|
LIQUIDITY AND CAPITAL RESOURCES
We are committed to maintaining a sound and conservative capital structure that enables us to: • protect the interests of our shareholders and lenders; and • have access at all times to all major financial markets. Two important elements of our policy governing capital structure include: • viewing the capital structure of Weyerhaeuser separately from that of Weyerhaeuser Real Estate Company (WRECO) given the very different nature of their assets and business activity; and • minimizing liquidity risk by managing a combination of maturing short-term and long-term debt. The amount of debt and equity at Weyerhaeuser and WRECO will reflect the following: • basic earnings capacity; and • liquidity characteristics of their respective assets. Where We Get Cash We generate cash from sales of our products, from short-term and long-term borrowings and from the issuance of our stock – primarily upon exercise of employee stock options. In recent years, we have also generated cash proceeds from the sale of nonstrategic assets. CASH FROM OPERATIONS Consolidated net cash provided by our operations for the last three years was approximately: • $633 million in 2007; • $1.6 billion in 2006; and • $1.8 billion in 2005. Comparing 2007 With 2006 The decrease of $1.0 billion in net cash from operations in 2007 as compared with 2006 was primarily due to the following: • Cash we received from customers in our forest products operations, which excludes Real Estate, net of cash paid to employees, suppliers and others, decreased by $1.9 billion. Cash from operations declined as a result of significantly lower demand for building materials due to the continued deterioration of the U.S. housing market. In addition, cash flows from operations declined in 2007 due to the combined effects of the Domtar Transaction in March 2007 as well as the sale of our Irish composite panel operations in November 2006, and the North American composite panel operations in July 2006. This was partially offset by increased price realizations for pulp, containerboard, packaging and recycling products. • Cash we received from customers in our Real Estate segment, net of cash paid to employees, suppliers and others, decreased by $237 million, primarily due to fewer closings of single-family home sales. • Consolidated cash paid for income taxes decreased by $544 million. Comparing 2006 With 2005 The decrease of $143 million in net cash from operations in 2006 as compared with 2005 was primarily due to the following: • Cash we received from customers in our forest products operations, which excludes Real Estate, net of cash paid to employees, suppliers and others, decreased by $76 million. Cash from operations declined as a result of significantly lower price realizations for softwood lumber and OSB and decreased shipments of softwood lumber and plywood. In addition, cash flows from operations declined in 2006 as a result of the combined effects of the sale of our Irish composite panel operations in November 2006, the North American composite panel operations in July 2006, the B.C. Coastal operations in May 2005, and the French composite panel operations in December 2005. This was partially offset by increased price realizations for pulp, paper, and packaging products and the receipt of a $344 million refund of countervailing and anti-dumping deposits in 2006. • Cash we received from customers, net of cash paid to employees, suppliers and others, in our Real Estate segment decreased by $113 million. This decrease is primarily due to an increase in our investment in land and inventory and an increase in receivables related to land sales, partially offset by an increase in payables and accrued liabilities, including income taxes. • Consolidated cash paid for income taxes increased by $105 million. • This was partially offset by a decrease in cash paid for interest, net of amounts capitalized, of $162 million, due primarily to $2.4 billion of debt reductions during 2005 and 2006. Financing Cash generated from financing activities includes: • issuances of long-term debt; • borrowings under revolving lines of credit; and • proceeds from stock offerings and option exercises. This section also includes information about our debt-to-total-capital ratio. Long-Term Debt During the last three years, we issued debt or borrowed under our available credit facilities as follows: • $664 million in 2007; • $36 million in 2006; and • $228 million in 2005. Stock Offerings and Option Exercises During the last three years, our cash proceeds from the exercise of stock options were: • $321 million in 2007; • $202 million in 2006; and • $160 million in 2005. Debt-to-Total-Capital Ratio Our debt-to-total-capital ratio for the last three years was: • 39.9 percent in 2007; • 39.4 percent in 2006; and • 38.7 percent in 2005. Weyerhaeuser’s investment in our Real Estate business segment over the last three years was: • $2.1 billion as of December 30, 2007; • $2.0 billion as of December 31, 2006; and • $1.5 billion as of December 25, 2005. Assuming the cash and cash equivalents balances of $114 million, $243 million and $1.1 billion as of December 30, 2007, December 31, 2006 and December 25, 2005, respectively, had been used to reduce outstanding debt, the consolidated debt-to-capital ratio would be: • 39.5 percent in 2007; • 38.7 percent in 2006; and • 35.5 percent in 2005. Excluding Weyerhaeuser’s investment in Real Estate – and the Real Estate amounts listed in the table below – our debt-to-total-capital ratio was: • 42.0 percent in 2007; • 41.6 percent in 2006; and • 39.0 percent in 2005. Debt-to-Total-Capital Ratio Details  PROCEEDS FROM THE SALE OF NONSTRATEGIC ASSETS Proceeds received from the sale of nonstrategic assets in each of the last three years were: • $1.6 billion in 2007 – includes $1.35 billion from the Domtar Transaction, $161 million from the sale of our interest in our New Zealand joint venture and management company and $106 million from the sale of certain wood products distribution facilities in the U.S. and Canada; • $304 million in 2006 – includes $273 million from the sale of the North American and Irish composite panel operations; and • $1.3 billion in 2005 – includes $1.2 billion from the sale of the B.C. Coastal and French composite panel operations and $115 million from the sale of an equity investment. How We Use Cash In addition to paying for ongoing operating costs, we use cash to: • invest in our business; • repay long-term debt and credit facilities; • pay dividends and repurchase our stock; and • meet our contractual obligations and commercial commitments. INVESTING IN OUR BUSINESS We anticipate that our capital expenditures for 2008 – excluding acquisitions and our Real Estate business segment – will be approximately $550 million. However, that amount could change due to: • future economic conditions; • weather; and • timing of equipment purchases. Three-Year Summary of Capital Spending by Business Segment – Excluding Real Estate  LONG-TERM DEBT During 2007, we reduced overall debt – including that for our Real Estate segment – by approximately $846 million. Our consolidated long-term debt was: • $7.3 billion as of December 30, 2007; • $8.2 billion as of December 31, 2006; and • $8.6 billion as of December 25, 2005. During 2007 and 2005, we retired some of our long-term debt prior to its scheduled maturity. The premiums and other costs related to doing so are recorded in interest expense and other and were: • $45 million in 2007; and • $32 million in 2005. REVOLVING CREDIT FACILITIES In December 2006, Weyerhaeuser Company and WRECO entered into two multiyear revolving credit facility agreements – a $1.2 billion revolving credit facility that expires in March 2010 and a $1.0 billion five-year revolving credit facility that expires in December 2011. The former replaces a $1.2 billion credit facility that was scheduled to expire in March 2010 and the latter replaces an $800 million multiyear revolving line of credit that was scheduled to expire in March 2007. WRECO can borrow up to $400 million under each of these facilities. Neither of the entities is a guarantor of the borrowing of the other under either of these credit facilities. As of December 30, 2007, approximately $1.8 billion of our credit facilities were available for incremental borrowings. PAYING DIVIDENDS AND REPURCHASING STOCK Over the last three years, we paid dividends of: • $531 million in 2007; • $538 million in 2006; and • $466 million in 2005. Changes in the amount of dividends we paid were primarily due to: • increasing our quarterly dividend; and • reducing the number of common shares outstanding. We increased our quarterly dividend from $0.40 per share to $0.50 per share effective with the second quarter of 2005 and from $0.50 per share to $0.60 per share effective with the third quarter of 2006. During 2007, we completed the stock repurchase program that was announced in October 2005, which authorized the repurchase of up to 18 million shares of our common stock. Since the authorization we repurchased the following: • 7.0 million shares in 2007 – net cost of $473 million; • 10.8 million shares in 2006 – net cost of $672 million; and • 0.2 million shares in 2005 – net cost of $11 million. During 2007, we also redeemed 25 million shares in connection with the Domtar Transaction. Our intent, over time, is to maintain a dividend payout ratio of 20 percent to 30 percent of our operating cash flows. Based on our 2007 consolidated cash from operations of $633 million and our 2007 dividend payments of $531 million, our 2007 dividend payout ratio was 84 percent. OUR CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS More details about our contractual obligations and commercial commitments are in Note 9: Pension and Other Postretirement Benefit Plans, Note 14: Long-Term Debt, and Note 16: Legal Proceedings, Commitments and Contingencies of Notes to Consolidated Financial Statements. Significant Contractual Obligations as of December 30, 2007  |