Weyerhaeuser Company 2016 Annual Report
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WEYERHAEUSER 2016 ANNUAL REPORT AND FORM 10K Working together to be the world’s premier timber, land, and forest products company DEAR SHAREHOLDER: This past year was transformative for our company. This work continues. We now expect to exceed our Over the past three years, we have been relentlessly focused $100 million cost synergy on making Weyerhaeuser a truly great company by driving value target by 25 percent, realize for our shareholders through a focused portfolio, industry-leading a total of $130–$140 million performance, and disciplined capital allocation. In 2016, we in operational synergies, FRPSOHWHGWZRVLJQLÀFDQWPRYHVWKDWUHSUHVHQWWKHFDSVWRQH and continue delivering on on our portfolio journey: our merger with Plum Creek Timber our operational excellence and the divestiture of our Cellulose Fibers business. targets. Capitalizing on these PORTFOLIO opportunities will enable us Following these transactions, we have emerged as a focused to further improve our relative forest products company with 13 million acres of world-class performance. timberlands and an industry-leading, low-cost wood products CAPITAL ALLOCATION manufacturing business. 2XUÀUVWSULRULW\IRUFDSLWDO 2XUWLPEHUKROGLQJVDUHQHDUO\ÀYHWLPHVWKHVFDOHRIRXU allocation is returning cash largest competitor, and we are one of the largest REITs in the to shareholders, and we continued to deliver on that commitment United States. Through the Plum Creek merger, we also gained in 2016 by repurchasing $2 billion of common shares. We remain unparalleled expertise in Real Estate, Energy and Natural strongly committed to disciplined capital allocation, including a Resources. This new business segment will further maximize sustainable and growing dividend. the value of our acres by identifying tracts with a premium POSITIONED FOR THE FUTURE value over timberland and fully capturing the value of surface In September, we moved our corporate headquarters from and subsurface assets. Federal Way, Washington, to Seattle. Our new building embodies The merger also gave us a unique opportunity to build a both our rich history and the exciting future of our merged company. world-class team of the best talent in the industry. We followed With industry-leading assets and a world-class team, we are well a disciplined process to place the right people in the right roles positioned to take advantage of the opportunities ahead as we work with the right mix of expertise from both companies. I am really together to become the world’s premier timber, land, and forest pleased with the team we have assembled and proud of what products company. they’ve already been able to accomplish together. I look forward to sharing our progress with you next year. PERFORMANCE Thank you for your ownership and support. In 2016, our teams were singularly focused on successfully integrating the Plum Creek merger, capturing synergies and further driving operational excellence improvements across the combined SRUWIROLR:HPDGHVLJQLÀFDQWSURJUHVVLQFOXGLQJ • Capturing more than three-quarters of our $100 million Doyle R. Simons cost synergy target, 3UHVLGHQW &KLHI([HFXWLYH2IÀFHU • Delivering more than $40 million in operational synergies from Timberlands, • Achieving $60 million of operational excellence improvements in Wood Products, and • Generating nearly $190 million of EBITDA from Real Estate, Energy & Natural Resources. 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, 2016 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) Chicago Stock Exchange 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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ ] 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, 2016, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $21.6 billion based on the closing sale price as reported on the New York Stock Exchange Composite Price Transactions. As of January 27, 2017, 748,998,273 shares of the registrant’s common stock ($1.25 par value) were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Notice of 2017 Annual Meeting of Shareholders and Proxy Statement for the company’s Annual Meeting of Shareholders to be held May 19, 2017, are incorporated by reference into Part II and III. WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K TABLE OF CONTENTS PART I PAGE PAGE ITEM 1. OUR BUSINESS ...................................... 1 WHAT YOU WILL FIND IN THIS MD&A ..................... 37 WE CAN TELL YOU MORE ............................... 1 ECONOMIC AND MARKET CONDITIONS AFFECTING OUR WHOWEARE........................................ 1 OPERATIONS ........................................ 37 • REAL ESTATE INVESTMENT TRUST (REIT) ELECTION ....... 1 FINANCIAL PERFORMANCE SUMMARY ..................... 38 • MERGER WITH PLUM CREEK .......................... 1 RESULTS OF OPERATIONS .............................. 39 • OUR BUSINESS SEGMENTS .......................... 2 • CONSOLIDATED RESULTS ............................ 39 • EFFECT OF MARKET CONDITIONS ...................... 2 • TIMBERLANDS ..................................... 41 • COMPETITION IN OUR MARKETS ....................... 2 • REAL ESTATE, ENERGY AND NATURAL RESOURCES ........ 43 • SALES OUTSIDE THE U.S. ............................ 2 • WOOD PRODUCTS .................................. 44 • OUR EMPLOYEES .................................. 2 • UNALLOCATED ITEMS ............................... 45 WHAT WE DO ........................................ 3 • INTEREST EXPENSE ................................. 46 • TIMBERLANDS ..................................... 3 • INCOME TAXES .................................... 46 • REAL ESTATE, ENERGY AND NATURAL RESOURCES ........ 10 LIQUIDITY AND CAPITAL RESOURCES ..................... 46 • WOOD PRODUCTS .................................. 11 • CASH FROM OPERATIONS ............................ 46 EXECUTIVE OFFICERS OF THE REGISTRANT ................. 15 • INVESTING IN OUR BUSINESS ........................ 47 NATURAL RESOURCE AND ENVIRONMENTAL MATTERS ....... 16 • FINANCING ....................................... 48 • REGULATIONS AFFECTING FORESTRY PRACTICES ......... 16 OFF-BALANCE SHEET ARRANGEMENTS .................... 51 • ENDANGERED SPECIES PROTECTIONS .................. 16 ENVIRONMENTAL MATTERS, LEGAL PROCEEDINGS AND OTHER • FOREST CERTIFICATION STANDARDS ................... 17 CONTINGENCIES ..................................... 51 • WHAT THESE REGULATIONS AND CERTIFICATION PROGRAMS ACCOUNTING MATTERS ................................ 51 MEAN TO US ...................................... 17 • CRITICAL ACCOUNTING POLICIES ...................... 51 • CANADIAN ABORIGINAL RIGHTS ....................... 17 • PROSPECTIVE ACCOUNTING PRONOUNCEMENTS .......... 53 • POLLUTION-CONTROL REGULATIONS ................... 18 PERFORMANCE MEASURES ............................. 53 • ENVIRONMENTAL CLEANUP .......................... 18 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT • REGULATION OF AIR EMISSIONS IN THE U.S. ............. 18 MARKET RISK ....................................... 56 • REGULATION OF AIR EMISSIONS IN CANADA ............