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8-K/A - FORM 8-K/A - WEYERHAEUSER COd578607d8ka.htm
EX-99.1 - EX-99.1 - WEYERHAEUSER COd578607dex991.htm

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information is based upon the historical consolidated financial information of Weyerhaeuser for the year ended December 31, 2012 and as of and for the six month periods ended June 30, 2013 and 2012, included in the Company’s annual report on Form 10-K for the year ended December 31, 2012 and the Company’s quarterly report on Form 10-Q for the respective periods, and Longview Timber LLC (“Longview” or “Longview Timber”) included or incorporated by reference in this Report on Form 8-K/A.

The unaudited pro forma condensed combined balance sheet as at June 30, 2013, is presented as if the Additional Common Shares Offering (as defined below) and the acquisition by Weyerhaeuser of all of the outstanding equity interests in Longview Timber (the “Acquisition”) were completed on that date. The unaudited pro forma condensed combined statements of operations data for the six month periods ended June 30, 2013 and 2012, and the year ended December 31, 2012, assume that the Prior Offerings (as defined below) and the Acquisition were completed on January 1, 2012. The historical consolidated financial information has been adjusted to give effect to estimated pro forma events that are (1) directly attributable to the Prior Offerings and the Acquisition, (2) factually supportable and (3) with respect to the statement of operations, expected to have a continuing impact on the combined results of operations.

The unaudited pro forma condensed combined financial information should be read in conjunction with the historical consolidated financial statements and accompanying notes of Weyerhaeuser and Longview.

The unaudited pro forma condensed combined financial information contained in this Form 8K/A is presented for illustrative purposes only, contains a variety of adjustments, assumptions and preliminary estimates, is subject to numerous other uncertainties and does not reflect what the combined company’s financial position or results of operations would have been had the Transactions (as defined below) been completed as of the dates assumed for purposes of that pro forma financial information nor does it reflect the financial position or results of operations of the combined company following the Acquisition. The pro forma adjustments are based on the preliminary information available at the time of the preparation of this Form 8K/A. For purposes of the unaudited pro forma condensed combined financial information, the Acquisition consideration has been preliminarily allocated to the assets acquired and liabilities assumed based on limited information presently available to Weyerhaeuser to estimate fair values. The Acquisition consideration has been allocated among the relative fair values of the assets acquired and liabilities assumed based on their estimated fair values as of the date of the Acquisition. The final allocation is dependent upon certain valuations and other analyses that could not be completed prior to the Acquisition and are required to make a definitive allocation. The actual amounts recorded upon completion of the valuation and other analyses related to the values as of July 23, 2013, the closing date of the Acquisition, may differ materially from the information presented in the accompanying unaudited pro forma condensed combined financial information. Additionally, the unaudited pro forma condensed combined financial information does not reflect the cost of any integration activities or benefits from synergies that may be derived from any integration activities nor does it include any other items not expected to have a continuing impact on the consolidated results of operations. In addition, the pro forma adjustments for the Acquisition do not include any post-closing adjustments that may occur pursuant to the Purchase Agreement (as defined below), which may include adjustments of the purchase price, and any such post-closing adjustments may be material.

The unaudited pro forma condensed combined financial information contained in this Report on Form 8K/A assumes that we elect to pay any and all dividends with respect to the Mandatory Convertible Preference Shares (as defined below) in cash.

Certain amounts in the historical consolidated financial statements of Longview will be reclassified to conform to Weyerhaeuser’s financial statement presentation. Management will also continue to assess Longview’s accounting policies for adjustments in addition to those reflected in the pro forma condensed combined information that may be required to conform Longview’s accounting policies to those of Weyerhaeuser.


Weyerhaeuser Company

Unaudited Pro Forma Condensed Combined Balance Sheet

As at June 30, 2013

(In millions)

 

     Weyerhaeuser
(Historical)
    Longview
(Historical)
     Adjustments
for the
Additional
Common
Shares
Offering
     Purchase
Accounting
Adjustments
    Pro
Forma
Combined
 

ASSETS

            

Forest Products

            

Current assets:

            

Cash and cash equivalents

   $ 908      $ 32       $ —         $ (34   $ 860   
             (32  
             (11  
             (2  
             (1  

Receivables

     632        11         —           (2     641   

Inventories

     561        6         —           —          567   

Prepaid expenses

     96        4         —           —          100   

Deferred tax assets

     144        —           —           —          144   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total current assets

     2,341        53         —           (82     2,312   

Property and equipment

     2,706        2         —           —          2,708   

Construction in progress

     72        —           —           —          72   

Timber and timberlands

     3,949        1,491         —           1,245        6,685   

Cash and cash equivalents designated for the Purchase of Longview Timber LLC

     1,450        —           117         (1,567     —     

Investments in and advances to equity affiliates

     186        1         —           —          187   

Other assets

     455        5         —           (5     468   
             11     
             2     

Restricted financial investments held by variable interest entities

     615        —           —           —          615   

Real Estate assets

     2,134        —           —           —          2,134   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

   $ 13,908      $ 1,552       $ 117       $ (396   $ 15,181   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

LIABILITIES AND EQUITY

            

Forest Products

            

Current liabilities:

            

Notes payable

   $ 2      $ —         $ —         $ —        $ 2   

Current maturities of long-term debt

     163        —           —           —          163   

Accounts payable

     341        7         —           (2     346   

Accrued liabilities

     573        12         —           —          585   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total current liabilities

     1,079        19         —           (2     1,096   

Long-term debt

     3,842        1,070         —           70        4,982   

Long-term debt (nonrecourse to the company) held by variable interest entities

     511        —           —           —          511   

Due to related party

     —          19         —           (19     —     

Deferred income taxes

     38        —           —           —          38   

Deferred pension and other postretirement benefits

     1,785        —           —           —          1,785   

Other liabilities

     446        —           —           —          446   

Real Estate liabilities

     301        —           —           —          301   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

     8,002        1,108         —           49        9,159   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Equity:

            

Weyerhaeuser shareholders’ interest:

            

Mandatory Convertible Preference Shares

     14        —           —           —          14   

Common Shares

     722        —           5         —          727   

Other capital

     6,290        —           112         —          6,402   

Retained earnings

     350        —           —           (1     349   

Cumulative comprehensive loss

     (1,508     —           —           —          (1,508

Members’ equity

     —          444         —           (444     —     
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total Weyerhaeuser shareholders’ interest

     5,868        444         117         (445     5,984   

Noncontrolling interests

     38        —           —           —          38   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total equity

     5,906        444         117         (445     6,022   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities and equity

   $ 13,908      $ 1,552       $ 117       $ (396   $ 15,181   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements.


Weyerhaeuser Company

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Six Months Ended June 30, 2013

(In millions, except per share data)

 

     Weyerhaeuser
(Historical)
    Longview
(Historical)
    Adjustments
for

Prior
Offerings
    Purchase
Accounting
Adjustments
    Pro
Forma
Combined
 

Net sales and revenues

   $ 4,092      $ 160      $ —        $ (53   $ 4,199   

Cost of products sold

     3,197        129        —          (53     3,232   
           (41  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     895        31        —          41        967   

Selling, general and administrative expenses

     331        6        —          —          337   

Research and development expenses

     15        —          —          —          15   

Charges for restructuring, closures and impairments

     10        —          —          —          10   

Other operating income, net

     (28     (2     —          —          (30
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     567        27        —          41        635   

Interest income and other

     21        —          —          —          21   

Interest expense, net of capitalized interest

     (163     (29     —          4        (188
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before income taxes

     425        (2     —          45        468   

Income taxes

     (83     (2     —          —          (85
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

     342        (4     —          45        383   

Dividends on preference shares

     (2     —          (20     —          (22
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings attributable to Weyerhaeuser common shareholders

   $ 340      $ (4   $ (20   $ 45      $ 361   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share attributable to Weyerhaeuser common shareholders:

          

Basic

   $ 0.62            $ 0.62   

Diluted

   $ 0.61            $ 0.62   

Weighted average shares outstanding (in thousands):

          

Basic

     549,159              580,426   

Diluted

     554,301              585,568   

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements.


Weyerhaeuser Company

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Six Months Ended June 30, 2012

(In millions, except per share data)

 

     Weyerhaeuser
(Historical)
    Longview
(Historical)
    Adjustments
for

Prior
Offerings
    Purchase
Accounting
Adjustments
    Pro
Forma
Combined
 

Net sales and revenues

   $ 3,287      $ 124      $ —        $ (32   $ 3,379   

Cost of products sold

     2,806        116        —          (32     2,856   
           (34  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     481        8        —          34        523   

Selling, general and administrative expenses

     292        9        —          —          301   

Research and development expenses

     15        —          —          —          15   

Charges for restructuring, closures and impairments

     16        —          —          —          16   

Other operating income, net

     (119     —          —          —          (119
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     277        (1     —          34        310   

Interest income and other

     23        2        —          —          25   

Interest expense, net of capitalized interest

     (173     (30     —          3        (200
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before income taxes

     127        (29     —          37        135   

Income taxes

     (2     (1     —          —          (3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

     125        (30     —          37        132   

Dividends on preference shares

     —          —          (22     —          (22
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings attributable to Weyerhaeuser common shareholders

   $ 125      $ (30   $ (22   $ 37      $ 110   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share attributable to Weyerhaeuser common shareholders:

          

Basic

   $ 0.23            $ 0.19   

Diluted

   $ 0.23            $ 0.19   

Weighted average shares outstanding (in thousands):

          

Basic

     537,667              571,017   

Diluted

     539,880              573,230   

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements.


Weyerhaeuser Company

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended December 31, 2012

(In millions, except per share data)

 

     Weyerhaeuser
(Historical)
    Longview
(Historical)
    Adjustments
for

Prior
Offerings
    Purchase
Accounting
Adjustments
    Pro
Forma
Combined
 

Net sales and revenues

   $ 7,059      $ 245      $ —        $ (68   $ 7,236   

Cost of products sold

     5,810        230        —          (68     5,904   
           (68  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     1,249        15        —          68        1,332   

Selling, general and administrative expenses

     630        19        —          —          649   

Research and development expenses

     32        —          —          —          32   

Charges for restructuring, closures and impairments

     32        —          —          —          32   

Other operating income, net

     (180     —          —          —          (180
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     735        (4     —          68        799   

Interest income and other

     52        —          —          —          52   

Interest expense, net of capitalized interest

     (348     (60     —          6        (402
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before income taxes

     439        (64     —          74        449   

Income taxes

     (55     (2     —          —          (57
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

     384        (66     —          74        392   

Net loss attributable to noncontrolling interests

     1        —          —          —          1   

Dividends on preference shares

     —          —          (44     —          (44
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings attributable to Weyerhaeuser common shareholders

   $ 385      $ (66   $ (44   $ 74      $ 349   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share attributable to Weyerhaeuser common shareholders:

          

Basic

   $ 0.71            $ 0.61   

Diluted

   $ 0.71            $ 0.61   

Weighted average shares outstanding (in thousands):

          

Basic

     539,140              572,490   

Diluted

     542,310              575,660   

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements.


NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

1. Basis of Presentation

On June 14, 2013, we entered into a purchase agreement (the “Purchase Agreement”) with Longview Timber Holdings, Corp. and certain of its security holders, other related agreements to acquire, with cash, all of the equity interests in Longview Timber for an aggregate purchase price of $2.65 billion (which amount includes the assumption of Longview’s senior secured fixed and floating rate loans in an aggregate principal amount of $1.07 billion under the Amended and Restated Loan Agreement dated as of November 4, 2008, as further amended, among Longview Timber Corp., Longview Timberlands LLC and Metropolitan Life Insurance Company (collectively, the “Longview Existing Debt”), and is subject to adjustment based on Longview’s net working capital and net cash at the closing date of the Acquisition in accordance with the terms of the Purchase Agreement. To finance the Acquisition, Weyerhaeuser issued the following:

 

   

29,000,000 of our common shares, par value $1.25 per share (the “Common Shares”), on June 24, 2013, at the price of $27.75 per common share for net proceeds of $781 million (the “Common Shares Offering”);

 

   

13,800,000 6.375% Mandatory Convertible Preference Shares, Series A, par value $1.00 and liquidation preference of $50.00 per share (the “ Mandatory Convertible Preference Shares”), on June 24, 2013, for net proceeds of $669 million (the “Mandatory Convertible Preference Shares Offering” and, together with the Common Shares Offering and the Additional Common Shares Offering, the “Prior Offerings”); and

 

   

4,350,000 common shares on July 8, 2013, at the price of $27.75 per share for net proceeds of $117 million, in connection with the exercise by the underwriters of the Common Shares Offering of the additional common shares purchase option (the “Additional Common Shares Offering”).

Net proceeds received from the issuances of shares are recorded in “Cash and cash equivalents designated for the purchase of Longview Timber LLC” in the Unaudited Pro Forma Condensed Combined Balance Sheet. The Acquisition closed on July 23, 2013.

Weyerhaeuser will account for the Acquisition as a purchase in accordance with accounting principles generally accepted in the United States. Under the purchase method, the assets and liabilities of Longview will be recorded as of the date of the Acquisition at their respective fair values.

2. Pro Forma Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet

The following table presents the preliminary purchase accounting adjustments to the net book value of the assets acquired and liabilities of Longview assumed based on the preliminary estimates of fair values of the assets acquired and liabilities assumed as if the Acquisition occurred at June 30, 2013.

 

Net cash paid

   $ 1,601   

Less book value of Longview net assets

     (444
  

 

 

 

Excess purchase price to be allocated

   $ 1,157   
  

 

 

 

Fair market value adjustments:

  

Eliminate Longview cash

   $ (32

Timber and timberlands

     1,245   

Eliminate deferred debt costs

     (5

Eliminate related party payables

     19   

Long-term debt

     (70
  

 

 

 

Total allocations

   $ 1,157   
  

 

 

 

Purchase accounting adjustments have been reflected to eliminate the historical Longview equity balances. Receivable and accounts payable balances related to Longview sales to Weyerhaeuser have been eliminated. Weyerhaeuser paid an $11 million deposit related to interest on the assumed Longview debt that is reflected as a long-term asset and $2 million to transfer the debt to Weyerhaeuser from Longview, which is reflected as a long-term asset and will be amortized over the life of the debt. A purchase accounting adjustment has been reflected on the retained earnings line to include estimated other transaction expenses of $1 million.

No deferred income taxes have been provided on the fair market value adjustments because Longview operates as a REIT and almost all of its income will continue to be distributed to shareholders without first paying corporate level tax.


3. Pro Forma Adjustments to Unaudited Pro Forma Condensed Combined Statement of Operations

The adjustment to net sales and revenues and cost of products sold includes the elimination of Longview sales to Weyerhaeuser. Additionally, cost of products sold includes a net reduction in combined depletion expense. Longview computed depletion rates by dividing the carrying amount of merchantable timber by the volume of merchantable timber estimated to be available by region in Oregon and Washington. Weyerhaeuser computes depletion rates by dividing the net carrying value of timber by the related volume of timber estimated to be available over the growth cycle. Further, Weyerhaeuser calculates depletion in the West in a Western depletion pool, as opposed to by region in Oregon and Washington. Conforming Longview’s depletion method to Weyerhaeuser’s depletion method results in a decrease in Longview’s historical depletion for the periods presented. This is partially offset by an increase in Weyerhaeuser’s historical depletion as a result of including the fair value basis of the Longview timber in Weyerhaeuser’s Western depletion pool. Total depletion under the two depletion methods will be the same amount over the harvest cycle.

The adjustment to interest expense, net of capitalized interest, reflects the elimination of amortization of losses recognized by Longview on terminated interest rate swaps and the elimination of amortization of Longview’s deferred loan costs. During second quarter 2013, we paid $11 million in fees related to a bridge loan commitment obtained in connection with the Acquisition. Upon closing of the Acquisition on July 23, 2013, we terminated the bridge loan commitment, which was unfunded, and the fees associated therewith will be expensed in third quarter 2013.

For purposes of calculating pro forma condensed combined basic and diluted earnings per share, we gave effect to the Prior Offerings and used the actual dividend rate of 6.375% on the Mandatory Convertible Preference Shares, or $3.1875 per Mandatory Convertible Preference Share annually. Accordingly, dividends on the Mandatory Convertible Preference Shares would have been $22 million for each of the six month periods ended June 30, 2013 and 2012, and $44 million for the year ended December 31, 2012, and were subtracted from net earnings attributable to Weyerhaeuser common shareholders, or $0.04 and $0.08 per Common Share, respectively, during such periods. The Mandatory Convertible Preference Shares are initially convertible into a maximum of 20,720,721 Common Shares, assuming mandatory conversion based on an “applicable market rate” (as determined pursuant to the terms of the Mandatory Convertible Preference Shares) for our Common Shares equal to $33.30 per Common Share. We have assumed that none of the Mandatory Convertible Preference Shares have been converted for purposes of calculating pro forma combined diluted earnings per share because conversion would have had an antidilutive effect. We have also assumed that we elect to pay all dividends on the Mandatory Convertible Preference Shares in cash.