UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WEYERHAEUSER COMPANY AND SUBSIDIARIES

Index to Form 10-Q Filing
For the thirteen weeks ended March 28, 2004

FINANCIAL INFORMATION

The financial information included in this report has been prepared in conformity with accounting practices and methods reflected in the financial statements included in the annual report (Form 10-K) filed with the Securities and Exchange Commission for the year ended December 28, 2003. Though not examined by independent public auditors, the financial information reflects, in the opinion of management, all adjustments necessary to present a fair statement of results for the interim periods indicated. The results of operations for the thirteen-week period ended March 28, 2004, should not be regarded as necessarily indicative of the results that may be expected for the full year.

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized.

2

WEYERHAEUSER COMPANY AND SUBSIDIARIES

See Accompanying Notes to Financial Statements

3

WEYERHAEUSER COMPANY AND SUBSIDIARIES

See Accompanying Notes to Financial Statements

4

5

See Accompanying Notes to Financial Statements

6

7

WEYERHAEUSER COMPANY AND SUBSIDIARIES

Note 1:     Basis of Presentation

The consolidated financial statements include the accounts of Weyerhaeuser Company and all of its majority-owned domestic and foreign subsidiaries. Investments in and advances to unconsolidated equity affiliates over which the company has significant influence are accounted for using the equity method with taxes provided on undistributed earnings. Significant intercompany transactions and accounts are eliminated.

Certain of the consolidated financial statements and notes to financial statements are presented in two groupings: (1) Weyerhaeuser, principally engaged in the growing and harvesting of timber and the manufacture, distribution and sale of forest products, and (2) Real Estate and Related Assets, principally engaged in real estate development and construction and other real estate related activities. The term “company” refers to Weyerhaeuser Company and all of its majority-owned domestic and foreign subsidiaries. The term “Weyerhaeuser” excludes the Real Estate and Related Assets operations.

The consolidated financial statements are unaudited; however, the consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary to a fair presentation of the company’s financial position, results of operations, and cash flows for the interim periods presented. Except as disclosed in the Notes to Financial Statements, such adjustments are of a normal, recurring nature. The consolidated financial statements have been prepared pursuant to rules and regulations of the Securities and Exchange Commission pertaining to interim financial statements. Certain disclosures normally provided in financial statements prepared under accounting principles generally accepted in the United States have been omitted in accordance with those rules and regulations. These consolidated financial statements should be read in conjunction with the consolidated financial statements included in the company’s Annual Report on Form 10-K for the year ended December 28, 2003.

Certain reclassifications have been made to conform comparative data to the current format.

Note 2:      New Accounting Pronouncements

The company adopted the provisions of Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations, as of the beginning of 2003. Statement 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The cumulative effect of adopting the accounting principle, after a tax benefit of $6 million, was a charge of $11 million, or 5 cents per share.

The company adopted the provisions of Financial Accounting Standards Board Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, as of March 28, 2004. Interpretation 46 (revised) addresses consolidation of certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. Adoption of Interpretation 46 (revised) did not have a material effect on the company’s financial position, results of operations or cash flows.

The company’s real estate development subsidiaries enter into options to acquire lots at fixed prices in the ordinary course of business, primarily for the purpose of building single-family homes. In addition, a Real Estate and Related Assets subsidiary provides subordinated financing to third party developers and homebuilders. Both the fixed price purchase options and the subordinated financing constitute variable interests under Interpretation 46 (revised). The company’s real estate development subsidiaries have entered into 50 lot option purchase agreements with entities created prior to December 31, 2003, with deposits of approximately $86 million at risk. After exhaustive efforts, the company was not able to obtain the information necessary to determine whether or not it is required to consolidate any of these entities under Interpretation 46 (revised). The total amount that would be paid under these option purchase contracts, if fully exercised, is approximately $535 million. In addition, one of the company’s real estate subsidiaries has approximately $10 million in subordinated loans at risk at March 28, 2004, in 32 variable interest entities.

8

Note 3:     Stock-Based Employee Compensation

The company uses the intrinsic-value method prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, to account for stock-based compensation provided to employees. The following table illustrates the effect on net earnings (loss) and earnings (loss) per share as if the company had applied the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation. The company has consistently defined the past year as the service period for purposes of applying the fair value recognition provisions of Statement 123. As a result, stock-based employee compensation expense is reflected as of the option grant dates in the following table:

Note 4:     Pension and Other Postretirement Benefit Plans

The company recognized net pension and other postretirement benefit expense of $41 million and $40 million in the thirteen weeks ended March 28, 2004, and March 30, 2003, respectively. The components of net periodic benefit costs are:

The company contributed $3 million to its Canadian pension plans in the first quarter of 2004 and expects to contribute a total of approximately $44 million to its Canadian pension plans in 2004. The company does not expect to make or be required to make any contributions to its U.S. pension plans during 2004.

9

Note 5:     Net Earnings Per Share

Basic net earnings (loss) per share are based on the weighted average number of common and exchangeable shares outstanding during the respective periods. Diluted net earnings (loss) per share are based on the weighted average number of common and exchangeable shares outstanding and stock options outstanding at the beginning of or granted during the respective periods.

Options to purchase 157,400 shares were not included in the computation of diluted earnings per share for the thirteen weeks ended March 28, 2004, because the option exercise prices were greater than the average market price of common shares during that period. Options to purchase 13,744,305 shares were not included in the computation of diluted earnings (loss) per share for the thirteen weeks ended March 30, 2003, because the company reported a loss before the cumulative effect of a change in accounting principle for that period.

Note 6:     Comprehensive Income

The company’s comprehensive income is as follows:

Note 7:     Equity Affiliates

Investments in unconsolidated equity affiliates over which the company has significant influence are accounted for using the equity method with taxes provided on undistributed earnings.

Weyerhaeuser

Weyerhaeuser’s significant equity affiliates as of March 28, 2004, are:

•		Jasmine Forests, LLC — A qualifying special purpose entity formed in 2002 to monetize the note received as part of the consideration for the sale of 115,000 acres of timberlands in western Washington.
•		Jewel Forests, LLC — A qualifying special-purpose entity formed in 2003 to monetize the note received as part of the consideration for the sale of 104,000 acres of timberlands in western Washington.
•		Liaison Technologies, LLC (formerly known as ForestExpress, LLC) — A 34 percent owned joint venture formed to develop and operate global, web-enabled, business-to-business connectivity, catalog content and timber trading services for the paper, forest products and affiliated industries. Other equity members include Boise Cascade Corporation, Georgia-Pacific Corp., International Paper, MeadWestvaco Corporation and Morgan Stanley.
•		MAS Capital Management Partners, L.P. — A 50 percent owned limited partnership formed for the purpose of providing investment management services to institutional and individual investors.

10

•		Nelson Forests Joint Venture — An investment in which Weyerhaeuser owns a 51 percent financial interest and has a 50 percent voting interest, which holds Crown Forest License cutting rights and freehold land on the South Island of New Zealand.
•		North Pacific Paper Corporation — A 50 percent owned joint venture that has a newsprint manufacturing facility in Longview, Washington.
•		Optiframe Software LLC — A 50 percent owned joint venture that develops whole-house design and optimization software for the building industry.
•		RII Weyerhaeuser World Timberfund, L.P. — A 50 percent owned limited partnership that invests in timberlands and related assets outside the United States. This partnership’s primary focus is in pine forests in the Southern Hemisphere.
•		SCA Weyerhaeuser Packaging Holding Company Asia Ltd. — A 50 percent owned joint venture formed to build or buy containerboard packaging facilities to serve manufacturers of consumer and industrial products in Asia. Two facilities are in operation in China.
•		Southern Cone Timber Investors Limited — A 50 percent owned joint venture that has invested in timberlands in Uruguay. The entity’s primary focus is on plantation forests in the Southern Hemisphere.
•		WY Carolina Holdings, LLC — A qualifying special-purpose entity formed in 2003 to monetize the note received as part of the consideration for the sale of 160,000 acres of timberlands in the Carolinas.
•		WY Tennessee Holdings, LLC — A qualifying special-purpose entity formed in 2003 to monetize the note received as part of the consideration for the sale of 168,000 acres of timberlands in Tennessee.

Unconsolidated financial information for affiliated companies, which are accounted for on the equity method, follows:

Weyerhaeuser provides goods and services to these affiliates, which vary by entity, in the form of raw materials, management and marketing services, support services and shipping services. Additionally, Weyerhaeuser purchases finished product from certain of these entities. The aggregate total of these transactions is not material to Weyerhaeuser’s results of operations.

11

Real Estate and Related Assets

Unconsolidated financial information for entities that are accounted for on the equity method follows:

Note 8:     Goodwill

The changes in the carrying amount of goodwill for the thirteen weeks ended March 28, 2004, are as follows:

Note 9:     Inventories

12

Note 10:     Accrued Liabilities

Note 11:     Debt

Weyerhaeuser Company had short-term bank credit lines of $1.2 billion under a 364-day revolving facility at December 28, 2003. The 364-day revolving line of credit was renewed during the thirteen weeks ended March 28, 2004, in the amount of $1.2 billion and expires in March 2005. Both Weyerhaeuser Company and Weyerhaeuser Real Estate Company (WRECO) can borrow against this facility. WRECO can borrow up to $400 million under the $1.2 billion facility. Neither Weyerhaeuser Company nor WRECO is a guarantor of the borrowings of the other under this facility.

In addition, Weyerhaeuser Company has a revolving credit facility agreement entered into with a group of banks that expires in March 2007 and that provides for borrowings up to a total amount of $1.3 billion, all of which is available to Weyerhaeuser Company. Borrowings are at LIBOR plus a spread or other such interest rates mutually agreed to between the borrower and lending banks.

Of the total committed bank facilities of $2.5 billion, $2.3 billion was available as of March 28, 2004, for incremental borrowings.

Note 12:      Legal Proceedings, Commitments and Contingencies

Legal Proceedings

Hardboard Siding Claims. The company announced in June 2000 it had entered into a proposed nationwide settlement of its hardboard siding class action cases and, as a result, took a charge of $130 million before taxes to cover the estimated cost of the settlement and related claims. The court approved the settlement in December 2000. An appeal from the settlement was denied in March 2002, and the settlement is now binding on all parties. In the third quarter of 2001, the company reassessed the adequacy of the reserve and increased the reserve by an additional $43 million. The company incurred claims and related costs in the amount of $2 million and $1 million in the first quarter of 2004 and 2003, respectively, and charged those costs against the reserve. As of March 28, 2004, the company had approximately $81 million in reserves remaining for hardboard siding claims. While the company believes that the reserve balances established for these matters are adequate, the company is unable to estimate at this time the amount of additional charges, if any, that may be required for these matters in the future.

The settlement class consists of all persons who own or owned structures in the United States on which the company’s hardboard siding had been installed from January 1, 1981, through December 31, 1999. This is a claims-based settlement, which means that the claims will be paid as submitted over a nine-year period. An independent adjuster will review each claim submitted and determine whether it qualifies for payment under the terms of the settlement agreement. The following table presents an analysis of the claims activity related to the hardboard siding class action cases:

13

The higher average damage award paid in 2003 was due primarily to the existence of more awards for multi-family structures and fewer awards for single-family residences in 2003 than in 2002 or 2004. The deadline for filing claims arising from hardboard siding installed between 1981 and 1987 occurred in December 2003.

The company negotiated settlements with its insurance carriers for recovery of $52 million of costs related to these claims. The company has received the full $52 million in recoveries from its insurance carriers.

The company is a defendant in state trial court in two cases that are outside of the settlement involving primarily multi-family structures and residential developments. The company anticipates that other individuals and entities that have opted out of the settlement may file lawsuits against the company. In January 2002, a jury returned a verdict in favor of the company in a lawsuit involving hardboard siding manufactured by the company and installed by a developer in a residential development located in Modesto, California. The verdict has been appealed and is not included in the two cases mentioned at the state court level. Oral argument on the appeal was heard in April 2004.

Antitrust Litigation. In May 1999, two civil antitrust lawsuits were filed against the company in U.S. District Court, Eastern District of Pennsylvania. Both suits named as defendants several other major containerboard and packaging producers. The complaint in the first case alleged the defendants conspired to fix the price of linerboard and that the alleged conspiracy had the effect of increasing the price of corrugated containers. The suit requested class certification for purchasers of corrugated containers during the period from October 1993 through November 1995. The complaint in the second case alleged that the company conspired to manipulate the price of linerboard and thereby the price of corrugated sheets. The suit requested class certification for purchasers of corrugated sheets during the period from October 1993 through November 1995. Both suits sought damages, including treble damages, under the antitrust laws. In September 2001, the district court certified both classes. Class certification was upheld on appeal and class members were given until June 9, 2003, to opt out of the class. Approximately 165 members of the classes opted out and filed lawsuits against the company and other producers. Two of the thirteen opt-out lawsuits against the company were filed in state court and the other eleven were filed in federal court. It is possible that additional class members that opted out may file lawsuits against the company in the future. In September 2003, the company, Georgia-Pacific and International Paper filed a motion with the court requesting preliminary approval of a $68 million settlement of the class action litigation. The company recognized a pretax charge of $23 million in the third quarter of 2003, representing Weyerhaeuser’s portion of the settlement. The court granted final approval of the settlement in December 2003. Since no objections were filed, the settlement is final and binding on the companies and class members, other than class members who have opted out. The company has not recorded a reserve for the opt-out cases and is unable to estimate at this time the amount of charges, if any, that may be required for this matter in the future.

In December 2000, a lawsuit was filed against the company in U.S. District Court in Oregon (the Initial Alder Case) alleging that from 1996 to present, the company had monopoly power or attempted to gain monopoly power in the Pacific Northwest market for alder logs and finished alder lumber. In August 2001, the complaint was amended to add an additional plaintiff. Prior to trial, one of the plaintiffs withdrew from the litigation. In April 2003, the jury returned a verdict in favor of one of the plaintiffs in the amount of $26 million, which was automatically trebled to $79 million under the antitrust laws. The company took a pretax charge of $79 million in its first quarter 2003 results. The company’s motion for a judgment notwithstanding the verdict was denied in July 2003. The company has appealed the matter to the U.S. Court of Appeals for the Ninth Circuit. While the company believes that the reserve balance established for this matter is adequate, the company is unable to estimate at this time the amount of additional charges, if any, which may be required for this matter in the future.

In April 2003, two separate lawsuits were filed in U.S. District Court in Oregon alleging that the company violated antitrust laws by monopolizing the markets for alder sawlogs and finished alder lumber. The first suit (the Westwood case) was brought by four separate corporations located in Oregon and Washington. It alleged that between 1999 and the present, the plaintiff suffered damages and asked the court to award damages, after trebling, of $101 million. On March 9, 2004, the company announced a settlement of the Westwood case for approximately $35 million and the company recognized a pretax charge of $35 million in the first quarter of 2004. The second suit was brought by Coast Mountain Hardwoods, Inc., a Canadian company that sold its assets to the company in 2000. In its third amended complaint, the plaintiff alleged two

14

causes of action, one for attempted monopolization of alder sawlog and finished lumber markets, and a second cause of action for fraud and breach of fiduciary duty. On the antitrust cause of action, plaintiff sought damages, after trebling, in the amount of $90 million (plus attorney’s fees, costs and disbursements). On the fraud and breach of fiduciary cause of action, plaintiff sought compensatory damages in the amount of $30 million and punitive damages of $300 million. There is no trebling associated with the second cause of action. On April 22, 2004, the company announced a settlement of the Coast Mountain case for $14 million, which resulted in the recognition of a pretax charge of $14 million in the first quarter of 2004.

In June 2003, an alder antitrust complaint was filed in U.S. District Court in Oregon by Washington Alder, an alder sawmill located in Washington. The complaint alleged monopolization of the alder log and lumber markets from 1998 to present and seeks damages, after trebling, of $32 million. The company filed a motion to dismiss based on insufficiencies in the pleadings. In November 2003, the court granted the company’s motion to dismiss the amended complaint because it failed to state a claim under the federal antitrust laws. The judge gave the plaintiff five business days to file a new complaint to correct the deficiencies in the amended complaint. In November 2003, a second amended complaint was filed. In December 2003, the court denied the company’s motion to consolidate this matter with the Westwood case and trial is scheduled to begin on May 11, 2004. In March 2004, the company received a third amended complaint which increased the request for trebled damages from $32 million to $36 million and also contained a request for divestiture of the company’s Northwest Hardwoods Division and alder sawmills in Oregon, Washington and British Columbia. Although the company denies liability and is vigorously defending this case, it will be presided over by the same judge who presided in the Initial Alder Case that is on appeal and the judge has issued a number of rulings adverse to the company, including a ruling precluding the company from contesting key issues that were decided against the company in the Initial Alder Case that is currently on appeal. Accordingly, the company recognizes that the company is not likely to prevail at the trial court level in this case and intends to appeal any adverse judgment in this case. The company has not recorded a reserve related to this lawsuit and is unable to estimate at this time the amount of charges, if any, that may be required for this lawsuit in the future.

In March 2004, the company was provided with two additional proposed complaints which have not been filed in court. Combined, the two new matters seek trebled damages of $47 million from the company’s alleged monopolization of the Pacific Northwest alder market. The company has reached an agreement to extend any filing of these matters until June 30, 2004. The company has not recorded a reserve related to these matters and is unable to estimate at this time the amount of charges, if any, that may be required for these matters in the future.

In addition, on April 29, 2004, a civil antitrust lawsuit was filed against the company in U.S. District Court in Portland, Oregon. The complaint alleges that as a result of the company’s alleged monopolization of the alder sawlog market in the Pacific Northwest as determined in the Initial Alder Case that is currently on appeal, the company monopolized the market for finished alder lumber in the Pacific Northwest and as a consequence has been able to charge monopoly prices for finished alder lumber. The lawsuit requests class certification primarily for businesses that sold finished alder products manufactured with finished alder lumber produced by the company from 2000 to the present. The lawsuit claims that the purported class may have realized over $100 million in direct damages, and seeks direct and treble damages under the antitrust laws in an amount to be determined at trial. The lawsuit also seeks injunctive relief to ensure the availability of alder sawlogs for saw mills competing with the company, which could include termination of certain of the company’s contracts to purchase alder logs or the company’s control over certain timberlands. The lawsuit has been assigned to the same judge who presided over the Initial Alder Case that is on appeal, the Westwood and Coast Mountain cases that the company settled and the Washington Alder case that is scheduled for trial on May 11, 2004. The company disagrees with the allegations in the purported class action lawsuit and plans to vigorously defend this case. The plaintiffs in the Initial Alder Case also claimed that the company had monopolized the finished alder lumber market in the Pacific Northwest, but the jury found in favor of the company on this claim and those plaintiffs have not appealed this finding.

Paragon Trade Brands, Inc., Litigation. In May 1999, the Equity Committee (Committee) in the Paragon Trade Brands, Inc. (Paragon), bankruptcy proceeding filed a motion in U.S. Bankruptcy Court for the Northern District of Georgia for authority to prosecute claims against the company in the name of the debtor’s estate. Specifically, the Committee asserted that the company breached certain warranties in agreements entered into between Paragon and the company in connection with Paragon’s public offering of common stock in January 1993. The Committee seeks to recover damages sustained by Paragon as a result of two patent infringement cases, one brought by Procter & Gamble and the other by Kimberly-Clark. In September 1999, the court authorized the Committee to commence an adversary proceeding against the company. The Committee commenced this proceeding in October 1999. Pursuant to a reorganization of Paragon, the litigation claims representative for the bankruptcy estate became the plaintiff in the proceeding. In June 2002, the Bankruptcy Court issued an oral opinion granting the plaintiff’s motion for partial summary judgment, holding the company liable to plaintiff for breaches of warranty and denying the company’s motion for summary judgment. In October 2002, the Bankruptcy Court issued a written order confirming the June oral opinion. In November 2002, the company filed a motion for reconsideration with the Bankruptcy Court. In June 2003, the judge issued an oral ruling denying the motion for reconsideration and set an

15

October 30, 2003, trial date for determination of the damages. In September 2003, the U.S. District Court declined to grant discretionary review of the bankruptcy court’s partial summary judgment decision on liability. The damages phase of the case began on October 30, 2003, and was concluded on December 16, 2003. The bankruptcy court initially asked both parties to present findings of fact and conclusions of law by the end of January 2004, but then extended the date to February 9, 2004. The damages requested by the plaintiff have changed. In October 1999, the plaintiff was seeking damages in excess of $420 million. In its proposed findings of fact and conclusions of law, the plaintiff requested damages in the range of $675 million to $832 million, primarily as a result of a new request for prejudgment interest. The company believes the plaintiff is not entitled to prejudgment interest under applicable law. The amount of damages, if any, the company may ultimately be exposed to is dependent on many unknown factors such as how the damages issues remaining to be decided by the bankruptcy court are resolved; whether an appeal to the U.S. District Court and/or Court of Appeals for the Eleventh Circuit is successful; the outcome of any retrial ordered by an appellate court; and whether a summary judgment in favor of the company on liability is ordered by an appellate court. The company has not established a reserve for this matter because, based upon the information available to the company on the date hereof, including management’s belief that an adverse result is not probable because the company will prevail on appeal, management does not believe the requirements of Statement of Financial Accounting Standards No. 5, Accounting for Contingencies, for establishing a reserve in this matter have been met. Even if the Bankruptcy Court should award damages against the company, management does not believe that the requirements of Statement 5 will have been met, and accordingly, the company does not intend to recognize a charge at the time of such a damage award. However, there is no guarantee that management will not determine in the future that a charge for all or a portion of any damage award is required. Any such charge could materially and adversely affect the company’s results of operations, cash flows or financial condition for the quarter or the year in which such a charge may be recognized. The company plans to appeal the partial summary judgment decision on liability and any damages award on completion of the damages phase of the trial.

Other Litigation. The company is a party to other matters generally incidental to its business in addition to the matters described above.

Summary. Although the final outcome of any legal proceeding is subject to a great many variables and cannot be predicted with any degree of certainty, management currently believes that adequate reserves have been established for probable losses from litigation when the amount could be reasonably determined. Management further believes that the ultimate outcome of these legal proceedings could materially adversely affect our results of operations, cash flows or financial condition in any given quarter or year but will not have a material adverse effect on the company’s long-term results of operations, cash flows or financial position.

Countervailing and Anti-dumping Duties

In April 2001, the Coalition for Fair Lumber Imports (Coalition) filed two petitions with the U.S. Department of Commerce (Department) and the International Trade Commission (ITC), claiming that production of softwood lumber in Canada was being subsidized by Canada and that imports from Canada were being “dumped” into the U.S. market (sold at less than fair value). The Coalition asked that countervailing duty (CVD) and anti-dumping tariffs be imposed on softwood lumber imported from Canada.

In March 2002, the Department confirmed its preliminary finding that certain Canadian provinces were subsidizing logs by failing to collect full market price for stumpage. The Department established a final CVD rate of 18.79 percent. In the anti-dumping proceedings, the Department found that the six Canadian manufacturers examined, including the company, were engaged in sales at less than fair value and set cash deposit rates ranging from 2.18 percent to 12.44 percent. The company’s deposit rate was set at 12.39 percent. Because of statutory limitations that affected timing, the bonds covering duties following the preliminary determinations were released by the United States. The resulting reversal of accrued expenses was included in earnings during 2002.

In May 2002, the ITC confirmed its earlier ruling that U.S. industry is threatened by subsidized and dumped imports. As a result, the company has made cash deposits relating to the CVD and anti-dumping actions at the rate of approximately $25 million to $30 million per quarter beginning in May 2002. The company incurred countervailing and anti-dumping duties and related costs of $26 million and $24 million in the thirteen weeks ended March 28, 2004, and March 30, 2003, respectively.

16

In June 2003, the Department began the process of an annual review to determine whether the company had engaged in dumping and whether Canada continued to subsidize softwood logs and, if so, the dumping duty and CVD to impose. It is expected that final verification and determination should be complete in late 2004. The determination will be subject to further review if appealed. The annual review process will be conducted for a period of five years. In 2007, both the countervailing duty and anti-dumping orders will be automatically reviewed in a “sunset” proceeding to determine whether dumping will continue or a countervailing subsidy is likely to recur if the relevant order were to be revoked.

The Canadian Government, the company and other Canadian companies appealed the Department’s 2002 anti-dumping and CVD determinations and the ITC’s 2002 injury determination in separate appeals under the North American Free Trade Agreement (NAFTA). The panel convened to review the Department’s findings on anti-dumping ruled that the Department must change its methodology for computing differences in merchandise when there is no product sold domestically that is similar to the exported product and, as a result, “comparable” products are used to calculate whether dumping is occurring. The panel convened to review the CVD decision ruled that cross-border comparisons are an invalid method to determine and measure subsidies. Finally, the panel convened to review the ITC finding of a threat of injury found that the ITC’s findings were not supported by the record and ordered the ITC to reconsider the findings. If the ITC fails to support its findings of threat of injury, the deposits collected to date would be refunded.

With the support of provincial governments, the federal government of Canada also moved for review by dispute settlement panels under the World Trade Organization (WTO) and those reviews are currently in process. One WTO panel has also issued an opinion finding that cross-border comparisons to determine and measure subsidies are not proper. In addition, the WTO appeals body has affirmed a panel ruling against the United States that the so-called “Byrd Amendment,” which gives U.S. firms cash from anti-dumping and countervailing duties applied on foreign imports, is inconsistent with U.S. international obligations. The deadline for the United States to comply with this WTO ruling has expired. The countries that obtained the ruling asked the WTO for permission to levy sanctions against the United States. An arbitration will address the U.S. objection to the level of sanctions sought. The U.S. administration has recommended that the law be changed to comply with that ruling, but whether or when Congress will implement that recommendation is uncertain.

In December 2003, the Department issued a decision on the remand from the NAFTA Panel in the CVD investigation. The decision has been resubmitted to the NAFTA panel for a ruling on the calculation. A decision by this panel is expected in mid-May. If the decision on remand is not further appealed or altered, it would have the effect of reducing the applicable CVD deposit rate to 13.3 percent. In addition, the WTO appellate body recently issued a decision in the CVD case which reopened the use of cross-border comparisons as a benchmark. In January 2004, a WTO anti-dumping panel rejected a portion of the method of calculation of the anti-dumping rate. It is not possible to predict whether these decisions will be appealed or their impact on the company’s business at this time.

In March 2004, the NAFTA Softwood Lumber Anti-dumping Panel upheld the Department’s decisions on several issues including the calculation of countervailing profits in issuing its second remand determination. On April 21, 2004, the Department announced its decision on implementing the NAFTA Softwood Lumber Anti-dumping Panel decision. The decision did not have a material effect on the anti-dumping tariff that forms part of the deposits the company has been making.

Also in March 2004, a WTO panel announced its final ruling faulting a U.S. ITC finding of potential injury resulting from dumped and subsidized imports of softwood lumber from Canada. This WTO ruling supports the NAFTA panel remand to the ITC on the same subject in September 2003. On April 29, 2004, a NAFTA panel ruled that the United States had failed to prove that U.S. timber companies were threatened with injury from Canadian shipments of softwood lumber. The panel held that the finding by the U.S. ITC that U.S. firms were threatened by Canadian softwood lumber shipments was “not in accordance with the law and is not supported by substantial evidence.”

The panel once again remanded the case back to the ITC with instructions to conduct its threat of injury analysis in accordance with four specific holdings of the panel that overturn the principal bases for the affirmative threat finding in the ITC’s December 15, 2003, remand determination. The ITC has been instructed to issue its remand decision within 21 days. If the ITC rules that there is no injury, the Coalition has the option of challenging the ITC decision, which would add 90 to 100 days or more to the process. The U.S. government may file an extraordinary challenge of this decision of the NAFTA panel. This process could take three to four months, or possibly longer. A continued reversal of the ITC position on injury could result in the current duty orders being revoked early in 2005, assuming such a decision survives an extraordinary challenge.

17

It is difficult to predict the net effect final duties will have on the company. In the event that final rates differ from the depository rates, ultimate charges may be higher or lower than those recorded to date. The company is unable to estimate at this time the amount of additional charges or reversals that may be necessary for this matter in the future. The U.S. and Canadian governments continue to discuss ways to settle the softwood lumber dispute, but there can be no assurance that they will be able to reach agreement or the terms and conditions of any agreement.

In January 2004, the Ministry of Commerce of the People’s Republic of China (MOC) received a petition requesting an anti-dumping investigation on the importing of unbleached kraft liner/linerboard originating in the United States, Thailand, Korea and Taiwan. On March 31, 2004, the MOC announced it would conduct an investigation of the petition. The period of investigation for dumping is from January 1, 2003, to December 31, 2003, and the period of investigation for industry injury is from January 1, 2001, to December 31, 2003. The announcement included Weyerhaeuser as one of five producers in the United States that are subject to the investigation. The company registered with the MOC in April 2004 and will participate in the investigation. The company is unable to determine at this time whether such investigation could result in the imposition of tariffs; however, the company does not currently believe that any such tariffs would have a material adverse effect on its results of operations, cash flows or financial condition.

Environmental Matters

In April 1999, the Johnsonburg, Pennsylvania, paper and pulp mill that the company acquired in its 2002 acquisition of Willamette Industries, Inc. received a notice of violation (NOV) from the U.S. Environmental Protection Agency (EPA) for alleged violations of the Clean Air Act. Management has met with federal and state officials to resolve the matters alleged in the NOV and will continue to work with officials to narrow issues in dispute. Management believes that it is reasonably possible that a settlement will be reached at a future date that may involve payment of a penalty of approximately $900,000 and the installation of pollution control equipment.

The company is also a party to various proceedings relating to the cleanup of hazardous waste sites under the Comprehensive Environmental Response Compensation and Liability Act, commonly known as “Superfund,” and similar state laws. The EPA and/or various state agencies have notified the company that it may be a potentially responsible party with respect to other hazardous waste sites as to which no proceedings have been instituted against the company. As of the end of the first quarter of 2004, the company has established reserves totaling $50 million for estimated remediation costs on all of the approximately 72 active sites across its operations. Environmental remediation reserves totaled $51 million at the end of 2003. The decrease in environmental remediation reserves reflects the incorporation of new information on all sites concerning remediation alternatives, updates on prior cost estimates and new sites, less the costs incurred to remediate these sites during this period. The company accrued remediation costs of $1 million and $9 million in the first quarters of 2004 and 2003, respectively. The company incurred remediation costs of $2 million and $1 million in the first quarters of 2004 and 2003, respectively, and charged these costs against the reserve. Based on currently available information and analysis, the company believes that it is reasonably possible that costs associated with all identified sites may exceed current accruals by amounts that may prove insignificant or that could range, in the aggregate, up to approximately $70 million over several years. This estimate of the upper end of the range of reasonably possible additional costs is much less certain than the estimates upon which accruals are currently based, and utilizes assumptions less favorable to the company among the range of reasonably possible outcomes. In estimating both its current accruals for environmental remediation and the possible range of additional future costs, the company has assumed that it will not bear the entire cost of remediation of every site to the exclusion of other known potentially responsible parties who may be jointly and severally liable. The ability of other potentially responsible parties to participate has been taken into account, generally based on each party’s financial condition and probable contribution on a per-site basis. No amounts have been recorded for potential recoveries from insurance carriers.

18

Guarantees

Weyerhaeuser Company has guaranteed approximately $64 million of debt of unconsolidated entities and other parties, which includes the guarantee of $25 million of debt that has been legally defeased. In connection with the defeasance, Weyerhaeuser Company would be required to pay under the guarantee if the U.S. government securities set aside in an escrow account are insufficient to pay off the debt in 2005. The value of the assets in the escrow account as of March 2004 is approximately $29 million. With respect to the other guarantees, approximately $35 million expire in 2004, $2 million expire in 2005 and $2 million expire in 2006. As of March 28, 2004, Weyerhaeuser accrued liabilities include obligations of approximately $8 million recorded in connection with these guarantees.

As of March 28, 2004, the Real Estate and Related Assets segment has guaranteed performance under two operating leases with future lease payments of approximately $28 million and $26 million of mortgages sold with recourse. In each case, the Real Estate and Related Assets segment would be required to perform if the obligor were to default. The mortgage guarantees expire as the underlying loans mature through 2019.

Warranties

Weyerhaeuser Real Estate Company provides warranties on home sales closed that vary depending on state and local laws. The reserves for these warranties are determined by applying the provisions of Statement of Financial Accounting Standards No. 5, Accounting for Contingencies. The liability was approximately $10 million at both March 28, 2004, and December 28, 2003.

Note 13:     Charges for Integration and Restructuring

Weyerhaeuser incurred the following charges for the integration of Willamette Industries and Weyerhaeuser’s overall cost-reduction efforts:

As of March 28, 2004, Weyerhaeuser accrued liabilities included approximately $15 million of severance accruals related to integration and restructuring charges recognized form 2002 through March 28, 2004. These accruals are associated with the termination of approximately 165 employees expected to occur during 2004.

19

Note 14:	Charges for Closure of Facilities

Weyerhaeuser incurred the following charges for the closure of facilities:

The first quarter 2003 charges include $19 million related to the permanent closure of a plywood mill.

Changes in accrued severance during the thirteen weeks ended March 28, 2004, were as follows:

Note 15:	Other Operating Costs, Net

Other operating costs, net, is an aggregation of both recurring and occasional income and expense items and, as a result, can fluctuate from period to period. Weyerhaeuser’s other operating costs, net, includes the following pretax items:

Foreign exchange transaction gains and losses result from changes in exchange rates, primarily related to Weyerhaeuser’s Canadian and New Zealand operations.

20

Note 16:	Subsequent Events

Stock Option Exercise and Share Repurchase Program

On April 13, 2004, the company instituted a program to purchase shares from a limited number of employees who have been limited in their ability to sell shares issuable upon exercise of their stock options as a result of trading restrictions the company imposes on such employees. Under this program, the option holders are permitted to effect a cashless exercise of their stock options followed by an immediate sale to the company of the common shares issued on such cashless exercise, so that there will be no market transaction in connection with such exercises. Only those options granted to 21 participating employees on or prior to April 19, 1999, (representing options to purchase 578,486 common shares) are eligible to be exercised under the program.

The program went into effect on April 13, 2004, and will remain in effect until April 1, 2005, unless further extended by the company’s Board of Directors. Options eligible for the program may also be exercised outside of the program through the company’s normal broker-assisted cashless exercise program, subject to the company’s insider trading policy.

The program will result in variable accounting treatment for the stock options included in the program. The company expects to record a pretax charge in the second quarter of 2004 of approximately $8 million in connection with the adoption of the program. Additional charges or credits will be recorded in the future (including the second quarter of 2004), depending on changes in quoted prices for the company’s common shares after April 13, 2004, and the number of eligible options outstanding. Variable accounting treatment will continue until the program expires, or eligible options are exercised or terminate, if earlier.

Common Share Offering

The company issued 16,675,000 common shares on May 5, 2004. The company expects to use the net proceeds (after deduction of the underwriting discount) of $954 million from the issuance to retire a portion of its outstanding debt.

2004 Long-Term Incentive Plan

At the company’s April 13, 2004, annual meeting, the company’s shareholders approved a new long-term incentive plan (the 2004 Plan). The 2004 Plan replaces the long-term incentive plan that was approved by shareholders in 1998 (the 1998 Plan) and no further grants will be made under the 1998 Plan.

Note 17:	Business Segments

The company is principally engaged in the growing and harvesting of timber; the manufacture, distribution and sale of forest products; and real estate development and construction. The company’s principal business segments are:

•

Timberlands, which includes logs, chips and timber;

•

Wood Products, which includes softwood lumber, plywood and veneer, composite panels, oriented strand board, hardwood lumber, engineered lumber, raw materials and building materials distribution;

•

Pulp and Paper, which includes pulp, paper and liquid packaging board;

•

Containerboard, Packaging and Recycling; and

•

Real Estate and Related Assets.

21

During the fourth quarter of 2003, the company changed the structure of its raw materials sourcing operations in Canada. During the first quarter of 2004, the company also changed the structure of its raw materials sourcing operations in the Southern United States. As a result, raw materials that used to be purchased by the Wood Products and Pulp and Paper segments are now managed by and reported as intersegment sales of the Timberlands segment. Comparative information has been restated to conform to the new presentation.

An analysis and reconciliation of the company’s business segment information to the respective information in the consolidated financial statements is as follows:

22

WEYERHAEUSER COMPANY AND SUBSIDIARIES

Forward-Looking Statements

Some information included in this report contains statements concerning the company’s future results and performance that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Some of these forward-looking statements can be identified by the use of forward-looking terminology such as “believes,” “will,” “expects,” “may,” “should,” “approximately,” “anticipates,” “indicates,” “plans,” and “estimates,” and the negative or other variations of those terms with comparable terminology or by discussions of strategy, plans or intentions. In particular, some of these forward-looking statements deal with expectations regarding: improvement in our pulp, paper and containerboard markets, higher export and domestic log sales volumes and seasonally higher fee harvest in the second quarter 2004, increased demand and pricing for wood products in second quarter 2004, price increases and stable demand for pulp and paper in the second quarter 2004, greater demand for boxes in second quarter 2004, increasing prices, shipments and old corrugated container (OCC) costs in the containerboard markets in second quarter 2004, continuing strong housing demands, contributions to earnings in second quarter 2004 of the company’s business segments, expected repayment of company debt and return to historic debt ratios, anticipated capital expenditures, the effect of pending litigation on the company’s financial position, cash flows or results of operations, projected effects of reduction in returns and assumed discount rates on pension expense, expected contributions to pension plans and similar matters. The accuracy of such statements is subject to a number of risks, uncertainties and assumptions that may cause actual results to differ materially from those projected, including, but not limited to:

•

the effect of general economic conditions, including the level of interest rates and housing starts;

•

market demand for the company’s products, which may be tied to the relative strength of various U.S. business segments;

•

energy prices;

•

raw material prices;

•

transportation disruptions;

•

performance of the company’s manufacturing operations;

•

the successful execution of internal performance plans;

•

the level of competition from domestic and foreign producers;

•

the effect of forestry, land use, environmental and other governmental regulations;

•

the risk of loss from fires, floods and other natural disasters;

•

legal proceedings; and

•

performance of pension fund investments.

The company is also a large exporter and is affected by changes in economic activity in Europe and Asia, particularly Japan, and by changes in currency exchange rates, particularly the relative value of the U.S. dollar to the Euro and the Canadian dollar, and restrictions on international trade or tariffs imposed on imports, including the countervailing and anti-dumping duties imposed on the company’s softwood lumber shipments from Canada to the United States. These and other factors could cause or contribute to actual results differing materially from such forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will occur, or if any of them occurs, what effect they will have on the company’s results of operations, cash flows or financial condition. The company expressly declines any obligation to publicly revise any forward-looking statements that have been made to reflect the occurrence of events after the date of this report.

23

Results of Operations

The term “company” refers to Weyerhaeuser Company and all of its majority-owned domestic and foreign subsidiaries. The term “Weyerhaeuser” excludes Real Estate and Related Assets.

Consolidated Results

A summary of consolidated results for the thirteen-week periods ended March 28, 2004, and March 30, 2003, follows:

Net sales and revenues increased $423 million, or 9 percent, in the first quarter of 2004 as compared to the first quarter of 2003. The majority of the increase in sales resulted from improved prices across the Wood Products segment.

Items that Affected Results:

A summary of some significant items that are included in operating income and net earnings (loss) follows:

These and other factors that affected the quarter-to-quarter comparison of operating income and net earnings (loss) are discussed in the segment analyses that follow.

24

Timberlands

Third party log sales volumes and fee harvest volumes for Timberlands for the thirteen week periods ended March 28, 2004, and March 30, 2003, are as follows:

Net sales and revenues increased $9 million, or 4 percent, for the thirteen-week period ended March 28, 2004, compared to the thirteen-week period ended March 30, 2003. Sales of logs increased $31 million and other revenues, primarily related to sales of nonstrategic timberlands, decreased $22 million. The volume of logs sold to export and domestic markets was up 3 percent and 13 percent, respectively, in the thirteen weeks ended March 28, 2004, as compared to the thirteen weeks ended March 30, 2003. Price realizations, which include freight and are net of normal sales deductions, increased approximately 13 percent in the West, and approximately 5 percent in the South from first quarter 2003 to first quarter 2004.

Contribution to earnings increased $10 million for the thirteen weeks ended March 28, 2004 compared to the thirteen weeks ended March 30, 2003. Items that affected the quarterly comparison of Timberlands’ contribution to earnings include the following:

•

Changes in sales price and mix added approximately $23 million to first quarter 2004 contribution to earnings, as both export and domestic markets improved from first quarter 2003 to first quarter 2004.

•

Fee harvest volume for the thirteen weeks ended March 28, 2004, was 290,000 cunits lower than for the thirteen weeks ended March 30, 2003. This was due mainly to the fourth quarter 2003 sale of 328 thousand acres of timberlands in the Carolinas and Tennessee. In addition, the fee harvest volume in coastal British Columbia was lower in the first quarter of 2004 than in the first quarter of 2003 due to favorable weather conditions that occurred in 2003. The decrease in fee harvest volume resulted in a reduction in contribution to earnings of approximately $14 million.

•

Operating costs were slightly higher in the first quarter of 2004 than in the first quarter of 2003. The increase primarily resulted from the effect of translating Canadian-denominated harvesting costs of coastal British Columbia operations into U.S. dollars. The Canadian dollar was stronger against the U.S. dollar in the first quarter 2004 than in the first quarter 2003.

Timberlands’ contribution to earnings in the second quarter of 2004 is expected to be slightly higher than the first quarter of 2004 due to higher export and domestic log volumes, and a seasonally higher fee harvest.

25

Wood Products

Net sales and revenues increased $389 million, or 22 percent, for the thirteen-week period ended March 28, 2004, compared to the thirteen-week period ended March 30, 2003. The increase in net sales and revenues was primarily due to higher average sales prices for softwood lumber, oriented strand board (OSB), plywood, composite panels, and engineered lumber products. Sales volumes for most product lines, with the exception of composite panels, declined slightly from the first quarter of 2003 to the first quarter of 2004.

Contribution to earnings for Wood Products was $173 million in the thirteen weeks ended March 28, 2004, compared to a loss of $150 million in the thirteen weeks ended March 30, 2003. Items that affected the quarterly comparison of Wood Products’ contribution to earnings include the following:

•

The surge in demand for building products that began in the second half of 2003 and carried over to the first quarter of 2004 caused significant upward price pressure for structural lumber and panel products when compared to the first quarter of 2003. Demand for furniture also increased in the last half of 2003 and the first quarter of 2004, which caused upward price pressure in non-structural wood products such as particleboard, medium density fiberboard (MDF), and appearance grades of softwood and hardwood lumber. The overall price improvements for wood products resulted in an increase in first quarter 2004 contribution to earnings of approximately $275 million.

•

The increases in OSB and veneer prices negatively impacted raw material costs for engineered lumber products, as the company sources a significant percentage of these raw material needs from other producers. Costs increased for OSB due to increases in wood and resin prices, and changes in product mix. Costs for lumber and OSB operations in Canada increased as a result of the effect of the strengthening of the Canadian dollar against the U.S. dollar on the translation of Canadian-denominated operating costs into U.S. dollars. These factors were partially offset by cost efficiencies realized in the company’s coastal British Columbia operations. The net effect of these items was a negative variance in contribution to earnings of approximately $39 million.

•

Wood Products recognized a $79 million charge for litigation and a $22 million charge for facility closures in the first quarter of 2003, compared to a $33 million gain on the sale of an OSB mill and a $49 million charge for litigation settlements in the first quarter of 2004.

Second quarter 2004 results for the Wood Products segment are expected to be significantly higher than first quarter due to continued high demand and the resulting effects on prices for all wood products. This outlook assumes that the transportation disruptions in truck, rail and ocean freight services that the company began to experience in the first quarter will continue into the second quarter, but will not significantly impair the company’s ability to ship products to customers.

Third party sales and total production volumes for the major products in Wood Products are as follows:

26