"^Weyerhaeuser Annual Report 1981
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"^Weyerhaeuser Annual Report 1981 Uri:\/EUi,r{ OF VA.'ASH:rJG.TOr.' —Face hm^ef^y^f^frfilter, a logged -K: works amidst volcanic ash remaining from the ilwell E. Mohi festor Relations, Weyerh May 18, 1980 eruption of Mount St. Helens. [>any, Tacoma, WA 98471* Salvage of the timber blown down by the moun IA copy will be provided at no char Corporate Mailing Address tain's explosion is two-thirds complete on the Weyerhaeuser Company Tacoma, WA 98477 Weyerhaeuser lands involved, and by the end Director of Investor Relations of 1982 more than 15,000 acres will have Lowell E, Moholt Annual Meeting been reforested by planting crews ivho follow the Aptil 15, 1982 loggers. The company's large Longview, Weyerhaeuser Headquarters Building Washington, manufacturing complex has been Federal Way, Washington Pfoxy material will be mailed almost entirely supplied by wood salvaged on or about March 3, 1982 to from the blast zone, since September, 1980. each holder of record of voting shares. Dividends and Change of Address Communications concerning dividends and change of address shoufd be directed to the Cotp- Contents: orate Secretary, Weyerhaeuser Company, Tacoma, WA 98477. Transfer Agent Presidents Message 2 Communications concerning transfer requirements and lost stock certificates should be Timberlands and Raw Materials 6 addressed to the Transfet Agent. The First Jcfsey National Bank ^! One Exchange Place Wood Products 12 Jersey City, NJ 07 303 Dividend Investment Plan Fiber Products 16 A dividend investment plan is available to holders ul common shares. For brochure and enroll Weyerhaeuser Real Estate Company 20 ment forms write to the Corp orate Secretary, Weyerhaeuser Diversified Businesses 23 Company, Tacoma, WA 98477. Common Shares Traded on: New Vbrk Stock Exchange, Financial and Statistical Report 23 Midwest Stock Exchange, Pacific Stock Exchange Preferred and $4-50 Preference Shares Traded on: New York Stock Exchange 5.20%, 7.65%, 8-5/8%. 8.90%o and 7.95%: Debentures and 8%c Notes Traded on: New \bfk Stock Exchange Highlights Weyerhaeuser Company and Subsidiaries 1981 1980 Net sales $4,501,512,000 $4,535,814,000 Earnings before extraordinary charges i 234,444,000 $ 321,487,000 Extraordinary charges, net of related tax effects $ 6,100,000 $ 43,500,000 Net earnings $ 228,344,000 $ 277,987,000 Depreciation, amortization and fee stumpage $ 372,227,000 $ 410,761,000 Cash flow from operations $ 673,732,000 $ 806,918,000 Capital expenditures $ 768,351,000 I 768,403,000 Dividends paid: Common $ 163,858,000 $ 162,931,000 Preferred $ 11,155,000 $ 11,160,000 Preference $ 10,812,000 $ 354,000 Working capital $ 574,415,000 $ 508,435,000 Long-term debt, including current maturities $1,417,217,000 $1,299,388,000 Shareholders' interest $3,107,865,000 $2,836,754,000 DATA PER COMMON SHARE: Net earnings: 1st quarter 2nd quarter .55 .76 3rd quarter .34 .23"' 4th quarter .30") .27"' $ 1.62 $ 2.12 Dividends: 1st quarter $ .321/2 $ .321/2 2nd quarter .321/2 .321/2 3rd quarter .321/2 .321/2 4th quarter .321/2 .321/2 $ 1.30 $ 1.30 Market prices—high/low: 1st quarter 4034-321/4 $ 375/8-28 2nd quarter 391/4-331/2 361/2-28 3rd quarter 36/4-26^8 38 -32 4th quarter 311/2-24V8 36^4-30 Shareholders' interest 21.44 20.96 NUMBER OF SHAREHOLDER ACCOUNTS AT END OF YEAR: Common 43,306 44,274 Preferred 2,970 3,312 Preference 1,290 3 "'After extraordinary charge of $ .05 per common share. *^'After extraordinary charge of $.29 per common share. '"After extraordinary charge of $. 06 per common share and disposal and closure costs of $. 19 per common share. ^president's Message In this report last year, I Net Sales #-^uggested that 1981 would be a more "normal" <Per Common Share) JLyear than 1980. While we faced no damaging volcanic eruptions in 1981, the past year was not "normal," average, or typical in several major respects. ^ Our view, shared by many, going into 1981 was that interest rates would begin to recede by mid-year, I allowing recovery in the nation's housing industry. Instead, the opposite happened, with interest rates 75 76 77 78 79 80 81 rising to new peaks and beginning to retreat only late in the year. In addition, the Japanese housing market also slumped early in 1981, at a time when both log and lumber inventories were high. Japan's import volumes were slashed dramatically early in the year, and recovery in that market began only in the past several months. And, finally, late in the year, the U.S. economy suffered a significant decline creating some softness in pulp, paper, and packaging markets. The U.S. housing recession has been the longest and deepest since the Great Depression, and U.S. softwood lumber production fell to its lowest level since 1945. / Through close coordination and integration of our harvesting operations^ converting plants, and marketing, we were able to maintain higher operating rates than the industry in general. This enabled us to continue with industry-leading investments in new facilities and technology, with our cash now much less affected by the slump than were earnings. These invest ments in new capacity and in new and more efficient Cash Flow technologies have served to cut current costs and will {Per Common Share) be available to increase earnings in the coming market U recovery. We doubled our newsprint capacity at Longview, Washington, in 1981, with the smoothest and I most rapid new machine startup in our experience. We continued construction on lightweight' coatee^ paper facilities at our new green-field mill site near 72 73 74 75 76 77 78 79 80 81 Columbus, Mississippi, aiming at mid-year 1982 Startup and entry into this new product line. We will Earnings and Cash also be adding lightweight linerboard grades to our Dividends* product mix, with startup of a new machine at Val (PerCommon Share) liant, Oklahoma, and will enter the structural compo site panel industry when our new Grayling, Michigan I\ mill begins producing Structurwood® late this t year. Meanwhile, our new-technology lumber mill iiiini at Raymond, Washington, is well up into its startup 78 79 80 81 curve, and we have several significant energy projects i Cash Dividends 'Before extraordinary charges oft.33 in 1978, S.35 ii underway. Engineering planning for modernization of 1980 andS-05 in 198!. our kraft pulp mill at Longview, Washington — where Weyerhaeuser Company first entered the pulp and paper industry 50 years ago—will be completed in 1982. When will recovery begin? How fast will it occur? It's impossible to make firm predictions, in view of the uncertainties we see immediately ahead. The range of possible market conditions spans from further deterioration to rapid recovery. With that much uncertainty, we are preparing ourselves for the worst case. But, we are anticipating a middle ground — bad conditions in the first two quarters, as the housing recession continues, with improvement in Japanese markets being offset by softness in some pulp, paper, and packaging markets . with gradual recovery in the second half and a stronger 1983. Inflation is being squeezed out of the economy, albeit with attendant difficulties and severe strains. In a dramatic reversal of half a century of policy, incentives are being provided for savings and productive investment in the United States. The housing and forest products industries have been casualties during the Total Taxes transition period. But, like all other segments of the (Per Common Share) economy, we will benefit in the longer term if these policies and programs succeed. Even so, the United J States and the world in the 1980s are facing a slower- growth, more turbulent economic environment than anyone could have guessed even a few years ago. There 72 73 74 75 76 77 78 79 80 81 has been a significant transfer of wealth and income Total Wages, Salaries from both the developed and developing world to the and Ben^ts OPEC nations — a transfer that still continues, al (Per Common Share!) though at a slower pace. In response, the developed nations, including the United States, are allocating a significant portion of capital investment toward lower ing energy use and to allow use of nonpetroleum fuels. I One inevitable result will be slower growth rates in the developed economies than had been expected. 72 7J 74 75 76 However, the growth rates in consumption, driven by population growth and standards of living, will still require large new supplies of basic commodities, including those that we pro duce and rriarket. Companies such as ours which possess strong financial positions should face strong growth prospects in the 1980s — provided they understand the changing needs of their markets and have matched their manufacturing and marketing capabilities to those changes. Our balance sheet remained strong even in such a wretched year as 1981, as did our cash flow. We were able to continue to rebalance and expand our manufacturing and marketing efforts. And, we increased the productivity of our total system, with new equipment and facilities utilizing improved processes and controls. We are also implementing changes in the structure of our organization itself, to assure the maximum benefit from the commitment, creativity, and skills of our people. This organizational redesign will be a major 1982 priori ty. The worldwide marketing capability that we have built in the past two decades, the facility development programs that we have been able to continue through this down-cycle, our industry-leading technological and forestry capability, and our organizational and human strengths should giyt us an increasing competitive advantage in this turbulent decade.