphorus lb/acre 296 Potassium lb/acre 1136 Selenium lb/acre < 0.85 Zinc lb/acre 45.6 Mercury lb/acre < 0.050 *Nitrate+Nitrite as Nitrogen lb/acre 8.2 *Result from sample collected in 2012.
6.4 Nearest Stream The nearest receiving waterbody to the land application area is Holly Creek, which flows through the Weyerhaeuser Dierks Mill site. The southwest corner of the land application site, which is the nearest point, is approximately 0.4 miles from Holly Creek.
6.5 Cover Crop The application area was previously vegetated with mixed hardwood and pine along with areas of pine plantation. However, due to recent construction activity related to the expansion of the Dierks mill, the area has been harvested and re-graded. Following the end of construction activity in the area, the vegetation is expected to consist of a crop of mixed grass (Bermuda, fescue, red clover, wheat, and other mixed grasses) for initial soil stabilization and potential harvesting of hay. Portions of the area will then be replanted with pine trees. A conservative value for the annual nitrogen uptake rate of 50 lb/ac. will be assumed for all vegetated areas. This value is lower than typical published values for either grasses or pine trees.
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6.6 Field Slope The land application area is separated into two drainage regions by a ridge running from east to west. The portion of the area lying north of the ridge drains to the north and the portion of the area lying south of the ridge drains to the south. The overall average slope of the northern drainage area is approximately 7.4%. The overall slope of the southern drainage area is approximately 8.5%. Overall, the land application area currently consists of approximately 8.9 acres of land which has a slope within 0 to 6%. There are isolated regions within the drainage area within which the slope exceeds 6%. These areas will be delineated with flagging and will be avoided in the actual application of water. The land forms may be modified during the construction of the new production facility and result in new areas that fit the slope criteria (All of the new areas (if any) are included in the area currently shown on the attached map). Calculations for application rates will be based on the areas to be used for actual application. The calculations for the annual report will be based on the area actually used in the previous year.
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7.0 LAND APPLICATION SITE
The land application site and surrounding land use maps are provided in Appendix A. Weyerhaeuser Dierks Mill owns the 22.9-acre tract of land currently being used for land application. A copy of the deed proving ownership of the land by Weyerhaeuser Dierks Mill is included in Appendix C. The land application area is located in Section 29, Township 7 South, Range 28 West, of Howard County, Arkansas, at a latitude of 34o 07' 07.34" and a longitude of 93o 59' 57.28". There are no other potential land application sites being considered at this time.
7-1 APPENDIX A Site Maps DIERKS, AR
APPROXIMATE LAND APPROXIMATE APPLICATION AREA FACILITY ENTRANCE HOLLY CREEK
Figure 2.1 Existing water reuse system schematic diagram
WEYERHAEUSER NR COMPANY DIERKS MILL LAND APPLICATION AREA SITE MAP
DIERKS, ARKANSAS APPENDIX B Calculations and Data Summary Water Application Rate Calculations Weyerhaueser, Dierks Arkansas Land Application Permit
in/year 55 Average Annual Precipitation (P) ft/year 4.6 in/year 38.0 Average Annual Pan Evaporation (E) ft/year 3.2 Pan Coefficient (k) - 0.75 acres 26.3 Drainage Area to Ponds (A1) SF 1,145,628 Runoff Coefficient ( C ) - 0.6 CF/year 429,610 Net Drainage to Ponds (D) Gallons/year 3,213,487 ft/year 1.1 Necessary Land Application Rate (N) in/year 13 Gallons/year 7,298,000 Annual Water Applied (Q) CF/year 975,668 Acres 8.9 Land Application Area (A2) SF 387,684 ft/year 2.5 Current Application Rate ( R ) in/year 30
Assume that all stormwater will be pumped through the land application process. Assume that some spray water will evaporate. Pan coefficient is based on moderate wind speed and relative humidity of 40-70%
D=A1(PC-Ek) R = Q / A2 N = D / A2
So long as R>N, no discharge will occur at Outfall 004. Volume Calculations for Storage Ponds Weyerhaeuser Dierks Mill
Pond Name Surface Area (SF) Depth below Outfall (FT) Approximate Volume (GAL) Spray Pond 38,659 6 1,735,016 Retention Pond 004 136,081 7.4 7,549,320
Volume=Surface Area * Depth Below Outfall * 7.48 gal/CF Weyerhaeuser NR Company - Dierks Mills - Dierks, Arkansas Land Application Permit 2019 Analytical Data Summary
Land Application Irrigation Water Units 2019 Result Land Application Site Soil Units 2019 Result Parameters Parameters pH SU 7.3 Electrical Conductivity mmhos/cm 37.1 Electrical Conductivity umhos/cm 72.2 Cation Exchange Capacity meq/100g 34.9 Biochemical Oxygen Demand (BOD) mg/L 7.44 pH SU 6.4 Total Suspended Solids (TSS) mg/L 362 Sodium Adsorption Ratio unitless 0.00473 Oil and Grease mg/L < 4.65 Calcium (SAR Extraction) mg/Kg 19 Ammonia as N mg/L 0.072 Magnesium (SAR Extraction) mg/Kg < 10 TKN mg/L 2.55 Sodium (SAR Extraction) mg/L < 10 Nitrate as N mg/L < 0.200 Sodium (CEC Extractable) mg/Kg 8020 Nitrite as N mg/L < 0.304 Sodium (SAR Extracted-Dry Weight) mg/Kg < 10 SAR Unitless 0.238 Aluminum mg/Kg 5140 Fecal Coliform MPN/10mL 140 Calcium (SAR Calculation) meq/L 0.950 Aluminum mg/L 40.9 Magnesium (SAR Calculation) meq/L < 0.833 Arsenic mg/L 0.00896 Sodium (SAR Calculation) meq/L < 0.435 Cadmium mg/L < 0.0002 Nitrate-Nitrogen mg/Kg 0.334 Calcium - Dissolved mg/L 6.23 Phosphorus mg/Kg 148 Copper mg/L 0.0143 Potassium mg/Kg 568 Iron mg/L 17.5 Arsenic mg/Kg 2.43 Lead mg/L 0.0125 Cadmium mg/Kg < 0.142 Magnesium - Dissolved mg/L 1.43 Copper mg/Kg 5.51 Phosphorus mg/L 0.531 Lead mg/Kg 9.78 Potassium mg/L 8.36 Iron mg/Kg 9910 Mercury mg/L < 0.200 Mercury mg/Kg < 0.0251 Molybdenum mg/L 0.00298 Molybdenum mg/Kg 0.403 Nickel mg/L 0.0123 Nickel mg/Kg 4.8 Selenium mg/L 0.0253 Selenium mg/Kg < 0.424 Zinc mg/L 0.058 Zinc mg/Kg 22.8 Residue mg/L 702 Total Solids % 79 PCB's mg/L <0.2 Saturated Water Percentage % 35.8 Weyerhaeuser NR Company - Dierks Mills - Dierks, Arkansas Loading Calculations for 2019 Land Application Permit Result Permit Conditions Monitoring Parameter 03/11/19 Limit Units Frequency Notes Calculated Field TKN 2.55 Report mg/L 1/Year Input Field Nitrate as N < 0.200 Report mg/L 1/year Exceeding Permit Condition Nitrite as N < 0.304 Report mg/L 1/year ND: No Data Total Nitrogen mg/L 3.1 190 lbs/acre/year 1/year PAN mg/L 1.3 Plant Available Nitrogen (PAN) = 0.3(TKN - NH3) + 0.5NH3 + NO3 + NO2
Estimated Land Application *Land Total Irrigation Water 5182-W Permit Limit Applied Land Pounds Water Estimated Total Application Applied Sample Collected Conversion (million Pounds Applied Area Used (lbs/acre / Monitoring Parameter 3/11/2019 (lb/mg*MMgal/L) gallons) (lbs/year) (Acres) year) Limit Units Frequency Notes Total Solids (mg/L) ND 8.34 7.25 ND 8.9 ND Report % 1/year Volatile Solids ND 8.34 7.25 ND 8.9 ND Electrical Conductivity 72.2 Report mmhos/cm 1/year Chemical Oxygen Demand (COD) ND Report mg/L 1/year TSS (mg/L) 362 Report mg/L 1/year Oil and Grease (mg/L) < 4.65 8.34 7.25 281 8.9 32 Report Gallons/acre/year 1/year SAR 0.238 Report Unitless 1/year Calcium. Dissolved 6.23 NA mg/L NA Magnesium. Dissolved 1.57 NA mg/L NA Sodium. Dissolved 5.5 NA mg/L NA pH ND Report su 1/year Ammonia as N (mg/L) 0.072 8.34 7.25 4.4 8.9 0.49 Report mg/L 1/year Calcium (mg/L) ND 8.34 7.25 ND 8.9 ND Report mg/L 1/year Phosphorus (mg/L) 0.531 8.34 7.25 32 8.9 3.6 Report mg/L 1/year Potassium (mg/L) 8.36 8.34 7.25 505 8.9 57 Report mg/L 1/year Sodium (mg/L) ND 8.34 7.25 ND 8.9 ND Report mg/L 1/year Magnesium (mg/L) ND 8.34 7.25 ND 8.9 ND Report mg/L 1/year Total Nitrogen (mg/L) 3.1 8.34 7.25 185 8.9 21 190 lbs/acre/year 1/year Pine Trees PAN (lbs/acre/year) 1.3 8.34 7.25 78 8.9 8.7 190 lbs/acre/year 1/year Pine Pines Arsenic (mg/L) 0.00896 8.34 7.25 0.54 8.9 0.061 37 lbs/acre 1/5years Cadmium (mg/L) < 0.0002 8.34 7.25 0.012 8.9 0.0014 35 lbs/acre 1/5years Chromium (Hexavalent - mg/L) < 0.003 8.34 7.25 0.18 8.9 0.020 Copper (mg/L) 0.0143 8.34 7.25 0.86 8.9 0.10 1350 lbs/acre 1/5years Lead (mg/L) 0.0125 8.34 7.25 0.76 8.9 0.085 270 lbs/acre 1/5years Mercury (mg/L) < 0.2 8.34 7.25 12 8.9 1.4 15 lbs/acre 1/5years Molybdenum (mg/L) 0.00298 8.34 7.25 0.18 8.9 0.020 N/A lbs/acre 1/5years Nickel (mg/L) 0.0123 8.34 7.25 0.74 8.9 0.08 378 lbs/acre 1/5years Selenium (mg/L) < 0.0253 8.34 7.25 1.5 8.9 0.17 90 lbs/acre 1/5years Zinc (mg/L) 0.058 8.34 7.25 3.5 8.9 0.39 2520 lbs/acre 1/5years Residue 702 NA mg/L NA *Estimated maximum shown, actual water application rates will be used for reporting. As of March 2019 no application has occurred since 2012. Weyerhaeuser NR Company - Dierks Mills - Dierks, Arkansas Cummulative Pullutant Loading Land Application Permit
lbs/acre/year
1994 to 2002 to 2007 to 2011 2012 2013 2014 2015 2016 2017 2018 2001 2006 Section 503 Parameter Standards Nitrogen ND ND ND 16 0 0 0 0 0 0 N/A Total Solids ND ND ND 1369 0 0 0 0 0 0 N/A Volatile Solids ND ND ND 1095 0 0 0 0 0 0 N/A Total Phosphorus ND ND ND 2.5 0 0 0 0 0 0 N/A Arsenic 1.2 1.2 0.78 ND 0 0 0 0 0 0 1.8 Cadmium 0.090 0.10 0.062 ND 0 0 0 0 0 0 1.7 Chromium 0.16 0.20 0.11 ND 0 0 0 0 0 0 133 Copper 0.25 0.23 0.093 ND 0 0 0 0 0 0 66 Lead 0.90 1.0 0.62 ND 0 0 0 0 0 0 13 Mercury 0.0060 0.0 0.0031 ND 0 0 0 0 0 0 0.76 Nickel 0.23 0.24 0.16 ND 0 0 0 0 0 0 18 Potassium ND ND ND 144 0 0 0 0 0 0 N/A Selenium 1.6 1.7 1.1 ND 0 0 0 0 0 0 4.0 Zinc 0.96 0.52 0.26 0.036 0 0 0 0 0 0 125 ND: No Data Weyerhaeuser - Dierks Mill Irrigation Pond - Land Application Underground Drinking Water Impact Study Appendix I to Part 257—Maximum Contaminant Levels (MCLs)
Laboratory Chemical CAS No. MCL (mg/l) Result Reporting Level (mg/L)
Arsenic - Total 7440-38-2 0.05 0.00896 0.0005 *Barium - Total 7440-39-3 1 0.161 0.005 *Benzene 71-343-2 0.005 <0.001 0.001 Cadmium - Total 7440-43-9 0.01 < 0.0002 0.0005 *Carbon tetrachloride 56-23-5 0.005 < 0.001 0.001 *Chromium (hexavalent) 7440-47-3 0.05 < 0.003 0.003 Lead - Total 7439-92-1 0.05 0.01250 0.0005 Mercury - Total 7439-97-6 0.002 <0.2 0.2 Selenium - Total 7782-49-2 0.01 0.0253 0.001 *Silver - Total 7440-22-4 0.05 <0.0005 0.0005 *Fluoride 7 4 <0.5 0.5 Nitrate as N 10 < 0.2 0.2 *2,4-Dichlorophenoxy acetic acid 94-75-7 0.1 < 0.000517 0.000517 *1,4-Dichlorobenzene 106-46-7 0.075 < 0.000514 0.000514 *1,2-Dichloroethane 107-06-2 0.005 < 0.001 0.001 *1,1-Dichloroethylene 75-35-4 0.007 < 0.001 0.001 *Endrin 75-20-8 0.0002 < 0.0000103 0.0000103 *Lindane (gamma-BHC) 58-89-9 0.004 < 0.0000103 0.0000103 *Methoxychlor 72-43-5 0.1 < 0.0000103 0.0000103 *Toxaphene 8001-35-2 0.005 < 0.0000103 0.0000103 *1,1,1-Trichloroethane 71-55-6 0.2 <0 .001 0.001 *Trichloroethylene 79-01-6 0.005 < 0.001 0.001 *2,4,5-Trichlorophenoxy acetic acid 93-76-5 0.01 < 0.00518 0.00518 *Vinyl chloride 75-01-4 0.002 <0.001 0.001 *Result from sample collected in 2014. Detection Limit higher than MCL >= 50% of the MCL > MCL not a Drinking Water Standard Not Tested APPENDIX C Soil & Water Laboratory Analytical Reports Report Page 1 of 19 Ana-Lab Corp. P.O. Box 9000 1 LELAP-accredited #02008 2 Kilgore, TX 75663 3 903/984-0551 Report 4
Table of Contents
Printed 03/22/2019 Page 1 of 1
Account Weyerhaeuser Shelly Boykin PO Box 38 WSB1-L Dierks, AR 71833
Project 865823
This report consists of this Table of Contents and the following pages:
Report Name Description Pages 865823_r03_03_ProjectResults Ana-Lab Project P:865823 C:WSB1 Project Results t:304 5 865823_r10_05_ProjectQC Ana-Lab Project P:865823 C:WSB1 Project Quality Control Groups 10 865823_r99_09_CoC__1_of_1 Ana-Lab CoC WSB1 865823_1_of_1 3 Total Pages: 18
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662
NELAP-accredited #T104704201
LDSClient v1.14.12.1764 Phone 903/984-0551 e-Mail [email protected] Form rptTOC Created 10/06/2004 v1.1 Report Page 2 of 19 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] 1 Employee Owned Integrity Caring Continual Improvement 2 Printed: 03/22/2019 Page 1 of 5 3 Results 4
Account Project Report To WSB1-L 865823 Weyerhaeuser Shelly Boykin PO Box 38 Dierks, AR 71833 Results
1765611 Land App Renewal-W Received: 03/11/2019
Non-Potable Water Collected by: Client Weyerhaeuser PO: Taken: 03/11/2019 09:15:00
600/2-78-054 3.2.19 Prepared: 03/18/2019 09:59:35 Calculated 03/18/2019 09:59:35 CAL
Parameter Results Units RL Flag CAS Bottle Sodium Adsorption Ratio - Liquid 0.238 1 s
EPA 1664B (HEM) Prepared: 827855 03/14/2019 09:00:00 Analyzed 827855 03/14/2019 09:00:00 MM2
Parameter Results Units RL Flag CAS Bottle N Oil and Grease (HEM) <4.65 mg/L 4.65 s 06
EPA 200.7 4.4 Prepared: 827705 03/13/2019 10:45:00 Analyzed 827782 03/13/2019 14:31:00 LPS
Parameter Results Units RL Flag CAS Bottle N Iron, Total 17.5 mg/L 0.125 s 7439-89-6 21 N Potassium 8.36 mg/L 2.50 7440-09-7 21
EPA 200.7, Rev. 4.4 Prepared: 827606 03/12/2019 10:30:00 Analyzed 828289 03/15/2019 17:28:00 LPS
Parameter Results Units RL Flag CAS Bottle N Dissolved Calcium 6.23 mg/L 0.500 s 7440-70-2 17 N Dissolved Magnesium 1.43 mg/L 0.020 7439-95-4 17 N Dissolved Sodium 2.54 mg/L 0.500 7440-23-5 17
EPA 200.8 5.4 Prepared: 827705 03/13/2019 10:45:00 Analyzed 828217 03/15/2019 14:10:00 CLK
Parameter Results Units RL Flag CAS Bottle N Arsenic, Total 0.00896 mg/L 0.0005 s 7440-38-2 21 N Cadmium, Total <0.0002 mg/L 0.0002 7440-43-9 21 N Copper, Total 0.0143 mg/L 0.001 7440-50-8 21 N Lead, Total 0.0125 mg/L 0.0005 7439-92-1 21 N Nickel, Total 0.0123 mg/L 0.001 7440-02-0 21 N Selenium, Total 0.0253 mg/L 0.001 7782-49-2 21 N Zinc, Total 0.058 mg/L 0.005 7440-66-6 21
EPA 200.8 5.4 Prepared: 827705 03/13/2019 10:45:00 Analyzed 828491 03/18/2019 13:22:00 JBP
Parameter Results Units RL Flag CAS Bottle N Molybdenum, Total 0.00298 mg/L 0.0005 Bs 7439-98-7 21 Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1764 www.ana-lab.com Form rptPROJRES Created 10/13/2004 v1.2 Report Page 3 of 19 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] 1 Employee Owned Integrity Caring Continual Improvement 2 Printed: 03/22/2019 Page 2 of 5 3 Results 4
1765611 Land App Renewal-W Received: 03/11/2019
Non-Potable Water Collected by: Client Weyerhaeuser PO: Taken: 03/11/2019 09:15:00
EPA 200.8 5.4 Prepared: 828659 03/19/2019 09:45:00 Analyzed 829055 03/20/2019 16:36:00 JBP
Parameter Results Units RL Flag CAS Bottle N Aluminum, Total 40.9 mg/L 5.00 s 7429-90-5 22
EPA 245.1 3 Prepared: 827430 03/12/2019 07:50:00 Analyzed 827583 03/12/2019 15:08:00 JBP
Parameter Results Units RL Flag CAS Bottle N Mercury, Total <0.200 ug/L 0.200 s 7439-97-6 12
EPA 300.0 2.1 Prepared: 827851 03/12/2019 11:09:00 Analyzed 827851 03/12/2019 11:09:00 AMB
Parameter Results Units RL Flag CAS Bottle N Nitrate-Nitrogen Total <0.200 mg/L 0.200 s 14797-55-8 01 N Nitrite-Nitrogen, Total <0.304 mg/L 0.304 01
EPA 350.1 2 Prepared: 827638 03/13/2019 08:45:00 Analyzed 827815 03/13/2019 00:00:00 MLC
Parameter Results Units RL Flag CAS Bottle N Ammonia (as N) 0.072 mg/L 0.020 s 20
EPA 351.2 2 Prepared: 827648 03/13/2019 09:30:00 Analyzed 828022 03/14/2019 13:02:00 RSV
Parameter Results Units RL Flag CAS Bottle N Total Kjeldahl Nitrogen 2.55 mg/L 0.050 s 7727-37-9 16
EPA 608 Prepared: 827667 03/13/2019 06:45:00 Analyzed 828966 03/16/2019 02:09:00 EMT
Parameter Results Units RL Flag CAS Bottle N PCB-1016 <0.200 ug/L 0.200 s 12674-11-2 15 N PCB-1221 <0.200 ug/L 0.200 11104-28-2 15 N PCB-1232 <0.200 ug/L 0.200 11141-16-5 15 N PCB-1242 <0.200 ug/L 0.200 53469-21-9 15 N PCB-1248 <0.200 ug/L 0.200 12672-29-6 15 N PCB-1254 <0.200 ug/L 0.200 11097-69-1 15 N PCB-1260 <0.200 ug/L 0.200 11096-82-5 15
SM 2510 B-2011 Prepared: 828139 03/15/2019 08:36:00 Analyzed 828139 03/15/2019 08:36:00 ELS
Parameter Results Units RL Flag CAS Bottle N Lab Spec. Conductance at 25 C 72.2 umhos/c s 01 m
SM 2540 B-2011 Prepared: 827437 03/12/2019 09:15:00 Analyzed 827437 03/12/2019 09:15:00 TH2
Parameter Results Units RL Flag CAS Bottle z Residue 702 mg/L 10.0 s 02 Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1764 www.ana-lab.com Form rptPROJRES Created 10/13/2004 v1.2 Report Page 4 of 19 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] 1 Employee Owned Integrity Caring Continual Improvement 2 Printed: 03/22/2019 Page 3 of 5 3 Results 4
1765611 Land App Renewal-W Received: 03/11/2019
Non-Potable Water Collected by: Client Weyerhaeuser PO: Taken: 03/11/2019 09:15:00
SM 2540 D-2011 Prepared: 828179 03/14/2019 10:45:00 Analyzed 828179 03/14/2019 10:45:00 ALW
Parameter Results Units RL Flag CAS Bottle N Total Suspended Solids 362 mg/L 50.0 s 01
SM 4500-P E-2011 Prepared: 828887 03/19/2019 12:30:00 Analyzed 828887 03/19/2019 12:30:00 NHL
Parameter Results Units RL Flag CAS Bottle N Phosphorus (as P), total 0.531 mg/L 0.100 s 7723-14-0 09
SM 5210 B-2011 Prepared: 827428 03/12/2019 Analyzed 827428 03/17/2019 13:26:10 JCB
Parameter Results Units RL Flag CAS Bottle N BOD Carbonaceous 7.44 mg/L 2.00 s 01
SM 9221 E + C-2006 Prepared: 827721 03/12/2019 12:56:00 Analyzed 827721 03/12/2019 12:56:00 MDM
Parameter Results Units RL Flag CAS Bottle N Fecal Coliform (MPN) 140 MPN/10 1.8 s 10 0 mL Sample Preparation
1765611 Land App Renewal-W Received: 03/11/2019
Prepared: 03/11/2019 14:35:58 Analyzed 03/11/2019 14:35:58
z Bottle pH <2 SU 07
Prepared: 03/11/2019 14:35:59 Analyzed 03/11/2019 14:35:59
z Bottle pH <2 SU 08
EPA 200.2 2.8 Prepared: 827705 03/13/2019 10:45:00 Analyzed 827705 03/13/2019 10:45:00 TES
N Liquid Metals Digestion 50/50 ml 07
EPA 200.2 2.8 Prepared: 828659 03/19/2019 09:45:00 Analyzed 828659 03/19/2019 09:45:00 TES
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1764 www.ana-lab.com Form rptPROJRES Created 10/13/2004 v1.2 Report Page 5 of 19 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] 1 Employee Owned Integrity Caring Continual Improvement 2 Printed: 03/22/2019 Page 4 of 5 3 Results 4
1765611 Land App Renewal-W Received: 03/11/2019
EPA 200.2 2.8 Prepared: 828659 03/19/2019 09:45:00 Analyzed 828659 03/19/2019 09:45:00 TES
N Liquid Metals Digestion 50/50 ml 07
EPA 245.1 3 Prepared: 827430 03/12/2019 07:50:00 Analyzed 827430 03/12/2019 07:50:00 ALB
N Mercury Liquid Metals Digestion 50/25 ml 07
EPA 350.2, Rev. 2.0 Prepared: 827638 03/13/2019 08:45:00 Analyzed 827638 03/13/2019 08:45:00 JAL
N Ammonia Distillation 50/50 ml 09
EPA 351.2, Rev 2.0 Prepared: 827648 03/13/2019 09:30:00 Analyzed 827648 03/13/2019 09:30:00 CRS
N TKN Block Digestion 20/20 ml 09
EPA 608 Prepared: 827667 03/13/2019 06:45:00 Analyzed 827667 03/13/2019 06:45:00 MCC
PCB Liq-Liq Extr. W/Hex Exch. 10/993 ml 04
EPA 608 Prepared: 827667 03/13/2019 06:45:00 Analyzed 828966 03/16/2019 02:09:00 EMT
N Polychlorinated Biphenyls Entered 15
SM 2540 D-2011 Prepared: 827495 03/14/2019 10:45:00 Analyzed 827495 03/14/2019 10:45:00 ALW
N TSS Set Started Started
SM 3030 B-2004 Prepared: 827606 03/12/2019 10:30:00 Analyzed 827606 03/12/2019 10:30:00 ALB
N Dissolved (Wastewater) Filtering 25/25 ml 01
SM 5210 B-2011 Prepared: 827428 03/12/2019 Analyzed 827428 03/12/2019 08:35:19 JCB
N BODc Set Started Started
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1764 www.ana-lab.com Form rptPROJRES Created 10/13/2004 v1.2 Report Page 6 of 19 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] 1 Employee Owned Integrity Caring Continual Improvement 2 Printed: 03/22/2019 Page 5 of 5 3 Results 4
1765611 Land App Renewal-W Received: 03/11/2019
SM 9221 E + C-2006 Prepared: 827717 03/11/2019 14:31:00 Analyzed 827717 03/11/2019 14:31:00 MDM
N Fecal Coliform MPN Started /L STARTED 10
Qualifiers:
B - Analyte detected in the associated method blank
We report results on an As Received or wet basis unless marked Dry Weight. Unless otherwise noted, testing was performed at Ana-labs corporate laboratory that holds the following Federal and State certificates: EPA Lab Number TX00063, US Department of Agriculture Soil Import Permit P330-17-00117, Texas Commission on Environmental Quality Commercial Drinking Water Lab Approval (Lab ID: TX219), Texas Commission on Environmental Quality NELAP T104704201-19-15, Louisiana Department of Environmental Quality Laboratory Certification (NELAP, LELAP) #02008, Louisiana Department of Health and Hospitals Drinking Water (NELAP) Certificate No LA026, Oklahoma Department of Environmental Quality TNI Laboratory Accreditation Program Certificate No. 2018-126, Arkansas Department of Environmental Quality Certification #18-068-0. The Accredited column designates accreditation by N -- NELAC, or z -- not covered under NELAC scope of accreditation. These analytical results relate to the sample tested. This report may NOT be reproduced EXCEPT in FULL without written approval of Ana-Lab Corp. Unless otherwise specified, these test results meet the requirements of NELAC. RL is the Reporting Limit (sample specific quantitation limit) and is at or above the Method Detection Limit (MDL). CAS is Chemical Abstract Service number. RL is our Reporting Limit, or Minimum Quantitation Level. The RL takes into account the Instrument Detection Limit (IDL), Method Detection Limit (MDL), and Practical Quantitation Limit (PQL), and any dilutions and/or concentrations performed during sample preparation (EQL). Our analytical result must be above this RL before we report a value in the 'Results' column of our report (without a 'J' flag). Otherwise, we report ND (Not Detected above RL), because the result is "<" (less than) the number in the RL column. MAL is Minimum Analytical Level and is typically from regulatory agencies. Unless we report a result in the result column, or interferences prevent it, we work to have our RL at or below the MAL.
Bill Peery, MS, VP Technical Services
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1764 www.ana-lab.com Form rptPROJRES Created 10/13/2004 v1.2 Report Page 7 of 19 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] LELAP-accredited #02008 1 Employee Owned Integrity Caring Continual Improvement 2 Quality Control Printed 03/22/2019 Page 1 of 10 3 4
Account Project Report To WSB1-L 865823 Weyerhaeuser Shelly Boykin PO Box 38 Dierks, AR 71833
Analytical Set 827721 SM 9221 E + C-2006 Blank
Parameter PrepSet Reading MDL MQL Units File Fecal Coliform MPN Started 827721 PASS 1.80 1.80 MPN/100 mL 119707325 /L Standard
Parameter Sample Reading Known Units Recover% Limits% File Fecal Coliform MPN Started 827717 POSITIVE POSITIVEMPN/100 mL - 119707326 /L
Analytical Set 827428 SM 5210 B-2011 Blank
Parameter PrepSet Reading MDL MQL Units File BOD Carbonaceous 827428 0.17 0.200 0.500 mg/L 119701470 Duplicate
Parameter Sample Result Unknown Unit RPD Limit% BOD Carbonaceous 1765593 7.88 5.56 mg/L 34.5 * 30.0 Seed Drop
Parameter PrepSet Reading MDL MQL Units File BOD Carbonaceous 827428 0.850 0.200 0.500 mg/L 119701471 Standard
Parameter Sample Reading Known Units Recover% Limits% File BOD Carbonaceous 226 198 mg/L 114 83.7 - 116 119701472
Analytical Set 827815 EPA 350.1 2 Blank
Parameter PrepSet Reading MDL MQL Units File Ammonia (as N) 827638 ND 0.00356 0.020 mg/L 119708983 CCV
Parameter Reading Known Units Recover% Limits% File Ammonia (as N) 2.00 2.00 mg/L 100 90.0 - 110 119708975 2.15 2.00 mg/L 108 90.0 - 110 119708984 1.98 2.00 mg/L 99.0 90.0 - 110 119708995 2.13 2.00 mg/L 106 90.0 - 110 119709002 1.89 2.00 mg/L 94.5 90.0 - 110 119709006 2.10 2.00 mg/L 105 90.0 - 110 119709007 1.86 2.00 mg/L 93.0 90.0 - 110 119709012 2.03 2.00 mg/L 102 90.0 - 110 119709016 Duplicate
Parameter Sample Result Unknown Unit RPD Limit% Ammonia (as N) 1765481 ND ND mg/L 20.0
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1764 www.ana-lab.com Form rptPROJQCGrpt Created 01/27/2005 v1.0 Report Page 8 of 19 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] LELAP-accredited #02008 1 Employee Owned Integrity Caring Continual Improvement 2 Quality Control Printed 03/22/2019 Page 2 of 10 3 4 Duplicate
Parameter Sample Result Unknown Unit RPD Limit% Ammonia (as N) 1765854 0.690 0.684 mg/L 0.873 20.0 ICV
Parameter Reading Known Units Recover% Limits% File Ammonia (as N) 2.11 2.00 mg/L 106 90.0 - 110 119708974 LCS Dup
Parameter PrepSet LCS LCSD Known Limits% LCS% LCSD% Units RPD Limit% Ammonia (as N) 827638 2.02 2.17 2.00 90.0 - 110 101 108 mg/L 7.16 20.0 Mat. Spike
Parameter Sample Spike Unknown Known Units Recovery % Limits % File Ammonia (as N) 1765481 2.09 0.005 2.00 mg/L 104 80.0 - 120 119708992 1765854 2.37 0.684 2.00 mg/L 84.3 80.0 - 120 119708989
Analytical Set 828022 EPA 351.2 2 Blank
Parameter PrepSet Reading MDL MQL Units File Total Kjeldahl Nitrogen 827648 ND 0.0191 0.050 mg/L 119713266 CCV
Parameter Reading Known Units Recover% Limits% File Total Kjeldahl Nitrogen 4.92 5.00 mg/L 98.4 90.0 - 110 119713265 4.86 5.00 mg/L 97.2 90.0 - 110 119713275 4.89 5.00 mg/L 97.8 90.0 - 110 119713284 4.74 5.00 mg/L 94.8 90.0 - 110 119713294 4.71 5.00 mg/L 94.2 90.0 - 110 119713296 4.63 5.00 mg/L 92.6 90.0 - 110 119713297 4.67 5.00 mg/L 93.4 90.0 - 110 119713298 Duplicate
Parameter Sample Result Unknown Unit RPD Limit% Total Kjeldahl Nitrogen 1765763 ND ND mg/L 20.0 1765764 ND ND mg/L 20.0 ICV
Parameter Reading Known Units Recover% Limits% File Total Kjeldahl Nitrogen 4.89 5.00 mg/L 97.8 90.0 - 110 119713264 LCS Dup
Parameter PrepSet LCS LCSD Known Limits% LCS% LCSD% Units RPD Limit% Total Kjeldahl Nitrogen 827648 5.16 5.14 5.00 90.0 - 110 103 103 mg/L 0.388 20.0 Mat. Spike
Parameter Sample Spike Unknown Known Units Recovery % Limits % File Total Kjeldahl Nitrogen 1765763 5.06 ND 5.00 mg/L 101 80.0 - 120 119713271 1765764 4.38 ND 5.00 mg/L 87.6 80.0 - 120 119713274
Analytical Set 827437 SM 2540 B-2011 Blank
Parameter PrepSet Reading MDL MQL Units File Residue 827437 ND 10.0 10.0 mg/L 119701530
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1764 www.ana-lab.com Form rptPROJQCGrpt Created 01/27/2005 v1.0 Report Page 9 of 19 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] LELAP-accredited #02008 1 Employee Owned Integrity Caring Continual Improvement 2 Quality Control Printed 03/22/2019 Page 3 of 10 3 4 ControlBlk
Parameter PrepSet Reading MDL MQL Units File Residue 827437 0.0001 grams 119701529 Duplicate
Parameter Sample Result Unknown Unit RPD Limit% Residue 1765611 710 702 mg/L 1.13 20.0 LCS
Parameter PrepSet Reading Known Units Recover% Limits File Residue 827437 202 200 mg/L 101 90.0 - 110 119701534 Standard
Parameter Sample Reading Known Units Recover% Limits% File Residue 104 100 mg/L 104 90.0 - 110 119701531
Analytical Set 827855 EPA 1664B (HEM) Blank
Parameter PrepSet Reading MDL MQL Units File Oil and Grease (HEM) 827855 ND 0.804 4.00 mg/L 119710183 ControlBlk
Parameter PrepSet Reading MDL MQL Units File Oil and Grease (HEM) 827855 -0.0005 grams 119710182 827855 0.0004 grams 119710197 LCS Dup
Parameter PrepSet LCS LCSD Known Limits% LCS% LCSD% Units RPD Limit% Oil and Grease (HEM) 827855 35.1 37.5 40.0 78.0 - 114 87.8 93.8 mg/L 6.61 20.0 MS
Parameter Sample MS MSD UNK Known Limits MS% MSD% Units RPD Limit% Oil and Grease (HEM) 1765388 33.3 0 2.07 40.0 78.0 - 114 83.2 mg/L 20.0
Analytical Set 828179 SM 2540 D-2011 Blank
Parameter PrepSet Reading MDL MQL Units File Total Suspended Solids 828179 ND 2 2 mg/L 119716544 ControlBlk
Parameter PrepSet Reading MDL MQL Units File Total Suspended Solids 828179 0.0003 grams 119716543 Duplicate
Parameter Sample Result Unknown Unit RPD Limit% Total Suspended Solids 1766208 630 640 mg/L 1.57 20.0 1766210 990 980 mg/L 1.02 20.0 1766211 1660 1770 mg/L 6.41 20.0 LCS
Parameter PrepSet Reading Known Units Recover% Limits File Total Suspended Solids 828179 54.0 50.0 mg/L 108 90.0 - 110 119716577 Standard
Parameter Sample Reading Known Units Recover% Limits% File Total Suspended Solids 100 100 mg/L 100 90.0 - 110 119716576
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1764 www.ana-lab.com Form rptPROJQCGrpt Created 01/27/2005 v1.0 Report Page 10 of 19 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] LELAP-accredited #02008 1 Employee Owned Integrity Caring Continual Improvement 2 Quality Control Printed 03/22/2019 Page 4 of 10 3 4
Analytical Set 827851 EPA 300.0 2.1 AWRL/MRL C
Parameter Reading Known Units Recover% Limits% File Nitrate-Nitrogen Total 0.0212 0.0226 mg/L 93.8 70.0 - 130 119710129 Nitrite-Nitrogen, Total 0.0293 0.0304 mg/L 96.4 70.0 - 130 119710129 Blank
Parameter PrepSet Reading MDL MQL Units File Nitrate-Nitrogen Total 827851 ND 0.00185 0.020 mg/L 119710130 Nitrite-Nitrogen, Total 827851 ND 0.00717 0.0152 mg/L 119710130 CCV
Parameter Reading Known Units Recover% Limits% File Nitrate-Nitrogen Total 2.26 2.26 mg/L 100 90.0 - 110 119710126 2.43 2.26 mg/L 108 90.0 - 110 119710140 2.41 2.26 mg/L 107 90.0 - 110 119710153 Nitrite-Nitrogen, Total 3.10 3.04 mg/L 102 90.0 - 110 119710126 3.24 3.04 mg/L 107 90.0 - 110 119710140 3.22 3.04 mg/L 106 90.0 - 110 119710153 LCS Dup
Parameter PrepSet LCS LCSD Known Limits% LCS% LCSD% Units RPD Limit% Nitrate-Nitrogen Total 827851 1.15 1.13 1.13 88.0 - 110 102 100 mg/L 1.75 20.0 Nitrite-Nitrogen, Total 827851 1.55 1.60 1.52 88.0 - 110 102 105 mg/L 3.17 20.0 MSD
Parameter Sample MS MSD UNK Known Limits MS% MSD% Units RPD Limit% Nitrate-Nitrogen Total 1765549 5.09 5.12 2.82 2.26 80.0 - 120 100 102 mg/L 1.31 20.0 Nitrite-Nitrogen, Total 1765549 3.23 3.25 0.159 3.04 80.0 - 120 101 102 mg/L 0.649 20.0 Nitrate-Nitrogen Total 1765882 2.19 2.22 0.088 2.26 80.0 - 120 93.0 94.3 mg/L 1.42 20.0 Nitrite-Nitrogen, Total 1765882 2.85 2.95 ND 3.04 80.0 - 120 93.8 97.0 mg/L 3.45 20.0
Analytical Set 827583 EPA 245.1 3 Blank
Parameter PrepSet Reading MDL MQL Units File Mercury, Total 827430 ND 0.075 0.100 ug/L 119704204 CCV
Parameter Reading Known Units Recover% Limits% File Mercury, Total 5.04 5.000 ug/L 101 90.0 - 110 119704197 5.06 5.000 ug/L 101 90.0 - 110 119704206 4.98 5.000 ug/L 99.6 90.0 - 110 119704215 5.01 5.000 ug/L 100 90.0 - 110 119704221 4.92 5.000 ug/L 98.4 90.0 - 110 119704225 ICL
Parameter Reading Known Units Recover% Limits% File Mercury, Total 19.4 20.00 ug/L 97.0 90.0 - 110 119704196 ICV
Parameter Reading Known Units Recover% Limits% File Mercury, Total 4.93 5.000 ug/L 98.6 90.0 - 110 119704195
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1764 www.ana-lab.com Form rptPROJQCGrpt Created 01/27/2005 v1.0 Report Page 11 of 19 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] LELAP-accredited #02008 1 Employee Owned Integrity Caring Continual Improvement 2 Quality Control Printed 03/22/2019 Page 5 of 10 3 4 LCS Dup
Parameter PrepSet LCS LCSD Known Limits% LCS% LCSD% Units RPD Limit% Mercury, Total 827430 5.09 5.08 5.00 85.0 - 115 102 102 ug/L 0.197 20.0 MSD
Parameter Sample MS MSD UNK Known Limits MS% MSD% Units RPD Limit% Mercury, Total 1764124 10.2 9.98 ND 10.0 70.0 - 130 102 99.8 ug/L 2.18 14.0 1765419 10.6 10.4 ND 10.0 70.0 - 130 106 104 ug/L 1.90 14.0
Analytical Set 827764 EPA 200.8 5.4 MSD
Parameter Sample MS MSD UNK Known Limits MS% MSD% Units RPD Limit% Iron, Total 1765480 0.673 0.663 0.239 0.500 75.0 - 125 86.8 84.8 mg/L 2.33 25.0 Potassium 1765480 23.2 23.1 16.0 5.00 75.0 - 125 144 * 142 * mg/L 1.40 25.0
Analytical Set 827782 EPA 200.7 4.4 Blank
Parameter PrepSet Reading MDL MQL Units File Iron, Total 827705 ND 0.00504 0.025 mg/L 119708306 Potassium 827705 0.088 0.0765 0.500 mg/L 119708306 CCV
Parameter Reading Known Units Recover% Limits% File Iron, Total 2.31 2.50 mg/L 92.4 90.0 - 110 119708305 2.35 2.50 mg/L 94.0 90.0 - 110 119708309 2.34 2.50 mg/L 93.6 90.0 - 110 119708314 Potassium 22.6 25.0 mg/L 90.4 90.0 - 110 119708305 23.0 25.0 mg/L 92.0 90.0 - 110 119708309 23.6 25.0 mg/L 94.4 90.0 - 110 119708314 Dir. SPKD
Parameter Sample DSPK DSPKD UNK Known Limits% DSPK% DSPKD% Units RPD Limit% Iron, Total 1765480 23.1 23.0 ND 25.0 75.0 - 125 92.4 92.0 mg/L 0.434 25.0 Potassium 1765480 261 269 15.6 250 75.0 - 125 98.2 101 mg/L 3.02 25.0 Direct SPK
Parameter Sample DSPK UNK Known Limits% DSPK% Units Iron, Total 1765480 23.1 ND 25.0 75.0 - 125 92.4 mg/L 25.0 Potassium 1765480 261 15.6 250 75.0 - 125 98.2 mg/L 25.0 ICL
Parameter Reading Known Units Recover% Limits% File Iron, Total 4.88 5.00 mg/L 97.6 95.0 - 105 119708300 Potassium 49.7 50.0 mg/L 99.4 95.0 - 105 119708300 ICV
Parameter Reading Known Units Recover% Limits% File Iron, Total 2.58 2.50 mg/L 103 90.0 - 110 119708304 Potassium 24.0 25.0 mg/L 96.0 90.0 - 110 119708304 LCS Dup
Parameter PrepSet LCS LCSD Known Limits% LCS% LCSD% Units RPD Limit% Iron, Total 827705 0.492 0.503 0.500 85.0 - 115 98.4 101 mg/L 2.21 25.0 Potassium 827705 5.14 5.17 5.00 85.0 - 115 103 103 mg/L 0.582 25.0
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1764 www.ana-lab.com Form rptPROJQCGrpt Created 01/27/2005 v1.0 Report Page 12 of 19 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
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Analytical Set 828217 EPA 200.8 5.4 Blank
Parameter PrepSet Reading MDL MQL Units File Arsenic, Total 827705 0.000648 0.00025 0.0005 mg/L * 119717222 Cadmium, Total 827705 0.000136 0.000095 0.0002 mg/L 119717222 Copper, Total 827705 ND 0.0005 0.001 mg/L 119717222 Lead, Total 827705 ND 0.00025 0.0005 mg/L 119717222 Nickel, Total 827705 ND 0.0005 0.001 mg/L 119717222 Selenium, Total 827705 ND 0.000728 0.001 mg/L 119717222 Zinc, Total 827705 ND 0.0025 0.005 mg/L 119717222 CCV
Parameter Reading Known Units Recover% Limits% File Arsenic, Total 0.0504 0.05 mg/L 101 90.0 - 110 119717221 0.050 0.05 mg/L 100 90.0 - 110 119717231 0.0477 0.05 mg/L 95.4 90.0 - 110 119717235 0.0485 0.05 mg/L 97.0 90.0 - 110 119717245 Cadmium, Total 0.0489 0.05 mg/L 97.8 90.0 - 110 119717221 0.048 0.05 mg/L 96.0 90.0 - 110 119717231 0.0472 0.05 mg/L 94.4 90.0 - 110 119717235 0.048 0.05 mg/L 96.0 90.0 - 110 119717245 Copper, Total 0.0491 0.05 mg/L 98.2 90.0 - 110 119717221 0.0477 0.05 mg/L 95.4 90.0 - 110 119717231 0.0487 0.05 mg/L 97.4 90.0 - 110 119717235 0.0479 0.05 mg/L 95.8 90.0 - 110 119717245 Lead, Total 0.0488 0.05 mg/L 97.6 90.0 - 110 119717221 0.0482 0.05 mg/L 96.4 90.0 - 110 119717231 0.0473 0.05 mg/L 94.6 90.0 - 110 119717235 0.0471 0.05 mg/L 94.2 90.0 - 110 119717245 Nickel, Total 0.0485 0.05 mg/L 97.0 90.0 - 110 119717221 0.0484 0.05 mg/L 96.8 90.0 - 110 119717231 0.0477 0.05 mg/L 95.4 90.0 - 110 119717235 0.0476 0.05 mg/L 95.2 90.0 - 110 119717245 Selenium, Total 0.0499 0.05 mg/L 99.8 90.0 - 110 119717221 0.0541 0.05 mg/L 108 90.0 - 110 119717231 0.0497 0.05 mg/L 99.4 90.0 - 110 119717235 0.0493 0.05 mg/L 98.6 90.0 - 110 119717245 Zinc, Total 0.050 0.05 mg/L 100 90.0 - 110 119717221 0.0484 0.05 mg/L 96.8 90.0 - 110 119717231 0.0493 0.05 mg/L 98.6 90.0 - 110 119717235 0.0486 0.05 mg/L 97.2 90.0 - 110 119717245 ICV
Parameter Reading Known Units Recover% Limits% File Arsenic, Total 0.0501 0.05 mg/L 100 90.0 - 110 119717218 Cadmium, Total 0.0495 0.05 mg/L 99.0 90.0 - 110 119717218 Copper, Total 0.0498 0.05 mg/L 99.6 90.0 - 110 119717218 Lead, Total 0.0485 0.05 mg/L 97.0 90.0 - 110 119717218 Nickel, Total 0.0486 0.05 mg/L 97.2 90.0 - 110 119717218 Selenium, Total 0.0493 0.05 mg/L 98.6 90.0 - 110 119717218 Zinc, Total 0.0506 0.05 mg/L 101 90.0 - 110 119717218
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1764 www.ana-lab.com Form rptPROJQCGrpt Created 01/27/2005 v1.0 Report Page 13 of 19 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] LELAP-accredited #02008 1 Employee Owned Integrity Caring Continual Improvement 2 Quality Control Printed 03/22/2019 Page 7 of 10 3 4 LCS Dup
Parameter PrepSet LCS LCSD Known Limits% LCS% LCSD% Units RPD Limit% Arsenic, Total 827705 0.493 0.500 0.500 85.0 - 115 98.6 100 mg/L 1.41 20.0 Cadmium, Total 827705 0.249 0.254 0.250 85.0 - 115 99.6 102 mg/L 1.99 20.0 Copper, Total 827705 0.493 0.500 0.500 85.0 - 115 98.6 100 mg/L 1.41 20.0 Lead, Total 827705 0.501 0.513 0.500 85.0 - 115 100 103 mg/L 2.37 20.0 Nickel, Total 827705 0.479 0.489 0.500 85.0 - 115 95.8 97.8 mg/L 2.07 20.0 Selenium, Total 827705 0.513 0.527 0.500 85.0 - 115 103 105 mg/L 2.69 20.0 Zinc, Total 827705 0.495 0.504 0.500 85.0 - 115 99.0 101 mg/L 1.80 20.0 LDR
Parameter Reading Known Units Recover% Limits% File Arsenic, Total 9.69 10 mg/L 96.9 90.0 - 110 119717220 Cadmium, Total 9.73 10 mg/L 97.3 90.0 - 110 119717220 Copper, Total 9.41 10 mg/L 94.1 90.0 - 110 119717220 Lead, Total 9.63 10 mg/L 96.3 90.0 - 110 119717220 Nickel, Total 9.75 10 mg/L 97.5 90.0 - 110 119717220 Selenium, Total 10.5 10 mg/L 105 90.0 - 110 119717220 Zinc, Total 9.66 10 mg/L 96.6 90.0 - 110 119717220 MRL Check
Parameter Reading Known Units Recover% Limits% File Copper, Total 0.000956 0.001 mg/L 95.6 50.0 - 150 119717276 Lead, Total 0.000962 0.001 mg/L 96.2 50.0 - 150 119717276 MSD
Parameter Sample MS MSD UNK Known Limits MS% MSD% Units RPD Limit% Arsenic, Total 1765480 0.492 0.502 0.0126 0.500 70.0 - 130 95.9 97.9 mg/L 2.06 20.0 Cadmium, Total 1765480 0.225 0.231 0.00014 0.250 70.0 - 130 89.9 92.3 mg/L 2.63 20.0 Copper, Total 1765480 0.455 0.461 0.000776 0.500 70.0 - 130 90.8 92.0 mg/L 1.31 20.0 Lead, Total 1765480 0.466 0.478 ND 0.500 70.0 - 130 93.2 95.6 mg/L 2.54 20.0 Nickel, Total 1765480 0.452 0.463 0.00138 0.500 70.0 - 130 90.1 92.3 mg/L 2.41 20.0 Selenium, Total 1765480 0.475 0.488 0.00862 0.500 70.0 - 130 93.3 95.9 mg/L 2.75 20.0 Zinc, Total 1765480 0.432 0.434 ND 0.500 70.0 - 130 86.4 86.8 mg/L 0.462 20.0 Arsenic, Total 1765486 0.479 0.495 0.00994 0.500 70.0 - 130 93.8 97.0 mg/L 3.35 20.0 Cadmium, Total 1765486 0.219 0.224 ND 0.250 70.0 - 130 87.6 89.6 mg/L 2.26 20.0 Copper, Total 1765486 0.443 0.460 0.00902 0.500 70.0 - 130 86.8 90.2 mg/L 3.84 20.0 Lead, Total 1765486 0.456 0.463 ND 0.500 70.0 - 130 91.2 92.6 mg/L 1.52 20.0 Nickel, Total 1765486 0.450 0.457 0.00433 0.500 70.0 - 130 89.1 90.5 mg/L 1.56 20.0 Selenium, Total 1765486 0.482 0.494 0.00991 0.500 70.0 - 130 94.4 96.8 mg/L 2.51 20.0 Zinc, Total 1765486 0.421 0.434 0.00842 0.500 70.0 - 130 82.5 85.1 mg/L 3.10 20.0
Analytical Set 828289 EPA 200.7 4.4 Blank
Parameter PrepSet Reading MDL MQL Units File Dissolved Calcium 827606 0.192 0.0419 0.500 mg/L 119718821 Dissolved Magnesium 827606 ND 0.0102 0.020 mg/L 119718821 Dissolved Sodium 827606 0.183 0.0315 0.500 mg/L 119718821 CCV
Parameter Reading Known Units Recover% Limits% File Dissolved Calcium 25.2 25.0 mg/L 101 90.0 - 110 119718817 23.2 25.0 mg/L 92.8 90.0 - 110 119718827
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1764 www.ana-lab.com Form rptPROJQCGrpt Created 01/27/2005 v1.0 Report Page 14 of 19 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] LELAP-accredited #02008 1 Employee Owned Integrity Caring Continual Improvement 2 Quality Control Printed 03/22/2019 Page 8 of 10 3 4 CCV
Parameter Reading Known Units Recover% Limits% File Dissolved Magnesium 26.2 25.0 mg/L 105 90.0 - 110 119718817 24.5 25.0 mg/L 98.0 90.0 - 110 119718827 25.7 25.0 mg/L 103 90.0 - 110 119718833 Dissolved Sodium 25.3 25.0 mg/L 101 90.0 - 110 119718817 23.7 25.0 mg/L 94.8 90.0 - 110 119718827 ICL
Parameter Reading Known Units Recover% Limits% File Dissolved Calcium 48.5 50.0 mg/L 97.0 95.0 - 105 119718790 Dissolved Magnesium 49.3 50.0 mg/L 98.6 95.0 - 105 119718790 Dissolved Sodium 49.4 50.0 mg/L 98.8 95.0 - 105 119718790 ICV
Parameter Reading Known Units Recover% Limits% File Dissolved Calcium 26.0 25.0 mg/L 104 90.0 - 110 119718794 Dissolved Magnesium 25.9 25.0 mg/L 104 90.0 - 110 119718794 Dissolved Sodium 25.4 25.0 mg/L 102 90.0 - 110 119718794 MSD
Parameter Sample MS MSD UNK Known Limits MS% MSD% Units RPD Limit% Dissolved Calcium 1765611 11.7 11.6 6.23 5.00 75.0 - 125 109 107 mg/L 1.85 20.0 Dissolved Magnesium 1765611 6.54 6.50 1.43 5.00 75.0 - 125 102 101 mg/L 0.786 20.0 Dissolved Sodium 1765611 7.90 7.80 2.54 5.00 75.0 - 125 107 105 mg/L 1.88 20.0
Analytical Set 828491 EPA 200.8 5.4 Blank
Parameter PrepSet Reading MDL MQL Units File Arsenic, Total 827705 ND 0.00025 0.0005 mg/L 119723822 Molybdenum, Total 827705 0.000874 0.00025 0.0005 mg/L * 119723822 Zinc, Total 827705 ND 0.0025 0.005 mg/L 119723822 CCV
Parameter Reading Known Units Recover% Limits% File Molybdenum, Total 0.0477 0.05 mg/L 95.4 90.0 - 110 119723821 0.0477 0.05 mg/L 95.4 90.0 - 110 119723831 0.0482 0.05 mg/L 96.4 90.0 - 110 119723834 ICV
Parameter Reading Known Units Recover% Limits% File Molybdenum, Total 0.047 0.05 mg/L 94.0 90.0 - 110 119723816 LCS Dup
Parameter PrepSet LCS LCSD Known Limits% LCS% LCSD% Units RPD Limit% Arsenic, Total 827705 0.492 0.500 0.500 85.0 - 115 98.4 100 mg/L 1.61 20.0 Molybdenum, Total 827705 0.524 0.549 0.500 85.0 - 115 105 110 mg/L 4.66 20.0 Zinc, Total 827705 0.502 0.510 0.500 85.0 - 115 100 102 mg/L 1.58 20.0 MSD
Parameter Sample MS MSD UNK Known Limits MS% MSD% Units RPD Limit% Arsenic, Total 1765480 0.480 0.495 0.00885 0.500 70.0 - 130 94.2 97.2 mg/L 3.13 20.0 Molybdenum, Total 1765480 0.577 0.613 0.0597 0.500 70.0 - 130 103 111 mg/L 6.73 20.0 Zinc, Total 1765480 0.430 0.434 ND 0.500 70.0 - 130 86.0 86.8 mg/L 0.926 20.0
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1764 www.ana-lab.com Form rptPROJQCGrpt Created 01/27/2005 v1.0 Report Page 15 of 19 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
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Analytical Set 829055 EPA 200.8 5.4 Blank
Parameter PrepSet Reading MDL MQL Units File Aluminum, Total 828659 0.0847 0.0025 0.005 mg/L * 119736818 CCV
Parameter Reading Known Units Recover% Limits% File Aluminum, Total 0.0522 0.05 mg/L 104 90.0 - 110 119736817 0.054 0.05 mg/L 108 90.0 - 110 119736828 0.0534 0.05 mg/L 107 90.0 - 110 119736838 0.0535 0.05 mg/L 107 90.0 - 110 119736848 0.053 0.05 mg/L 106 90.0 - 110 119736858 ICV
Parameter Reading Known Units Recover% Limits% File Aluminum, Total 0.0467 0.05 mg/L 93.4 90.0 - 110 119736812 LCS Dup
Parameter PrepSet LCS LCSD Known Limits% LCS% LCSD% Units RPD Limit% Aluminum, Total 828659 0.497 0.498 0.500 85.0 - 115 99.4 99.6 mg/L 0.201 20.0 MSD
Parameter Sample MS MSD UNK Known Limits MS% MSD% Units RPD Limit% Aluminum, Total 1767422 0.497 0.499 0.00641 0.500 70.0 - 130 98.1 98.5 mg/L 0.407 20.0
Analytical Set 828966 EPA 608 Blank
Parameter PrepSet Reading MDL MQL Units File PCB-1016 827667 ND 0.155 0.200 ug/L 119734122 PCB-1221 827667 ND 0.143 0.200 ug/L 119734122 PCB-1232 827667 ND 0.143 0.200 ug/L 119734122 PCB-1242 827667 ND 0.143 0.200 ug/L 119734122 PCB-1248 827667 ND 0.143 0.200 ug/L 119734122 PCB-1254 827667 ND 0.143 0.200 ug/L 119734122 PCB-1260 827667 ND 0.143 0.200 ug/L 119734122 CCV
Parameter Reading Known Units Recover% Limits% File PCB-1016 1190 1000 ug/L 119 -39000 - 41000 119734100 1170 1000 ug/L 117 -39000 - 41000 119734129 1180 1000 ug/L 118 -39000 - 41000 119734131 PCB-1260 1190 1000 ug/L 119 -39000 - 41000 119734100 1200 1000 ug/L 120 -39000 - 41000 119734129 1210 1000 ug/L 121 -39000 - 41000 119734131 LCS Dup
Parameter PrepSet LCS LCSD Known Limits% LCS% LCSD% Units RPD Limit% PCB-1016 827667 8.41 8.15 10.0 15.0 - 137 84.1 81.5 ug/L 3.14 30.0 PCB-1260 827667 12.1 11.4 10.0 16.4 - 143 121 114 ug/L 5.96 30.0 Surrogate
Parameter Sample Type Reading Known Units Recover% Limits% File Decachlorobiphenyl 827667 Blank 41.3 100 ug/L 41.3 10.0 - 200 119734122 Tetrachloro-m-Xylene (Surr) 827667 Blank 44.0 100 ug/L 44.0 10.0 - 200 119734122
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1764 www.ana-lab.com Form rptPROJQCGrpt Created 01/27/2005 v1.0 Report Page 16 of 19 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
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Parameter Sample Type Reading Known Units Recover% Limits% File Decachlorobiphenyl 1765611 UNKNOWN0.280 1.01 ug/L 27.7 10.0 - 200 119734130 Tetrachloro-m-Xylene (Surr) 1765611 UNKNOWN0.382 1.01 ug/L 37.8 10.0 - 200 119734130
Analytical Set 828139 SM 2510 B-2011 Blank
Parameter PrepSet Reading MDL MQL Units File Lab Spec. Conductance at 25 828139 0.97 umhos/cm 119715808 C Duplicate
Parameter Sample Result Unknown Unit RPD Limit% Lab Spec. Conductance at 25 1765611 72.0 72.2 umhos/cm 0.277 20.0 C 1765889 356 356 umhos/cm 0 20.0 ICV
Parameter Reading Known Units Recover% Limits% File Lab Spec. Conductance at 25 12800 12900 umhos/cm 99.2 90.0 - 110 119715811 C Standard
Parameter Sample Reading Known Units Recover% Limits% File Lab Spec. Conductance at 25 828139 1410 1410 umhos/cm 100 90.0 - 110 119715809 C 828139 101 100 umhos/cm 101 90.0 - 110 119715810 828139 1410 1410 umhos/cm 100 90.0 - 110 119715823 828139 1410 1410 umhos/cm 100 90.0 - 110 119715835
Analytical Set 828887 SM 4500-P E-2011 Blank
Parameter PrepSet Reading MDL MQL Units File Phosphorus (as P), total 828887 ND 0.00285 0.010 mg/L 119731894 CCV
Parameter Reading Known Units Recover% Limits% File Phosphorus (as P), total 0.297 0.300 mg/L 99.0 90.0 - 110 119731895 0.300 0.300 mg/L 100 90.0 - 110 119731910 LCS Dup
Parameter PrepSet LCS LCSD Known Limits% LCS% LCSD% Units RPD Limit% Phosphorus (as P), total 828887 0.299 0.302 0.300 80.0 - 120 99.7 101 mg/L 0.998 20.0 MSD
Parameter Sample MS MSD UNK Known Limits MS% MSD% Units RPD Limit% Phosphorus (as P), total 1766377 0.347 0.353 0.0287 0.300 70.0 - 130 106 108 mg/L 1.87 20.0
* Out RPD is Relative Percent Difference: abs(r1-r2) / mean(r1,r2) * 100% Recover% is Recovery Percent: result / known * 100% Blank - Method Blank; LCS - Laboratory Control Sample; CCV - Continuing Calibration Verification; ICV - Initial Calibration Verification; AWRL/MRL C - Ambient Water Reporting Limit/Minimum Reporting Limit Check Std; MS - Matrix Spike; LDR - Linear Dynamic Range Standard; MRL Check - Minimum Reporting Limit Check Std
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1764 www.ana-lab.com Form rptPROJQCGrpt Created 01/27/2005 v1.0 Report Page 17 of 19
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865823 CoC Print Group 001 of 001 Report Page 1 of 15 Ana-Lab Corp. P.O. Box 9000 1 LELAP-accredited #02008 2 Kilgore, TX 75663 3 903/984-0551 Report 4
Table of Contents
Printed 03/20/2019 Page 1 of 1
Account Weyerhaeuser Shelly Boykin PO Box 38 WSB1-L Dierks, AR 71833
Project 865824
This report consists of this Table of Contents and the following pages:
Report Name Description Pages 865824_r03_03_ProjectResults Ana-Lab Project P:865824 C:WSB1 Project Results t:304 5 865824_r10_05_ProjectQC Ana-Lab Project P:865824 C:WSB1 Project Quality Control Groups 7 865824_r99_09_CoC__1_of_1 Ana-Lab CoC WSB1 865824_1_of_1 2 Total Pages: 14
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662
NELAP-accredited #T104704201
LDSClient v1.14.12.1762 Phone 903/984-0551 e-Mail [email protected] Form rptTOC Created 10/06/2004 v1.1 Report Page 2 of 15 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] 1 Employee Owned Integrity Caring Continual Improvement 2 Printed: 03/20/2019 Page 1 of 5 3 Results 4
Account Project Report To WSB1-L 865824 Weyerhaeuser Shelly Boykin PO Box 38 Dierks, AR 71833 Results
1765612 LA-S Received: 03/11/2019
Solid & Chemical Materials Collected by: Client Weyerhaeuser PO: Taken: 03/11/2019 08:45:00
600/2-78-054 3.2.19 Prepared: 03/18/2019 13:58:58 Calculated 03/18/2019 13:58:58 CAL
Parameter Results Units RL Flag CAS Bottle Sodium Adsorption Ratio 0.00473 1 s
EPA 6010B Prepared: 828313 03/15/2019 18:26:00 Analyzed 828313 03/15/2019 18:26:00 LPS
Parameter Results Units RL Flag CAS Bottle N Calcium (SAR Extracted) 19.0 mg/L 5.00 s 7440-70-2 10 N Magnesium (SAR Extracted) <10.0 mg/L 10.0 7439-95-4 10
EPA 6010C Prepared: 827669 03/13/2019 12:00:00 Analyzed 828054 03/14/2019 17:56:00 LPS
Parameter Results Units RL Flag CAS Bottle N Phosphorus 148 * mg/kg 14.2 s 7723-14-0 12
EPA 6010C Prepared: 827669 03/13/2019 12:00:00 Analyzed 828293 03/15/2019 20:51:00 LPS
Parameter Results Units RL Flag CAS Bottle N Potassium 568 * mg/Kg 70.6 s 7440-09-7 12
EPA 6010C Prepared: 827669 03/13/2019 12:00:00 Analyzed 828293 03/15/2019 21:01:00 LPS
Parameter Results Units RL Flag CAS Bottle N Iron, Total 9910 * mg/Kg 17.7 PD6s 7439-89-6 12
EPA 6010C Prepared: 827858 03/14/2019 09:15:00 Analyzed 828292 03/15/2019 18:48:00 LPS
Parameter Results Units RL Flag CAS Bottle N Sodium (CEC Extractable) 8020 mg/kg 82.8 s 7440-23-5 17
EPA 6010C Prepared: 828313 03/15/2019 18:26:00 Analyzed 828313 03/15/2019 18:26:00 LPS
Parameter Results Units RL Flag CAS Bottle N Sodium (SAR Extracted) <10.0 mg/L 10.0 s 7440-23-5 10 * Dry Weight Basis
EPA 6020A Prepared: 827669 03/13/2019 12:00:00 Analyzed 827806 03/13/2019 15:06:00 JBP
Parameter Results Units RL Flag CAS Bottle s Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1762 www.ana-lab.com Form rptPROJRES Created 10/13/2004 v1.2 Report Page 3 of 15 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] 1 Employee Owned Integrity Caring Continual Improvement 2 Printed: 03/20/2019 Page 2 of 5 3 Results 4
1765612 LA-S Received: 03/11/2019
Solid & Chemical Materials Collected by: Client Weyerhaeuser PO: Taken: 03/11/2019 08:45:00
EPA 6020A Prepared: 827669 03/13/2019 12:00:00 Analyzed 827806 03/13/2019 15:06:00 JBP
Parameter Results Units RL Flag CAS Bottle N Arsenic, Total 2.43 * mg/kg 0.282 s 7440-38-2 12 N Cadmium, Total <0.142 * mg/kg 0.142 7440-43-9 12 N Lead, Total 9.78 * mg/kg 0.142 7439-92-1 12 N Molybdenum, Total 0.403 * mg/kg 0.142 7439-98-7 12 N Nickel, Total 4.80 * mg/kg 0.142 7440-02-0 12 N Selenium, Total <0.424 * mg/kg 0.424 7782-49-2 12 N Zinc, Total 22.8 * mg/kg 0.706 D 7440-66-6 12
EPA 6020A Prepared: 827669 03/13/2019 12:00:00 Analyzed 827976 03/14/2019 14:23:00 JBP
Parameter Results Units RL Flag CAS Bottle N Copper, Total 5.51 * mg/kg 0.142 s 7440-50-8 12
EPA 6020A Prepared: 827669 03/13/2019 12:00:00 Analyzed 828891 03/19/2019 16:23:00 JBP
Parameter Results Units RL Flag CAS Bottle N Aluminum, Total 5140 * mg/kg 3.53 s 7429-90-5 12 * Dry Weight Basis
EPA 7471B 2 Prepared: 827844 03/14/2019 07:45:00 Analyzed 827914 03/14/2019 12:07:00 JBP
Parameter Results Units RL Flag CAS Bottle N Mercury <0.0251 * mg/kg 0.0251 s 7439-97-6 15 * Dry Weight Basis
EPA 9045D Prepared: 827798 03/12/2019 13:00:00 Analyzed 827798 03/12/2019 13:00:00 ELS
Parameter Results Units RL Flag CAS Bottle N Soil pH Measured in Water 6.4 @ 22 C SU 2.00 s 01
EPA 9050 Prepared: 828768 03/19/2019 14:00:00 Analyzed 828768 03/19/2019 14:00:00 NHL
Parameter Results Units RL Flag CAS Bottle N Lab Electrical Conductance at 25 37.1 umhos/c s 01 m
EPA 9056 Prepared: 827578 03/12/2019 15:19:08 Analyzed 827762 03/13/2019 02:41:00 AMB
Parameter Results Units RL Flag CAS Bottle N Nitrate-Nitrogen 0.334 * mg/kg 0.286 PDs 14797-55-8 07 * Dry Weight Basis
EPA 9081 (Mod) Prepared: 03/18/2019 10:05:12 Calculated 03/18/2019 10:05:12 CAL
Parameter Results Units RL Flag CAS Bottle s Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1762 www.ana-lab.com Form rptPROJRES Created 10/13/2004 v1.2 Report Page 4 of 15 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] 1 Employee Owned Integrity Caring Continual Improvement 2 Printed: 03/20/2019 Page 3 of 5 3 Results 4
1765612 LA-S Received: 03/11/2019
Solid & Chemical Materials Collected by: Client Weyerhaeuser PO: Taken: 03/11/2019 08:45:00
EPA 9081 (Mod) Prepared: 03/18/2019 10:05:12 Calculated 03/18/2019 10:05:12 CAL
Parameter Results Units RL Flag CAS Bottle N Cation Exchange Capacity (CEC) 34.9 meq/100 s g
Handbook 60 Prepared: 827594 03/13/2019 08:40:00 Analyzed 827594 03/13/2019 08:40:00 TH2
Parameter Results Units RL Flag CAS Bottle Saturated Water Percentage 35.8 % 0.100 s 01
SM2540 G-1997 /MOD Prepared: 827467 03/11/2019 15:10:00 Analyzed 827467 03/11/2019 15:10:00 TH2
Parameter Results Units RL Flag CAS Bottle N Total Solids for Dry Wt 79.0 % 0.010 s 03 Sample Preparation
1765612 LA-S Received: 03/11/2019
600/2-78-054 3.2.19 Prepared: 827707 03/12/2019 10:00:00 Analyzed 827707 03/12/2019 10:00:00 ALH
Sodium Adsorption Ratio Extract PREPARED/PRE grams 01 PAR
Calculation Prepared: 03/20/2019 12:52:07 Calculated 03/20/2019 12:52:07 CAL
As Received to Dry Weight Basis Calculated
EPA 3050B Prepared: 827669 03/13/2019 12:00:00 Analyzed 827669 03/13/2019 12:00:00 TES
N Solid/Sludge/Soil/Sediment Metal 50/2.24 grams 04
EPA 6010B Prepared: 03/18/2019 13:58:57 Calculated 03/18/2019 13:58:57 CAL
N Calcium (SAR) meq/L calculation 0.950 meq/L 0.250 7440-70-2 N Magnesium (SAR) meq/L calculatio <0.833 meq/L 0.833 7439-95-4
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1762 www.ana-lab.com Form rptPROJRES Created 10/13/2004 v1.2 Report Page 5 of 15 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] 1 Employee Owned Integrity Caring Continual Improvement 2 Printed: 03/20/2019 Page 4 of 5 3 Results 4
1765612 LA-S Received: 03/11/2019
EPA 6010C Prepared: 03/18/2019 13:58:57 Calculated 03/18/2019 13:58:57 CAL
N Sodium (SAR) meq/L calculation <0.435 meq/L 0.435 7440-23-5
EPA 7471B Prepared: 827844 03/14/2019 07:45:00 Analyzed 827844 03/14/2019 07:45:00 ALB
N Solid Metals Digestion Hg 50/0.5048 grams 01
EPA 9056 Prepared: 827578 03/12/2019 15:19:08 Analyzed 827578 03/12/2019 15:19:08 LSD
N Water Extract-Ion Chromatography 50/5 grams 03
EPA 9081 Prepared: 827858 03/14/2019 09:15:00 Analyzed 827858 03/14/2019 09:15:00 ALH
N Cation Exchange Capacity Extract 25/1.51 ml NA 02
SM 2540 G-1997 Prepared: 827313 03/11/2019 15:10:00 Analyzed 827313 03/11/2019 15:10:00 TH2
N Total Solids Start Code Started
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1762 www.ana-lab.com Form rptPROJRES Created 10/13/2004 v1.2 Report Page 6 of 15 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] 1 Employee Owned Integrity Caring Continual Improvement 2 Printed: 03/20/2019 Page 5 of 5 3 Results 4 Qualifiers:
D - Duplicate RPD was higher than expected 6 - Sample result is above the calibration curve, but within the Linear Dynamic Range. P - Spike recovery outside control limits due to matrix effects.
We report results on an As Received or wet basis unless marked Dry Weight. Unless otherwise noted, testing was performed at Ana-labs corporate laboratory that holds the following Federal and State certificates: EPA Lab Number TX00063, US Department of Agriculture Soil Import Permit P330-17-00117, Texas Commission on Environmental Quality Commercial Drinking Water Lab Approval (Lab ID: TX219), Texas Commission on Environmental Quality NELAP T104704201-19-15, Louisiana Department of Environmental Quality Laboratory Certification (NELAP, LELAP) #02008, Louisiana Department of Health and Hospitals Drinking Water (NELAP) Certificate No LA026, Oklahoma Department of Environmental Quality TNI Laboratory Accreditation Program Certificate No. 2018-126, Arkansas Department of Environmental Quality Certification #18-068-0. The Accredited column designates accreditation by N -- NELAC, or z -- not covered under NELAC scope of accreditation. These analytical results relate to the sample tested. This report may NOT be reproduced EXCEPT in FULL without written approval of Ana-Lab Corp. Unless otherwise specified, these test results meet the requirements of NELAC. RL is the Reporting Limit (sample specific quantitation limit) and is at or above the Method Detection Limit (MDL). CAS is Chemical Abstract Service number. RL is our Reporting Limit, or Minimum Quantitation Level. The RL takes into account the Instrument Detection Limit (IDL), Method Detection Limit (MDL), and Practical Quantitation Limit (PQL), and any dilutions and/or concentrations performed during sample preparation (EQL). Our analytical result must be above this RL before we report a value in the 'Results' column of our report (without a 'J' flag). Otherwise, we report ND (Not Detected above RL), because the result is "<" (less than) the number in the RL column. MAL is Minimum Analytical Level and is typically from regulatory agencies. Unless we report a result in the result column, or interferences prevent it, we work to have our RL at or below the MAL.
Bill Peery, MS, VP Technical Services
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1762 www.ana-lab.com Form rptPROJRES Created 10/13/2004 v1.2 Report Page 7 of 15 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] LELAP-accredited #02008 1 Employee Owned Integrity Caring Continual Improvement 2 Quality Control Printed 03/20/2019 Page 1 of 7 3 4
Account Project Report To WSB1-L 865824 Weyerhaeuser Shelly Boykin PO Box 38 Dierks, AR 71833
Analytical Set 827467 SM2540 G-1997 /MOD ControlBlk
Parameter PrepSet Reading MDL MQL Units File Total Solids for Dry Wt 827467 0 grams 119702285 Duplicate
Parameter Sample Result Unknown Unit RPD Limit% Total Solids for Dry Wt 1765422 53.5 58.3 % 8.59 20.0 1765548 84.7 84.2 % 0.592 20.0 1765612 79.2 79.0 % 0.253 20.0
Analytical Set 827594 Handbook 60 ControlBlk
Parameter PrepSet Reading MDL MQL Units File Saturated Water Percentage 827594 -0.0001 grams 119704280 Duplicate
Parameter Sample Result Unknown Unit RPD Limit% Saturated Water Percentage 1765612 33.4 35.8 % 6.94 20.0
Analytical Set 827762 EPA 9056 Blank
Parameter PrepSet Reading MDL MQL Units File Nitrate-Nitrogen 827578 ND 0.00185 0.0226 mg/kg 119707860 CCV
Parameter Reading Known Units Recover% Limits% File Nitrate-Nitrogen 2.41 2.26 mg/kg 107 90.0 - 110 119707859 2.35 2.26 mg/kg 104 90.0 - 110 119707867 LCS Dup
Parameter PrepSet LCS LCSD Known Limits% LCS% LCSD% Units RPD Limit% Nitrate-Nitrogen 827578 1.21 1.14 1.13 81.0 - 113 107 101 mg/kg 5.96 20.0 MSD
Parameter Sample MS MSD UNK Known Limits MS% MSD% Units RPD Limit% Nitrate-Nitrogen 1765612 3.03 2.49 0.264 2.26 80.0 - 120 122 * 98.5 mg/kg 21.6 * 20.0
Analytical Set 827806 EPA 6020A Blank
Parameter PrepSet Reading MDL MQL Units File Arsenic, Total 827669 ND 0.000869 0.002 mg/kg 119708860 Cadmium, Total 827669 ND 0.000187 0.001 mg/kg 119708860 Lead, Total 827669 0.00013 0.00004460.001 mg/kg 119708860 Molybdenum, Total 827669 0.000265 0.000186 0.001 mg/kg 119708860 Nickel, Total 827669 ND 0.000441 0.001 mg/kg 119708860
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1762 www.ana-lab.com Form rptPROJQCGrpt Created 01/27/2005 v1.0 Report Page 8 of 15 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] LELAP-accredited #02008 1 Employee Owned Integrity Caring Continual Improvement 2 Quality Control Printed 03/20/2019 Page 2 of 7 3 4 Blank
Parameter PrepSet Reading MDL MQL Units File Selenium, Total 827669 ND 0.00194 0.003 mg/kg 119708860 Zinc, Total 827669 0.00274 0.0011 0.005 mg/kg 119708860 CCV
Parameter Reading Known Units Recover% Limits% File Arsenic, Total 0.049 0.05 mg/kg 98.0 90.0 - 110 119708859 0.049 0.05 mg/kg 98.0 90.0 - 110 119708869 Cadmium, Total 0.0504 0.05 mg/kg 101 90.0 - 110 119708859 0.0508 0.05 mg/kg 102 90.0 - 110 119708869 Lead, Total 0.0507 0.05 mg/kg 101 90.0 - 110 119708859 0.0511 0.05 mg/kg 102 90.0 - 110 119708869 Molybdenum, Total 0.0499 0.05 mg/kg 99.8 90.0 - 110 119708859 0.0521 0.05 mg/kg 104 90.0 - 110 119708869 Nickel, Total 0.0506 0.05 mg/kg 101 90.0 - 110 119708859 0.0511 0.05 mg/kg 102 90.0 - 110 119708869 Selenium, Total 0.0492 0.05 mg/kg 98.4 90.0 - 110 119708859 0.0508 0.05 mg/kg 102 90.0 - 110 119708869 Zinc, Total 0.0535 0.05 mg/kg 107 90.0 - 110 119708859 0.0534 0.05 mg/kg 107 90.0 - 110 119708869 ICV
Parameter Reading Known Units Recover% Limits% File Arsenic, Total 0.0519 0.05 mg/kg 104 90.0 - 110 119708854 Cadmium, Total 0.0516 0.05 mg/kg 103 90.0 - 110 119708854 Lead, Total 0.0516 0.05 mg/kg 103 90.0 - 110 119708854 Molybdenum, Total 0.0511 0.05 mg/kg 102 90.0 - 110 119708854 Nickel, Total 0.0521 0.05 mg/kg 104 90.0 - 110 119708854 Selenium, Total 0.0523 0.05 mg/kg 105 90.0 - 110 119708854 Zinc, Total 0.0522 0.05 mg/kg 104 90.0 - 110 119708854 LCS Dup
Parameter PrepSet LCS LCSD Known Limits% LCS% LCSD% Units RPD Limit% Arsenic, Total 827669 2.38 2.35 2.50 85.8 - 109 95.2 94.0 mg/kg 1.27 20.0 Cadmium, Total 827669 1.23 1.21 1.25 90.3 - 108 98.4 96.8 mg/kg 1.64 20.0 Lead, Total 827669 2.57 2.54 2.50 91.6 - 113 103 102 mg/kg 1.17 20.0 Molybdenum, Total 827669 2.65 2.61 2.50 91.4 - 121 106 104 mg/kg 1.52 20.0 Nickel, Total 827669 2.43 2.41 2.50 90.3 - 112 97.2 96.4 mg/kg 0.826 20.0 Selenium, Total 827669 2.42 2.39 2.50 82.0 - 111 96.8 95.6 mg/kg 1.25 20.0 Zinc, Total 827669 2.43 2.39 2.50 84.0 - 108 97.2 95.6 mg/kg 1.66 20.0 LDR
Parameter Reading Known Units Recover% Limits% File Arsenic, Total 9.52 10 mg/kg 95.2 90.0 - 110 119708858 Cadmium, Total 9.65 10 mg/kg 96.5 90.0 - 110 119708858 Lead, Total 9.63 10 mg/kg 96.3 90.0 - 110 119708858 Molybdenum, Total 9.77 10 mg/kg 97.7 90.0 - 110 119708858 Nickel, Total 9.62 10 mg/kg 96.2 90.0 - 110 119708858 Selenium, Total 9.70 10 mg/kg 97.0 90.0 - 110 119708858 Zinc, Total 9.77 10 mg/kg 97.7 90.0 - 110 119708858 MSD
Parameter Sample MS MSD UNK Known Limits MS% MSD% Units RPD Limit%
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1762 www.ana-lab.com Form rptPROJQCGrpt Created 01/27/2005 v1.0 Report Page 9 of 15 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] LELAP-accredited #02008 1 Employee Owned Integrity Caring Continual Improvement 2 Quality Control Printed 03/20/2019 Page 3 of 7 3 4 MSD
Parameter Sample MS MSD UNK Known Limits MS% MSD% Units RPD Limit% Arsenic, Total 1765612 48.1 44.8 1.92 52.1 60.6 - 119 81.3 75.5 mg/kg 7.41 20.0 Cadmium, Total 1765612 28.5 26.1 0.0598 26.0 82.1 - 114 100 91.7 mg/kg 8.81 20.0 Lead, Total 1765612 66.3 62.6 7.73 52.1 76.3 - 122 103 96.6 mg/kg 6.52 20.0 Molybdenum, Total 1765612 53.0 48.6 0.318 52.1 62.2 - 132 92.8 85.0 mg/kg 8.72 20.0 Nickel, Total 1765612 57.8 52.6 3.79 52.1 71.4 - 119 95.1 85.9 mg/kg 10.1 20.0 Selenium, Total 1765612 47.8 43.7 0.0604 52.1 56.6 - 124 84.0 76.8 mg/kg 8.97 20.0 Zinc, Total 1765612 82.2 60.9 18.0 52.1 25.3 - 153 113 75.5 mg/kg 39.8 * 20.0
Analytical Set 827914 EPA 7471B 2 Blank
Parameter PrepSet Reading MDL MQL Units File Mercury 827844 ND 0.00004340.0002 mg/kg 119711328 CCV
Parameter Reading Known Units Recover% Limits% File Mercury 0.00522 0.005 mg/kg 104 90.0 - 110 119711327 0.00509 0.005 mg/kg 102 90.0 - 110 119711334 0.00508 0.005 mg/kg 102 90.0 - 110 119711336 ICL
Parameter Reading Known Units Recover% Limits% File Mercury 0.0197 0.02 mg/kg 98.5 90.0 - 110 119711310 ICV
Parameter Reading Known Units Recover% Limits% File Mercury 0.00497 0.005 mg/kg 99.4 90.0 - 110 119711309 LCS Dup
Parameter PrepSet LCS LCSD Known Limits% LCS% LCSD% Units RPD Limit% Mercury 827844 0.00891 0.00906 0.010 79.2 - 104 89.1 90.6 mg/kg 1.67 20.0 MSD
Parameter Sample MS MSD UNK Known Limits MS% MSD% Units RPD Limit% Mercury 1766253 0.980 1.03 0.145 0.996 74.5 - 109 88.5 93.8 mg/kg 5.81 25.0
Analytical Set 827976 EPA 6020A Blank
Parameter PrepSet Reading MDL MQL Units File Copper, Total 827669 0.00108 0.000618 0.001 mg/kg * 119712607 CCV
Parameter Reading Known Units Recover% Limits% File Copper, Total 0.0507 0.05 mg/kg 101 90.0 - 110 119712606 0.0499 0.05 mg/kg 99.8 90.0 - 110 119712608 0.0499 0.05 mg/kg 99.8 90.0 - 110 119712614 ICV
Parameter Reading Known Units Recover% Limits% File Copper, Total 0.0504 0.05 mg/kg 101 90.0 - 110 119712601 LCS Dup
Parameter PrepSet LCS LCSD Known Limits% LCS% LCSD% Units RPD Limit% Copper, Total 827669 2.50 2.45 2.50 87.6 - 112 100 98.0 mg/kg 2.02 20.0
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1762 www.ana-lab.com Form rptPROJQCGrpt Created 01/27/2005 v1.0 Report Page 10 of 15 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] LELAP-accredited #02008 1 Employee Owned Integrity Caring Continual Improvement 2 Quality Control Printed 03/20/2019 Page 4 of 7 3 4 LDR
Parameter Reading Known Units Recover% Limits% File Copper, Total 9.44 10 mg/kg 94.4 90.0 - 110 119712605 MSD
Parameter Sample MS MSD UNK Known Limits MS% MSD% Units RPD Limit% Copper, Total 1765612 58.3 50.2 4.35 52.1 20.6 - 161 95.0 80.7 mg/kg 16.2 20.0
Analytical Set 828054 EPA 6010C Blank
Parameter PrepSet Reading MDL MQL Units File Phosphorus 827669 ND 0.00734 0.100 mg/kg 119714053 CCV
Parameter Reading Known Units Recover% Limits% File Phosphorus 9.97 10.0 mg/kg 99.7 90.0 - 110 119714046 9.98 10.0 mg/kg 99.8 90.0 - 110 119714055 9.78 10.0 mg/kg 97.8 90.0 - 110 119714060 ICL
Parameter Reading Known Units Recover% Limits% File Phosphorus 25.6 25.0 mg/kg 102 95.0 - 105 119714033 ICV
Parameter Reading Known Units Recover% Limits% File Phosphorus 9.94 10.0 mg/kg 99.4 90.0 - 110 119714034 LCS Dup
Parameter PrepSet LCS LCSD Known Limits% LCS% LCSD% Units RPD Limit% Phosphorus 827669 19.2 19.4 20.0 85.3 - 118 96.0 97.0 mg/kg 1.04 25.0 MSD
Parameter Sample MS MSD UNK Known Limits MS% MSD% Units RPD Limit% Phosphorus 1765612 560 536 117 417 30.7 - 168 97.4 92.1 mg/kg 5.57 25.0
Analytical Set 828292 EPA 6010C Blank
Parameter PrepSet Reading MDL MQL Units File Sodium (CEC Extractable) 827858 ND 0.300 0.500 mg/kg 119719076 CCV
Parameter Reading Known Units Recover% Limits% File Sodium (CEC Extractable) 25.1 25.0 mg/kg 100 90.0 - 110 119719073 25.6 25.0 mg/kg 102 90.0 - 110 119719082 ICL
Parameter Reading Known Units Recover% Limits% File Sodium (CEC Extractable) 49.4 50.0 mg/kg 98.8 95.0 - 105 119719032 ICV
Parameter Reading Known Units Recover% Limits% File Sodium (CEC Extractable) 25.4 25.0 mg/kg 102 90.0 - 110 119719036
Analytical Set 828293 EPA 6010C
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1762 www.ana-lab.com Form rptPROJQCGrpt Created 01/27/2005 v1.0 Report Page 11 of 15 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] LELAP-accredited #02008 1 Employee Owned Integrity Caring Continual Improvement 2 Quality Control Printed 03/20/2019 Page 5 of 7 3 4 Blank
Parameter PrepSet Reading MDL MQL Units File Iron, Total 827669 ND 0.0035 0.025 mg/Kg 119719171 Potassium 827669 ND 0.111 0.500 mg/Kg 119719171 CCV
Parameter Reading Known Units Recover% Limits% File Iron, Total 2.49 2.50 mg/Kg 99.6 90.0 - 110 119719172 2.55 2.50 mg/Kg 102 90.0 - 110 119719181 Potassium 23.5 25.0 mg/Kg 94.0 90.0 - 110 119719172 23.9 25.0 mg/Kg 95.6 90.0 - 110 119719181 Dir. SPKD
Parameter Sample DSPK DSPKD UNK Known Limits% DSPK% DSPKD% Units RPD Limit% Iron, Total 1765612 7840 7220 7830 284 80.0 - 120 * * 3.52 * 0 * mg/Kg 8.23 25.0 Potassium 1765612 3390 3110 466 2840 80.0 - 120 103 102 mg/Kg 8.62 25.0 Direct SPK
Parameter Sample DSPK UNK Known Limits% DSPK% Units Iron, Total 1765612 7840 7830 284 80.0 - 120 3.52 * mg/Kg 25.0 Potassium 1765612 3390 466 2840 80.0 - 120 103 mg/Kg 25.0 ICL
Parameter Reading Known Units Recover% Limits% File Iron, Total 4.95 5.00 mg/Kg 99.0 95.0 - 105 119719111 Potassium 50.3 50.0 mg/Kg 101 95.0 - 105 119719111 ICV
Parameter Reading Known Units Recover% Limits% File Iron, Total 2.60 2.50 mg/Kg 104 90.0 - 110 119719115 Potassium 24.6 25.0 mg/Kg 98.4 90.0 - 110 119719115 LCS Dup
Parameter PrepSet LCS LCSD Known Limits% LCS% LCSD% Units RPD Limit% Iron, Total 827669 2.29 2.36 2.50 82.1 - 120 91.6 94.4 mg/Kg 3.01 25.0 Potassium 827669 23.5 23.8 25.0 78.1 - 118 94.0 95.2 mg/Kg 1.27 25.0 MSD
Parameter Sample MS MSD UNK Known Limits MS% MSD% Units RPD Limit% Iron, Total 1765612 7350 8580 7150 52.1 84.3 - 121 352 * 2520 * mg/Kg 151 * 25.0 Potassium 1765612 963 961 449 521 37.8 - 170 90.5 90.1 mg/Kg 0.390 25.0
Analytical Set 828313 EPA 6010C Blank
Parameter PrepSet Reading MDL MQL Units File Calcium (SAR Extracted) 828313 0.124 0.0266 0.250 mg/L 119720296 Magnesium (SAR Extracted) 828313 ND 0.100 0.500 mg/L 119720296 Sodium (SAR Extracted) 828313 0.135 0.0753 0.500 mg/L 119720296 CCV
Parameter Reading Known Units Recover% Limits% File Calcium (SAR Extracted) 23.2 25.0 mg/L 92.8 90.0 - 110 119720295 24.9 25.0 mg/L 99.6 90.0 - 110 119720298 25.7 25.0 mg/L 103 90.0 - 110 119720300 Magnesium (SAR Extracted) 24.5 25.0 mg/L 98.0 90.0 - 110 119720295
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1762 www.ana-lab.com Form rptPROJQCGrpt Created 01/27/2005 v1.0 Report Page 12 of 15 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] LELAP-accredited #02008 1 Employee Owned Integrity Caring Continual Improvement 2 Quality Control Printed 03/20/2019 Page 6 of 7 3 4 CCV
Parameter Reading Known Units Recover% Limits% File Magnesium (SAR Extracted) 25.7 25.0 mg/L 103 90.0 - 110 119720298 27.0 25.0 mg/L 108 90.0 - 110 119720300 Sodium (SAR Extracted) 23.7 25.0 mg/L 94.8 90.0 - 110 119720295 25.1 25.0 mg/L 100 90.0 - 110 119720298 25.6 25.0 mg/L 102 90.0 - 110 119720300 Duplicate
Parameter Sample Result Unknown Unit RPD Limit% Calcium (SAR Extracted) 1765612 16.3 19.0 mg/L 15.3 75.0 Magnesium (SAR Extracted) 1765612 2.28 2.64 mg/L 14.6 75.0 Sodium (SAR Extracted) 1765612 4.28 4.06 mg/L 5.28 75.0 ICL
Parameter Reading Known Units Recover% Limits% File Calcium (SAR Extracted) 48.5 50.0 mg/L 97.0 95.0 - 105 119720290 Magnesium (SAR Extracted) 49.3 50.0 mg/L 98.6 95.0 - 105 119720290 Sodium (SAR Extracted) 49.4 50.0 mg/L 98.8 95.0 - 105 119720290 ICV
Parameter Reading Known Units Recover% Limits% File Calcium (SAR Extracted) 26.0 25.0 mg/L 104 90.0 - 110 119720294 Magnesium (SAR Extracted) 25.9 25.0 mg/L 104 90.0 - 110 119720294 Sodium (SAR Extracted) 25.4 25.0 mg/L 102 90.0 - 110 119720294 LDR
Parameter Reading Known Units Recover% Limits% File Calcium (SAR Extracted) 96.4 100 mg/L 96.4 90.0 - 110 119720291 Magnesium (SAR Extracted) 93.0 100 mg/L 93.0 90.0 - 110 119720291 Sodium (SAR Extracted) 99.5 100 mg/L 99.5 90.0 - 110 119720291
Analytical Set 828891 EPA 6020A Blank
Parameter PrepSet Reading MDL MQL Units File Aluminum, Total 827669 0.00359 0.000592 0.005 mg/kg 119731917 CCV
Parameter Reading Known Units Recover% Limits% File Aluminum, Total 0.0515 0.05 mg/kg 103 90.0 - 110 119731916 0.053 0.05 mg/kg 106 90.0 - 110 119731924 0.0534 0.05 mg/kg 107 90.0 - 110 119731930 Dir. SPKD
Parameter Sample DSPK DSPKD UNK Known Limits% DSPK% DSPKD% Units RPD Limit% Aluminum, Total 1765612 4360 4360 4060 279 80.0 - 120 108 108 mg/kg 0 20.0 Direct SPK
Parameter Sample DSPK UNK Known Limits% DSPK% Units Aluminum, Total 1765612 4360 4060 279 80.0 - 120 108 mg/kg 20.0 ICV
Parameter Reading Known Units Recover% Limits% File Aluminum, Total 0.0537 0.05 mg/kg 107 90.0 - 110 119731912
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
LDSClient v1.14.12.1762 www.ana-lab.com Form rptPROJQCGrpt Created 01/27/2005 v1.0 Report Page 13 of 15 Ana-Lab Corp. P.O. Box 9000 Kilgore, TX 75663
Phone 903/984-0551 FAX 903/984-5914 e-Mail [email protected] LELAP-accredited #02008 1 Employee Owned Integrity Caring Continual Improvement 2 Quality Control Printed 03/20/2019 Page 7 of 7 3 4 LCS Dup
Parameter PrepSet LCS LCSD Known Limits% LCS% LCSD% Units RPD Limit% Aluminum, Total 827669 2.56 2.51 2.50 81.9 - 114 102 100 mg/kg 1.97 20.0 LDR
Parameter Reading Known Units Recover% Limits% File Aluminum, Total 10.4 10 mg/kg 104 90.0 - 110 119731915 MSD
Parameter Sample MS MSD UNK Known Limits MS% MSD% Units RPD Limit% Aluminum, Total 1765612 5310 5560 4010 52.1 0.100 - 3710 2290 2730 mg/kg 17.5 20.0
Analytical Set 827798 EPA 9045D Duplicate
Parameter Sample Result Unknown Unit RPD Limit% Soil pH Measured in Water 1765522 7.3 7.3 SU 0 20.0 1765612 6.3 6.4 SU 1.57 20.0 Standard
Parameter Sample Reading Known Units Recover% Limits% File Soil pH Measured in Water 827798 7.01 7.00 SU 100 90.0 - 110 119708571 827798 4.01 4.00 SU 100 90.0 - 110 119708572 827798 10.05 10.00 SU 100 90.0 - 110 119708573 827798 6.02 6.00 SU 100 90.0 - 110 119708574 827798 7.99 8.00 SU 99.9 90.0 - 110 119708575 827798 6.04 6.00 SU 101 90.0 - 110 119708587 827798 8.00 8.00 SU 100 90.0 - 110 119708588 827798 6.04 6.00 SU 101 90.0 - 110 119708599 827798 8.00 8.00 SU 100 90.0 - 110 119708600
Analytical Set 828768 EPA 9050 Blank
Parameter PrepSet Reading MDL MQL Units File Lab Electrical Conductance 828768 0.95 umhos/cm 119728659 at 25 Duplicate
Parameter Sample Result Unknown Unit RPD Limit% Lab Electrical Conductance 1765612 34.9 37.1 umhos/cm 6.11 20.0 at 25 ICV
Parameter Reading Known Units Recover% Limits% File Lab Electrical Conductance 12800 12900 umhos/cm 99.2 90.0 - 110 119728662 at 25 Standard
Parameter Sample Reading Known Units Recover% Limits% File Lab Electrical Conductance 828768 1410 1410 umhos/cm 100 90.0 - 110 119728660 at 25 828768 99.4 100 umhos/cm 99.4 90.0 - 110 119728661 828768 1410 1410 umhos/cm 100 90.0 - 110 119728665
* Out RPD is Relative Percent Difference: abs(r1-r2) / mean(r1,r2) * 100% Recover% is Recovery Percent: result / known * 100% Blank - Method Blank; CCV - Continuing Calibration Verification; ICV - Initial Calibration Verification; LDR - Linear Dynamic Range Standard
Corporate Shipping: 2600 Dudley Rd. Kilgore, TX 75662 Ark-La-Miss Region: 4720 Viking Dr. Suite A Bossier City LA 71111
NELAP-accredited #T104704201
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865824 CoC Print Group 001 of 001 Report Page 15 of 15
1 2 3 4 2 of 2
865824 CoC Print Group 001 of 001 ATTACHMENT 3 Disclosure Statement Weyerhaeuser Company Exhibit 99.2 Q4.2018 Analyst Package Preliminary results (unaudited) Consolidated Statement of Operations
Q1 Q2 Q3 Q4 Year-to-Date Mar 31, Jun 30, Sep 30, Dec 31, Dec 31, Dec 31, Dec 31, in millions 2018 2018 2018 2018 2017 2018 2017 Net sales $ 1,865 $ 2,065 $ 1,910 $ 1,636 $ 1,823 $ 7,476 $ 7,196 Costs of sales 1,348 1,447 1,452 1,345 1,316 5,592 5,298 Gross margin 517 618 458 291 507 1,884 1,898 Selling expenses 23 23 20 22 21 88 87 General and administrative expenses 78 80 78 82 72 318 310 Research and development expenses 2 2 2 2 2 8 14 Charges for integration and restructuring, closures and asset impairments 2 — — — 16 2 194 Charges (recoveries) for product remediation, net (20) 20 — — 50 — 290 Other operating costs (income), net 28 17 21 8 (130) 74 (128) Operating income 404 476 337 177 476 1,394 1,131 Non-operating pension and other postretirement benefit (costs) credits (24) (13) (17) (218) (16) (272) (62) Interest income and other 12 11 13 24 10 60 40 Interest expense, net of capitalized interest (93) (92) (93) (97) (96) (375) (393) Earnings (loss) before income taxes 299 382 240 (114) 374 807 716 Income taxes (30) (65) 15 21 (103) (59) (134) Net earnings (loss) $ 269 $ 317 $ 255 $ (93) $ 271 $ 748 $ 582
Per Share Information Q1 Q2 Q3 Q4 Year-to-Date Mar 31, Jun 30, Sep 30, Dec 31, Dec 31, Dec 31, Dec 31, 2018 2018 2018 2018 2017 2018 2017 Earnings (loss) per share, basic and diluted $ 0.35 $ 0.42 $ 0.34 $ (0.12) $ 0.36 $ 0.99 $ 0.77 Dividends paid per common share $ 0.32 $ 0.32 $ 0.34 $ 0.34 $ 0.32 $ 1.32 $ 1.25 Weighted average shares outstanding (in thousands): Basic 756,815 757,829 754,986 748,694 755,409 754,556 753,085 Diluted 759,462 760,533 757,389 750,025 758,463 756,827 756,666 Common shares outstanding at end of period (in thousands) 756,700 757,646 749,199 746,391 755,223 746,391 755,223
Adjusted Earnings before Interest, Tax, Depreciation, Depletion and Amortization (Adjusted EBITDA)* Q1 Q2 Q3 Q4 Year-to-Date Mar 31, Jun 30, Sep 30, Dec 31, Dec 31, Dec 31, Dec 31, in millions 2018 2018 2018 2018 2017 2018 2017 Net earnings (loss) $ 269 $ 317 $ 255 $ (93) $ 271 $ 748 $ 582 Non-operating pension and other postretirement benefit costs (credits) 24 13 17 218 16 272 62 Interest income and other (12) (11) (13) (24) (10) (60) (40) Interest expense, net of capitalized interest 93 92 93 97 96 375 393 Income taxes 30 65 (15) (21) 103 59 134 Operating income 404 476 337 177 476 1,394 1,131 Depreciation, depletion and amortization 120 119 122 125 127 486 521 Basis of real estate sold 12 22 46 44 33 124 81 Unallocated pension service costs ———— 1 — 4 Special items included in operating income 8 20 — — (86) 28 343 Adjusted EBITDA* $ 544 $ 637 $ 505 $ 346 $ 551 $ 2,032 $ 2,080
*Adjusted EBITDA is a non-GAAP measure that management uses to evaluate the performance of the company. Adjusted EBITDA, as we define it, is operating income adjusted for depreciation, depletion, amortization, basis of real estate sold, unallocated pension service costs and special items. Our definition of Adjusted EBITDA may be different from similarly titled measures reported by other companies. Adjusted EBITDA should not be considered in isolation from and is not intended to represent an alternative to our GAAP results.
Page 1 of 8 Weyerhaeuser Company Total Company Statistics Q4.2018 Analyst Package Preliminary results (unaudited) Special Items Included in Net Earnings (Income Tax Affected) Q1 Q2 Q3 Q4 Year-to-Date Mar 31, Jun 30, Sep 30, Dec 31, Dec 31, Dec 31, Dec 31, in millions 2018 2018 2018 2018 2017 2018 2017 Net earnings (loss) $ 269 $ 317 $ 255 $ (93) $ 271 $ 748 $ 582 Plum Creek merger and integration-related costs — — — — 12 — 27 Restructuring, impairments and other charges — — — — — — 151 Gain on sale of timberlands and other nonstrategic assets — — — (10) (99) (10) (99) Environmental remediation charges (recoveries) 21 — — — (26) 21 (26) Product remediation charges (recoveries), net (15) 15 — — 31 — 180 Countervailing and antidumping duties charges (credits)(1) — — — — (7) — 5 Tax adjustments(2) — — (41) 21 52 (20) 52 Pension settlement charge(3) — — — 152 — 152 — Net earnings before special items $ 275 $ 332 $ 214 $ 70 $ 234 $ 891 $ 872
Q1 Q2 Q3 Q4 Year-to-Date Mar 31, Jun 30, Sep 30, Dec 31, Dec 31, Dec 31, Dec 31, 2018 2018 2018 2018 2017 2018 2017 Net earnings (loss) per diluted share $ 0.35 $ 0.42 $ 0.34 $ (0.12) $ 0.36 $ 0.99 $ 0.77 Plum Creek merger and integration-related costs — — — — 0.02 — 0.03 Restructuring, impairments and other charges — — — — — — 0.21 Gain on sale of timberlands and other nonstrategic assets — — — (0.01) (0.14) (0.01) (0.14) Environmental remediation charges (recoveries) 0.03 — — — (0.03) 0.03 (0.03) Product remediation charges (recoveries), net (0.02) 0.02 — — 0.04 — 0.23 Countervailing and antidumping duties charges (credits)(1) — — — — (0.01) — 0.01 Tax adjustments(2) — — (0.06) 0.03 0.07 (0.03) 0.07 Pension settlement charge(3) — — — 0.20 — 0.20 — Net earnings per diluted share before special items $ 0.36 $ 0.44 $ 0.28 $ 0.10 $ 0.31 $ 1.18 $ 1.15
(1) As of first quarter 2018, countervailing and antidumping duties are no longer reported as a special item. (2) During third quarter 2018, we recorded a tax benefit related to our contribution to our U.S. qualified pension plan. During fourth quarter 2018 and 2017, we recorded tax adjustment charges of $21 million and $52 million, respectively. (3) During fourth quarter 2018, we recorded a $200 million non-cash pre-tax settlement charge related to our U.S. qualified pension plan lump sum offer.
Selected Total Company Items Q1 Q2 Q3 Q4 Year-to-Date Mar 31, Jun 30, Sep 30, Dec 31, Dec 31, Dec 31, Dec 31, in millions 2018 2018 2018 2018 2017 2018 2017 Pension and postretirement costs: Pension and postretirement service cost $ 10 $ 8 $ 10 $ 9 $ 9 $ 37 $ 35 Non-operating pension and other postretirement benefit costs 24 13 17 218 16 272 62 Total company pension and postretirement costs $ 34 $ 21 $ 27 $ 227 $ 25 $ 309 $ 97
Page 2 of 8 Weyerhaeuser Company Q4.2018 Analyst Package Preliminary results (unaudited) Consolidated Balance Sheet
March 31, June 30, September 30, December 31, December 31, in millions 2018 2018 2018 2018 2017 ASSETS Current assets: Cash and cash equivalents $ 598 $ 901 $ 348 $ 334 $ 824 Receivables, less discounts and allowances 481 491 444 337 396 Receivables for taxes 24 23 140 137 14 Inventories 445 414 389 389 383 Prepaid expenses and other current assets 118 146 140 152 98 Current restricted financial investments held by variable interest entities 253 253 253 253 — Total current assets 1,919 2,228 1,714 1,602 1,715 Property and equipment, net 1,573 1,597 1,672 1,857 1,618 Construction in progress 275 282 255 136 225 Timber and timberlands at cost, less depletion 12,888 12,790 12,727 12,671 12,954 Minerals and mineral rights, less depletion 306 302 297 294 308 Deferred tax assets 244 168 71 15 268 Other assets 318 319 329 312 356 Restricted financial investments held by variable interest entities 362 362 362 362 615 Total assets $ 17,885 $ 18,048 $ 17,427 $ 17,249 $ 18,059
LIABILITIES AND EQUITY Current liabilities: Current maturities of long-term debt $ — $ — $ — $ 500 $ 62 Current debt (nonrecourse to the company) held by variable interest entities 209 209 511 302 209 Borrowings on line of credit — — — 425 — Accounts payable 245 270 271 222 249 Accrued liabilities 457 543 491 490 645 Total current liabilities 911 1,022 1,273 1,939 1,165 Long-term debt 5,928 5,924 5,921 5,419 5,930 Long-term debt (nonrecourse to the company) held by variable interest entities 302 302 — — 302 Deferred tax liabilities — — — 43 — Deferred pension and other postretirement benefits 1,454 1,224 885 527 1,487 Other liabilities 299 295 291 275 276 Total liabilities 8,894 8,767 8,370 8,203 9,160 Total equity 8,991 9,281 9,057 9,046 8,899 Total liabilities and equity $ 17,885 $ 18,048 $ 17,427 $ 17,249 $ 18,059
Page 3 of 8 Weyerhaeuser Company Q4.2018 Analyst Package Preliminary results (unaudited) Consolidated Statement of Cash Flows Q1 Q2 Q3 Q4 Year-to-Date Mar 31, Jun 30, Sep 30, Dec 31, Dec 31, Dec 31, Dec 31, in millions 2018 2018 2018 2018 2017 2018 2017 Cash flows from operations: Net earnings (loss) $ 269 $ 317 $ 255 $ (93) $ 271 $ 748 $ 582 Noncash charges (credits) to income: Depreciation, depletion and amortization 120 119 122 125 127 486 521 Basis of real estate sold 12 22 46 44 33 124 81 Deferred income taxes, net 10 15 86 (39) 35 72 44 Pension and other postretirement benefits 34 21 27 227 25 309 97 Share-based compensation expense 9 9 13 11 11 42 40 Charges for impairment of assets 1 — — — 1 1 154 Net gains on disposition of discontinued and other operations —————— (1) Net gains on sale of nonstrategic assets (2) — — (14) (2) (16) (16) Net gains on sale of southern timberlands — — — — (99) — (99) Change in: Receivables, less allowances (83) (18) 46 117 78 62 (35) Receivables and payables for taxes 5 10 (124) 6 66 (103) (50) Inventories (66) 30 27 (5) (43) (14) (39) Prepaid expenses and other current assets (5) 4 (6) (11) (3) (18) (12) Accounts payable and accrued liabilities (173) 103 (63) (21) (78) (154) 106 Pension and postretirement contributions and payments (16) (16) (323) (26) (19) (381) (78) Other 21 (19) (19) (29) (49) (46) (94) Net cash from (used in) operations $ 136 $ 597 $ 87 $ 292 $ 354 $ 1,112 $ 1,201 Cash flows from investing activities: Capital expenditures for property and equipment $ (61) $ (83) $ (94) $ (130) $ (145) $ (368) $ (358) Capital expenditures for timberlands reforestation (20) (14) (11) (14) (15) (59) (61) Proceeds from disposition of discontinued and other operations — — — — — — 403 Proceeds from sale of nonstrategic assets 2 — — 2 6 4 26 Proceeds from sale of southern timberlands — — — — 203 — 203 Proceeds from redemption of ownership in related party — — — — 108 — 108 Other 3 24 (10) (34) 18 (17) 46 Cash from (used in) investing activities $ (76) $ (73) $ (115) $ (176) $ 175 $ (440) $ 367 Cash flows from financing activities: Cash dividends on common shares $ (242) $ (243) $ (256) $ (254) $ (242) $ (995) $ (941) Proceeds from issuance of long-term debt — — — — — — 225 Payments on long-term debt (62) — — — — (62) (831) Proceeds from borrowing on line of credit — — — 425 — 425 100 Payments on line of credit —————— (100) Payments on debt held by variable interest entities — — — (209) — (209) — Proceeds from exercise of stock options 25 23 4 — 39 52 128 Repurchase of common shares — — (273) (93) — (366) — Other (7) (1) — 1 1 (7) (1) Cash from (used in) financing activities $ (286) $ (221) $ (525) $ (130) $ (202) $ (1,162) $ (1,420)
Net change in cash and cash equivalents $ (226) $ 303 $ (553) $ (14) $ 327 $ (490) $ 148 Cash and cash equivalents at beginning of period 824 598 901 348 497 824 676 Cash and cash equivalents at end of period $ 598 $ 901 $ 348 $ 334 $ 824 $ 334 $ 824
Cash paid (received) during the year for: Interest, net of amount capitalized $ 105 $ 67 $ 113 $ 73 $ 66 $ 358 $ 381 Income taxes $ 17 $ 41 $ 22 $ 15 $ 40 $ 95 $ 169
Page 4 of 8 Weyerhaeuser Company Timberlands Segment Q4.2018 Analyst Package Preliminary results (unaudited) Segment Statement of Operations in millions Q1.2018 Q2.2018 Q3.2018 Q4.2018 Q4.2017 YTD.2018 YTD.2017 Sales to unaffiliated customers $ 505 $ 482 $ 468 $ 460 $ 496 $ 1,915 $ 1,942 Intersegment sales 228 185 185 204 218 802 762 Total net sales 733 667 653 664 714 2,717 2,704 Costs of sales 526 485 505 536 531 2,052 2,043 Gross margin 207 182 148 128 183 665 661 Selling expenses 1 — 1 — 1 2 4 General and administrative expenses 23 25 23 25 19 96 90 Research and development expenses 2 1 2 1 2 6 12 Charges for integration and restructuring, closures and asset impairments — — — — — — 147 Other operating costs (income), net (8) (5) (4) (5) (104) (22) (124) Operating income and Net contribution to earnings $ 189 $ 161 $ 126 $ 107 $ 265 $ 583 $ 532
Adjusted Earnings before Interest, Tax, Depreciation, Depletion and Amortization* in millions Q1.2018 Q2.2018 Q3.2018 Q4.2018 Q4.2017 YTD.2018 YTD.2017 Operating income $ 189 $ 161 $ 126 $ 107 $ 265 $ 583 $ 532 Depreciation, depletion and amortization 79 79 80 81 86 319 356 Special items — — — — (99) — 48 Adjusted EBITDA* $ 268 $ 240 $ 206 $ 188 $ 252 $ 902 $ 936 * See definition of Adjusted EBITDA (a non-GAAP measure) on page 1. Segment Special Items Included in Net Contribution to Earnings (Pre-Tax) in millions Q1.2018 Q2.2018 Q3.2018 Q4.2018 Q4.2017 YTD.2018 YTD.2017 Restructuring, impairments and other charges $ —$ —$ —$ —$ —$ —$ (147) Gain on sale of timberlands and other nonstrategic assets $ — $ — $ — $ — $ 99 $ — $ 99 Total $ — $ — $ — $ — $ 99 $ — $ (48) Selected Segment Items in millions Q1.2018 Q2.2018 Q3.2018 Q4.2018 Q4.2017 YTD.2018 YTD.2017 Total decrease (increase) in working capital(1) $ (40) $ 70 $ (32) $ (7) $ (15) $ (9) $ 5 Cash spent for capital expenditures $ (28) $ (29) $ (25) $ (35) $ (36) $ (117) $ (115) (1) Represents the change in prepaid assets, accounts receivable, accounts payable, accrued liabilities and log inventory for the Timberlands and Real Estate & ENR segments combined. Segment Statistics(2)(3) Q1.2018 Q2.2018 Q3.2018 Q4.2018 Q4.2017 YTD.2018 YTD.2017 Delivered logs: West $ 266 $ 262 $ 238 $ 221 $ 242 $ 987 $ 915 South 157 158 157 153 165 625 616 North 25 20 25 29 27 99 95 Third Party Other 14 7 9 11 11 41 59 Net Sales Total delivered logs 462 447 429 414 445 1,752 1,685 (millions) Stumpage and pay-as-cut timber 15 11 13 20 21 59 73 Products from international operations — — — — — — 63 Recreational and other lease revenue 14 15 15 15 14 59 59 Other revenue 14 9 11 11 16 45 62 Total $ 505 $ 482 $ 468 $ 460 $ 496 $ 1,915 $ 1,942 Delivered Logs West $ 131.59 $ 132.24 $ 125.67 $ 112.58 $ 121.41 $ 125.59 $ 111.58 Third Party Sales South $ 34.83 $ 34.55 $ 34.88 $ 34.38 $ 34.53 $ 34.66 $ 34.43 Realizations (per ton) North $ 60.79 $ 64.92 $ 60.97 $ 57.27 $ 60.77 $ 60.55 $ 60.38 Delivered Logs West 2,019 1,984 1,897 1,958 1,992 7,858 8,202 Third Party Sales South 4,510 4,560 4,521 4,417 4,790 18,008 17,895 Volumes North 404 313 414 497 439 1,628 1,574 (tons, thousands) Other 317 81 154 204 232 756 1,458 West 2,443 2,360 2,305 2,463 2,544 9,571 10,083 Fee Harvest Volumes South 6,751 6,630 6,478 6,849 7,350 26,708 27,149 (tons, thousands) North 549 423 537 620 635 2,129 2,205 Other — — — — — — 1,384 (2) The Western region includes Washington and Oregon. The Southern region includes Virginia, North Carolina, South Carolina, Florida, Georgia, Alabama, Mississippi, Louisiana, Arkansas, Texas and Oklahoma. The Northern region includes West Virginia, Maine, New Hampshire, Vermont, Michigan, Wisconsin and Montana. Other includes our Canadian operations and formerly managed Twin Creeks operations (our management agreement for the Twin Creeks Venture began in April 2016 and terminated in December 2017). (3) Western logs are primarily transacted in MBF but are converted to ton equivalents for external reporting purposes.
Page 5 of 8 Weyerhaeuser Company Real Estate, Energy and Natural Resources Segment Q4.2018 Analyst Package Preliminary results (unaudited) Segment Statement of Operations in millions Q1.2018 Q2.2018 Q3.2018 Q4.2018 Q4.2017 YTD.2018 YTD.2017 Net sales $ 51 $ 58 $ 96 $ 102 $ 100 $ 307 $ 281 Costs of sales 19 30 54 52 43 155 110 Gross margin 32 28 42 50 57 152 171 General and administrative expenses 7 6 6 7 6 26 26 Other operating costs (income), net ———— 1 — — Operating income 25 22 36 43 50 126 145 Interest income and other ——— 1 — 1 1 Net contribution to earnings $ 25 $ 22 $ 36 $ 44 $ 50 $ 127 $ 146
Adjusted Earnings before Interest, Tax, Depreciation, Depletion and Amortization* in millions Q1.2018 Q2.2018 Q3.2018 Q4.2018 Q4.2017 YTD.2018 YTD.2017 Operating income $ 25 $ 22 $ 36 $ 43 $ 50 $ 126 $ 145 Depreciation, depletion and amortization 4 3 4 3 4 14 15 Basis of real estate sold 12 22 46 44 33 124 81 Adjusted EBITDA* $ 41 $ 47 $ 86 $ 90 $ 87 $ 264 $ 241 * See definition of Adjusted EBITDA (a non-GAAP measure) on page 1.
Selected Segment Items in millions Q1.2018 Q2.2018 Q3.2018 Q4.2018 Q4.2017 YTD.2018 YTD.2017 Cash spent for capital expenditures $ —$ —$ —$ —$ —$ —$ (2)
Segment Statistics Q1.2018 Q2.2018 Q3.2018 Q4.2018 Q4.2017 YTD.2018 YTD.2017 Real Estate $ 34 $ 38 $ 76 $ 81 $ 80 $ 229 $ 208 Net Sales Energy and Natural Resources 17 20 20 21 20 78 73 (millions) Total $ 51 $ 58 $ 96 $ 102 $ 100 $ 307 $ 281 Acres sold Real Estate 21,771 16,290 61,681 31,833 38,226 131,575 97,235 Price per acre Real Estate $ 1,539 $ 2,258 $ 1,209 $ 2,479 $ 2,076 $ 1,701 $ 2,079
Page 6 of 8 Weyerhaeuser Company Wood Products Segment Q4.2018 Analyst Package Preliminary results (unaudited) Segment Statement of Operations in millions Q1.2018 Q2.2018 Q3.2018 Q4.2018 Q4.2017 YTD.2018 YTD.2017 Net sales $ 1,309 $ 1,525 $ 1,346 $ 1,075 $ 1,228 $ 5,255 $ 4,974 Costs of sales 1,005 1,119 1,071 991 947 4,186 3,880 Gross margin 304 406 275 84 281 1,069 1,094 Selling expenses 21 22 18 20 20 81 80 General and administrative expenses 34 31 32 33 32 130 126 Research and development expenses — 1 — 1 — 2 2 Charges for integration and restructuring, closures and asset 2 — — — 2 2 13 impairments Charges (recoveries) for product remediation, net (20) 20 — — 50 — 290 Other operating costs (income), net (3) 3 12 4 (3) 16 14 Operating income and Net contribution to earnings $ 270 $ 329 $ 213 $ 26 $ 180 $ 838 $ 569
Adjusted Earnings before Interest, Tax, Depreciation, Depletion and Amortization* in millions Q1.2018 Q2.2018 Q3.2018 Q4.2018 Q4.2017 YTD.2018 YTD.2017 Operating income $ 270 $ 329 $ 213 $ 26 $ 180 $ 838 $ 569 Depreciation, depletion and amortization 36 36 37 40 37 149 145 Special items (20) 20 — — 41 — 303 Adjusted EBITDA* $ 286 $ 385 $ 250 $ 66 $ 258 $ 987 $ 1,017 * See definition of Adjusted EBITDA (a non-GAAP measure) on page 1. Segment Special Items Included in Net Contribution to Earnings (Pre-Tax) in millions Q1.2018 Q2.2018 Q3.2018 Q4.2018 Q4.2017 YTD.2018 YTD.2017 Countervailing and antidumping duties (charges) credits(1) $ —$ —$ —$ —$ 9$ —$ (7) Restructuring, impairments and other charges —————— (6) Product remediation (charges) recoveries, net 20 (20) — — (50) — (290) Total $ 20 $ (20) $ — $ — $ (41) $ — $ (303) (1) As of first quarter 2018, countervailing and antidumping duties are no longer reported as a special item. Selected Segment Items in millions Q1.2018 Q2.2018 Q3.2018 Q4.2018 Q4.2017 YTD.2018 YTD.2017 Total decrease (increase) in working capital(2) $ (226) $ 3 $ 71 $ 83 $ (81) $ (69) $ 60 Cash spent for capital expenditures $ (52) $ (68) $ (79) $ (107) $ (123) $ (306) $ (299) (2) Represents the change in prepaid assets, accounts receivable, accounts payable, accrued liabilities and inventory for the Wood Products segment. Segment Statistics in millions, except for third party sales realizations Q1.2018 Q2.2018 Q3.2018 Q4.2018 Q4.2017 YTD.2018 YTD.2017 Third party net sales $ 569 $ 681 $ 581 $ 427 $ 517 $ 2,258 $ 2,058 Structural Lumber Third party sales realizations $ 498 $ 541 $ 491 $ 388 $ 466 $ 482 $ 442 (board feet) Third party sales volumes(3) 1,140 1,261 1,184 1,099 1,110 4,684 4,658 Production volumes 1,160 1,180 1,106 1,095 1,118 4,541 4,509 Third party net sales $ 129 $ 139 $ 132 $ 121 $ 122 $ 521 $ 500 Engineered Solid Third party sales realizations $ 2,088 $ 2,156 $ 2,208 $ 2,139 $ 2,076 $ 2,148 $ 1,995 Section (3) (cubic feet) Third party sales volumes 6.2 6.4 6.0 5.7 5.9 24.3 25.1 Production volumes 6.3 6.4 6.3 5.3 5.8 24.3 25.1 Third party net sales $ 78 $ 92 $ 91 $ 75 $ 85 $ 336 $ 336 Engineered Third party sales realizations $ 1,585 $ 1,630 $ 1,668 $ 1,696 $ 1,561 $ 1,643 $ 1,524 I-joists (3) (lineal feet) Third party sales volumes 49 57 54 44 54 204 220 Production volumes 56 52 46 37 52 191 213 Third party net sales $ 232 $ 277 $ 215 $ 167 $ 233 $ 891 $ 904 Oriented Strand Third party sales realizations $ 314 $ 367 $ 321 $ 252 $ 335 $ 315 $ 304 Board (3) (square feet 3/8") Third party sales volumes 739 754 669 665 697 2,827 2,971 Production volumes 734 747 665 691 739 2,837 2,995 Third party net sales $ 50 $ 55 $ 53 $ 42 $ 40 $ 200 $ 176 Softwood Plywood Third party sales realizations $ 438 $ 461 $ 439 $ 396 $ 417 $ 435 $ 389 (square feet 3/8") Third party sales volumes(3) 115 118 122 104 95 459 453 Production volumes 97 105 106 96 86 404 370 Third party net sales $ 43 $ 47 $ 48 $ 39 $ 37 $ 177 $ 183 Medium Density Fiberboard Third party sales realizations $ 839 $ 839 $ 828 $ 835 $ 829 $ 835 $ 822 (square feet 3/4") Third party sales volumes(3) 51 55 59 47 45 212 222 Production volumes 50 57 61 52 50 220 232 (3) Volumes include sales of internally produced products and products purchased for resale primarily through our distribution business.
Page 7 of 8 Weyerhaeuser Company Unallocated Items Q4.2018 Analyst Package Preliminary results (unaudited)
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.
Contribution to Earnings in millions Q1.2018 Q2.2018 Q3.2018 Q4.2018 Q4.2017 YTD.2018 YTD.2017 Unallocated corporate function and variable compensation expenses $ (18) $ (19) $ (19) $ (28) $ (18) $ (84) $ (73) Liability classified share-based compensation — (2) 4 8 (2) 10 (9) Foreign exchange gains (loss) (2) 2 (2) 5 1 3 1 Elimination of intersegment profit in inventory and LIFO (21) 3 — 24 (14) 6 (20) Charges for integration and restructuring, closures and asset impairments — — — — (14) — (34) Other (39) (20) (21) (8) 28 (88) 20 Operating income (loss) (80) (36) (38) 1 (19) (153) (115) Non-operating pension and other postretirement benefit (costs) credits (24) (13) (17) (218) (16) (272) (62) Interest income and other 12 11 13 23 10 59 39 Net contribution to earnings (loss) $ (92) $ (38) $ (42) $ (194) $ (25) $ (366) $ (138)
Adjusted Earnings before Interest, Tax, Depreciation, Depletion and Amortization* in millions Q1.2018 Q2.2018 Q3.2018 Q4.2018 Q4.2017 YTD.2018 YTD.2017 Operating income (loss) $ (80) $ (36) $ (38) $ 1 $ (19) $ (153) $ (115) Depreciation, depletion and amortization 1 1 1 1 — 4 5 Unallocated pension service costs — — — — 1 — 4 Special items 28 — — — (28) 28 (8) Adjusted EBITDA* $ (51) $ (35) $ (37) $ 2 $ (46) $ (121) $ (114) * See definition of Adjusted EBITDA (a non-GAAP measure) on page 1.
Unallocated Special Items Included in Net Contribution to Earnings (Pre-Tax) in millions Q1.2018 Q2.2018 Q3.2018 Q4.2018 Q4.2017 YTD.2018 YTD.2017 Plum Creek merger and integration-related costs $ — $ — $ — $ — $ (14) $ — $ (34) Environmental remediation insurance (charges) recoveries (28) — — — 42 (28) 42 Special items included in operating income (loss) (28) — — — 28 (28) 8 Pension settlement charge — — — (200) — (200) — Gain on sale of nonstrategic assets — — — 13 — 13 — Special items included in net contribution to earnings (loss) $ (28) $ — $ — $ (187) $ 28 $ (215) $ 8
Unallocated Selected Items in millions Q1.2018 Q2.2018 Q3.2018 Q4.2018 Q4.2017 YTD.2018 YTD.2017 Cash spent for capital expenditures $ (1) $ — $ (1) $ (2) $ (1) $ (4) $ (3)
Page 8 of 8 WEYERHAEUSER
2017 ANNUAL REPORT AND FORM 10K
Working together to be the world’s premier timber, land, and forest products company DEAR SHAREHOLDER:
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In 2017, we: :HGHPRQVWUDWHGWKDWFRPPLWPHQWE\LQFUHDVLQJRXUGLYLGHQG LQIRUWKHVL[WKWLPHVLQFHZKLOHDOVRVWUHQJWKHQLQJ ,QFUHDVHG$GMXVWHG(%,7'$E\SHUFHQWWRQHDUO\ELOOLRQ RXUEDODQFHVKHHW *HQHUDWHGPRUHWKDQELOOLRQRI:RRG3URGXFWV(%,7'$ A BRIGHT FUTURE AHEAD the most since 2004 :H\HUKDHXVHULVWKHODUJHVWRZQHURIKLJKTXDOLW\WLPEHUODQGVLQ *UHZ5HDO(VWDWH(QHUJ\ 1DWXUDO5HVRXUFHV(%,7'$ WKH86ZLWKDQLQGXVWU\OHDGLQJZRRGSURGXFWVPDQXIDFWXULQJ E\QHDUO\SHUFHQW EXVLQHVVDQGDWHDPRIZRUOGFODVVHPSOR\HHV,·PH[WUHPHO\ SURXGRIZKDWRXUSHRSOHKDYHDFFRPSOLVKHGWRJHWKHUDQGYHU\ (DUQHGDSHUFHQWSUHPLXPWRWLPEHUODQGYDOXHRQRXU RSWLPLVWLFDERXWZKDW·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oyle R. Simons :H·UHSURXGRIWKHQHDUO\PLOOLRQLQRSHUDWLRQDOH[FHOOHQFH 3UHVLGHQW &KLHI([HFXWLYH2IÀFHU LPSURYHPHQWVZH·YHFDSWXUHGVLQFHEXWZHNQRZPRUH RSSRUWXQLWLHVUHPDLQ:HORRNIRUZDUGWRFRQWLQXLQJWRLPSURYH RXUUHODWLYHSHUIRUPDQFHLQHDFKRIRXUEXVLQHVVHV UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-4825 WEYERHAEUSER COMPANY A WASHINGTON CORPORATION 91-0470860 (IRS EMPLOYER IDENTIFICATION NO.) 220 OCCIDENTAL AVENUE SOUTH, SEATTLE, WASHINGTON 98104-7800 TELEPHONE (206) 539-3000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: 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 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [X] Yes [ ] No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [ ] Yes [X] No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [ ] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ ] Emerging growth company [ ] If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). [ ] Yes [X] No As of June 30, 2017, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $25.0 billion based on the closing sale price as reported on the New York Stock Exchange Composite Price Transactions. As of February 5, 2018, 756,097,841 shares of the registrant’s common stock ($1.25 par value) were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Notice of 2018 Annual Meeting of Shareholders and Proxy Statement for the company’s Annual Meeting of Shareholders to be held May 18, 2018, are incorporated by reference into Part II and III.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K TABLE OF CONTENTS
PART I PAGE PAGE ITEM 1. OUR BUSINESS ...... 1 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ..... 57 WE CAN TELL YOU MORE ...... 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING WHOWEARE...... 1 FIRM ...... 57 WHAT WE DO ...... 2 CONSOLIDATED STATEMENT OF OPERATIONS ...... 58 EXECUTIVE OFFICERS OF THE REGISTRANT ...... 14 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME .... 59 NATURAL RESOURCE AND ENVIRONMENTAL MATTERS ...... 15 CONSOLIDATED BALANCE SHEET ...... 60 FORWARD-LOOKING STATEMENTS ...... 20 CONSOLIDATED STATEMENT OF CASH FLOWS ...... 61 ITEM 1A. RISK FACTORS ...... 21 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ...... 62 ITEM 1B. UNRESOLVED STAFF COMMENTS ...... 30 INDEX FOR NOTES TO CONSOLIDATED FINANCIAL ITEM 2. PROPERTIES ...... 30 STATEMENTS ...... 63 ITEM 3. LEGAL PROCEEDINGS ...... 30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...... 64 ITEM 4. MINE SAFETY DISCLOSURES — NOT APPLICABLE ...... ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ...... 104 PART II ITEM 9A. CONTROLS AND PROCEDURES ...... 104 ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED ITEM 9B. OTHER INFORMATION — NOT APPLICABLE ...... STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ...... 31 PART III ITEM 6. SELECTED FINANCIAL DATA ...... 33 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL GOVERNANCE ...... 106 CONDITION AND RESULTS OF OPERATIONS ...... 34 ITEM 11. EXECUTIVE AND DIRECTOR COMPENSATION ...... 106 ECONOMIC AND MARKET CONDITIONS AFFECTING OUR ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OPERATIONS ...... 34 AND MANAGEMENT AND RELATED STOCKHOLDER FINANCIAL PERFORMANCE SUMMARY ...... 35 MATTERS ...... 106 RESULTS OF OPERATIONS ...... 37 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .... 106 LIQUIDITY AND CAPITAL RESOURCES ...... 46 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES ...... 106 OFF-BALANCE SHEET ARRANGEMENTS ...... 50 ENVIRONMENTAL MATTERS, LEGAL PROCEEDINGS AND OTHER PART IV CONTINGENCIES ...... 51 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES ...... 107 ACCOUNTING MATTERS ...... 51 EXHIBITS ...... 107 PERFORMANCE MEASURES ...... 53 ITEM 15. FORM 10-K SUMMARY ...... 109 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT SIGNATURES ...... 110 MARKET RISK ...... 56 OUR BUSINESS Throughout this Form 10-K, unless specified otherwise, references to “we,” “our,” “us” and “the company” refer to the We are one of the world’s largest private owners of consolidated company. timberlands. We own or control 12.4 million acres of timberlands, primarily in the U.S., and manage an additional 14.0 million acres of timberlands under long-term licenses in WE CAN TELL YOU MORE Canada. We manage these timberlands on a sustainable basis in compliance with internationally recognized forestry AVAILABLE INFORMATION standards. Our objective is to maximize the long-term value of We meet the information-reporting requirements of the timberlands we own. We analyze each timberland acre Securities Exchange Act of 1934 by filing periodic reports, proxy comprehensively to understand its highest-value use. We statements and other information with the Securities and realize this value in many ways, particularly through harvesting Exchange Commission (SEC). These reports and statements — the trees, but also by selling properties when we can create information about our company’s business, financial results incremental value. In addition, we focus on opportunities to and other matters — are available at: realize value for oil and natural gas production, construction aggregates and mineral extraction, wind power, communication •the SEC website — www.sec.gov; tower leases and transportation rights of way that exist in our •the SEC’s Public Conference Room, 100 F St. N.E., ownership. Washington, D.C., 20549, (800) SEC-0330; and •our website (without charge) — www.weyerhaeuser.com. We are also one of the largest manufacturers of wood products When we file the information electronically with the SEC, it also in North America. We provide high-quality wood products, is posted to our website. including softwood lumber, engineered wood products, structural panels, medium density fiberboard and other specialty products. These products are primarily supplied to the WHO WE ARE residential, multi-family, industrial, light commercial and repair and remodel markets. Our manufacturing operations are Weyerhaeuser Timber Company was incorporated in the state located in the United States and Canada and span across 35 of Washington in January 1900, when Frederick Weyerhaeuser facility locations. and 15 partners bought 900,000 acres of timberland. Today, we are working to be the world’s premier timber, land, and Our company is a real estate investment trust (REIT). forest products company for our shareholders, customers and We are committed to operate as a sustainable company and employees. are listed on the North American and Dow Jones World Sustainability Indices. In our operations, we focus on increasing REAL ESTATE INVESTMENT TRUST (REIT) ELECTION energy and resource efficiency, reducing greenhouse gas Starting with our 2010 fiscal year, we elected to be taxed as a emissions, reducing water consumption, conserving natural REIT. REIT income can be distributed to shareholders without resources, and offering products that meet our customers’ first paying corporate level tax, substantially eliminating the needs with superior sustainability attributes. We operate with double taxation on income. We expect to derive most of our world class safety results, understand and address the needs REIT income from investments in timberlands, including the of the communities in which we operate, and communicate sale of standing timber through pay-as-cut sales contracts and transparently. lump sum timber deeds. We continue to be required to pay In 2017, we generated $7.2 billion in net sales from continuing federal corporate income taxes on earnings of our Taxable REIT operations and employed approximately 9,300 people who Subsidiary (TRS), which includes our Wood Products segment serve customers worldwide. and a portion of our Timberlands and Real Estate, Energy and Natural Resources (Real Estate & ENR) segments. This portion of our Annual Report on Form 10-K provides detailed information about who we are, what we do and where MERGER WITH PLUM CREEK we are headed. Unless otherwise specified, current information On February 19, 2016, pursuant to the Agreement and Plan of reported in this Form 10-K is as of or for the fiscal year ended Merger dated November 6, 2015, Plum Creek Timber Company, December 31, 2017. Inc. (Plum Creek) merged with and into Weyerhaeuser. Plum We break out financial information such as revenues, earnings Creek was a REIT that primarily owned and managed and assets by the business segments that form our company. timberlands in the United States. Plum Creek also produced We also discuss the development of our company and the wood products, developed opportunities for mineral and other geographic areas where we do business. natural resource extraction, and sold real estate properties. The
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 1 merger combined two industry leaders. The breadth and •Real Estate & ENR — Deliver premiums to timber value by diversity of our combined timberlands, real estate, energy and identifying and monetizing higher and better use lands and natural resources assets, and wood products operations capturing the full value of surface and subsurface assets. position Weyerhaeuser to capitalize on the improving housing •Wood Products — Manufacture high-quality lumber, structural market and to continue to capture value across the combined panels and engineered wood products, as well as deliver portfolio. See Note 4: Merger with Plum Creek in the Notes to complementary building products for residential, multi-family, Consolidated Financial Statements for further information about industrial and light commercial applications at competitive the merger. costs.
OUR BUSINESS SEGMENTS SALES OUTSIDE THE U.S. In the Consolidated Results section of Management’s In 2017, $1,028 million — 14 percent — of our total Discussion and Analysis of Financial Condition and Results of consolidated sales from continuing operations were to Operations, you will find our overall performance results for our customers outside the U.S. Our sales outside the U.S. are business segments, which are as follows: generally denominated in U.S. dollars. The table below shows sales outside the U.S. for the last three years. •Timberlands; •Real Estate, Energy and Natural Resources (Real Estate & DOLLAR AMOUNTS IN MILLIONS ENR); and 2017 2016(1) 2015(1) Wood Products. • Exports from the U.S. $ 545 $515 $497 Detailed financial information about our business segments Canadian export and domestic sales 443 342 317 and our geographic locations is provided in Note 2: Business Other foreign sales 40 58 69 Segments and Note 21: Geographic Areas in the Notes to Consolidated Financial Statements, as well as in this section Total $1,028 $915 $883 and in Management’s Discussion and Analysis of Financial Percent of total sales 14% 14% 17% (1) Excludes sales from Discontinued Operations. Refer to Note 3: Discontinued Operations Condition and Results of Operations. and Other Divestitures in the Notes to Consolidated Financial Statements for further information. EFFECT OF MARKET CONDITIONS OUR EMPLOYEES The health of the U.S. housing market strongly affects the performance of all our business segments. Wood Products We have approximately 9,300 employees. Of these employees, primarily sells into the new residential building and repair and approximately 2,500 are members of unions covered by multi- remodel markets. Demand for logs from our Timberlands year collective-bargaining agreements. More information about segment is affected by the production of wood-based building these agreements is provided in Note 9: Pension and Other products as well as export demand. Real Estate is affected by Postretirement Benefit Plans in the Notes to Consolidated local real estate market conditions, such as the level of supply Financial Statements. or demand for properties sharing the same or similar characteristics as our timberlands. Energy and Natural WHAT WE DO Resources is affected by underlying demand for commodities, including oil and gas. This section provides information about how we:
COMPETITION IN OUR MARKETS •grow and harvest trees; •maximize the value of every acre we own; and We operate in highly competitive domestic and foreign markets, •manufacture and sell wood products. with numerous companies selling similar products. Many of our products also face competition from substitutes for wood For each of our business segments, we provide details about products. We compete in our markets primarily through product what we do, where we do it, how much we sell and where we quality, service levels and price. We are relentlessly focused on are headed. operational excellence, producing quality products customers want and are willing to pay for, at the lowest possible cost. TIMBERLANDS Our business segments’ competitive strategies are as follows: Our Timberlands segment manages 12.4 million acres of private commercial timberlands in the U.S. We own 11.5 million •Timberlands — Extract maximum timber value from each acre of those acres and have long-term leases on the remaining we own or manage.
2 acres. In addition, we have renewable, long-term licenses on Canadian Forestry Operations 14.0 million acres of Canadian timberlands. The tables In Canada, we manage timberlands under long-term licenses presented in this section include data from this segment’s that provide the primary source of the raw material for our business units as of the end of 2017. manufacturing facilities in various provinces. When we harvest trees, we pay the provinces at stumpage rates set by the WHAT WE DO government. We transfer logs to our manufacturing facilities at cost, and do not generate any significant profit in the Forestry Management Timberlands segment from the harvest of timber from the Our Timberlands segment: licensed acres in Canada. •plants seedlings to reforest harvested areas using the most Timberlands Products effective regeneration method for the site and species PRODUCTS HOW THEY’RE USED (natural regeneration is employed and managed in parts of Canada and the northern U.S.); Delivered logs: Grade logs are made into lumber, plywood, •Grade logs veneer and other products used in residential •manages our timberlands as the planted trees grow to •Fiber logs homes, commercial structures, furniture, industrial and decorative applications. Fiber logs maturity; are sold to pulp, paper, and oriented strand board •harvests trees to be converted into lumber, wood products, mills to make products used for printing, writing, packaging, homebuilding and consumer products, pellets, pulp and paper; as well as into renewable energy and pellet •strives to sustain and maximize the timber supply from our manufacturing. timberlands while keeping the health of our environment a Timber Standing timber is sold to third parties. key priority; and Recreational leases Timberlands are leased to the public for •offers recreational access to the public. recreational purposes. Our goal is to maximize returns by selling logs and stumpage to Other products Seed and seedlings grown in the U.S. and plywood produced at our mill in Uruguay(1). internal and external customers. We leverage our expertise in (1) Our Uruguayan operations were divested on September 1, 2017. Refer to Note 3: forestry and use intensive silviculture to improve forest Discontinued Operations and Other Divestitures in the Notes to Consolidated Financial Statements for further information on this divestiture. productivity and returns while managing our forests on a sustainable basis to meet customer needs and public expectations. HOW WE MEASURE OUR PRODUCT Competitive factors within each of our market areas generally We use multiple units of measure when transacting business include price, species, grade, quality, proximity to wood including: consuming facilities and the ability to consistently meet Thousand board feet (MBF) — used in the West to measure customer requirements. We compete in the marketplace • the expected lumber recovery from a tree or log. through our ability to provide customers with a consistent and Green tons (GT) — used in the South to measure weight; reliable supply of high-quality logs at scale volumes and • factors used for conversion to product volume can vary by competitive price. Our customers also value our status as a species, size, location and season. Sustainable Forestry Initiative® certified supplier. We report Timberland volumes in ton equivalents. Prior to Sustainable Forestry Practices 2016, we reported Timberlands volumes information in cubic meters. Volumes for periods prior to 2016 have been converted We manage our forests intensively to maximize the value of from cubic meters to tons using conversion factors as follows: each acre and produce a sustainable supply of wood fiber for our customers. At the same time, we are careful to protect •West: 1.056 m3 = 1 ton biological diversity, water quality and other ecosystem •South: 0.818 m3 = 1 ton services. Our working forests also provide unique •Uruguay: 0.907 m3 = 1 ton environmental, cultural, historical and recreational value. We •Canada: 1.244 m3 = 1 ton work hard to protect these and other qualities, while still managing our forests to produce financially mature timber. We WHERE WE DO IT follow regulatory requirements, voluntary standards and certify one hundred percent of our North American timberlands under We manage sustainable timberlands in twenty states. This the Sustainable Forestry Initiative® (SFI) Forest Management includes owned or leased acres in the following locations: Standard. •2.93 million acres in the western U.S. (Oregon and Washington);
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 3 •6.95 million acres in the southern U.S. (Alabama, Arkansas, Summary of 2017 Standing Timber Inventory Florida, Georgia, Louisiana, Mississippi, North Carolina, MILLIONS OF TONS AT Oklahoma, South Carolina, Texas and Virginia); and GEOGRAPHIC AREA DECEMBER 31, 2017 2.48 million acres in the northern U.S. (Maine, Michigan, TOTAL • (1) Montana, New Hampshire, Vermont, West Virginia and INVENTORY Wisconsin). U.S.: West In Canada, we manage timberlands under long-term licenses Douglas fir/Cedar 164 that provide raw material for our manufacturing facilities. These Whitewood 34 licenses are in Alberta, British Columbia, Ontario (license is Hardwood 15 managed by partnership) and Saskatchewan (license is Total West 213 managed by partnership). South Our total timber inventory — including timber on owned and Southern yellow pine 263 leased land — is approximately 635 million tons. The amount Hardwood 83 of timber inventory does not translate into an amount of lumber Total South 346 or panel products because the quantity of end products varies North according to the species, size and quality of the timber; and will Conifer 35 change through time as these variables adjust. Hardwood 41 Total North 76 We maintain our timber inventory in an integrated resource Total Company 635 inventory system and geographic information system (“GIS”). (1) Inventory encompasses all conservation and non-harvest areas. The resource inventory component of the system is proprietary and is largely based on internally developed methods, including growth and yield models developed by our research and development organization. The GIS component is based on GIS software that is viewed as the standard in our industry. Timber inventory data collection and verification techniques include the use of industry standard field sampling procedures as well as proprietary remote sensing technologies in some geographies. The data is collected and maintained at the timber stand level. We also own and operate nurseries and seed orchards in Alabama, Arkansas, Georgia, Louisiana, Mississippi, Oregon, South Carolina, and Washington.
4 Summary of 2017 Timberland Locations deep-water port facilities, competitively positions us to meet
THOUSANDS OF ACRES AT the needs of Pacific Rim log markets. GEOGRAPHIC AREA DECEMBER 31, 2017 Our holdings are composed primarily of Douglas fir, a species LONG- FEE TERM TOTAL highly valued for its structural strength, stiffness and visual OWNERSHIP LEASES ACRES(1) appearance. Most of our lands are located on the west side of U.S.: the Cascade Mountain Range with soil and rainfall conditions West considered favorable for growing this species. Approximately Oregon 1,593 — 1,593 80 percent of our lands are in established Douglas fir Washington 1,333 — 1,333 plantations. Our remaining holdings include a mix of whitewood Total West 2,926 — 2,926 and hardwood. South Our management systems and supply chain expertise provide us Alabama 390 232 622 a competitive operating advantage in a number of areas including Arkansas 1,214 18 1,232 research and forestry, harvesting, marketing, and logistics. Florida 227 84 311 Additionally, our scale, diversity of timberlands ownership and Georgia 623 55 678 infrastructure in the West Coast allow us to consistently and Louisiana 1,027 351 1,378 reliably supply logs to our customers year round. Mississippi 1,154 76 1,230 North Carolina 564 1 565 2017 Western U.S. Inventory by Species Oklahoma 495 — 495 South Carolina 281 — 281 7% Texas 30 2 32 DOUGLAS FIR/CEDAR Virginia 124 — 124 16% Total South 6,129 819 6,948 WHITEWOOD North Maine 839 — 839 HARDWOOD 77% Michigan 558 — 558 Montana 713 — 713 New Hampshire 24 — 24 Vermont 86 — 86 West Virginia 258 — 258 2017 Western U.S. Inventory by Age / Species Wisconsin 4 — 4 Total North 2,482 — 2,482 MILLIONS OF TONS Total Company 11,537 819 12,356 50 (1) Acres include all conservation and non-harvest areas. 40 We provide a year-round flow of logs to internal and external 30 customers. We sell grade and fiber logs to manufacturers that 20 produce a diverse range of products. We also sell standing 10 timber to third parties and lease land for recreational purposes. Our timberlands are generally well located to take advantage of 0 AGE 0–9 10–19 20–29 30–39 40–49 50–59 60–89 90–134 135+ road, logging and transportation systems for efficient delivery of (in years) logs to customers. DOUGLAS FIR/CEDAR WHITEWOOD HARDWOOD
Western United States Note: Inventory charted encompasses all conservation and non-harvest areas.
Our Western timberlands are well situated to serve the wood The average age of timber harvested from our Western product and pulp markets in Oregon and Washington. timberlands in 2017 was 50 years. In accordance with our Additionally, our location on the West Coast provides access to sustainable forestry practices, we harvest approximately higher-value export markets for Douglas fir and whitewood logs 2 percent of our Western acreage each year. to Japan, China and Korea. Our largest export market is Japan where Douglas fir is the preferred species for higher-valued Southern United States post and beam homebuilding. The size and quality of our Our Southern acres, covering 11 states, are well situated to Western Timberlands, coupled with their proximity to several serve domestic wood products and pulp markets, including our
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 5 own mills. Additionally, our coastal locations position us to Northern United States serve a developing Asian log export market. Our holdings are We are one of the largest private owners of northern hardwood comprised of 76 percent Southern yellow pine and 24 percent timberlands. Our Northern acres contain a diverse mix of hardwoods. temperate broadleaf hardwoods and mixed conifer species We intensively manage our timber plantations using: across timberlands located in seven states. Species include American beech, balsam fir, birch, cedar, cherry, Douglas fir, forestry research and planning systems to optimize log • hemlock, maple, oak, poplar, red pine, spruce, Western larch production, and white pine. We grow over 50 species and market over 600 customized silviculture prescriptions increasing productivity • product grades to a diverse mix of customers. across our acreage and •innovative planting and harvesting techniques on varying Our large-diameter cherry saw logs and veneer logs serve Southern terrain. domestic and export furniture markets. Our hard maple and other appearance woods support furniture and high-value decorative Operationally, we focus on efficiently harvesting and hauling applications. In addition to high value hardwood saw logs, our mix logs from our ownership and capitalizing on our scale and includes hardwood fiber logs for pulp and OSB applications. supply chain expertise to consistently and reliably serve Hardwood pulpwood is a significant market in the Northern region customers through seasonal events. and we have long term supply agreements, primarily at market We lease more than 95 percent of our owned Southern acreage rates, for nearly 86 percent of our production. for recreational purposes. We also grow softwood logs that supply our Montana medium 2017 Southern U.S. Inventory by Species density fiberboard (MDF), lumber and plywood mills and other customers. Our competitive advantages include a merchandising program to capture the value of the premium hardwood logs and steep slope harvest mechanizing systems. SOUTHERN 24% Regeneration is predominantly natural, augmented by planting YELLOW PINE where appropriate. HARDWOOD 76% 2017 Northern U.S. Inventory by Species
HARDWOOD 46% 2017 Southern U.S. Inventory by Age / Species 54% SOFTWOOD MILLIONS OF TONS
75
60
45
30 2017 Northern U.S. Inventory by Age / Species 15 MILLIONS OF TONS 0 AGE 15 (in years) 0–4 5–9 10–14 15–19 20–24 25–29 30+
SOUTHERN YELLOW PINE HARDWOOD 10
Note: Inventory charted encompasses all conservation and non-harvest areas. 5 The average age of timber harvested from our Southern timberlands in 2017 was 30 years. In accordance with our 0 AGE sustainable forestry practices, we harvest approximately (in years) 0–9 10-19 20-29 30-39 40-49 50-59 60-89 90-134 135+ 3 percent of our acreage each year in the South. SOFTWOOD HARDWOOD
Note: Inventory charted encompasses all conservation and non-harvest areas.
6 The average age of timber harvested from our Northern Five-Year Summary of Timberlands Fee Harvest Volumes timberlands in 2017 was 66 years. Timber harvested in the FEE HARVEST VOLUMES IN THOUSANDS North is sold predominantly as delivered logs to domestic mills, 2017 2016 2015 2014 2013 including our manufacturing facilities located in Montana and Fee harvest West Virginia. In accordance with our sustainable forestry volume — tons: practices, we harvest approximately 1 percent of our acreage West 10,083 11,083 10,563 10,580 8,435 each year in the North. South 27,149 26,343 14,113 14,276 14,177 Canada — Licensed Timberlands North 2,205 2,044 — — — We manage timberlands in Canada under long-term licenses Uruguay(1) 822 1,119 980 1,091 902 from the provincial governments to secure volume for our Other(2) 1,384 701 — — — manufacturing facilities in various provinces. The provincial Total 41,643 41,290 25,656 25,947 23,514 governments regulate the volume of timber that may be (1) Our Uruguayan operations were divested on September 1, 2017. Refer to Note 3: harvested each year through Annual Allowable Cuts (AAC), Discontinued Operations and Other Divestitures in the Notes to Consolidated Financial Statements for further information on this divestiture. which are updated every 10 years. As of December 31, 2017, (2) 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 our AAC by province was: 2017. For additional information see Note 8: Related Parties in Notes to Consolidated Financial Statements. •Alberta — 3,107 thousand tons, •British Columbia — 627 thousand tons, Five-Year Summary of Timberlands Fee Harvest Volumes — •Ontario — 254 thousand tons and Percentage of Grade and Fiber •Saskatchewan — 632 thousand tons. PERCENTAGE OF GRADE AND FIBER When the volume is harvested, we pay the province at 2017 2016 2015 2014 2013 stumpage rates set by the government. The harvested logs are Grade 89% 87% 87% 89% 90% West transferred to our manufacturing facilities at cost (stumpage Fiber 11% 13% 13% 11% 10% plus harvest, haul and overhead costs less any margin on Grade 52% 52% 59% 59% 57% South selling logs to third parties). Any profit from harvesting the log Fiber 48% 48% 41% 41% 43% through to converting to finished products is recognized at the Grade 49% 47% — — — North respective mill in our Wood Products segment. Fiber 51% 53% — — — Grade 69% 66% 65% 63% 60% A small amount of harvested volumes are sold to unaffiliated Uruguay(1) Fiber 31% 34% 35% 37% 40% customers. Grade 47% 45% — — — Other(2) THOUSANDS OF ACRES AT Fiber 53% 55% — — — GEOGRAPHIC AREA DECEMBER 31, 2017 Grade 63% 64% 73% 73% 69% Total TOTAL Fiber 37% 36% 27% 27% 31% ACRES UNDER LICENSE (1) Our Uruguayan operations were divested on September 1, 2017. Refer to Note 3: ARRANGEMENTS Discontinued Operations and Other Divestitures in the Notes to Consolidated Financial Statements for further information on this divestiture. Province: (2) 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 Alberta 5,398 2017. For additional information see Note 8: Related Parties in Notes to Consolidated Financial Statements. British Columbia 1,012
Ontario(1) 2,574 HOW MUCH WE SELL Saskatchewan(1) 4,987 Our net sales to unaffiliated customers over the last two years Total Canada 13,971 were: (1) License is managed by partnership. •$1.9 billion in 2017 — up 8 percent from 2016; and $1.8 billion in 2016. HOW MUCH WE HARVEST • Effective December 31, 2017, we terminated the agreements Our fee harvest volumes are managed sustainably across all under which we had managed the Twin Creeks timberlands. regions to ensure the preservation of long-term economic value of Refer to Note 8: Related Parties in Notes to Consolidated the timber and to capture maximum value from the markets. This Financial Statements for further detail. is accomplished by ensuring annual harvest schedules target financially mature timber and reforestation activities align with the growing of timber through its life cycle to financial maturity.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 7 Our intersegment sales over the last two years were: Five-Year Trend for Total Net Sales in Timberlands •$762 million in 2017 — a decrease of 9 percent from 2016; NET SALES IN MILLIONS OF DOLLARS and $1,942 $2,000 $1,805 •$840 million in 2016. $1,415 $1,500 The decrease in intersegment sales is primarily due to a $1,249 $1,273 decrease in chip and pulp log intersegment sales, which were $1,000 $799 $867 $830 $840 $762 previously sold to our Cellulose Fibers business segment. Refer to Note 3: Discontinued Operations and Other Divestitures in $500 Notes to Consolidated Financial Statements for further detail $0 regarding this divestiture. 2013 2014 2015 2016 2017 Five-Year Summary of Net Sales for Timberlands INTERSEGMENT SALES WESTERN LOGS ALL OTHER SOUTHERN LOGS NORTHERN LOGS PRODUCTS NET SALES IN MILLIONS OF DOLLARS 2017 2016 2015 2014 2013 Percentage of 2017 Sales Dollars to Unaffiliated Customers To unaffiliated customers: Delivered WESTERN LOGS Logs: SOUTHERN LOGS West $ 915 $ 865 $ 830 $ 972 $ 828 32% South 616 566 241 257 256 NORTHERN LOGS 47% North 95 91 — — — STUMPAGE AND Other(1) 59 38 24 22 19 PAY-AS-CUT TIMBER 5% Total 1,685 1,560 1,095 1,251 1,103 (1) URUGUAY OPERATIONS 4% Stumpage and 73 85 37 18 9 3% pay-as-cut OTHER PRODUCTS 9% timber Uruguay 63 79 87 88 76 operations(2) (1) Sales from our Uruguay operations include plywood and hardwood lumber. Recreational 59 44 25 22 21 lease revenue Log Sales Volume Other 62 37 29 36 40 products(3) Logs sold to unaffiliated customers in 2017 increased Subtotal sales to 1,942 1,805 1,273 1,415 1,249 1.8 million tons — 7 percent — from 2016. unaffiliated customers •Sales volume in the South increased 1.9 million tons — Intersegment sales: 12 percent — primarily due to the addition of volumes United States 520 590 559 576 518 harvested from acquired Plum Creek Timberlands. Canada 242 250 271 291 281 •Sales to “Other” unaffiliated customers increased 0.5 million tons — 55 percent — primarily due to increased chips sales Subtotal 762 840 830 867 799 intersegment in Canada, which we previously sold to our former Cellulose sales Fibers segment and were intersegment sales during 2016. Total $2,704 $2,645 $2,103 $2,282 $2,048 We sell three grades of logs — domestic grade, domestic fiber (1) Other delivered logs include sales to unaffiliated customers in Canada and sales from timberlands managed for the Twin Creeks Venture. Our management agreement for the and export. Factors that may affect log sales in each of these Twin Creeks Venture began in April 2016 and terminated in December 2017. For additional information see Note 8: Related Parties in Notes to Consolidated Financial categories include: Statements. (2) Sales from our Uruguay operations include plywood and hardwood lumber. Our Uruguayan domestic grade log sales — lumber usage, primarily for operations were divested on September 1, 2017. Refer to Note 3: Discontinued • Operations and Other Divestitures in the Notes to Consolidated Financial Statements for housing starts and repair and remodel activity, the needs of further information on this divestiture. (3) Other products sales include sales of seeds and seedlings from our nursery operations, our own mills and the availability of logs from both outside chips, and sales from our operations in Brazil (operations sold in 2014). markets and our own timberlands; •domestic fiber log sales — demand for chips by pulp, containerboard mills, pellet mills and OSB mills; and •export log sales — the level of housing starts in Japan and construction in China.
8 Our sales volume includes logs purchased in the open market Five-Year Summary of Export Log Prices (#2 Sawlog Bark and all our domestic and export logs that are sold to unaffiliated On—$/MBF) customers or transferred at market prices to our internal mills. SELECTED PRODUCT PRICES Five-Year Summary of Log Sales Volume to Unaffiliated Customers $888 $869 $838 $840 SALES VOLUME IN THOUSANDS $833 2017 2016 2015 2014 2013
Logs — tons: $607 $555 $562 West 8,202 8,713 8,212 8,504 7,300 $522 $479 South 17,895 15,967 6,480 6,941 7,198 North 1,574 1,500 — — —
Uruguay(1) 291 470 714 667 394
Other(2) 1,458 943 551 474 410 2013 2014 2015 2016 2017
Total 29,420 27,593 15,957 16,586 15,302 COASTAL - DOUGLAS FIR — LONGVIEW (1) Our Uruguayan operations were divested on September 1, 2017. Refer to Note 3: Discontinued Operations and Other Divestitures in the Notes to Consolidated Financial Statements for further information on this divestiture. COASTAL - HEMLOCK (2) Other includes our Canadian operations and managed Twin Creeks Venture. Our management agreement for the Twin Creeks Venture began in April 2016 and terminated SOURCE: Loglines in December 2017. For additional information see Note 8: Related Parties in Notes to Consolidated Financial Statements. Log prices are affected by the supply of and demand for grade and fiber logs. Export log prices are particularly affected by the Log Prices Japanese housing market and Chinese demand. The majority of our log sales to unaffiliated customers involve sales to domestic sawmills and the export market. Log prices WHERE WE’RE HEADED in the following tables are on a delivered (mill) basis: Our competitive strategies include: Five-Year Summary of Published Domestic Log Prices (#2 Sawlog Bark On — $/MBF) •continuing to capitalize on our scale of operations, silviculture expertise and sustainability practices; SELECTED PRODUCT PRICES •optimizing cash flow through operational excellence initiatives including merchandising for value, harvest and transportation efficiencies, and flexing harvest to capture seasonal and $716 $705 short-term opportunities; $663 $650 $650 •sustaining our export and domestic market access, infrastructure and strong customer relationships; •increasing our recreational lease revenue stream; and •continuing to maximize the value of our timberlands portfolio $335 $323 $334 $328 $320 by managing the acres with the ultimate best use in mind.
REAL ESTATE, ENERGY AND NATURAL RESOURCES 2013 2014 2015 2016 2017 Our Real Estate & ENR segment maximizes the value of our DOUGLAS FIR timberland ownership through application of our asset value optimization (AVO) process and captures the full value of SOUTHERN PINE LARGE surface and subsurface assets, such as oil, natural gas, SOURCE: Loglines minerals and wind resources.
WHAT WE DO Real Estate Properties that exhibit higher value than commercial timberlands are monetized within our Real Estate business. We
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 9 analyze existing U.S. timberland holdings using a process we resources produced from our property in exchange for rents and call AVO. We start with understanding the value of a parcel royalties. Our primary sources of revenue are: operating as commercial timberlands and then assess the rentals and royalties from the exploration, extraction, specific real estate attributes of the parcel and its • generation and sale of minerals, oil and natural gas, coal and corresponding market. The assessment includes wind energy production; demographics, infrastructure and proximity to amenities and rental payments from communication, energy and recreation to determine the potential to yield a premium value • transportation rights of way; and to commercial timberland. Attributes can evolve over time, and the occasional sale of mineral assets. accordingly, the assignment of value and opportunity can • change. We generally reserve mineral rights when selling timberlands acreage. Some Energy and Natural Resources activities are These properties are acres we expect to sell, and/or entitle to conducted through our taxable REIT subsidiary. support development, for recreational, conservation, commercial or residential purposes over time. Development, Real Estate Development Joint Venture outside of entitlement activities, is typically performed by third Our share of equity earnings from WestRock-Charleston Land parties. Some of our real estate activities are conducted Partners, LLC (WR-CLP) is included in the net contribution to through our taxable REIT subsidiary. earnings of our Real Estate & ENR segment. WR-CLP develops Occasionally we sell a small amount of timberlands acreage in and sells its acreage of high value rural lands and development- areas where we choose to reduce our market presence, or we quality lands near Charleston, South Carolina. Refer to Note 8: can capture a price that exceeds the value derivable from Related Parties in Notes to Consolidated Financial Statements holding and operating as commercial timberlands. These for further information. transactions will vary based on factors including the locations Real Estate, Energy and Natural Resources Sources of and physical characteristics of the timberlands. Revenue
The timing of real estate sales is a function of many factors, SOURCES ACTIVITIES including the general state of the economy, demand in local Real Estate Select timberland tracts are sold for recreational, real estate markets, the ability of buyers to obtain financing, conservation, commercial or residential purposes. the number of competing properties listed for sale, the Energy and Natural •Rights are sold to explore and extract seasonal nature of sales (particularly in the Northern states), Resources construction aggregates (rock, sand and gravel), coal, industrial materials and oil and the plans of adjacent landowners, our expectation of future natural gas for sale into energy markets. price appreciation, the timing of the harvesting activities, and •Ground leases and easements are granted to wind and solar developers to generate the availability of government and not-for-profit funding. In any renewable electricity from our timberlands. period, the average sales price per acre will vary based on the •Rights are granted to access and utilize timberland acreage for communications, location and physical characteristics of parcels sold. pipeline, powerline and transportation rights of way. The AVO review of our legacy Weyerhaeuser Southern timberlands was completed in fourth quarter 2016. The AVO review of our legacy Weyerhaeuser Western timberlands was WHERE WE DO IT completed in second quarter 2017. We will continually revisit Our Real Estate business identifies opportunities to realize our AVO assessment of all of our U.S. timberland acres, premium value for our U.S. timberland acreage. including legacy Plum Creek acres for which AVO assessment was completed prior to the merger. Our significant Energy and Natural Resources revenue sources are located in Oregon, South Carolina and Georgia (construction Energy and Natural Resources material royalties); the Gulf South (oil and natural gas We focus on maximizing potential opportunities for oil, natural royalties); and West Virginia (coal reserves). gas, construction materials, industrial minerals, coal, renewable energy and rights of way easements on our HOW MUCH WE SELL timberlands portfolio and retained mineral interests. Our net sales to unaffiliated buyers over the last two years As the owner of mineral rights and interests, we typically do not were: invest in operations but instead enter into contracts with operators granting them the rights to explore and sell natural •$280 million in 2017 — up 24 percent from 2016; and •$226 million in 2016.
10 Five-Year Summary of Net Sales for Real Estate, Energy and Wood Products Natural Resources PRODUCTS HOW THEY’RE USED NET SALES IN MILLIONS OF DOLLARS Structural lumber Structural framing for new residential, repair and 2017 2016 2015 2014 2013 remodel, treated applications, industrial and commercial structures Net Sales: Engineered wood products Floor and roof joists, and headers and beams for Real Estate $208 $172 $ 75 $ 72 $ 84 •Solid section residential, multi-family and commercial Energy and Natural 72 54 26 32 31 •I-joists structures Resources Structural panels Structural sheathing, subflooring and stair tread Total $280 $226 $101 $104 $115 •OSB for residential, multi-family and commercial •Softwood plywood structures Five-Year Summary of Real Estate Sales Statistics Medium density fiberboard Furniture and cabinet components, architectural (MDF) moldings, doors, store fixtures, core material for REAL ESTATE SALES STATISTICS hardwood plywood, face material for softwood plywood, commercial wall paneling and substrate 2017 2016 2015 2014 2013 for laminate flooring Acres sold 97,235 82,687 27,390 24,583 25,781 Other products Wood chips and other byproducts Average $ 2,079 $ 2,072 $ 2,490 $ 2,428 $ 2,462 Complementary building Complementary building products such as cedar, price per products decking, siding, insulation and rebar sold in our acre distribution facilities
WHERE WE’RE HEADED WHERE WE DO IT Our competitive strategies include: We operate manufacturing facilities in the United States and •continuing to apply the AVO process to identify opportunities Canada. We distribute through a combination of Weyerhaeuser to capture a premium to timber value; distribution centers and third-party distributors. Information •maintaining a flexible, low-cost execution model by continuing about the locations, capacities and actual production of our to leverage strategic relationships with outside real estate manufacturing facilities is included below. brokers; Summary of Wood Products Capacities and Principal •capturing the full value of our oil and natural gas, aggregates Manufacturing Locations as of December 31, 2017 and industrial minerals, and wind renewable energy CAPACITIES IN MILLIONS resources; and PRODUCTION NUMBER OF FACILITY •delivering the most value from every acre. CAPACITY FACILITIES LOCATION Structural lumber — 4,985 19 Alabama, Arkansas, WOOD PRODUCTS board feet Louisiana (2), Mississippi (3), We are a large manufacturer of wood products in North America Montana, North and distributor of wood products, primarily in North America. Carolina (3), Oklahoma, Oregon (2), Washington (2), Alberta (2), British WHAT WE DO Columbia Our wood products segment: Engineered solid 43 6 Alabama, Louisiana, section — cubic feet(1) Oregon, West Virginia, British Columbia, •provides high-quality softwood lumber, engineered wood Ontario products, structural panels, medium density fiberboard (MDF) Oriented strand 3,035 6 Louisiana, Michigan, and other specialty products to the residential, multi-family, board — square North Carolina, West industrial, light commercial and repair and remodel markets; feet (3/8”) Virginia, Alberta, Saskatchewan distributes our products as well as complementary building • Softwood plywood — 610 3 Arkansas, Louisiana, products that we purchase from other manufacturers; and square feet (3/8”) Montana exports our softwood lumber, oriented strand board (OSB) • Medium density 265 1 Montana and engineered wood products, primarily to Asia. fiberboard — square feet (3/4”) (1) This represents total press capacity. Three facilities also produce I-Joist to meet market demand. In 2017, approximately 26 percent of the total press production was converted into 213 lineal feet of I-Joist.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 11 Production capacities listed represent annual production Five-Year Trend for Total Net Sales in Wood Products volume under normal operating conditions and producing a NET SALES IN MILLIONS OF DOLLARS normal product mix for each individual facility. $5,000 $4,794 We also own or lease 18 distribution centers in the U.S. where $4,334 $4,000 $4,009 $3,970 $3,872 our products and complementary building products are sold. Five-Year Summary of Wood Products Production $3,000
PRODUCTION IN MILLIONS $2,000
2017 2016 2015 2014 2013 $1,000
Structural lumber — 4,509 4,516 4,252 4,152 4,084 $0 board feet 2013 2014 2015 2016 2017 Engineered solid 25.1 22.8 20.9 20.4 18.0 section — cubic feet(1) Percentage of 2017 Net Sales Dollars in Wood Products Engineered I-joists — 213 184 185 182 168 (1) lineal feet STRUCTURAL LUMBER Oriented strand 2,995 2,910 2,847 2,749 2,723 16% board — square ENGINEERED SOLID SECTION feet (3/8”) ENGINEERED I-JOISTS 4% Softwood plywood — 370 396 248 252 241 4% square feet (3/8”)(2) ORIENTED STRAND BOARD 41% Medium density 232 209 — — — SOFTWOOD PLYWOOD fiberboard — square 18% feet (3/4”) MEDIUM DENSITY FIBERBOARD (1) Weyerhaeuser engineered solid section facilities also may produce engineered I-joist. 7% 10% (2) All Weyerhaeuser plywood facilities also produce veneer. OTHER PRODUCTS
HOW MUCH WE SELL Wood Products Volume Revenues of our Wood Products segment come from sales to Five-Year Summary of Sales Volume for Wood Products wood products dealers, do-it-yourself retailers, builders and industrial users. Wood Products net sales were $5.0 billion in SALES VOLUME(1) IN MILLIONS 2017 and $4.3 billion in 2016. 2017 2016 2015 2014 2013 Five-Year Summary of Net Sales for Wood Products Structural lumber — 4,658 4,723 4,588 4,463 4,436 board feet NET SALES IN MILLIONS OF DOLLARS Engineered solid 25.1 23.3 21.3 20.0 18.2 2017 2016 2015 2014 2013 section — cubic feet Structural lumber $2,058 $1,839 $1,741 $1,901 $1,873 Engineered I-joists — 220 195 188 184 177 Engineered solid 500 450 428 402 353 lineal feet section Oriented strand 2,971 2,934 2,972 2,788 2,772 Engineered 336 290 284 277 247 board — square feet I-joists (3/8”)
Oriented strand 904 707 595 610 809 Softwood Plywood — 453 481 381 395 402 board square feet (3/8”) Softwood 176 174 129 143 144 plywood Medium density 222 206 — — — fiberboard — square Medium density 183 158 — — — feet (3/4”) fiberboard Other products 276 201 189 176 171 (1) Sales volume includes sales of internally produced products and complementary building produced(1) products sold primarily through our distribution centers. Complementary 541 515 506 461 412 building products Wood Products Prices Total $4,974 $4,334 $3,872 $3,970 $4,009 Prices for commodity wood products — Structural lumber, OSB (1) Includes wood chips and other byproducts. and Plywood — increased in 2017 from 2016.
12 In general, the following factors influence sales realizations for Five-Year Summary of Published Oriented Strand Board wood products: Price — $/MSF •Demand for wood products used in residential and multi- SELECTED PUBLISHED PRODUCT PRICE family construction and the repair and remodel of existing homes affects prices. Residential and multi-family $354 $315 construction is influenced by factors such as population $269 growth and other demographics, the level of employment, $217 $208 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 2013 2014 2015 2016 2017 is affected by the size and age of existing housing inventory and access to home equity financing and other credit. OSB (7/16") NORTH CENTRAL PRICE The availability of supply of commodity building products such • SOURCE: RANDOM LENGTHS 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 WHERE WE’RE HEADED material supply and availability of transportation. Our competitive strategies include: Demand for wood products continued to improve in 2017. The Industry leading controllable manufacturing costs through following graphs reflect product price trends for the past five • operational excellence and disciplined capital execution; years. •strong alignment with fiber supply; Five-Year Summary of Published Lumber Prices — $/MBF •leverage our brand and reputation as the preferred provider of quality building products; and SELECTED PUBLISHED PRODUCT PRICES •pursue disciplined, profitable sales growth in target markets.
$469 $426 $432 $408 $427 $413 $397 $393 $376 $401 $350 $355 $377 $358 $336 $344 $338 $315 $305 $277
2013 2014 2015 2016 2017
2X4 DOUGLAS FIR (KILN DRIED) 2X4 DOUGLAS FIR (GREEN) 2X4 SOUTHERN YELLOW PINE (KILN DRIED) 2X4 SPRUCE-PINE-FIR (MILL)
SOURCE: RANDOM LENGTHS
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 13 EXECUTIVE OFFICERS OF THE REGISTRANT law at K&L Gates LLP. Before he began practicing law, Mr. Stockfish was an engineer with the Boeing Company. Adrian M. Blocker, 61, has been senior vice president, Wood James A. Kilberg, 61, has been senior vice president, Real Products since January 2015. Previously, he served as senior Estate, Energy and Natural Resources, since April 2016. In this vice president, Lumber, from August 2013 to December 2014. position, he oversees the company’s real estate development, He joined the company in May 2013 as vice president, Lumber. land asset management, conservation, mitigation banking, Prior to joining the company, he served as CEO of the Wood recreational lease management, oil and gas, construction Products Council. He has held numerous leadership positions materials, heavy minerals, wind and water. Prior to joining the in the industry focused on forest management, fiber company, he served as Plum Creek’s senior vice president, procurement, consumer packaging, strategic planning, business Real Estate, Energy and Natural Resources, from 2006 until development and manufacturing, including at West Fraser, February 2016, and as Plum Creek’s vice president, Land International Paper and Champion International. Management, from 2001 until 2006. Prior to joining Plum Russell S. Hagen, 52, has been senior vice president and chief Creek, Mr. Kilberg held several executive positions in real financial officer since February 2016. Previously, he served as estate, asset management and development. He currently senior vice president, Business Development, at Plum Creek serves on the board of the Georgia Chamber of Commerce and from December 2011 to February 2016. Prior to this he was the Alliance Theater, as well as the Corporate Council of the vice president, Real Estate Development, overseeing the Land Trust Alliance. development activities of the company’s real estate, oil and Denise M. Merle, 54, has been senior vice president, Human gas, construction materials and bioenergy businesses. Resources and Information Technology, since February 2016. Mr. Hagen began his career in 1988 with Coopers and Lybrand, Prior to her current role, she was senior vice president, Human where he was a certified public accountant and led the audits Resources and Investor Relations, since August 2014; and of public clients in technology, banking and natural resource senior vice president, Human Resources, since February 2014. industries. He joined Plum Creek in 1993 as Manager of She was director, Finance and Human Resources, for the Internal Audit and held director-level positions in accounting, Lumber business since 2013. Prior to that, she was director, financial operations, risk management and information Compliance & Enterprise Planning, from 2009 to 2013, and technology. director, Internal Audit, from 2004 to 2009. She has also held Kristy T. Harlan, 44, has been senior vice president, general various roles in the company’s paper and packaging counsel and corporate secretary since January 2017. She leads businesses, including finance, capital planning and analysis, the company’s Law department, with responsibility for global and business development. She is a licensed CPA in the state legal, compliance, real estate services and land title functions. of Washington. She serves on the Board of Advisors of the Before joining the company, she was a partner at K&L Gates Seattle University business school. LLP since 2007. Previously, she worked as an attorney at Doyle R. Simons, 54, has been president and chief executive Preston Gates & Ellis LLP and Akin Gump Strauss Hauer & officer since August 2013 and a director of the company since Feld. June 2012. He was appointed chief executive officer-elect and Devin W. Stockfish, 44, has been senior vice president, an executive officer of the company in June 2013. Prior to Timberlands, since January 2018. Previously, he has served as joining the company, he served as chairman and chief executive senior vice president, general counsel and corporate secretary, officer of Temple-Inland, Inc., from 2008 until February 2012 and vice president, Western Timberlands. He joined the when it was acquired by International Paper Company. He held company in March 2013 as corporate secretary and assistant various management positions with Temple-Inland, including general counsel. Before joining the company, he was vice executive vice president from 2005 through 2007 and chief president & associate general counsel at Univar Inc. where he administrative officer from 2003 to 2005. Prior to joining focused on mergers and acquisitions, corporate governance Temple-Inland in 1992, he practiced real estate and banking and securities law. Previously, he was an attorney in the law law with Hutcheson and Grundy, L.L.P. He also serves on the department at Starbucks Corporation and practiced corporate Board of Fiserv, Inc.
14 NATURAL RESOURCE AND ENVIRONMENTAL caribou. While the CBFA mandate came to an end in 2017, MATTERS CBFA signatories continue to work on management plans with provincial governments, and seek the participation of aboriginal We are subject to a multitude of laws and regulations in the and local communities in advancing the goals of the CBFA. operation of our businesses. We also participate in voluntary certification of our timberlands to ensure that we sustain their ENDANGERED SPECIES PROTECTIONS overall quality, including the protection of wildlife and water In the United States, a number of fish and wildlife species that quality. Changes in law and regulation, or certification inhabit geographic areas near or within our timberlands have standards, can significantly affect our business. been listed as threatened or endangered under the federal Endangered Species Act (ESA) or similar state laws, such as: REGULATIONS AFFECTING FORESTRY PRACTICES •the northern spotted owl, the marbled murrelet, a number of In the United States, regulations established by federal, state salmon species, bull trout and steelhead trout in the Pacific and local government agencies to protect water quality, Northwest; wetlands and other wildlife habitat could affect future harvests •several freshwater mussel and sturgeon species; and and forest management practices on our timberlands. Forest •the red-cockaded woodpecker, gopher tortoise, gopher frog, practice laws and regulations that affect present or future dusky gopher frog, American burying beetle and Northern harvest and forest management activities in certain states long-eared bat in the South or Southeast. include: Additional species or populations may be listed as threatened •limits on the size of clearcuts, or endangered as a result of pending or future citizen petitions •requirements that some timber be left unharvested to protect or petitions initiated by federal or state agencies. In addition, water quality and fish and wildlife habitat, significant citizen litigation seeks to compel the federal •regulations regarding construction and maintenance of forest agencies to designate “critical habitat” for ESA-listed species, roads, and many cases have resulted in settlements under which •rules requiring reforestation following timber harvest and designations will be implemented over time. Such designations •various related permit programs. may adversely affect some management activities and options. Each state in which we own timberlands has developed best Restrictions on timber harvests can result from: management practices to reduce the effects of forest practices •federal and state requirements to protect habitat for on water quality and aquatic habitats. Additional and more threatened and endangered species; stringent regulations may be adopted by various state and local •regulatory actions by federal or state agencies to protect governments to achieve water-quality standards under the these species and their habitat; and federal Clean Water Act, protect fish and wildlife habitats, •citizen suits under the ESA. human health, or achieve other public policy objectives. Such actions could increase our operating costs and affect In Canada, our forest operations are carried out on public timber supply and prices in general. To date, we do not believe timberlands under forest licenses with the provinces. All forest that these measures have had, and we do not believe that in operations are subject to: 2018 they will have, a significant effect on our harvesting •forest practices and environmental regulations and operations. We anticipate that likely future actions will not •license requirements established by contract between us and disproportionately affect Weyerhaeuser as compared with the relevant province designed to: comparable operations of U.S. competitors. – protect environmental values and In Canada: – encourage other stewardship values. •The federal Species at Risk Act (SARA) requires protective In Canada, 21 member companies of the Forest Products measures for species identified as being at risk and for Association of Canada (FPAC), including Weyerhaeuser’s critical habitat, pursuant to SARA, Environment Canada Canadian subsidiary, announced in May 2010 the signing of a continues to identify and assess species deemed to be at Canadian Boreal Forest Agreement (CBFA) with nine risk and their critical habitat. environmental organizations. The CBFA applies to approximately •In October 2012, the Canadian Minister of the Environment 72 million hectares of public forests licensed to FPAC members released a strategy for the recovery of the boreal population and, when fully implemented, was expected to lead to the of woodland caribou under the SARA. The population and conservation of significant areas of Canada’s boreal forest and distribution objectives for boreal caribou across Canada are protection of boreal species at risk, in particular, woodland to (1) maintain the current status of existing, self-sustaining
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 15 local caribou populations and (2) stabilize and achieve self- WHAT THESE REGULATIONS AND CERTIFICATION sustaining status for non-self-sustaining local caribou PROGRAMS MEAN TO US populations. Critical habitat for boreal caribou is identified for The regulatory and non-regulatory forest management programs all boreal caribou ranges, except for northern described above have: Saskatchewan’s Boreal Shield range (SK1) where additional information is required for that population. Species •increased our operating costs; assessment and recovery plans are developed in •resulted in changes in the value of timber and logs from our consultation with aboriginal communities and stakeholders. timberlands; •In 2017, the Provinces were required to update the federal •contributed to increases in the prices paid for wood products government on any progress associated with their draft and wood chips during periods of high demand; caribou range plans. These draft plans will be further •sometimes made it more difficult for us to respond to rapid evaluated in 2018, and any additional information on potential changes in markets, extreme weather or other unexpected impacts to forest harvest operations will be released. circumstances; and •potentially encouraged further reductions in the use of, or The identification and protection of habitat and the substitution of other products for, lumber, oriented strand implementation of range plans and land use action plans may, board, engineered wood products and plywood. over time, result in additional restrictions on timber harvests and other forest management practices that could increase We believe that these kinds of programs have not had, and in operating costs for operators of timberlands in Canada. To 2018 will not have, a significant effect on our total harvest of date, we do not believe that these Canadian measures have timber in the United States or Canada. However, these kinds of had, and we do not believe that in 2018 they will have, a programs may have such an effect in the future. We expect we significant effect on our harvesting operations. We anticipate will not be disproportionately affected by these programs as that likely future measures will not disproportionately affect compared with typical owners of comparable timberlands. We Weyerhaeuser as compared with similar operations of Canadian also expect that these programs will not significantly disrupt our competitors. planned operations over large areas or for extended periods.
FOREST CERTIFICATION STANDARDS CANADIAN ABORIGINAL RIGHTS We operate in North America under the Sustainable Forestry Many of the Canadian timberlands are subject to the Initiative (SFI®). This is a certification standard designed to constitutionally protected treaty or common-law rights of supplement government regulatory programs with voluntary aboriginal peoples of Canada. Most of British Columbia (B.C.) is landowner initiatives to further protect certain public resources not covered by treaties, and as a result the claims of B.C.’s and values. SFI® is an independent standard, overseen by a aboriginal peoples relating to forest resources have been governing board consisting of: largely unresolved. On June 26, 2014 the Supreme Court of Canada ruled that the Tsilhqot’in Nation holds aboriginal title to conservation organizations, • approximately 1,900 square kilometers in B.C. This was the academia, • first time that the court has declared title to exist based on the forest industry and • historical occupation by aboriginal peoples. Many aboriginal large and small forest landowners. • groups continue to be engaged in treaty discussions with the Ongoing compliance with SFI® may result in some increases in governments of B.C., other provinces and Canada. our operating costs and curtailment of our timber harvests in Final or interim resolution of claims brought by aboriginal some areas. There also is competition from other private groups can be expected to result in: certification systems, primarily the Forest Stewardship Council (FSC), coupled with efforts by supporters to further those •additional restrictions on the sale or harvest of timber, systems by persuading customers of forest products to require •potential increase in operating costs and products certified to their preferred system. Certain features of •impact to timber supply and prices in Canada. the FSC system could impose additional operating costs on We believe that such claims will not have a significant effect on timberland management. Because of the considerable variation our total harvest of timber or production of forest products in in FSC standards, and variability in how those standards are 2018, although they may have such an effect in the future. In interpreted and applied, if sufficient marketplace demand 2008, FPAC, of which we are a member, signed a Memorandum develops for products made from raw materials sourced from of Understanding with the Assembly of First Nations, under other than SFI-certified forests, we could incur substantial which the parties agree to work together to strengthen additional costs for operations and be required to reduce Canada’s forest sector through economic-development harvest levels.
16 initiatives and business investments, strong environmental Our liability with respect to these various sites ranges from stewardship and the creation of skill-development opportunities insignificant to substantial. The amount of liability depends on: particularly targeted to aboriginal youth. •the quantity, toxicity and nature of materials at the site; and the number and economic viability of the other responsible POLLUTION-CONTROL REGULATIONS • parties. Our operations are subject to various laws and regulations, including: We spent approximately $15 million in 2017 and expect to spend approximately $14 million in 2018 on environmental •federal, remediation of these sites. •state, •provincial and It is our policy to accrue for environmental-remediation costs •local pollution controls. when we: These laws and regulations, as well as market demands, •determine it is probable that such an obligation exists and impose controls with regard to: •can reasonably estimate the amount of the obligation. •air, water and land; We currently believe it is reasonably possible that our costs to •solid and hazardous waste management; remediate all the identified sites may exceed our current •waste disposal; accruals of $48 million. Based on currently available •remediation of contaminated sites; and information and analysis, remediation costs for all identified •the chemical content of some of our products. sites may exceed our existing reserves by up to $150 million. This estimate of the upper end of the range of reasonably Compliance with these laws, regulations and demands usually possible additional costs is much less certain than the involves capital expenditures as well as additional operating estimates we currently are using to determine how much to costs. We cannot easily quantify the future amounts of capital accrue. The estimate of the upper range also uses expenditures we might have to make to comply with these laws, assumptions less favorable to us among the range of regulations and demands or the effects on our operating costs reasonably possible outcomes. because in some instances compliance standards have not been developed or have not become final or definitive. In REGULATION OF AIR EMISSIONS IN THE U.S. addition, it is difficult to isolate the environmental component The United States Environmental Protection Agency (EPA) has of most manufacturing capital projects. promulgated regulations for air emissions from: Our capital projects typically are designed to: •wood products facilities and •enhance safety, •industrial boilers. extend the life of a facility, • These regulations cover: •increase capacity, •increase efficiency, •hazardous air pollutants that require use of maximum •facilitate raw material changes and handling requirements, achievable control technology (MACT); and •increase the economic value of assets or products, and •controls for pollutants that contribute to smog, haze and •comply with regulatory standards. more recently, greenhouse gases. Between 2011 and 2015, the EPA issued three related ENVIRONMENTAL CLEANUP portions of new MACT standards for industrial boilers and We are involved in the environmental investigation or process heaters. In July 2016, a court decision was issued that remediation of numerous sites. Of these sites: remains unsettled at this time, but which will cause certain of •we may have the sole obligation to remediate, the emissions standards to be re-issued. Some of these •we may share that obligation with one or more parties, re-issued emissions standards will be applicable to a small •several parties may have joint and several obligations to number of our wood products mills. Because the court decision remediate or remains unsettled and because we do not know how or when •we may have been named as a potentially responsible party the EPA will implement the final court decision, we cannot for sites designated as U.S. Superfund sites. predict whether or when the emission standard revisions may have a material impact on regulatory compliance costs at our mills. We do not expect any material expenditures in 2017 to comply with MACT standards.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 17 The EPA must still promulgate supplemental MACT standards •reduced greenhouse gas emissions by approximately for plywood, lumber and composite wood products facilities. 25 percent considering changes in the asset portfolio The EPA is expected to collect information for these future according to 2014 data, compared to our 2000 baseline. rulemakings in 2017. Additional factors that could affect greenhouse gas emissions We cannot currently quantify the amount of capital we will need in the future include: in the future to comply with new regulations being developed by policy proposals by federal or state governments regarding the EPA because final rules have not been promulgated. • regulation of greenhouse gas emissions, In 2010, the EPA issued a final greenhouse gas rule limiting •Congressional legislation regulating greenhouse gas the growth of emissions from new projects meeting certain emissions within the next several years and thresholds. On June 23, 2014, the US Supreme Court issued a •establishment of a multistate or federal greenhouse gas decision that removed potential applicability of the underlying emissions reduction trading system with potentially 2010 regulations based solely on greenhouse gas emissions significant implications for all U.S. businesses. and limited application of the rule’s technology requirements to We believe these developments have not had, and in 2018 will larger emission sources as a result of new emissions from not have, a significant effect on our operations. Although these non-greenhouse gas pollutants. As a result of this Supreme measures could have a material adverse effect on our Court ruling, EPA is expected to issue new regulations to set operations in the future, we expect that we will not be thresholds for when the greenhouse gas technology disproportionately affected by these measures as compared requirements apply if the non-greenhouse gas emissions trigger with owners of comparable operations. We maintain an active the rule in the first instance. The impact of the Supreme Court forestry research program to track and understand any potential ruling is to end the potential applicability of the technology effect from actual climate change related parameters that could requirements for our smaller manufacturing operations and limit affect the forests we own and manage and do not anticipate the applicability for our other operations. any disruptions to our planned operations. In 2015, the EPA issued an extensive regulatory program for new and existing electric utility generating units to scale back REGULATION OF AIR EMISSIONS IN CANADA emissions of greenhouse gas carbon dioxide (CO2) arising from In addition to existing provincial air quality regulations, the fossil fuel use to generate electricity. EPA also proposed Canadian federal government has proposed an air quality additional regulations related to how states and federal management system (AQMS) as a comprehensive national agencies may implement the requirements finalized in 2015. approach for improving air quality in Canada. The federal This regulatory program potentially will have indirect impacts on proposed AQMS includes: our operations, such as from rising purchased electricity prices or from mandated energy demand reductions that could apply •ambient air quality standards for outdoor air quality to our mills and other facilities that we operate. We are management across the country, evaluating the regulations and additional proposals but are not •a framework for air zone air management within provinces able to predict whether the regulations, when complete and and territories that targets specific sources of air emissions, implemented, will have a material impact on our operations. •regional airsheds that facilitate coordinated action across borders, We use significant biomass for energy production at our mills. •industrial sector based emission requirements that set a EPA is currently working on rules regarding regulation of national base level of performance for major industries in biomass emissions. The impact of these greenhouse gas and Canada and biomass rules, as well as recent court decisions, on our •improved intergovernmental collaboration to reduce operations remains uncertain. To address concerns about emissions from the transportation sector. greenhouse gases as a pollutant, we: In 2016, Environment Canada released the Pan-Canadian •closely monitor legislative, regulatory and scientific Framework on Clean Growth and Climate Change, a developments pertaining to climate change; “Greenhouse Gas Emission Framework.” The framework put in •adopted in 2006, as part of the company’s sustainability place a national, sector-based greenhouse gas reduction program, a goal of reducing greenhouse gas emissions by program applicable to a number of industries. 40 percent by 2020 compared with our emissions in 2000, assuming a comparable portfolio and regulations; All Canadian provincial governments: •determined to achieve this goal by increasing energy •have greenhouse gas reporting requirements, efficiency and using more greenhouse gas-neutral, biomass •are working on reduction strategies and fuels instead of fossil fuels; and
18 •together with the Canadian federal government, are In 2016, the EPA finalized new and revised federal Clean Water considering new or revised emission standards. Act water quality standards and human health criteria that would apply to waters under the state of Maine’s jurisdiction. In addition, British Columbia has adopted a carbon tax and Alberta has a mandatory greenhouse gas emission reduction In addition, in 2013, amendments to the Canadian Federal regulation. Fisheries Act came into force. These amendments change the focus from habitat protection to fisheries protection and We believe these measures have not had, and in 2018 will not increase penalties. We expect further changes to these have, a significant effect on our operations. Although these regulations subsequent to review and regulatory consultations measures could have a material adverse effect on our that took place in 2016, but we cannot predict the scope or operations in the future, we expect that we will not be potential impact, if any, on our operations. disproportionately affected by these measures as compared with owners of comparable operations. We also expect that We believe the above developments have not had, and in 2018 these measures will not significantly disrupt our planned will not have, a significant effect on our operations. Although operations. these measures could have a material adverse effect on our operations in the future, we expect that we will not be REGULATION OF WATER disproportionately affected by these measures as compared In the U.S., as a result of litigation under the federal Clean with owners of comparable operations. We also expect that Water Act, additional federal or state permits are now required these measures will not significantly disrupt our planned in some states for the application of pesticides, including operations. herbicides, on timberlands. Those permits have entailed payment of additional costs. In 2015, federal regulatory POTENTIAL CHANGES IN POLLUTION REGULATION agencies adopted rules that potentially expand the definition of State governments continue to promulgate total maximum daily waters subject to federal Clean Water Act jurisdiction, which load (TMDL) requirements for pollutants in water bodies that do could increase the scope and number of permits required for not meet state or EPA water quality standards. State TMDL forestry-related activities and entail additional costs for requirements may: Weyerhaeuser and other forest landowners in the U.S. Those set limits on pollutants that may be discharged to a body of rules were challenged in various federal courts by numerous • water; or parties and states, and a nationwide injunction was issued set additional requirements, such as best management against the rule by the Sixth Circuit Court of Appeals. The U.S. • practices for nonpoint sources, including timberland Supreme Court recently ruled that the circuit court does not operations, to reduce the amounts of pollutants. have jurisdiction over the case, so the nationwide injunction will be dissolved in the immediate future, but one other injunction It is not possible to estimate the capital expenditures that may still blocks the rule in several states. On January 31, 2018, be required for us to meet pollution allocations across the federal agencies took regulatory action to further delay the various proposed state TMDL programs until a specific TMDL is 2015 rules from going into effect until February 2020. That promulgated. action will likely be challenged in litigation. If any such In Canada, various levels of government have been working to challenge is successful, other injunctive efforts will likely be address water issues including use, quality and management. pursued by the parties to one or more of the other pending Recent areas of focus include water allocation, regional cases challenging the 2015 rules, whose jurisdiction has now watershed protection, protection of drinking water, water pricing been confirmed by the Supreme Court. Meanwhile, the federal and a national water quality index. agencies will likely continue to pursue the repeal of the 2015 rules entirely and replacement of them with the pre-2015 rules. We are not able to predict the ultimate resolution of these pending legal and regulatory actions. In 2016, Washington State Department of Ecology (WA DOE) adopted human health-based water quality criteria. The EPA subsequently promulgated its own water quality standards for Washington state for the protection of human health for certain pollutants. It is unclear what effect, if any, these rules will have on our manufacturing operations in Washington state.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 19 FORWARD-LOOKING STATEMENTS RISKS, UNCERTAINTIES AND ASSUMPTIONS Major risks and uncertainties, and assumptions that we make, that affect our business and may cause actual results to differ This report contains statements concerning our future results materially from the content of these forward-looking statements and performance that are forward-looking statements within the include, but are not limited to: meaning of the Private Securities Litigation Reform Act of 1995. These statements: •the effect of general economic conditions, including employment rates, interest rate levels, housing starts, are based on various assumptions we make and • general availability of financing for home mortgages and the may not be accurate because of risks and uncertainties • relative strength of the U.S. dollar; surrounding the assumptions we make. •market demand for the company’s products, including market These statements reflect our current views with respect to demand for our timberland properties with higher and better future events. Factors listed in this section, factors discussed uses, which is related to, among other factors, the strength under “Risk Factors” and “Management’s Discussion and of the various U.S. business segments and U.S. and Analysis of Financial Condition and Results of Operations”in international economic conditions; this report, and other factors not included, may cause our •changes in currency exchange rates, particularly the relative actual results to differ significantly from our forward-looking value of the U.S. dollar to the yen and the Canadian dollar, statements. There is no guarantee that any of the events and the relative value of the euro to the yen; anticipated by our forward-looking statements will occur. Or if •restrictions on international trade, tariffs imposed on imports any of the events occur, there is no guarantee what effect it will and the availability and cost of shipping and transportation; have on our operations, cash flows, or financial condition. economic activity in Asia, especially Japan and China; performance of our manufacturing operations, including We undertake no obligation to update our forward-looking • maintenance and capital requirements; statements after the date of this report. •potential disruptions in our manufacturing operations; FORWARD-LOOKING TERMINOLOGY •the level of competition from domestic and foreign producers; •the successful execution of our internal plans and strategic Forward-looking statements can be identified by the fact that initiatives, including restructuring and cost reduction they do not relate strictly to historical or current facts. They initiatives; often use words such as expects, may, should, will, believes, •the successful and timely execution and integration of our anticipates, estimates, projects, intends, plans, targets or strategic acquisitions, including our ability to realize expected approximately, or similar words. They may use the positive, benefits and synergies, and the successful and timely negative or another variation of those and similar words. execution of our strategic divestitures, each of which is subject to a number of risks and conditions beyond our STATEMENTS control including, but not limited to, timing and required In this report we make forward-looking statements concerning regulatory approvals; our plans, strategies, intentions and expectations, including •raw material availability and prices; with respect to our strategic corporate initiatives; operational •the effect of weather; excellence initiatives, including costs and product development •the risk of loss from fires, floods, windstorms, hurricanes, and production; estimated taxes and tax rates; future debt pest infestation and other natural disasters; payments; future dividends; future restructuring charges; •energy prices; expected results of litigation and other legal proceedings and •transportation and labor availability and costs; the sufficiency of litigation and other contingent liability •federal tax policies; reserves; expected uses of cash, including share repurchases; •the effect of forestry, land use, environmental and other expected capital expenditures; expected economic conditions, governmental regulations; including markets, pricing and demand for our products; laws •legal proceedings; and regulations relevant to our businesses; and our •performance of pension fund investments and related expectations relating to pension contributions and benefit derivatives; payments. •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;
20 •changes in accounting principles; and products. In addition, prices for our products are affected by •other factors described in this report under Risk Factors. many other factors outside of our control. As a result, we have little influence over the timing and extent of price changes, which often are volatile. Our profitability with respect to these RISK FACTORS products depends, in part, on managing our costs, particularly We are subject to various risks and events that could adversely raw material, labor (including contract labor) and energy costs, affect our business, our financial condition, our results of which represent significant components of our operating costs operations, our cash flows and the price of our common stock. and can fluctuate based upon factors beyond our control. Both sales and profitability of our products are subject to volatility You should consider the following risk factors, in addition to the due to market forces beyond our control. information presented elsewhere in this report, particularly in “Our Business — Who We Are”, “Our Business — What We INDUSTRY SUPPLY OF LOGS AND WOOD PRODUCTS Do”, “Our Business — Natural Resources and Environmental Excess supply of logs and wood products may adversely affect Matters”, “Forward-Looking Statements” and “Management’s prices and margins. Discussion and Analysis of Financial Condition and Results of Operations” as well as in the filings we make from time to time Our industry may increase harvest levels, which could lead to with the SEC, in evaluating us, our business and an investment an oversupply of logs. Wood products producers may likewise in our securities. expand manufacturing capacity, which could lead to an oversupply of manufactured wood products. Any increase of The risks discussed below are not the only risks we face. industry supply to our markets could adversely affect our prices Additional risks not currently known to us or that we currently and margins. deem immaterial also may adversely affect our business. HOMEBUILDING MARKET AND ECONOMIC RISKS RISKS RELATED TO OUR INDUSTRY High unemployment, low demand and low levels of consumer confidence can adversely affect our business and results of MACROECONOMIC CONDITIONS operations. The industries in which we operate are sensitive to Our business is dependent upon the health of the U.S. housing macroeconomic conditions and consequently are highly market. Demand for homes is sensitive to changes in economic cyclical. conditions such as the level of employment, consumer The overall levels of demand for the products we manufacture confidence, consumer income, the availability of financing and and distribute reflect fluctuations in levels of end-user demand, interest rate levels. Other factors that could limit or adversely which consequently impact our sales and profitability. End-user affect demand for new homes, and hence demand for our demand depends in large part on general macroeconomic products, include factors such as limited wage growth, conditions, both in the U.S. and globally, as well as on local increases in non-mortgage consumer debt, any weakening in economic conditions. Current economic conditions in the United consumer confidence, and any increase in foreclosure rates States reflect growth at or below historical trends. Global and distress sales of houses. economic conditions reflect issues such as inflation and volatile and sporadic growth in emerging countries. The length Homebuyers’ ability to qualify for and obtain affordable and magnitude of industry cycles vary over time, both by market mortgages could be affected by changes in interest rates, and by product, but generally reflect changes in macroeconomic changes in home loan underwriting standards and government conditions and levels of industry capacity. Any decline or sponsored entities and private mortgage insurance companies stagnation in macroeconomic conditions could cause us to supporting the mortgage market. experience lower sales volume and reduced margins. Access to affordable mortgage financing is critical to the health of the U.S. housing market. Generally, increases in interest COMMODITY PRODUCTS rates make it more difficult for home buyers to obtain mortgage Many of our products are commodities that are widely financing, which could negatively affect demand for housing available from other producers. and, in turn, negatively affect demand for our wood products. After an extended period during which the U.S. Federal Reserve Because commodity products have few distinguishing kept its benchmark interest rate at historically low levels, it properties from producer to producer, competition for these began raising rates again in 2016 and 2017. The number and products is based primarily on price, which is determined by extent of further rate increases is uncertain. supply relative to demand and competition from substitute
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 21 Credit requirements were severely tightened, and the number of Our third-party transportation providers are also subject to mortgage loans available for financing home purchases were several events outside of their control, such as disruption of severely reduced, during the most recent recession and transportation infrastructure, labor issues and natural ensuing credit crisis. Although the availability of credit has disasters. Any failure of a third-party transportation provider to improved since that time, the demand for new homes could be timely deliver our products, including delivery of our wood limited or adversely affected if credit requirements were to products to our customer and delivery of wood fiber to our again tighten or become more restrictive for any reason. mills, could harm our supply chain, negatively affect our customer relationships and have a material adverse effect on The liquidity provided to the mortgage industry by Fannie Mae our financial condition, results of operations and our reputation. and Freddie Mac, both of which purchase home mortgages and mortgage-backed securities originated by mortgage lenders, has been critical to the housing market. Any political or other RISKS RELATED TO OUR BUSINESS developments that would have the effect of limiting or restricting the availability of financing by these government MANAGING COMMERCIAL TIMBERLANDS RISKS sponsored entities could also adversely affect interest rates Our ability to harvest and deliver timber may be subject to and the availability of mortgage financing. Whether resulting limitations which could adversely affect our results of from direct increases in borrowing rates, tightened underwriting operations. standards on mortgage loans or reduced federal support of the mortgage lending industry, a challenging mortgage financing Our primary assets are our timberlands. Weather conditions, environment could reduce demand for housing and, therefore, timber growth cycles, access limitations, and availability of adversely affect demand for our products. contract loggers and haulers may adversely affect our ability to harvest our timberlands. Other factors that may adversely affect Changes in regulations relating to tax deductions for our timber harvest include damage to our standing timber by mortgage interest expense and real estate taxes could harm fire or by insect infestation, disease, prolonged drought, our future sales and earnings. flooding, severe weather and other natural disasters. Changes Significant costs of homeownership include mortgage interest in global climate conditions could intensify one or more of expense and real estate taxes, both of which are generally these factors. Although damage from such causes usually is deductible for an individual’s federal and, in some cases, state localized and affects only a limited percentage of standing income taxes. Recent federal legislation reduced the amount of timber, there can be no assurance that any damage affecting mortgage interest and real estate taxes that certain taxpayers our timberlands will in fact be limited. As is common in the may deduct. These and any similar changes to income tax laws forest products industry, we do not maintain insurance by the federal government or by a state government to coverage for damage to our timberlands. Our revenues, net eliminate or substantially reduce these income tax deductions, income and cash flow from operations are dependent to a or any increase in real property taxes by local governments, significant extent on the pricing of our products and our may increase the cost of homeownership and thus could continued ability to harvest timber at adequate levels. adversely affect the demand for our products. Therefore, if we were to be restricted from harvesting on a significant portion of our timberlands for a prolonged period of TRANSPORTATION time, or if material damage to a significant portion of our We depend on third parties for transportation services and standing timber were to occur, we could suffer a materially increases in costs and disruptions in the availability of adverse impact to our results of operations. transportation could materially adversely affect our business Our timber harvest levels may be affected by acquisitions of and operations. additional timberlands, sales of existing timberlands and shifts Our business depends heavily on the availability of third-party in harvest from one region to another. Future timber harvest transportation service providers for the transportation of our levels may also be affected by our ability to timely and manufactured wood products and wood fiber; we are therefore effectively replant harvested areas, which depends on several materially affected by the availability and cost of these factors including changes in estimates of long-term sustainable services. Any significant increase in the operating costs to our yield because of silvicultural advances, natural disasters, fires, service providers, including without limitation the cost of fuel or pests, insects and other hazards, regulatory constraints and labor, could have a material negative impact on our financial other factors beyond our control. results by increasing the cost of these services to us, as well Timber harvest activities are also subject to a number of as result in an overall reduction in the availability of these federal, state and local regulations pertaining to the protection services altogether. of fish, wildlife, water and other resources. Regulations,
22 re-interpretations and litigation can restrict timber harvest Timber prices are also affected by changes in timber availability activities and increase costs. Examples include federal and at the local, national and international level. Our timberland state laws protecting threatened, endangered and “at-risk” ownership is concentrated in Alabama, Arkansas, Louisiana, species, harvesting and forestry road building activities that Mississippi, North Carolina, Oklahoma, Oregon and may be restricted under the U.S. Federal Clean Water Act, state Washington. In some of these states, much of the timberland forestry practices laws, laws protecting aboriginal rights, and is privately owned. Increases in timber prices often result in other similar regulations. substantial increases in harvesting on private timberlands, including lands not previously made available for commercial Our estimates of timber inventories and growth rates may be timber operations, causing a short-term increase in supply that inaccurate and include risks inherent in calculating such moderates such price increases. In western states such as estimates, which may impair our ability to realize expected Oregon and Washington, where a greater proportion of revenues. timberland is government-owned, any substantial increase in Whether in connection with managing our existing timberland timber harvesting from government-owned land could portfolio or assessing potential timberland acquisitions, we significantly reduce timber prices. Any decrease in the demand make and rely on important estimates of merchantable timber from our log export markets could also result in significant inventories. These include estimates of timber inventories that downward pressure on timber prices, particularly in the western may be lawfully and economically harvested, timber growth region. On a local level, timber supplies can fluctuate rates and end-product yields. Timber growth rates and yield depending on factors such as changes in weather conditions estimates are developed by forest biometricians and other and harvest strategies of local timberland owners, as well as experts using statistical measurements of tree samples on occasionally high timber salvage efforts due to events such as given property. These estimates are central to forecasting our pest infestations, fires or other natural disasters. anticipated timber harvests, revenues and expected cash flows. Timberlands make up a significant portion of our business While the company has confidence in its timber inventory portfolio. processes and the professionals in the field who administer it, growth and yield estimates are inherently inexact and uncertain. Our real property holdings are primarily timberlands and we may If these estimates are inaccurate, our ability to manage our make additional timberlands acquisitions in the future. As the timberlands in a sustainable or profitable manner may be owner and manager of approximately 12.4 million acres of compromised, which may cause our results of operations and timberlands, we are subject to the risks that are inherent in our stock price to be adversely affected. concentrated real estate investments. A downturn in the real estate industry generally, or the timber or forest products Our operating results and cash flows will be materially industries specifically, could reduce the value of our properties affected by supply and demand for timber. and adversely affect our results of operations. Such a downturn A variety of factors affect prices for timber, including available could also adversely affect our customers and reduce the supply, changes in economic conditions that impact demand, demand for our products, as well as our ability to realize upon the level of domestic new construction and remodeling activity, our strategy of selling nonstrategic timberlands and timberland interest rates, credit availability, population growth, weather properties that have higher and better uses at attractive prices. conditions and pest infestation, and other factors. These These risks may be more pronounced than if we diversified our factors vary by region, by timber type (i.e., sawlogs or pulpwood investments outside of real property holdings. logs) and by species. MANUFACTURING AND SELLING WOOD PRODUCTS Timber prices are affected by changes in demand on a local, RISKS national and international level. The closure of a mill in a region where we own timber could have a material adverse effect on A material disruption at one of our manufacturing facilities demand in that region, and therefore pricing. For example, as could prevent us from meeting customer demand, reduce our the demand for paper continues to decline, closures of pulp sales or negatively affect our results of operation and financial mills in some of our operating regions have adversely affected condition. the regional demand for pulpwood and wood chips. Another Any of our manufacturing facilities, or any of our machines example involves our export of logs to Asia. While recent within an otherwise operational facility, could cease operations demand from Asian markets has remained steady, some Asian unexpectedly due to a number of events, including: markets, particularly in China, have a history of significant volatility. A decrease in demand for logs from one or more •unscheduled maintenance outages; Asian markets could have a negative impact on log and lumber •prolonged power failures; prices. •equipment failure;
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 23 •a chemical spill or release; We face intense competition in our markets; any failure to •explosion of a boiler; compete effectively could have a material adverse effect on •fires, floods, windstorms, earthquakes, hurricanes or other our business, financial condition and results of operations. severe weather conditions or catastrophes, affecting the We compete with North American producers and, for some of production of goods or the supply of raw materials (including our product lines, global producers, some of which may have fiber); greater financial resources and lower production costs than do the effect of drought or reduced rainfall on water supply; • we. The principal basis for competition for many of our products labor difficulties; • is selling price. Our ability to maintain satisfactory margins disruptions in transportation infrastructure, including roads, • depends in large part on our ability to control our costs. Our bridges, rail, tunnels, shipping and port facilities; industries also are particularly sensitive to other factors terrorism or threats of terrorism; • including innovation, design, quality and service, with varying governmental regulations; and • emphasis on these factors depending on the product line. To other operational problems. • the extent that one or more of our competitors become more Any such downtime or facility damage could prevent us from successful with respect to any key competitive factor, our ability meeting customer demand for our products or require us to to attract and retain customers could be materially adversely make unplanned capital expenditures. If one of our facilities or affected. Any failure to compete effectively could have a machines were to incur significant downtime, our ability to meet material adverse effect on our business, financial condition and our production targets and satisfy customer requirements could results of operations. be impaired, resulting in lower sales and income. Although Another emerging form of competition is between brands of some risks are not insurable and some coverage is limited, we sustainably produced products; customer demand for certain purchase insurance protecting our manufacturing facilities from brands could reduce competition among buyers for our fires, floods, windstorms, earthquakes, equipment failures and products or cause other adverse effects. boiler explosions. In North America, our forests are third party-certified to the Some of our products are vulnerable to declines in demand Sustainable Forestry Initiative (SFI®) standard. Some of our due to competing technologies or materials. customers have expressed a preference in certain of our Our products may compete with non-fiber based alternatives or product lines for products made from raw materials sourced with alternative products in certain market segments. For from forests certified to different standards, including example, plastic, wood/plastic or composite materials may be standards of the Forest Stewardship Council (FSC). If and to the used by builders as alternatives to the products produced by extent that preference for a standard other than SFI® becomes our Wood Products businesses such as lumber, veneer, a customer requirement, there may be reduced demand and plywood and oriented strand board. Changes in prices for oil, lower prices for our products relative to competitors who can chemicals and wood-based fiber can change the competitive supply products sourced from forests certified to competing position of our products relative to available alternatives and certification standards. If we seek to comply with such other could increase substitution of those products for our products. standards, we could incur materially increased costs for our If use of these alternative products grows, demand for and operations or be required to modify our operations, such as pricing of our products could be adversely affected. reducing harvest levels. FSC, in particular, employs standards that are geographically variable and could cause a material Our results of operations and financial condition could be reduction in the harvest levels of some of our timberlands, materially adversely affected by changes in product mix or most notably in the Pacific Northwest. pricing. Our business and operations could be materially adversely Our results may be materially adversely affected by a change in affected by changes in the cost or availability of raw materials our product mix or pricing. If we are not successful in and energy. implementing previously announced or future price increases, or in our plans to increase sales of higher-priced, higher-value We rely heavily on certain raw materials (principally wood fiber products, or if there are delays in acceptance of price increases and chemicals) and energy sources (principally natural gas, or if customers do not accept higher-priced products, our electricity and fuel oil) in our manufacturing processes. Our results of operations and financial condition could be materially ability to increase earnings has been, and will continue to be, and adversely affected. Price discounting, if required to affected by changes in the costs and availability of such raw maintain our competitive position in one or more markets, materials and energy sources. We may not be able to fully could result in lower than anticipated price realizations and offset the effects of higher raw material or energy costs through margins.
24 price increases, productivity improvements, cost-reduction cash requirements on acceptable economic terms, we could programs or hedging arrangements. experience a material adverse effect on our business, financial condition, results of operations and cash flows.
RISKS RELATED TO CAPITAL MARKETS FOREIGN CURRENCY CAPITAL MARKETS We will be affected by changes in currency exchange rates. Deterioration in economic conditions and capital markets We have manufacturing operations in Canada. We are also an could adversely affect our access to capital. exporter and compete with global producers of products very similar to ours. Therefore, we are affected by changes in the Challenging market conditions could impair the company’s strength of the U.S. dollar, particularly relative to the Canadian ability to raise debt or equity capital or otherwise access capital dollar, euro and yen, and the strength of the euro relative to the markets on terms acceptable to us, which may, among other yen. Changes in exchange rates could materially and adversely impacts, reduce our ability to take advantage of growth and affect our sales volume, margins and results of operations. expansion opportunities. Likewise, our customers and suppliers may be unable to raise capital to fund their operations, which could, in turn, adversely affect their ability to purchase products RISKS RELATED TO LEGAL, REGULATORY AND TAX or sell products to us. ENVIRONMENTAL LAWS AND REGULATIONS CREDIT RATINGS We could incur substantial costs as a result of compliance Changes in credit ratings issued by nationally recognized with, violations of, or liabilities under applicable rating organizations could adversely affect our cost of environmental laws and other laws and regulations. financing and have an adverse effect on the market price of We are subject to a wide range of general and industry-specific our securities. laws and regulations relating to the protection of the Credit rating agencies rate our debt securities on factors that environment, including those governing: include our operating results and balance sheet, actions that •air emissions, we take, their view of the general outlook for our industry and •wastewater discharges, their view of the general outlook for the economy. Ratings •harvesting and other silvicultural activities, decisions by these agencies include maintaining, upgrading or •forestry operations and endangered species habitat downgrading our current rating, as well as placing the company protection, on a “watch list” for possible future ratings actions. Any •surface water management, downgrade of our credit rating, or decision by a rating agency to •the storage, management and disposal of hazardous place us on a “watch list” for possible future downgrading could substances and wastes, have an adverse impact on our ability to access credit markets, •the cleanup of contaminated sites, increase our cost of financing, and have an adverse effect on •landfill operation and closure obligations, the market price of our securities. •building codes, and health and safety matters. CAPITAL REQUIREMENTS AND ACCESS TO CAPITAL • We have incurred, and we expect to continue to incur, Our operations require substantial capital. significant capital, operating and other expenditures complying Our businesses require substantial capital for expansion and with applicable environmental laws and regulations and as a for repair or replacement of existing facilities or equipment. result of remedial obligations. We also could incur substantial Although we maintain our production equipment with regular costs, such as civil or criminal fines, sanctions and scheduled maintenance, key pieces of equipment may need to enforcement actions (including orders limiting our operations or be repaired or replaced periodically. The costs of repairing or requiring corrective measures, installation of pollution control replacing such equipment and the associated downtime of the equipment or other remedial actions), cleanup and closure affected production line could have a significant impact on our costs, and third-party claims for property damage and personal financial condition, results of operations and cash flows. injury as a result of violations of, or liabilities under, environmental laws and regulations. While we believe our capital resources will be adequate to meet our current projected operating needs, capital expenditures and As the owner and operator of real estate, we may be liable other cash requirements, if for any reason we are unable to under environmental laws for cleanup, closure and other provide for our operating needs, capital expenditures and other damages resulting from the presence and release of hazardous
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 25 substances on or from our properties or operations. In addition, these proposals would (and have in some Canadian provinces) surface water management regulations may present liabilities regulate and/or tax the production of carbon dioxide and other and are subject to change. The amount and timing of greenhouse gases to facilitate the reduction of carbon environmental expenditures is difficult to predict, and in some compound emissions into the atmosphere and provide tax and cases, our liability may exceed forecasted amounts or the value other incentives to produce and use cleaner energy. Climate of the property itself. The discovery of additional contamination change impacts, if they occur, and governmental initiatives, or the imposition of additional cleanup obligations at our sites laws and regulations to address potential climate concerns, or third-party sites may result in significant additional costs. could increase our costs and have a long-term adverse impact on our businesses and results of operations. Future legislation We also lease some of our properties to third-party operators or regulatory activity in this area remains uncertain, and its for the purpose of exploring, extracting, developing and impact on our operations is unclear at this time. However, it is producing oil, gas, rock and other minerals in exchange for fees possible that legislation or government mandates, standards or and royalty payments. These activities are also subject to regulations intended to mitigate or reduce carbon compound or federal, state and local laws and regulations. These operations greenhouse gas emissions or other climate change impacts may create risk of environmental liabilities for any unlawful could adversely affect our operations. For example, such discharge of oil, gas or other chemicals into the air, soil or activities could limit harvest levels or result in significantly water. Generally, these third-party operators indemnify us higher costs for energy and other raw materials. Because our against any such liability, and we require that that they maintain manufacturing operations depend upon significant amounts of liability insurance during the term of our lease with them. energy and raw materials, these initiatives could have an However, if for any reason our third-party operators are not able adverse impact on our results of operations and profitability. to honor their indemnity obligation, or if the required liability insurance were not in effect, then it is possible that we could LEGAL MATTERS be deemed responsible for costs associated with environmental liability caused by such third-party operators. We are involved in various environmental, regulatory, product liability and other legal matters, disputes and proceedings Any material liability we incur as a result of activities conducted that, if determined or concluded in a manner adverse to our on our properties by us or by others with whom we have a interests, could have a material adverse effect on our business relationship could adversely affect our financial financial condition. condition. We are, from time to time, involved in a number of legal We also anticipate public policy developments at the state, matters, disputes and proceedings (“legal matters”), some of federal and international level regarding climate change and which involve on-going litigation. These include, without energy access, security and competitiveness. We expect these limitation, legal matters involving environmental clean-up and developments to address emission of carbon dioxide, remediation, warranty and non-warranty product liability claims, renewable energy and fuel standards, and the monetization of regulatory issues, contractual and personal injury claims and carbon. Compliance with regulations that implement new public other legal matters. In some cases, all or a portion of any loss policy in these areas might require significant expenditures. we experience in connection with any such legal matters will be These developments may also include mandated changes to covered by insurance; in other cases, any such losses will not energy use and building codes which could affect our be covered. homebuilding practices. Enactment of new environmental laws or regulations or changes in existing laws or regulations, or the The outcome, costs and other effects of current legal matters interpretation of these laws or regulations, might require in which we are involved, and any related insurance recoveries, significant expenditures. We also anticipate public policy cannot be determined with certainty. Although the disclosures developments at the state, federal and international level in Note 14: Legal Proceedings, Commitments and regarding taxes and a number of other areas that could require Contingencies and Note 20: Income Taxes of Notes to significant expenditures. Consolidated Financial Statements contain management’s current views of the effect such legal matters could have on our Changes in global or regional climate conditions and financial results, there can be no assurance that the outcome governmental response to such changes at the international, of such legal matters will be as currently expected. It is U.S. federal and state levels may affect our operations or our possible that there could be adverse judgments against us in planned or future growth activities. some or all major litigation matters against us, and that we There continue to be numerous international, U.S. federal and could be required to take a charge and make cash payments state-level initiatives and proposals to address domestic and for all or a portion of any related awards of damages. Any one global climate issues. Within the U.S. and Canada, some of or more of such charges or cash payment could materially and
26 adversely affect our results of operations or cash flows for the engage in non-REIT qualifying business activities such as the quarter or year in which we record or pay it. sale of logs, production and sale of wood products, and the development and sale of certain higher and better use (HBU) REIT STATUS AND TAX IMPLICATIONS property. Our TRSs are subject to corporate-level income tax. If we fail to remain qualified as a REIT, our taxable income Under the Code, no more than 20 percent of the value of the would be subject to tax at corporate rates and we would not gross assets of a REIT may be represented by securities of one be able to deduct dividends to shareholders. or more TRSs. This limitation may affect our ability to increase In any taxable year in which we fail to qualify as a REIT, unless the size of our TRSs’ operations. Furthermore, our use of TRSs we are entitled to relief under the Internal Revenue Code: may cause the market to value our common shares differently than the shares of other REITs, which may not use TRSs as •We would not be allowed to deduct dividends to shareholders extensively as we use them. in computing our taxable income. •We would be subject to federal and state income tax on our We may be limited in our ability to fund distributions using cash taxable income at applicable corporate rates. generated through our TRSs. •We also would be disqualified from treatment as a REIT for The ability of the REIT to receive dividends from our TRSs is the four taxable years following the year during which we lost limited by the rules with which we must comply to maintain our qualification. status as a REIT. In particular, at least 75 percent of gross Qualification as a REIT involves the application of highly income for each taxable year as a REIT must be derived from technical and complex provisions of the Internal Revenue Code real estate sources including sales of our standing timber and to our operations and the determination of various factual other types of qualifying real estate income and no more than matters and circumstances not entirely within our control. There 25 percent of our gross income may consist of dividends from are only limited judicial or administrative interpretations of our TRSs and other non-real estate income. these provisions. Although we operate in a manner consistent This limitation on our ability to receive dividends from our TRSs with the REIT qualification rules, we cannot assure you that we may affect our ability to fund cash distributions to our are or will remain so qualified. shareholders using cash flows from our TRSs. The net income Certain of our business activities are subject to corporate-level of our TRSs is not required to be distributed, and TRS income income tax and potentially subject to prohibited transactions that is not distributed to the REIT will not be subject to the REIT tax. income distribution requirement. Under the Internal Revenue Code, REITs generally must engage Our cash dividends are not guaranteed and may fluctuate. in the ownership and management of income producing real estate. For the company, this generally includes owning and Generally, REITs are required to distribute 90 percent of their managing a timberland portfolio for the production and sale of ordinary taxable income and 95 percent of their net capital standing timber. Accordingly, the harvesting and sale of logs, gains income. Capital gains may be retained by the REIT but the development or sale of certain timberlands and other real would be subject to corporate income taxes. If capital gains are estate, and the manufacture and sale of wood products are retained rather than distributed, our shareholders would be conducted through one or more of our wholly-owned taxable notified, and they would be deemed to have received a taxable REIT subsidiaries (TRSs) because such activities could distribution, with a refundable credit for any federal income tax generate non-qualifying REIT income and could constitute paid by the REIT. Accordingly, we believe that we are not “prohibited transactions.” Prohibited transactions are defined required to distribute material amounts of cash since by the Internal Revenue Code generally to be sales or other substantially all of our taxable income is treated as capital dispositions of property to customers in the ordinary course of gains income. Our board of directors, in its sole discretion, a trade or business. By conducting our business in this determines the amount of quarterly dividends to be provided to manner, we believe that we satisfy the REIT requirements of our shareholders based on consideration of a number of the Internal Revenue Code and are not subject to the factors. These factors include, but are not limited to, our 100 percent tax that could be imposed if a REIT were to results of operations, cash flow and capital requirements, conduct a prohibited transaction. The net income of our TRSs is economic conditions, tax considerations, borrowing capacity subject to corporate-level income tax. and other factors, including debt covenant restrictions that may impose limitations on cash payments, future acquisitions and The extent of our use of our TRSs may affect the price of our divestitures, harvest levels, changes in the price and demand common shares relative to the share price of other REITs. for our products and general market demand for timberlands We conduct a significant portion of our business activities including those timberland properties that have higher and through one or more TRSs. The use of our TRSs enables us to better uses. Consequently, our dividend levels may fluctuate.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 27 Changes in tax laws or their interpretation could adversely business, financial results and financial condition, including affect our shareholders and our results of operations. facility closures or impairments of assets. We cannot predict Federal and state tax laws are constantly under review by persons future trade policy or the terms of any settlements of involved in the legislative process, the Internal Revenue Service, the international trade disputes and their impact on our business. United States Department of the Treasury, and state taxing authorities. Changes to tax laws could adversely affect our shareholders or increase DISTRIBUTION OF WRECO SHARES our effective tax rates. We cannot predict with certainty whether, when, in what forms, or with what effective dates, the tax laws applicable to We could incur substantial U.S. federal tax liability if the us or our shareholders may be changed. WRECO transaction were found not to qualify as a tax-free “reorganization” or the distribution of WRECO shares to IMPORT/EXPORT TAXES AND DUTIES Weyerhaeuser shareholders were found not to qualify as a We may be required to pay significant taxes on our exported tax-free distribution. products or countervailing and anti-dumping duties on our In 2014, we closed the divestiture of our home building imported products. business, Weyerhaeuser Real Estate Company (WRECO), via a We export logs and finished wood products to foreign markets, “Reverse Morris Trust” transaction pursuant to which a wholly- and our ability to do so profitably is affected by U.S. and foreign owned subsidiary of TRI Pointe Homes, Inc. (TRI Pointe) merged trade policy. International trade disputes occur frequently and with and into WRECO, with WRECO surviving the merger and can be taken to an International Trade Court for resolution of becoming a wholly-owned subsidiary of TRI Pointe. The Reverse unfair trade practices between countries. For example, there Morris Trust transaction was structured to qualify as a tax-free have been many disputes and subsequent trade agreements reorganization and the associated distribution of WRECO regarding sales of softwood lumber between Canada, shares to Weyerhaeuser shareholders as a tax-free distribution. historically a significant source of lumber for the U.S. market, If the transaction were determined not to qualify as a tax-free and the United States. The Softwood Lumber Agreement (SLA) reorganization, or if the distribution does not qualify as a between Canada and the U.S., originally signed in October tax-free distribution, then Weyerhaeuser or its subsidiaries or 2006, expired in October 2015, and a new agreement has not Weyerhaeuser shareholders may be required to pay substantial been reached. The prior agreement imposed a sliding scale U.S. federal income taxes. export tax on Canadian lumber exported to the U.S. when the If the transaction were determined not to qualify as a tax-free price of lumber was at or below a threshold price. In November reorganization or the distribution not to qualify as a tax-free 2016, a coalition of U.S. lumber producers filed petitions distribution, or if Weyerhaeuser were required to indemnify TRI seeking countervailing and anti-dumping duties on Canadian Pointe and WRECO, such taxes and indemnification obligations lumber. On the basis of the U.S. International Trade could be substantial and could materially and adversely affect Commission’s affirmative finding of injury to U.S. lumber the company’s cash flows, financial condition and results of producers, the U.S. Department of Commerce recently imposed operations. final anti-dumping and countervailing duties at a combined rate of 20.23% on most Canadian softwood lumber exporters. OUR MERGER WITH PLUM CREEK TIMBER COMPANY, For more information regarding the status of the softwood INC. lumber agreement and any U.S. government regulatory action We could incur substantial U.S. federal tax liability in regarding imposition of countervailing and anti-dumping duties connection with our merger with Plum Creek. or other actions, and the effect of any such actions on our On February 19, 2016, Plum Creek Timber Company, Inc. business, see the discussion in the Management’s Discussion merged with and into Weyerhaeuser Company, with and Analysis — Softwood Lumber Agreement section of this Weyerhaeuser continuing as the surviving company. Both report. companies have operated in a manner intended to qualify them U.S. international trade policy could result in one or more of our as “REITs” for U.S. federal income tax purposes under the foreign export market jurisdictions adopting responsive trade Internal Revenue Code. See “REIT Status and Tax Implications” policy making it more difficult or costly for us to export our above for a description of the consequences of our failure to products to those countries. We could therefore experience maintain REIT status. However, even if we have operated in a reduced revenues and margins in any of our businesses that is manner that allows us to retain our REIT status, if Plum Creek adversely affected by international trade tariffs, duties, taxes, were deemed to have lost its REIT status for a taxable year customs or dispute settlement terms. To the extent such trade before the merger or the taxable year in which the merger policies increase prices, they could also reduce the demand for occurred, we could face serious tax consequences that could our products and could have a material adverse effect on our substantially reduce cash available for distribution to our
28 shareholders and significantly impair our ability to expand our interest rates could increase our costs under our plans and business and raise capital. In addition, if the merger were may significantly impact future contribution requirements. It is determined not to qualify as a tax-free merger, we could incur unknown what the actual investment return on our pension substantial federal tax liability that could materially and assets will be in future years and what interest rates may be at adversely affect the company’s cash flows, financial condition any given point in time. We cannot therefore provide any and results of operations. assurance of what our actual pension plan costs will be in the future, or whether we will be required under applicable law to make future material plan contributions. See Note 9: Pension OTHER RISKS and Other Postretirement Benefit Plans of Notes to Consolidated Financial Statements for additional information CYBERSECURITY about these plans, including funding status. We rely on information technology to support our operations and reporting environments. A security failure of that STRATEGIC INITIATIVES technology could impact our ability to operate our businesses Our business and financial results may be adversely affected if effectively, adversely affect our reported financial results, we are unable to successfully execute on important strategic impact our reputation and expose us to potential liability or initiatives. litigation. There can be no assurance that we will be able to successfully We use information systems to carry out our operational implement important strategic initiatives in accordance with our activities, maintain our business records, collect and store expectations, which may result in an adverse impact on our sensitive data, including intellectual property, other proprietary business and financial results. These strategic initiatives are and personally identifiable information. Some systems are designed to improve our results of operations and drive long- internally managed and some are maintained by third-party term shareholder value, and include, among others: optimizing service providers. We and our service providers employ what we cash flow through operational excellence; reducing costs to believe are reasonably adequate security measures, but achieve industry-leading cost structure; and innovating in notwithstanding these efforts, our systems could be higher-margin products. compromised as a result of a cyber incident, natural disaster, hardware or software corruption, failure or error, We may be unsuccessful in carrying out our acquisition telecommunications system failure, service provider error or strategy. failure, intentional or unintentional personnel actions or other We intend to strategically pursue acquisitions of timberland disruption. If by any cause our systems or information properties when market conditions warrant. As with any resources were compromised, or if our data were destroyed, investment, our acquisitions may not perform in accordance misappropriated or inappropriately disclosed we could suffer with our expectations. In addition, we anticipate financing such significant loss or incur significant liability, including: damage to acquisitions through cash from operations, borrowings under our reputation; loss of customer confidence or goodwill; and our unsecured credit facilities, proceeds from equity or debt significant expenditures of time and money to address and offerings or proceeds from asset dispositions, or any remediate resulting damages to affected individuals or combination thereof. Our inability to finance future acquisitions business partners, or to defend ourselves in resulting litigation on favorable terms could adversely affect our results of or other legal proceedings, by affected individuals, business operations. partners or regulators. PEOPLE PENSION PLAN LIABILITY Our business is dependent upon attracting, retaining and We have a significant pension liability. developing key personnel. A portion of our current and former employees have accrued Our success depends, to a significant extent, upon our ability to benefits under our defined benefit pension plans. Although the attract, retain and develop senior management, operations plans are not open to employees hired on or after January 1, management and other key personnel. Our financial condition 2014, current employees hired before that time continue to or results of operations could be significantly adversely affected accrue benefits. Requirements for funding our pension plan if we were to fail to recruit, retain, and develop such personnel, liabilities are based on a number of actuarial assumptions, or if there were to occur any significant increase in the cost of including the expected rate of return on our plan assets and the providing such personnel with competitive total compensation discount rate applied to our pension plan obligations. and benefits. Fluctuations in equity market returns and changes in long-term
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 29 STOCK-PRICE VOLATILITY •For details about our Wood Products properties, go to Our The market price of our common stock may be influenced by Business/What We Do/Wood Products/Where We Do It. many factors, some of which are beyond our control. The market price of our common stock may be influenced by LEGAL PROCEEDINGS many factors, some of which are beyond our control, including See Note 14: Legal Proceedings, Commitments and without limitation those described above and elsewhere in this Contingencies and Note 20: Income Taxes in the Notes to report, as well as the following: Consolidated Financial Statements for a summary of legal proceedings. •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; •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 stockholders; •sales or repurchases of substantial amounts of common stock; •changes in accounting principles; and •changes in tax laws and regulations. In addition, there has been significant volatility in the market price and trading volume of securities of companies operating in the forest products industry that often has been unrelated to individual company operating performance. Some companies that have experienced volatile market prices for their securities have had securities litigation brought against them. If litigation of this type is brought against us, it could result in substantial costs and divert management’s attention and resources. UNRESOLVED STAFF COMMENTS There are no unresolved comments that were received from the SEC staff relating to our periodic or current reports under the Securities Exchange Act of 1934. PROPERTIES Details about our facilities, production capacities and locations are found in the Our Business — What We Do section of this report. •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.
30 MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock trades on the following exchanges under the symbol WY: •New York Stock Exchange As of December 31, 2017, there were 15,138 holders of record of our common shares. Dividend-per-share data and the range of closing market prices for our common stock for each of the four quarters in 2017 and 2016 are included in Note 22: Selected Quarterly Financial Information (unaudited) in the Notes to Consolidated Financial Statements. INFORMATION ABOUT SECURITIES AUTHORIZED FOR ISSUANCE UNDER OUR EQUITY COMPENSATION PLAN
NUMBER OF NUMBER OF SECURITIES SECURITIES TO BE WEIGHTED REMAINING AVAILABLE ISSUED UPON AVERAGE EXERCISE FOR FUTURE ISSUANCE EXERCISE OF PRICE OF UNDER EQUITY OUTSTANDING OUTSTANDING COMPENSATION PLANS OPTIONS, OPTIONS, (EXCLUDING WARRANTS AND WARRANTS AND SECURITIES TO BE RIGHTS RIGHTS ISSUED UPON EXERCISE) Equity compensation plans approved by security holders(1) 11,232,881 $21.21 21,092,207 Equity compensation plans not approved by security holders N/A N/A N/A Total 11,232,881 $21.21 21,092,207
(1) Includes 1,509,474 restricted stock units and 965,347 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 $26.38.
INFORMATION ABOUT COMMON STOCK REPURCHASES DURING 2017 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 are to be made in open-market transactions. We did not enter into any common stock repurchases during 2017.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 31 COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN Weyerhaeuser Company, S&P 500 and S&P Global Timber & Forestry Index
250
200
150
100
2013 2014 2015 2016 2017
WEYERHAEUSER S&P 500 S&P GLOBAL TIMBER & FORESTRY INDEX
PERFORMANCE GRAPH ASSUMPTIONS •Assumes $100 invested on December 31, 2012, 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.
32 SELECTED FINANCIAL DATA DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES
PER COMMON SHARE 2017 2016 2015 2014 2013 Diluted earnings from continuing operations attributable to Weyerhaeuser $ 0.77 $ 0.55 $ 0.71 $ 1.02 $ 0.54 common shareholders Diluted earnings from discontinued operations attributable to Weyerhaeuser $ — $ 0.84 $ 0.18 $ 2.16 $ 0.41 common shareholders Diluted net earnings attributable to Weyerhaeuser common shareholders $ 0.77 $ 1.39 $ 0.89 $ 3.18 $ 0.95 Dividends paid $ 1.25 $ 1.24 $ 1.20 $ 1.02 $ 0.81 Weyerhaeuser shareholders’ interest (end of year) $ 11.78 $ 12.26 $ 9.54 $ 10.11 $ 11.64
FINANCIAL POSITION(1) 2017 2016 2015 2014 2013 Total assets $ 18,059 $ 19,243 $ 12,470 $ 13,247 $ 14,352 Total long-term debt, including current portion(2) $ 5,992 $ 6,610 $ 4,787 $ 4,873 $ 4,871 Weyerhaeuser shareholders’ interest $ 8,899 $ 9,180 $ 4,869 $ 5,304 $ 6,795 Percent earned on average year-end Weyerhaeuser shareholders’ interest 6.4% 14.3% 9.1% 29.5% 9.9% OPERATING RESULTS 2017 2016 2015 2014 2013 Net sales $ 7,196 6,365 5,246 5,489 5,373 Earnings from continuing operations 582 415 411 616 330 Discontinued operations, net of income taxes — 612 95 1,210 233 Net earnings 582 1,027 506 1,826 563 Dividends on preference shares — (22) (44) (44) (23) Net earnings attributable to Weyerhaeuser common shareholders $ 582 $ 1,005 $ 462 $ 1,782 $ 540
CASH FLOWS(1) 2017 2016 2015 2014 2013 Net cash from operations $ 1,201 $ 735 $ 1,075 $ 1,109 $ 1,023 Net cash from investing activities 367 2,559 (487) 361 (1,848) Net cash from financing activities (1,420) (3,630) (1,156) (725) 762 Net change in cash and cash equivalents $ 148 $ (336) $ (568) $ 745 $ (63) STATISTICS (UNAUDITED) 2017 2016 2015 2014 2013 Number of employees 9,300 10,400 12,600 12,800 13,700 Number of common shareholder accounts at year-end 15,138 15,504 7,700 8,248 8,859 Number of common shares outstanding at year-end (thousands) 755,223 748,528 510,483 524,474 583,548 Weighted average common shares outstanding – diluted (thousands) 756,666 722,401 519,618 560,899 571,239 (1) Amounts are not updated for the Cellulose Fibers divestitures. See Note 3: Discontinued Operations and Other Divestitures in the Notes to Consolidated Financial Statements. (2) Does not include nonrecourse debt held by our Variable Interest Entities (VIEs). See Note 8: Related Parties in the Notes to Consolidated Financial Statements for further information on our VIEs and the related nonrecourse debt.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 33 MANAGEMENT’S DISCUSSION Census reported new homes sales of 608 thousand units in 2017, an increase of 8.4 percent over 2016. This sales level AND ANALYSIS OF FINANCIAL was characterized by consistently low inventories as measured CONDITION AND RESULTS OF by months of supply, which averaged 5.4 months through OPERATIONS (MD&A) 2017. Existing home sales continued to rise in 2017, with total sales of 5.51 million units, a gain of 1.1 percent over 2016 and the highest sales level since 2006 according to the WHAT YOU WILL FIND IN THIS MD&A National Association of Realtors. Existing home inventories were also tight with supplies averaging 3.9 months for the year, Our MD&A includes the following major sections: down from 4.3 months in 2016. We attribute this continued •economic and market conditions affecting our operations; improvement primarily to employment growth, improving •financial performance summary; consumer confidence and favorable mortgage rates. discussion of the softwood lumber agreement; • According to the Joint Center for Housing Studies at Harvard results of our operations — consolidated and by segment; • University, the Leading Indicator of Remodeling Activity (LIRA) liquidity and capital resources — where we discuss our • increased by 6.4 percent in 2017 and is expected to increase cash flows; by 7.5 percent year over year for 2018. •off-balance sheet arrangements; •environmental matters, legal proceedings and other U.S. wood product markets advanced in 2017, consistent with contingencies; and growth in homebuilding and remodeling segments, as described •accounting matters — where we discuss critical accounting above. According to FEA, North American lumber consumption policies and areas requiring judgments and estimates. grew at a 7.2 percent rate in 2017. The Random Lengths framing lumber composite price increased 19.4 percent in 2017 versus 2016 while oriented strand board (OSB) increased ECONOMIC AND MARKET CONDITIONS 31 percent in 2017 versus 2016 as measured by Random AFFECTING OUR OPERATIONS Lengths North Central Price. We expect similar to slightly higher wood product prices in 2018 as demand continues to increase The demand for logs within our Timberlands segment is directly with growth in housing starts and remodeling. affected by production levels of domestic wood-based building products. This segment, specifically the Western region, is also Consistent with this, demand for logs increased with wood affected by export demand. Japanese housing starts are a key products production within our Western region. This coupled driver of export log demand in Japan. The strength of the U.S. with higher market prices year over year drove higher housing market strongly affects demand in our Wood Products realizations within this region. Douglas fir sawlog prices as segment, as does repair and remodeling activity. reported by Loglines increased 10 percent from 2016 for the domestic market and 5.7 percent for Japan export logs. In the According to the U.S. Census Bureau, housing starts in 2017 South, log supplies increased consistent with increased totaled 1.2 million units. Single family units accounted for demand, leaving prices flat to slightly down year-over-year. 0.8 million of total housing starts year to date, increasing the According to TimberMart — South, prices for delivered share of single family units to 71 percent of total housing sawtimber and stumpage were down 2.6 percent and starts compared with 67 percent in 2016. While total housing 4.6 percent respectively. start growth slowed in 2017, rising by a modest 2.4 percent overall, there has been a shift in construction away from Log inventories in Chinese ports have been stable through multifamily units, which are down 10 percent year over year, to 2017, ranging from 1.0 million to 1.5 million cubic meters (M3) single family units, which have increased 9 percent over the per month as reported by International Wood Markets China same period. This shift to the more wood intensive single family Bulletin. Log and lumber demand in China remain strong, construction has been positive for wood products demand. We primarily due to the strength of construction activity. Total continue to expect improving U.S. housing starts and anticipate imports of logs and lumber increased 13 percent and a 4 percent to 10 percent increase in total starts in 2018. 20 percent, respectively, for the first 11 months of 2017 Consensus forecasts place expected total housing starts compared on a year ago basis. In Japan, post and beam between 1.25 and 1.31 million units for 2018 (sources include housing starts (the primary source of log demand) for January National Association of Home Builders (NAHB), Fannie Mae, through November 2017 are up 1.0 percent from the same Mortgage Bankers Association, The Engineered Wood period last year while total housing starts are down 0.1 percent Association (APA), and Forest Economic Advisors, LLC (FEA)). on a year ago basis. Demand for homes remains strong relative to inventories. U.S.
34 We expect demand from China and Japan in 2018 to be similar Energy markets recovered steadily in 2017. For the year, Brent to modestly improved from demand experienced in 2017. crude oil averaged $54 per barrel in 2017, an increase of $10 per barrel from 2016 levels. Prices increased fairly steadily Our Real Estate, Energy and Natural Resources segment is through the second half of the year, with year-end prices higher affected by the health of the U.S. economy and especially the than the annual average. Natural gas prices were also higher in U.S. housing sector of the economy. According to the Realtors 2017 averaging $2.99 per million British thermal units (MMBtu) Land Institute of the National Association of Realtors, the dollar a 19 percent increase over 2016. Expectations are for energy volume of rural properties, including timber, sold in 2017 grew prices to be stable to gradually increasing in 2018. 4 percent over 2016 sales while per acre prices were up 3 percent on average.
FINANCIAL PERFORMANCE SUMMARY
Net Sales by Segment
NET SALES BY SEGMENT IN MILLIONS OF DOLLARS
$4,974 $5,000 $4,334 $4,000 $3,872
$3,000
$2,000 $1,805 $1,942 $1,273 $1,000 $101$101 $226 $280 $0
TIMBERLANDS REAL ESTATE & ENR WOOD PRODUCTS
2015 2016 2017
Contribution to Earnings by Segment
CONTRIBUTION TO EARNINGS BY SEGMENT IN MILLIONS OF DOLLARS
600 $569 $532 $499 $512 $470 450
300 $258
150 $146 $79 $55
0
TIMBERLANDS REAL ESTATE & ENR WOOD PRODUCTS
20152016 2017
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 35 SOFTWOOD LUMBER AGREEMENT entries occurring after the expiration of the provisional measures period, until and through the day preceding the day We operate a total of 19 softwood lumber mills with a total of publication of the USITC’s final injury determinations in the capacity of 4.9 billion board feet. Three of these mills, located Federal Register (AD suspension date was December 26, in Canada, produce approximately 900 million board feet 2017 — January 2, 2018). annually, and sell products in Canada, Asia, and the U.S. For retroactive imposition of CVD and AD duties to apply On April 24, 2017, the U.S. Department of Commerce 90 days prior to the dates of publication of the preliminary announced a preliminary determination that it would implement determinations, both the USITC and DOC must make a positive countervailing duties on Canadian softwood lumber shipments determination. The USITC made a negative determination to the U.S. The rate applicable to Weyerhaeuser was regarding critical circumstances on December 7, 2017. As a 19.88 percent and became effective as of April 28, 2017. The result, we reversed the accrual for the retroactive duties for U.S. Department of Commerce also announced that retroactive both CVD and AD, which totaled $9 million. Additionally, we deposits at the 19.88 percent rate would be collected from reduced our accrual by $2 million related to reduced rate certain Canadian lumber producers, including Weyerhaeuser, applicable to prospective period duties. As of December 31, for softwood lumber shipments from Canada to the U.S. during 2017, we have expensed CVD and AD duties at the final the 90-day period prior to April 28, 2017. published rates totaling $7 million. The preliminary countervailing duties were suspended on August 26, 2017, at which time we effectively stopped accruing for the expense. The suspension of the countervailing duties was set to last until the US International Trade Commission reaches its final determination of injury, which was issued December 28, 2017. On June 26, 2017, the U.S. Department of Commerce announced a preliminary determination that it would implement anti-dumping duties on Canadian softwood lumber shipments to the U.S. The rate applicable to Weyerhaeuser was 6.87 percent and became effective as of June 30, 2017. The U.S. Department of Commerce also announced that retroactive deposits at the 6.87 percent rate would be collected from certain Canadian lumber producers, including Weyerhaeuser, for softwood lumber shipments from Canada to the U.S. during the 90-day period prior to June 30, 2017. Based on affirmative final determinations by the Department of Commerce (DOC) and the US International Trade Commission (USITC) on December 28, 2017, the DOC issued countervailing duty (CVD) and anti-dumping (AD) duty orders on certain softwood lumber products from Canada. The CVD rate applicable to Weyerhaeuser is 14.19 percent and will be assessed on entries of softwood lumber from Canada for consumption on or after April 28, 2017, the date of publication of the preliminary determination. It will not include entries occurring after the expiration of the provisional measures period and before publication of the ITC’s final injury determination (CVD suspension date was August 26, 2017 — December 27, 2017). The AD rate applicable to Weyerhaeuser is 6.04 percent and will be assessed on entries of softwood lumber from Canada for consumption on or after June 30, 2017, the date of publication of the preliminary determination. It will not include
36 RESULTS OF OPERATIONS COMPARING 2017 WITH 2016
In reviewing our results of operations, it is important to Net Sales understand these terms: Net sales increased $831 million — 13 percent — primarily •Sales realizations refer to net selling prices — this includes due to: selling price plus freight minus normal sales deductions. •Wood Products segment Net sales to unaffiliated customers •Net contribution to earnings refers to earnings (loss) increased $640 million, primarily attributable to increased attributable to Weyerhaeuser shareholders before interest sales realizations across all product lines, as well as expense and income taxes. increased sales volumes within our oriented strand board, Our merger with Plum Creek during first quarter 2016 engineered I-joists, medium density fiberboard, and our significantly affected the comparability of our consolidated engineered solid section product lines. Additionally, upon operating results between 2016 and prior periods. As a result completion of the sales of our former Cellulose Fibers of progress made to integrate financial processes and systems businesses, chips previously sold to Cellulose Fibers are now since the merger date, the results beginning on February 19, sales to unaffiliated customers. Refer to Note 3: 2016, from acquired Plum Creek operations and the respective Discontinued Operations and Other Divestitures in the Notes impacts of these results on our current period results are to Consolidated Financial Statements for further details impracticable to disclose in the year-to-date period ended regarding these divestitures. December 31, 2016. Our prior period results do not include •Timberlands segment Net sales to unaffiliated customers pre-merger results of Plum Creek operations. increased $137 million, which is primarily attributable to increased Southern and Other (includes our Canadian CONSOLIDATED RESULTS operations and timberlands included in the Twin Creeks Venture) delivered log sales volumes, as well as, an increase HOW WE DID IN 2017 in Western log sales prices. Summary of Financial Results •Real Estate & ENR segment Net sales to unaffiliated customers increased $54 million attributable to an increase DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES in timberlands acres sold in Real Estate and an increase in AMOUNT OF CHANGE royalties. 2017 2016 2015 2017 2016 vs. vs. 2016 2015 Costs of Products Sold Net sales $7,196 $6,365 $5,246 $ 831 $1,119 Costs of products sold increased $318 million — 6 percent — Costs of products $5,298 $4,980 $4,153 $ 318 $ 827 primarily due to: sold Operating income $1,131 $ 822 $ 644 $ 309 $ 178 •Wood Products segment Costs of products sold increased Earnings from $ — $ 612 $ 95 $ (612) $ 517 $192 million primarily attributable to an overall increase in discontinued sales volumes, as discussed above. This increase was offset operations, net of tax by the mix of products sold during 2017 compared to 2016. Net earnings $ 582 $1,005 $ 462 $ (423) $ 543 Intercompany eliminations decreased $144 million, therefore attributable to • Weyerhaeuser increasing our consolidated Cost of products sold. This common reduction in intercompany costs of products sold is primarily shareholders due to the completion of the divestitures of our former Basic earnings per $ 0.77 $ 1.40 $ 0.89 $(0.63) $ 0.51 share attributable to Cellulose Fibers businesses. Prior to the completion of these Weyerhaeuser divestitures the sales and related cost of products sold for common shareholders chips and logs sold to our Cellulose Fibers businesses were considered intercompany and therefore were not included in Diluted earnings per $ 0.77 $ 1.39 $ 0.89 $(0.62) $ 0.50 share attributable to our consolidated results. However, subsequent to the Weyerhaeuser divestitures these sales and the related cost of products sold common shareholders are considered sales to unaffiliated customers and therefore included in our consolidated results. These increases were partially offset by a decrease in Real Estate and ENR costs of $24 million, primarily attributable to the mix in properties sold in 2017 compared to 2016.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 37 Operating Income benefits (costs) credits” due to a decrease in the expected return on our plan assets as well as an increase in the Operating income increased $309 million — 38 percent — amortization of actuarial losses. primarily due to: Earnings from discontinued operations, net of tax, decreased an increase in consolidated gross margin of $513 million, as • $612 million — 100 percent — as all discontinued operations described above; were sold in 2016. •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 COMPARING 2016 WITH 2015 result of the sale of land in our Southern timberlands Net Sales region to Twin Creeks (refer to Note 8: Related Parties in the Notes to Consolidated Financial Statements for further Net sales increased $1,119 million — 21 percent — primarily details); due to the following developments: – a $42 million benefit related to environmental remediation Timberlands segment sales increased $532 million primarily insurance recoveries received in 2017; and • due to sales from acquired Plum Creek operations. This – a $44 million decrease in gains on disposition of increase was partially offset by lower average sales nonstrategic assets, primarily attributable to a $36 million realizations. The decrease in average sales realizations is pretax gain recognized in the first quarter of 2016 on the primarily attributable to the increase in sales volume for the sale of our Federal Way, Washington headquarters campus South, which has lower average sales realizations compared (refer to Note 19: Other Operating Costs (Income) in the to the West. The South comprised 31 percent of Notes to Consolidated Financial Statements for further Timberlands’ sales to unaffiliated customers in 2016 information). compared to 19 percent in 2015. These increases were partially offset by the following: •Real Estate & ENR segment sales increased $125 million attributable to increased volume of timberland acres sold and the addition of $290 million in “Charges for product • increased ENR sales volume attributable to the operations remediation” in 2017, as there were no similar charges acquired in our merger with Plum Creek. These increases during 2016. Refer to Note 18: Charges for Product were partially offset by a decrease in average price realized Remediation in the Notes to Consolidated Financial per acre due to geographic mix of properties sold. Statements for further information. Wood Products segment sales increased $462 million due to a $24 million increase in “Charges for integration and • • increased medium density fiberboard and plywood sales restructuring, closures and asset impairments,” which is generated from our operations acquired from our merger with primarily attributable to a $147 million noncash impairment Plum Creek and increased oriented strand board and lumber charge recognized during second quarter 2017 in relation to average sales realizations. the divestiture of our Uruguayan operations. This was partially offset by a $112 million decrease in charges related Costs of Products Sold to our merger with Plum Creek. Refer to Note 17: Charges for integration and restructurings, closures, and asset Costs of products sold increased $827 million — 20 percent — impairments in the Notes to Consolidated Financial primarily attributable to the following developments: Statements for further details regarding the impairment as Timberlands costs of products sold increased $488 million well as the Plum Creek merger related costs. • due to increased sales volume as explained above and to higher depletion rates in the South and West for acquired Net Earnings Attributable to Weyerhaeuser Common Plum Creek timberlands, which were measured at fair value Shareholders as of the merger date. Our Net earnings attributable to Weyerhaeuser common •Real Estate & ENR costs of products sold increased shareholders decreased $423 million — 42 percent — $114 million attributable to increased real estate and ENR compared to 2016. Excluding “Earnings from discontinued sales volume and higher basis of real estate sold, which is a operations, net of tax,” Net earnings attributable to result of measuring acquired Plum Creek properties at fair Weyerhaeuser common shareholders increased $189 million — value as of the February 19, 2016 merger date. 48 percent — primarily due to the increase in Operating •Wood Products costs of products sold increased income, as explained above. The increases in Operating income $201 million primarily attributable to increased sales volume were partially offset by a $110 million increase in expense as explained above. This increase was partially offset by related to “Non-operating pension and other postretirement lower log costs and lower manufacturing costs per unit.
38 Operating Income •increased charges for restructuring, closures and asset impairments and transaction-related costs related to our strategic Operating income increased $178 million — 28 percent — evaluation and divestiture of the Cellulose Fibers businesses. primarily due to:
an increase to company-wide gross margin of $292 million as • TIMBERLANDS described above; •a favorable shift in gain on foreign currency HOW WE DID IN 2017 remeasurement — $52 million; and We report sales volume and annual production data for our •a gain on the sale of our Federal Way headquarters Timberlands segment in Our Business/What We Do/Timberlands. campus — $36 million. Net Sales and Net Contribution to Earnings for Timberlands These increases were partially offset by: DOLLAR AMOUNTS IN MILLIONS •a $131 million increase in charges for integration and AMOUNT OF CHANGE restructuring, closures and asset impairments, primarily 2017 2016 2015 2017 2016 attributable to incurring $146 million of costs related to our vs. vs. 2016 2015 merger with Plum Creek in 2016 compared to $14 million in Net sales to unaffiliated 2015; and customers: •a $76 million increase in selling, general and administrative Delivered logs(1): expenses primarily attributable to merging legacy West $ 915 $ 865 $ 830 $ 50 $ 35 Weyerhaeuser and Plum Creek operations. South 616 566 241 50 325
North 95 91 — 4 91 Net Earnings Attributable to Weyerhaeuser Common Other 59 38 24 21 14 Shareholders Total 1,685 1,560 1,095 125 465
Our net earnings attributable to Weyerhaeuser common Stumpage and pay-as-cut 73 85 37 (12) 48 shareholders increased $543 million — 118 percent — timber compared to 2015. Earnings from continuing operations before Uruguay operations(2) 63 79 87 (16) (8) Recreational and other lease 59 44 25 15 19 income taxes increased $151 million — 43 percent — due to revenue variances in net sales, costs of products sold and operating Other products(3) 62 37 29 25 8 income explained above. The increase was offset by a Subtotal sales to unaffiliated 1,942 1,805 1,273 137 532 $147 million increase to income taxes from continuing customers operations resulting from increased taxable earnings generated Intersegment sales: by our TRSs. United States 520 590 559 (70) 31 Earnings from discontinued operations, net of tax, increased Other 242 250 271 (8) (21) $517 million — 544 percent — primarily due to: Subtotal intersegment sales 762 840 830 (78) 10 Total $2,704 $2,645 $2,103 $ 59 $542 •the after-tax gains recognized from divesting our Cellulose Costs of products sold $2,043 $2,054 $1,566 $ (11) $488 Fibers business in 2016 — $546 million; Operating income and Net $ 532 $ 499 $ 470 $ 33 $ 29 •a decrease in the equity loss from our printing papers joint contribution to earnings (1) The Western region includes Oregon and Washington. The Southern region includes venture — $101 million — primarily attributable to an Alabama, Arkansas, Georgia, Florida, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Texas and Virginia. The Northern region includes Maine, Michigan, $84 million noncash asset impairment recorded in fourth Montana, New Hampshire, Vermont, West Virginia and Wisconsin. Other includes our Canadian operations and the timberlands of the Twin Creeks Venture that we managed. quarter 2015; and (Our management agreement for the Twin Creeks Venture began in April 2016 and lower costs of products sold, primarily due to lower sales terminated in December 2017. For additional information see Note 8: Related Parties in • Notes to Consolidated Financial Statements.) volumes and the cessation of depreciation when Cellulose (2) Sales from our former Uruguayan operations included plywood and hardwood lumber. Our Uruguayan operations were divested on September 1, 2017. Refer to Note 3: Fibers manufacturing assets were classified as held-for-sale Discontinued Operations and Other Divestitures in the Notes to Consolidated Financial Statements for further information on this divestiture. in second quarter 2016. (3) Other products sales include sales of seeds and seedlings from our nursery operations and chips. These increases were partially offset by: •lower average sales realizations for pulp and liquid packaging board; •lower sales volume for pulp and liquid packaging board attributable to a partial year of operations in 2016 compared to a full year in 2015; and
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 39 COMPARING 2017 WITH 2016 Operating Income and Net Contribution to Earnings Net Sales — Unaffiliated Customers Net contribution to earnings increased $33 million — 7 percent — primarily due to: Net sales to unaffiliated customers increased $137 million — 8 percent — primarily due to: •a $99 million gain recorded in fourth quarter 2017 as a result of the sale of land in our Southern timberlands region a $50 million increase in Southern log sales attributable to • to Twin Creeks (refer to Note 8: Related Parties in the Notes 12 percent increase in delivered logs sales volumes, partially to Consolidated Financial Statements for further details), and offset by a 3 percent decrease in Southern log prices; a $70 million increase in gross margin, as explained above. •a $50 million increase in Western log sales attributable to a • 12 percent increase in Western log prices, partially offset by These increases were partially offset by a $147 million a 6 percent decrease in delivered logs sales volumes; noncash impairment charge recognized in relation to the •a $25 million increase in Other products, primarily divestiture of our Uruguayan operations. Refer to Note 17: attributable to increased chips sales to unaffiliated Charges for integration and restructuring, closures, and asset customers (prior to our 2016 divestitures of our Cellulose impairments in the Notes to Consolidated Financial Statements Fibers businesses, chips sales were primarily intersegment for further details of this impairment. sales); and a $21 million increase in Other delivered logs, primarily due • COMPARING 2016 WITH 2015 to a 55 percent increase in delivered logs sales volumes. Compared to 2015, the changes to the results of operations for These increases were partially offset by a $16 million decrease our Timberlands segment during 2016 are primarily attributable in our Uruguayan operations, primarily attributable to the to the addition of approximately 6.3 million acres of Plum Creek divestiture that occurred during third quarter 2017. Refer to timberlands, which produced over 18 million tons of harvest Note 3: Discontinued Operations and Other Divestitures in the volume in 2015. The merger resulted in the expansion of our Notes to Consolidated Financial Statements. Southern timberlands from 4.0 million acres to 7.4 million acres — an 85 percent increase — and our Western Intersegment Sales timberlands from 2.6 to 3.0 million acres — a 15 percent Intersegment sales decreased $78 million — 9 percent — due increase. The merger also added 2.5 million acres across to a decrease in chip and log intersegment sales, which were Maine, Michigan, Montana, New Hampshire, Vermont, West previously sold to our former Cellulose Fibers business Virginia and Wisconsin, which we refer to collectively as our segment. The businesses within this segment were divested Northern timberlands. Increases to sales volume are primarily during the second half of 2016. Refer to Note 3: Discontinued attributable to the significant increases in the overall size of Operations and Other Divestitures in the Notes to Consolidated and harvests from our timberlands holdings by region, Financial Statements for further information on these particularly in the South and North regions. divestitures. The composition of our sales volume by region was also altered by the merger, as the South and North regions, which Costs of Products Sold historically had lower average sales realizations compared to Costs of products sold decreased $11 million — 1 percent — the West, comprise a greater portion of our overall sales primarily due to: subsequent to the merger. Additionally, within the South the acquired timberlands altered the overall sales mix, as lower a $23 million decrease due to the divestiture of our • realization pulpwood sales increased and higher realization Uruguayan operations in third quarter 2017. Refer to Note 3: grade logs decreased as a percentage of total sales volume, Discontinued Operations and Other Divestitures in the Notes resulting in lower average sales realizations overall for the to Consolidated Financial Statements for further details. region in 2016 compared with 2015. •a $16 million decrease in the West, attributable to a decrease in delivered logs sales volumes. As a result of applying acquisition accounting to our Timber and timberland assets acquired as described in Note 4: Merger with These decreases were partially offset by a $19 million increase Plum Creek in Notes to Consolidated Financial Statements, in Canada primarily attributable to an increase in delivered logs depletion rates increased significantly in 2016 compared to sales volumes. 2015. When combined with increased sales volume, these higher depletion rates drove significant increases in our costs of products sold in 2016 compared to 2015.
40 Net Sales — Unaffiliated Customers REAL ESTATE, ENERGY AND NATURAL RESOURCES Net sales to unaffiliated customers increased $532 million — HOW WE DID IN 2017 42 percent — primarily due to: We report acres sold and average price per acre for our Real •a $325 million increase in Southern log sales as a result of a Estate, Energy and Natural Resources segment in Our 146 percent increase in delivered logs sales volume primarily Business/What We Do/Real Estate, Energy and Natural attributable to adding acquired Plum Creek operations, partially Resources. offset by a 5 percent decrease in average sales realizations of Net Sales and Net Contribution to Earnings for Real Estate, delivered logs due to mix of sawlogs and pulp logs; Energy and Natural Resources •a $91 million increase in Northern log sales attributable entirely to operations acquired upon our merger with Plum DOLLAR AMOUNTS IN MILLIONS Creek; and AMOUNT OF CHANGE a $35 million increase in Western log sales as a result of a 2017 2016 2015 2017 2016 • vs. vs. 6 percent increase in delivered logs sales volume attributable 2016 2015 to adding acquired Plum Creek operations, partially offset by Net sales to a 2 percent decrease in average sales realizations for unaffiliated buyers: delivered logs; Real estate $208 $172 $ 75 $ 36 $ 97 •a $48 million increase in stumpage and pay-as-cut timber, Energy and 72 54 26 18 28 which is primarily attributable to adding stumpage sales from natural resources acquired Plum Creek timberlands in the South; and Subtotal sales to 280 226 101 54 125 •a $19 million increase in recreational and other lease unaffiliated buyers revenue due entirely to the acquired Plum Creek leases. Intersegment sales 1 1 — — 1 Total $281 $227 $101 $ 54 $126 Intersegment Sales Cost of products sold $110 $134 $ 20 $(24) $114 Intersegment sales increased $10 million — 1 percent — due Operating income $145 $ 53 $ 79 $ 92 $ (26) to a $31 million increase in intersegment sales in the United Equity earnings 1 2 — (1) 2 States. This increase is attributable to adding intersegment log (loss) from joint sales volume for the Montana operations acquired from Plum venture Creek. This increase was partially offset by a decrease in Net contribution to $146 $ 55 $ 79 $ 91 $ (24) earnings average intersegment sales realizations. The increase in the United States intersegment sales was The timing of real estate sales is a function of many factors, partially offset by a $21 million decrease in intersegment sales including: in Canada. This decrease is attributable to lower log and chip •the general state of the economy, sales volume to our former Cellulose Fibers segment as a •demand in local real estate markets, result of divesting from our pulp mill in Grande Prairie, Alberta. •the ability to obtain entitlements, There was also a slight decrease in average intersegment sales •the ability of buyers to obtain financing, realizations compared to 2015. •the number of competing properties listed for sale, the seasonal nature of sales (particularly in the northern Costs of Products Sold • states), Costs of products sold increased $488 million — 31 percent — •the plans of adjacent landowners, primarily due to a 78 percent increase in sales volume •our expectations of future price appreciation, attributable to the operations acquired in our merger with Plum •the timing of harvesting activities, and Creek. Additionally, per unit costs increased due to higher •the availability of government and not-for-profit funding depletion rates in the South and West attributable to acquired (especially for conservation sales). Plum Creek timberlands, which were measured at fair value as In any period, the average sales price per acre will vary based of the merger date. on the location and physical characteristics of parcels sold. Operating Income and Net Contribution to Earnings Net contribution to earnings increased $29 million — 6 percent — primarily attributable to the changes in net sales and costs of products sold as explained above.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 41 COMPARING 2017 WITH 2016 Costs of Products Sold Net Sales — Unaffiliated Buyers Costs of products sold increased $114 million — 570 percent — due primarily to: Net sales to unaffiliated buyers increased $54 million — 24 percent — primarily due to: •increased real estate and ENR sales volume, as explained above; a $36 million increase in Net real estate sales primarily • higher basis of real estate sold resulting from measuring attributable to an 18 percent increase in volume of • acquired Plum Creek properties at fair value as of the timberlands acres sold. February 19, 2016, merger date; and an $18 million increase in Net energy and natural resources • an $11 million increase in commissions and closing costs sales primarily attributable to the increased operations • that corresponds with the increased volume of transactions. 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 Net Contribution to Earnings operations in 2016. The increase is further attributable to Net contribution to earnings decreased $24 million — increases in royalties. 30 percent — primarily attributable to increased general and administrative expenses of $20 million. The increase in general Costs of Products Sold and administrative expenses is the result of creating a standalone Costs of products sold decreased $24 million — 18 percent — business segment separate from Timberlands and dedicating primarily due to the mix of properties sold in 2017 compared to more staff to the expanded land and natural resource footprint. 2016. WOOD PRODUCTS Net Contribution to Earnings HOW WE DID IN 2017 Net contribution to earnings increased $91 million — 165 percent — primarily due to increased gross margin We report sales volume and annual production data for our Wood discussed above. Additionally, our 2016 results include a Products segment in Our Business/What We Do/Wood Products. $15 million asset impairment charge recorded for development Net Sales and Net Contribution to Earnings for Wood Products projects. No comparable impairment charges were recorded within this segment during 2017. DOLLAR AMOUNTS IN MILLIONS AMOUNT OF CHANGE 2017 2016 2015 2017 2016 COMPARING 2016 WITH 2015 vs. vs. 2016 2015 Land acquired as a result of our merger with Plum Creek generally carried a higher per acre cost basis compared to our Net sales: other acreage as a result of measuring acquired land at fair Structural lumber $2,058 $1,839 $1,741 $219 $ 98 value via acquisition accounting as of the February 19, 2016, Engineered solid 500 450 428 50 22 merger date. As a result, our costs of timberlands varied section period-to-period based on the sales mix between acquired Plum Engineered I-joists 336 290 284 46 6 Creek acreage and acreage owned by Weyerhaeuser prior to the Oriented strand 904 707 595 197 112 merger. board Softwood plywood 176 174 129 2 45 Net Sales — Unaffiliated Buyers Medium density 183 158 — 25 158 fiberboard Net sales to unaffiliated buyers increased $125 million — Other products 276 201 189 75 12 124 percent — attributable to the following developments: produced (1) Net real estate sales increased $97 million attributable to Complementary 541 515 506 26 9 • building products increases in volume of timberlands acres sold. This increase was partially offset by a decrease in average price realized Total $4,974 $4,334 $3,872 $640 $462 per acre due to mix of properties sold. Costs of products sold $3,880 $3,688 $3,487 $192 $201 •Net energy and natural resources sales increased Operating income and $ 569 $ 512 $ 258 $ 57 $254 $28 million due primarily to increased sales volumes Net contribution to earnings attributable to the operations acquired with our merger with (1) Includes wood chips and other byproducts. Plum Creek.
42 COMPARING 2017 WITH 2016 of our former Cellulose Fibers business, which occurred in the second half of 2016, chips sold to these businesses Net Sales were considered intersegment sales. Upon completion of Net sales increased $640 million — 15 percent — primarily these divestitures, chips sold to our former Cellulose Fibers due to: businesses were considered sales to unaffiliated customers. A $7 million increase in “Other operating costs, net,” related a $219 million increase in structural lumber sales, • • to countervailing and anti-dumping duties. Refer to Softwood attributable to a 13 percent increase in average sales Lumber Agreement for further information regarding these realizations, partially offset by a 1 percent decrease in sales regulations. volumes; A $6 million impairment on nonstrategic assets recognized a $197 million increase in oriented strand board sales, • • during third quarter 2017. Refer to Note 17: Charges for attributable to a 26 percent increase in average sales Integration and Restructuring, Closures and Asset realizations as well as a 1 percent increase in sales Impairments in the Notes to Consolidated Financial volumes; Statements for further detail. •a $75 million increase in other products produced, primarily attributable to increased chip sales. Chips were previously COMPARING 2016 WITH 2015 sold to our former Cellulose Fibers segment and were therefore considered intersegment sales until the sale of our Upon our merger with Plum Creek, we acquired five Cellulose Fibers businesses which occurred in the second manufacturing facilities in Montana. The sales and net half of 2016. Upon completion of these divestitures, chips contribution to earnings of these facilities as of the merger date sold to those businesses were considered sales to are included in the results of our Wood Products segment. The unaffiliated customers. (Refer to Note 3: Discontinued results of the plywood facilities are reported in softwood Operations and Other Divestitures in the Notes to plywood and the lumber facilities are reported in structural Consolidated Financial Statements for further details lumber. regarding these divestitures.); The Medium Density Fiberboard (MDF) facility supplies high- •a $50 million increase in engineered solid section, primarily quality MDF to a wide range of customers throughout North attributable to an 8 percent increase in sales volumes as America. Some of the more common uses for our MDF include well as a 3 percent increase in average sales realizations; furniture and cabinet components, architectural moldings, and doors, store fixtures, core material for hardwood plywood, face •a $46 million increase in engineered I-joists, primarily material for softwood plywood, commercial wall paneling and attributable to a 13 percent increase in sales volume as well substrate for laminate flooring. as a 3 percent increase in average sales realizations. We permanently closed two of the five acquired Plum Creek mills, the lumber facility and softwood plywood facility in Costs of Products Sold Columbia Falls, Montana, during third quarter 2016. The Costs of products sold increased $192 million — 5 percent — closure of these facilities allows us to align the available log primarily attributable to an overall increase in sales volumes, supply with our manufacturing capacity, including adding shifts as discussed above. This increase was offset by the mix of at our Kalispell, Montana facilities, to position our Montana products sold during 2017 compared to 2016. operations for long-term success. Refer to Note 4: Merger with Plum Creek in Notes to Operating Income and Net Contribution to Earnings Consolidated Financial Statements for further information Operating income and Net contribution to earnings increased regarding our merger with Plum Creek. $57 million — 11 percent — primarily due to increased gross margin, as discussed above. This was partially offset by: Net Sales Net sales increased $462 million — 12 percent — primarily The $290 million addition of “Charges for product • due to: remediation” in 2017, as there were no similar charges during 2016 (refer to Note 18: Charges for Product •a $158 million increase in medium density fiberboard sales Remediation in the Notes to Consolidated Financial generated from operations acquired in our merger with Plum Statements for further information); Creek; •A $68 million decrease in intersegment sales in 2017 •a $112 million increase in oriented strand board sales, compared to 2016, which is primarily attributable to attributable primarily to a 21 percent increase in average decreased intersegment chip sales. Prior to our divestitures sales realizations;
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 43 •a $98 million increase in lumber sales, attributable to a Net Contribution to Earnings for Unallocated Items 3 percent increase in average sales realizations and a DOLLAR AMOUNTS IN MILLIONS 3 percent increase in sales volume; and AMOUNT OF CHANGE a $45 million increase in plywood sales, attributable to a • 2017 2016 2015 2017 2016 9 percent increase in average sales realizations and a vs. vs. 26 percent increase in sales volume, with the volume 2016 2015 increase due in part to acquired Plum Creek operations. Unallocated corporate $ (73) $ (87) $ (64) $ 14 $ (23) function expenses
Unallocated share- (9) (3) 6 (6) (9) Costs of Products Sold based compensation Unallocated pension (4) (5) (3) 1 (2) Costs of products sold increased $201 million — 6 percent — service costs primarily due to increased sales volume across most product Foreign exchange 1 6 (46) (5) 52 lines and from added volumes produced and sold by the gains (losses) manufacturing operations acquired from our merger with Plum Elimination of (20) (18) 8 (2) (26) Creek. This increase is partially offset by lower log costs and intersegment profit in inventory and LIFO lower manufacturing costs per unit. Gain (loss) from sales 9 50 6 (41) 44 of nonstrategic assets Operating Income and Net Contribution to Earnings Charges for integration Net contribution to earnings increased $254 million — and restructuring, closures and asset 98 percent — primarily attributable to the changes in net sales impairments: and costs of products sold, as explained above. Plum Creek (34) (146) (14) 112 (132) merger-and integration-related UNALLOCATED ITEMS costs Other — (2) (15) 2 13 Unallocated Items are gains or charges from continuing restructuring, operations not related to or allocated to an individual operating closures, and asset segment. They include a portion of items such as: share-based impairments compensation, pension and postretirement costs, foreign Other 15 (37) (41) 52 4 exchange transaction gains and losses associated with Operating income $(115) $(242) $(163) $ 127 $ (79) financing, and the elimination of intersegment profit in (loss) inventory, equity earnings from our Timberland Venture and the Equity earnings from — 20 — (20) 20 LIFO reserve. As a result of reclassifying our former Cellulose joint venture(1) Fibers segment as discontinued operations, Unallocated Items Non-operating pension (62) 48 14 (110) 34 also includes retained indirect corporate overhead costs and other postretirement benefit previously allocated to the former segment. (costs) credits
Interest income and 39 43 36 (4) 7 other
Net contribution to $(138) $(131) $(113) $ (7) $ (18) earnings (1) 2016 includes equity earnings from our Timberland Venture, which effective August 31, 2016, is consolidated as a wholly-owned subsidiary.
Unallocated Items in 2017 include: •an increase in expense related to “Non-operating pension and other postretirement benefits (costs) credits” 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
44 •decreased charges recognized in 2017 related to our merger AMOUNTS PER SHARE with Plum Creek (refer to Note 17: Charges for Integration 2017 2016 2015 and Restructuring, Closures and Asset Impairments in Notes Preference – capital gain distribution $ — $1.59 $3.19 to Consolidated Financial Statements) — $112 million. Common – capital gain distribution $1.25 $1.24 $1.20 Unallocated Items in 2016 include: The table below summarizes the items of tax preference for •charges recognized in 2016 related to our merger with Plum alternative minimum tax (AMT) purposes which have been Creek (refer to Note 17: Charges for Integration and apportioned to shareholders for the years ended December 31.
Restructuring, Closures and Asset Impairments in Notes to AMOUNTS PER SHARE Consolidated Financial Statements) — $146 million; 2017 2016 2015 an increase in unallocated corporate function expenses • Preference – AMT $ — $0.0120 $— primarily as a result of retaining costs allocated to our former Cellulose Fibers segment — $23 million; and Common – AMT $0.0097 $0.0094 $— a gain related to the sale of our Federal Way, Washington • We are required to pay corporate income taxes on earnings of headquarters campus, which is recorded in “Other operating our TRSs, which includes our Wood Products segment and costs (income), net” in our Consolidated Statement of portions of our Timberlands and Real Estate & ENR segments’ Operations – $36 million. earnings. Our provision for income taxes is primarily driven by Unallocated Items in 2015 include: earnings generated by our TRSs. Overall performance results for our business segments can be found in Results of $13 million noncash impairment charge recognized in first • Operations/Timberlands, Results of Operations/Real Estate, quarter 2015 related to a nonstrategic asset that was sold in Energy and Natural Resources, and Results of Operations/ second quarter 2015 which is recorded in “Charges for Wood Products. integration and restructuring, closures and asset impairments” in our Consolidated Statement of Operations. On December 22, 2017, H.R. 1, commonly known as the Tax See Note 17: Charges for Integration and Restructuring, Cuts and Jobs Act (the “Tax Act”), was enacted. The Tax Act Closures and Asset Impairments in the Notes to contains significant changes to corporate taxation, including the Consolidated Financial Statements for more information. reduction of the corporate tax rate from 35 percent to •$14 million Plum Creek merger-related costs which are 21 percent, increased deductions for capital spending and recorded in “Charges for integration and restructuring, limitations on interest expense deductions. The Tax Act does closures and asset impairments” in our Consolidated not affect our REIT status or the provisions that allow us to pay Statement of Operations. capital gain dividends to our shareholders. As a result of the reduction in the corporate tax rate, we have INTEREST EXPENSE revalued our deferred tax assets and liabilities and have Our net interest expense incurred for the last three years was: recorded a tax expense of $74 million during 2017, which reduced our net deferred tax asset. •$393 million in 2017, •$431 million in 2016 and For 2018, we expect our effective tax rate will be between •$341 million in 2015. 11 percent and 13 percent. The estimated range is based on current assumptions with respect to our earnings and the Tax The primary factor driving the $38 million decrease in interest Act. Our actual effective tax rate in 2018 may differ. The expense in 2017 as compared to 2016 is the decrease in our reduced effective tax rate is expected to result in overall lower average indebtedness throughout the year. tax expense beginning in 2018. INCOME TAXES Our provision (benefit) for income taxes for our continuing operations over the last three years was: As a REIT, we generally are not subject to federal corporate level income taxes on REIT taxable income that is distributed to •$134 million in 2017, shareholders. Historical distributions to shareholders, including •$89 million in 2016 and amounts and tax characteristics, for the years ended •$(58) million in 2015. December 31 are summarized in the table below. During 2017, we recorded a $22 million tax benefit related to the repatriation of Canadian earnings. During 2016, we recorded a $24 million tax charge related to the repatriation of Canadian earnings.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 45 During 2015, we recorded a $13 million tax benefit for the COMPARING 2016 WITH 2015 expiration of the company’s built-in-gains tax period due to a Net cash provided by our continuing and discontinued change in tax law in the fourth quarter 2015. operations decreased $340 million, primarily due to: See also Note 20: Income Taxes in Notes to Consolidated •an increase in cash paid for income taxes of $471 million Financial Statements, which outlines the major components largely due to taxes paid in connection with our Cellulose related to our income tax provision. Fibers businesses; •decreased operating cash flows from discontinued operations of $233 million; LIQUIDITY AND CAPITAL RESOURCES •an increase in cash paid for interest of $99 million corresponding with our increased average indebtedness; and We are committed to maintaining an appropriate capital cash payments made in 2016 related to the Plum Creek structure that enables us to: • merger of $154 million, comprised of: •protect the interests of our shareholders and lenders and – termination benefits — $33 million; •have access to major financial markets. – investment banking and other professional services fees — $52 million; CASH FROM OPERATIONS – settlement of Value Management Awards — $6 million; Consolidated net cash provided by our operations was: – pension and postretirement benefits — $38 million; and – other merger-related costs — $14 million. •$1,201 million in 2017, •$735 million in 2016 (includes continuing and discontinued Pension Contributions and Benefit Payments Made and operations) and Expected $1,075 million in 2015 (includes continuing and • During 2017, we: discontinued operations). •contributed $25 million for our Canadian registered plan in COMPARING 2017 WITH 2016 accordance with minimum funding rules and respective provincial regulations; Net cash provided by our operations increased $466 million, contributed to or made benefit payments for our Canadian primarily due to: • nonregistered pension plans of $2 million; •increased cash flows from business segments of •made benefit payments of $31 million for our U.S. $499 million; nonqualified pension plans; and •a decrease in cash paid for income taxes of $316 million, •made benefit payments of $20 million for our U.S. and which is primarily attributable to taxes paid in connection with Canadian other postretirement plans. our divestitures of our former Cellulose Fibers businesses There was no minimum required contribution for our U.S. during 2016; and qualified plan for 2017, nor were any contributions made to this a decrease in cash paid for interest of $65 million • plan in 2017. corresponding with our decreased average indebtedness during 2017 compared to 2016. During 2018, based on estimated year-end assets and projections of plan liabilities, we expect to: These items were partially offset by: be required to contribute approximately $23 million for our decreased operating cash flows from discontinued operations • • Canadian registered plan; of $196 million; and be required to contribute or make benefit payments for our an increase of $192 million in cash used for product • • Canadian nonregistered plans of $4 million; remediation efforts (refer to Note 18: Charges for Product make benefit payments of $19 million for our U.S. Remediation in the Notes to Consolidated Financial • nonqualified pension plans; and Statements). •make benefit payments of $19 million for our U.S. and Also see Performance Measures for our Adjusted EBITDA by Canadian other postretirement plans. segment. We do not anticipate being required to make a contribution to our U.S. qualified pension plan for 2018.
46 INVESTING IN OUR BUSINESS COMPARING 2016 WITH 2015 Cash from investing activities includes: Net cash from investing activities changed $3.0 billion to an inflow in 2016 as compared with an outflow in 2015, primarily acquisitions of property, equipment, timberlands and • due to: reforestation; •investments in or distribution from equity affiliates; •net proceeds from the divestitures of our Cellulose Fibers •proceeds from sale of assets and operations; and businesses in 2016 — $2.5 billion; •purchases and redemptions of short-term investments. •proceeds received for our contribution of timberlands to the Twin Creeks Venture in 2016 — $440 million; Consolidated net cash provided by (used in) investing activities proceeds from sales of nonstrategic assets — $104 million; was: • and •$367 million in 2017, •distributions received from joint ventures during 2016 — •$2,559 million in 2016 (includes continuing and $46 million. discontinued operations) and Three-Year Summary of Capital Spending by Business •$(487) million in 2015 (includes continuing and discontinued Segment operations). DOLLAR AMOUNTS IN MILLIONS 2017 2016 2015 COMPARING 2017 WITH 2016 Timberlands $115 $116 $ 75 Net cash from investing activities decreased $2.2 Real Estate & ENR 2 1 — billion primarily due to: Wood Products 299 297 287 •a $2.1 billion decrease in net proceeds from the disposition Unallocated Items 3 11 3 of discontinued and other operations, primarily attributable to Discontinued operations — 85 118 the proceeds received from the divestitures of our Cellulose Total $419 $510 $483 Fibers businesses in 2016 — $2.5 billion — compared to the proceeds received for the divestiture of our Uruguayan We expect our net capital expenditures for 2018 to be operations — $403 million (refer to Note 3: Discontinued $420 million, which is comparable to 2017 capital spend. The Operations and Other Divestitures in the Notes to amount we spend on capital expenditures could change due to: Consolidated Financial Statements for further details); future economic conditions, a decrease of $440 million in proceeds received for our • • environmental regulations, contribution of timberlands to Twin Creeks Venture in 2016 • changes in the composition of our business, (refer to Note 8: Related Parties in the Notes to Consolidated • weather and Financial Statements for further details); and • timing of equipment purchases. •a decrease of $78 million in proceeds from sales of • nonstrategic assets. FINANCING This activity was partially offset by: Cash from financing activities includes: •$311 million in combined proceeds from the sale of land in our Southern timberlands region to Twin Creeks as well as •issuances and payments of debt, the redemption of our ownership interest in Twin Creeks, •borrowings and payments under revolving lines of credit, both of which occurred during fourth quarter 2017 (refer to •proceeds from stock offerings and option exercises and Note 8: Related Parties in the Notes to Consolidated •payments for cash dividends and repurchasing stock. Financial Statements for further details); Consolidated net cash used in financing activities was: •a $91 million decrease in capital expenditures primarily attributable to the divestiture of our Cellulose Fibers •$1,420 million in 2017, business in 2016. •$3,630 million in 2016 (includes continuing and discontinued operations) and •$1,156 million in 2015 (includes continuing and discontinued operations).
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 47 COMPARING 2017 WITH 2016 We have $62 million of long-term debt scheduled to mature during first quarter 2018. Net cash used in financing activities decreased $2,210 million in 2017, primarily due to the following: See Note 12: Long-Term Debt in the Notes to Consolidated Financial Statements for more information about the long-term a decrease of $2,003 million related to cash used to • debt discussed above. repurchase common shares during 2016; and •a decrease of $1,592 million in cash used for payments on Refer to Note 8: Related Parties in the Notes to Consolidated long-term debt. Financial Statements for information regarding the nonrecourse debt held by our Variable Interest Entities (VIEs). This activity was partially offset by a $1,473 million decrease in cash received from the issuance of new long-term debt. 2016 TERM LOAN PAYMENT AND EXTINGUISHMENT COMPARING 2016 WITH 2015 During February 2016, and subsequent to completion of the Plum Creek merger, we entered into a $600 million 18-month Net cash used in financing activities increased $2,474 million senior unsecured term loan maturing in August 2017. in 2016, primarily due to: Borrowings were at LIBOR plus 1.05 percent. The $600 million •a $1,485 million increase in repurchase shares; outstanding under this facility was repaid in full and terminated •payment of $720 million of the debt assumed in our merger during fourth quarter 2016. with Plum Creek on the merger date; and During March 2016, we entered into a $1.9 billion 18-month a $313 million increase in dividends paid to common • senior unsecured term loan maturing in September 2017. shareholders. Borrowings were at LIBOR plus 1.05 percent. The remaining $1.1 billion outstanding under this facility was repaid in full and LONG-TERM DEBT terminated during fourth quarter 2016. Our consolidated long-term debt (including current portion) was: REVOLVING CREDIT FACILITIES •$6.0 billion as of December 31, 2017, •$6.6 billion as of December 31, 2016, and During March 2017, we entered into a new $1.5 billion five-year •$4.8 billion as of December 31, 2015. senior unsecured revolving credit facility that expires in March The decrease in our long-term debt during 2017 is attributable to the 2022. This replaced a $1 billion senior unsecured revolving following activity: credit facility that was set to expire September 2018. The entire amount is available to Weyerhaeuser Company. We prepaid a $550 million variable-rate term loan during July • Borrowings are at LIBOR plus a spread or at other interest rates 2017, which was originally set to mature in 2020 (2020 term mutually agreed upon between the borrower and the lending loan). The 2020 term loan was prepaid using available cash banks. As of December 31, 2017 and December 31, 2016, of $325 million as well as borrowing proceeds from a new there were no borrowings outstanding under the facility and we $225 million variable-rate term loan set to mature in 2026. were in compliance with the credit facility covenants. •We paid our $281 million 6.95 percent debenture during August 2017. Debt covenants: The increase in our long-term debt during 2016 is attributable As of December 31, 2017, Weyerhaeuser Company: to the following activity: had no borrowings outstanding under our credit facility and We assumed $3.4 billion of long-term debt during our merger • • was in compliance with the credit facility covenants. with Plum Creek. Immediately following the merger, we paid • $720 million of the debt assumed. (Refer to Note 4: Merger Weyerhaeuser Company Covenants: with Plum Creek in Notes to Consolidated Financial Statements for further information about our merger). Key covenants related to Weyerhaeuser Company include the •As part of our Cellulose Fibers Pulp business divestiture, requirement to maintain: $88 million of long-term debt was assumed by International a minimum total adjusted shareholders’ equity of Paper. (Refer to Note 3: Discontinued Operations and Other • $3.0 billion; and Divestitures in Notes to Consolidated Financial Statements a defined funded debt ratio of 65 percent or less. for further information about our Cellulose Fibers • divestitures).
48 Weyerhaeuser Company’s total adjusted shareholders’ equity is OPTION EXERCISES comprised of: Our cash proceeds from the exercise of stock options were: total Weyerhaeuser shareholders’ equity, • $128 million in 2017, excluding accumulated comprehensive income (loss), • • $61 million in 2016 and minus Weyerhaeuser Company’s investment in our • • $34 million in 2015. unrestricted subsidiaries. • Our average stock price was $33.61, $30.01 and $31.67 in Total Weyerhaeuser Company capitalization is comprised of: 2017, 2016 and 2015, respectively. •total Weyerhaeuser Company debt •plus total adjusted shareholders’ equity. DIVIDENDS As of December 31, 2017, Weyerhaeuser Company had: We paid cash dividends on common shares of: •a defined total adjusted shareholders’ equity of $10.4 billion •$941 million in 2017, and •$932 million in 2016 and •a defined debt-to-total-capital ratio of 36.65 percent. •$619 million in 2015. Debt agreements that were assumed by Weyerhaeuser in the Changes in the amount of dividends we paid were primarily due merger with Plum Creek were amended to materially conform to: key covenants with the covenants described above. •an increase in our quarterly dividend from 31 cents per share When calculating compliance in accordance with financial debt to 32 cents per share in November 2017; covenants as of December 31, 2016, we excluded the impact •an increase in our quarterly dividend from 29 cents per share of our pension and other postretirement plans recorded within to 31 cents per share in August 2015; and cumulative other comprehensive income from adjusted •an increase in the number of common shares outstanding shareholders’ interest (equity). The excluded amount at during 2016, which was primarily attributable to the December 31, 2016, was $1,698 million, which is equal to the 278,886,704 shares issued as consideration in our merger cumulative actuarial losses and prior service costs for our with Plum Creek on February 19, 2016, offset by our pension and postretirement plans. When calculating subsequent repurchase of 67,816,810 shares between compliance in accordance with financial debt covenants as of March 2016 and July 2016. December 31, 2017, we excluded the full amount of cumulative other comprehensive loss of $1,562 million. See Note 15: We paid cash dividends on preference shares of $22 million in Shareholders’ Interest in the Notes to Consolidated Financial 2016 and $44 million in 2015. As all preference shares were Statements. converted to common shares on July 1, 2016, we did not pay any cash dividends on preference shares during 2017. See There are no other significant financial debt covenants related Note 15: Shareholders’ Interest in the Notes to Consolidated to our third-party debt. See Note 11: Lines of Credit in the Financial Statements for more information. Notes to Consolidated Financial Statements for more information. Our dividends declared on preference shares were 79.69 cents per share in: CREDIT RATINGS •February and May 2016; and February, May, August and October 2015. Upon completion of our merger with Plum Creek on • February 19, 2016, S&P changed our long-term issuer credit On February 9, 2018, our board of directors declared a dividend ratings from BBB to BBB-. However, on May 9, 2017, S&P of 32 cents per share, payable on March 23, 2018, to upgraded our long-term issuer credit ratings from BBB- back to shareholders of record at the close of business March 2, 2018. BBB. On April 14, 2015, Moody’s Investors Service upgraded our STOCK REPURCHASES long-term issuer credit ratings from Baa3 to Baa2. There was On August 13, 2014, our board of directors approved a stock no change to our Moody’s rating as a result of completing the repurchase program under which we were authorized to merger with Plum Creek. repurchase up to $700 million of outstanding shares (the 2014 Repurchase Program). The 2014 Repurchase Program replaced the prior 2011 stock repurchase program. During 2014, we
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 49 repurchased 6,062,993 shares of common stock for Significant Contractual Obligations as of December 31, 2017
$203 million under the 2014 Repurchase Program. During DOLLAR AMOUNTS IN MILLIONS 2015 we completed the 2014 Repurchase Program by PAYMENTS DUE BY PERIOD repurchasing 15,471,962 shares of common stock for TOTAL LESS 1–3 3–5 MORE $497 million. All common stock purchases under the stock THAN 1 YEARS YEARS THAN 5 repurchase program were made in open-market transactions. YEAR YEARS Long-term debt $5,956 $ 62 $ 500 $ 719 $4,675 On August 27, 2015, our board of directors approved a new obligations, share repurchase program of up to $500 million of outstanding including current portion(1) shares (the 2015 Repurchase Program), commencing upon (Note 12) completion of the 2014 Repurchase Program. During 2015, we Interest(2) 3,023 362 678 586 1,397 repurchased 717,464 shares of common stock for $22 million Operating lease 324 40 67 56 161 under the 2015 Repurchase Program. As of December 31, obligations 2015, we had remaining authorization of $478 million for future Purchase 53 50 3 — — stock repurchases. All common stock purchases under the obligations(3) stock repurchase program were made in open-market Employee-related 416 140 50 32 89 transactions. obligations(4) Liabilities related 4———— The 2016 Share Repurchase Authorization was approved in to unrecognized November 2015 by our Board of Directors and authorized tax benefits (Note 20)(5) management to repurchase up to $2.5 billion of outstanding Total $9,776 $654 $1,298 $1,393 $6,322 shares subsequent to the closing of our merger with Plum (1) Does not include nonrecourse debt held by our Variable Interest Entities (VIEs). See Creek (the 2016 Repurchase Program). This new authorization Note 8: Related Parties in the Notes to Consolidated Financial Statements for further information on our VIEs and the related nonrecourse debt. replaced the August 2015 share repurchase authorization. (2) Amounts presented for interest payments assume that all long-term debt obligations During 2016, we repurchased 67,816,810 shares of common outstanding as of December 31, 2017, will remain outstanding until maturity, and interest rates on variable-rate debt in effect as of December 31, 2017, will remain in stock for $2 billion under the 2016 Repurchase Program. We effect until maturity. (3) Purchase obligations include agreements to purchase goods or services that are did not repurchase any shares of common stock during 2017. enforceable and legally binding on the company and that specify all significant terms, As of December 31, 2017, we had remaining authorization of including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude $500 million for future stock repurchases. All common stock arrangements that the company can cancel without penalty. (4) The timing of certain of these payments will be triggered by retirements or other events. purchases under the stock repurchase program were made in These payments can include workers’ compensation, deferred compensation and banked vacation, among other obligations. When the timing of payment is uncertain, the open-market transactions. We had 755,223 thousand shares amounts are included in the total column only. Minimum pension funding is required by of common stock outstanding as of December 31, 2017. established funding standards and estimates are not made beyond 2018. Estimated payments of contractually obligated postretirement benefits are not included due to the uncertainty of payment timing. (5) We have recognized total liabilities related to unrecognized tax benefits of $4 million as OUR CONTRACTUAL OBLIGATIONS AND COMMERCIAL of December 31, 2017. The timing of payments related to these obligations is uncertain; however, none of this amount is expected to be paid within the next year. COMMITMENTS More details about our contractual obligations and commercial commitments are in Note 9: Pension and Other Postretirement OFF-BALANCE SHEET ARRANGEMENTS Benefit Plans, Note 12: Long-Term Debt, Note 14: Legal Proceedings, Commitments and Contingencies and Note 20: Off-balance sheet arrangements have not had — and are not Income Taxes in the Notes to Consolidated Financial reasonably likely to have — a material effect on our current or Statements. future financial condition, results of operations or cash flows. Note 8: Related Parties and Note 11: Lines of Credit in the Notes to Consolidated Financial Statements contain our disclosures of: •surety bonds, •letters of credit and guarantees and •information regarding variable interest entities.
50 ENVIRONMENTAL MATTERS, LEGAL assumptions or any changes in our assumptions could have a PROCEEDINGS AND OTHER CONTINGENCIES significant effect on our financial position, results of operations and cash flows. See Note 14: Legal Proceedings, Commitments and Other factors that affect our accounting for the plans include: Contingencies in the Notes to Consolidated Financial Statements. •actual pension fund performance, •level of lump sum distributions, •plan changes and amendments, ACCOUNTING MATTERS •portfolio changes and restructuring, •anticipated trends in health care costs, CRITICAL ACCOUNTING POLICIES •assumed increases in salaries and In the preparation of our financial statements we follow •mortality rates. established accounting policies and make estimates that affect This section provides more information about our: both the amounts and timing of the recording of assets, liabilities, revenues and expenses. Some of these estimates •expected long-term rate of return and require judgments about matters that are inherently uncertain. •discount rates. Accounting policies whose application may have a significant effect on the reported results of operations and financial Expected Long-Term Rate of Return on Plan Assets position are considered critical accounting policies. Plan assets are assets of the pension plan trusts that fund the In accounting, we base our judgments and estimates on: benefits provided under the pension plans. The expected long- term rate of return is our estimate of the long-term rate of historical experience and • return that our plan assets will earn. Our expected long-term assumptions we believe are appropriate and reasonable • rate of return is important in determining the net periodic under current circumstances. benefit or cost we recognize for our plans. Actual results, however, may differ from the estimated amounts Over the 33 years it has been in place, our U.S. pension trust we have recorded. investment strategy has achieved a 13.7 percent net Our most critical accounting policies relate to our: compound annual return rate. •pension and postretirement benefit plans; After considering available information at the end of 2016, we •potential impairments of long-lived assets; determined that it was appropriate to reduce our assumption of •legal, environmental and product liability reserves; long-term rate of return on plan assets used in determining net •timber depletion; and periodic benefit cost from 9.0 percent for the year ended •business combinations. December 31, 2016, to 8.0 percent for the year ended December 31, 2017. Based on the information available at the Details about our other significant accounting policies — what end of 2017, we determined that it is appropriate to continue we use and how we estimate — are in Note 1: Summary of to use the 8.0 percent return on plan assets assumption during Significant Accounting Policies in the Notes to Consolidated 2018. Financial Statements. Factors we considered include: PENSION AND POSTRETIREMENT BENEFIT PLANS •the net compounded annual return of over 8 percent achieved by our U.S. pension trust investment strategy the We sponsor several pension and postretirement benefit plans past 5 years and for our employees. Key assumptions we use in accounting for current and expected valuation levels in the global equity and the plans include our: • credit markets. expected long-term rate of return on plan assets and • Our expected long-term rate of return is important in discount rates. • determining the net periodic benefit or cost we recognize for our At the end of every year, we review our assumptions with plans. Every 50 basis point decrease in our expected long-term external advisers and make adjustments as appropriate. We rate of return would increase expense or reduce a credit by use these assumptions to calculate liability information as of approximately: yearend and pension and post retirement expense for the $22 million for our U.S. qualified pension plans and following year. Actual experience that differs from our • •$5 million for our Canadian registered pension plans.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 51 The actual return on plan assets in any given year may vary Key assumptions we use in developing the estimates include: from our expected long-term rate of return. Actual returns on probability of alternative outcomes, plan assets affect the funded status of the plans. Differences • product pricing, between actual returns on plan assets and the expected long- • raw material costs, term rate of return are reflected as adjustments to cumulative • product sales and other comprehensive income (loss), a component of total • discount rate. equity. • CONTINGENT LIABILITIES Discount Rates We are subject to lawsuits, investigations and other claims Our discount rates as of December 31, 2017, are: related to environmental, product and other matters, and are •3.7 percent for our U.S. pension plans — compared with required to assess the likelihood of any adverse judgments or 4.3 percent at December 31, 2016; outcomes to these matters, as well as potential ranges of •3.5 percent for our U.S. postretirement plans — compared probable losses. with 3.7 percent at December 31, 2016; We record contingent liabilities when: •3.5 percent for our Canadian pension plans — compared with 3.7 percent at December 31, 2016; and •it becomes probable that we will have to make payments and •3.4 percent for our Canadian postretirement plans — •the amount of loss can be reasonably estimated. compared with 3.6 percent at December 31, 2016. Assessing probability of loss and estimating probable losses We review our discount rates annually and revise them as requires analysis of multiple factors, including: needed. The discount rates are selected at the measurement historical experience, date by matching current spot rates of high-quality corporate • evaluations of relevant legal and environmental regulations, bonds with maturities similar to the timing of expected cash • judgments about the potential actions of third party claimants outflows for benefits. • and courts, and Pension and postretirement benefit expenses for 2018 will be •consideration of potential environmental remediation based on the 3.7 percent and 3.5 percent assumed discount methods. rates for U.S. plans and 3.5 percent and 3.4 percent assumed In addition to contingent liabilities recorded for probable losses, discount rates for the Canadian plans. we disclose contingent liabilities when there is a reasonable Our discount rates are important in determining the cost of our possibility that an ultimate loss may occur. plans. A 50 basis point decrease in our discount rate would increase expense or reduce a credit by approximately: While we do our best in developing our projections, recorded contingent liabilities are based on the best information •$34 million for our U.S. qualified pension plans and available and actual losses in any future period are inherently •$4 million for our Canadian registered pension plans. uncertain. If estimated probable future losses or actual losses exceed our recorded liability for such claims, we would record LONG-LIVED ASSETS additional charges. These exposures and proceedings can be We review the carrying value of our long-lived assets whenever significant and the ultimate negative outcomes could be events or changes in circumstances indicate that the carrying material to our operating results or cash flow in any given value of the assets may not be recoverable through future quarter or year. See Note 14: Legal Proceedings, Commitments operations. The carrying value is the amount assigned to long- and Contingencies in the Notes to Consolidated Financial lived assets in our financial statements. Statements for more information.
An impairment occurs when the carrying value of long-lived TIMBER DEPLETION assets will not be recovered from future cash flows and is more than fair market value. Fair market value is the estimated We record depletion, the costs attributed to timber harvested, amount we would receive if we were to sell the assets. as trees are harvested. In determining fair market value and whether impairment has To calculate our depletion rates, which are updated annually, occurred, we are required to estimate: we: •future cash flows, •take the total carrying cost of the timber and •residual values and •divide by the total timber volume estimated to be harvested •fair values of the assets. during the harvest cycle. 52 Estimating the volume of timber available for harvest over the assets acquired or liabilities assumed, whichever comes first, harvest cycle requires consideration of the following factors: any subsequent adjustments are recorded to our consolidated statement of operations. •effects of fertilizer and pesticide applications, changes in environmental regulations and other regulatory • PROSPECTIVE ACCOUNTING PRONOUNCEMENTS restrictions, •limits on harvesting certain timberlands, A summary of prospective accounting pronouncements is in •changes in harvest plans, Note 1: Summary of Significant Accounting Policies in the Notes •scientific advancement in seedling and growing technology; to Consolidated Financial Statements. and •changes in weather patterns. PERFORMANCE MEASURES In addition, the duration of the harvest cycle varies by geographic region and species of timber. We use Adjusted Earnings before Interest, Taxes, Depreciation, Depletion and Amortization (Adjusted EBITDA) as a key Depletion rate calculations do not include estimates for: performance measure to evaluate the performance of the •future silviculture or sustainable forest management costs consolidated company and our business segments. This associated with existing stands, measure should not be considered in isolation from and is not •future reforestation costs associated with a stand’s final intended to represent an alternative to our results reported in harvest; and accordance with U.S. generally accepted accounting principles •future volume in connection with the replanting of a stand (U.S. GAAP). However, we believe Adjusted EBITDA provides subsequent to its final harvest. meaningful supplemental information for our investors about our operating performance, better facilitates period to period A 5 percent decrease in our estimate of future harvest volumes comparisons, and is widely used by analysts, lenders, rating would have: agencies and other interested parties. Our definition of •increased depletion expense by $12 million for 2017 and Adjusted EBITDA may be different from similarly titled measures •increased depletion expense by $13 million for 2016. reported by other companies. Adjusted EBITDA, as we define it, is operating income from continuing operations adjusted for BUSINESS COMBINATIONS depreciation, depletion, amortization, basis of real estate sold, pension and postretirement costs not allocated to business We recognize identifiable assets acquired and liabilities segments (primarily interest cost, expected return on plan assumed at their acquisition date fair value. Goodwill, if any, as assets, amortization of actuarial loss and amortization of prior of the acquisition date is measured as the excess of service cost/credit), and special items. Adjusted EBITDA consideration transferred over the net of the acquisition date excludes results from joint ventures. fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions for the purchase price allocation process to value assets acquired and Adjusted EBITDA by Segment liabilities assumed at the acquisition date, our estimates are DOLLAR AMOUNTS IN MILLIONS inherently uncertain and subject to refinement. As a result, 2017 2016 2015 during the measurement period, which may be up to one year Timberlands $ 936 $ 865 $ 678 from the acquisition date, we record adjustments to the assets Real Estate & ENR 241 189 98 acquired and liabilities assumed, with the corresponding offset Wood Products 1,017 641 372 to any goodwill previously recorded (or to earnings in the event 2,194 1,695 1,148 that no goodwill was previously recorded) to the extent that we Unallocated Items (114) (112) (123) identify adjustments to the preliminary purchase price Total $2,080 $1,583 $1,025 allocation. Beginning January 1, 2016, we adopted ASU 2015-16, which eliminates the requirements to retrospectively We reconcile Adjusted EBITDA to net earnings for the apply measurement period adjustments to the preliminary consolidated company and to operating income for the purchase price allocation and revise comparative information on business segments, as those are the most directly comparable the income statement and balance sheet for any prior periods U.S. GAAP measures for each. affected. We will recognize measurement period adjustments and any resulting effect on earnings during the period in which the adjustment is identified. Upon the conclusion of the measurement period or final determination of the values of
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 53 The table below reconciles Adjusted EBITDA by segment to net The table below reconciles Adjusted EBITDA by segment to net earnings during the year ended 2017: earnings during the year ended 2016:
DOLLAR AMOUNTS IN MILLIONS DOLLAR AMOUNTS IN MILLIONS TIMBERLANDS REAL ESTATE WOOD UNALLOCATED TOTAL TIMBERLANDS REAL ESTATE WOOD UNALLOCATED TOTAL & ENR PRODUCTS ITEMS & ENR PRODUCTS ITEMS
Net earnings $ 582 Net earnings $1,027 Earnings from discontinued operations, net of taxes — Earnings from discontinued operations, net of taxes (612) Interest expense, net of capitalized interest 393 Interest expense, net of capitalized interest 431 Income taxes 134 Income taxes 89
Net contribution $532 $146 $ 569 $(138) $1,109 Net contribution $499 $ 55 $512 $(131) $ 935 to earnings to earnings
Equity earnings — (1) — — (1) Equity earnings — (2) — (20) (22) from joint from joint ventures ventures
Non-operating ———6262Non-operating — — — (48) (48) pension and pension and other other postretirement postretirement benefit costs benefit costs (credits) (credits)
Interest income — — — (39) (39) Interest income — — — (43) (43) and other and other
Operating 532 145 569 (115) 1,131 Operating 499 53 512 (242) 822 income income
Depreciation, 356 15 145 5 521 Depreciation, 366 13 129 4 512 depletion and depletion and amortization amortization
Basis of real —81— —81Basis of real — 109 — — 109 estate sold estate sold
Unallocated ——— 44Unallocated ——— 55 pension service pension service costs costs
Special 48 — 303 (8) 343 Special items(1)(2) — 14 — 121 135 items(1)(2)(3) Adjusted $865 $189 $641 $(112) $1,583 Adjusted $936 $241 $1,017 $(114) $2,080 EBITDA EBITDA (1) Special items included in Real Estate & ENR relate to an asset impairment charge (1) Pretax special items included in Timberlands consists of: a $147 million noncash recorded for development projects. impairment charge of the Uruguayan operations a $99 million gain on sale of land in our (2) Special items included in Unallocated Items consist of: $146 million Plum Creek merger- Southern timberlands region. related costs, $36 million gain on sale of nonstrategic assets and $11 million of legal (2) Pretax special items included in Wood Products consists of: $290 million charge for expense. product remediation, $7 million for countervailing and antidumping duties on Canadian softwood lumber that the Company sold in the United States, and a $6 million impairment charge on a nonstrategic asset. (3) Pretax special items included in Unallocated Items consist of: $42 million for environmental remediation insurance recoveries and $34 million for Plum Creek merger- related costs.
54 The table below reconciles Adjusted EBITDA by segment to net earnings during the year ended 2015:
DOLLAR AMOUNTS IN MILLIONS TIMBERLANDS REAL ESTATE WOOD UNALLOCATED TOTAL & ENR PRODUCTS ITEMS
Net earnings $ 506 Earnings from discontinued operations, net of taxes (95) Interest expense, net of capitalized interest 341 Income taxes (58)
Net contribution $470 $79 $258 $(113) $ 694 to earnings
Equity earnings ————— from joint ventures
Non-operating — — — (14) (14) pension and other postretirement benefit costs (credits)
Interest income — — — (36) (36) and other
Operating 470 79 258 (163) 644 income
Depreciation, 208 1 106 10 325 depletion and amortization
Basis of real —18— —18 estate sold
Unallocated ——— 33 pension service costs
Special items(1)(2) ——8 2735 Adjusted $678 $98 $372 $(123) $1,025 EBITDA
(1) Special items included in Wood Products are pretax restructuring charges related to the closure of four distribution centers. (2) Special items included in Unallocated Items consist of a $13 million noncash impairment charge related to a nonstrategic asset that was sold in the second quarter and $14 million of Plum Creek merger-related costs.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 55 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
LONG-TERM DEBT OBLIGATIONS
The following summary of our long-term debt obligations includes: •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. We estimate the fair value of long-term debt based on quoted market prices we received for the same types and issues of our debt or on the discounted value of the future cash flows using market yields for the same type and comparable issues of debt. Changes in market rates of interest affect the fair value of our fixed-rate debt. SUMMARY OF LONG-TERM DEBT OBLIGATIONS AS OF DECEMBER 31, 2017
DOLLAR AMOUNTS IN MILLIONS
2018 2019 2020 2021 2022 THEREAFTER TOTAL(1)(2) FAIR VALUE Fixed-rate debt $ 62 $ 500 $ — $ 719 $ 4,450 $ 5,731 $ 6,823 Average interest rate 7.00% 7.38% —% 5.56% —% 6.38% 6.37% N/A Variable-rate debt $ — $ — $ — $ — $ — $ 225 $ 225 $ 225 Average interest rate —% —% —% —% —% 3.15% 3.15% N/A (1) Excludes $36 million of unamortized discounts, capitalized 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 8: Related Parties in the Notes to Consolidated Financial Statements for further information on our VIEs and the related nonrecourse debt.
56 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors Weyerhaeuser Company:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Weyerhaeuser Company and subsidiaries (the Company) as of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2017, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 16, 2018 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP We have served as the Company’s auditor since 2002.
Seattle, Washington February 16, 2018
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 57 CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2017
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES 2017 2016 2015 Net sales $ 7,196 $ 6,365 $ 5,246 Costs of products sold 5,298 4,980 4,153 Gross margin 1,898 1,385 1,093 Selling expenses 87 89 99 General and administrative expenses 310 338 252 Research and development expenses 14 19 18 Charges for integration and restructuring, closures and asset impairments (Note 17) 194 170 39 Charges for product remediation (Note 18) 290 — — Other operating costs (income), net (Note 19) (128) (53) 41 Operating income 1,131 822 644 Equity earnings from joint ventures (Note 8) 122— Non-operating pension and other postretirement benefit (costs) credits (62) 48 14 Interest income and other 39 43 36 Interest expense, net of capitalized interest (393) (431) (341) Earnings from continuing operations before income taxes 716 504 353 Income taxes (Note 20) (134) (89) 58 Earnings from continuing operations 582 415 411 Earnings from discontinued operations, net of income taxes (Note 3) — 612 95 Net earnings 582 1,027 506 Dividends on preference shares — (22) (44) Net earnings attributable to Weyerhaeuser common shareholders $ 582 $ 1,005 $ 462 Basic earnings per share attributable to Weyerhaeuser common shareholders (Note 5): Continuing operations $ 0.77 $ 0.55 $ 0.71 Discontinued operations — 0.85 0.18 Net earnings per share $ 0.77 $ 1.40 $ 0.89 Diluted earnings per share attributable to Weyerhaeuser common shareholders (Note 5): Continuing operations $ 0.77 $ 0.55 $ 0.71 Discontinued operations — 0.84 0.18 Net earnings per share $ 0.77 $ 1.39 $ 0.89 Dividends paid per common share $ 1.25 $ 1.24 $ 1.20 Weighted average shares outstanding (in thousands) (Note 5): Basic 753,085 718,560 516,371 Diluted 756,666 722,401 519,618
See accompanying Notes to Consolidated Financial Statements.
58 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2017
DOLLAR AMOUNTS IN MILLIONS 2017 2016 2015 Comprehensive income: Net earnings $ 582 $1,027 $506 Other comprehensive income (loss): Foreign currency translation adjustments 32 25 (97) Changes in unamortized net pension and other postretirement benefit gain (loss), net of tax expense (benefit) of (132) (269) 282 ($2) in 2017, ($151) in 2016, and $131 in 2015 Changes in unamortized prior service cost, net of tax benefit of $2 in 2017, $0 in 2016 and $1 in 2015 (5) (4) (4) Unrealized gains on available-for-sale securities 21— Total comprehensive income $ 479 $ 780 $687
See accompanying Notes to Consolidated Financial Statements.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 59 CONSOLIDATED BALANCE SHEET
DOLLAR AMOUNTS IN MILLIONS DECEMBER 31, DECEMBER 31, 2017 2016 ASSETS Current assets: Cash and cash equivalents $ 824 $ 676 Receivables, less discounts and allowances of $1 and $1 396 390 Receivables for taxes 14 84 Inventories (Note 6) 383 358 Prepaid expenses and other current assets 98 114 Total current assets 1,715 1,622 Property and equipment, less accumulated depreciation of $3,338 and $3,306 (Note 7) 1,618 1,562 Construction in progress 225 213 Timber and timberlands at cost, less depletion 12,954 14,299 Minerals and mineral rights, less depletion 308 319 Investments in and advances to joint ventures (Note 8) 31 56 Goodwill 40 40 Deferred tax assets (Note 20) 268 293 Other assets 285 224 Restricted financial investments held by variable interest entities (Note 8) 615 615 Total assets $18,059 $19,243 LIABILITIES AND EQUITY Current liabilities: Current maturities of long-term debt (Notes 12 and 13) $ 62 $ 281 Current debt (nonrecourse to the company) held by variable interest entities (Note 8) 209 — Accounts payable 249 233 Accrued liabilities (Note 10) 645 692 Total current liabilities 1,165 1,206 Long-term debt (Notes 12 and 13) 5,930 6,329 Long-term debt (nonrecourse to the company) held by variable interest entities (Note 8) 302 511 Deferred pension and other postretirement benefits (Note 9) 1,487 1,322 Deposit received from contribution of timberlands to related party (Note 8) — 426 Other liabilities 276 269 Commitments and contingencies (Note 14) Total liabilities 9,160 10,063 Equity: Weyerhaeuser shareholders’ interest (Notes 15 and 16): Common shares: $1.25 par value; authorized 1,360,000,000 shares; issued and outstanding: 755,222,727 and 944 936 748,528,131 shares, Other capital 8,439 8,282 Retained earnings 1,078 1,421 Cumulative other comprehensive loss (1,562) (1,459) Total equity 8,899 9,180 Total liabilities and equity $18,059 $19,243
See accompanying Notes to Consolidated Financial Statements.
60 CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2017
DOLLAR AMOUNTS IN MILLIONS
2017 2016 2015 Cash flows from operations: Net earnings $ 582 $ 1,027 $ 506 Noncash charges (credits) to income: Depreciation, depletion and amortization 521 565 479 Basis of real estate sold 81 109 18 Deferred income taxes, net 44 (159) — Pension and other postretirement benefits 97 5 42 Share-based compensation expense (Note 16) 40 60 31 Charges for impairment of assets 154 37 15 Equity (earnings) loss from joint ventures (Note 8) (1) (18) 105 Net gains on disposition of discontinued and other operations (Note 3) (1) (789) — Net gains on sale of nonstrategic assets (16) (73) (38) Net gains on sale of southern timberlands (Note 8) (99) — — Foreign exchange transaction (gains) losses (Note 19) (1) (5) 47 Change in, net of acquisition: Receivables less allowances (35) (54) 17 Receivable / payable for taxes (50) 106 (5) Inventories (39) 61 10 Prepaid expenses (12) 5 3 Accounts payable and accrued liabilities 106 11 (35) Pension and postretirement contributions / benefit payments (78) (99) (83) Distributions of earnings received from joint ventures (Note 8) 11415 Other (93) (68) (52) Net cash from operations 1,201 735 1,075 Cash flows from investing activities: Capital expenditures for property and equipment (358) (451) (443) Capital expenditures for timberlands reforestation (61) (59) (40) Acquisition of timberlands — (10) (36) Proceeds from disposition of discontinued and other operations (Note 3) 403 2,486 — Proceeds from sale of nonstrategic assets 26 104 19 Proceeds from sale of southern timberlands (Note 8) 203—— Proceeds from redemption of ownership in related party (Note 8) 108—— Proceeds from contribution of timberlands to related party (Note 8) — 440 — Distributions of investment received from joint ventures (Note 8) 25 46 — Other 21 3 13 Net cash from investing activities 367 2,559 (487) Cash flows from financing activities: Cash dividends on common shares (941) (932) (619) Cash dividends on preference shares — (22) (44) Proceeds from issuance of long-term debt (Note 12) 225 1,698 — Payments on long-term debt (Note 12) (831) (2,423) — Proceeds from borrowings on line of credit (Note 11) 100—— Payments on line of credit (Note 11) (100) — — Proceeds from exercise of stock options 128 61 34 Repurchase of common stock — (2,003) (518) Other (1) (9) (9) Net cash from financing activities (1,420) (3,630) (1,156) Net change in cash and cash equivalents $ 148 $ (336) $ (568) Cash and cash equivalents from continuing operations at beginning of year $ 676 $ 1,011 $ 1,577 Cash and cash equivalents from discontinued operations at beginning of year —13 Cash and cash equivalents at beginning of year $ 676 $ 1,012 $ 1,580 Cash and cash equivalents from continuing operations at end of year $ 824 $ 676 $ 1,011 Cash and cash equivalents from discontinued operations at end of year —— 1 Cash and cash equivalents at end of year $ 824 $ 676 $ 1,012 Cash paid (received) during the year for: Interest, net of amounts capitalized of $9 in 2017, $8 in 2016 and $7 in 2015 $ 381 $ 446 $ 347 Income taxes $ 169 $ 485 $ 14
See accompanying Notes to Consolidated Financial Statements.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 61 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2017
DOLLAR AMOUNTS IN MILLIONS 2017 2016 2015 Mandatory convertible preference shares, series A: Balance at beginning of year $— $14$14 Conversion to common shares (Note 15) — (14) — Balance at end of year $— $— $14 Common shares: Balance at beginning of year $ 936 $ 638 $ 656 Preference shares converted to common shares (Note 15) —29— Issued for exercise of stock options 732 Repurchases of common shares (Note 15) — (85) (20) Release of vested restricted stock units 12— Plum Creek acquisition — 349 — Balance at end of year $ 944 $ 936 $ 638 Other capital: Balance at beginning of year $ 8,282 $ 4,080 $ 4,519 Issued for exercise of stock options 128 61 32 Repurchase of common shares (Note 15) — (1,918) (498) Share-based compensation 35 35 32 Plum Creek acquisition — 6,046 — Other transactions, net (6) (22) (5) Balance at end of year $ 8,439 $ 8,282 $ 4,080 Retained earnings: Balance at beginning of year $ 1,421 $ 1,349 $ 1,508 Net earnings 582 1,027 506 Dividends on common shares (944) (933) (621) Adjustments related to new accounting pronouncements (Note 1) 19 — — Cash dividends on preference shares — (22) (44) Balance at end of year $ 1,078 $ 1,421 $ 1,349 Cumulative other comprehensive loss: Balance at beginning of year $(1,459) $(1,212) $(1,393) Annual changes — net of tax: Foreign currency translation adjustments 32 25 (97) Changes in unamortized net pension and other postretirement benefit gain (loss) (Note 9) (132) (269) 282 Changes in unamortized prior service credit (cost) (Note 9) (5) (4) (4) Unrealized gains on available-for-sale securities 21— Balance at end of year $(1,562) $(1,459) $(1,212) Total equity: Balance at end of year $ 8,899 $ 9,180 $ 4,869
See accompanying Notes to Consolidated Financial Statements.
62 INDEX FOR NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ...... 64 NOTE 2: BUSINESS SEGMENTS ...... 69 NOTE 3: DISCONTINUED OPERATIONS AND OTHER DIVESTITURES ...... 71 NOTE 4: MERGER WITH PLUM CREEK ...... 73 NOTE 5: NET EARNINGS PER SHARE ...... 73 NOTE 6: INVENTORIES ...... 74 NOTE 7: PROPERTY AND EQUIPMENT ...... 75 NOTE 8: RELATED PARTIES ...... 75 NOTE 9: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS ...... 77 NOTE 10: ACCRUED LIABILITIES ...... 86 NOTE 11: LINES OF CREDIT ...... 86 NOTE 12: LONG-TERM DEBT ...... 86 NOTE 13: FAIR VALUE OF FINANCIAL INSTRUMENTS ...... 88 NOTE 14: LEGAL PROCEEDINGS, COMMITMENTS AND CONTINGENCIES ...... 88 NOTE 15: SHAREHOLDERS’ INTEREST ...... 90 NOTE 16: SHARE-BASED COMPENSATION ...... 92 NOTE 17: CHARGES FOR INTEGRATION AND RESTRUCTURING, CLOSURES AND ASSET IMPAIRMENTS ...... 98 NOTE 18: CHARGES FOR PRODUCT REMEDIATION ...... 99 NOTE 19: OTHER OPERATING COSTS (INCOME), NET ...... 99 NOTE 20: INCOME TAXES ...... 99 NOTE 21: GEOGRAPHIC AREAS ...... 102 NOTE 22: SELECTED QUARTERLY FINANCIAL INFORMATION (unaudited) ...... 103
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 63 NOTES TO CONSOLIDATED FINANCIAL They do not include our intercompany transactions and STATEMENTS accounts, which are eliminated, and noncontrolling interests are presented as a separate component of equity. NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING We account for investments in and advances to unconsolidated POLICIES equity affiliates using the equity method. We record our share Our significant accounting policies describe: of equity in net earnings of equity affiliates within “Equity earnings from joint ventures” in our Consolidated Statement of our election to be taxed as a real estate investment trust, • Operations in the period in which the earnings are recorded by how we report our results, • our equity affiliates. •changes in how we report our results and •how we account for various items. Throughout these Notes to Consolidated Financial Statements, unless specified otherwise, references to “Weyerhaeuser,” “the OUR ELECTION TO BE TAXED AS A REAL ESTATE company,” “we” and “our” refer to the consolidated company. INVESTMENT TRUST (REIT) Starting with our 2010 fiscal year, we elected to be taxed as a OUR BUSINESS SEGMENTS REIT. REIT income can be distributed to shareholders without Reportable business segments are determined based on the first paying corporate level tax, substantially eliminating the company’s “management approach,” as defined by Financial double taxation on income. We expect to derive most of our Accounting Standards Board (FASB) ASC 280, “Segment REIT income from investments in timberlands, including the Reporting.” The management approach is based on the way the sale of standing timber through pay-as-cut sales contracts and chief operating decision maker organizes the segments within a lump sum timber deeds. company for making decisions about resources to be allocated We were no longer subject to the REIT built-in gains tax as of and assessing their performance. December 31, 2014. Our built-in gains tax period expired in During fiscal year 2016, the company’s chief operating decision 2015 due to a change in U.S. tax law that statutorily shortened maker changed the information regularly reviewed when making the built-in gains tax period to 5 years from 10 years. This decisions to allocate resources and assess performance. Since means we are no longer subject to federal corporate level this change, the company reports its financial performance income taxes on sales of REIT property that had a fair market based on three business segments: Timberlands, Real value in excess of tax basis when we converted to a REIT on Estate & ENR, and Wood Products. Prior to revising our January 1, 2010. We continue to be required to pay federal segment structure, activities related to the Real Estate & ENR corporate income taxes on earnings of our Taxable REIT business segment were reported as part of the Timberlands Subsidiary (TRS), which includes our Wood Products segment business segment. and portions of our Timberlands and Real Estate, Energy and Natural Resources (Real Estate & ENR) segments. Amounts for all periods presented have been reclassified throughout the consolidated financial statements and disclosures to conform to the new segment structure. HOW WE REPORT OUR RESULTS Our report includes: We are principally engaged in: •consolidated financial statements, •growing and harvesting timber; •our business segments, •manufacturing, distributing and selling products made from •foreign currency translation, trees; •estimates, and •maximizing the value of every acre we own through the sale •fair value measurements. of higher and better use (HBU) properties; and •monetizing reserves of minerals, oil, gas, coal, and other natural resources on our timberlands. CONSOLIDATED FINANCIAL STATEMENTS Our business segments are organized based primarily on Our consolidated financial statements provide an overall view of products and services. our results and financial condition. They include our accounts and the accounts of entities that we control, including: •majority-owned domestic and foreign subsidiaries and •variable interest entities in which we are the primary beneficiary.
64 Our Business Segments and Products FAIR VALUE MEASUREMENTS SEGMENT PRODUCTS AND SERVICES We use a fair value hierarchy in accounting for certain Timberlands Logs, timber, and leased recreational access nonfinancial assets and liabilities including: Real Estate & ENR Sales of timberlands; rights to explore for and extract hard minerals, construction materials, oil •long-lived assets (asset groups) measured at fair value for an and gas production, wind and coal; and equity impairment assessment; interests in our Real Estate Development Ventures •reporting units measured at fair value in the first step of a goodwill impairment test; Wood Products Softwood lumber, engineered wood products, structural panels, medium density fiberboard and •nonfinancial assets and nonfinancial liabilities measured at building materials distribution fair value in the second step of a goodwill impairment assessment; We also transfer raw materials, semi-finished materials and •assets acquired and liabilities assumed in a business end products among our business segments. Because of this acquisition; and intracompany activity, accounting for our business segments asset retirement obligations initially measured at fair value. involves: • The fair value hierarchy is based on inputs to valuation •pricing products transferred between our business segments techniques that are used to measure fair value that are either at current market values and observable or unobservable. Observable inputs reflect •allocating joint conversion and common facility costs assumptions market participants would use in pricing an asset according to usage by our business segment product lines. or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s Gains or charges not related to or allocated to an individual pricing based upon its own market assumptions. operating segment are held in Unallocated Items. This includes a portion of items such as: share-based compensation; pension The fair value hierarchy consists of the following three levels: and postretirement costs; foreign exchange transaction gains •Level 1 — Inputs are quoted prices in active markets for and losses associated with financing; the elimination of identical assets or liabilities. intersegment profit in inventory and the LIFO reserve. •Level 2 — Inputs are: – quoted prices for similar assets or liabilities in an active FOREIGN CURRENCY TRANSLATION market; – quoted prices for identical or similar assets or liabilities in Local currencies are the functional currencies for most of our markets that are not active; or operations outside the U.S. We translate foreign currencies into – inputs other than quoted prices that are observable and U.S. dollars in two ways: market-corroborated inputs, which are derived principally •assets and liabilities — at the exchange rates in effect as of from or corroborated by observable market data. our balance sheet date; and •Level 3 — Inputs are derived from valuation techniques in •revenues and expenses — at average monthly exchange which one or more significant inputs or value drivers are rates throughout the year. unobservable.
ESTIMATES CHANGES IN HOW WE REPORT OUR RESULTS We prepare our financial statements according to U.S. generally Changes in how we report our results come from: accepted accounting principles (U.S. GAAP). This requires us to •reclassification of certain balances and results from prior make estimates and assumptions during our reporting periods years to make them consistent with our current reporting and and at the date of our financial statements. The estimates and •accounting changes made upon our adoption of new assumptions affect our: accounting guidance •reported amounts of assets, liabilities and equity; •disclosure of contingent assets and liabilities; and RECLASSIFICATIONS reported amounts of revenues and expenses. • We have reclassified certain balances and results from the While we do our best in preparing these estimates, actual prior year to be consistent with our 2017 reporting. This makes results can and do differ from those estimates and year-to-year comparisons easier. Our reclassifications had no assumptions. effect on consolidated net earnings or equity. Our reclassifications present the adoption of new accounting
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 65 pronouncements on our Consolidated Statement of Operations estimated selling price less reasonable costs to sell the and in the related footnotes. Refer to discussion of new inventory. The new guidance is effective prospectively for fiscal accounting pronouncements below. periods starting after December 15, 2016, and early adoption is permitted. We adopted on January 1, 2017, and determined this pronouncement does not have a material impact on our NEW ACCOUNTING PRONOUNCEMENTS consolidated financial statements and related disclosures. Revenue Recognition Lease Recognition In May 2014, the FASB issued Accounting Standards Update (ASU) 2014-09, a comprehensive new revenue recognition In February 2016, FASB issued ASU 2016-02, which requires model that requires an entity to recognize revenue to depict the lessees to recognize assets and liabilities for the rights and transfer of goods or services to customers at an amount that obligations created by those leases and requires both capital reflects the consideration it expects to receive in exchange for and operating leases to be recognized on the balance sheet. those goods or services. In August 2015, FASB issued The new guidance is effective for fiscal years beginning after ASU 2015-14, which deferred the effective date for an December 15, 2018, and early adoption is permitted. We additional year. In March 2016, FASB issued ASU 2016-08, expect to adopt on January 1, 2019. We are still evaluating which does not change the core principle of the guidance; certain aspects of the revised guidance and subsequent however, it does clarify the implementation guidance on revisions either made or being contemplated by the FASB, principal versus agent considerations. In April 2016, including application of the available practical expedients. We FASB issued ASU 2016-10, which clarifies two aspects of expect adoption to result in the recognition of the present value ASU 2014-09: identifying performance obligations and the of the future commitments on operating leases disclosed in licensing implementation guidance. In May 2016, FASB issued Note 14: Legal Proceedings, Commitments and Contingencies ASU 2016-12, which amends ASU 2014-09 to provide on our Consolidated Balance Sheet. improvements and practical expedients to the new revenue Intra-Entity Transfers (other than inventory) recognition model. In December 2016, the FASB issued ASU 2016-20, which amends ASU 2014-09 for technical In October 2016, FASB issued ASU 2016-16, which requires corrections and to correct for unintended application of the immediate recognition of the income tax consequences upon guidance. In February 2017, FASB issued ASU 2017-05, which intra-entity transfers of assets other than inventory. The new clarifies the scope of ASC 610-20 and impacts accounting for guidance is effective for annual periods beginning after partial sales of nonfinancial assets. December 15, 2017, and early adoption is permitted. We adopted this accounting standard update on January 1, 2017. We have adopted and implemented the new revenue As a result of this adoption, our opening balance sheet was recognition guidance effective January 1, 2018. The new adjusted through “Retained Earnings” by $19 million for prior standard is required to be applied retrospectively to each prior period intra-entity transfers. Adoption of this standard did not reporting period presented (full retrospective transition method) have a material impact on our Consolidated Statement of Cash or retrospectively with the cumulative effect of initially applying Flows or Consolidated Statement of Operations. it recognized at the date of initial application (cumulative effect method). We have adopted using the cumulative effect method. Pension and Other Post Retirement Benefit (Costs)/Credits The adoption of the new revenue recognition guidance will not In March 2017, FASB issued ASU 2017-07, which requires that materially impact our Consolidated Statement of Operations, an employer report the service cost component of pension and Consolidated Balance Sheet,orConsolidated Statement of other postretirement benefit costs in the Consolidated Cash Flows. We plan to add expanded disclosures, beginning in Statement of Operations in the same line item or items as first quarter 2018. other compensation costs arising from services rendered by the pertinent employees. This requirement is consistent with how Inventory Valuation Methods we have historically presented our pension service costs. The In July 2015, FASB issued ASU 2015-11, which simplifies the other requirement of ASU 2017-07 is to present the remaining measurement of inventories valued under most methods, components of pension and other postretirement benefit costs including our inventories valued under FIFO — the first-in, (i.e., interest, expected return on plan assets, amortization of first-out — and moving average cost methods. Inventories actuarial gains or losses, and amortization of prior service valued under LIFO — the last-in, first-out method — are credits or costs) in the Consolidated Statement of Operations excluded. Under this new guidance, inventories valued under separately from the service cost component and outside a these methods would be valued at the lower of cost or net subtotal of income from operations. The new guidance is realizable value, with net realizable value defined as the effective for annual periods beginning after December 15,
66 2017, and early adoption is permitted. We adopted this •Maintenance, repairs and minor replacements are expensed. accounting standard as of January 1, 2017. As a result, we •Depreciation is calculated using a straight-line method at reclassified amounts related to other components of pension rates based on estimated service lives. and other postretirement benefit costs from their prior financial •We capitalize costs associated with logging roads that we statements captions (“Costs of products sold,” “General and intend to utilize for a period longer than one year. These administrative expenses,” and “Other operating costs (income), roads are then amortized over an estimated service life. net”) into a new financial statement caption titled •Cost and accumulated depreciation of property sold or retired “Non-operating pension and other postretirement benefit are removed from the accounts and the gain or loss is (costs) credits” in our Consolidated Statement of Operations. included in earnings. The adoption of ASU 2017-07 did not impact “Net earnings,” nor did it impact our Consolidated Balance Sheet. Timber and Timberlands We carry timber and timberlands at cost less depletion. Reclassification of Certain Tax Effects from Accumulated Depletion refers to the carrying value of timber that is Other Comprehensive Income harvested, lost as a result of casualty, or sold. In February 2018, FASB issued ASU 2018-02, which allows for the reclassification of certain income tax effects related to the Key activities affecting how we account for timber and Tax Cuts and Jobs Act between “Accumulated other timberlands include: comprehensive income” and “Retained earnings.” This ASU •reforestation, relates to the requirement that adjustments to deferred tax •depletion and liabilities and assets related to a change in tax laws or rates to •forest management in Canada. be included in “Income from continuing operations”, even in situations where the related items were originally recognized in Reforestation. Generally, we capitalize initial site preparation “Other comprehensive income” (rather than in “Income from and planting costs as reforestation. Generally, we expense continuing operations”). The amendments in this ASU are costs after the first planting as they are incurred or over the effective for all entities for fiscal years beginning after period of expected benefit. These costs include: December 15, 2018, and interim periods within those fiscal •fertilization, years, with early adoption permitted. Adoption of this ASU is to •vegetation and insect control, be applied either in the period of adoption or retrospectively to •pruning and precommercial thinning, each period in which the effect of the change in the tax laws or •property taxes, and rates were recognized. We are still evaluating certain aspects of •interest. this ASU as well as the related impacts it may have on our financial statements. Accounting practices for these costs do not change when timber becomes merchantable and harvesting starts.
HOW WE ACCOUNT FOR VARIOUS ITEMS Timber depletion. To determine depletion rates, we divide the net carrying value of timber by the related volume of timber This section provides information about how we account for estimated to be available over the growth cycle. To determine certain key items related to: the growth cycle volume of timber, we consider: capital investments, • regulatory and environmental constraints, financing our business and • • our management strategies, •operations. • •inventory data improvements, ITEMS RELATED TO CAPITAL INVESTMENTS •growth rate revisions and recalibrations and •known dispositions and inoperable acres. Key items related to accounting for capital investments pertain to property and equipment, timber and timberlands, impairment We include the cost of timber harvested in the carrying values of long-lived assets and goodwill. of raw materials and product inventories. As these inventories are sold to third parties, we include them in the cost of Property and Equipment products sold. We maintain property accounts on an individual asset basis. Forest Management in Canada. We manage timberlands under Here is how we handle major items: long-term licenses in various Canadian provinces that are: •Improvements to and replacements of major units of property •granted by the provincial governments; are capitalized. •granted for initial periods of 15 to 25 years; and
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 67 •renewable provided we meet reforestation, operating and Accounts Payable management guidelines. Our banking system replenishes our major bank accounts daily Calculation of the fees we pay on the timber we harvest: as checks we have issued are presented for payment. As a result, we may have negative book cash balances due to •varies from province to province, outstanding checks that have not yet been paid by the bank. •is tied to product market pricing and These negative balances would be included in “Accounts •depends upon the allocation of land management payable” on our Consolidated Balance Sheet. Changes in these responsibilities in the license. negative cash balances would be reported as financing activities in our Consolidated Statement of Cash Flows. We had Impairment of Long-Lived Assets no negative book cash balances as of December 31, 2017, We review long-lived assets — including certain identifiable and December 31, 2016. intangibles — for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets Concentration of Risk may not be recoverable. Impaired assets held for use are We disclose customers that represent a concentration of written down to fair value. Impaired assets held for sale are risk. As of December 31, 2017, and December 31, 2016, no written down to fair value less cost to sell. We determine fair customer accounted for 10 percent or more of our net sales. value based on: •appraisals, ITEMS RELATED TO OPERATIONS •market pricing of comparable assets, Key items related to operations include revenue recognition, •discounted value of estimated cash flows from the asset and inventories, shipping and handling costs, income taxes, share- •replacement values of comparable assets. based compensation, pension and other postretirement plans, and environmental remediation. Goodwill Goodwill is the purchase price minus the fair value of net Revenue Recognition assets acquired when we buy another entity. We assess Operations recognizes revenue when title and the risk of loss goodwill for impairment: transfers to the customer, in general this is upon shipment to •using a fair-value-based approach and customers. For certain export sales, revenue is recognized •at least annually — at the beginning of the fourth quarter. when title transfers at the foreign port. In 2017, the fair value of the reporting unit with goodwill For timberland sales, we recognize revenue when title and substantially exceeded its carrying value. possession have been transferred to the buyer and all other criteria for sale and profit recognition have been satisfied. ITEMS RELATED TO FINANCING OUR BUSINESS Inventories Key items related to financing our business include financial We state inventories at the lower of cost or net realizable value. instruments, cash and cash equivalents, accounts payable and Cost includes labor, materials and production overhead. concentration of risk. LIFO — the last-in, first-out method — applies to major inventory products held at our U.S. domestic locations. We Financial Instruments began to use the LIFO method for domestic products in the We estimate the fair value of financial instruments where 1940s as required to conform with the tax method elected. appropriate. The assumptions we use — including the discount Subsequent acquisitions of entities added new products under rate and estimates of cash flows — can significantly affect our the FIFO — the first-in, first-out method — or moving average fair-value amounts. Our fair values are estimates and may not cost methods that have continued under those methods. The match the amounts we would realize upon sale or settlement of FIFO or moving average cost methods applies to the balance of our financial positions. our domestic raw material and product inventories as well as for all material and supply inventories and all foreign Cash Equivalents inventories. Cash equivalents are investments with original maturities of 90 days or less. We state cash equivalents at cost, which Shipping and Handling Costs approximates market. We classify shipping and handling costs in “Costs of products sold” on our Consolidated Statement of Operations.
68 Income Taxes employee group covered by the plans or the average We account for income taxes under the asset and liability remaining life expectancy in situations where the plan method. Unrecognized tax benefits represent potential future participants affected by the plan amendment are inactive; and funding obligations to taxing authorities if uncertain tax •amortization of cumulative unrecognized net actuarial gains positions the company has taken on previously filed tax returns and losses — generally in excess of 10 percent of the are not sustained. In accordance with the company’s greater of the benefit obligation or market-related value of accounting policy, accrued interest and penalties related to plan assets at the beginning of the year — over the average unrecognized tax benefits are recognized as a component of remaining service period of the active employee group income tax expense. covered by the plans or the average remaining life expectancy in situations where the plan participants are inactive. We recognize deferred tax assets and liabilities to reflect: Pension plans. We have pension plans covering most of our •future tax consequences due to differences between the employees. Determination of benefits differs for salaried, hourly carrying amounts for financial reporting purposes and the tax and union employees: bases of certain items and •operating loss and tax credit carryforwards. •Salaried employee benefits are based on each employee’s highest monthly earnings for five consecutive years during To measure deferred tax assets and liabilities, we: the final 10 years before retirement. •determine when the differences between the carrying •Hourly and union employee benefits generally are stated amounts and tax bases of affected items are expected to be amounts for each year of service. recovered or resolved and •Union employee benefits are set through collective-bargaining •use enacted tax rates expected to apply to taxable income in agreements. those years. We contribute to our U.S. and Canadian pension plans according to established funding standards. The funding Share-Based Compensation standards for the plans are: We generally measure the fair value of share-based awards on U.S. pension plans — according to the Employee Retirement the dates they are granted or modified. These measurements • Income Security Act of 1974; and establish the cost of the share-based awards for accounting Canadian pension plans — according to the applicable purposes. We then recognize the cost of share-based awards in • provincial pension act and the Income Tax Act. our Consolidated Statement of Operations over each employee’s required service period. Note 16: Share-Based Postretirement benefits other than pensions. We provide Compensation provides more information about our share- certain postretirement health care and life insurance benefits based compensation. for some retired employees. In some cases, we pay a portion of the cost of the benefit. Note 9: Pension and Other Pension and Other Postretirement Benefit Plans Postretirement Benefit Plans provides additional information about changes made in our postretirement benefit plans during We recognize the overfunded or underfunded status of our 2017 and 2016. defined benefit pension and other postretirement plans on our Consolidated Balance Sheet and recognize changes in the Environmental Remediation funded status through comprehensive income (loss) in the year in which the changes occur. We accrue losses associated with environmental remediation obligations when such losses are probable and reasonably Actuarial valuations determine the amount of the pension and estimable. Future expenditures for environmental remediation other postretirement benefit obligations and the net periodic obligations are not discounted to their present value. Recoveries benefit cost we recognize. The net periodic benefit cost of environmental remediation costs from other parties are includes: recorded as assets when the recovery is deemed probable and •cost of benefits provided in exchange for employees’ services does not exceed the amount of losses previously recorded. rendered during the year; •interest cost of the obligations; NOTE 2: BUSINESS SEGMENTS •expected long-term return on plan assets; •gains or losses on plan settlements and curtailments; Our business segments and how we account for those •amortization of prior service costs and plan amendments segments are discussed in Note 1: Summary of Significant over the average remaining service period of the active Accounting Policies. This note provides key financial data by business segment.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 69 KEY FINANCIAL DATA BY BUSINESS SEGMENT Sales and Contribution (Charge) to Earnings
DOLLAR AMOUNTS IN MILLIONS TIMBERLANDS REAL ESTATE WOOD UNALLOCATED CONSOLIDATED & ENR(1) PRODUCTS ITEMS(2) AND INTERSEGMENT ELIMINATIONS Sales to unaffiliated customers 2017 $1,942 $280 $4,974 $ — $7,196 2016 $1,805 $226 $4,334 $ — $6,365 2015 $1,273 $101 $3,872 $ — $5,246 Intersegment sales 2017 $ 762 $ 1 $ — $(763) $ — 2016 $ 840 $ 1 $ 68 $(909) $ — 2015 $ 830 $ — $ 82 $(912) $ — Contribution (charge) to earnings from continuing operations 2017 $ 532 $146 $ 569 $(138) $1,109 2016 $ 499 $ 55 $ 512 $(131) $ 935 2015 $ 470 $ 79 $ 258 $(113) $ 694 (1) The Real Estate & ENR segment includes the equity earnings from, investments in and advances to our Real Estate Development Ventures (as defined and described in Note 8: Related Parties), which are accounted for under the equity method. (2) Unallocated items are gains or charges not related to or allocated to an individual operating segment. They include a portion of items such as: share-based compensation, pension and postretirement costs, foreign exchange transaction gains and losses associated with financing, equity earnings from our Timberland Venture (as defined and described in Note 8: Related Parties), the elimination of intersegment profit in inventory and the LIFO reserve. As a result of reclassifying our former Cellulose Fibers segment as discontinued operations, Unallocated items also includes retained indirect corporate overhead costs previously allocated to the former segment.
Management evaluates segment performance based on the contributions to earnings of the respective segments. An analysis and reconciliation of our business segment information to the consolidated financial statements follows: Reconciliation of Contribution to Earnings to Net Earnings
DOLLAR AMOUNTS IN MILLIONS 2017 2016 2015 Net contribution to earnings from continuing operations $1,109 $ 935 $ 694 Net contribution to earnings from discontinued operations — 957 156 Total contribution to earnings 1,109 1,892 850 Interest expense, net of capitalized interest(1) (393) (436) (347) Income before income taxes(1) 716 1,456 503 Income taxes(1) (134) (429) 3 Net earnings $ 582 $1,027 $ 506 (1) Results shown for 2016 and 2015 include amounts for both continuing and discontinued operations. Refer to Note 3: Discontinued Operations and Other Divestitures for further information.
70 Additional Financial Information
DOLLAR AMOUNTS IN MILLIONS TIMBERLANDS REAL WOOD UNALLOCATED CONSOLIDATED ESTATE & ENR PRODUCTS ITEMS Depreciation, depletion and amortization 2017 $356 $15 $145 $ 5 $521 2016 $366 $13 $129 $ 4 $512 2015 $208 $ 1 $106 $ 10 $325 Net pension and postretirement cost (credit)(1) 2017 $ 7 $ 1 $ 23 $ 66 $ 97 2016 $ 8 $ — $ 22 $ (43) $ (13) 2015 $ 9 $ — $ 27 $ (11) $ 25 Charges for integration and restructuring, closures and asset impairments(2) 2017 $147 $ — $ 13 $ 34 $194 2016 $ — $15 $ 7 $148 $170 2015 $ — $ — $ 10 $ 29 $ 39 Equity earnings (loss) from joint ventures 2017 $ — $ 1 $ — $ — $ 1 2016 $ — $ 2 $ — $ 20 $ 22 2015 $ — $ — $ — $ — $ — Capital expenditures 2017 $115 $ 2 $299 $ 3 $419 2016 $116 $ 1 $297 $ 11 $425 2015 $ 75 $ — $287 $ 3 $365 Investments in and advances to joint ventures 2017 $ — $31 $ — $ — $ 31 2016 $ — $56 $ — $ — $ 56 2015 $ — $ — $ — $ — $ — (1) Net pension and postretirement cost (credit) excludes special items, as well as the recognition of curtailments, settlements and special termination benefits due to closures, restructuring or divestitures. See Note 9: Pension and Other Postretirement Benefit Plans for more information. (2) See Note 17: Charges for Integration and Restructuring, Closures and Asset Impairments for more information.
Total Assets
DOLLAR AMOUNTS IN MILLIONS TIMBERLANDS and WOOD UNALLOCATED CONSOLIDATED REAL ESTATE & ENR PRODUCTS ITEMS Total assets(1)(2) 2017 $14,122 $2,145 $1,792 $18,059 2016 $15,608 $1,910 $1,725 $19,243 2015 $ 7,260 $1,541 $3,919 $12,720 (1) Assets attributable to the Real Estate & ENR business segment are combined with total assets for the Timberlands segment because we do not produce separate balance sheets internally. (2) Unallocated Items total assets includes assets of discontinued operations.
DISCONTINUED OPERATIONS NOTE 3: DISCONTINUED OPERATIONS AND OTHER DIVESTITURES During 2016, we disposed of our former Cellulose Fibers segment, which is excluded from the segment results above OPERATIONS DIVESTED unless otherwise noted. See Note 3: Discontinued Operations On October 12, 2016, we announced the exploration of and Other Divestitures for information regarding our strategic alternatives for our Uruguay timberlands and discontinued operations and the segments affected. manufacturing operations, which was part of our Timberlands business segment. On June 2, 2017, the Weyerhaeuser Board of Directors approved an equity purchase agreement with a consortium led by BTG Pactual’s Timberland Investment Group
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 71 (TIG), including other long-term investors, pursuant to which the The following table presents the components of the net gain on Company agreed to sell, in exchange for $403 million in cash, the divestiture of Cellulose Fibers: all of its equity interest in the subsidiaries that collectively owned and operated its Uruguayan timberlands and DOLLAR AMOUNTS IN MILLIONS manufacturing operations. 2016 Proceeds, net of cash and cash equivalents disposed of $ 2,486 On September 1, 2017, we completed the sale of our Uruguay Less: timberlands and manufacturing operations for $403 million of Net book value of assets and liabilities disposed of (1,678) cash proceeds. Due to the impairment of our Uruguayan Transaction costs, net of reimbursement (19) operations recorded during second quarter 2017 (refer to (1,697) Note 17: Charges for Integration and Restructuring, Closures Pretax gain on Cellulose Fibers divestitures 789 and Asset Impairments), no material gain or loss was recorded Income taxes (243) as a result of this sale. As of December 31, 2017, no assets Net gain on Cellulose Fibers divestitures $ 546 or liabilities related to Uruguayan operations remain on the Consolidated Balance Sheet. The sale of our Uruguayan operations was not considered a NET EARNINGS FROM DISCONTINUED OPERATIONS strategic shift that had or will have a major effect on our Sales and Net Earnings from Discontinued Operations operations or financial results and therefore did not meet the DOLLAR AMOUNTS IN MILLIONS requirements for presentation as discontinued operations. 2016(1) 2015(2) Total net sales $1,537 $1,860 DISCONTINUED OPERATIONS Costs of products sold 1,283 1,573 During 2016, we entered into three separate transactions to sell Gross margin 254 287 our Cellulose Fibers business. As a result of these transactions, Selling expenses 12 14 the company recognized a pretax gain on disposition of General and administrative expenses 29 30 $789 million and total cash proceeds of $2.5 billion in the Research and development expenses 5 6 second half of 2016. These transactions consisted of: Charges for integration and restructuring, closures 63 2 and asset impairments(3) •sale of our Cellulose Fibers liquid packaging board business Other operating income, net (27) (26) to Nippon Paper Industries Co., Ltd for $285 million in cash Operating income 172 261 proceeds, which closed on August 31, 2016; Equity loss from joint venture (4) (105) •sale of our Cellulose Fibers printing papers joint venture to Interest expense, net of capitalized interest (5) (6) One Rock Capital Partners, LLC for $42 million in cash Earnings from discontinued operations before income 163 150 proceeds, which closed on November 1, 2016; and taxes •sale of our Cellulose Fibers pulp business to International Income taxes (97) (55) Paper for $2.2 billion in cash proceeds, which closed on Net earnings from operations 66 95 December 1, 2016. Net gain on divestiture of Cellulose Fibers 546 —
The results of operations for our pulp and liquid packaging Net earnings from discontinued operations $ 612 $ 95 (1) Discontinued operations in 2016 includes 335 days of the pulp business, 305 days of board businesses, along with our interest in our printing papers our printing papers joint venture operations, and 244 days of the liquid packaging board joint venture, were reclassified to discontinued operations business. (2) Discontinued operations in 2015 includes a full year of the Cellulose Fibers business during our 2016 reporting year. These results have been segment operations. (3) Charges for integration and restructuring, closures and asset impairments consist of summarized in “Earnings from discontinued operations, net of costs related to our strategic evaluation of the Cellulose Fibers businesses and income taxes” on our Consolidated Statement of Operations for transaction-related costs. each period presented. We did not reclassify our Consolidated Results of discontinued operations exclude certain general Statement of Cash Flows to reflect discontinued operations. corporate overhead costs that have been allocated to and are Cellulose Fibers was previously disclosed as a separate included in contribution to earnings for the operating segments. reportable business segment. Retained indirect corporate overhead costs previously allocated to Cellulose Fibers are now reported as part of Unallocated Items. CARRYING VALUE OF ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS We used $1.7 billion of the after-tax proceeds from the sale of As all discontinued operations were sold during 2016, no our Cellulose Fibers business segment for repayment of debt assets or liabilities remain as of December 31, 2017, or during 2016. December 31, 2016.
72 CASH FLOWS FROM DISCONTINUED OPERATIONS years ended December 31, 2016 and December 31, 2015, Cash Flows from Discontinued Operations respectively. Pro forma data may not be indicative of the results that would have been obtained had these events occurred at DOLLAR AMOUNTS IN MILLIONS the beginning of the periods presented, nor is it intended to be 2016(1) 2015(2) a projection of future results. Net cash provided by (used in) operating activities $ 196 $ 429 Net cash provided by (used in) investing activities $2,356 $(118) Initial and Final Estimated Fair Value of Identifiable Assets (1) Discontinued operations in 2016 includes 335 days of the pulp business, 305 days of Acquired and Liabilities Assumed as of the Merger Date 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 (2) Discontinued operations in 2015 includes a full year of the Cellulose Fibers business segment operations. MEASUREMENT PRELIMINARY PERIOD FINAL ALLOCATION ADJUSTMENTS ALLOCATION Current assets $ 128 $ 10 $ 138 RELATED PARTY TRANSACTIONS WITH PRINTING PAPERS Timber and 8,124 2 8,126 JOINT VENTURE timberlands Prior to November 1, 2016, we held a 50 percent ownership Minerals and 312 6 318 mineral rights interest in North Pacific Paper Corporation (NORPAC), our Property and 272 5 277 printing papers joint venture, which we considered a related equipment party. We provided goods and services to NORPAC, including Equity investment in 876 (29) 847 raw materials and support services. The amount paid to Timberland Venture Weyerhaeuser by this joint venture for goods and services were: Equity investment in 88 (3) 85 Real Estate Development •$126 million in 2016 and Ventures •$197 million in 2015. Other assets 163 4 167 Total assets acquired 9,963 (5) 9,958 NOTE 4: MERGER WITH PLUM CREEK Current liabilities 610 — 610 Long-term debt 2,056 — 2,056 On February 19, 2016, we merged with Plum Creek Timber Note payable to 837 1 838 Company, Inc. (Plum Creek). Plum Creek was a REIT that Timberland Venture primarily owned and managed timberlands in the United States. Other liabilities 77 (6) 71 Plum Creek also produced wood products, developed Total liabilities 3,580 (5) 3,575 opportunities for mineral and other natural resource extraction, assumed and sold real estate properties. Net assets acquired $6,383 $ — $6,383 The acquisition of total assets of $10.0 billion was a noncash The initial allocation of purchase price was recorded using investing and financing activity comprised of $6.4 billion in preliminary estimated fair value of assets acquired and equity consideration transferred and $3.6 billion of liabilities liabilities assumed based upon the best information available assumed. to management at the time. The purchase price allocation was Summarized Unaudited Pro Forma Information that Presents finalized as of December 31, 2016. The measurement period Combined Amounts as if this Merger Occurred at the adjustments reflect additional information obtained to record Beginning of 2015 the fair value of certain assets acquired and liabilities assumed DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES based on facts and circumstances existing as of the acquisition 2016 2015 date. Measurement period adjustments reflected above did not Net sales $6,525 $6,664 have a material impact to earnings or cash flows for the year Net earnings from continuing operations attributable $ 519 $ 487 ended December 31, 2016. to Weyerhaeuser common shareholders Net earnings from continuing operations per share $ 0.69 $ 0.61 attributable to Weyerhaeuser common shareholders, NOTE 5: NET EARNINGS PER SHARE basic Net earnings from continuing operations per share $ 0.68 $ 0.61 Our basic earnings per share attributable to Weyerhaeuser attributable to Weyerhaeuser common shareholders, common shareholders for the last three years were: diluted $0.77 in 2017, Pro forma net earnings attributable to Weyerhaeuser common • $1.40 in 2016 and shareholders exclude $155 million and $22 million of • $0.89 in 2015. non-recurring merger-related costs (net of tax) incurred in the •
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 73 Our diluted earnings per share attributable to Weyerhaeuser SHARES EXCLUDED FROM DILUTIVE EFFECT common shareholders for the last three years were: The following shares were not included in the computation of •$0.77 in 2017, diluted earnings per share because they were either antidilutive •$1.39 in 2016 and or the required performance or market conditions were not met. •$0.89 in 2015. Some or all of these shares may be dilutive potential common shares in future periods.
HOW WE CALCULATE BASIC AND DILUTED NET EARNINGS Potential Shares Not Included in the Computation of Diluted PER SHARE Earnings per Share “Basic earnings” per share is net earnings available to common SHARES IN THOUSANDS shareholders divided by the weighted average number of our 2017 2016 2015 outstanding common shares, including stock equivalent units Stock options 1,351 1,462 5,016 where there is no circumstance under which those shares Performance share units 799 384 155 would not be issued. Preference shares(1) — — 25,307 (1) See Note 15: Shareholders’ Interest for more information. “Diluted earnings” per share is net earnings available to common shareholders divided by the sum of the: NOTE 6: INVENTORIES •weighted average number of our outstanding common shares and Inventories include raw materials, work-in-process, finished •the effect of our outstanding dilutive potential common goods as well as materials and supplies. shares. Inventories as of the End of Our Last Two Years
Dilutive potential common shares may include: DOLLAR AMOUNTS IN MILLIONS DECEMBER 31, DECEMBER 31, •outstanding stock options, 2017 2016 restricted stock units, • LIFO inventories: •performance share units and •preference shares. Logs $ 17 $ 18 Lumber, plywood, panels, and 66 61 Calculation of Weighted Average Number of Outstanding fiberboard Common Shares — Dilutive Other products 10 10 SHARES IN THOUSANDS FIFO or moving average cost inventories: 2017 2016 2015 Weighted average number of 753,085 718,560 516,371 Logs 38 21 outstanding shares — basic Lumber, plywood, panels, fiberboard 91 73 Dilutive potential common shares: and engineered wood products Stock options 2,571 2,672 2,342 Other products 77 90 Restricted stock units 582 756 381 Materials and supplies 84 85 Performance share units 428 413 524 Total $383 $358 Total effect of outstanding dilutive 3,581 3,841 3,247 potential common shares Weighted average number of 756,666 722,401 519,618 LIFO — the last-in, first-out method — applies to major outstanding common shares — inventory products held at our U.S. domestic locations. The dilutive FIFO — the first-in, first-out method — or moving average cost methods apply to the balance of our domestic raw material and We use the treasury stock method to calculate the dilutive product inventories as well as for all material and supply effect of our outstanding stock options, restricted stock units inventories and all foreign inventories. If we used FIFO for all and performance share units. Share-based payment awards LIFO inventories, our stated inventories would have been higher that are contingently issuable upon the achievement of by $70 million as of December 31, 2017, and $71 million as of specified performance or market conditions are included in our December 31, 2016, respectively. diluted earnings per share calculation in the period in which the conditions are satisfied.
74 HOW WE ACCOUNT FOR OUR INVENTORIES JOINT VENTURES ACCOUNTED FOR USING THE EQUITY METHOD The Inventories section of Note 1: Summary of Significant Accounting Policies provides details about how we account for We have investments in an unconsolidated joint venture over our inventories. which we have significant influence that we account for using the equity method. We record our share of net earnings within “Equity Earnings from joint ventures” in our Consolidated NOTE 7: PROPERTY AND EQUIPMENT Statement of Operations in the period in which earnings are Property and equipment includes land, buildings and recorded by the affiliates. improvements, machinery and equipment, roads and other items. Real Estate Development Ventures Carrying Value of Property and Equipment and Estimated WestRock-Charleston Land Partners, LLC (WR-CLP) is a limited Service Lives liability company which holds residential and commercial real DOLLAR AMOUNTS IN MILLIONS estate development properties, currently under development DECEMBER 31, DECEMBER 31, (Class A Properties) and higher-value timber and development RANGE OF LIVES 2017 2016 lands (Class B Properties) (referred to collectively as the Real Property and equipment, at cost: Estate Development Ventures). We have a 3 percent interest in Land N/A $ 88 $ 90 Class A Properties and a 50 percent interest in Class B Buildings and 15-35 867 789 Properties. WestRock Company is the other member of WR-CLP improvements and owns 97 percent of the Class A Properties and 50 percent Machinery and 5-25 3,037 3,022 of the Class B Properties. The company uses the equity method equipment for both its Class A and Class B interests. Our share of the Roads 10-35 782 773 equity earnings is included in the net contribution to earnings of Other 3-10 182 194 our Real Estate & ENR segment. Total cost 4,956 4,868 Accumulated (3,338) (3,306) WR-CLP is a variable interest entity and is financed by regular depreciation and amortization capital calls from the manager of WR-CLP in proportion to a Property and $ 1,618 $ 1,562 member’s ownership interest. If a member does not make a equipment, net capital contribution, the member’s ownership interest is diluted. We are not committed to make any material capital contributions during the remaining term of the venture, which SERVICE LIVES AND DEPRECIATION expires in 2020. We do not intend to provide any additional In general, additions are classified into components, each with sources of financing for WR-CLP. its own estimated useful life as determined at the time of We are not the primary beneficiary of WR-CLP. We consider the purchase. Buildings and improvements for property and activities that most significantly impact the economic equipment have estimated lives that are generally at either the performance of WR-CLP to be the day-to-day operating decisions high end or low end of the range from 15 years to 35 years, along with the oversight responsibilities for the real estate depending on the type and performance of construction. development projects and properties. WestRock Company (the Depreciation expense, excluding discontinued operations, was: other equity member) has the power to direct the activities of WR-CLP that most significantly impact its economic •$206 million in 2017, performance through its ability to manage the day-to-day •$198 million in 2016 and operations of WR-CLP. WestRock Company also has the ability •$160 million in 2015. to control all management decisions associated with all Class A and Class B Properties through its majority representation on NOTE 8: RELATED PARTIES the board of directors for the Class A Properties and due to its equal representation on the board of directors for the Class B This note provides details about and our transactions with Properties. related parties. Our related parties consist of: The carrying amount of our investment in WR-CLP is $31 million •joint ventures accounted for using equity method; and $56 million at December 31, 2017, and December 31, •our Twin Creeks Venture; and 2016, respectively. The change in our investment in WR-CLP •special-purpose entities (SPEs). during 2017 is due to a $25 million cash return of investment
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 75 received during 2017. Additionally, we had $1 million of equity no further responsibilities or obligations related to the Twin earnings from the joint ventures during 2017. We record our Creeks Venture and our continuing involvement in the share of net earnings within “Equity earnings from joint contributed timberlands ceased. Due to the events during the ventures” in our Consolidated Statement of Operations in the quarter, we have recognized the sale of the original contribution period which earnings are recorded by the affiliates. of timberlands that occurred April 2016. Changes in our deposit from contribution of timberlands to Other Joint Ventures related party balance during 2016 and 2017 were as follows: Timberland Venture DOLLAR AMOUNTS IN MILLIONS Balance at December 31, 2015 $ — Since August 31, 2016, we hold all of the equity interests in Initial cash receipt upon contribution of timberlands to Twin Creeks 440 the Timberland Venture and consolidate it as a wholly-owned Venture subsidiary and eliminated our equity method investment in the Lease payments to Twin Creeks Venture (17) Timberland Venture. Distributions from Twin Creeks Venture 3 Balance at December 31, 2016 $ 426 Beginning on the date of our merger with Plum Creek until Lease payments to Twin Creeks Venture (8) August 31, 2016, we held preferred and common interests in Distributions from Twin Creeks Venture 2 Southern Diversified Timber, LLC, a timberland joint venture Recognition of contributed timberlands (420) (Timberland Venture), which included 100 percent of the Balance at December 31, 2017 $ — preferred interests and 9 percent of the common interests. The Timberland Venture’s other member, an affiliate of Campbell Global LLC (TCG Member), held 91 percent of the Timberland Formation and Operations Venture’s common interests. Our investment in and share of On April 1, 2016, we contributed approximately 260,000 acres the equity earnings of the Timberland Venture was not of our southern timberlands with an agreed-upon value of attributed to one of our business segments, and was reported approximately $560 million to Twin Creeks Timber, LLC (Twin in Unallocated Items. On August 31, 2016, the Timberland Creeks Venture), in exchange for cash of approximately Venture redeemed TCG Member’s interest. In conjunction with $440 million and a 21 percent ownership interest. The other the redemption of TCG Member, we remeasured our previously members contributed cash of approximately $440 million for a held equity interest to fair value at August 31, 2016, resulting combined 79 percent ownership interest. in recognition of a gain of $6 million in “Interest income and other” on our Consolidated Statement of Operations during In conjunction with contributing to the venture, we entered into third quarter 2016. a separate agreement to manage the timberlands owned by the Twin Creeks Venture, including harvesting activities, marketing and log sales activities, and replanting and silviculture North Pacific Paper Company (NORPAC) activities. This management agreement guaranteed the Twin During 2016, we sold our interest in North Pacific Paper Creeks Venture an annual return equal to 3 percent of the Corporation (NORPAC). See Note 3: Discontinued Operations contributed value of the managed timberlands in the form of and other divestitures for additional information. minimum quarterly payments from Weyerhaeuser. This agreement also required us to annually distribute 75 percent of any profits earned by us in excess of the minimum quarterly TWIN CREEKS VENTURE payments. The management agreement was cancellable at any Ownership Redemption, Agreement Termination and Sale time by Twin Creeks Timber, LLC, and otherwise would expire Recognition on April 1, 2019. During October 2017, we redeemed our 21 percent ownership The guaranteed return that the management agreement interest in the Twin Creeks Venture for $108 million in cash. required Weyerhaeuser to provide to the Twin Creeks Venture We did not recognize a material gain or loss on the redemption constituted continuing involvement in the timberlands that we of our ownership interest. The cash received was classified as contributed to the venture. This continuing involvement a cash flow from investing activities in our Consolidated prohibited the recognition of the contribution as a sale and Statement of Cash Flows. required application of the deposit method to account for the cash payment received. By applying the deposit method to the Effective December 31, 2017, we terminated the agreements contribution of timberlands to the venture: under which we had managed the Twin Creeks timberlands. Our receipt of $440 million proceeds from the contribution of Following termination of these agreements, Weyerhaeuser has • timberlands to the venture was recorded as a noncurrent
76 liability — “Deposit from contribution of timberlands to and 2016. Maturities of the financial investments at the end of related party” — on our Consolidated Balance Sheet. 2017 were: The contributed timberlands continued to be reported within • $253 million in 2019 and the “Timber and timberlands at cost, less depletion charged • $362 million in 2020. to disposals” on our Consolidated Balance Sheet. • •No gain or loss was recognized in our Consolidated The long-term notes of our monetization SPEs were Statement of Operations. $511 million as of both December 31, 2017, and •Our balance sheet did not reflect our 21 percent ownership December 31, 2016. The weighted average interest rate was interest in the Twin Creeks Venture. 5.6 percent during 2017 and 2016. Maturities of the notes at the end of 2017 were: The receipt of $440 million was classified as a cash flow from investing activities in our Consolidated Statement of Cash •$209 million in 2018 and Flows. The cash proceeds from our contribution of timberlands •$302 million in 2019. were used for share repurchases. Financial investments consist of bank guarantees backed by bank notes for three of the SPE transactions. Interest earned Sale of Additional Timberlands to Twin Creeks from each financial investment is used to pay interest accrued In conjunction with the redemption and termination discussed on the corresponding SPE’s note. Any shortfall between interest above, we also entered an agreement to sell 100,000 acres of earned and interest accrued reduces our equity in the Southern Timberlands to Twin Creeks for $203 million. The monetization SPEs. sale, which included 80,000 acres of timberlands in Upon dissolution of the SPEs and payment of all obligations of Mississippi and 20,000 acres in Georgia, closed December 29, the entities, we would receive any net equity remaining in the 2017. The sale resulted in a $99 million gain recognized during monetization SPEs and would be required to report taxable fourth quarter 2017. gains on our income tax return. In the event that proceeds from the financial investments are insufficient to settle all of the SPECIAL-PURPOSE ENTITIES liabilities of the SPEs, we are not obligated to contribute any From 2002 through 2004, we sold certain nonstrategic funds to any of the SPEs. As of December 31, 2017, our net timberlands in five separate transactions. We are the primary equity in the three SPEs was approximately $105 million and beneficiary and consolidate the assets and liabilities of certain the deferred tax liability was estimated to be approximately monetization and buyer-sponsored SPEs involved in these $116 million. transactions. We have an equity interest in the monetization SPEs, but no ownership interest in the buyer-sponsored SPEs. NOTE 9: PENSION AND OTHER POSTRETIREMENT The following disclosures refer to assets of buyer-sponsored BENEFIT PLANS SPEs and liabilities of monetization SPEs. However, because these SPEs are distinct legal entities: This note provides details about defined benefit and defined contribution plans we sponsor for our employees. The Pension •Assets of the SPEs are not available to satisfy our liabilities and Other Postretirement Benefit Plans section of Note 1: or obligations. Summary of Significant Accounting Policies provides information •Liabilities of the SPEs are not our liabilities or obligations. about employee eligibility for pension plans and postretirement Our Consolidated Statement of Operations includes: health care and life insurance benefits, as well as how we account for the plans and benefits. •Interest expense on SPE notes of: – $29 million in 2017, – $29 million in 2016 and DEFINED BENEFIT PLANS WE SPONSOR – $29 million in 2015. OVERVIEW OF PLANS •Interest income on SPE investments of: – $34 million in 2017, The defined benefit pension plans we sponsor in the U.S. and – $34 million in 2016 and Canada differ according to each country’s requirements. In the – $34 million in 2015. U.S., we have qualified plans that qualify under the Internal Revenue Code and nonqualified plans for select employees that Sales proceeds paid to buyer-sponsored SPEs were invested in provide additional benefits not qualified under the Internal restricted financial investments with a balance of $615 million Revenue Code. In Canada, we have registered plans that are as of both December 31, 2017, and December 31, 2016. The registered under the Income Tax Act and applicable provincial weighted average interest rate was 5.5 percent during 2017
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 77 pension acts and nonregistered plans for select employees that FUNDED STATUS OF PLANS provide additional benefits that may not be registered under the The funded status of the plans we sponsor is determined by Income Tax Act or provincial pension acts. We also offer other comparing the projected benefit obligation with the fair value of postretirement benefit plans in the U.S. and Canada, including plan assets at the end of the year. The following table retiree medical and life insurance plans. demonstrates how our plans’ funded status is reflected on the Assumed Plans from Merger with Plum Creek Consolidated Balance Sheet. Upon our merger with Plum Creek, we assumed one qualified DOLLAR AMOUNTS IN MILLIONS pension plan and two nonqualified pension plans. These plans PENSION OTHER POSTRETIREMENT were frozen as of February 19, 2016, and all plans were BENEFITS merged into existing Weyerhaeuser plans effective 2017 2016 2017 2016 December 31, 2016. Funded status: The fair values of items assumed are included as plan Fair value of plan assets $ 5,514 $ 5,351 $ — $ — acquisitions in the following tables. We also assumed assets of Projected benefit obligations (6,795) (6,469) (200) (225) $47 million related to the nonqualified plans held in a grantor Funded status $(1,281) $(1,118) $(200) $(225) Presentation on our trust. These assets are subject to the claims of creditors in the Consolidated Balance Sheet: event of bankruptcy. As a result, these are not considered plan Noncurrent assets $ 45 $ 27 $ — $ — assets and are not netted against the nonqualified pension Current liabilities (21) (28) (19) (21) liability. These assets are included in “Other assets” in our Noncurrent liabilities (1,305) (1,117) (181) (204) Consolidated Balance Sheet. During 2016 and 2017, we Funded status $(1,281) $(1,118) $(200) $(225) redeemed $42 million of these assets to make nonqualified pension benefit payments. Assets and liabilities on the Consolidated Balance Sheet are different from the cumulative income or expense that we have During first quarter 2016, we recognized $5 million of pension recorded associated with the plans. The differences are benefit costs from change in control provisions for certain Plum actuarial gains and losses and prior service costs and credits Creek executives. These enhanced pension benefits were that are deferred and amortized into periodic benefit costs in triggered by changes in control and retention decisions made future periods. Unamortized amounts are recorded in after the completion of the merger (see Note 17: Charges for “Cumulative Other Comprehensive Loss”, which is a component Integration and Restructuring, Closures and Asset of total equity on our Consolidated Balance Sheet. The Impairments). “Cumulative Other Comprehensive Income (Loss)” section of Amendments of Pension and Other Postretirement Benefit Note 15: Shareholder’s Interest details changes in these Plans for Salaried Employees amounts by component. There were no material pension plan, postretirement medical or Changes in Fair Value of Plan Assets life insurance plan amendments in 2017. Aside from the DOLLAR AMOUNTS IN MILLIONS December 31, 2016, amendments to merge the Plum Creek PENSION OTHER POSTRETIREMENT plans into the Weyerhaeuser plans as described above, there BENEFITS were no material plan amendments in 2016. There were also 2017 2016 2017 2016 no material plan amendments in 2015. Fair value of plan assets at $5,351 $5,491 $ — $ — beginning of year (estimated) Adjustment for final fair value 187—— of plan assets Actual return on plan assets 553 27 — — Foreign currency translation 59 29 — — Employer contributions and 57 78 20 21 benefit payments Plan participants’ ——67 contributions Plan transfers 3 1 — — Plan acquisitions — 137 — — Benefits paid (includes lump (527) (419) (26) (28) sum settlements) Fair value of plan assets at end $5,514 $5,351 $ — $ — of year (estimated)
78 We estimate the fair value of pension plan assets based upon The accumulated benefit obligation for all of our defined benefit the information available during the year-end reporting process. pension plans was: In some cases, primarily private equity funds, the available $6.7 billion at December 31, 2017, and information consists of net asset values as of an interim date, • $6.4 billion at December 31, 2016. plus cash flows and market events between the interim date • and the end of the year. We update the year-end estimated fair value of pension plan assets during the first half of the next PENSION ASSETS year to incorporate year-end net asset values received after we Our Investment Policies and Strategies have filed our Annual Report on Form 10-K. Our investment policies and strategies guide and direct how the See additional details about the changes in the fair value of funds are managed for the benefit plans we sponsor. These plan assets in the “Pension Assets” section below. funds include our: Changes in Projected Benefit Obligations of Our Pension and Other Postretirement Benefit Plans •U.S. Pension Trust — funds our U.S. qualified pension plans; Canadian Pension Trust — funds our Canadian registered DOLLAR AMOUNTS IN MILLIONS • pension plans; and PENSION OTHER POSTRETIREMENT •Retirement Compensation Arrangements — fund a portion of BENEFITS our Canadian nonregistered pension plans. 2017 2016 2017 2016 Reconciliation of projected benefit obligation: U.S. and Canadian Pension Trusts Projected benefit obligation $6,469 $6,211 $225 $240 Investment managers of our pension plan asset portfolios use beginning of year a diversified set of investment strategies. Our trusts invest Service cost 35 48 — — both directly in a diversified mix of nontraditional investments, Interest cost 264 277 8 8 and indirectly through derivatives to promote effective use of Plan participants’ ——67 contributions capital, increase returns and manage associated risk. Our Actuarial (gains) losses 489 120 (18) (5) direct investments include cash and short-term investments, Foreign currency translation 59 27 5 3 common and preferred stocks, hedge funds and related Benefits paid (includes lump (527) (419) (26) (28) investments and private equity and related investments. Our sum settlements) indirect investments include equity and fixed income index Plan amendments and other 3 — — — derivatives, foreign currency derivatives and total return swaps. Plan transfers 3 1 — — Plan acquisitions — 199 — — Cash and short-term investments include highly liquid money Change in control enhanced — 5——market and government securities and are primarily held to benefits fund benefit payments, capital calls, margin requirements or to Projected benefit obligation at $6,795 $6,469 $200 $225 meet regulatory requirements. end of year Common and preferred stocks are equity instruments that have See additional details about the actuarial assumptions and been purchased directly or resulted from transactions related to changes in the projected benefit obligation in the “Actuarial private equity investment holdings. Assumptions” section below. Hedge fund and related investments are privately-offered Accumulated Benefit Obligations Greater Than Plan Assets managed pools primarily structured as limited liability entities. General members or partners of these limited liability entities As of December 31, 2017, pension plans with accumulated serve as portfolio managers and are thus responsible for the benefit obligations greater than plan assets had: fund’s underlying investment decisions. Underlying investments •$5.9 billion in projected benefit obligations, within these funds may include long and short public and •$5.9 billion in accumulated benefit obligations and private equities, corporate, mortgage and sovereign debt, •assets with a fair value of $4.6 billion. options, swaps, forwards and other derivative positions. These funds have varying degrees of leverage, liquidity, and As of December 31, 2016, pension plans with accumulated redemption provisions. benefit obligations greater than plan assets had: •$5.7 billion in projected benefit obligations, Private equity and related investments are investments in •$5.6 billion in accumulated benefit obligations and private equity, mezzanine, distressed, co-investments and other •assets with a fair value of $4.5 billion. structures. Private equity funds generally participate in buyouts
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 79 and venture capital of limited liability entities through unlisted market price risk by investing in a diversified portfolio whose equity and debt instruments. These funds may also borrow at returns exhibit low correlation to traditional asset classes and the underlying entity level. Mezzanine and distressed funds to each other. In addition, we and our investment advisers generally invest in the debt of public or private companies with perform regular monitoring with ongoing qualitative additional participation through warrants or other equity assessments, quantitative assessments, and comprehensive options. investment and operational due diligence. Derivative instruments are comprised of swaps, futures, Liquidity risk is the risk that the trust will not be able to settle forwards or options. Equity and fixed income index derivatives liabilities such as payments to participants, counterparties, and are used to achieve target equity and bond exposure or to service providers. Plan investments in limited liability pools with reduce exposure to certain market risks. Foreign currency no active secondary market may be illiquid. Private equity funds derivatives reduce exposure to certain currency risks. Total are subject to distribution and funding schedules set by fund return swaps enable exposure to return characteristics of managers and market activity. Hedge funds may also be specific financial strategies with limited exchange of principal. subject to restrictions that delay redemptions. To mitigate liquidity risk, private equity portfolios have been diversified While we do not target specific direct investment or derivative across different vintage years and strategies, and hedge fund allocations, we have established guidelines on the percentage portfolios have been diversified across investment fund of pension trust assets that can be invested in certain managers, strategies and liquidity provisions. In addition, the categories to provide diversification by investment type fund investment committee regularly reviews cash flows of the and investment managers, as well as to manage overall pension trusts and sets appropriate guidelines to address liquidity. Allocation of trust assets at the end of the last two liquidity needs. years is presented below. Currency risk arises from holding plan assets denominated in a Assets within our qualified and registered pension plans in our currency other than the currency in which its liabilities are U.S. and Canadian pension trusts were invested as follows: settled. Currency risk is generally managed through notional DECEMBER 31, DECEMBER 31, contracts designed to hedge net exposure to non-functional 2017 2016 currencies. Cash and short-term investments 10.6% 13.7% Common and preferred stock — 0.1 Interest rate risk is the risk that a change in interest rates will Hedge funds and related investments 58.8 56.6 adversely affect the fair value of fixed income securities. Private equity and related investments 22.2 22.7 Interest rate risk exposure is primarily indirect through Derivative instruments, net 8.7 7.1 investment in limited liability pools. Fund managers mitigate Accrued liabilities (0.3) (0.2) this risk with predefined investment mandates and investment decisions. Total 100.0% 100.0% Credit risk is the risk that counterparties’ failure to discharge Retirement Compensation Arrangements their obligations could impact cash flows. The trusts’ primary exposure is through settlement receivables from derivative Retirement compensation arrangements fund a portion of our contracts. Only the amount of unsettled net receivables is at Canadian nonregistered pension plans. As required by risk for these types of investments, and no principal is at risk. Canadian tax rules, approximately 50 percent of these assets We decrease credit risk exposure by only dealing with highly- are invested into a noninterest-bearing refundable tax account rated financial counterparties; as of year-end, our held by the Canada Revenue Agency. This portion of the counterparties each had a credit rating of at least A from S&P. portfolio does not earn returns. The remaining portion is We further manage this risk through diversification of invested in a portfolio of equities. counterparties, predefined settlement and margining provisions and documented agreements. Managing Risk We are also exposed to credit risk indirectly through Investments and contracts are subject to risks including market counterparty relationships initiated by underlying managers of price, liquidity, currency, interest rate and credit risks. The investments in limited liability pools. This risk is mitigated following provides an overview of these risks and describes through initial due diligence and ongoing monitoring processes. governance processes and actions we take to mitigate these risks on our pension plan asset portfolios. Valuation of Our Plan Assets Market price risk is the risk that market fluctuations will Pension assets are stated at fair value as of the reporting date. adversely affect the value of plan assets. The trusts mitigate Fair value is based on the amount that would be received to
80 sell an asset or paid to settle a liability in an orderly transaction The net pension plan assets, when categorized in accordance between market participants at the reporting date. We do not with this fair value hierarchy, are as follows. Investments consider forced or distressed sale scenarios. Instead, we valued using net asset value (NAV) as a practical expedient are consider both observable and unobservable inputs that reflect presented to reconcile with total plan assets. assumptions applied by market participants when setting the exit price of an asset or liability in an orderly transaction within DOLLAR AMOUNTS IN MILLIONS the principal market for that asset or liability. 2017 LEVEL 1 LEVEL 2 LEVEL 3 NAV TOTAL Pension trust We value the pension plan assets based upon the observability investments: of exit pricing inputs and classify pension plan assets based Cash and short- $580 $ 2 $ — $ — $ 582 upon the lowest level input that is significant to the fair value term investments measurement of the pension plan assets in their entirety. The Common and 1——— 1 preferred stock fair value hierarchy is: Hedge fund and 59 — 10 3,168 3,237 related •Level 1: Inputs are unadjusted quoted prices for identical investments assets and liabilities traded in an active market. Private equity and — — 102 1,120 1,222 •Level 2: Inputs are quoted prices in non-active markets for related which pricing inputs are observable either directly or indirectly investments Derivative at the reporting date. instruments: •Level 3: Inputs are derived from valuation techniques in Assets — 31 445 — 476 which one or more significant inputs or value drivers are Liabilities — — — — — unobservable. Total pension trust 640 33 557 4,288 5,518 investments Investments for which fair value is measured using the net Accrued liabilities, (16) asset value per share as a practical expedient are not net categorized within the fair value hierarchy. Pension trust net 5,502 assets Cash and short-term investments are valued at cost, which Canadian approximates market. nonregistered plan assets: Common and preferred stocks are valued at exit prices quoted Cash and short- 6——— 6 in public markets. term investments Common and 6——— 6 Hedge funds, private equities, and related fund units are valued preferred stock based on the net asset values of the funds. These values Total Canadian 12———12 nonregistered plan represent the per-unit price at which new investors are assets permitted to invest and existing investors are permitted to exit. Total plan assets $5,514 When net asset values as of the end of the year have not been received, we estimate fair value by adjusting the most recently reported net asset values for market events and cash flows between the interim date and the end of the year. Derivative instruments are valued based upon valuation statements received from each derivative’s counterparty. These contracts are not publicly traded.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 81 DOLLAR AMOUNTS IN MILLIONS A reconciliation of the beginning and ending balances of the 2016 LEVEL 1 LEVEL 2 LEVEL 3 NAV TOTAL pension plan assets measured at fair value using significant Pension trust unobservable inputs (Level 3) is presented below: investments:
Cash and short- $715 $16 $ — $ — $ 731 DOLLAR AMOUNTS IN MILLIONS term investments INVESTMENTS Common and 7——— 7 preferred stock Hedge funds Private equity and Derivative Hedge fund and 62 — 4 2,957 3,023 and related related instruments, related investments investments net Total investments Balance as of $3 $52 $491 $ 546 December 31, Private equity and — — 75 1,138 1,213 2015 related investments Net realized (1) (2) 134 131 gains (losses) Derivative instruments: Net change in 2 (3) (121) (122) unrealized gains Assets — 10 376 — 386 (losses) Liabilities — (8) — — (8) Purchases — 21 — 21 Total pension trust 784 18 455 4,095 5,352 Sales — (18) — (18) investments Settlements — — (128) (128) Accrued liabilities, (11) net Transfers into —25—25 Level 3 Pension trust net 5,341 investments Transfers out of ———— Level 3 Canadian nonregistered plan Balance as of 4 75 376 455 assets: December 31, 2016 Cash and short- 5——— 5 term investments Net realized (1) (30) 15 (16) gains (losses) Common and 5——— 5 preferred stock Net change in 24167110 unrealized gains Total Canadian 10———10 (losses) nonregistered plan assets Purchases — 14 — 14 Total plan assets $5,351 Sales (1) — — (1) Settlements — — (13) (13) Assets that do not have readily available quoted prices in an Transfers into 619—25 active market require more judgment to value and have Level 3 increased risk. Approximately $557 million, or 10.1 percent, of Transfers out of — (17) — (17) Level 3 our pension plan assets were classified as Level 3 assets as of Balance as of $10 $102 $ 445 $ 557 December 31, 2017. December 31, 2017
The availability of observable market data is monitored to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period. We evaluate the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total net assets available for benefits.
82 The table below shows the fair value and aggregate notional and 3.60 percent for the years ended December 31, 2017, and amount of the derivative instruments held by our pension trusts December 31, 2016, respectively. at the end of the last two years. Estimating Our Net Periodic Benefit Costs
DOLLAR AMOUNTS IN MILLIONS PENSION FAIR VALUE NOTIONAL 2017 2016 2015 DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, Discount rates: 2017 2016 2017 2016 United States 4.30% 4.50% 4.10% Equity and $ 19 $ 10 $ 501 $ 405 Canada fixed income 3.70% 4.00% 3.90% index Lump sum PPA Table PPA Table PPA Table derivatives, distributions(1)(2) net Expected return on plan assets: Foreign 12 (5) 1,413 2,811 currency Qualified/ 8.00% 9.00% for all 9.00% derivatives, registered plans except plans(3) 7.00% for plans net assumed from Plum Creek Total return 445 373 1,443 1,515 swaps, net Nonregistered 3.50% 3.50% 3.50% plans Total $476 $378 $3,357 $4,731 Rate of compensation increase: ACTUARIAL ASSUMPTIONS Salaried: United 13.00% to 2.00% 13.00% to 2.00% 2.50% for 2015 We use actuarial assumptions to estimate our benefit States decreasing with decreasing with and 3.50% thereafter obligations and our net periodic benefit costs. The following participant age participant age tables show the rates used to estimate our benefit obligations Canada 3.50% 3.50% 2.50% for 2015 and 3.50% thereafter and periodic net benefit costs. Hourly: United 13.00% to 2.30% 13.00% to 2.30% 3.00% States decreasing with decreasing with Rates We Use in Estimating Our Benefit Obligations participant age participant age PENSION Canada 3.25% 3.25% 3.25% DECEMBER 31, DECEMBER 31, Lump sum 60.00% 60.00% 60.00% distributions 2017 2016 election(2) Discount rates: (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. United States 3.70% 4.30% (2) U.S. qualified salaried and nonqualified plans only (3) Beginning in 2017 and continuing in 2018 we will use an assumed expected return on Canada 3.50% 3.70% plan assets of 8.00 percent for qualified and registered pension plans. Lump sum distributions(1)(2) PPA Table PPA Table Rate of compensation increase: The discount rates used for our U.S. other postretirement Salaried: benefit plans were 3.70 percent, 4.00 percent and United States 13.00% to 2.00% 13.00% to 2.00% 3.60 percent for the years ended December 31, 2017, decreasing with decreasing with participant age participant age December 31, 2016, and December 31, 2015, respectively. Canada 3.25% 3.50% Additionally, the discount rates used for our Canadian other Hourly: postretirement benefit plans were 3.60 percent, 3.90 percent United States 13.00% to 2.30% 13.00% to 2.30% and 3.80 percent for the years ended December 31, 2017, decreasing with decreasing with participant age participant age December 31, 2016, and December 31, 2015, respectively. Canada 3.00% 3.25% Expected Return on Plan Assets Lump sum or installment 60.00% 60.00% distributions election(2) We estimate the expected long-term return on assets for our (1) PPA Phased Table: Interest and mortality assumptions as mandated by Pension qualified, registered and nonregistered pension plans. 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 Qualified and Registered Pension Plans The discount rates used for our U.S. other postretirement We have assumed a long-term rate of return on plan assets of benefit plans were 3.50 percent and 3.70 percent for the years 8 percent for the year ended December 31, 2017. As part of ended December 31, 2017, and December 31, 2016, our 2016 annual evaluation of key assumptions, we reduced respectively. Additionally, the discount rates used for our our assumption of long-term rate of return on plan assets to Canadian other postretirement benefit plans were 3.40 percent 8 percent for estimated 2017 net periodic benefit cost.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 83 Determining our expected return requires a high degree of Assumptions We Use in Estimating Health Care Benefit Cost judgment. We consider actual pension fund performance over Trends multiple years, and current and expected valuation levels in the 2017 2016 global equity and credit markets. Historical fund returns are U.S. CANADA U.S. CANADA used as a base, and we place added weight on more recent Weighted 8.40% for 5.10% 8.90% for 4.90% pension plan asset performance. Over the 33 years it has been health care Pre-Medicare Pre-Medicare cost trend rate and 4.50% and 4.50% in place, our U.S. pension trust investment strategy has assumed for for HRA for HRA achieved a 13.7 percent net compound annual return rate. The next year past 5 years, our net compounded annual return was over Rate that the 4.50% 4.30% 4.50% 4.30% cost trend rate 8 percent. gradually declines to Nonregistered Plans Year the cost 2037 2028 2037 2028 trend rate is Canadian tax rules require that 50 percent of the assets for reached nonregistered plans go to a noninterest-bearing refundable tax account. As a result, the return we earn investing the other The assumed health care cost trend rate can significantly 50 percent is spread over 100 percent of the assets. Our influence projected postretirement benefit plan payments. The expected long-term annual rate of return on the portion we are following table demonstrates the effect a one percent change in allowed to manage is 7 percent. This assumption is based on assumed health care cost trend rates would have with all other historical experience and future return expectations. The assumptions remaining constant. expected overall annual return on assets that fund our Effect of a One Percent Change in Health Care Costs nonregistered plans is 3.5 percent. AS OF DECEMBER 31, 2017 (DOLLAR AMOUNTS IN MILLIONS) Allocation of Actual Returns Between Assets Held by Our 1% INCREASE 1% DECREASE Pension Trusts Effect on total service and interest cost less than $1 less than $(1) The percentage of actual return on assets held by our pension components trusts in 2017 based on valuations as of year-end is as follows: Effect on accumulated postretirement $7 $(7) benefit obligation
2017 2016 2015 ACTIVITY OF PLANS Direct investments 72% 44% 77% Net Periodic Benefit Cost (Credit) Derivative instruments 28% 56% 23% Total 100% 100% 100% DOLLAR AMOUNTS IN MILLIONS OTHER POSTRETIREMENT PENSION BENEFITS Health Care Costs 2017 2016 2015 2017 2016 2015 Rising costs of health care affect the costs of our other Net periodic benefit cost (credit): postretirement plans. We use assumptions about health care Service cost(1) $35$48$57$—$—$— cost trend rates to estimate the cost of benefits we provide. Interest cost 264 277 265889 Our trend rate assumptions are based on historical market Expected return on plan (409) (495) (476) — — — assets experience, current environment and future expectations. In Amortization of actuarial loss 195 156 182 8 9 10 2017, the assumed weighted health care cost trend rate was: Amortization of prior service 4 4 4 (8) (7) (9) •8.9 percent for U.S. Pre-Medicare cost (credit) 4.5 percent for U.S. Health Reimbursement Account (HRA) Accelerated pension costs for — 5 ———— • Plum Creek merger-related •4.9 percent for Canada change-in-control provisions Net periodic benefit cost (credit) $ 89 $ (5) $ 32 $ 8 $10 $10 This table shows the assumptions we use in estimating the (1) Service cost includes $13 million in 2016 and $17 million in 2015 for employees that annual cost increase for health care benefits we provide. 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.
84 Estimated Amortization from Cumulative Other Comprehensive Estimated Projected Benefit Payments for the Next 10 Years
Loss in 2018 DOLLAR AMOUNTS IN MILLIONS DOLLAR AMOUNTS IN MILLIONS OTHER POSTRETIREMENT OTHER PENSION BENEFITS POSTRETIREMENT PENSION BENEFITS TOTAL 2018 $ 369 $19 Net actuarial loss $242 $8 $250 2019 371 18 Prior service cost (credit) 3 (8) (5) 2020 374 17 Net effect cost $245 $— $245 2021 374 16 2022 376 15 2023-2027 1,902 65 Expected Pension Plan and Benefit Funding
Established funding standards govern the funding requirements UNION-ADMINISTERED MULTIEMPLOYER BENEFIT PLANS for our qualified and registered pension plans. We fund the benefit payments of our nonqualified and nonregistered plans We contribute to multiemployer defined benefit plans under the as benefit payments come due. There was no minimum terms of collective-bargaining agreements. These plans cover a required contribution for our U.S. qualified plan for 2017, nor small number of our employees and on an annual basis our were any contributions made to this plan in 2017. During 2017, contributions are immaterial. we contributed $25 million for our Canadian registered plans, These plans have different risks than single-employer plans. we made contributions and benefit payments of $2 million for Our contributions may be used to fund benefits for employees our Canadian nonregistered pension plans and made benefit of other participating employers. If we choose to stop payments of $31 million for our nonqualified pension plans, participating, we may be required to pay a withdrawal liability including $1 million of enhanced pension benefit payments based on the underfunded status of the plan. If another from change in control provisions. participating employer stops contributing to the plan, we may During 2018, based on estimated year-end asset values and become responsible for remaining plan unfunded obligations. projections of plan liabilities, we expect to: •be required to contribute approximately $23 million for our DEFINED CONTRIBUTION PLANS Canadian registered plan; We sponsor various defined contribution plans for our U.S. and •be required to contribute or make benefit payments for our Canadian salaried and hourly employees. Our contributions to Canadian nonregistered plans of $4 million; and these plans were: •make benefit payments of approximately $19 million for our U.S. nonqualified pension plans. •$21 million in 2017, •$27 million in 2016 and We do not anticipate a contribution being required for our U.S. •$21 million in 2015. qualified pension plan for 2018. Upon our merger with Plum Creek, we assumed one defined contribution plan, the Plum Creek Thrift and Profit Sharing Plan. Expected Postretirement Benefit Funding Effective July 15, 2016, the assets of this plan were merged Benefits for these plans are paid from our general assets as into the Weyerhaeuser 401(k) Plan. they come due. We expect to make benefit payments of $19 million for our U.S. and Canadian other postretirement benefit plans in 2018, including $7 million expected to be required to cover benefit payments under collectively bargained contractual obligations.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 85 NOTE 10: ACCRUED LIABILITIES NOTE 12: LONG-TERM DEBT Accrued liabilities were comprised of the following: This note provides details about: DOLLAR AMOUNTS IN MILLIONS •term loans issued and extinguished, DECEMBER 31, DECEMBER 31, •long-term debt assumed in the Plum Creek merger, and 2017 2016 •long-term debt and long-term debt maturities. Wages, salaries and severance pay $150 $178 Pension and other postretirement 40 49 Our long-term debt includes notes, debentures and other benefits borrowings. Vacation pay 33 33 Taxes – Social Security and real and 24 20 TERM LOANS ISSUED AND EXTINGUISHED personal property Interest 111 120 During July 2017, we prepaid a $550 million variable-rate term Customer rebates and volume 48 39 loan originally set to mature in 2020 (2020 term loan). The discounts 2020 term loan was prepaid using available cash of Deferred income 48 40 $325 million as well as borrowing proceeds from a new Accrued income taxes 19 139 $225 million variable-rate term loan set to mature in 2026 Product remediation accrual (Note 18) 98 — (2026 term loan). The 2020 term loan was eligible to received Other 74 74 patronage refunds while outstanding. Similarly, we receive Total $645 $692 patronage refunds on the 2026 term loans, which will continue while the loan remains outstanding. Refer to the “Installment Note” section below for further details regarding patronage NOTE 11: LINES OF CREDIT refunds. OUR LINES OF CREDIT During August 2017, we paid our $281 million 6.95 percent During March 2017, we entered into a new $1.5 billion five-year debenture due in 2017. senior unsecured revolving credit facility that expires in March During February 2016, and subsequent to completion of the 2022. This replaced a $1 billion senior unsecured revolving Plum Creek merger, we entered into a $600 million 18-month credit facility that was originally set to expire September 2018. senior unsecured term loan set to mature in August 2017. The The entire amount is available to Weyerhaeuser Company. $600 million outstanding under this facility was repaid in full Borrowings are at LIBOR plus a spread or at other interest rates and terminated during fourth quarter 2016. mutually agreed upon between the borrower and the lending banks. As of December 31, 2017, there were no borrowings During March 2016, we entered into a $1.9 billion 18-month outstanding under the facility and we were in compliance with senior unsecured term loan set to mature in September 2017. the credit facility covenants. The $1.1 billion outstanding under this facility was repaid in full and terminated during fourth quarter 2016.
OTHER LETTERS OF CREDIT AND SURETY BONDS LONG-TERM DEBT ASSUMED IN THE PLUM CREEK MERGER The amounts of other letters of credit and surety bonds we Through our merger with Plum Creek, we assumed long-term have entered into as of the end of our last two years are debt instruments consisting of: included in the following table: two issuances of publicly traded Senior Notes, DOLLAR AMOUNTS IN MILLIONS • •an Installment Note (defined and described below) and DECEMBER 31, DECEMBER 31, 2017 2016 •the Note Payable to Timberland Venture (defined and Letters of credit $ 37 $ 38 described below). Surety bonds $134 $125 Concurrent with the merger, we repaid in full the outstanding balances of Plum Creek’s Revolving Line of Credit and Term Our compensating balance requirements for our letters of credit Loan using $720 million of cash on hand. were $5 million as of December 31, 2017. Senior Notes The assumed Senior Notes are publicly traded and were issued by Plum Creek Timberlands, L.P. (PC Timberlands) and were fully and unconditionally guaranteed by Weyerhaeuser Company
86 as of the acquisition date. During third quarter 2016, PC Note Payable to Timberland Venture Timberlands was merged into Weyerhaeuser Company and We assumed the Note Payable to Timberland Venture, which Weyerhaeuser Company assumed the obligations. There were had a principal balance of $783 million. The annual interest two separate Senior Notes: $569 million (principal) rate on the Note Payable to Timberland Venture is fixed of 4.70 percent notes which mature in 2021 and $325 million at 7.375 percent. Interest is paid quarterly with the principal (principal) of 3.25 percent notes which mature in 2023. The due upon maturity. The note matures on October 1, 2018, but Senior Notes are redeemable prior to maturity; however, they may be extended until October 1, 2020, at our election. The are subject to a premium on redemption, which is based upon note is not redeemable prior to maturity. interest rates of U.S. Treasury securities having similar average maturities. Through acquisition accounting, the Note Payable to Timberland Venture was recognized at an estimated fair value of Through acquisition accounting the Senior Notes were $838 million as of the acquisition date. The difference between recognized at estimated fair values of $614 million for the the cash interest payments and the amount being recorded as 4.70 percent notes and $324 million for the 3.25 percent interest expense at the effective market rate will reduce the notes as of the acquisition date. The differences between cash carrying value of the note to the principal amount at the interest payments and the amounts recorded as interest maturity date. expense at the effective market rates will adjust the carrying values of the notes to the principal amounts at maturity. On August 31, 2016, the Timberland Venture redeemed TCG Member’s interest and Weyerhaeuser obtained full ownership of the Timberland Venture’s equity. As a result, we Installment Note consolidated the Timberland Venture as a wholly-owned We assumed an installment note (Installment Note) payable to subsidiary and the Note Payable to Timberland Venture is WestRock Land and Development, LLC (WR LD) that was issued therefore eliminated for financial reporting purposes upon in connection with Plum Creek’s acquisition of certain consolidation as it is now intercompany indebtedness. The timberland assets. The principal balance of the Installment redemption transaction and consolidation are described in Note is $860 million. Following the issuance, WR LD pledged Note 8: Related Parties. the installment note to certain banks. The annual interest rate on the Installment Note is fixed at 5.207 percent. Interest is paid semi-annually with the principal due upon maturity in December 2023. The term may be extended at the request of the holder if the company at the time of the request intends to refinance all or a portion of the Installment Note for a term of five years or more. The Installment Note is generally not redeemable prior to maturity except in certain limited circumstances and could be subject to a premium on redemption.
We receive patronage refunds under the Installment Note. Patronage refunds are distributions of profits from banks in the farm credit system, which are cooperatives that are required to distribute profits to their members. Patronage distributions, which are made in either cash or stock, are received in the year after they were earned and are recorded as offsets to interest expense. Through acquisition accounting, the Installment Note was recognized at an estimated fair value of $893 million as of the acquisition date. The difference between the cash interest payments and the amount being recorded as interest expense at the effective market rate will reduce the carrying value of the Installment Note to the principal amount at the maturity date.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 87 LONG-TERM DEBT AND LONG-TERM DEBT MATURITIES NOTE 13: FAIR VALUE OF FINANCIAL INSTRUMENTS The following table lists our long-term debt by types and FAIR VALUE OF DEBT interest rates at the end of our last two years and includes the The estimated fair values and carrying values of our long-term current portion. debt consisted of the following: Long-Term Debt by Types and Interest Rates (Includes Current DOLLAR AMOUNTS IN MILLIONS Portion) DECEMBER 31, 2017 DECEMBER 31, 2016 DOLLAR AMOUNTS IN MILLIONS CARRYING FAIR VALUE CARRYING FAIR VALUE DECEMBER 31, DECEMBER 31, VALUE (LEVEL 2) VALUE (LEVEL 2) 2017 2016 Long-term debt 6.95% debentures due 2017 $ — $ 281 (including current maturities): 7.00% debentures due 2018 62 62 Fixed rate $5,768 $6,823 $6,061 $6,925 7.375% notes due 2019 500 500 Variable rate 224 225 549 550 Variable rate term loan credit facility — 550 matures 2020 Total Debt $5,992 $7,048 $6,610 $7,475 9.00% debentures due 2021 150 150 4.70% debentures due 2021 597 606 To estimate the fair value of long-term debt, we used the 7.125% debentures due 2023 191 191 following valuation approaches: 5.207% debentures due 2023 885 889 4.625% notes due 2023 500 500 •market approach — based on quoted market prices we 3.25% debentures due 2023 324 324 received for the same types and issues of our debt; or 8.50% debentures due 2025 300 300 •income approach — based on the discounted value of the 7.95% debentures due 2025 136 136 future cash flows using market yields for the same type and 7.70% debentures due 2026 150 150 comparable issues of debt. 7.35% debentures due 2026 62 62 We believe that our variable rate long-term debt instruments 7.85% debentures due 2026 100 100 have net carrying values that approximate their fair values with Variable rate term loan credit facility 225 — only insignificant differences. matures 2026 6.95% debentures due 2027 300 300 The inputs to these valuations are based on market data 7.375% debentures due 2032 1,250 1,250 obtained from independent sources or information derived 6.875% debentures due 2033 275 275 principally from observable market data. The difference Other 1 2 between the fair value and the carrying value represents the 6,008 6,628 theoretical net premium or discount we would pay or receive to Less unamortized discounts (5) (5) retire all debt at the measurement date. Less unamortized debt expense (11) (13) Total $5,992 $6,610 FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS Portion due within one year $ 62 $ 281 We believe that our other financial instruments, including cash and cash equivalents, short-term investments, mutual fund Amounts of Long-Term Debt Due Annually for the Next Five investments held in grantor trusts, receivables, and payables, Years and the Total Amount Due After 2022 have net carrying values that approximate their fair values with DOLLAR AMOUNTS IN MILLIONS(1) only insignificant differences. This is primarily due to the short- 2018 $ 62 term nature of these instruments and the allowance for 2019 500 doubtful accounts. 2020 — 2021 719 NOTE 14: LEGAL PROCEEDINGS, COMMITMENTS AND 2022 — CONTINGENCIES Thereafter 4,675 This note provides details about our: (1) Excludes $36 million of unamortized discounts, capitalized debt expense and fair value adjustments (related to Plum Creek merger). •legal proceedings, •environmental matters and •commitments and other contingencies.
88 LEGAL PROCEEDINGS These reserves are recorded in “Accrued liabilities” and “Other liabilities” in our Consolidated Balance Sheet. We are party to various legal proceedings arising in the ordinary course of business. We are not currently a party to any legal Changes in the Reserve for Environmental Remediation proceeding that management believes could have a material adverse effect on our long-term consolidated financial position, DOLLAR AMOUNTS IN MILLIONS results of operations or cash flows. See “Ongoing IRS Matter” Reserve balance as of December 31, 2016 $ 34 in Note 20: Income Taxes for a discussion of a tax proceeding Reserve charges and adjustments, net 29 involving Plum Creek REIT’s 2008 U.S. federal income tax Payments (15) return. Reserve balance as of December 31, 2017 $ 48 ENVIRONMENTAL MATTERS Total active sites as of December 31, 2017 37
Our environmental matters include: We change our accrual to reflect: •site remediation and •new information on any site concerning implementation of •asset retirement obligations. remediation alternatives, •updates on prior cost estimates and new sites and Site Remediation •costs incurred to remediate sites. Under the Comprehensive Environmental Response, Estimates. We believe it is reasonably possible, based on Compensation and Liability Act — commonly known as the currently available information and analysis, that remediation Superfund — and similar state laws, we: costs for all identified sites may exceed our existing reserves by up to $150 million. •are a party to various proceedings related to the cleanup of hazardous waste sites and This estimate, in which those additional costs may be incurred •have been notified that we may be a potentially responsible over several years, is the upper end of the range of reasonably party related to the cleanup of other hazardous waste sites possible additional costs. The estimate: for which proceedings have not yet been initiated. •is much less certain than the estimates on which our We have received notification from the Environmental Protection accruals currently are based and Agency (the EPA) and have acknowledged that we are a •uses assumptions that are less favorable to us among the potentially responsible party in a portion of the Kalamazoo River range of reasonably possible outcomes. Superfund site in southwest Michigan. Our involvement in the In estimating our current accruals and the possible range of remediation site is based on our former ownership of the additional future costs, we: Plainwell, Michigan mill located within the remediation site. Several other companies also operated upstream pulp mills •assumed we will not bear the entire cost of remediation of within the remediation site. We are currently cooperating with every site, the other parties to jointly implement an administrative order •took into account the ability of other potentially responsible issued by the EPA on April 14, 2016, with respect to a portion parties to participate and of the site comprising a stretch of the river approximately •considered each party’s financial condition and probable 1.7 miles long referred to as the Otsego Township Dam Area. contribution on a per-site basis. We do not expect to incur material losses related to the We have not recorded any amounts for potential recoveries implementation of this administrative order; however, we may from insurance carriers. incur additional costs, as yet not specified, in connection with remediation tasks resulting from other areas of the site. The company, along with others, was named as a defendant by Asset Retirement Obligations Georgia Pacific Consumer Products LP, Fort James Corporation We have obligations associated with the retirement of tangible and Georgia-Pacific LLC in an action seeking contribution under long-lived assets consisting primarily of reforestation CERCLA for remediation costs relating to the site. The trial has obligations related to forest management licenses in Canada been concluded but a decision on cost contribution and and obligations to close and cap landfills. Some of our sites allocation has not yet been rendered by the Court. have asbestos containing materials. We have met our current Our Established Reserves. We have established reserves for legal obligation to identify and manage these materials. In estimated remediation costs on the active Superfund sites and situations where we cannot reasonably determine when other sites for which we are a potentially responsible party. asbestos containing materials might be removed from the
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 89 sites, we have not recorded an accrual because the fair value Product Remediation Contingency of the obligation cannot be reasonably estimated. These In July 2017, the company announced it was implementing a obligations are recorded in “Accrued liabilities” and “Other solution to address concerns regarding our TJI® Joists with liabilities” in our Consolidated Balance Sheet. Flak Jacket® Protection product. The company has determined Changes in the Reserve for Asset Retirement Obligations that an odor in certain newly constructed homes is related to a DOLLAR AMOUNTS IN MILLIONS recent formula change to the Flak Jacket coating that included
Reserve balance as of December 31, 2016(1) $29 a formaldehyde-based resin. This issue is isolated to Flak Jacket product manufactured after December 1, 2016, and Reserve charges and adjustments, net 12 does not affect any of the company’s other products. We Payments (11) recorded a pretax charge of $290 million in the period ended Other adjustments(2) 2 December 31, 2017, related to remediation costs. Refer to Reserve balance as of December 31, 2017 $ 32 Note 18: Charges for Product Remediation for further (1) Reserve balance for continuing operations information. (2) Primarily related to a foreign currency remeasurement gain for our Canadian reforestation obligation NOTE 15: SHAREHOLDERS’ INTEREST COMMITMENTS AND OTHER CONTINGENCIES This note provides details about: Our commitments and contingencies include: preferred and preference shares, guarantees of debt and performance, • • common shares, operating leases and • • share-repurchase programs and product remediation contingency. • • •cumulative other comprehensive income (loss). Guarantees PREFERRED AND PREFERENCE SHARES We have guaranteed the performance of the buyer/lessee of a timberlands lease we sold in 2005. Future payments on the We had no preferred shares outstanding at the end of 2017 or lease, which expires in 2023, are $12 million. 2016. However, we have authorization to issue 7 million preferred shares with a par value of $1.00 per share. Operating Leases On June 24, 2013, we issued 13.8 million of our 6.375 percent Our rent expense for continuing operations was: Mandatory Convertible Preference Shares, Series A, par value $1.00 and liquidation preference of $50.00 per share, for net •$39 million in 2017, proceeds of $669 million, which remained outstanding at •$37 million in 2016 and December 31, 2015. Dividends were payable on a cumulative •$24 million in 2015. basis when, as and if declared by our board of directors, at an We have operating leases for: annual rate of 6.375 percent on the liquidation preference. We could pay declared dividends in cash or, subject to certain various equipment, including logging equipment, lift trucks, • limitations, in common shares or by delivery of any combination automobiles and office equipment; of cash and common shares on January 1, April 1, July 1 and timberland ground leases; and • October 1 of each year, commencing on October 1, 2013, office and wholesale space. • through and including, July 1, 2016. These shares automatically converted to common shares on July 1, 2016. At Future Commitments on Operating Leases any time prior to that date, holders could elect to convert each Our operating lease commitments as of December 31, 2017 share into common shares at the minimum conversion rate of were: 1.5283 common shares, subject to anti-dilution adjustments. DOLLAR AMOUNTS IN MILLIONS On July 1, 2016, all outstanding 6.375 percent Mandatory 2018 $ 40 Convertible Preference Shares, Series A (Preference Shares) 2019 35 converted into Weyerhaeuser common shares at a rate of 2020 32 1.6929 Weyerhaeuser common shares per Preference Share. 2021 29 The company issued a total of 23.2 million Weyerhaeuser common shares in conjunction with the conversion, based on 2022 27 13.7 million Preference Shares outstanding as of the Thereafter 161 conversion date.
90 In accordance with the terms of the Preference Shares, the SHARE REPURCHASE PROGRAMS number of Weyerhaeuser common shares issuable on On August 13, 2014, our board of directors approved a stock conversion was determined based on the average volume repurchase program under which we were authorized to weighted average price of $29.54 for Weyerhaeuser common repurchase up to $700 million of outstanding shares (the 2014 shares over the 20-trading-day period beginning June 1, 2016, Repurchase Program). The 2014 Repurchase Program replaced and ending on June 28, 2016. the prior 2011 stock repurchase program. During 2014, we We may issue preferred or preference shares at one time or repurchased 6,062,993 shares of common stock for through a series of offerings. The shares may have varying $203 million under the 2014 Repurchase Program. During rights and preferences that can include: 2015, we completed the 2014 Repurchase Program by repurchasing 15,471,962 shares of common stock for dividend rights and amounts, • $497 million. •redemption rights, •conversion terms, On August 27, 2015, our board of directors approved a new •sinking-fund provisions, share repurchase program of up to $500 million on outstanding •values in liquidation and shares (the 2015 Repurchase Program), commencing upon •voting rights. completion of the 2014 Repurchase Program. During 2015, we repurchased 717,464 shares of common stock for $22 million When issued, outstanding preferred and preference shares rank under the 2015 Repurchase Program. As of December 31, senior to outstanding common shares. That means preferred 2016, we had remaining authorization of $478 million for future and preference shares would receive dividends and assets stock repurchases. available on liquidation before any payments are made to common shares. In November 2015, our board of directors approved a stock repurchase program under which we were authorized to repurchase up to $2.5 billion of outstanding shares subsequent COMMON SHARES to the closing of our merger with Plum Creek (the 2016 The number of common shares we have outstanding changes Repurchase Program). This new authorization replaced the when: August 2015 share repurchase authorization. Transaction fees incurred for repurchases are not counted as use of funds new shares are issued, • authorized for repurchases under the 2016 Share Repurchase stock options are exercised, • Authorization. During 2016, we repurchased 67,816,810 restricted stock units or performance share units vest, • shares of common stock for $2 billion under the 2016 Share stock-equivalent units are paid out, • Repurchase Authorization. We did not repurchase any shares of shares are tendered, • common stock during 2017. As of December 31, 2017, we had shares are repurchased or • remaining authorization of $500 million for future stock shares are canceled. • repurchases. We had 755,223 thousand shares of common stock outstanding as of December 31, 2017. Reconciliation of Our Common Share Activity
SHARES IN THOUSANDS All common stock purchases under the 2016, 2015, and 2014 Repurchase Programs were made in open-market transactions. 2017 2016 2015 Outstanding at beginning of year 748,528 510,483 524,474 We record share repurchases upon trade date as opposed to Issuance from merger with Plum — 278,887 — the settlement date when cash is disbursed. We record a Creek (Note 4) liability to account for repurchases that have not been cash Stock options exercised 5,970 2,571 1,592 settled. There were no unsettled repurchases as of Issued for restricted stock units 605 840 365 December 31, 2017, or December 31, 2016. Issued for performance shares 120 219 242
Preference shares converted to — 23,345 — common
Repurchased — (67,817) (16,190) Outstanding at end of year 755,223 748,528 510,483
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 91 CUMULATIVE OTHER COMPREHENSIVE INCOME (LOSS) Changes in amounts included in our cumulative other comprehensive income (loss) by component are:
DOLLAR AMOUNTS IN MILLIONS OTHER POSTRETIREMENT PENSION BENEFITS Unrealized Foreign gains on currency Prior Prior available- translation Actuarial service Actuarial service for-sale adjustments losses costs losses credits securities Total Beginning balance as of January 1, 2016 $207 $(1,372) $(11) $(77) $35 $ 6 $(1,212) Other comprehensive income (loss) before reclassifications 25 (590) — 5 — 1 (559) Income taxes — 208 — (1) — — 207 Net other comprehensive income (loss) before reclassifications 25 (382) — 4 — 1 (352) Amounts reclassified from cumulative other comprehensive income — 156 4 9 (7) — 162 (loss)(1) Income taxes — (53) (2) (3) 1 — (57) Net amounts reclassified from cumulative other comprehensive — 103 2 6 (6) — 105 income (loss) Total other comprehensive income (loss) 25 (279) 2 10 (6) 1 (247) Beginning balance as of January 1, 2017 $232 $(1,651) $ (9) $(67) $29 $ 7 $(1,459) Other comprehensive income (loss) before reclassifications 32 (356) (3) 19 — 2 (306) Income taxes — 76 1 (5) — — 72 Net other comprehensive income (loss) before reclassifications 32 (280) (2) 14 — 2 (234) Amounts reclassified from cumulative other comprehensive income — 195 4 8 (8) — 199 (loss)(1) Income taxes — (66) (1) (3) 2 — (68) Net amounts reclassified from cumulative other comprehensive — 129 3 5 (6) — 131 income (loss) 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) (1) Actuarial losses and prior service credits (costs) are included in the computation of net periodic benefit costs (credits). See Note: 9 Pension and Other Postretirement Benefit Plans.
NOTE 16: SHARE-BASED COMPENSATION The 2016 and 2015 amounts above contain awards to employees of the divested Cellulose Fibers businesses and are This note provides details about: included in our results of discontinued operations. These •our Long-Term Incentive Compensation Plan (2013 Plan), amounts are: share-based compensation resulting from our merger with • $6 million in 2016 and Plum Creek, • $6 million in 2015. •how we account for share-based awards, • •tax benefits of share-based awards, •types of share-based compensation and OUR LONG-TERM INCENTIVE COMPENSATION PLAN unrecognized share-based compensation. • Our long-term incentive plans provide for share-based awards Share-based compensation expense was: that include: •$40 million in 2017, •restricted stock, •$60 million in 2016 and •restricted stock units, •$31 million in 2015. •performance shares •performance share units, •stock options and •stock appreciation rights.
92 We may issue future grants of up to 21 million shares under awards were fully vested prior to the date of the merger, so no the 2013 Plan (the Plan). We also have the right to reissue expense will be recorded. The value of the replacement stock forfeited and expired grants. option awards was $5 million, which was included in the equity consideration issued in the merger as described in Note 4: For restricted stock, restricted stock units, performance shares, Merger with Plum Creek. performance share units or other equity grants: An individual participant may receive a grant of up to 1 million • Replacement Restricted Stock Unit Awards shares annually. •No participant may be granted awards that exceed The replacement RSUs issued as a result of the merger with $10 million earned in a 12-month period. Plum Creek have similar vesting provisions as the terms of existing Weyerhaeuser restricted stock unit awards. Expense For stock options and stock appreciation rights: for replacement RSUs will continue to be recognized over the •An individual participant may receive a grant of up to 2 million remaining service period unless a qualifying termination occurs. shares in any one calendar year. A qualifying termination of an awardee will result in acceleration •The exercise price is required to be the market price on the of vesting and expense recognition in the period that the date of the grant. qualifying termination occurs. Qualifying terminations during 2016 resulted in accelerated vesting of 705,394 of the The Compensation Committee of our board of directors (the replacement RSUs and recognition of $15 million of expense. Committee) annually establishes an overall pool of stock The accelerated expense is included in the merger-related awards available for grants based on performance. integration costs as described in Note 17: Charges for For stock-settled awards, we: Integration and Restructuring, Closures and Asset Impairments. •issue new stock into the marketplace and •generally do not repurchase shares in connection with Value Management Awards issuing new awards. Following the merger, the VMAs assumed were valued at target. Our common shares would increase by approximately 32 million All outstanding VMAs, if earned, were set to vest December 31, shares if all share-based awards were exercised or vested. 2017, and will be paid in the first quarter 2018. The VMAs These include: were classified and accounted for as liabilities, as they are •all options, restricted stock units, and performance share settled in cash upon vesting. The expense recognized over the units outstanding at December 31, 2017, under the 2013 performance period subsequent to the merger was equal to the Plan and 2004 Plan; and cash value of an award as of the last day of the performance •all remaining options, restricted stock units, and performance period multiplied by the number of awards that were earned. share units that could be granted under the 2013 Plan. Expense for VMAs was recognized over the remaining service period unless a qualifying termination occurs. A qualifying termination of an awardee resulted in the acceleration of SHARE-BASED COMPENSATION RESULTING FROM OUR vesting and expense recognition in the period that the qualifying MERGER WITH PLUM CREEK termination occurred. Qualifying terminations during 2016 Replacement awards were granted as a result of the merger resulted in $6 million of expense recognized. This accelerated with Plum Creek. Eligible outstanding Plum Creek stock options, expense is included in merger-related integration costs as restricted stock units and deferred stock unit awards were described in Note 17: Charges for Integration and converted into equivalent equity awards with respect to Restructuring, Closures and Asset Impairments. Weyerhaeuser Common Shares, after giving effect to the appropriate adjustments to reflect the consummation of the HOW WE ACCOUNT FOR SHARE-BASED AWARDS merger. In total, we issued replacement awards consisting of 1,953,128 stock options and 1,248,006 RSUs. We also When accounting for share-based awards we: assumed 289,910 value management awards (VMAs) through use a fair-value-based measurement for share-based awards the merger with Plum Creek. • and recognize the cost of share-based awards in our consolidated Replacement Stock Option Awards • financial statements. The replacement stock option awards issued as a result of the We recognize the cost of share-based awards in our merger with Plum Creek have similar exercise provisions as the Consolidated Statement of Operations over the required service terms of our current awards. All replacement stock option
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 93 period — generally the period from the date of the grant to the The Details date when it is vested. Special situations include: Our restricted stock units granted in 2017, 2016 and 2015 •Awards that vest upon retirement — the required service generally: period ends on the date an employee is eligible for vest ratably over four years; retirement, including early retirement. • immediately vest in the event of death while employed or Awards that continue to vest following job elimination or the • • disability; sale of a business — the required service period ends on the continue to vest upon retirement at an age of at least 62, but date the employment from the company is terminated. • a portion of the grant is forfeited if retirement occurs before In these special situations, compensation expense from share- the one year anniversary of the grant; based awards is recognized over a period that is shorter than •continue vesting for one year in the event of involuntary the stated vesting period. termination when the retirement has not been met; and •will be forfeited upon termination of employment in all other TAX BENEFITS OF SHARE-BASED AWARDS situations including early retirement prior to age 62. Our total income tax benefit from share-based awards — as recognized in our Consolidated Statement of Operations — for Our Accounting the last three years was: The fair value of our restricted stock units is the market price of •$6 million in 2017, our stock on the grant-date of the awards. •$12 million in 2016 and We generally record share-based compensation expense for •$8 million in 2015. restricted stock units over the four-year vesting period. The 2016 and 2015 amounts above contain income tax benefit Generally, for restricted stock units that continue to vest from share-based awards to employees that were part of the following the termination of employment, we record the share- Cellulose Fibers divestitures and are included in our results of based compensation expense over a required service period discontinued operations. These amounts are: that is less than the stated vesting period. •$2 million in 2016 and •$2 million in 2015. Activity Tax benefits from share-based awards are accrued as stock The following table shows our restricted stock unit activity for compensation expense is recognized in the Consolidated 2017. Statement of Operations. Tax benefits from share-based WEIGHTED RESTRICTED AVERAGE awards are realized when: STOCK UNITS GRANT-DATE (IN THOUSANDS) FAIR VALUE restricted shares and restricted share units vest, • Nonvested at December 31, 2016 1,583 $26.49 performance shares and performance share units vest, • Granted 739 32.83 stock options are exercised and • Vested (670) 27.23 stock appreciation rights are exercised. • Forfeited (137) 27.43 Nonvested at December 31, 2017(1) 1,515 $29.12 TYPES OF SHARE-BASED COMPENSATION (1) As of December 31, 2017, there were approximately 203 thousand restricted stock units that had met the requisite service period and will be released as identified in the grant Our share-based compensation is in the form of: terms.
•restricted stock units, The weighted average grant-date fair value for restricted stock •performance share units, units was: •stock options, •stock appreciation rights, •$32.83 in 2017, •deferred compensation stock equivalent units and •$30.25 in 2016 and •value management awards assumed in merger with Plum •$35.41 in 2015. Creek. The total grant-date fair value of restricted stock units vested was: RESTRICTED STOCK UNITS •$18 million in 2017, Through the Plan, we award restricted stock units — grants that •$36 million in 2016 and entitle the holder to shares of our stock as the award vests. •$14 million in 2015. 94 Nonvested restricted stock units accrue dividends that are paid •continue vesting for one year in the event of involuntary out when restricted stock units vest. Any restricted stock units termination when the retirement criteria has not been met forfeited will not receive dividends. and the employee has met the second anniversary of the grant date; and As restricted stock units vest, a portion of the shares awarded will be forfeited upon termination of employment in all other is withheld to cover employee taxes. As a result, the number of • situations including early retirement prior to age 62. stock units vested and the number of common shares issued will differ. Our Accounting PERFORMANCE SHARE UNITS Since the awards contain a market condition, the effect of the market condition is reflected in the grant-date fair value which Through the Plan, we award performance share units — grants is estimated using a Monte Carlo simulation model. This model that entitle the holder to shares of our stock as the award estimates the TSR ranking of the company over the vests. performance period. Compensation expense is based on the estimated probable number of earned awards and recognized The Details over the vesting period on an accelerated basis. Generally, compensation expense would be reversed if the performance The final number of shares awarded will range from 0 percent condition is not met unless the requisite service period has to 150 percent of each grant’s target, depending upon actual been achieved. company performance. Weighted Average Assumptions Used in Estimating the Value For shares granted in 2017, the ultimate number of of Performance Share Units performance share units earned is based on two measures: 2017 GRANTS 2016 GRANTS 2015 GRANTS •our relative total shareholder return (TSR) ranking measured Performance 1/1/2017 – 1/1/2016 – 1/1/2015 – against the S&P 500 over a three-year period and period 12/31/2019 12/31/2018 12/31/2017 Expected 3.74% 3.92% – 5.37% 3.26% •our relative TSR ranking measured against an industry peer dividends group of companies over a three-year period. Risk-free rate 0.68% – 1.55% 0.45% – 0.97% 0.05% – 1.07% For shares granted in 2016, the ultimate number of Volatility 22.71% – 24.07% 21.87% – 28.09% 16.33% – 20.89% performance share units earned is based on three measures: Weighted $ 37.93 $ 22.58 $ 34.75 average grant- •our relative total shareholder return (TSR) ranking measured date fair value against the S&P 500 over a three-year period, •our relative TSR ranking measured against an industry peer Activity group of companies over a three-year period and The following table shows our performance share unit activity •achievement of Plum Creek merger cost synergy targets. for 2017. For shares granted in 2015, the ultimate number of WEIGHTED AVERAGE GRANTS (IN GRANT-DATE performance share units earned is based on two measures: THOUSANDS) FAIR VALUE •our relative total shareholder return (TSR) ranking measured Nonvested at December 31, 2016 761 $25.23 against the S&P 500 over a three-year period and Granted at target 346 37.93 •our relative TSR ranking measured against an industry peer Vested (130) 29.98 group of companies over a three-year period. Forfeited (12) 30.93 Nonvested at December 31, 965 $30.87 The vesting provisions for performance share units granted in 2017(1) 2017, 2016 and 2015 were as follows: (1) As of December 31, 2017, there were approximately 41 thousand performance share units that had met the requisite service period and will be released as identified in the grant terms. •vest 100 percent on the third anniversary of the grant date as long as the individual remains employed by the company; The total grant-date fair value of performance share units •fully vest in the event the participant dies or becomes vested was: disabled while employed; •continue to vest upon retirement at an age of at least 62, but •$4 million in 2017, a portion of the grant is forfeited if retirement occurs before •$8 million in 2016 and the one year anniversary of the grant; •$9 million in 2015.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 95 As performance share units vest, a portion of the shares Weighted Average Assumptions Used in Estimating Value of awarded is withheld to cover participant taxes. As a result, the Stock Options Granted number of stock units vested and the number of common 2016 2015 shares issued will differ. GRANTS GRANTS Expected volatility 25.43% 25.92% Expected dividends 5.37% 3.28% STOCK OPTIONS Expected term (in years) 4.95 4.77 Stock options entitle award recipients to purchase shares of Risk-free rate 1.28% 1.54% our common stock at a fixed exercise price. During 2017, we Weighted average grant-date fair value $ 2.73 $ 5.85 did not grant any stock option awards. When granted in prior Share-based compensation expense for stock options is years, however, we granted stock options with an exercise price generally recognized over the vesting period. There are equal to the market price of our stock on the date of the grant. exceptions for stock options awarded to employees who:
The Details •are eligible for retirement, •will become eligible for retirement during the vesting period or Our stock options generally: •whose employment is terminated during the vesting period •vest over four years of continuous service and due to job elimination or the sale of a business. •must be exercised within 10 years of the grant-date. In these cases, we record the share-based compensation The vesting and post-termination vesting terms for stock expense over a required service period that is less than the options granted in 2016 and 2015 were as follows: stated vesting period.
•vest ratably over four years; Activity vest or continue to vest in the event of death while employed • The following table shows our option unit activity for 2017. or disability; WEIGHTED •continue to vest upon retirement at an age of at least 62, but AVERAGE a portion of the grant is forfeited if retirement occurs before WEIGHTED REMAINING AGGREGATE AVERAGE CONTRACTUAL INTRINSIC the one year anniversary of the grant; OPTIONS (IN EXERCISE TERM VALUE (IN •continue to vest for one year in the event of involuntary THOUSANDS) PRICE (IN YEARS) MILLIONS) termination when the retirement criteria has not been met; Outstanding at 14,712 $24.96 December 31, 2016 and Granted — $ — stop vesting for all other situations including early retirement • Exercised (5,975) $22.71 prior to age 62. Forfeited or expired (250) $27.75 Outstanding at 8,487 $26.47 6.06 $ 75 Our Accounting December 31, 2017(1) Exercisable at 5,374 $26.45 5.11 $133 We use a Black-Scholes option valuation model to estimate the December 31, 2017 fair value of every stock option award on its grant-date. (1) As of December 31, 2017, there were approximately 727 thousand stock options that had met the requisite service period and will be released as identified in the grant terms. In our estimates, we use: The total intrinsic value of stock options exercised was: •historical data — for option exercise time and employee terminations; •$68 million in 2017, •a Monte-Carlo simulation — for how long we expect granted •$18 million in 2016 and options to be outstanding; and •$13 million in 2015. •the U.S. Treasury yield curve — for the risk-free rate. We use The total grant-date fair value of stock options vested was: a yield curve over a period matching the expected term of the grant. •$5 million in 2017, •$14 million in 2016 and The expected volatility in our valuation model is based on: •$14 million in 2015. •implied volatilities from traded options on our stock, •historical volatility of our stock and STOCK APPRECIATION RIGHTS •other factors. During 2017, we did not grant any stock appreciation rights. When granted in prior years, however, we granted cash-settled stock appreciation rights as part of certain compensation awards.
96 The Details The total liabilities paid for stock appreciation rights was: Stock appreciation rights are similar to stock options. Employees •$1 million in 2017, benefit when the market price of our stock is higher on the •$1 million in 2016 and exercise date than it was on the date the stock appreciation rights •$1 million in 2015. were granted. The differences are that the employee: UNRECOGNIZED SHARE-BASED COMPENSATION •receives the benefit as a cash award and •does not purchase the underlying stock. As of December 31, 2017, our unrecognized share-based compensation cost for all types of share-based awards included The vesting conditions and exceptions are the same as for $38 million related to non-vested equity-classified share-based 10-year stock options. Details are in the Stock Options section compensation arrangements — expected to be recognized over earlier in this note. a weighted average period of approximately 2.0 years. Stock appreciation rights are generally issued to employees outside of the U.S. DEFERRED COMPENSATION STOCK EQUIVALENT UNITS Certain employees and our board of directors may defer Our Accounting compensation into stock-equivalent units.
We use a Black-Scholes option-valuation model to estimate the The Details fair value of a stock appreciation right on its grant-date and every subsequent reporting date that the right is outstanding. The plan works differently for employees and directors. Stock appreciation rights are liability-classified awards and the Eligible employees: fair value is remeasured at every reporting date. •may choose to defer all or part of their bonus into stock- The process used to develop our valuation assumptions is the equivalent units; same as for the 10-year stock options we grant. Details are in •may choose to defer part of their salary, except for executive the Stock Options section earlier in this note. officers; and receive a 15 percent premium if the deferral is for at least Weighted Average Assumptions Used to Re-measure Value of • five years. Stock Appreciation Rights at Year-End Our directors: 2016 2015 GRANTS GRANTS •receive a portion of their annual retainer fee in the form of Expected volatility 24.12% 22.10% restricted stock units, which vest over one year and may be Expected dividends 4.04% 4.20% deferred into stock-equivalent units; Expected term (in years) 2.20 1.94 •may choose to defer some or all of the remainder of their Risk-free rate 1.36% 0.99% annual retainer fee into stock-equivalent units; and Weighted average fair value $ 7.84 $ 6.96 •do not receive a premium for their deferrals. Employees and directors also choose when the deferrals will be Activity paid out although no deferrals may be paid until after the separation from service of the employee or director. The following table shows our stock appreciation rights activity for 2017. Our Accounting AVERAGE WEIGHTED REMAINING AGGREGATE We settle all deferred compensation accounts in cash for our AVERAGE CONTRACTUAL INTRINSIC RIGHTS (IN EXERCISE TERM VALUE (IN employees. Our directors receive shares of common stock as THOUSANDS) PRICE (IN YEARS) MILLIONS) payment for stock-equivalent units. In addition, we credit all Outstanding at 386 $23.82 stock-equivalent accounts with dividend equivalents. The December 31, 2016 number of common shares to be issued in the future to Granted — $ — directors is 616 thousand. Exercised (102) $24.08 Forfeited or expired (12) $30.39 Stock-equivalent units are: Outstanding at 272 $23.42 5.23 $3 liability-classified awards and December 31, 2017 • re-measured to fair value at every reporting date. Exercisable at 168 $21.54 2.29 $2 • December 31, 2017 The fair value of a stock-equivalent unit is equal to the market price of our stock.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 97 Activity and closure charges related to the closure of four distribution centers for our Wood Products business. The number of stock-equivalent units outstanding in our deferred compensation accounts were: Other restructuring and closure costs include lease termination •804 thousand as of December 31, 2017, charges, dismantling and demolition of plant and equipment, •1,004 thousand as of December 31, 2016 and gain or loss on disposition of assets, environmental cleanup •1,003 thousand as of December 31, 2015. costs and incremental costs to wind down operating facilities.
NOTE 17: CHARGES FOR INTEGRATION AND ACCRUED TERMINATION BENEFITS RESTRUCTURING, CLOSURES AND ASSET IMPAIRMENTS Changes in accrued severance related to restructuring during 2017 were as follows: Items Included in Our Charges for Integration and Restructuring, Closures and Asset Impairments DOLLAR AMOUNTS IN MILLIONS
DOLLAR AMOUNTS IN MILLIONS Accrued severance as of December 31, 2016 $ 26 2017 2016 2015 Charges 14 Integration and restructuring charges related to Payments (21) our merger with Plum Creek: Accrued severance as of December 31, 2017 $ 19 Termination benefits $ 11 $ 54 $ —
Acceleration of share-based compensation —21— related to qualifying terminations (Note 16) ASSET IMPAIRMENTS Acceleration of pension benefits related to —5— qualifying terminations (Note 9) The Impairment of Long-Lived Assets and Goodwill sections of Professional services 16 52 14 Note 1: Summary of Significant Accounting Policies provide details about how we account for these impairments. Additional Other integration and restructuring costs 7 14 — information can also be found in our Critical Accounting Total integration and restructuring charges 34 146 14 related to our merger with Plum Creek Policies. Charges related to closures and other restructuring activities: Long-Lived Assets Termination benefits 3 4 4 Our long-lived asset impairments were primarily related to the Other closures and restructuring costs 3 4 6 following: Total charges related to closures and other 6810 restructuring activities •2017 — In second quarter 2017, we recognized an Impairment of long-lived assets 154 16 15 impairment charge to the timberlands and manufacturing assets of our Uruguayan operations. On June 2, 2017, our Total charges for integration and restructuring, $194 $170 $39 closures and asset impairments 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 INTEGRATION, RESTRUCTURING AND CLOSURES Group (TIG). As a result of this agreement, the related assets During 2017, we incurred and accrued for termination benefits met the criteria to be classified as held for sale at June 30, (primarily severance) and non-recurring professional services 2017. This designation required us to record the related costs directly attributable to our merger with Plum Creek. assets at fair value, less an amount of estimated selling During 2016, we incurred and accrued for termination benefits costs, and thus recognize a $147 million noncash pretax (primarily severance), accelerated share-based payment costs, impairment charge. This amount was recorded in the and accelerated pension benefits based upon actual and Timberlands segment. The fair value of the related assets expected qualifying terminations of certain employees as a was primarily based on the agreed upon cash purchase price result of restructuring decisions made subsequent to the of $403 million. On September 1, 2017, we announced the merger. We also incurred non-recurring professional services completion of the sale. Refer to Note 3: Discontinued costs for investment banking, legal and consulting, and certain Operations and Other Divestitures for further details on the other fees directly attributable to our merger with Plum Creek. Uruguayan operations sale. During 2015, we incurred non-recurring professional services Additionally, in September 2017, we recognized an costs for banking, legal and consulting fees directly attributable impairment charge of $6 million related to a nonstrategic to our merger with Plum Creek. We also incurred restructuring asset in our Wood Products segment. The fair value of the
98 asset was determined using the value indicated in a 2017, $192 million has been paid out in relation to our purchase sale agreement. remediation efforts. The remaining accrual of $98 million is recorded in “Accrued liabilities” on the Consolidated Balance 2016 — We reviewed all of our development projects during • Sheet. The company ultimately expects a significant portion of 2016. As a result, we ceased development and initiated the total expense will be covered by insurance, however, as of plans to sell certain projects. We analyzed each of the the date of these financial statements no amounts related to projects we ceased development and initiated plans to sell potential recoveries have been recorded. and determined which had a book value greater than fair value. We recognized a $15 million impairment charge in NOTE 19: OTHER OPERATING COSTS (INCOME), NET Real Estate & ENR which represents the fair value less direct selling costs of these projects. The fair values of the projects Other operating costs (income), net: were determined using significant unobservable inputs •includes both recurring and occasional income and expense (Level 3) based on broker opinion of value reports. items and Our remaining projects did not have any indicators of •can fluctuate from year to year. impairment; however, we corroborated this evaluation with an Various Income and Expense Items Included in Other assessment of the undiscounted cash flows for the legacy Operating Costs (Income), Net
Weyerhaeuser projects or noted that projects acquired from DOLLAR AMOUNTS IN MILLIONS Plum Creek were recorded at estimated fair value when 2017 2016 2015 acquired in 2016. Gain on disposition of nonstrategic assets(1) $ (16) $(60) $(12) •2015 — We recognized an impairment charge of $13 million Foreign exchange losses (gains), net(2) (1) (6) 47 related to a nonstrategic asset held in Unallocated Items. Litigation expense, net 20 24 23 The fair value of the asset was determined using significant (3) unobservable inputs (Level 3) based on a discounted cash Gain on sale of timberlands (99) — — flow model. The asset was subsequently sold for no gain Environmental remediation insurance recoveries (42) — — during 2015. Other, net 10 (11) (17) Total other operating costs (income), net $(128) $(53) $ 41 NOTE 18: CHARGES FOR PRODUCT REMEDIATION (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. In July 2017, we announced we were implementing a solution (2) Foreign exchange gains and losses result from changes in exchange rates primarily to address concerns regarding our TJI® Joists with Flak related to our U.S. dollar denominated debt that is held by our Canadian subsidiary. (3) Gain on sale of 100,000 acres sold to Twin Creeks during Q4 2017. Refer to Note 8: Jacket® Protection product. This issue is isolated to Flak Related Parties for further information. Jacket product manufactured after December 1, 2016, and does not affect any of our other products. We estimate that NOTE 20: INCOME TAXES approximately 2,400 homes were affected. This note provides details about our income taxes applicable to We recorded a liability of $50 million in second quarter 2017 continuing operations: based on the preliminary information that was available at that earnings before income taxes, time. As remediation work progressed, we obtained additional • provision for income taxes, information and experience regarding the scope of the required • effective income tax rate, remediation efforts and associated costs. Accordingly, we • deferred tax assets and liabilities, adjusted our liability to account for the higher than originally • unrecognized tax benefits and expected cost per home for remediation, a modest increase in • our ongoing IRS tax matter. the estimated number of homes affected, as well as additional • homebuilder and homeowner reimbursements. We recorded Income taxes related to discontinued operations are discussed pretax charges of $190 million and $50 million in the third and in Note 3: Discontinued Operations and Other Divestitures. fourth quarters 2017, respectively, to accrue for expected costs The Income Taxes section of Note 1: Summary of Significant associated with the remediation. Accounting Policies provides details about how we account for Our charges related to remediation efforts total $290 million for our income taxes. the period ended December 31, 2017. The charges recorded are attributable to our Wood Products segment and were Tax Legislation recorded in “Charges for product remediation,” on the On December 22, 2017, H.R. 1, commonly known as the Tax Consolidated Statement of Operations. As of December 31, Cuts and Jobs Act (the “Tax Act”), was enacted. The Tax Act
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 99 contains significant changes to corporate taxation, including the EFFECTIVE INCOME TAX RATE reduction of the corporate tax rate from 35 percent to Effective Income Tax Rate Applicable to Continuing 21 percent. As a result of the reduction in the corporate tax Operations rate, we have revalued our deferred tax assets and liabilities DOLLAR AMOUNTS IN MILLIONS and have recorded a tax expense of $74 million during 2017, 2017 2016 2015 which reduced our net deferred tax asset. The deemed U.S. federal statutory income tax $ 250 $ 177 $ 123 repatriation on deferred foreign income provisions does not State income taxes, net of federal tax (2) (3) (5) impact our operations due to the fact that we have no foreign benefit undistributed earnings. REIT income not subject to federal (198) (99) (158) income tax REIT benefit from change to tax law — — (13) EARNINGS BEFORE INCOME TAXES Tax affect of U.S. corporate rate change 74 — — Domestic and Foreign Earnings from Continuing Operations Foreign taxes 54 (4) 4 Before Income Taxes Provision for unrecognized tax benefits (2) — (7) DOLLAR AMOUNTS IN MILLIONS Repatriation of Canadian earnings (22) 24 — 2017 2016 2015 Other, net (20) (6) (2) Domestic earnings $643 $353 $326 Total income tax provision (benefit) $ 134 $ 89 $ (58) Foreign earnings 73 151 27 Effective income tax rate 18.8% 17.6% (16.4)% Total earnings before income taxes $716 $504 $353 DEFERRED TAX ASSETS AND LIABILITIES PROVISION FOR INCOME TAXES Deferred tax assets and liabilities reflect the future tax impact Provision (Benefit) for Income Taxes from Continuing created by differences between the timing of when income or Operations deductions are recognized for pretax financial book reporting DOLLAR AMOUNTS IN MILLIONS purposes versus income tax purposes. Deferred tax assets 2017 2016 2015 represent a future tax benefit (or reduction to income taxes in a future period), while deferred tax liabilities represent a future Current: tax obligation (or increase to income taxes in a future period). Federal $ 10 $ 1 $ 7 Our deferred tax assets and liabilities have been revalued for State — 1 (2) the reduction in the U.S. corporate tax rate. Foreign 82 11 (5) Balance Sheet Classification of Deferred Income Tax Assets Total current 92 13 — (Liabilities) Related to Continuing Operations Deferred: DOLLAR AMOUNTS IN MILLIONS Federal 61 37 (69) DECEMBER 31, DECEMBER 31, State (18) (3) (3) 2017 2016 Foreign (1) 42 14 Net noncurrent deferred tax asset $268 $293 Total deferred 42 76 (58) Net noncurrent deferred tax liability — — Total income tax provision (benefit) $134 $89 $(58) Net deferred tax asset (liability) $268 $293
100 Items Included in Our Deferred Income Tax Assets (Liabilities) Our valuation allowance on our deferred tax assets was
DOLLAR AMOUNTS IN MILLIONS $63 million at the end of 2017, related to state credits, state net operating losses and passive foreign tax credits. DECEMBER 31, DECEMBER 31, 2017 2016 Postretirement benefits $ 50 $ 76 Reinvestment of Undistributed Earnings Pension 306 395 It is our practice and intention to reinvest the earnings of our State tax credits 56 46 foreign subsidiaries into those respective operations. As such, we have not made a provision for U.S. income taxes or Other reserves 38 14 additional foreign withholding taxes for potential distribution of Net operating loss carryforwards 18 25 future earnings of our foreign subsidiaries which are Other 152 218 permanently reinvested. As of December 31, 2017, we had no Gross deferred tax assets 620 774 foreign undistributed earnings. Valuation allowance (63) (56) Net deferred tax assets 557 718 UNRECOGNIZED TAX BENEFITS Property, plant and equipment (154) (214) Unrecognized tax benefits represent potential future obligations Timber installment notes (116) (180) to taxing authorities if uncertain tax positions we have taken on Other (19) (31) previously filed tax returns are not sustained. The total gross Deferred tax liabilities (289) (425) amount of unrecognized tax benefits as of December 31, 2017, and 2016, is $4 million and $6 million, of which a net amount Net deferred tax asset (liability) $ 268 $ 293 of $2 million and $5 million, respectively, would affect our tax rate if recognized. OTHER INFORMATION ABOUT OUR DEFERRED INCOME TAX The net liability recorded in our Consolidated Balance Sheet ASSETS (LIABILITIES) related to unrecognized tax benefits is $2 million as of Other information about our deferred income tax assets December 31, 2017, comprised of the $4 million gross (liabilities) include: unrecognized tax benefit amount net of $2 million in loss •net operating loss and credit carryforwards, carryforwards available to offset the liability. The net liability as •valuation allowances and of December 31, 2016 was $5 million, comprised of $6 million •reinvestment of undistributed earnings. gross unrecognized tax benefit amount net of $2 million loss carryforwards available to offset the liability and includes $1 million of interest. Net Operating Loss and Credit Carryforwards In accordance with our accounting policy, we accrue interest Our gross federal, state and foreign net operating loss and penalties related to unrecognized tax benefits as a carryforwards as of the end of 2017 totaled $1.0 billion as component of income tax expense. See Note 1: Summary of follows: Significant Accounting Policies. •U.S. REIT — $684 million, which expire from 2030 through Reconciliation of the Beginning and Ending Amount of 2036; Unrecognized Tax Benefits •State — $349 million, which expire from 2018 through 2037; and DOLLAR AMOUNTS IN MILLIONS Foreign — none. DECEMBER 31, DECEMBER 31, • 2017 2016 Our gross state credit carryforwards at the end of 2017 totaled Balance at beginning of year $ 6 $ 6 $70 million, which includes $22 million that expire from 2018 Lapse of statute (2) — through 2031 and $48 million that do not expire. Our U.S. TRS Balance at end of year $4 $6 has $6 million in foreign tax credit carryforwards that expire in 2027. As of December 31, 2017, none of our U.S. federal income tax returns are under examination, with years 2013 forward open to examination. We are undergoing examinations in state Valuation Allowances jurisdictions for tax years 2013 through 2016, with tax years With the exception of the valuation allowance discussed below, 2009 forward open to examination. We are also undergoing we believe it is more likely than not that we will have sufficient examinations in foreign jurisdictions for tax years 2013 through future taxable income to realize our deferred tax assets. 2014, with tax years 2010 forward open to examination. We do
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 101 not expect that the outcome of any examination will have a SALES material effect on our consolidated financial statements; Our sales to unaffiliated customers outside the U.S. are primarily to however, audit outcomes and the timing of audit settlements customers in Canada, China and Japan. Our export sales include: are subject to significant uncertainty. •logs, lumber and wood chips to Japan and In the next 12 months, we estimate a decrease of $1 million in •logs and lumber to other Pacific Rim countries. unrecognized tax benefits due to the lapse of applicable statutes of limitation. Sales by Geographic Area
DOLLAR AMOUNTS IN MILLIONS ONGOING IRS MATTER 2017 2016 2015 Sales to unaffiliated customers: In connection with the merger with Plum Creek, we acquired U.S. $6,168 $5,451 $4,362 equity interests in Southern Diversified Timber, LLC, a Canada 472 341 307 timberland joint venture (Timberland Venture) with an affiliate of Japan 352 369 363 Campbell Global LLC (TCG Member). On August 31, 2016, the China 107 108 99 Timberland Venture redeemed TCG Member’s interest and Other foreign countries 97 96 115 became a fully consolidated, wholly-owned subsidiary of Total $7,196 $6,365 $5,246 Weyerhaeuser. Export sales from the U.S.: We received a Notice of Final Partnership Administrative Japan $ 295 $ 314 $ 309 Adjustment (FPAA), dated July 20, 2016, from the Internal China 102 103 97 Revenue Service (IRS) in regard to Plum Creek’s 2008 U.S. Other foreign countries 148 98 91 federal income tax treatment of the transaction forming the Total $ 545 $ 515 $ 497 Timberland Venture. The IRS is asserting that the transfer of the timberlands to the Timberland Venture was a taxable transaction to Plum Creek at the time of the transfer rather than a LONG-LIVED ASSETS nontaxable capital contribution. We have filed a petition in the Our long-lived assets — used in the generation of revenues in U.S. Tax Court and will vigorously contest this adjustment. the different geographical areas — are nearly all in the U.S. and In the event that we are unsuccessful in this tax litigation, we Canada. Our long-lived assets include: could be required to recognize and distribute gain to •property and equipment, including construction in progress, shareholders of approximately $600 million and pay built-in •timber and timberlands, gains tax of approximately $100 million. We would also be •minerals and mineral rights and required to pay interest on both of those amounts, which would •goodwill. be substantial. As much as 80 percent of any such gain distribution could be made with our common stock, and shareholders would be subject to tax on the distribution at the Long-Lived Assets by Geographic Area applicable capital gains tax rate. Alternatively, we could elect to DOLLAR AMOUNTS IN MILLIONS retain the gain and pay corporate-level tax to minimize interest DECEMBER 31, DECEMBER 31, DECEMBER 31, costs to the company. 2017 2016(1) 2015(1) U.S. $14,922 $15,700 $8,260 Although the outcome of this process cannot be predicted with Canada 223 206 460 certainty, we are confident in our position based on U.S. tax law and believe we will be successful in defending it. Accordingly, Other foreign — 527 654 countries no reserve has been recorded related to this matter. Total $15,145 $16,433 $9,374
(1) Includes assets of discontinued operations. NOTE 21: GEOGRAPHIC AREAS
This note provides selected key financial data according to the geographical locations of our customers. The selected key financial data includes: •sales to unaffiliated customers, •export sales from the U.S. and •long-lived assets. 102 NOTE 22: SELECTED QUARTERLY FINANCIAL INFORMATION (unaudited) Quarterly financial data provides a review of our results and performance throughout the year. Our earnings per share for the full year do not always equal the sum of the four quarterly earnings-per share amounts because of common share activity during the year. Key Quarterly Financial Data for the Last Two Years
DOLLAR AMOUNTS IN MILLIONS EXCEPT PER-SHARE FIGURES FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER(1) QUARTER(1) FULL YEAR 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 from continuing operations before income 181 58 103 374 716 taxes
Net earnings 157 24 130 271 582
Net earnings attributable to Weyerhaeuser common 157 24 130 271 582 shareholders
Basic net earnings per share attributable to 0.21 0.03 0.17 0.36 0.77 Weyerhaeuser common shareholders
Diluted net earnings per share attributable to 0.21 0.03 0.17 0.36 0.77 Weyerhaeuser common shareholders Dividends paid per share 0.31 0.31 0.31 0.32 1.25 Market prices - high/low $34.37 - $29.88 $35.50 - $32.28 $34.46 - $30.95 $36.92 - $33.92 $36.92 - $29.88 2016: Net sales $ 1,405 $ 1,655 $ 1,709 $ 1,596 $ 6,365 Operating income from continuing operations 139 248 261 174 822
Earnings from continuing operations before income 72 161 184 87 504 taxes Net earnings 81 168 227 551 1,027
Net earnings attributable to Weyerhaeuser common 70 157 227 551 1,005 shareholders
Basic net earnings per share attributable to 0.11 0.21 0.30 0.74 1.40 Weyerhaeuser common shareholders
Diluted net earnings per share attributable to 0.11 0.21 0.30 0.73 1.39 Weyerhaeuser common shareholders Dividends paid per share 0.31 0.31 0.31 0.31 1.24 Market prices - high/low $31.38 - $22.06 $32.56 - $26.55 $33.17 - $29.52 $33.28 - $28.58 $33.28 - $22.06
(1) Third and fourth quarter 2016 include a gain on our Cellulose Fibers divestitures. Refer to Note 3: Discontinued Operations and Other Divestitures for further information.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 103 CHANGES IN AND Management, under our supervision, conducted an evaluation of the effectiveness of the company’s internal control over DISAGREEMENTS WITH financial reporting based on the framework in Internal ACCOUNTANTS ON ACCOUNTING Control — Integrated Framework (2013) issued by the AND FINANCIAL DISCLOSURE Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation under the Not applicable. framework in Internal Control — Integrated Framework (2013), management concluded that the company’s internal control CONTROLS AND PROCEDURES over financial reporting was effective as of December 31, 2017. The effectiveness of the company’s internal control over financial reporting as of December 31, 2017, has been audited EVALUATION OF DISCLOSURE CONTROLS AND by KPMG LLP, an independent registered public accounting PROCEDURES firm, as stated in their report, which is included herein.
The company’s principal executive officer and principal financial officer have evaluated the effectiveness of the company’s disclosure controls and procedures as of the end of the period covered by this annual report on Form 10-K. Disclosure controls are controls and other procedures that are designed to ensure that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act of 1934, as amended (Act), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s (SEC) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosure. Based on their evaluation, the company’s principal executive officer and principal financial officer have concluded that the company’s disclosure controls and procedures are effective to ensure that information required to be disclosed complies with the SEC’s rules and forms.
CHANGES IN INTERNAL CONTROL
During 2017, we integrated the acquired Plum Creek operations into our overall internal controls over financial reporting. No changes occurred in the company’s internal control over financial reporting during the period that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal control over financial reporting as is defined in the Securities and Exchange Act of 1934 rules.
104 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors Weyerhaeuser Company:
Opinion on Internal Control Over Financial Reporting
We have audited Weyerhaeuser Company and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2017, and the related notes (collectively, the consolidated financial statements), and our report dated February 16, 2018 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Seattle, Washington February 16, 2018
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 105 DIRECTORS, EXECUTIVE to be held May 18, 2018 under the headings “Stock Information — Beneficial Ownership of Common Shares,” and OFFICERS AND CORPORATE “Stock Information — Information about Securities Authorized GOVERNANCE for Issuance under our Equity Compensation Plans,” and in each case, is incorporated herein by reference. A list of our executive officers and biographical information are found in the Our Business — Executive Officers of the Registrant section of this report. Information with respect to CERTAIN RELATIONSHIPS AND directors of the company and certain other corporate governance matters, as required by this item to Form 10-K, is RELATED TRANSACTIONS AND set forth in the Notice of the 2018 Annual Meeting and Proxy DIRECTOR INDEPENDENCE Statement for the company’s Annual Meeting of Shareholders Information about certain relationships and related transactions to be held May 18, 2018 under the headings “Item 1. Election and director independence, as required by this item to of Directors — Nominees for Election,” “Item 1. Election of Form 10-K, is set forth in the Notice of the 2018 Annual Directors — Committees of the Board ,” “Stock Meeting and Proxy Statement for the company’s Annual Information — Section 16(a) Beneficial Ownership Reporting Meeting of Shareholders to be held May 18, 2018 under the Compliance,” and “Corporate Governance at headings “Corporate Governance at Weyerhaeuser — Related Weyerhaeuser — Code of Ethics,” and in each case is Party Transactions Review and Approval Policy,” “Corporate incorporated herein by reference. Governance at Weyerhaeuser — Independent Board of The Weyerhaeuser Code of Ethics applies to our chief executive Directors,” and “Item 1. Election of Directors — Committees of officer, our chief financial officer and our chief accounting the Board,” and in each case, is incorporated herein by officer, as well as other officers, directors and employees of the reference. company. The Weyerhaeuser Code of Ethics is posted on our website at www.weyerhaeuser.com, and currently is located under the tabs “Sustainability”, then “Governance” and finally PRINCIPAL ACCOUNTING FEES “Operating Ethically.” AND SERVICES Information with respect to principal accounting fees and EXECUTIVE AND DIRECTOR services, as required by this item to Form 10-K, is set forth in COMPENSATION the Notice of the 2018 Annual Meeting and Proxy Statement for the company’s Annual Meeting of Shareholders to be held Information with respect to executive and director May 18, 2018 under the heading “Item 3. Ratify Selection of compensation, as required by this item to Form 10-K, is set Independent Registered Public Accounting Firm” and is forth in the Notice of the 2018 Annual Meeting and Proxy incorporated herein by reference. Statement for the company’s Annual Meeting of Shareholders to be held May 18, 2018 under the headings “Item 1. Election of Directors — Directors’ Compensation” and “Executive Compensation,” and in each case, is incorporated herein by reference.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information with respect to security ownership of certain beneficial owners and management and with respect to securities authorized for issuance under our equity compensation plans, as required by this item to Form 10-K, is set forth the Notice of the 2018 Annual Meeting and Proxy Statement for the company’s Annual Meeting of Shareholders
106 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES All financial statement schedules have been omitted because they are not applicable or the required information is included in the consolidated financial statements, or the notes thereto, in Financial Statements and Supplementary Data above. The agreements included as exhibits to this annual report are included to provide information about their terms and not to provide any other factual or disclosure information about the company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement that were made solely for the benefit of the other parties to the agreement and should not be treated as categorical statements of fact, but rather as a way of allocating the risk among the parties if those statements prove to be inaccurate. These representations and warranties may have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement, may apply standards of materiality in a way that is different from what may be viewed as material to investors, were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement, and are subject to more recent developments. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time.
EXHIBITS
2 — Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession (a) Transaction Agreement, dated as of November 3, 2013, among Weyerhaeuser Company, Weyerhaeuser Real Estate Company, TRI Pointe Homes, Inc. and Topaz Acquisition, Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on November 4, 2013 — Commission File Number 1-4825) (b) 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) (c) 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 3.2 to the Quarterly Report on Form 10-Q filed on May 6, 2011 — 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 (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 (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 (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 (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 (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)
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 107 (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) Form of Plum Creek Executive Change in Control Agreement (incorporated by reference to Exhibit 10(c) to the Annual Report on Form 10-K for the annual period ended December 31, 2016 — 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) 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)* (f) 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)* (g) 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)* (h) Form of Weyerhaeuser Company 2013 Long Term Incentive Plan Performance Share Unit Award Terms and Conditions for Plan Years 2017 and 2018 (incorporated by reference to Exhibit 10.1 the Current Report on Form 8-K filed on January 26, 2017 — Commission File Number 1-4825)* (i) Form of Weyerhaeuser Company 2013 Long-Term Incentive Plan Restricted Stock Unit Award Terms and Conditions* (j) 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)* (k) 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)* (l) 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)* (m) 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)* (n) 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)* (o) 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)* (p) 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)* (q) 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)* (r) 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)* (s) 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)* (t) 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)* (u) 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)* (v) 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)* (w) 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)* (x) 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)* (y) 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)* (z) Form of Weyerhaeuser Company 2013 Long-Term Incentive Plan Director Restricted Stock Unit Award Terms and Conditions* (aa) 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)
108 (bb) 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) (cc) 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) (dd) 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) (ee) 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) 12 — Statements regarding computation of ratios 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 — Subsidiaries of the Registrant 23 — Consent of Independent Registered Public Accounting Firm 31 — Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended 32 — Certification pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) 101.INS — 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
* Denotes a management contract or compensatory plan or arrangement. ** Filed in paper — hyperlink not required pursuant to Rule 105 of Regulation S-T FORM 10-K SUMMARY None.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 109 SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized February 16, 2018.
WEYERHAEUSER COMPANY
/s/ DOYLE R. SIMONS Doyle R. Simons President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities indicated February 16, 2018.
/s/ DOYLE R. SIMONS /s/ RICK R. HOLLEY Doyle R. Simons Rick R. Holley Principal Executive Officer and Director Chairman of the Board and Director
/s/ RUSSELL S. HAGEN /s/ KIM WILLIAMS Russell S. Hagen Kim Williams Principal Financial Officer Director
/s/ JEANNE M. HILLMAN /s/ JOHN F. MORGAN SR. Jeanne M. Hillman John F. Morgan Sr. Principal Accounting Officer Director
/s/ LAWRENCE A. SELZER /s/ NICOLE W. PIASECKI Lawrence A. Selzer Nicole W. Piasecki Director Director
/s/ MARK A. EMMERT /s/ MARC F. RACICOT Mark A. Emmert Marc F. Racicot Director Director
/s/ SARA GROOTWASSINK LEWIS /s/ CHARLES R. WILLIAMSON Sara Grootwassink Lewis Charles R. Williamson Director Director
/s/ D. MICHAEL STEUERT D. Michael Steuert Director
110 CERTIFICATIONS EXHIBIT 31
Certification Pursuant to Rule 13a-14(a) Under the Securities Exchange Act of 1934 I, Doyle R. Simons, certify that: 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 16, 2018
/s/ DOYLE R. SIMONS Doyle R. Simons President and Chief Executive Officer
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 111 Certification Pursuant to Rule 13a-14(a) Under the Securities Exchange Act of 1934
I, Russell S. Hagen, certify that: 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 16, 2018
/s/ RUSSELL S. HAGEN Russell S. Hagen Senior Vice President and Chief Financial Officer
112 EXHIBIT 32
Certification Pursuant to Rule 13a-14(b) Under the Securities Exchange Act of 1934 and Section 1350, Chapter 63 of Title 18, United States Code Pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and Section 1350, Chapter 63 of Title 18, United States Code, each of the undersigned officers of Weyerhaeuser Company, a Washington corporation (the “Company”), hereby certifies that: The Company’s Annual Report on Form 10-K dated February 16, 2018 (the “Form 10-K”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ DOYLE R. SIMONS Doyle R. Simons President and Chief Executive Officer
Dated: February 16, 2018
/s/ RUSSELL S. HAGEN Russell S. Hagen Senior Vice President and Chief Financial Officer
Dated: February 16, 2018 The foregoing certification is being furnished solely pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and Section 1350, Chapter 63 of Title 18, United States Code, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, and is not being filed as part of the Form 10-K or as a separate disclosure document. A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
WEYERHAEUSER COMPANY > 2017 ANNUAL REPORT AND FORM 10-K 113 ABOUT WEYERHAEUSER TRANSFER AGENT AND REGISTRAR WEYERHAEUSER CONTACT INFORMATION :H\HUKDHXVHU&RPSDQ\EHJDQ &RPSXWHUVKDUH Investor Relations contact RSHUDWLRQVLQ DQGLVRQHRI 32%R[ (OL]DEHWK/%DXP WKHZRUOG·VODUJHVWSULYDWHRZQHUV /RXLVYLOOH.< 6HQLRU'LUHFWRU,QYHVWRU5HODWLRQVDQG RIWLPEHUODQGV:HPDQDJHWKHVH (QWHUSULVH3ODQQLQJ &RPSXWHUVKDUHRXUWUDQVIHUDJHQW WLPEHUODQGVRQDVXVWDLQDEOHEDVLV PDLQWDLQVWKHUHFRUGVIRURXUUHJLVWHUHG LQFRPSOLDQFHZLWKLQWHUQDWLRQDOO\ Shareholder Services contact VKDUHKROGHUVDQGFDQKHOS\RXZLWKD UHFRJQL]HGIRUHVWU\VWDQGDUGV:HDUH -DFTXHOLQH:+DZQ YDULHW\RIVKDUHKROGHUUHODWHGVHUYLFHV DOVRRQHRIWKHODUJHVWPDQXIDFWXUHUVRI $VVLVWDQW&RUSRUDWH6HFUHWDU\DQG LQFOXGLQJ ZRRGSURGXFWV:HHPSOR\DSSUR[LPDWHO\ 0DQDJHU6KDUHKROGHU6HUYLFHV SHRSOHZKRVHUYHFXVWRPHUV FKDQJHRIQDPHRUDGGUHVV ZRUOGZLGH:HDUHOLVWHGRQWKH1RUWK FRQVROLGDWLRQRIDFFRXQWV &RUSRUDWHVHFUHWDU\#ZH\HUKDHXVHUFRP $PHULFDQDQG:RUOG'RZ-RQHV GXSOLFDWHPDLOLQJV Ordering company reports 6XVWDLQDELOLW\,QGLFHV2XUFRPSDQ\LV GLYLGHQGUHLQYHVWPHQWDQGGLUHFWVWRFN 7RRUGHUDIUHHFRS\RIRXU$QQXDO DUHDOHVWDWHLQYHVWPHQWWUXVW SXUFKDVHSODQHQUROOPHQW 5HSRUWDQG)RUP.YLVLW ORVWVWRFNFHUWLÀFDWHV Corporate mailing address KWWS LQYHVWRUZH\HUKDHXVHUFRP WUDQVIHURIVWRFNWRDQRWKHUSHUVRQDQG and telephone TXDUWHUO\DQGDQQXDOUHVXOWV DGGLWLRQDODGPLQLVWUDWLYHVHUYLFHV :H\HUKDHXVHU&RPSDQ\ Production notes 2FFLGHQWDO$YHQXH6RXWK $FFHVV\RXULQYHVWRUVWDWHPHQWVRQOLQH 7KLVUHSRUWLVSULQWHGRQOE)LQFK 6HDWWOH:$ KRXUVDGD\VHYHQGD\VDZHHNDW 2SDTXHFRYHUDQGOE)LQFK2SDTXH ZZZFRPSXWHUVKDUHFRPLQYHVWRU WH[W7KHHQWLUHUHSRUWFDQEHUHF\FOHGLQ 7RÀQGRXWPRUHDERXWWKHVHUYLFHV Weyerhaeuser online PRVWKLJKJUDGHRIÀFHSDSHUUHF\FOLQJ DQGSURJUDPVDYDLODEOHWR\RXSOHDVH ZZZZH\HUKDHXVHUFRP SURJUDPV7KDQN\RXIRUUHF\FOLQJ FRQWDFW&RPSXWHUVKDUHGLUHFWO\WRDFFHVV Annual meeting \RXUDFFRXQWE\LQWHUQHWWHOHSKRQHRU 0D\ PDLO³ZKLFKHYHULVPRVWFRQYHQLHQWIRU\RX (PEDVV\6XLWHV³3LRQHHU6TXDUH Contact us by telephone 6RXWK.LQJ6WUHHW 6KDUHKROGHUVLQWKH8QLWHG6WDWHV 6HDWWOH:$ 3UR[\PDWHULDOZLOOEHPDLOHGRQRUDERXW 7''IRUKHDULQJLPSDLUHG $SULOWRHDFKKROGHURIUHFRUG )RUHLJQVKDUHKROGHUV RIFRPPRQVKDUHVRQ0DUFK WKHUHFRUGGDWH 7''IRUKHDULQJLPSDLUHG Stock exchanges and symbols Contact us online :H\HUKDHXVHU&RPSDQ\FRPPRQVWRFN ZZZFRPSXWHUVKDUHFRPLQYHVWRU LVOLVWHGRQWKH1HZ Printed with inks containing soy and/or vegetable oils SFI-01682 FOR MORE INFORMATION, VISIT: http://investor.weyerhaeuser.com ATTACHMENT 4 Proof of Land Ownership ATTACHMENT 5 Proof of Good Standing with the Arkansas Secretary of State Arkansas Secretary of State https://www.sos.arkansas.gov/corps/search_corps.php?DETAIL=329280&corp_type_id=&cor... Search Incorporations, Cooperatives, Banks and Insurance Companies Printer Friendly Version LLC Member information is now confidential per Act 865 of 2007 Use your browser's back button to return to the Search Results Begin New Search For service of process contact the Secretary of State's office. Corporation Name WEYERHAEUSER NR COMPANY Fictitious Names Filing # 800143884 Filing Type Foreign For Profit Corporation Filed under Act For Bus Corp; 958 of 1987 Status Good Standing Principal Address Reg. Agent CORPORATION SERVICE COMPANY Agent Address 300 SPRING BUILDING, SUITE 900 300 S SPRING STREET LITTLE ROCK, AR 72201 Date Filed 10/17/2008 Officers VICKI MERRICK , Incorporator/Organizer DOYLE R. SIMONS , President KRISTY T. HARLAN , Secretary PAUL A. STAMNES , Vice-President LAURA B SMITH , Treasurer JEANNE M. HILLMAN , Controller Foreign Name N/A 1 of 2 3/26/2019, 3:42 PM Arkansas Secretary of State https://www.sos.arkansas.gov/corps/search_corps.php?DETAIL=329280&corp_type_id=&cor... Foreign Address 33663 WEYERHAEUSER WAY SOUTH FEDERAL WAY, 98003 State of Origin WA Purchase a Certificate of Good Pay Franchise Tax for this corporation Standing for this Entity 2 of 2 3/26/2019, 3:42 PM https://ccfs.sos.wa.gov/#/BusinessSearch/BusinessInformation BUSINESS INFORMATION Business Name: WEYERHAEUSER NR COMPANY UBI Number: 602 865 829 Business Type: WA PROFIT CORPORATION Business Status: ACTIVE Principal Office Street Address: 220 OCCIDENTAL AVE S, SEATTLE, WA, 98104-3120, UNITED STATES Principal Office Mailing Address: 220 OCCIDENTAL AVE S, SEATTLE, WA, 98104-3120, UNITED STATES Expiration Date: 09/30/2019 Jurisdiction: UNITED STATES, WASHINGTON Formation/ Registration Date: 09/24/2008 Period of Duration: PERPETUAL Inactive Date: Nature of Business: MANUFACTURE AND SALE OF FOREST PRODUCTS REGISTERED AGENT INFORMATION Registered Agent Name: CORPORATION SERVICE COMPANY Street Address: 300 DESCHUTES WAY SW STE 304, TUMWATER, WA, 98501, UNITED STATES Mailing Address: 1 of 4 3/26/2019, 3:47 PM https://ccfs.sos.wa.gov/#/BusinessSearch/BusinessInformation 300 DESCHUTES WAY SW STE 304, TUMWATER, WA, 98501, UNITED STATES GOVERNORS Title Governors Type Entity Name First Name Last Name GOVERNOR INDIVIDUAL JEANNE HILLMAN GOVERNOR INDIVIDUAL LAURA SMITH GOVERNOR INDIVIDUAL DOYLE SIMONS GOVERNOR INDIVIDUAL PAUL STANMES GOVERNOR INDIVIDUAL KRISTY HARLAN GOVERNOR INDIVIDUAL ADRIAN BLOCKER GOVERNOR INDIVIDUAL ALAN SHERRINGTON GOVERNOR INDIVIDUAL ALLAN BRADSHAW GOVERNOR INDIVIDUAL BO FORD GOVERNOR INDIVIDUAL BRAD MJELDE GOVERNOR INDIVIDUAL CARLA NELSON-HUGHES GOVERNOR INDIVIDUAL CORRIN CRAWFORD GOVERNOR INDIVIDUAL DAVID GRAHAM GOVERNOR INDIVIDUAL DAVID HELMERS GOVERNOR INDIVIDUAL DENISE MERLE GOVERNOR INDIVIDUAL DEVIN STOCKFISH GOVERNOR INDIVIDUAL DOW DERATO GOVERNOR INDIVIDUAL ELIZABETH BERGQUIST GOVERNOR INDIVIDUAL GREG DUVALL GOVERNOR INDIVIDUAL JACQUELINE HAWN GOVERNOR INDIVIDUAL JAMES KILBERG GOVERNOR INDIVIDUAL JAMES JOHNSTON 2 of 4 3/26/2019, 3:47 PM https://ccfs.sos.wa.gov/#/BusinessSearch/BusinessInformation Title Governors Type Entity Name First Name Last Name GOVERNOR INDIVIDUAL JASON MINCHIN GOVERNOR INDIVIDUAL JERRY NIX GOVERNOR INDIVIDUAL JOANIE CURTIS GOVERNOR INDIVIDUAL JOHN LAMBDIN GOVERNOR INDIVIDUAL JON RASHLEIGH GOVERNOR INDIVIDUAL JOSE QUINTANA GOVERNOR INDIVIDUAL JUSTIN NIKBAKHSH GOVERNOR INDIVIDUAL KARL WATT GOVERNOR INDIVIDUAL KEITH O'REAR GOVERNOR INDIVIDUAL KERRI LOCKWOOD GOVERNOR INDIVIDUAL KRISTEN SAWIN GOVERNOR INDIVIDUAL LISA ANN WYSOCKI GOVERNOR INDIVIDUAL MARK MILLER GOVERNOR INDIVIDUAL MATTHEW WILLIAMS GOVERNOR INDIVIDUAL MIKE BRADY GOVERNOR INDIVIDUAL PAMELA BERRY GOVERNOR INDIVIDUAL PAUL DAVIS GOVERNOR INDIVIDUAL PAUL HOSSAIN GOVERNOR INDIVIDUAL PAUL LEUZZI GOVERNOR INDIVIDUAL PEGGY HEBBLETHWAITE GOVERNOR INDIVIDUAL RACHEL MCCALL GOVERNOR INDIVIDUAL RUSSELL HAGEN GOVERNOR INDIVIDUAL RYAN BEAVER GOVERNOR INDIVIDUAL SCOTT MARLEGA GOVERNOR INDIVIDUAL SCOTT HENKER GOVERNOR INDIVIDUAL SHANE CONWAY 3 of 4 3/26/2019, 3:47 PM https://ccfs.sos.wa.gov/#/BusinessSearch/BusinessInformation Title Governors Type Entity Name First Name Last Name GOVERNOR INDIVIDUAL SHARON DUSEK GOVERNOR INDIVIDUAL SUSAN LAPRAIRIE GOVERNOR INDIVIDUAL SUZANNE CUTHBERT GOVERNOR INDIVIDUAL TERI RONGEN GOVERNOR INDIVIDUAL TODD JANSEN GOVERNOR INDIVIDUAL TODD POWELL GOVERNOR INDIVIDUAL TRAVIS KEATLEY GOVERNOR INDIVIDUAL WILLIAM CALTON GOVERNOR INDIVIDUAL XAN MCCALLUM 4 of 4 3/26/2019, 3:47 PM