Weyerhaeuser Company

founded: 1900

Contact Information:

headquarters: 33663 weyerhaeuser way s.
federal way, wa 98003 phone: (206)924-2345 url: http://www.weyerhaeuser.com

OVERVIEW

The Weyerhaeuser Company, a leader in the international forest products business, is the largest international owner of merchantable softwood timber and the largest producer of softwood and hardwood lumber and engineered lumber products. Incorporated in 1900, the company primarily grows and harvests trees and produces and sells forest products. It also builds homes, develops land, and recycles paper products. Many of its products are used in the manufacturing and construction industries. In North America, it is the second-largest producer of structural panels and second-largest distributor of wood products. In the United States, it is the top forest products exporter and it ranks among the top exporters overall.

Headquartered in Federal Way, Washington, the Weyerhaeuser Company has offices or operations in 18 countries and customers across the world. Its principal business segments are timberlands and wood products; pulp, paper, and packaging; and real estate and related assets.

As may be expected, Weyerhaeuser's land holdings are great. In North America, it manages 5.9 million acres of company-owned and a half-million acres of leased commercial forestland in North America. The company also has renewable, long-term licenses on 32.6 million acres of forestland in five Canadian provinces managed by its Canadian operations.

COMPANY FINANCES

In the first quarter of 2002, the company's revenues rose 13 percent to $4.01 billion. Net income before extraordinary item fell 50 percent to $53 million. Results reflect an improved performance at the real estate division, offset by non-recurring charges related to facility closure. In 2001 the company's sales totaled $14.5 billion. Accounting for 19 percent of this total were sales outside of the United States, including exports. Its timberlands business segment accounted for 7 percent of sales, while the wood products segment accounted for 44 percent. The pulp, paper, and packaging segment accounted for 39 percent. In 2000 wood products accounted for 42 percent of revenues; pulp, paper, and packaging, 41 percent; real estate and related assets, 9 percent; and timberlands, 7 percent.

ANALYSTS' OPINIONS

Heading into 2002, analysts felt that Weyerhaeuser Company may be in a somewhat difficult financial position. However, it was also acknowledged that the company demonstrated aggressive growth in the past several years, and that that kind of approach can involve significant financial risks. Many wouldn't be surprised if the company's fortunes assumed an upward trajectory, especially following the major acquisition of Williamette Industries in 2002. In the first quarter of 2002, Weyerhaeuser earned $.27 per share. The earnings were above Wall Street forecasts. According to the research firm of Thomson Financial/First Call, nine analysts had expected the company to earn an average of $.15 per share.

HISTORY

Though not incorporated until 1900, the Weyerhaeuser Company's beginnings go back to the mid-eighteenth century, when a man named Frederick Weyerhaeuser, who was born in 1834 and died in 1914, emigrated to America in 1852 at the age of 18. Weyerhaeuser worked at a succession of menial jobs, but he saved his money and eventually bought a sawmill in 1857 in Rock Island, Illinois. Weyerhaeuser was a hard worker and a smart businessman, and the mill became a great success. This allowed him to purchase more sawmills on the Mississippi and to buy forests in Wisconsin, Minnesota, Idaho, Washington, and Oregon. By the turn of the century, Weyerhaeuser owned more timberland than anyone in the country. Also, he had taken on several partners. This group turned its eyes from the American Midwest to the Northwest, one of the greatest areas of timber on the face of the Earth, and the company was well on its way to becoming a global leader in the industry.

Officially, the Weyerhaeuser Company was founded in 1900, when it was incorporated. It didn't take long for the enterprise to extent itself into the international realm. Company sales to Japan started in 1923, when the island needed Weyerhaeuser lumber to rebuild Tokyo and Yokohama following an earthquake. But it wouldn't be until 1963 that the company opened its first Asia-based office, located in Tokyo. The company would spread itself out through the region during the rest of the decade and into the 1970s.

The company's Asian connection was strengthened when former U.S. President Richard Nixon initiated partial relations with China in 1971. Weyerhaeuser became the first U.S. forest products company to develop business in the Communist country. That same year, the company opened its first-ever corporate headquarters, in Federal Way, Washington.

As the company headed into the new millennium, it began demonstrating an aggressive approach to growth, as it made some significant acquisitions and business moves. In 2001 in acquired a 50 percent interest in Southern Cone Timber Investors Limited, a joint venture with institutional investors focusing on plantation forests in the Southern Hemisphere. Principal assets include 68,000 acres of eucalyptus and pine tree plantings. In July, the Weyerhaeuser Company bought the remaining 50 percent interest in Cedar River Paper Company, a manufacturer of liner and medium containerboard from recycled fiber, for $261 million. In January 2002 Weyerhaeuser entered into a merger agreement with Willamette Industries, a premium and low-cost forest products company focused on producing white paper, brown paper, and building materials.

STRATEGY

The Weyerhaeuser Company's overall stated strategies are to achieve total quality, maintain managerial excellence, pursue full customer satisfaction, empower its employees, and produce large returns for shareholders. These strategies are designed to help the company achieve its ultimate vision of becoming "the best forest products company in the world." To achieve its aims, the company is implementing business metrics and improved work processes.

Specifically, as the company headed into 2002, management placed strong focus on what it considered to be two key business metrics: safety and return on net assets (RONA). Safety, the Weyerhaeuser leaders believe, is not only about protecting employees. It also results in increased productivity and product quality.

To improve its RONA, the company has developed a "road map" that includes three elements: PACE, PIE, and process reliability. PACE (Process to Achieve Capital Excellence), the company explains, is a business metric designed to help reduce capital spending and maximize effectiveness. Weyerhaeuser puts each of its projects through a PACE analysis, which helps determine if the project provides the correct solution in the first place and then it helps keep the project on track. PIE, or Purchasing Improvement Effort, is designed to help decrease spending on goods, services, and capital equipment; to reduce inventories; and to simplify purchasing transactions. The third element, process reliability, is designed to insure that the company's products are produced in the safest and most efficient manner possible. The company is also focusing on improving work systems throughout the organization and the internal delivery of services, and on streamlining its core services. The company estimates that these efforts will result in more than $150 million in annual savings.

The Weyerhaeuser Company is also focusing on the issue of increased globalization. To deal with this, the company says it is important that its internal companies develop proper scale and scope through consolidation. In this way, they can better serve the changing customer base resulting from globalization, which will improve returns for shareholders. As far as the future of international trade, the company says the global demand for forest products will outweigh supply for most of the next decade. To deal with this situation, it is developing strategic partnerships with international companies. These include entering a joint marketing agreement with Svenska Cellulosa Aktiebolaget of Sweden, creating a partnership with the World Timberfund, and opening its first packaging plant in Mexico.

INFLUENCES

One of the ongoing strategies that has helped put the Weyerhaeuser Company where it is today is its proactive approach to its business. Obviously, a company that primarily makes its money by manufacturing and marketing wood products must ensure that raw materials remain plentiful. To this end, Weyerhaeuser strongly focuses on activities designed to increase the yield from its fee timberland acreage. These activities include extensive planting, suppression of non-merchantable species, pre-commercial and commercial thinning, fertilization, and operational pruning. Success in this area requires effective forest management, and Weyerhaeuser has dedicated itself to learning more about a forest's natural cycles. Specifically, the company applies principles of science and sustainable forestry to protect natural resources and increase forest productivity.

With the increasing globalization that began in the 1990s, Weyerhaeuser has applied these same strategies and standards to its international land holdings. In areas where it is only involved in the importation of wood products, it only conducts business with companies who operate responsibly managed forests.

CURRENT TRENDS

The merger agreement with Willamette Industries, completed in January 2002 and described as a "hostile takeover," was the most significant development in the company's recent history. Analysts estimated the total value of the transaction to be somewhere between $6 and $8 billion. Many repercussions resulted from the acquisition. As Weyerhaeuser began aligning its operations with Williamette, it closed three facilities (in Oregon, Louisiana, and Colorado) which eliminated 206 jobs, a move that was part of the consolidations and cuts intended to help Weyerhaeuser save $300 million a year over the next three years. It also closed two Williamette facilities and a Weyerhaeuser packaging facility in Denver, Colorado. Other job cuts and downsizing measures were expected.

Weyerhauser's first quarter profits for 2002 fell, in part because of the charges for its acquisition of Williamette and the resulting plant closures. For the first quarter, Weyerhaeuser reported net earnings of $30 million. At the same time in 2001, it reported net earnings of $107 million.

FAST FACTS: About Weyerhaeuser Company

Ownership: The Weyerhaeuser Company is a publicly owned company operating in the forestry, wood products, and paper sectors of the materials industry. It is traded on the New York and Toronto Stock Exchanges.

Ticker Symbol: WY

Officers: Steven Rogel, 59, Chmn., Pres., and CEO, 2001 salary $2,100,000; William Stivers 63, CFO, EVP, 2001 Salary $761,00; William Corbin, 60, EVP Wood Products, 2001 Salary $885,000; Richard Hanson, 58, EVP Timberlands, 2001 Salary $655,000; Steven Hill, 54, SVP of Human Resources

Employees: 60,000

Principal Subsidiary Companies: The Weyerhaeuser Company has three wholly owned subsidiaries: Weyerhaeuser New Zealand Inc., Weyerhaeuser Australia Pty. Ltd., and Weyerhaeuser Forestlands International. Through Weyerhaeuser New Zealand Inc., the Company runs the management and marketing activities of a New Zealand joint venture, Nelson Forests Joint Venture, which consists of 151,000 acres of Crown Forest License cutting rights, 42,000 acres of freehold land and the Kaituna sawmill. Through Weyerhaeuser Australia Pty. Ltd., the company owns a 70 percent interest in Pine Solutions, an Australian softwood timber distributor. It also owns two sawmills and 16,800 acres of cutting rights. Through Weyerhaeuser Forestlands International, the company is a 50 percent owner and managing general partner in RII Weyerhaeuser World Timberfund, L.P. (WTF), a limited partnership that makes investments outside the United States. WTF owns 58,500 acres of radiata pine plantations, two softwood lumber mills, a pine molding remanufac-turing plant, a chip export business, and a 30 percent interest in Pine Solutions. This partnership also owns a Uruguayan venture, Colonvade, S.A. The company is also involved in real estate development, construction, and other real estate-related activities through its real estate subsidiary, Weyerhaeuser Real Estate Company, and its financial services subsidiary, Weyerhaeuser Financial Services, Inc.

Chief Competitors: The Weyerhaeuser Company's major competitors include International Paper and Georgia Pacific.

Still, Weyerhaeuser felt confident following the prolonged, 14-month process to acquire Williamette. The company said it expected the market for wood products to improve in the second quarter. Also, at the time, the industry had been in a year-long downturn and was beginning to show signs of a recovery. Weyerhaeuser CEO Steven Rogel said the company was still on its way to meeting the goal of saving $300 million at the end of three years.

PRODUCTS

The Weyerhaeuser Company is divided into business segments that include timberland and wood products; pulp, paper, and packaging; and real estate and related assets. The company's wood products segment produces and sells engineered, hardwood, and softwood lumber; plywood and veneer; composite panels; oriented strand board; doors; treated products; logs; and chips and timber.

Its pulp, paper, and packaging division is further divided into businesses that include pulp, which manufactures chemical wood pulp; newsprint, which manufactures newsprint at the company's North Pacific Paper Corporation mill; paper, which manufactures and markets a range of coated and uncoated fine papers; containerboard packaging, which manufactures liner-board and corrugating medium and manufactures and markets industrial and agricultural packaging; paper-board, which manufactures and markets bleached paperboard, used for production of liquid containers; recycling, which operates a wastepaper collection system and markets it to company mills and worldwide customers; and chemicals, which produces chlorine, caustic, and tall oil.

Weyerhaeuser's real estate and related assets businesses are involved in real estate development and construction through its real estate subsidiary, Weyerhaeuser Real Estate Company, and in other real estate-related activities through its financial services subsidiary, Weyerhaeuser Financial Services, Inc.

CORPORATE CITIZENSHIP

Frederick Weyerhaeuer reputedly was a very phil-anthropic individual. In keeping with the spirit of its founder, the Weyerhaeuser Company established the Weyerhaeuser Company Foundation in 1948, which has donated more than $100 million to humanitarian causes, public outreach, and education programs.

The company itself assumes the highest degree of environmental responsibility. In 1971 it established an environmental policy that outlined its commitments and codes of behavior toward the environment, as well as to the surrounding communities and its employees. In 1999 the company began aligning all of its timberlands and manufacturing operations to the ISO 14001 Environmental Management System standard. It expects to complete this process by 2005. By adhering to these standards, the company expects that it will improve upon its already solid environmental performance and meet regulatory and stakeholder requirements. It also believes the standards will improve its efforts toward practicing sustainable forestry, reducing pollution, and conserving natural resources.

GLOBAL PRESENCE

The Weyerhaeuser Company has operations throughout North America, as well as in the British Virgin Islands, New Zealand, Germany, Hong Kong, Japan, and Korea. Its Canadian operations are located in Alberta, the Atlantic Region, British Columbia, Ontario, and Saskatchewan. The company has sales offices in Japan, China, Korea, Hong Kong, Singapore, Taiwan, Switzerland, and Belgium.

The company's Weyerhaeuser Australia Pty Limited operates facilities in the Tumut region of New South Wales and in the Caboolture area, located north of Brisbane, Queensland. The Tumut operations include a sawmill that handles more than 500,000 cubic meters of logs a year, as well as the Gilmore Operations, which include finger-jointing, kiln drying, molding, and treatment plant facilities. The Caboolture operations include a sawmill, plantation, and chip export business.

CHRONOLOGY: Weyerhaeuser Company

1852:

Frederick Weyerhaeuser comes to America

1857:

Weyerhaeuser buys his first saw mill, in Rock Island, Illinois

1900:

Weyerhaeuser and partners incorporate as the Weyerhaeuser Company

1914:

Frederick Weyerhaeuser dies

1923:

The company makes its first sale in Japan

1948:

The philanthropic Weyerhaeuser Company Foundation is established

1963:

The company's first Asian-based office is opened

1971

Weyerhaeuser becomes the first U.S. forest products company to do business in China

2001:

Weyerhaeuser acquires a 50 percent interest in Southern Cone Timber Investors Limited

2002:

Weyerhaeuser acquires Willamette Industries

EMPLOYMENT

The Weyerhaeuser Company offers its employees a wide range of benefits including health and dental benefits, life insurance, short- and long-term disability, 401(k) plans, and performance share and pension plans. The benefits package is designed to create a mutually beneficial arrangement for the company and employees. The reason that the company offers such an attractive benefits package is that it feels it is the best way to recruit and retain top-quality employees and to manage costs in a competitive environment. On the other side, the employees are protected against financial loss and are ensured a secure financial future.

The company also actively seeks vigorous employee involvement as well as good labor relations. Moreover, employee safety is the company's top priority. Many of its facilities have been recognized for their outstanding health and safety programs. The company also takes employee concern to a higher level, as its prevention focus is designed to help reduce preventable diseases, such as hypertension, heart disease, substance abuse and diabetes. To this end, the company offers an employee and family assistance program that provides free and confidential assistance in the areas of personal, financial, family or work-related problems, and a wellness program that provides comprehensive health and wellness resources and health screenings.

THE ENRON AFTERMATH

Following the Enron Scandal of 2002, things became tough for the Texas corporation's public accounting firm Arthur Andersen. After it was indicted on criminal charges in connection with Enron's collapse, the Chicago-based Arthur Anderson immediately lost more than 200 clients—including the Weyerhaeuser Company.

After dropping the Andersen account, Weyerhaeuser named KPMG LLP as its independent public accountant. Weyerhaeuser claimed that its decision to change auditors didn't result from any disagreement on accounting issues. In fact, Weyerhaeuser praised Arthur Andersen for its quality service and professionalism. The decision came after a review process by the Audit Committee of the Weyerhaeuser board of directors and Weyerhaeuser management.

Andersen's involvement with Weyerhaeuser became particularly problematic during Weyerhauser's takeover of Williamette—in the eyes of many, a hostile takeover that generated questions of merger accounting and conflicts of interest, issues of great concern in the Enron debacle.

In fact, the company is quite innovative and forward thinking in regards to its company culture, which even includes a work/life balance element. Believing that there is more to life than just work, the company provides resources for employees to help them focus on themselves, their families, and their community. These resources include adoption and adult/elder care assistance, employee support groups, employee and family assistance program, exercise facilities, family events, financial planning workshops, flexible spending accounts, flexible working arrangements, recreation services, and scholarships.

SOURCES OF INFORMATION

Bibliography

davitt publications. "weyhaeuser, frederick (1834-1914)." german-american corner, 2002. available at http://www.german-heritage.com.

dcipher reports. "corporate snapshots-weyerhaeuser company." business week online, 13 june 2002. available at http://host.businessweek.com

parrish, bill. "enron lessons for weyerhaeuser, willamette industries, the sec and arthur andersen." parrish and company, 24 january 2002. available at http://www.billparish.com/20020124willamette.html.

verespej, michael a. "who owns trees?," industryweek.com, 20 march 2000. available at http://www.industryweek.com

yahoo! finance. "profile-weyerhaeuser company." yahoo! market guide, 2002. available at http://biz.yahoo.com/p/w/wy.html

For an annual report:

on the internet at: http://investor.weyerhaeuser.com

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. weyerhaeuser company's primary sics are:

0811 timber tracts

2421 sawmills & planing mills, general

2611 pulp mills

2621 paper mills

2631 paperboard mills

2679 converted paper & paperboard prod, nec

also investigate companies by their north american industry classification system codes, also known as naics codes. weyerhaeuser company's primary naics codes are:

233110 land subdivision and land development

321113 sawmills

322110 pulp mills

322130 paperboard mills