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WEYERHAEUSER CO - Annual Report: 2015 (Form 10-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2015
or
[    ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                      TO                     
COMMISSION FILE NUMBER 1-4825
WEYERHAEUSER COMPANY
A WASHINGTON CORPORATION
91-0470860
(IRS EMPLOYER IDENTIFICATION NO.)
33663 WEYERHAEUSER WAY SOUTH, FEDERAL WAY, WASHINGTON 98063-9777 TELEPHONE (253) 924-2345
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS
 
NAME OF EACH EXCHANGE ON WHICH REGISTERED:
Common Shares ($1.25 par value)
 
Chicago Stock Exchange
 
 
New York Stock Exchange
6.375% Mandatory Convertible Preference Shares, Series A ($1.00 par value)
 
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  [X] Yes  [   ] No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  [   ] Yes  [X] No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  [X] Yes  [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  [X] Yes  [   ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  [X]    Accelerated filer  [   ]    Non-accelerated filer  [   ]    Smaller reporting company  [   ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  [   ] Yes  [X] No
As of June 30, 2015, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $16.0 billion based on the closing sale price as reported on the New York Stock Exchange Composite Price Transactions.
As of January 29, 2016, 510,492,965 shares of the registrant’s common stock ($1.25 par value) were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Notice of 2016 Annual Meeting of Shareholders and Proxy Statement for the company’s Annual Meeting of Shareholders to be held May 20, 2016, are incorporated by reference into Part II and III.

 WEYERHAEUSER COMPANY > 2015 ANNUAL REPORT AND FORM 10-K


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TABLE OF CONTENTS
PART I
 
 
ITEM 1.
 
 
 
 
 
 
 
 
 
   OUR EMPLOYEES
 
 
   TIMBERLANDS
 
   WOOD PRODUCTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 1A.
 
 
 
 
 
 
 
 
   SUBSTITUTION
 
 
 
 
 
 
 
 
 
•   PEOPLE
 
 
 
 
 
 
 
 
 
 
 
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
MINE SAFETY DISCLOSURES — NOT APPLICABLE
 
PART II
 
 
ITEM 5.
ITEM 6.
ITEM 7.
 
 
 
 
 
 
   TIMBERLANDS
 
 
 
 
 
   INCOME TAXES
 
 
 
 
   FINANCING
 
 
 
 
 
 
ITEM 7A.
 
ITEM 8.
 
 
 
 
 
 
 
 
ITEM 9.
ITEM 9A.
 
 
 
 
ITEM 9B.
OTHER INFORMATION — NOT APPLICABLE
 
 
 
 
PART III
 
 
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
 
 
 
PART IV
 
 
ITEM 15.
 
 
 
 
 
 
113


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OUR BUSINESS
We are one of the world's largest private owners of timberlands. We own or control nearly 7 million acres of timberlands, primarily in the U.S., and manage additional timberlands under long-term licenses in Canada. We manage these timberlands on a sustainable basis in compliance with internationally recognized forestry standards. We are also one of the largest manufacturers of wood and specialty cellulose fibers products. Our company is a real estate investment trust (REIT).
We are committed to operate as a sustainable company and are listed on the Dow Jones World Sustainability Index. We focus on increasing energy and resource efficiency, reducing greenhouse gas emissions, reducing water consumption, conserving natural resources, and offering products that meet human needs with superior sustainability attributes. We operate with world class safety results, understand and address the needs of the communities in which we operate, and present ourselves transparently.
In 2015, we generated $7.1 billion in net sales and employed approximately 12,600 people who serve customers worldwide.
This portion of our Annual Report and Form 10-K provides detailed information about who we are, what we do and where we are headed. Unless otherwise specified, current information reported in this Form 10-K is as of the fiscal year ended December 31, 2015.
We break out financial information such as revenues, earnings and assets by the business segments that form our company. We also discuss the development of our company and the geographic areas where we do business.
Throughout this Form 10-K, unless specified otherwise, references to “we,” “our,” “us” and “the company” refer to the consolidated company.

WE CAN TELL YOU MORE
AVAILABLE INFORMATION
We meet the information-reporting requirements of the Securities Exchange Act of 1934 by filing periodic reports, proxy statements and other information with the Securities and Exchange Commission (SEC). These reports and statements — information about our company’s business, financial results and other matters — are available at:
the SEC website — www.sec.gov;
the SEC’s Public Conference Room, 100 F St. N.E., Washington, D.C., 20549, (800) SEC-0330; and
our website — www.weyerhaeuser.com.
When we file the information electronically with the SEC, it also is posted to our website.

WHO WE ARE
We started out as Weyerhaeuser Timber Company, incorporated in the state of Washington in January 1900, when Frederick Weyerhaeuser and 15 partners bought 900,000 acres of timberland. Today, we are working to grow a truly great company for our shareholders, customers and employees. We grow and harvest trees and manufacture and sell products made from trees.

REAL ESTATE INVESTMENT TRUST (REIT) ELECTION
Starting with our 2010 fiscal year, we elected to be taxed as a REIT. We expect to derive most of our REIT income from investments in timberlands, including the sale of standing timber through pay-as-cut sales contracts and lump sum timber deeds. REIT income can be distributed to shareholders without first paying corporate level tax, substantially eliminating the double taxation on income. A significant portion of our timberland segment earnings receives this favorable tax treatment. We continue to be required to pay federal corporate income taxes on earnings of our Taxable REIT Subsidiary (TRS), which includes our manufacturing businesses and the portion of our Timberlands segment income included in the TRS.
 
PENDING MERGER WITH PLUM CREEK
On November 6, 2015 Weyerhaeuser Company and Plum Creek Timber Company, Inc. (“Plum Creek”) entered into an Agreement and Plan of Merger (“Merger Agreement”) pursuant to which Plum Creek will merge with and into Weyerhaeuser Company with Weyerhaeuser continuing as the surviving corporation. Under the terms of the Merger Agreement, Plum Creek shareholders will receive 1.60 shares of Weyerhaeuser common shares for each share of Plum Creek common stock at the closing date. Plum Creek is a REIT that owns and manages more than 6 million acres of timberland in the United States. In addition Plum Creek produces wood products, develops opportunities for mineral and other natural resource extraction, and develops and sells real estate properties. See Note 4: Acquisitions in the Notes to Consolidated Financial Statements for further information about the pending merger.

OUR BUSINESS SEGMENTS
In the Consolidated Results section of Management’s Discussion and Analysis of Financial Condition and Results of Operations, you will find our overall performance results for our business segments:
Timberlands,
Wood Products and
Cellulose Fibers.
Detailed financial information about our business segments and our geographic locations is in Note 2: Business Segments and Note 21: Geographic Areas in the Notes to Consolidated Financial Statements, as well as in this section and in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 WEYERHAEUSER COMPANY > 2015 ANNUAL REPORT AND FORM 10-K 1


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On November 8, 2015 Weyerhaeuser announced that the board authorized the exploration of strategic alternatives for its Cellulose Fibers business. At this time there can be no assurance that the board's evaluation process will result in any transaction or that any transaction, if pursued, will be consummated.

EFFECT OF MARKET CONDITIONS
The health of the U.S. housing market strongly affects our Wood Products and Timberlands segments. Wood Products primarily sells into the new residential building and repair and remodel markets. Demand for logs from our Timberlands segment is affected by the production of wood-based building products as well as export demand. Cellulose Fibers is primarily affected by global demand and the relative strength of the U.S. dollar.

COMPETITION IN OUR MARKETS
We operate in highly competitive domestic and foreign markets, with numerous companies selling similar products. Many of our products also face competition from substitutes for wood and wood-fiber products. We compete in our markets primarily through price, product quality and service levels. We are relentlessly focused on improving operational excellence to ensure a competitive cost structure and producing quality products customers want and are wiling to pay for.
Our business segments’ competitive strategies are as follows:
Timberlands — Extract maximum value from each acre we own or manage.
Wood Products — Deliver high-quality lumber, structural panels, engineered wood products and complementary building products for residential, multi-family, industrial and light commercial applications at competitive costs.
Cellulose Fibers — Concentrate on value-added pulp products and low cost manufacturing assets.

SALES OUTSIDE THE U.S.
In 2015, $2.3 billion — 32 percent — of our total consolidated sales from continuing operations were to customers outside the U.S. Our sales outside the U.S. are generally denominated in U.S. dollars. The table below shows sales outside the U.S. for the last three years.
SALES OUTSIDE THE U.S. IN MILLIONS OF DOLLARS
  
2015

2014

2013

Exports from the U.S.
$
1,719

$
1,892

$
1,891

Canadian export and domestic sales
400

472

488

Other foreign sales
144

150

114

Total
$
2,263

$
2,514

$
2,493

Percent of total sales
32
%
34
%
29
%

OUR EMPLOYEES
We have approximately 12,600 employees. This number includes:
11,700 employed in North America and
900 employed by our operations outside of North America.
Of these employees, approximately 3,500 are members of unions covered by multi-year collective-bargaining agreements. More information about these agreements is in Note 9: Pension and Other Postretirement Benefit Plans in the Notes to Consolidated Financial Statements.

WHAT WE DO
This section provides information about how we:
grow and harvest trees and
manufacture and sell products made from them.
For each of our business segments, we provide details about what we do, where we do it, how much we sell and where we are headed.

TIMBERLANDS
Our Timberlands segment manages 6.9 million acres of private commercial timberlands worldwide. We own 6.3 million of those acres and have long-term leases on the other 0.6 million acres. In addition, we have renewable, long-term licenses on Canadian timberlands. The tables presented in this section include data from this segment's business units as of the end of 2015.

WHAT WE DO
Forestry Management
Our Timberlands segment:
grows and harvests trees to be converted into lumber, other wood and building products and pulp and paper;
exports logs to other countries where they are made into products;
plants seedlings to reforest harvested areas using the most effective regeneration method for the site and species (in parts of Canada natural regeneration is employed);
monitors and cares for the planted trees as they grow to maturity; and
strives to sustain and maximize the timber supply from our timberlands while keeping the health of our environment a key priority.
Our goal is to maximize returns by selling logs and stumpage to internal and external customers. We focus on solid wood and use intensive silviculture to improve forest productivity and returns while managing our forests on a sustainable basis to meet customer and public expectations.

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Sustainable Forestry Practices
We are committed to responsible environmental stewardship wherever we operate, managing forests to produce financially mature timber while protecting the ecosystem services they provide. Our working forests include places with unique environmental, cultural, historical or recreational value. To protect their unique qualities, we follow regulatory requirements, voluntary standards and implement the Sustainable Forestry Initiative® (SFI) standard. Independent auditing of all of the forests we own or manage in the United States and Canada certifies that we meet the SFI standard. Our timberlands in Uruguay are certified under the Forest Stewardship Council (FSC) standard or the Uruguayan national forestry management standard which is endorsed by the Program for the Endorsement of Forest Certification (PEFC).
Canadian Forestry Operations
In Canada, we manage timberlands under long-term licenses that provide raw material for our manufacturing facilities in various provinces. When we harvest trees, we pay the provinces at stumpage rates set by the government, which generally are based on prevailing market prices. We transfer logs to our manufacturing facilities at cost, and do not generate any profit in the Timberlands segment from the harvest of timber from the licensed acres in Canada.
Other Values From Our Timberlands
In the United States, we actively manage mineral, oil and gas leases on our land and use geologic databases to identify and market opportunities for commercial mineral and geothermal development. We recognize leasing, bonus, and option revenue over the terms of agreements with customers. Revenue primarily comes from:
royalty payments on oil and gas production;
bonus payments from oil and gas leasing and exploration activity;
royalty payments on hard minerals (rock, sand and gravel);
geothermal lease and option revenues; and
the sale of mineral assets.
In managing mineral resources, we generate revenue related to our ownership of the minerals and, separately, related to our ownership of the surface. The ownership of mineral rights and surface acres may be held by two separate parties. Materials that can be mined from the surface, and whose value comes from factors other than their chemical composition, typically belong to the surface owner. Examples of surface materials include rock, sand, gravel, dirt and topsoil. The mineral owner holds the title to commodities that derive value from their unique chemical composition. Examples of mineral rights include oil, gas, coal (even if mined at the surface) and precious metals. If the two types of rights conflict, then mineral rights generally are superior to surface rights. A third type of land right is geothermal, which can belong to either the surface or mineral owner. We routinely reserve mineral and geothermal rights when selling surface timberlands acreage.
Timberlands Products
PRODUCTS
HOW THEY’RE USED
Logs
Logs are made into lumber, other wood and building products, and pulp and paper products.
Timberlands
Timberland tracts are sold or exchanged to maximize value or improve our timberland portfolio.
Timber
Standing timber is sold to third parties.
Minerals, oil and gas
Minerals, oil and gas are sold into construction and energy markets.
Other products
Seed and seedlings grown in the U.S. and plywood produced at our mill in Uruguay are sold to third parties. U.S. timberlands are leased to the public for recreational purposes.
HOW WE MEASURE OUR PRODUCT
We report Timberlands data in cubic meters. Cubic meters measure the total volume of wood fiber in a tree or log that we can sell. Cubic meter volume is determined from the large and small-end diameters and length and provides a comparative measure of timber and log volume among operating regions, species, size and seasons of the year.
We also use multiple units of measure when transacting business including:
Thousand board feet (MBF) — used in the West to measure the expected lumber recovery from a tree or log. This measure does not include taper or recovery of non-lumber residual products.
Hundred cubic feet (CCF) — used in the West to measure the volume of a log. The measure does not include any calculation for expected lumber recovery.
Green tons (GT) — used in the South to measure weight; factors used for conversion to product volume can vary by species, size, location and season.
WHERE WE DO IT
Our timberlands assets are located primarily in North America. In the U.S. we own and manage sustainable timberlands in nine states for use in wood products and pulp and paper manufacturing. We own or lease:
4.0 million acres in the southern U.S. (Alabama, Arkansas, Louisiana, Mississippi, North Carolina, Oklahoma and Texas); and
2.6 million acres in the Pacific Northwest (Oregon and Washington).

We also own and operate nurseries and seed orchards in Washington, Oregon, South Carolina and Georgia.
Our international operations are located in Uruguay, where we own 298,000 acres and have long-term leases on 25,000 acres. In Canada, we manage timberlands under long-term licenses that provide raw material for our manufacturing facilities. These licenses are in Alberta, British Columbia, Ontario (license is managed by partnership) and Saskatchewan.
Our total timber inventory — including timber on owned and leased land— is approximately 350 million cubic meters. The amount of timber inventory does not translate into an amount of lumber or panel products because the quantity of end products:
varies according to the species, size and quality of the timber; and
will change through time as the mix of these variables adjust.

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The species, size and grade of the trees affects the relative value of our timberlands.
We maintain our timber inventory in an integrated resource inventory and geographic information system (“GIS”). The resource inventory component of the system is proprietary and is largely based on internally developed technologies, including growth and yield models developed by our research and development organization. The GIS component is based on GIS software that is viewed as the standard in our industry.
Timber inventory data collection and verification techniques include the use of industry standard field sampling procedures as well as proprietary remote sensing technologies in some geographies where they generate improved estimates. The data is collected and maintained at the timber stand level.
United States
Summary of 2015 United States Standing Timber Inventory
GEOGRAPHIC AREA
MILLIONS OF CUBIC METERS AT  
 DECEMBER 31, 2015

  
TOTAL
INVENTORY(1)

West:
 
Douglas fir/Cedar
153

Whitewood
31

Hardwood
12

 
196

South:
 
Southern yellow pine
113

Hardwood
29

 
142

Total U.S.
338

(1) Inventory includes all conservation and set aside areas.
Summary of 2015 United States Timberland Locations
GEOGRAPHIC AREA
THOUSANDS OF ACRES AT  
 DECEMBER 31, 2015
 
  
FEE
OWNERSHIP

LONG-
TERM
LEASES

TOTAL
ACRES(1)

U.S.:
 
 
 
West
2,594


2,594

South
3,403

630

4,033

Total U.S.
5,997

630

6,627

(1) Acres include all conservation and set aside areas.
We provide a constant year round flow of logs to internal and third-party customers. We sell grade logs to mills that manufacture a diverse range of products including lumber, plywood and veneer. We also sell chips and fiber logs to pulp, paper and oriented strand board mills. We also sell standing timber to third parties. Our timberlands are well located to take advantage of road, logging and transportation systems for efficient delivery of logs to these customers.
Western United States
Our Western acres are well situated to serve the wood product markets in Oregon and Washington. In addition, our location on the West Coast provides access to higher-value export markets for Douglas fir and whitewood logs in Japan, China and Korea. The size and quality of our Western Timberlands, coupled with their proximity to several deep-water port facilities, positions us to meet the needs of Pacific Rim log markets.
Our lands are composed primarily of Douglas fir, a species highly valued for its structural strength. Our coastal lands also contain whitewood and have a higher proportion of hemlock and other whitewoods than our interior holdings. Our management systems provide us a competitive operating advantage and range from research and forestry, to technical planning models, mechanized harvesting, and marketing and logistics.
On July 23, 2013, we purchased 100 percent of the equity interests in Longview Timber LLC (Longview Timber) for $1.58 billion cash and assumed debt of $1.07 billion, for an aggregate purchase price of $2.65 billion. Longview Timber was a privately-held Delaware limited liability company engaged in the ownership and management of approximately 645,000 acres of timberlands in Oregon and Washington. More information on this transaction can be found in Note 4: Acquisitions in the Notes to Consolidated Financial Statements.

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2015 Western U.S. Inventory by Species
2015 Western U.S. Inventory by Age / Species
The average age of timber harvested in 2015 was 52 years. Most of our U.S. timberland is intensively managed for timber production, but some areas are conserved for environmental, historical, recreational or cultural reasons. Some of our older trees are protected in acreage set aside for conservation, and some are not yet logged due to harvest rate regulations. While over the long term our average harvest age will decrease in accordance with our sustainable forestry practices, we harvest generally 2 percent of our Western acreage each year.
Southern United States
Our Southern acres predominantly contain southern yellow pine and encompass timberlands in seven states.
We intensively manage our timber plantations using forestry research and planning systems to optimize grade log production. We also actively manage our land to capture revenues from our oil, gas and hard minerals resources. We do this while providing quality habitat for a range of animals and birds. We lease more than 94 percent of our acres to the public and state wildlife agencies for recreational purposes.
2015 Southern U.S. Inventory by Species

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2015 Southern U.S. Inventory by Age / Species
The average age of timber harvested in 2015 was 31 years for southern yellow pine. In accordance with our sustainable forestry practices, we harvest generally 3 percent of our acreage each year in the South.
International
Summary of 2015 International Standing Timber Inventory
GEOGRAPHIC AREA
MILLIONS OF CUBIC METERS AT  
 DECEMBER 31, 2015

  
TOTAL
INVENTORY

Uruguay:
 
Pine
8

Eucalyptus
4

Total International
12

Summary of 2015 International Timberland Locations
GEOGRAPHIC AREA
THOUSANDS OF ACRES AT  
 DECEMBER 31, 2015
 
  
FEE
OWNERSHIP

LONG-TERM
LEASES

TOTAL
ACRES

Uruguay
298

25

323

Our timberland acres in Uruguay are split approximately 49 percent loblolly pine and 51 percent eucalyptus. Loblolly pine comprises more of our timber inventory due to its older age. On average, the timber in Uruguay is in the second third of its rotation age. It is entering into that part of the growth rotation when we will see increased volume accretion. About 97 percent of the area to be planted has been afforested to date.
2015 International Inventory by Species (Uruguay)
In Uruguay, the target rotation ages are 21 to 22 years for pine and 14 to 17 years for eucalyptus. We manage both species to a grade (appearance) regime.
We also operate a plywood mill in Uruguay with a production capacity of 250,000 cubic meters. Production volume reached 218,000 cubic meters in 2015.
In Brazil, we were a managing partner in a joint venture that operated a hardwood sawmill. We sold our interest in this joint venture during 2014.

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Canada — Licensed Timberlands
We manage timberlands in Canada under long-term licenses from the provincial governments to secure volume for our manufacturing facilities in various provinces. The provincial governments regulate the volume of timber that may be harvested each year through Annual Allowable Cuts (AAC), which are updated every 10 years. As of December 31, 2015, our AAC by province was: 
Alberta — 3,906 thousand cubic meters,
British Columbia — 804 thousand cubic meters,
Ontario — 146 thousand cubic meters and
Saskatchewan — 788 thousand cubic meters.
When the volume is harvested, we pay the province at stumpage rates set by the government and generally based on prevailing market prices. The harvested logs are transferred to our manufacturing facilities at cost (stumpage plus harvest, haul and overhead costs less any margin on selling logs to third parties). Any profit from harvesting the log through to converting it to a finished product is recognized at the respective mill in either the Cellulose Fibers or Wood Products segment.
GEOGRAPHIC AREA
THOUSANDS OF ACRES AT  
 DECEMBER 31, 2015

  
TOTAL
LICENSE
ARRANGEMENTS

Canada:
 
Alberta
5,306

British Columbia
1,008

Ontario(1)
2,574

Saskatchewan
4,987

Total Canada
13,875

(1) License is managed by partnership.
Five-Year Summary of Timberlands Fee Harvest Volumes
FEE HARVEST VOLUMES IN THOUSANDS
  
2015

2014

2013

2012

2011

Fee harvest volume – cubic meters:
 

 
 
 
 
West
11,130

11,173

8,907

7,170

6,595

South
11,568

11,676

11,596

11,488

9,738

International
889

990

818

763

854

Total
23,587

23,839

21,321

19,421

17,187

Our Timberlands annual fee harvest volumes represents the depletion of the timber assets we own. Depletion is a method of expensing the cost of establishing the fee timber asset base over the harvest or timber sales volume.
Our fee harvest volumes are managed sustainably across all regions to ensure the preservation of long-term economic value of the timber and to capture maximum value from the markets. This is accomplished by ensuring annual harvest schedules target financially mature timber and reforestation activities align with the growing of timber through its life cycle to financial maturity.
Five-Year Summary of Timberlands Fee Harvest Volumes - Percentage of Grade and Fiber
PERCENTAGE OF GRADE AND FIBER
  
 
2015

2014

2013

2012

2011

West
Grade
87
%
89
%
90
%
90
%
90
%
Fiber
13
%
11
%
10
%
10
%
10
%
South
Grade
59
%
59
%
57
%
59
%
58
%
Fiber
41
%
41
%
43
%
41
%
42
%
International
Grade
65
%
63
%
60
%
67
%
55
%
Fiber
35
%
37
%
40
%
33
%
45
%
Total
Grade
73
%
73
%
69
%
71
%
70
%
Fiber
27
%
27
%
31
%
29
%
30
%

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HOW MUCH WE SELL
Our net sales to unaffiliated customers over the last two years were:
$1.4 billion in 2015 — down 10 percent from 2014; and
$1.5 billion in 2014.
Our intersegment sales over the last two years were:
$830 million in 2015 — down 4 percent from 2014; and
$867 million in 2014.
Five-Year Summary of Net Sales for Timberlands
NET SALES IN MILLIONS OF DOLLARS
  
2015

2014

2013

2012

2011

To unaffiliated customers:
 
 
 
 
 
Logs:
 
 
 
 
 
West
$
830

$
972

$
828

$
559

$
545

South
241

257

256

233

196

Canada
24

22

19

19

17

Total
1,095

1,251

1,103

811

758

Chip sales
15

12

9

18

19

Timberlands sales and exchanges(1)
62

52

65

59

77

Higher and better use land sales(1)
14

19

19

22

25

Minerals, oil and gas
26

32

32

31

53

Products from international operations(2)
87

96

90

106

86

Other products
51

35

25

30

26

Subtotal sales to unaffiliated customers
1,350

1,497

1,343

1,077

1,044

Intersegment sales:
 
 
 
 
 
United States
559

576

518

447

424

Other
271

291

281

236

222

Subtotal intersegment sales
830

867

799

683

646

Total
$
2,180

$
2,364

$
2,142

$
1,760

$
1,690

(1)   Significant dispositions of higher and better use timberland and some nonstrategic timberlands are made through subsidiaries.
(2)   Products include logs, plywood and hardwood lumber harvested or produced by our international operations. Includes sales from our operations in Uruguay, Brazil (sold in 2014) and China (sold in 2012).
Five-Year Trend for Total Net Sales in Timberlands

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Percentage of 2015 Sales Dollars to Unaffiliated Customers
Log Sales Volumes
Logs sold to unaffiliated customers in 2015 decreased 0.5 million cubic meters — 3 percent — from 2014.
Sales volumes in the West decreased 0.3 million cubic meters — 3 percent — primarily due to lower export sales to China and Korea.
Sales to unaffiliated customers in the South decreased 378 thousand cubic meters — 7 percent — primarily due to lower fee log harvest production.
Sales volumes from Canada increased 95 thousand cubic meters — 16 percent — in 2015. The increase in volume to unaffiliated customers was primarily due to an increase in delivered log sales versus stumpage sales.
Sales volumes from our international operations increased 44 thousand cubic meters — 7 percent — in 2015. The increase in volume was primarily due to increased fiber log sales in Uruguay.
We sell three grades of logs — domestic grade, domestic fiber and export. Factors that may affect log sales in each of these categories include:
domestic grade log sales — lumber usage, primarily for housing starts and repair and remodel activity, the needs of our own mills and the availability of logs from both outside markets and our own timberlands;
domestic fiber log sales — demand for chips by pulp, containerboard mills, and OSB mills; and
export log sales — the level of housing starts in Japan and construction in China.
Our sales volumes include logs purchased in the open market and all our domestic and export logs that are sold to unaffiliated customers or transferred at market prices to our internal mills.
Five-Year Summary of Log Sales Volumes to Unaffiliated Customers for Timberlands
SALES VOLUMES IN THOUSANDS
  
2015

2014

2013

2012

2011

Logs – cubic
meters:
 
 
 
 
 
West
8,672

8,980

7,708

5,898

5,267

South
5,300

5,678

5,888

5,575

4,879

Canada
687

592

511

531

479

International
648

604

357

343

314

Total
15,307

15,854

14,464

12,347

10,939


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Log Prices
The majority of our log sales to unaffiliated customers involve sales to domestic sawmills and the export market. Log prices in the following tables are on a delivered (mill) basis:
Five-Year Summary of Published Domestic Log Prices (#2 Sawlog Bark On — $/MBF)
Five-Year Summary of Export Log Prices (#2 Sawlog Bark On — $/MBF)
Our log prices are affected by the supply of and demand for grade and fiber logs and are influenced by the same factors that affect log sales. Export log prices are particularly affected by the Japanese housing market and Chinese demand.
Our average 2015 log realizations in the West decreased from 2014 — primarily due to weaker export log markets. Our average 2015 log realizations in the South were flat from 2014.
Minerals and Energy Products
Mineral revenue was down in 2015 as royalty revenue from natural gas declined amid weaker oil and gas prices and construction aggregates declined.
WHERE WE’RE HEADED
Our competitive strategies include:
continuing to capitalize on our scale operations, silviculture expertise and sustainability practices;
maximizing cash flow through operational excellence initiatives such as merchandising for value, harvest and transportation efficiencies, and flexing harvest to seasonal and short term opportunities;
sustaining our export and domestic market access, infrastructure and strong customer relationships; and
increasing non-timber revenue streams.
On November 6, 2015 we entered into a Merger Agreement with Plum Creek. Plum Creek is among the largest and most geographically diverse private landowners in the United States with more than 6 million acres of timberlands in 19 states, including significant holdings in proximity to our Western and Southern timberlands. Pending the completion of the merger, the combined company will own more than 13 million acres of timberlands.

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WOOD PRODUCTS
We are a large manufacturer and distributor of wood products primarily in North America and Asia.
WHAT WE DO
Our wood products segment:
provides a family of high-quality softwood lumber, engineered wood products, structural panels and other specialty products to the residential, multi-family, industrial, light commercial and repair and remodel markets;
distributes our products as well as complementary building products that we purchase from other manufacturers; and
exports our softwood lumber, oriented strand board (OSB) and engineered wood products primarily to Asia.
Wood Products
PRODUCTS
HOW THEY’RE USED
Structural lumber
Structural framing for new residential, repair and remodel, treated applications, industrial and commercial structures
Engineered wood products
• Solid section
• I-joists
Floor and roof joists, and headers and beams for residential, multi-family and commercial structures
Structural panels
• OSB
• Softwood plywood
Structural sheathing, subflooring and stair tread for residential, multi-family and commercial structures
Other products
Wood chips and other byproducts
Complimentary building products
Complementary building products such as cedar, decking, siding, insulation and rebar sold in our distribution facilities
WHERE WE DO IT
We operate manufacturing facilities in the United States and Canada. We distribute through a combination of Weyerhaeuser and third-party locations. Information about the locations, capacities and actual production of our manufacturing facilities is included below.
Principal Manufacturing Locations
Locations of our principal manufacturing facilities as of December 31, 2015, by major product group were:
Structural lumber
– U.S. — Alabama, Arkansas, Louisiana, Mississippi, North Carolina, Oklahoma, Oregon and Washington
– Canada — Alberta and British Columbia
Engineered wood products
– U.S. — Alabama, Louisiana, Oregon and West Virginia
– Canada — British Columbia and Ontario
Oriented strand board
– U.S. — Louisiana, Michigan, North Carolina and West Virginia
– Canada — Alberta and Saskatchewan
Softwood plywood
– U.S. — Arkansas and Louisiana
We also own or lease 17 distribution centers in the U.S. where our major products and complementary building products are sold. During 2015, we decided to close our distribution centers in Baltimore, Pittsburgh, Chicago, and St. Paul.
Summary of Wood Products Capacities as of December 31, 2015
CAPACITIES IN MILLIONS
  
PRODUCTION
CAPACITY

NUMBER OF
FACILITIES

Structural lumber – board feet
4,750

18

Engineered solid section – cubic feet(1)
43

6

Oriented strand board – square feet (3/8”)
3,035

6

Softwood plywood – square feet (3/8”)
460

2

(1) Three engineered wood products facilities also produce engineered I-Joists to meet market demand. 2015 production of I-Joists was 185 million lineal feet.
Production capacities listed represent annual production volume under normal operating conditions and producing a normal product mix for each individual facility. Production capacities do not include any capacity for facilities that were sold or permanently closed as of the end of 2015. We also operate a facility in Foster, Oregon that produces veneer, primarily for use in our engineered wood products facilities.
In 2014, we decided to reopen our Evergreen, Alabama engineered wood products facility. This facility was previously indefinitely closed.

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Five-Year Summary of Wood Products Production
PRODUCTION IN MILLIONS
  
2015

2014

2013

2012

2011

Structural lumber – board feet
4,252

4,152

4,084

3,846

3,528

Engineered solid section – cubic feet(1)
20.9

20.4

18.0

15.4

13.4

Engineered I-joists – lineal feet(1)
185

182

168

147

122

Oriented strand board – square feet (3/8”)
2,847

2,749

2,723

2,511

2,127

Softwood plywood – square feet (3/8”)(2)
248

252

241

214

197

(1)   Weyerhaeuser engineered I-joist facilities also may produce engineered solid section.
(2)   All Weyerhaeuser plywood facilities also produce veneer.
HOW MUCH WE SELL
Revenues of our Wood Products segment come from sales to wood products dealers, do-it-yourself retailers, builders and industrial users. Wood Products net sales were $3.9 billion in 2015 and $4 billion 2014.
Five-Year Summary of Net Sales for Wood Products
NET SALES IN MILLIONS OF DOLLARS
  
2015

2014

2013

2012

2011

Structural lumber
$
1,741

$
1,901

$
1,873

$
1,400

$
1,087

Engineered solid section
428

402

353

279

235

Engineered I-joists
284

277

247

190

161

Oriented strand board
595

610

809

612

354

Softwood plywood
129

143

144

115

66

Other products produced
189

176

171

167

142

Complementary building products
506

461

412

295

231

Total
$
3,872

$
3,970

$
4,009

$
3,058

$
2,276

Five-Year Trend for Total Net Sales in Wood Products
Percentage of 2015 Net Sales Dollars in Wood Products

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Wood Products Volume
The volume of structural lumber, OSB, and engineered wood products sold in 2015 increased from 2014 due to increased demand.
Five-Year Summary of Sales Volume for Wood Products
SALES VOLUMES IN MILLIONS
  
2015

2014

2013

2012

2011

Structural lumber – board feet
4,588

4,463

4,436

4,031

3,586

Engineered solid section – cubic feet
21.3

20.0

18.2

15.4

12.3

Engineered I-joists – lineal feet
188

184

177

152

128

Oriented strand board – square feet (3/8”)
2,972

2,788

2,772

2,508

1,977

Softwood Plywood – square feet (3/8”)
381

395

402

340

249

Sales volumes include sales of internally produced products and complementary building products sold primarily through our distribution centers.
Wood Products Prices
Prices for commodity wood products — Structural lumber, OSB and Plywood — decreased in 2015 from 2014.
In general, the following factors influence prices for wood products:
Demand for wood products used in residential and multi-family construction and the repair and remodel of existing homes affects prices. Residential construction is influenced by factors such as population growth and other demographics, the level of employment, consumer confidence, consumer income, availability of financing and interest rate levels, and the supply and pricing of existing homes on the market. Repair and remodel activity is affected by the size and age of existing housing inventory and access to home equity financing and other credit.
The availability of supply of commodity building products such as structural lumber, OSB and plywood affects prices. A number of factors can influence supply, including changes in production capacity and utilization rates, weather, raw material supply and availability of transportation.
The North American housing market continued to show steady but slow improvement in 2015. Oversupply and weak Canadian currency resulted in generally lower lumber commodity pricing in 2015. The following graphs reflect product price trends for the past five years.
Five-Year Summary of Published Lumber Prices — $/MBF
Five-Year Summary of Published Oriented Strand Board Prices — $/MSF

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WHERE WE’RE HEADED
Our competitive strategies include:
reduce controllable manufacturing costs through operational excellence and capital execution;
maintain a value-added product mix;
leverage our brand and reputation as the preferred provider of quality building products; and
pursue disciplined, profitable sales growth.


CELLULOSE FIBERS
Our cellulose fibers segment is one of the world’s largest producers of absorbent fluff pulp used in products such as diapers. We also manufacture liquid packaging board and other pulp products. We have a 50 percent interest in North Pacific Paper Corporation (NORPAC) — a joint venture with Nippon Paper Industries that produces primarily high-brightness publication papers and newsprint.
WHAT WE DO
Our cellulose fibers segment:
provides cellulose fibers for absorbent products in markets around the world;
works closely with our customers to develop unique or specialized applications;
manufactures liquid packaging board used primarily for the production of containers for liquid products; and
is largely energy self sufficient, with over 80 percent of its energy derived from black liquor produced at the mills and biomass.
Cellulose Fibers Products
PRODUCTS
HOW THEY’RE USED
Pulp
• Fluff pulp (Southern softwood kraft fiber)
• Softwood papergrade pulp
• Specialty chemical cellulose pulp
• Used in sanitary disposable products that require bulk, softness and absorbency
• Used in products that include printing and writing papers and tissue
• Used in textiles, absorbent products, specialty packaging, specialty applications and proprietary high-bulking fibers
Liquid packaging board
Converted into containers to hold liquids such as milk, juice and tea
Other products
• Slush pulp
• Wet lap pulp
Used in the manufacture of paper products
WHERE WE DO IT
Our cellulose fibers products are distributed globally through a direct sales network. Locations of our principal manufacturing facilities by major product group are:
Pulp Manufacturing
– U.S. — Georgia (2), Mississippi and North Carolina
– Canada — Alberta
Pulp Converting
– U.S. — Mississippi
– Poland
Liquid packaging board
– U.S. — Washington
Summary of Cellulose Fibers Capacities as of December 31, 2015
CAPACITIES IN THOUSANDS
  
PRODUCTION
CAPACITY

NUMBER OF
FACILITIES

Pulp – air-dry metric tons
1,870

5

Liquid packaging board – metric tons
315

1

Production capacities listed represent annual production volume under normal operating conditions and producing a normal product mix for each individual facility.
Five-Year Summary of Cellulose Fibers Production
PRODUCTION IN THOUSANDS
  
2015

2014

2013

2012

2011

Pulp – air-dry metric tons
1,822

1,859

1,815

1,773

1,769

Liquid packaging board – metric tons
255

265

279

265

279


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HOW MUCH WE SELL
Revenues of our Cellulose Fibers segment come from sales to customers who use the products for further manufacturing or distribution and for direct use. Our net sales were $1.9 billion in 2015 and 2014.
Five-Year Summary of Net Sales for Cellulose Fibers
NET SALES IN MILLIONS OF DOLLARS
  
2015

2014

2013

2012

2011

Pulp
$
1,499

$
1,559

$
1,501

$
1,433

$
1,617

Liquid packaging board
305

310

326

332

346

Other products
56

67

75

89

95

Total
$
1,860

$
1,936

$
1,902

$
1,854

$
2,058

Five-Year Trend for Total Net Sales in Cellulose Fibers
Percentage of 2015 Net Sales Dollars in Cellulose Fibers
Pulp Volumes
Our sales volumes of cellulose fiber products were 1.8 million tons in 2015 and 2014.
Factors that affect sales volumes for cellulose fiber products include:
growth of the world gross domestic product,
demand for absorbent hygiene products and paper and
relative strength of the U.S. dollar.
Five-Year Summary of Sales Volume for Cellulose Fibers
SALES VOLUMES IN THOUSANDS
  
2015

2014

2013

2012

2011

Pulp – air-dry metric tons
1,821

1,826

1,866

1,762

1,756

Liquid packaging board – metric tons
255

249

277

262

269


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Pulp Prices
Our average pulp prices in 2015 decreased compared with 2014 due to a stronger US dollar and available supply.
Five-Year Summary of Published NBSK Pulp Prices — $/ADMT
WHERE WE’RE HEADED
Our competitive strategies include:
profitably growing with long-term strategic customers;
developing enhanced products for existing and new markets;
continued execution of operational excellence initiatives such as manufacturing reliability and quality management systems; and
focusing capital investments on cost reduction, green energy opportunities and product quality.
On November 8, 2015 Weyerhaeuser announced that the board authorized the exploration of strategic alternatives for its Cellulose Fibers business. At this time there can be no assurance that the board's evaluation process will result in any transaction or that any transaction, if pursued, will be consummated.


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EXECUTIVE OFFICERS OF THE REGISTRANT
Patricia M. Bedient, 62, has been executive vice president and chief financial officer since 2007. She was senior vice president, Finance and Strategic Planning from February 2006 to 2007. She served as vice president, Strategic Planning from 2003, when she joined the company, to 2006. Prior to joining the company, she was a partner with Arthur Andersen LLP (Independent Accountant) from 1987 to 2002 and served as the managing partner for the Seattle office and as the partner in charge of the firms forest products practice from 1999 to 2002. She is on the board of directors for Alaska Air Group and Oregon State University and also serves as Treasurer and a board member of Overlake Hospital Medical Center. She is a CPA and member of the American Institute of CPAs.
Adrian M. Blocker, 59, has been senior vice president, Wood Products since January 2015. Previously, he served as senior vice president, Lumber from August 2013 to December 2014. He joined the company in May 2013 as vice president, Lumber. Prior to joining the company, he served as CEO of the Wood Products Council. He has held numerous leadership positions in the industry focused on forest management, fiber procurement, consumer packaging, strategic planning, business development and manufacturing, including at West Fraser, International Paper and Champion International.
Rhonda D. Hunter, 53, has been senior vice president, Timberlands, since January 2014. Previously, she was vice president, Southern Timberlands from 2010 to 2014. She held a number of leadership positions in the Southern Timberlands organization and has experience in inventory and planning, regional timberlands management, environmental and work systems, finance and land acquisition. She joined Weyerhaeuser in 1987 as an accountant.
Denise M. Merle, 52, has been senior vice president, Human Resources and Investor Relations since August 2014. She served as senior vice president, Human Resources beginning February 2014. Prior to that, she was director, Finance and Human Resources for the Lumber business from 2013, director, Compliance & Enterprise Planning from 2009 to 2013, and director of Internal Audit from 2004 to 2009. She has held various roles in the company’s paper and packaging businesses, including finance, capital planning and analysis, and business development. She joined the company in 1981. She is a licensed CPA in the state of Washington.
Doyle R. Simons, 52, has been president and chief executive officer since August 2013 and a director of the company since June 2012. He was appointed chief executive officer-elect and an executive officer of the company in June 2013. Prior to joining the company, he served as chairman and chief executive officer of Temple-Inland, Inc. from 2008 until February 2012 when it was acquired by International Paper Company. He held various management positions with Temple-Inland, including executive vice president from 2005 through 2007 and chief administrative officer from 2003 to 2005. Prior to joining Temple-Inland in 1992, he practiced real estate and banking law with Hutcheson and Grundy, L.L.P. He also serves on the Board of Fiserv, Inc.
Catherine I. Slater, 52, has been senior vice president, Cellulose Fibers effective January 2015. She has served as senior vice president, Engineered Products and Distribution since August 2013 and vice president, OSB from 2011 to 2013. Prior to that role, she held a number of other leadership positions in the company’s Wood Products business, including vice president for both engineered wood products manufacturing and veneer technologies. Before joining the Wood Products team, she held positions in Cellulose Fibers business, including leadership roles at Flint River and Port Wentworth pulp mills, and leadership oversight for the company’s operations in Alberta, Canada, which included pulp, timberlands, OSB, lumber, and engineered wood products. Prior to joining the company in 1992, she held several leadership roles at Procter and Gamble.
Devin W. Stockfish, 42, has been senior vice president, general counsel and corporate secretary since July 2014. He leads the company's Law & Corporate Affairs department, with responsibility for global Legal, Compliance, Government Affairs, Real Estate Services, Land Title, and Environmental, Health and Safety functions. He joined the company in March 2013 as corporate secretary and assistant general counsel. Before joining the company, he was vice president & associate general counsel at Univar Inc. where he focused on mergers and acquisitions, corporate governance and securities law. Previously, he was an attorney in the law department at Starbucks Corporation and practiced corporate law at K&L Gates LLP. Before he began practicing law, Mr. Stockfish was an engineer with the Boeing Company.


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NATURAL RESOURCE AND ENVIRONMENTAL MATTERS
We are subject to a multitude of laws and regulations in the operation of our businesses. We also participate in voluntary certification of our timberlands to assure that we sustain their values including the protection of wildlife and water quality. Changes in law and regulation, or certification standards, can significantly affect our business.

REGULATIONS AFFECTING FORESTRY PRACTICES
In the United States, regulations established by federal, state and local government agencies to protect water quality and wetlands could affect future harvests and forest management practices on some of our timberlands. Forest practice laws and regulations that affect present or future harvest and forest management activities in certain states include:
limits on the size of clearcuts,
requirements that some timber be left unharvested to protect water quality and fish and wildlife habitat,
regulations regarding construction and maintenance of forest roads,
rules requiring reforestation following timber harvest, and
various related permit programs.
Each state in which we own timberlands has developed best management practices to reduce the effects of forest practices on water quality and aquatic habitats. Additional and more stringent regulations may be adopted by various state and local governments to achieve water-quality standards under the federal Clean Water Act, protect fish and wildlife habitats, or achieve other public policy objectives.
In Canada, our forest operations are carried out on public timberlands under forest licenses with the provinces. All forest operations are subject to:
forest practices and environmental regulations, and
license requirements established by contract between us and the relevant province designed to:
- protect environmental values, and
- encourage other stewardship values.
In Canada, 21 member companies of the Forest Products Association of Canada (FPAC), including Weyerhaeusers Canadian subsidiary, announced in May 2010 the signing of a Canadian Boreal Forest Agreement (CBFA) with nine environmental organizations. The CBFA applies to approximately 72 million hectares of public forests licensed to FPAC members and, when fully implemented, is expected to lead to the conservation of significant areas of Canadas boreal forest and protection of boreal species at risk, in particular woodland caribou. CBFA signatories continue to work on management plans with provincial governments, and seek the participation of aboriginal and local communities in advancing the goals of the CBFA. Progress under the CBFA is measured and reported on by an independent auditor.

ENDANGERED SPECIES PROTECTIONS
In the United States, a number of fish and wildlife species that inhabit geographic areas near or within our timberlands have been listed as threatened or endangered under the federal Endangered Species Act (ESA) or similar state laws, such as:
the northern spotted owl, the marbled murrelet, a number of salmon species, bull trout and steelhead trout in the Pacific Northwest,
several freshwater mussel and sturgeon species, and
the red-cockaded woodpecker, gopher tortoise, gopher frog, American burying beetle and Northern long-eared bat in the South or Southeast.
Additional species or populations may be listed as threatened or endangered as a result of pending or future citizen petitions or petitions initiated by federal or state agencies. In addition, significant citizen litigation seeks to compel the federal agencies to designate "critical habitat" for ESA-listed species, and many cases have resulted in settlements under which designations will be implemented over time. Such designations may adversely affect some management activities and options. Restrictions on timber harvests can result from:
federal and state requirements to protect habitat for threatened and endangered species,
regulatory actions by federal or state agencies to protect these species and their habitat, and
citizen suits under the ESA.

Such actions could increase our operating costs and affect timber supply and prices in general. To date, we do not believe that these measures have had, and we do not believe that in 2016 they will have, a significant effect on our harvesting operations. We anticipate that likely future actions will not disproportionately affect Weyerhaeuser as compared with comparable operations of U.S. competitors.
In Canada:
The federal Species at Risk Act (SARA) requires protective measures for species identified as being at risk and for critical habitat, pursuant to SARA, Environment Canada continues to identify and assess species deemed to be at risk and their critical habitat, and
in October 2012, the Canadian Minister of the Environment released a strategy for the recovery of the boreal population of woodland caribou under the SARA. The population and distribution objectives for boreal caribou across Canada are to (1) maintain the current status of existing, self-sustaining local caribou populations and (2) stabilize and achieve self-sustaining status for non-self-sustaining local caribou populations. Critical habitat for boreal caribou is identified for all boreal caribou ranges, except for northern Saskatchewan’s Boreal Shield range (SK1) where additional information is required for that population. Species assessment and recovery plans are developed in consultation with aboriginal communities and stakeholders.

The identification and protection of habitat and the implementation of range plans and land use action plans may, over time, result in additional restrictions on timber harvests and other forest management practices that could increase operating costs for operators of timberlands in Canada. To date, we do not believe that these Canadian measures have had, and we do not believe that in 2016 they will have, a significant effect on our harvesting operations. We anticipate that likely future measures will not disproportionately affect Weyerhaeuser as compared with similar operations of Canadian competitors.


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FOREST CERTIFICATION STANDARDS
We operate in North America under the Sustainable Forestry Initiative (SFI®). This is a certification standard designed to supplement government regulatory programs with voluntary landowner initiatives to further protect certain public resources and values. SFI® is an independent standard, overseen by a governing board consisting of:
conservation organizations,
academia,
the forest industry, and
large and small forest landowners.
Ongoing compliance with SFI® may result in some increases in our operating costs and curtailment of our timber harvests in some areas. There also is competition from other private certification systems, primarily the Forest Stewardship Council (FSC), coupled with efforts by supporters to further those systems by persuading customers of forest products to require products certified to their preferred system. Certain features of the FSC system could impose additional operating costs on timberland management. Because of the considerable variation in FSC standards, and variability in how those standards are interpreted and applied, if sufficient marketplace demand develops for products made from raw materials sourced from other than SFI-certified forests, we could incur substantial additional costs for operations and be required to reduce harvest levels.

WHAT THESE REGULATIONS AND CERTIFICATION PROGRAMS MEAN TO US
The regulatory and nonregulatory forest management programs described above have:
increased our operating costs,
resulted in changes in the value of timber and logs from our timberlands,
contributed to increases in the prices paid for wood products and wood chips during periods of high demand,
sometimes made it more difficult for us to respond to rapid changes in markets, extreme weather or other unexpected circumstances, and
potentially encouraged further reductions in the use of, or substitution of other products for, lumber, oriented strand board, and plywood.
We believe that these kinds of programs have not had, and in 2016 will not have, a significant effect on our total harvest of timber in the United States or Canada. However, these kinds of programs may have such an effect in the future. We expect we will not be disproportionately affected by these programs as compared with typical owners of comparable timberlands. We also expect that these programs will not significantly disrupt our planned operations over large areas or for extended periods.

CANADIAN ABORIGINAL RIGHTS
Many of the Canadian timberlands are subject to the constitutionally protected treaty or common-law rights of aboriginal peoples of Canada. Most of British Columbia (B.C.) is not covered by treaties, and as a result the claims of B.C.’s aboriginal peoples relating to forest resources have been largely unresolved. On June 26, 2014 the Supreme Court of Canada ruled that the Tsilhqot’in Nation holds aboriginal title to approximately 1,900 square kilometers in B.C. This was the first time that the court has declared title to exist based on historical occupation by aboriginal peoples. Many aboriginal groups continue to be engaged in treaty discussions with the governments of B.C., other provinces and Canada.
Final or interim resolution of claims brought by aboriginal groups can be expected to result in:
additional restrictions on the sale or harvest of timber,
potential increase in operating costs, and
impact to timber supply and prices in Canada.
We believe that such claims will not have a significant effect on our total harvest of timber or production of forest products in 2016, although they may have such an effect in the future. In 2008, FPAC, of which we are a member, signed a Memorandum of Understanding with the Assembly of First Nations, under which the parties agree to work together to strengthen Canadas forest sector through economic-development initiatives and business investments, strong environmental stewardship and the creation of skill-development opportunities particularly targeted to aboriginal youth.

POLLUTION-CONTROL REGULATIONS
Our operations are subject to various laws and regulations, including:
federal,
state,
provincial, and
local pollution controls.
These laws and regulations, as well as market demands, impose controls with regard to:
air, water and land,
solid and hazardous waste management,
waste disposal,
remediation of contaminated sites, and
the chemical content of some of our products.
Compliance with these laws, regulations and demands usually involves capital expenditures as well as additional operating costs. We cannot easily quantify the future amounts of capital expenditures we might have to make to comply with these laws, regulations and demands or the effects on our operating costs because in some instances compliance standards have not been developed or have not become final or definitive. In addition, it is difficult to isolate the environmental component of most manufacturing capital projects.

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Our capital projects typically are designed to:
enhance safety,
extend the life of a facility,
increase capacity,
increase efficiency,
facilitate raw material changes and handling requirements,
increase the economic value of assets or products, and
comply with regulatory standards.
We had capital expenditures of $23 million relating primarily to environmental compliance in 2015. Based on our understanding of current regulatory requirements in the U.S. and Canada, we expect no material capital expenditures relating primarily to environmental compliance in 2016.

ENVIRONMENTAL CLEANUP
We are involved in the environmental investigation or remediation of numerous sites. Of these sites:
we may have the sole obligation to remediate,
we may share that obligation with one or more parties,
several parties may have joint and several obligations to remediate, or
we may have been named as a potentially responsible party for sites designated as U.S. Superfund sites.
Our liability with respect to these various sites ranges from insignificant to substantial. The amount of liability depends on:
the quantity, toxicity and nature of materials at the site, and
the number and economic viability of the other responsible parties.
We spent approximately $7 million in 2015 and expect to spend approximately $7 million in 2016 on environmental remediation of these sites.
It is our policy to accrue for environmental-remediation costs when we:
determine it is probable that such an obligation exists, and
can reasonably estimate the amount of the obligation.
We currently believe it is reasonably possible that our costs to remediate all the identified sites may exceed our current accruals of $37 million. The excess amounts required may be insignificant or could range, in the aggregate, up to $116 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 we currently are using to determine how much to accrue. The estimate of the upper range also uses assumptions less favorable to us among the range of reasonably possible outcomes.

REGULATION OF AIR EMISSIONS IN THE U.S.
The United States Environmental Protection Agency (EPA) has promulgated regulations for air emissions from:
pulp and paper manufacturing facilities,
wood products facilities, and
industrial boilers.
These regulations cover:
hazardous air pollutants that require use of maximum achievable control technology (MACT); and
controls for pollutants that contribute to smog, haze and more recently, greenhouse gases.
Between 2011 and 2015 EPA issued three related portions of new MACT standards for industrial boilers and process heaters. EPA had completed a technology and residual risk review for MACT standards applicable to pulping and bleaching operations at pulp and paper manufacturing facilities in 2012 and in 2014 had issued a revised New Source Performance Standard for kraft pulp mills. These latter two rules apply on a project specific basis when certain thresholds are exceeded; as a result, we cannot predict whether or when those rules may have a material impact on future projects. Regarding other recent final actions by the EPA, we do not expect any material expenditures in 2016 to comply with MACT standards.
The EPA must still promulgate:
technology and residual risk review standards for additional operations at pulp and paper manufacturing facilities and
supplemental MACT standards for plywood, lumber and composite wood products facilities.
We cannot currently quantify the amount of capital we will need in the future to comply with new regulations being developed by the EPA because final rules have not been promulgated.
In 2010 EPA issued a final greenhouse gas rule limiting the growth of emissions from new projects meeting certain thresholds. On June 23, 2014, the US Supreme Court issued a decision that removed potential applicability of the underlying 2010 regulations based solely on greenhouse gas emissions and limited application of the rule’s technology requirements to larger emission sources as a result of new emissions from non-greenhouse gas pollutants. As a result of this Supreme Court ruling, EPA is expected to issue new regulations to set thresholds for when the greenhouse gas technology requirements apply if the non-greenhouse gas emissions trigger the rule in the first instance. The impact of the Supreme Court ruling is to end the potential applicability of the technology requirements for our smaller manufacturing operations and limit the applicability for our other operations.
In 2015 EPA issued an extensive regulatory program for new and existing electric utility generating units to scale back emissions of greenhouse gas carbon dioxide (CO2) arising from fossil fuel use to generate electricity. EPA also proposed additional regulations related to how states and federal agencies may implement the requirements finalized in 2015. This regulatory program potentially will have indirect impacts on our operations, such as from rising purchased electricity prices or from mandated energy demand reductions that could apply to our mills and other facilities that we operate. We are evaluating the regulations and additional proposals but are not able to predict whether the regulations, when complete and implemented, will have a material impact on our operations.

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We use significant biomass for energy production at our mills. EPA is currently working on rules regarding regulation of biomass emissions.
The impact of these greenhouse gas and biomass rules, as well as recent court decisions, on our operations remains uncertain.
To address concerns about greenhouse gases as a pollutant, we:
closely monitor legislative, regulatory and scientific developments pertaining to climate change;
adopted in 2006, as part of the Company's sustainability program, a goal of reducing greenhouse gas emissions by 40 percent by 2020 compared with our emissions in 2000, assuming a comparable portfolio and regulations;
determined to achieve this goal by increasing energy efficiency and using more greenhouse gas-neutral, biomass fuels instead of fossil fuels; and
reduced greenhouse gas emissions by approximately 25 percent considering changes in the asset portfolio according to 2014 data, compared to our 2000 baseline.
Additional factors that could affect greenhouse gas emissions in the future include:
policy proposals by federal or state governments regarding regulation of greenhouse gas emissions,
Congressional legislation regulating greenhouse gas emissions within the next several years and
establishment of a multistate or federal greenhouse gas emissions reduction trading systems with potentially significant implications for all U.S. businesses.
We believe these developments have not had, and in 2016 will not have, a significant effect on our operations. Although these measures could have a material adverse effect on our operations in the future, we expect that we will not be disproportionately affected by these measures as compared with owners of comparable operations. We maintain an active forestry research program to track and understand any potential effect from actual climate change related parameters that could affect the forests we own and manage and do not anticipate any disruptions to our planned operations.

REGULATION OF AIR EMISSIONS IN CANADA
In addition to existing provincial air quality regulations, the Canadian federal government has proposed an air quality management system (AQMS) as a comprehensive national approach for improving air quality in Canada. The federal proposed AQMS includes:
ambient air quality standards for outdoor air quality management across the country,
a framework for air zone air management within provinces and territories that targets specific sources of air emissions,
regional airsheds that facilitate coordinated action across borders,
industrial sector based emission requirements that set a national base level of performance for major industries in Canada, and
improved intergovernmental collaboration to reduce emissions from the transportation sector.
Environment Canada is developing a Greenhouse Gas Emission Framework that is expected to be proposed in 2016 with implementation in 2020. The framework will put in place a national, sector-based greenhouse gas reduction program applicable to a number of industries, including pulp and paper manufacturing.
All Canadian provincial governments:
have greenhouse gas reporting requirements,
are working on reduction strategies, and
together with the Canadian federal government, are considering new or revised emission standards.
In addition, British Columbia has adopted a carbon tax and Alberta has a mandatory GHG emission reduction regulation. Our Grande Prairie, Alberta cellulose fiber mill generates and sells carbon credits.
We believe these measures have not had, and in 2016 will not have, a significant effect on our operations. Although these measures could have a material adverse effect on our operations in the future, we expect that we will not be disproportionately affected by these measures as compared with owners of comparable operations. We also expect that these measures will not significantly disrupt our planned operations.

REGULATION OF AIR EMISSIONS IN POLAND AND URUGUAY
The European Unions Clean Air Programme includes new air quality objectives that Poland and other European Union countries will implement through 2030. Some provinces in Uruguay have established air quality monitoring networks and ambient air objectives have been proposed for the region where our Los Piques mill is located.
We believe these measures have not had, and in 2016 will not have, a significant effect on our operations. Although these measures could have a material adverse effect on our operations in the future, we expect that we will not be disproportionately affected by these measures as compared with owners of comparable operations. We also expect that these measures will not significantly disrupt our planned operations.

REGULATION OF WATER
In the U.S., as a result of litigation under the federal Clean Water Act, additional federal or state permits are now required in some states for the application of pesticides, including herbicides, on timberlands. Those permits have entailed additional costs. In addition, there are continuing regulatory developments and continuing litigation in the federal courts that may result in permit requirements for pollution discharges from forest roads and other drainage features on timberland, which would entail additional costs for forest landowners including Weyerhaeuser. Finally, federal regulatory agencies adopted rules in 2015 that potentially expand the definition of waters subject to federal Clean Water Act jurisdiction, which could increase the scope and number of permits required for forestry-related activities and entail additional costs for Weyerhaeuser and other forest landowners in the U.S. Those rules have been challenged in federal court by multiple parties and states and an injunction has been entered that prevents them from going into effect. We are not able to predict the ultimate resolution of these pending legal actions.
In August 2014 EPA issued a final regulation on thermal cooling water intakes for the protection of aquatic resources. The final rule is not expected to have a material impact although the technology requirements to protect aquatic resources outlined in the rule may be applied on a case-by-case basis when water permits are renewed.

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In 2015, Washington State Department of Ecology (WA DOE) and the regional federal EPA proposed rules to update the Human Health Water Quality Criteria for the protection of human health. It is unclear what effect, if any, the proposed rules will have on our manufacturing operations in Washington State.
In addition:
In 2013, amendments to the Canadian Federal Fisheries Act came into force. These amendments change the focus from habitat protection to fisheries protection and increase penalties. We expect further changes to these regulations in 2016, but we cannot predict the scope or potential impact, if any, on our operations.
Uruguay's national policy for water includes regulation of river basin planning, management and water use permits. Wastewater discharge authorization is required for industry, including our Los Piques mill.
In response to an European Union Water Framework Directive, in 2015 Polish authorities announced their intention to develop a water management plan to reduce total nitrogen and phosphorous loads in municipal waste water by 75 percent. The plan could impact our Poland facility, although it is unclear what effect, if any, the water management plan may have on our operation in Poland until the plan is complete.
We believe the above developments have not had, and in 2016 will not have, a significant effect on our operations. Although these measures could have a material adverse effect on our operations in the future, we expect that we will not be disproportionately affected by these measures as compared with owners of comparable operations. We also expect that these measures will not significantly disrupt our planned operations.

POTENTIAL CHANGES IN POLLUTION REGULATION
State governments continue to promulgate total maximum daily load (TMDL) requirements for pollutants in water bodies that do not meet state or EPA water quality standards. State TMDL requirements may:
set limits on pollutants that may be discharged to a body of water; or
set additional requirements, such as best management practices for nonpoint sources, including timberland operations, to reduce the amounts of pollutants.
It is not possible to estimate the capital expenditures that may be required for us to meet pollution allocations across the various proposed state TMDL programs until a specific TMDL is promulgated.
In Canada, various levels of government have been working to address water issues including use, quality and management. Recent areas of focus include water allocation, regional watershed protection, protection of drinking water, water pricing and a national water quality index.


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FORWARD-LOOKING STATEMENTS
This report contains statements concerning our future results and performance that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements:
are based on various assumptions we make, and
may not be accurate because of risks and uncertainties surrounding the assumptions we make.
These statements reflect our current views with respect to future events. Factors listed in this section, factors discussed under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this report, and other factors not included, may cause our actual results to differ significantly from our forward-looking statements. There is no guarantee that any of the events anticipated by our forward-looking statements will occur. Or if any of the events occur, there is no guarantee what effect it will have on our operations, cash flows, or financial condition.
We undertake no obligation to update our forward-looking statements after the date of this report.
FORWARD-LOOKING TERMINOLOGY
Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often use words such as expects, may, should, will, believes, anticipates, estimates, projects, intends, plans, targets or approximately. They may use the positive or negative or a variation of those and similar words.
STATEMENTS
In this report we make forward-looking statements concerning our plans, strategies, intentions and expectations, including with respect to our strategic corporate initiatives; operational excellence initiatives, including costs and product development and production; estimated taxes and tax rates; future dividends; future restructuring charges; expected results of litigation and the sufficiency of litigation reserves; expected uses of cash, including share repurchases; expected capital expenditures; expected economic conditions, including markets, pricing and demand for our products; laws and regulations relevant to our businesses; and our expectations relating to pension contributions and benefit payments.
RISKS, UNCERTAINTIES AND ASSUMPTIONS
Major risks and uncertainties, and assumptions that we make, that affect our business and may cause actual results to differ from these forward-looking statements include, but are not limited to:
the effect of general economic conditions, including employment rates, interest rate levels, housing starts, availability of financing for home mortgages and strength of the U.S. dollar;
market demand for our products, which is related to the strength of the various U.S. business segments and U.S. and international economic conditions;
performance of our manufacturing operations, including maintenance requirements;
potential disruptions in our manufacturing operations;
level of competition from domestic and foreign producers;
our ability to successfully realize the expected benefits from the merger with Plum Creek;
the results of our strategic alternatives review of the Cellulose Fibers business;
the successful execution of our internal plans and strategic initiatives, including restructurings and cost reduction initiatives;
raw material availability and prices;
the effect of weather;
the risk of loss from fires, floods, windstorms, hurricanes, pest infestations and other natural disasters;
energy prices;
transportation and labor availability and costs;
federal tax policies;
the effect of forestry, land use, environmental and other governmental regulations;
legal proceedings;
performance of pension fund investments and related derivatives;
the effect of timing of retirements and changes in the market price of our common stock on charges for share-based compensation;
changes in accounting principles; and
other factors described under Risk Factors.
EXPORTING ISSUES
We are a large exporter. Our business is affected by:
economic activity in Europe and Asia, especially Japan and China;
currency exchange rates, particularly the relative value of the U.S. dollar to the euro and the Canadian dollar, and the relative value of the euro to the yen; and
restrictions on international trade, tariffs imposed on imports and the availability and cost of shipping and transportation.

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RISK FACTORS
We are subject to various risks and events that could adversely affect our business, our financial condition, our results of operations, our cash flows and the price of our common stock.
You should consider the following risk factors, in addition to the information presented elsewhere in this report, particularly in “Forward-Looking Statements” and "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as in the filings we make from time to time with the SEC, in evaluating us, our business and an investment in our securities.
The risks discussed below are not the only risks we face. Additional risks not currently known to us or that we currently deem immaterial also may adversely affect our business.

RISKS RELATED TO OUR INDUSTRIES AND BUSINESS

MACROECONOMIC CONDITIONS
The industries in which we operate are sensitive to macroeconomic conditions and consequently are highly cyclical.
The overall levels of demand for the products we manufacture and distribute reflect fluctuations in levels of end-user demand, which consequently impact our sales and profitability. End-user demand depends in part on general macroeconomic conditions, both in the U.S. and globally, as well as on local economic conditions. Current economic conditions in the United States reflect growth at or below historical trends and general business uncertainty. Global economic conditions reflect issues such as inflation and slowing growth in emerging countries. The construction and homebuilding industries continue to slowly recover from the severe downturn caused by the overall collapse of credit markets and recession of 2009. However, construction activity remains below pre-recession and trend levels. Our Wood Products segment is highly dependent on the strength of the homebuilding industry. The decline in home construction activity due to the recession resulted in depressed prices of and reduced demand for wood products and building materials. This resulted in lower prices and demand for logs and reduced harvests in our Timberlands segment. The length and magnitude of industry cycles vary over time and by product, but generally reflect changes in macroeconomic conditions and levels of industry capacity. Those conditions have improved since the recession, but if macroeconomic conditions do not continue to improve we could experience lower sales volumes and smaller margins.

COMMODITY PRODUCTS
Many of our products are commodities that are widely available from other producers.
Because commodity products have few distinguishing properties from producer to producer, competition for these products is based primarily on price, which is determined by supply relative to demand and competition from substitute products. In addition, prices for our products are affected by many other factors outside of our control. As a result, we have little influence over the timing and extent of price changes, which often are volatile. Our profitability with respect to these products depends, in part, on managing our costs, particularly raw material and energy costs, which represent significant components of our operating costs and can fluctuate based upon factors beyond our control. Both sales and profitability of our products are subject to volatility due to market forces beyond our control.

INDUSTRY SUPPLY OF LOGS, WOOD PRODUCTS AND PULP
Excess supply of products may adversely affect prices and margins.
Oversupply of products may result from producers introducing new capacity for manufactured products or increasing harvest levels in response to favorable short-term pricing trends. Industry supplies of pulp are also influenced by global production capacity, which has grown in recent years and is expected to continue to grow. Continuation of these factors could adversely affect our sales volumes and margins.

HOMEBUILDING MARKET AND ECONOMIC RISKS
High unemployment, low demand and low levels of consumer confidence can adversely affect our business and results of operations.
Our business is dependent upon the health of the U.S. housing market. Demand for homes is sensitive to changes in economic conditions such as the level of employment, consumer confidence, consumer income, the availability of financing and interest rate levels. The legacy of the housing bubble, its collapse and ensuing credit crisis was tightened credit requirements and a reduced number of mortgage loans available for financing home purchases. Although credit conditions have eased, they remain more restrictive than prior to the housing bubble. Demand for new homes also has been adversely affected by factors such as unemployment and lower job participation, limited wage growth and weak consumer confidence. Additionally, rising student loan debt among younger adults is limiting access to mortgage financing and home ownership. Foreclosure rates and distress sales of houses, have fallen significantly and are less of an impact compared to the years immediately following the housing collapse.
Homebuyers’ ability to qualify for and obtain affordable mortgages could be affected by changes in government sponsored entities and private mortgage insurance companies supporting the mortgage market.
The federal government has historically had a significant role in supporting mortgage lending through its sponsorship of Fannie Mae and Freddie Mac. As a result of turbulence in credit markets and the mortgage finance industry in the last few years, the effect of the federal governments conservatorship of these government sponsored entities on the short-term and long-term demand for new housing remains unclear. The liquidity provided to the mortgage industry by Fannie Mae and Freddie Mac, both of which purchase home mortgages and mortgage-backed securities originated by mortgage lenders, is critical to the housing market. There have been significant concerns about the future purpose of Fannie Mae and Freddie Mac and a number of proposals to curtail their activities over time are under review. Limitations or restrictions on the availability of financing by these entities could adversely affect interest rates and the availability of mortgage financing, which could reduce demand for housing and adversely affect demand for our products.

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Changes in mortgage interest expense and real estate tax regulations could harm our future sales and earnings.
Significant costs of homeownership include mortgage interest expense and real estate taxes, both of which are generally deductible for an individuals federal and, in some cases, state income taxes. Any changes to income tax laws by the federal government or a state government to eliminate or substantially reduce these income tax deductions, as has been considered from time to time, would increase the after-tax cost of owning a home. Increases in real estate taxes by local governmental authorities would also increase the cost of homeownership. Any such increases to the cost of homeownership could adversely affect the demand for our products.

CAPITAL MARKETS
Deterioration in economic conditions and the credit markets could adversely affect our access to capital.
Upset financial or credit market conditions can impair the companys ability to borrow money or otherwise access credit markets on terms acceptable to us, which may, among other impacts, reduce our ability to take advantage of growth and expansion opportunities. Similarly, our customers may be unable to borrow money to fund their operations. Similarly, deteriorating or volatile market conditions could have an adverse effect on our customers and suppliers and their ability to purchase our products or sell products to us.

CHANGES IN CREDIT RATINGS
Changes in credit ratings issued by nationally recognized rating organizations could adversely affect our cost of financing and have an adverse effect on the market price of our securities.
Credit rating agencies rate our debt securities on factors that include our operating results, actions that we take, their view of the general outlook for our industry and their view of the general outlook for the economy. Actions taken by the rating agencies can include maintaining, upgrading or downgrading the current rating or placing the company on a watch list for possible future downgrading. Downgrading the credit rating of our debt securities or placing us on a watch list for possible future downgrading could limit our access to the credit markets, increase our cost of financing, and have an adverse effect on the market price of our securities.

SUBSTITUTION
Some of our products are vulnerable to declines in demand due to competing technologies or materials.
Our products may compete with nonfiber-based alternatives or with alternative products in certain market segments. For example, plastic, wood/plastic or composite materials may be used by builders as alternatives to the products produced by our Wood Products businesses such as lumber, veneer, plywood and oriented strand board. Changes in prices for oil, chemicals and wood-based fiber can change the competitive position of our products relative to available alternatives and could increase substitution of those products for our products. If use of these alternative products grows, demand for and pricing of our products could be adversely affected.

CHANGES IN PRODUCT MIX OR PRICING
Our results of operations and financial condition could be materially adversely affected by changes in product mix or pricing.
Our results may be adversely affected by a change in our product mix or pricing. If we are not successful in implementing previously announced or future price increases, or in our plans to increase sales of higher-priced, higher-value products, or if there are delays in acceptance of price increases or failure of customers to accept higher-priced products our results of operations and financial condition could be materially and adversely affected. Price discounting, if required to maintain our competitive position, could result in lower than anticipated price realizations.

INTENSE COMPETITION
We face intense competition in our markets, and the failure to compete effectively could have a material adverse effect on our business, financial condition and results of operations.
We compete with North American and, for many of our product lines, global producers, some of which may have greater financial resources and lower production costs than we do. The principal basis for competition for many of our products is selling price. Our ability to maintain satisfactory margins depends in large part on our ability to control our costs. Our industries also are particularly sensitive to other factors including innovation, design, quality and service, with varying emphasis on these factors depending on the product line. To the extent that one or more of our competitors become more successful with respect to any key competitive factor, our ability to attract and retain customers could be materially adversely affected. If we are unable to compete effectively, such failure could have a material adverse effect on our business, financial condition and results of operations.
Expiration of the Softwood Lumber Agreement creates uncertainty about competition from Canadian imports.
Historically, Canada has been a significant source of lumber for the U.S. market, particularly in the new home construction market. We produce lumber in our Canadian mills, but the bulk of our production is in the U.S. The Softwood Lumber Agreement (SLA) between Canada and the U.S., originally signed in October 2006, expired in October 2015. The 2006 SLA required Canadian softwood lumber facilities, including our mills, to pay an export tax when the price of lumber is at or below a threshold price. We are not able to predict when or if a new agreement will be reached or, if reached, what the terms of the agreement would be. We could experience downward pressure on timber and lumber prices caused by Canadian lumber imports.
Another emerging form of competition is between brands of sustainably produced products; customer demand for certain brands could reduce competition among buyers for our products or cause other adverse effects.
In North America, our forests are third party-certified to the Sustainable Forestry Initiative (SFI®) standard. Some of our customers have expressed a preference in certain of our product lines for products made from raw materials sourced from forests certified to different standards, including standards of the Forest Stewardship Council (FSC). If and to the extent that preference for a standard other than SFI® becomes a customer requirement, there may be reduced demand and lower prices for our products relative to competitors who can supply products sourced from forests certified to competing certification standards. If we seek to comply with such other standards, we could incur materially increased costs for our operations or be required to modify our operations, such as reducing harvest levels. FSC, in particular, employs standards that are geographically variable and could cause a material reduction in the harvest levels of some of our timberlands, most notably in the Pacific Northwest.

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MATERIAL DISRUPTION OF MANUFACTURING
A material disruption at one of our manufacturing facilities could prevent us from meeting customer demand, reduce our sales or negatively affect our results of operation and financial condition.
Any of our manufacturing facilities, or any of our machines within an otherwise operational facility, could cease operations unexpectedly due to a number of events, including:
unscheduled maintenance outages,
prolonged power failures,
equipment failure,
a chemical spill or release,
explosion of a boiler,
fires, floods, windstorms, earthquakes, hurricanes or other severe weather conditions or catastrophes, affecting the production of goods or the supply of raw materials (including fiber),
the effect of drought or reduced rainfall on water supply,
labor difficulties,
disruptions in transportation infrastructure, including roads, bridges, rail, tunnels, shipping and port facilities,
terrorism or threats of terrorism,
governmental regulations, and
other operational problems.
Any such downtime or facility damage could prevent us from meeting customer demand for our products or require us to make unplanned capital expenditures. If one of our facilities or machines were to incur significant downtime, our ability to meet our production targets and satisfy customer requirements could be impaired, resulting in lower sales and income. Although some risks are not insurable and some coverage is limited, we purchase insurance protecting our manufacturing facilities from fires, floods, windstorms, earthquakes, equipment failures and boiler explosions.

STRATEGIC INITIATIVES
Our business and financial results may be adversely impacted if we are unable to successfully execute on important strategic initiatives.
There can be no assurance that we will be able to successfully implement important strategic initiatives in accordance with our expectations, which may result in an adverse impact on our business and financial results. These strategic initiatives are designed to improve our results of operations and drive long-term shareholder value, and include, among others: maximizing cash flow through operational excellence; reducing costs to achieve industry-leading cost structure; and innovating in higher-margin products.
We may be unsuccessful in carrying out our acquisition strategy.
We intend to strategically pursue acquisitions of timberland properties when market conditions warrant. As with any investment, our acquisitions may not perform in accordance with our expectations. In addition, we anticipate financing such acquisitions through cash from operations, borrowings under our unsecured credit facilities, proceeds from equity or debt offerings or proceeds from asset dispositions, or any combination thereof. Our inability to finance future acquisitions on favorable terms could adversely affect our results of operations.

CAPITAL REQUIREMENTS
Our operations require substantial capital.
Our businesses require substantial capital for expansion and for repair or replacement of existing facilities or equipment. Although we maintain our production equipment with regular scheduled maintenance, key pieces of equipment may need to be repaired or replaced periodically. The costs of repairing or replacing such equipment and the associated downtime of the affected production line could have a material adverse effect on our financial condition, results of operations and cash flows.
While we believe our capital resources will be adequate to meet our current projected operating needs, capital expenditures and other cash requirements, if for any reason we are unable to provide for our operating needs, capital expenditures and other cash requirements on acceptable economic terms, we could experience a material adverse effect on our business, financial condition, results of operations and cash flows.

ENVIRONMENTAL LAWS AND REGULATIONS
We could incur substantial costs as a result of compliance with, violations of, or liabilities under applicable environmental laws and other laws and regulations.
We are subject to a wide range of general and industry-specific laws and regulations relating to the protection of the environment, including those governing:
air emissions,
wastewater discharges,
harvesting and other silvicultural activities,
forestry operations and endangered species habitat protection,
surface water management,
the storage, management and disposal of hazardous substances and wastes,
the cleanup of contaminated sites,
landfill operation and closure obligations,
building codes, and
health and safety matters.
We have incurred, and we expect to continue to incur, significant capital, operating and other expenditures complying with applicable environmental laws and regulations and as a result of remedial obligations. We also could incur substantial costs, such as civil or criminal fines,

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sanctions and enforcement actions (including orders limiting our operations or requiring corrective measures, installation of pollution control equipment or other remedial actions), cleanup and closure costs, and third-party claims for property damage and personal injury as a result of violations of, or liabilities under, environmental laws and regulations.
As the owner and operator of real estate, we may be liable under environmental laws for cleanup, closure and other damages resulting from the presence and release of hazardous substances on or from our properties or operations. In addition, surface water management regulations may present liabilities and are subject to change. The amount and timing of environmental expenditures is difficult to predict, and in some cases, our liability may exceed forecasted amounts or the value of the property itself. The discovery of additional contamination or the imposition of additional cleanup obligations at our sites or third-party sites may result in significant additional costs. Any material liability we incur could adversely affect our financial condition or preclude us from making capital expenditures that otherwise would benefit our business.
We also anticipate public policy developments at the state, federal and international level regarding climate change and energy access, security and competitiveness. We expect these developments to address emission of carbon dioxide, renewable energy and fuel standards, and the monetization of carbon. Compliance with regulations that implement new public policy in these areas might require significant expenditures. These developments may also include mandated changes to energy use and building codes which could affect our homebuilding practices. Enactment of new environmental laws or regulations or changes in existing laws or regulations, or the interpretation of these laws or regulations, might require significant expenditures. We also anticipate public policy developments at the state, federal and international level regarding taxes and a number of other areas that could require significant expenditures.
Changes in global or regional climate conditions and governmental response to such changes at the international, U.S. federal and state levels may affect our operations or our planned or future growth activities.
There continue to be numerous international, U.S. federal and state-level initiatives and proposals to address domestic and global climate issues. Within the U.S. and Canada, some of these proposals would (and have in some Canadian provinces) regulate and/or tax the production of carbon dioxide and other “greenhouse gases” to facilitate the reduction of carbon compound emissions into the atmosphere and provide tax and other incentives to produce and use “cleaner” energy. Climate change impacts, if they occur, and governmental initiatives, laws and regulations to address potential climate concerns, could increase our costs and have a long-term adverse impact on our businesses and results of operations. Future legislation or regulatory activity in this area remains uncertain, and its impact on our operations is unclear at this time. However, it is possible that legislation or government mandates, standards or regulations intended to mitigate or reduce carbon compound or greenhouse gas emissions or other climate change impacts could adversely affect our operations. For example, such activities could limit harvest levels or result in significantly higher costs for energy and other raw materials. Because our manufacturing operations depend upon significant amounts of energy and raw materials, these initiatives could have an adverse impact on our results of operations and profitability.

CURRENCY EXCHANGE RATES
We will be affected by changes in currency exchange rates.
We have manufacturing operations in Canada, Poland and Uruguay. We are also a large exporter and compete with global producers of products very similar to ours. Therefore, we are affected by changes in the strength of the U.S. dollar, particularly relative to the Canadian dollar, euro and yen, and the strength of the euro relative to the yen. Changes in exchange rates could materially and adversely affect our sales volumes, margins and results of operations.

AVAILABILITY OF RAW MATERIALS AND ENERGY
Our business and operations could be materially adversely affected by changes in the cost or availability of raw materials and energy.
We rely heavily on certain raw materials (principally wood fiber and chemicals) and energy sources (principally natural gas, electricity, coal and fuel oil) in our manufacturing processes. Our ability to increase earnings has been, and will continue to be, affected by changes in the costs and availability of such raw materials and energy sources. We may not be able to fully offset the effects of higher raw material or energy costs through hedging arrangements, price increases, productivity improvements or cost-reduction programs.

PEOPLE
Our business is dependent upon attracting, retaining and developing key personnel.
We believe that our success depends, to a significant extent, upon our ability to attract, retain and develop key senior management and operations management personnel. Our failure to recruit, retain, and develop key personnel could adversely affect our financial condition or results of operations.

TRANSPORTATION
We depend on third parties for transportation services and increases in costs and disruptions in the availability of transportation could materially adversely affect our business and operations.
Our business depends on the transportation of a large number of products, both domestically and internationally. We rely primarily on third parties for transportation of the products we manufacture or distribute as well as delivery of our raw materials. A significant portion of the goods we manufacture and raw materials we use are transported by marine, rail and truck, each of which is highly regulated. In addition, each has historically been subject to periodic disruption due to labor issues.
If any of our third-party transportation providers were to fail to deliver the goods we manufacture or distribute in a timely manner, we may be unable to sell those products at full value, or at all. Similarly, if any of these providers were to fail to deliver raw materials to us in a timely manner, we may be unable to manufacture our products in response to customer demand. In addition, if any of these third parties were to cease operations or cease doing business with us, we may be unable to replace them at reasonable cost. Our third-party transportation providers are also subject to events outside of their control, such as disruption of transportation infrastructure due to labor issues or natural disasters.
Any failure of a third-party transportation provider to deliver raw materials or finished products in a timely manner could harm our reputation, negatively affect our customer relationships and have a material adverse effect on our financial condition and results of operation.
In addition, an increase in transportation rates or fuel surcharges could materially adversely affect our sales and profitability.


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REIT STATUS AND TAX IMPLICATIONS
If we fail to remain qualified as a REIT, our taxable income would be subject to tax at corporate rates and we would not be able to deduct dividends to shareholders.
In any taxable year in which we fail to qualify as a REIT, unless we are entitled to relief under the Internal Revenue Code:
We would not be allowed to deduct dividends to shareholders in computing our taxable income.
We would be subject to federal and state income tax on our taxable income at applicable corporate rates.
We also would be disqualified from treatment as a REIT for the four taxable years following the year during which we lost qualification.
Qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code to our operations and the determination of various factual matters and circumstances not entirely within our control. There are only limited judicial or administrative interpretations of these provisions. Although we operate in a manner consistent with the REIT qualification rules, we cannot assure you that we are or will remain so qualified.
Certain of our business activities are subject to corporate-level income tax and potentially subject to prohibited transactions tax.
Under the Internal Revenue Code, REITs generally must engage in the ownership and management of income producing real estate. For the Company, this generally includes owning and managing a timberland portfolio for the production and sale of standing timber. Accordingly, the harvesting and sale of logs, the development or sale of certain timberlands and other real estate, the manufacture and sale of wood products and the manufacture and sale of pulp products are conducted through one or more of our wholly-owned taxable REIT subsidiaries (TRSs) because such activities could generate non-qualifying REIT income and could constitute prohibited transactions. Prohibited transactions are defined by the Internal Revenue Code generally to be sales or other dispositions of property to customers in the ordinary course of a trade or business. By conducting our business in this manner we believe that we satisfy the REIT requirements of the Internal Revenue Code and are not subject to the 100 percent tax that could be imposed if a REIT were to conduct a prohibited transaction. The net income of our TRSs is subject to corporate-level income tax.
The extent of our use of our TRS may affect the price of our common shares relative to the share price of other REITs.
We conduct a significant portion of our business activities through one or more TRSs. Our use of our TRSs enables us to engage in non-REIT qualifying business activities such as the sale of logs, production and sale of wood products and pulp products, and sale of HBU property. Our TRSs are subject to corporate-level tax. Therefore, we pay income taxes on the income generated by our TRSs. Under the Code, no more than 25 percent (20 percent after December 31, 2017) of the value of the gross assets of a REIT may be represented by securities of one or more TRS. This limitation may affect our ability to increase the size of our TRSs operations. Furthermore, our use of TRSs may cause the market to value our common shares differently than the shares of other REITs, which may not use TRSs as extensively as we use them.
We may be limited in our ability to fund distributions using cash generated through our taxable REIT subsidiaries.
The ability of the REIT to receive dividends from our TRS is limited by the rules with which we must comply to maintain our status as a REIT. In particular, at least 75 percent of gross income for each taxable year as a REIT must be derived from passive real estate sources including sales of our standing timber and other types of qualifying real estate income and no more than 25 percent of our gross income may consist of dividends from our TRS and other non-real estate income.
This limitation on our ability to receive dividends from our TRSs may affect our ability to fund cash distributions to our shareholders using cash flows from our TRSs. The net income of our TRSs is not required to be distributed, and income that is not distributed will not be subject to the REIT income distribution requirement.
Our cash dividends are not guaranteed and may fluctuate.
Generally, REITs are required to distribute 90 percent of their ordinary taxable income and 95 percent of their net capital gains income. Capital gains may be retained by the REIT, but would be subject to income taxes. If capital gains are retained rather than distributed, our shareholders would be notified and they would be deemed to have received a taxable distribution, with a refundable credit for any federal income tax paid by the REIT. Accordingly, we believe that we are not required to distribute material amounts of cash since substantially all of our taxable income is treated as capital gains income. Our board of directors, in its sole discretion, determines the amount of quarterly dividends to be provided to our shareholders based on consideration of a number of factors. These factors include, but are not limited to, our results of operations, cash flow and capital requirements, economic conditions, tax considerations, borrowing capacity and other factors, including debt covenant restrictions that may impose limitations on cash payments, future acquisitions and divestitures, harvest levels, changes in the price and demand for our products and general market demand for timberlands including those timberland properties that have higher and better uses. Consequently, our dividend levels may fluctuate.
Changes in tax laws or their interpretation could adversely affect our shareholders and our results of operations.
Federal and state tax laws are constantly under review by persons involved in the legislative process, the Internal Revenue Service, the United States Department of the Treasury, and state taxing authorities. Changes to tax laws could adversely affect our shareholders or increase our effective tax rates. We cannot predict with certainty whether, when, in what forms, or with what effective dates, the tax laws applicable to us or our shareholders may be changed.


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LEGAL PROCEEDINGS
We are a party to a number of legal proceedings, and adverse judgments in certain legal proceedings could have a material adverse effect on our financial condition.
The costs and other effects of pending litigation against us and related insurance recoveries cannot be determined with certainty. Although the disclosure in Note 15: Legal Proceedings, Commitments and Contingencies of Notes to Consolidated Financial Statements contains managements current views of the effect such litigation will have on our financial results, there can be no assurance that the outcome of such proceedings will be as expected.
It is possible that there could be adverse judgments against us in some or all major litigation against us and that we could be required to take a charge and make cash payments for all or a portion of any damage award. Any such charge or cash payment could materially and adversely affect our results of operations or cash flows for the quarter or year in which we record or pay it.

IMPORT/EXPORT TAXES AND DUTIES
We may be required to pay significant taxes on our exported products or countervailing and anti-dumping duties on our imported products.
International trade disputes occur frequently and can be taken to an International Trade Court for resolution of unfair trade practices between countries. As an example, there have been many disputes and subsequent trade agreements regarding sales of softwood lumber between Canada and the United States. The Softwood Lumber Agreement (SLA) between Canada and the U.S., originally signed in October 2006, expired in October 2015. A new agreement has not been reached. The SLA required Canadian softwood lumber facilities, including our mills, to pay an export tax when the price of lumber is at or below a threshold price, which could be as high as 22.5 percent if a province exceeds its total allotted export share, as well as potentially impose additional countervailing antidumping duties. We could experience reduced revenues and margins in any business that is subject to such tariffs or to the terms of the settlements of such international disputes. To the extent such tariffs increase prices, they could also reduce the demand for our products. These tariffs or settlement terms could have a material adverse effect on our business, financial results and financial condition, including facility closures or impairments of assets. We cannot predict whether or when there will be a further extension of the SLA or a new agreement or, if any extension or new agreement is completed, its impact on our business.

DISTRIBUTION OF WRECO SHARES
We could incur substantial U.S. federal tax liability if the WRECO transaction were found not to qualify as a tax-free “reorganization” or the distribution of WRECO shares to Weyerhaeuser shareholders were found not to qualify as a tax-free distribution.
In 2014 we closed the divestiture of our home building business, Weyerhaeuser Real Estate Company (WRECO), via a "Reverse Morris Trust" transaction pursuant to which a wholly-owned subsidiary of TRI Pointe Homes, Inc. (TRI Pointe) merged with and into WRECO, with WRECO surviving the merger and becoming a wholly-owned subsidiary of TRI Pointe. The Reverse Morris Trust transaction was structured to qualify as a tax-free reorganization and the associated distribution of WRECO shares to Weyerhaeuser shareholders as a tax-free distribution. If the transaction were determined not to qualify as a tax-free reorganization, or if the distribution does not qualify as a tax-free distribution, then Weyerhaeuser or its subsidiaries or Weyerhaeuser shareholders may be required to pay substantial U.S. federal income taxes.
If the transaction were determined not to qualify as a tax-free reorganization or the distribution not to qualify as a tax-free distribution, or if Weyerhaeuser were required to indemnify TRI Pointe and WRECO, such taxes and indemnification obligations could be substantial and could materially and adversely affect the company’s liquidity, financial condition and results of operations.
OUR MERGER WITH PLUM CREEK TIMBER COMPANY, INC.
The merger may not be completed on the terms currently contemplated, or at all.
On November 6, 2015 Weyerhaeuser Company and Plum Creek Timber Company, Inc. (“Plum Creek”) entered into an Agreement and Plan of Merger (“Merger Agreement”) pursuant to which Plum Creek will merge with and into Weyerhaeuser Company with Weyerhaeuser continuing as the surviving corporation. If the merger is not completed, our businesses may be adversely affected and we may be subject to various risks without realizing any of the benefits of having the merger completed, including the following:
We may be required, under certain circumstances, to pay a termination fee of $250 million.
We may be required to reimburse Plum Creek for all reasonable documented out-of-pocket fees and expenses incurred in connection with the Merger Agreement and the merger up to a maximum of $40 million.
We may experience negative reactions from the financial markets or from our customers, suppliers or employees.
We may be subject to litigation related to failure to complete the merger or to enforcement proceedings to perform our obligations under the Merger Agreement.
A delay in completing the merger, which is subject to a number of conditions, some of which are outside our control, may reduce or eliminate the expected benefits from the merger.
The merger is subject to a number of conditions, some of which are beyond our control, that could prevent, delay or otherwise materially adversely affect its completion. We cannot predict whether and when the conditions will be satisfied. In addition, several putative class action lawsuits relating to the merger have been filed and additional lawsuits may be filed, which could delay completion of the merger. We intend to vigorously defend the litigation but we cannot predict the outcome. The requirement to obtain certain regulatory approvals could delay the completion of the merger for a significant period of time or prevent it from occurring. A delay in completing the merger could cause the combined company not to realize some or all of the synergies and other benefits that it expects to achieve if the merger is successfully completed within its expected time frame. The Merger Agreement contains certain restrictions on the conduct of our business. If the merger is delayed, these restrictions could adversely affect our ability to execute business strategies or pursue attractive business opportunities. In addition, a delay could cause management to focus on completion of the merger instead of on other opportunities that could be beneficial to the company.

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The merger will involve substantial costs, and the combined company may be unable to successfully integrate the businesses of the two companies and realize the anticipated benefits of the merger.
We have incurred and expect to continue to incur substantial costs and expenses relating directly to the merger, including fees and expenses payable to financial and other professional advisors, SEC filing fees, printing and mailing costs and other transaction-related costs, fees and expenses. We expect to incur substantial expenses in connection with the integration of the businesses, policies, procedures, operations, employees, technologies and systems of Plum Creek with those of Weyerhaeuser. There are a large number of systems that must be integrated, including management information, purchasing, accounting and finance, sales, billing, payroll and benefits, fixed asset and lease administration systems and regulatory compliance. Expenses related to this integration are by their nature difficult to estimate accurately. These expenses could, particularly in the near term, exceed the savings that we expect to achieve from the realization of economies of scale and cost savings and synergies related to the integration of the businesses. These integration expenses likely will result in significant charges against earnings following the completion of the merger, but the amount and timing of such charges are uncertain.
The merger involves the combination of two independently operated public companies. The merger will require management to devote significant attention and resources to integrating business practices and operations. The combined company may fail to realize some or all of the anticipated benefits of the merger if the integration process takes longer than expected or is more costly than expected.
Uncertainties associated with the merger may adversely affect our business and operations.
Uncertainties associated with the merger could cause customers, suppliers or other entities with whom we have a business relationship to delay or defer decisions, which could negatively impact our revenues, earnings and cash flows. In addition, customers or suppliers may elect to cease doing business with us or the combined company in anticipation of or following the merger, or seek to take advantage of potential uncertainty or disruption resulting from the merger to interfere with relationships with customers, suppliers or employees.
We are dependent on the valuable experience and industry knowledge of our officers and other employees to execute our business plans and successfully conduct operations. Our success after the merger will depend in part upon our ability to retain key personnel. Current and prospective employees may feel uncertain about their roles following the merger, which may materially adversely affect our ability to attract and retain key personnel.
The market price of our common stock may decline in the future as a result of the merger.
The market price of our common stock may decline in the future as a result of the merger for a number of reasons, including our inability to successfully integrate the two companies or our failure to achieve the perceived benefits of the merger, including financial results, as rapidly as or to the extent anticipated by financial or industry analysts. Failure to successfully integrate the two companies could negatively impact our revenues, earnings and cash flows, and could materially adversely affect our ability to pay dividends at historical levels, or at all.
The combined company may incur adverse tax consequences if either Weyerhaeuser or Plum Creek has failed or fails to qualify as a REIT for U.S. federal income tax purposes.
Each of Weyerhaeuser and Plum Creek has operated in a manner that it believes has allowed it to qualify as a REIT for U.S. federal income tax purposes under the Code. See “REIT Status and Tax Implications” above for a description of the REIT requirements and consequences of failing to maintain REIT status. We intend to operate in a manner that allows us to continue to qualify as a REIT after the merger. However, even if we have operated so as to retain our REIT status, if Plum Creek were to lose its REIT status for a taxable year before the merger or that includes the merger, we will face serious tax consequences that could substantially reduce cash available for distribution to our shareholders and significantly impair our ability to expand our business and raise capital. If the merger were determined not to qualify as a tax-free merger, we could incur substantial federal tax liability that could materially and adversely affect the company's liquidity, financial condition and results of operations.
TIMBERLAND SPECIFIC RISKS
Our ability to harvest and deliver timber may be subject to limitations which could adversely affect our results of operations.
Our primary assets are our timberlands. Weather conditions, timber growth cycles, access limitations, and availability of contract loggers and haulers, may restrict our ability to harvest our timberlands. Other factors that may restrict our timber harvest include damage to our standing timber by fire or by insect infestation, disease, prolonged drought, flooding, severe weather and other natural disasters. Changes in global climate conditions could intensify one or more of these factors. Although damage from such causes usually is localized and affects only a limited percentage of standing timber, there can be no assurance that any damage affecting our timberlands will in fact be limited. As is common in the forest products industry, we do not maintain insurance coverage for damage to our timberlands. Our revenues, net income and cash flow from operations are dependent to a significant extent on the pricing of our products and our continued ability to harvest timber at adequate levels. Therefore, if we were to be restricted from harvesting on a significant portion of our timberlands for a prolonged period of time, or if material damage to a significant portion of our standing timber were to occur, we could suffer a materially adverse impact to our results of operations.
On a short-term basis, we may adjust our timber harvest levels in response to market conditions. Longer term, our timber harvest levels may be affected by acquisitions of additional timberlands, sales of existing timberlands and shifts in harvest from one region to another. In addition to timberland acquisitions and sales, future timber harvest levels may be affected by changes in estimates of long-term sustainable yield because of silvicultural advances, natural disasters, fires, pests, insects and other hazards, regulatory constraints and other factors beyond our control.
Timber harvest activities are also subject to a number of federal, state and local regulations pertaining to the protection of fish, wildlife, water and other resources. Regulations, re-interpretations and litigation can restrict timber harvest activities and increase costs. Examples are federal and state laws protecting threatened, endangered and “at-risk” species, harvesting and forestry road building activities that may be restricted under the U.S. Federal Clean Water Act, state forestry practices laws, laws protecting aboriginal rights, and other similar regulations.
Our estimates of timber inventories and growth rates may be inaccurate, include risks inherent to such estimates, and may impair our ability to realize expected revenues.
We rely upon estimates of merchantable timber inventories, which include judgments regarding inventories that may be lawfully and economically harvested, timber growth rates and end-product yields when acquiring and managing working forests. These estimates, which are inherently inexact and uncertain in nature, are central to forecasting our anticipated timber harvests, revenues and expected cash flows. Timber

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growth rates and yield estimates are developed by forest biometricians and other experts using statistical measurements of a sample of trees on a given property. Timber growth equations are used that predict the rate of height and diameter growth of trees so that foresters can estimate the volume of timber that may be present in the tree stand at a given age. Tree growth varies by soil type, geographic area, and climate. Inappropriate application of growth equations in forest management planning may lead to inaccurate estimates of future volumes. If these estimates are inaccurate, our ability to manage our timberlands in a sustainable or profitable manner may be diminished, which may cause our results of operations and our stock price to be adversely affected.

Our operating results and cash flows will be materially affected by supply and demand for timber.
A variety of factors affect prices for timber, including available supply, changes in economic conditions that impact demand, the level of domestic new construction and remodeling activity, interest rates, credit availability, population growth, weather conditions and pest infestation, and other factors. These factors vary by region, timber type (sawlogs or pulpwood logs) and species.
Timber prices are affected by changes in demand on a local, national or international level. The closure of a mill in the regions where we own timber can have a material adverse effect on demand, and therefore pricing. As the demand for paper continues to decline, closures of pulp mills have adversely affected the demand for pulpwood and wood chips in certain regions in which we operate. We export logs to Asia. While demand for Asia has remained steady, recently Asian markets have experienced a high degree of volatility, especially in China. A decrease in demand of logs from Asia may have a negative impact on log and lumber in the markets in which we compete.
Timber prices are affected by changes in timber availability at the local, national and international level. Our timberland ownership is concentrated in Alabama, Arkansas, Louisiana, Mississippi, North Carolina, Oklahoma, Oregon and Washington. In some of these states, much of the timberland is privately owned. Increases in timber prices often result in substantial increases in harvesting on private timberlands, including lands not previously made available for commercial timber operations, causing a short-term increase in supply that moderates price increases. In western states such as Oregon, and Washington, where a greater proportion of timberland is government owned, any substantial increase in timber harvesting from government-owned land could significantly reduce timber prices. On a local level, timber supplies can fluctuate depending upon factors such as changes in weather conditions and harvest strategies of local timberland owners, as well as occasionally high timber salvage efforts due to events such as unusual pest infestations or fires.

Timberlands make up a significant portion of our business portfolio.
Our real estate holdings are primarily timberlands and we may make additional timberlands acquisitions in the future. As the owner and manager of approximately 6.9 million acres of timberlands, we are subject to the risks that are inherent in concentrated real estate investments. A downturn in the real estate industry generally, or the timber or forest products industries specifically, could reduce the value of our properties and adversely affect our results of operations. Such a downturn could also adversely affect our customers and reduce the demand for our products. The risks we face may be more pronounced than if we diversified our investments outside real estate or outside timberlands.

CYBERSECURITY RISKS
We rely on information technology to support our operations and reporting environments. A security failure of that technology could impact our ability to operate our businesses effectively, adversely affect our reported financial results, impact our reputation and expose us to potential liability or litigation.
We use information systems to carry out our operational activities and maintain our business records. Some systems are internally managed and some are maintained by third-party service providers. We and our service providers employ what we believe are adequate security measures. Our ability to conduct business could be materially and adversely affected if these systems or resources are compromised, damaged or fail. This could be a result of a cyber incident, natural disaster, hardware or software corruption, failure or error, telecommunications system failure, service provider error or failure, intentional or unintentional personnel actions or other disruption.
In the ordinary course of our business, we collect and store sensitive data, including intellectual property, other proprietary information and personally identifiable information. If this data is compromised, destroyed or inappropriately disclosed, it could have a material adverse effect, including damage to our reputation, loss of customers, significant expenses to address and resolve the issues, or litigation or other proceedings by affected individuals, business partners and/or regulators.

RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK

STOCK-PRICE VOLATILITY
The market price of our common stock may be influenced by many factors, some of which are beyond our control.
The market price of our common stock may be influenced by many factors, some of which are beyond our control, including those described above under "Risks Related to our Industries and Business" and the following:
actual or anticipated fluctuations in our operating results or our competitors' operating results,
announcements by us or our competitors of new products, capacity changes, significant contracts, acquisitions or strategic investments,
our growth rate and our competitors growth rates,
general economic conditions,
conditions in the financial markets,
changes in stock market analyst recommendations regarding us, our competitors or the forest products industry generally, or lack of analyst coverage of our common stock,
sales of our common stock by our executive officers, directors and significant stockholders,
sales or repurchases of substantial amounts of common stock,
changes in accounting principles, and
changes in tax laws and regulations.

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In addition, there has been significant volatility in the market price and trading volume of securities of companies operating in the forest products industry that often has been unrelated to the operating performance of particular companies.
Some companies that have had volatile market prices for their securities have had securities litigation brought against them. If litigation of this type is brought against us, it could result in substantial costs and divert managements attention and resources.

PREFERENCE SHARES
Our common shares will rank junior to our mandatory convertible preference shares with respect to dividends and amounts payable in the event of our liquidation.
Our common shares will rank junior to our mandatory convertible preference shares with respect to the payment of dividends and amounts payable in the event of our liquidation, dissolution or winding-up. This means that, unless full cumulative dividends have been paid or set aside for payment on all outstanding mandatory convertible preference shares for all past dividend periods and the then current dividend period, no dividends may be declared or paid on our common shares. Likewise, in the event of our voluntary or involuntary liquidation, dissolution or winding-up, no distribution of our assets may be made to holders of our common shares until we have paid to holders of the mandatory convertible preference shares a liquidation preference equal to $50.00 per share plus accrued and unpaid dividends.
Certain provisions in the mandatory convertible preference shares could delay or prevent an otherwise beneficial takeover or takeover attempt of us and, therefore, the ability of holders to exercise their rights associated with a potential fundamental change.
Certain provisions in our mandatory convertible preference shares could make it more difficult or more expensive for a third party to acquire us. For example, if a fundamental change were to occur on or prior to July 1, 2016, holders of the mandatory convertible preference shares may have the right to convert their mandatory convertible preference shares, in whole or in part, at an increased conversion rate and be entitled to receive a fundamental change dividend make-whole amount equal to the present value of all remaining dividend payments on their mandatory convertible preference shares. These features of the mandatory convertible preference shares could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management.

UNRESOLVED STAFF COMMENTS
There are no unresolved comments that were received from the SEC staff relating to our periodic or current reports under the Securities Exchange Act of 1934.

PROPERTIES
Details about our facilities, production capacities and locations are found in the Our Business — What We Do section of this report.
For details about our Timberlands properties, go to Our Business/What We Do/Timberlands/Where We Do It.
For details about our Wood Products properties, go to Our Business/What We Do/Wood Products/Where We Do It.
For details about our Cellulose Fibers properties, go to Our Business/What We Do/Cellulose Fibers/Where We Do It.

LEGAL PROCEEDINGS
See Note 15: Legal Proceedings, Commitments and Contingencies in the Notes to Consolidated Financial Statements for a summary of legal proceedings.

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MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock trades on the following exchanges under the symbol WY:
New York Stock Exchange and
Chicago Stock Exchange
As of December 31, 2015, there were 7,700 holders of record of our common shares. Dividend-per-share data and the range of closing market prices for our common stock for each of the four quarters in 2015 and 2014 are included in Note 22: Selected Quarterly Financial Information (unaudited) in the Notes to Consolidated Financial Statements.
INFORMATION ABOUT SECURITIES AUTHORIZED FOR ISSUANCE UNDER OUR EQUITY COMPENSATION PLAN
 
NUMBER OF
SECURITIES TO BE
ISSUED UPON
EXERCISE OF
OUTSTANDING
OPTIONS,
WARRANTS AND
RIGHTS

WEIGHTED
AVERAGE EXERCISE
PRICE OF
OUTSTANDING
OPTIONS,
WARRANTS AND
RIGHTS

NUMBER OF
SECURITIES
REMAINING AVAILABLE
FOR FUTURE ISSUANCE
UNDER EQUITY
COMPENSATION PLANS
(EXCLUDING
SECURITIES TO BE ISSUED UPON EXERCISE)

Equity compensation plans approved by security holders(1)
14,935,316

$
22.74

17,317,903

Equity compensation plans not approved by security holders
N/A

N/A

N/A

Total
14,935,316

$
22.74

17,317,903

(1)   Includes 1,104,621 restricted stock units and 685,535 performance share units. Because there is no exercise price associated with restricted stock units and performance share units, excluding these stock units the weighted average exercise price calculation would be $25.83.

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INFORMATION ABOUT COMMON STOCK REPURCHASES DURING 2015
 
TOTAL NUMBER OF SHARES (OR UNITS) PURCHASED

AVERAGE PRICE PAID PER SHARE (OR UNIT)

TOTAL NUMBER OF SHARES (OR UNITS) PURCHASED AS PART OF PUBLICLY ANNOUNCED PLANS OF PROGRAMS

MAXIMUM NUMBER (OR APPROXIMATE DOLLAR VALUE) OF SHARES (OR UNITS) THAT MAY YET BE PURCHASED UNDER THE PLANS OR PROGRAMS(1)(2)

Common Stock Repurchases During First Quarter:
 
 
 
 
January
228,429

$
35.85

228,429

$
488,348,381

February
3,038,219

$
35.21

3,038,219

$
381,369,837

March
4,074,918

$
33.69

4,074,918

$
244,089,600

Total repurchases during first quarter
7,341,566

$
34.39

7,341,566

$
244,089,600

Common Stock Repurchases During Second Quarter:
 
 
 
 
April
1,949,315

$
31.84

1,949,315

$
182,017,591

May
1,570,276

$
31.81

1,570,276

$
132,064,000

June
1,322,926

$
31.76

1,322,926

$
90,047,982

Total repurchases during second quarter
4,842,517

$
31.81

4,842,517

$
90,047,982

Common Stock Repurchases During Third Quarter:
 
 
 
 
July



$
90,047,982

August
145,720

$
28.00

145,720

$
585,967,414

September
3,112,428

$
27.56

3,112,428

$
500,190,226

Total repurchases during third quarter
3,258,148

$
27.58

3,258,148

$
500,190,226

Common Stock Repurchases During Fourth Quarter:
 
 
 
 
October
616,265

$
28.76

616,265

$
482,469,449

November
130,930

$
30.75

130,930

$
478,442,984

December

$


$
478,442,984

Total repurchases during fourth quarter
747,195

$
29.11

747,195

$
478,442,984

Total common stock repurchases during 2015
16,189,426

$
32.00

16,189,426

$
478,442,984

(1)   On August 13, 2014, our board of directors approved a stock repurchase program under which we were authorized to repurchase up to $700 million of outstanding shares (the 2014 Repurchase Program). The 2014 stock repurchase program replaced the prior 2011 stock repurchase program. During 2014, we repurchased $203 million of outstanding shares under the 2014 Repurchase Program. During 2015, we completed the 2014 Repurchase Program by purchasing $497 million of outstanding shares. All common stock purchases under the stock repurchase program were made in open-market transactions.
(2) On August 27, 2015, our board of directors approved a new share repurchase program of up to $500 million of outstanding shares (the 2015 Repurchase Program), commencing upon completion of the 2014 Repurchase Program. During 2015, we repurchased $22 million of outstanding shares under the 2015 Repurchase Program. All common stock purchases under the stock repurchase program were made in open-market transactions.


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COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN
Weyerhaeuser Company, S&P 500 and S&P Global Timber & Forestry Index
PERFORMANCE GRAPH ASSUMPTIONS
Assumes $100 invested on December 31, 2010 in Weyerhaeuser common stock, the S&P 500 Index and the S&P Global Timber & Forestry Index.
Total return assumes dividends received are reinvested at month end.
Measurement dates are the last trading day of the calendar year shown.
 

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SELECTED FINANCIAL DATA
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES
PER COMMON SHARE
  
2015

2014

2013

2012

2011

Diluted earnings from continuing operations attributable to Weyerhaeuser common shareholders
$
0.89

1.40

0.82

0.58

0.50

Diluted earnings from discontinued operations attributable to Weyerhaeuser common shareholders(1)

1.78

0.13

0.13

0.11

Diluted net earnings attributable to Weyerhaeuser common shareholders
$
0.89

3.18

0.95

0.71

0.61

Dividends paid per common share
$
1.20

1.02

0.81

0.62

0.60

Weyerhaeuser shareholders’ interest (end of year)
$
9.54

10.11

11.64

7.50

7.95

FINANCIAL POSITION
  
2015

2014

2013

2012

2011

Total assets
$
12,486

13,265

14,372

12,609

12,523

Total long-term debt
$
4,891

4,891

4,891

4,291

4,478

Weyerhaeuser shareholders’ interest
$
4,869

5,304

6,795

4,070

4,263

Percent earned on average Weyerhaeuser shareholders’ interest
9.1
%
29.5
%
9.9
%
9.2
%
7.5
%
OPERATING RESULTS
  
2015

2014

2013

2012

2011

Net sales
$
7,082

7,403

7,254

5,989

5,378

Earnings from continuing operations
$
506

828

491

312

270

Discontinued operations, net of income taxes(1)

998

72

72

61

Net earnings
506

1,826

563

384

331

Net loss (earnings) attributable to noncontrolling interest



1


Net earnings attributable to Weyerhaeuser
506

1,826

563

385

331

Dividends on preference shares
(44
)
(44
)
(23
)


Net earnings attributable to Weyerhaeuser common shareholders
$
462

1,782

540

385

331

CASH FLOWS
  
2015

2014

2013

2012

2011

Net cash from operations
$
1,064

1,088

1,004

581

291

Cash from investing activities
(487
)
361

(1,829
)
(192
)
122

Cash from financing activities
(1,145
)
(704
)
762

(444
)
(927
)
Net change in cash and cash equivalents
$
(568
)
745

(63
)
(55
)
(514
)
STATISTICS (UNAUDITED)
  
2015

2014

2013

2012

2011

Number of employees
12,600

12,800

13,700

13,200

12,800

Number of common shareholder accounts at year-end
7,700

8,248

8,859

9,227

9,724

Number of common shares outstanding at year-end (thousands)
510,483

524,474

583,548

542,393

536,425

Weighted average common shares outstanding – diluted (thousands)
519,618

560,899

571,239

542,310

539,879

(1)


 WEYERHAEUSER COMPANY > 2015 ANNUAL REPORT AND FORM 10-K 36


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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

WHAT YOU WILL FIND IN THIS MD&A
 
Our MD&A includes the following major sections:
economic and market conditions affecting our operations;
financial performance summary;
results of our operations — consolidated and by segment;
liquidity and capital resources — where we discuss our cash flows;
off-balance sheet arrangements;
environmental matters, legal proceedings and other contingencies; and
accounting matters — where we discuss critical accounting policies and areas requiring judgments and estimates.

ECONOMIC AND MARKET CONDITIONS AFFECTING OUR OPERATIONS
The strength of the U.S. housing market strongly affects our Wood Products and Timberlands segments. As published by the U.S. Census Bureau, total U.S. housing starts for 2015 were 1,111,000 units, with single-family units accounting for 715,000 of the total. This represents a 10 percent increase in single-family starts from 2014, which were 648,000 units. Multi-family construction also increased in 2015 to 396,000 units compared with 358,000 in 2014. Expectations are for a similar increase in 2016. Consensus forecasts place expected total housing starts between 1.2 and 1.3 million units for 2016. Sources include IHS Global Insight, John Burns Real Estate and RISI. While housing has improved significantly since the recession of 2009, current demand for new housing continues to run below historic pre bubble averages. The 25-year period of 1976-2000 averaged 1.5 million total starts and 1.1 million single family starts, levels which have not yet been achieved in the post recession period.
Wood Products primarily sells into the new residential building and repair and remodel markets. Demand for wood products continued to improve in 2015 following the growth in home construction, however, growth in production also expanded and prices were lower in 2015 than 2014. The Random Lengths framing lumber composite was 14 percent lower in 2015 versus 2014 while oriented strand board (OSB) was 4 percent lower in 2015 as measured by Random Lengths North Central Price. Expectations are for similar to slightly higher wood product prices in 2016 as demand continues to increase with growth in housing starts and remodeling.
Demand for logs from our Timberlands segment is affected by the production of wood-based building products as well as export demand in our Western holdings. In the South, Southern pine sawlog prices were flat to slightly higher in 2015 as available supplies continue to match or exceed growth in demand. Western log prices were lower in 2015 due primarily to the pullback in demand from China which had been actively competing with domestic lumber producers for sawlogs. Expectations are for slightly improved log prices as off-shore demand improves over 2015 and domestic wood products manufacturing output increases with rising housing starts creating increased log demand.
Cellulose Fibers is primarily affected by global supply and demand factors and the relative strength of the U.S. dollar. The slowdown in global growth and reduced expectations for emerging economies slowed demand growth for pulp in 2015. The U.S. dollar continued to strengthen versus the Euro in 2015, rising 12 percent due to stronger US economic growth and increasingly accommodative monetary policies in Eurozone economies. Consequently prices for benchmark NBSK pulp were 8% lower in 2015 versus 2014. Expectations are for similar to slightly lower prices in 2016 as global economic growth is expected to be weak, which will limit growth in demand for products made with cellulose fibers. Furthermore, the US dollar is expected to remain strong relative to other currencies including the euro and a weak euro has historically been associated with lower US dollar prices for cellulose fibers.


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FINANCIAL PERFORMANCE SUMMARY
Net Sales by Segment
Contribution to Pretax Earnings by Segment

 WEYERHAEUSER COMPANY > 2015 ANNUAL REPORT AND FORM 10-K 38


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RESULTS OF OPERATIONS
In reviewing our results of operations, it is important to understand these terms:
Sales realizations refer to net selling prices — this includes selling price plus freight minus normal sales deductions.
Net contribution to earnings refers to earnings (loss) attributable to Weyerhaeuser shareholders before interest expense and income taxes.

CONSOLIDATED RESULTS
HOW WE DID IN 2015
Summary of Financial Results
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES
  
  
  
  
AMOUNT OF CHANGE
 
  
2015

2014

2013

2015 
 vs. 
 2014

2014 
 vs. 
 2013

Net sales
$
7,082

$
7,403

$
7,254

$
(321
)
$
149

Operating income
$
919

$
1,320

$
634

$
(401
)
$
686

Earnings from discontinued operations, net of tax
$

$
998

$
72

$
(998
)
$
926

Net earnings attributable to Weyerhaeuser common shareholders
$
462

$
1,782

$
540

$
(1,320
)
$
1,242

Basic earnings per share attributable to Weyerhaeuser common shareholders
$
0.89

$
3.20

$
0.95

$
(2.31
)
$
2.25

Diluted earnings per share attributable to Weyerhaeuser common shareholders
$
0.89

$
3.18

$
0.95

$
(2.29
)
$
2.23

COMPARING 2015 WITH 2014
Net Sales
Net sales decreased $321 million — 4 percent — primarily due to:
lower Timberlands segment sales — $147 million — primarily due to lower average log sales realizations and export sales volumes in the West, and lower log sales volumes in the South;
lower Wood Products segment sales — $98 million — primarily due to decreased structural lumber and OSB average realizations, partially offset by higher structural lumber, OSB, and engineered solid section sales volumes and higher sales of complementary building products; and
lower Cellulose Fibers segment sales — $76 million — primarily due to lower pulp and liquid packaging board average sales realizations.
Net Earnings Attributable to Weyerhaeuser Common Shareholders
Our net earnings attributable to Weyerhaeuser common shareholders decreased $1,320 million primarily due to:
earnings from discontinued operation recognized in 2014 — $998 million. There were no earnings from discontinued operations in 2015;
lower gross margin — $252 million — primarily due to lower average sales realizations in lumber and OSB in our Wood Products segment, lower average log sales realizations and sales volumes in our Timberlands segment, and lower average sales realizations for pulp and liquid packaging board, and higher operating costs due to scheduled maintenance outages and the West Coast port slowdown in our Cellulose Fibers segment;
lower other operating income — $219 million — primarily due to a $151 million pretax gain recognized in 2014 related to a previously announced postretirement plan amendment, a $22 million pretax gain recognized in 2014 on the sale of a landfill in Washington State, $14 million of Plum Creek merger-related costs in 2015, and a $13 million noncash impairment charge related to a nonstrategic asset sale in 2015; and
losses from an equity affiliate in 2015 — $105 million — primarily due to an $84 million noncash asset impairment recorded by an equity affiliate in the fourth quarter 2015.
These decreases were partially offset by:
lower income taxes — $188 million — primarily due to lower earnings in our Taxable REIT Subsidiary (TRS) in 2015, an income tax benefit recognized in the fourth quarter 2015 related to a noncash asset impairment recorded by an equity affiliate and the expiration of the company's built-in-gains tax period as a result of a change in U.S. tax legislation; and
lower general and administrative expenses — $49 million.
COMPARING 2014 WITH 2013
Net Sales
Net sales increased $149 million — 2 percent — primarily due to:
Timberlands segment sales increased $154 million, primarily due to higher log prices and increased sales volumes in the West, including our acquired Longview Timber holdings.
Cellulose Fibers segment sales increased $34 million primarily due to higher sales realizations for pulp.


 WEYERHAEUSER COMPANY > 2015 ANNUAL REPORT AND FORM 10-K 39


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These increases were partially offset by a $39 million decrease in our Wood Products segment sales, primarily due to lower sales realizations for OSB. This decrease in sales was partially offset by higher sales realizations and volumes for engineered wood products and lumber and increased sales from complementary building products.
Net Earnings Attributable to Weyerhaeuser Common Shareholders
Our net earnings attributable to Weyerhaeuser common shareholders increased $1,242 million primarily due to:
a $926 million increase in earnings from discontinued operations, primarily due to a $972 million net gain on the Real Estate Divestiture recognized in 2014;
a $333 million decrease in charges for restructuring, closure and asset impairments primarily related to a noncash impairment charge relating to a large master-planned community north of Las Vegas, Nevada which was retained by Weyerhaeuser in the divestiture of Weyerhaeuser Real Estate Company (WRECO);
a $206 million increase in gross margin in our Timberlands and Cellulose Fibers segments, primarily due to higher sales realizations and owning Longview Timber for a full year;
a $166 million increase in other operating income, primarily due to a $151 million pretax gain recognized in 2014 related to a previously announced postretirement plan amendment; and
a $79 million decrease in our selling, general and administrative expenses.

These increases were partially offset by:

a $356 million change in income taxes from a benefit in 2013 to an expense in 2014 primarily related to a previously unrecognized tax benefit recorded in 2013 and higher earnings in our Taxable REIT Subsidiary (TRS) in 2014; and
a $140 million decrease in gross margin in our Wood Products segment, primarily due to lower sales realizations in OSB.

TIMBERLANDS
HOW WE DID IN 2015
We report sales volume and annual production data for our Timberlands segment in Our Business/What We Do/Timberlands.
Here is a comparison of net sales to unaffiliated customers, intersegment sales, and net contribution to earnings for the last three years:
Net Sales and Net Contribution to Earnings for Timberlands
DOLLAR AMOUNTS IN MILLIONS
  
  
  
  
AMOUNT OF CHANGE
 
  
2015

2014

2013

2015 
 vs. 
 2014

2014 
 vs. 
 2013

Net sales to unaffiliated customers:
 
 
 
 
 
Logs:
 
 
 
 
 
West
$
830

$
972

$
828

$
(142
)
$
144

South
241

257

256

(16
)
1

Canada
24

22

19

2

3

Total
1,095

1,251

1,103

(156
)
148

Chip sales
15

12

9

3

3

Timberlands exchanges(1)
62

52

65

10

(13
)
Higher and better-use land sales(1)
14

19

19

(5
)

Minerals, oil and gas
26

32

32

(6
)

Products from international operations(2)
87

96

90

(9
)
6

Other products
51

35

25

16

10

Subtotal sales to unaffiliated customers
1,350

1,497

1,343

(147
)
154

Intersegment sales:
 
 
 
 
 
United States
559

576

518

(17
)
58

Other
271

291

281

(20
)
10

Subtotal intersegment sales
830

867

799

(37
)
68

Total
$
2,180

$
2,364

$
2,142

$
(184
)
$
222

Net contribution to earnings
$
549

$
613

$
470

$
(64
)
$
143

(1)   Significant dispositions of higher and better use timberland and some nonstrategic timberlands are made through subsidiaries.
(2)   Products include logs, plywood and hardwood lumber harvested or produced by our international operations. This includes sales from our operations in Uruguay and Brazil (sold in 2014).
On July 23, 2013, we purchased 100 percent of the equity interests in Longview Timber LLC (Longview Timber) for cash and assumed debt. The sales and net contribution to earnings of our acquired entity from the acquisition date forward are included in the West results of our Timberlands segment. Longview Timber was and continues to be a supplier to our Wood Products segment and those sales are shown in intersegment sales. More information on this transaction can be found in Note 4: Acquisitions in the Notes to Consolidated Financial Statements.

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COMPARING 2015 WITH 2014
Net Sales — Unaffiliated Customers
Net sales to unaffiliated customers decreased $147 million10 percent — primarily due to a $142 million decrease in Western log sales as a result of lower average sales realizations and export sales volumes, and a $16 million decrease in Southern log sales due to lower sales volumes.
Intersegment Sales
Intersegment sales decreased $37 million4 percent — primarily due to a $20 million decrease in Canada due to lower translated revenues as a result of the strengthening U.S. dollar, and a $17 million decrease in the United States due to lower Southern log sales volumes and decreased Western average realizations.
Net contribution to earnings
Net contribution to earnings decreased $64 million — 10 percent — primarily due to:
lower average log sales realizations in the West — $106 million and
lower sales volumes in the West and South — $46 million.
These decreases were partially offset by:
lower operating costs, primarily due to lower logging and silviculture costs in the South and lower log purchases in the West — $68 million;
higher average sales realizations in the South — $13 million; and
lower selling, general and administrative expenses — $11 million.
COMPARING 2014 WITH 2013
Net Sales — Unaffiliated Customers
Net sales to unaffiliated customers increased $154 million — 11 percent — primarily due to a $144 million increase in Western log sales due to higher log prices from our legacy Western timberlands and a 17 percent increase in sales volumes including the increase related to the acquired Longview Timber holdings.

Intersegment Sales
Intersegment sales increased $68 million — 9 percent — primarily due to:
higher sales volume in the United States including the increase related to acquired Longview Timber holdings, and higher log prices in our legacy Western and Southern timberlands — $58 million; and
higher log and chip sales volumes in Canada — $10 million.
Net contribution to earnings
Net contribution to earnings increased $143 million — 30 percent — primarily due to:
an $87 million increase as a result of owning Longview Timber for a full year;
a $59 million increase due to higher log prices in our legacy Western timberlands and Southern timberlands;
a $20 million increase due to higher sales volumes in our legacy Western timberlands; and
a $12 million decrease in selling, general and administrative expenses, excluding Longview Timber.

These increases were partially offset by a $40 million increase in operating costs in our legacy Western timberlands due to increased log purchases.


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WOOD PRODUCTS
HOW WE DID IN 2015
We report sales volume and annual production data for our Wood Products segment in Our Business/What We Do/Wood Products.
Net Sales and Net Contribution to Earnings for Wood Products
DOLLAR AMOUNTS IN MILLIONS
  
  
  
  
AMOUNT OF CHANGE
 
  
2015

2014

2013

2015 
 vs. 
 2014

2014 
 vs. 
 2013

Net sales:
 
 
 
 
 
Structural lumber
$
1,741

$
1,901

$
1,873

$
(160
)
$
28

Engineered solid section
428

402

353

26

49

Engineered I-joists
284

277

247

7

30

Oriented strand board
595

610

809

(15
)
(199
)
Softwood plywood
129

143

144

(14
)
(1
)
Other products produced
189

176

171

13

5

Complementary building products
506

461

412

45

49

Total
$
3,872

$
3,970

$
4,009

$
(98
)
$
(39
)
Net contribution to earnings
$
258

$
327

$
441

$
(69
)
$
(114
)
COMPARING 2015 WITH 2014
Net Sales
Net sales decreased $98 million — 2 percent — primarily due to an 11 percent decrease in structural lumber average sales realizations, and a 9 percent decrease in OSB average sales realizations.
These decreases were partially offset by:
higher structural lumber sales volumes — 3 percent,
higher OSB sales volumes — 7 percent,
higher engineered solid section sales volumes — 6 percent and
higher sales of complementary building products — 10 percent.
Net Contribution to Earnings
Net contribution to earnings decreased $69 million — 21 percent — primarily due to:
lower average sales realizations in lumber and OSB — $258 million and
pretax restructuring charges related to the closure of four distribution centers — $8 million.
These decreases were partially offset by:
lower unit manufacturing costs due to lower resin and other input costs, higher operating rates, and lower translated Canadian operating costs due to the strengthening of the U.S. dollar — $96 million;
lower log costs due to decreasing log prices and lower translated Canadian costs due to the strengthening of the U.S. dollar— $45 million;
lower general and administrative expenses — $28 million;
lower freight costs due to declining fuel prices — $18 million and
higher sales volumes across most product lines — $17 million.
COMPARING 2014 WITH 2013
Net Sales
Net sales decreased $39 million — 1 percent — primarily due to a 25 percent decrease in OSB average sales realizations.
This decrease was partially offset by:
higher engineered solid section shipment volumes — 10 percent, and average sales realizations — 4 percent;
higher sales of complementary building products — 12 percent;
higher engineered I-joists average sales realizations — 8 percent, and shipment volumes — 4 percent; and
higher structural lumber average sales realizations — 1 percent, and shipment volumes — 1 percent.
Net Contribution to Earnings
Net contribution to earnings decreased $114 million — 26 percent —primarily due to:
lower OSB sales realizations — $204 million and
higher log costs — $47 million.
These decreases were partially offset by:
lower lumber manufacturing costs primarily due to aggressive cost control — $40 million;
higher average sales realizations in engineered wood products and lumber — $35 million;
higher margins in our distribution business — $31 million;

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lower selling, general and administrative expenses — $15 million;
higher shipment volumes primarily in engineered wood products and our distribution business — $10 million; and
an impairment charge in 2013 related to the decision to permanently close an engineered wood products facility — $9 million.

CELLULOSE FIBERS
HOW WE DID IN 2015
We report sales volume and annual production data for our Cellulose Fibers segment in Our Business/What We Do/Cellulose Fibers.
Here is a comparison of net sales and net contribution to earnings for the last three years:
Net Sales and Net Contribution to Earnings for Cellulose Fibers
DOLLAR AMOUNTS IN MILLIONS
  
  
  
  
AMOUNT OF CHANGE
 
  
2015

2014

2013

2015 
 vs. 
 2014

2014 
 vs. 
 2013

Net sales:
 
 
 
 
 
Pulp
$
1,499

$
1,559

$
1,501

$
(60
)
$
58

Liquid packaging board
305

310

326

(5
)
(16
)
Other products
56

67

75

(11
)
(8
)
Total
$
1,860

$
1,936

$
1,902

$
(76
)
$
34

Net contribution to earnings:
 
 
 
$

$

Operating income
$
224

$
292

$
197

(68
)
95

Gain (Loss) from equity affiliates
(105
)
1

3

(106
)
(2
)
Total
$
119

$
291

$
200

$
(172
)
$
91

COMPARING 2015 WITH 2014
Net Sales
Net sales decreased $76 million — 4 percent — primarily due to the following:
pulp average sales realizations decreased $31 per ton — 4 percent;
liquid packaging board average sales realizations decreased $48 per ton — 4 percent; and
other products sales volumes decreased 12 percent.
These decreases were partially offset by increased sales volumes for liquid packaging board of 2 percent.
Net Contribution to Earnings
Net contribution to earnings decreased $172 million — 59 percent — primarily due to:
losses from an equity affiliate — $105 million — primarily due to an $84 million noncash asset impairment recorded in the fourth quarter 2015;
lower pulp average sales realizations — $58 million;
higher operating costs primarily due to scheduled maintenance outages and the West Coast port slowdown — $46 million;
lower liquid packaging board average sales realizations — $18 million; and
higher fiber costs — $13 million.
These decreases were partially offset by:
lower energy and chemical costs — $28 million,
lower translated Canadian operating costs due to the strengthening of the U.S. dollar — $27 million and
lower selling, general and administrative expenses — $10 million.
COMPARING 2014 WITH 2013
Net Sales
Net sales increased $34 million — 2 percent — primarily due to increased sales realizations for pulp of $50 per ton — 6 percent and liquid packaging board of $61 per ton — 6 percent.

This was partially offset by decreased sales volumes for pulp of 2 percent and liquid packaging board of 10 percent.
Net Contribution to Earnings
Net contribution to earnings increased $91 million — 46 percent — primarily due to:
higher pulp and liquid packaging board sales realizations — $108 million and
lower translated Canadian operating costs due to the strengthening of the U.S. dollar — $14 million.

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These increases were partially offset by:
higher energy costs primarily due to reduced electricity sales and higher fuel prices — $13 million and
higher maintenance costs due to a scheduled machine rebuild in our liquid packaging board facility and pulp planned maintenance outages — $13 million.

UNALLOCATED ITEMS
Unallocated Items are gains or charges not related to or allocated to an individual operating segment. They include a portion of items such as: share-based compensation, pension and postretirement costs, foreign exchange transaction gains and losses associated with financing, and the elimination of intersegment profit in inventory and the LIFO reserve.
Net Contribution to Earnings for Unallocated Items
DOLLAR AMOUNTS IN MILLIONS
  
  
  
  
AMOUNT OF CHANGE
 
  
2015

2014

2013

2015 
 vs. 
 2014

2014 
 vs. 
 2013

Unallocated corporate function expenses
$
(27
)
$
(24
)
$
(38
)
$
(3
)
$
14

Unallocated share-based compensation
6

(9
)
(8
)
15

(1
)
Unallocated pension and postretirement credits (costs)
11

196

(40
)
(185
)
236

Foreign exchange gains (losses)
(47
)
(27
)
(7
)
(20
)
(20
)
Elimination of intersegment profit in inventory and LIFO
10

(10
)
15

20

(25
)
Other
(65
)
(38
)
(392
)
(27
)
354

Operating income (loss)
(112
)
88

(470
)
(200
)
558

Interest income and other
36

38

48

(2
)
(10
)
Net contribution to earnings
$
(76
)
$
126

$
(422
)
$
(202
)
$
548

Unallocated Items in 2015 include:
$13 million noncash impairment charge recognized in first quarter 2015 related to a nonstrategic asset that was sold in second quarter 2015 which is recorded in "Other" above and "Charges for restructuring, closures, and impairments" in our Consolidated Statement of Operations. See Note 18: Charges for Restructuring, Closures and Asset Impairments in the Notes to Consolidated Financial Statements for more information.
$14 million Plum Creek merger-related costs which are recorded in "Other" above and "Other operating income, net" in our Consolidated Statement of Operations.
Unallocated Items in 2014 include:
$151 million pretax gain related to a previously announced postretirement plan amendment which is recorded in "Unallocated pension and postretirement credits (costs)" above. See Note 9: Pension and Other Postretirement Benefit Plans in the Notes to Consolidated Financial Statements for more information.
$39 million in charges related to our selling, general and administrative cost reduction initiative which is recorded in "Other" above.
$22 million pretax gain on the sale of a landfill in Washington State, which is recorded in "Other" above and "Other operating income, net" in our Consolidated Statement of Operations. See Note 19: Other Operating Income, Net in the Notes to Consolidated Financial Statements for more information.

INTEREST EXPENSE
Our net interest expense incurred for the last three years was:
$347 million in 2015,
$344 million in 2014 and
$369 million in 2013.
There were no changes in our amount of outstanding debt during 2015 and 2014. Our outstanding debt balane increased $600 million during 2013.
Interest expense in 2013 includes $11 million in fees related to a bridge loan we did not draw from in the acquisition of Longview Timber and $25 million in pretax losses on early extinguishment of debt.

INCOME TAXES
Our provision (benefit) for income taxes for our continuing operations over the last three years was:
$(3) million in 2015,
$185 million in 2014 and
$(171) million in 2013.
During 2015, our provision for income taxes decreased $188 million as compared with 2014, primarily due to lower earnings in our TRS in 2015.  We also recorded a $13 million tax benefit for the expiration of the company’s built-in-gains tax period due to a change in tax law in the fourth quarter 2015, and a $28 million tax benefit for the reduction in the deferred tax liability associated with an equity affiliate resulting from a non-cash impairment charge recorded by that entity. 

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During 2013, we recorded a $193 million tax benefit related to unrecognized tax benefits and a $21 million tax charge related to the repatriation of Canadian earnings.

As a REIT, we generally are not subject to corporate level tax on income of the REIT that is distributed to shareholders. We are no longer subject to corporate taxes on built-in-gains (the excess of fair market value over tax basis at January 1, 2010) due to a change in tax law in the fourth quarter 2015, which statutorily shortened the built-in-gains tax period from 10 years to 5 years following the REIT conversion. We continue to be required to pay federal corporate income taxes on earnings of our TRS, which includes our manufacturing businesses and the portion of our timberlands segment income included in the TRS.
The table below summarizes the historical tax characteristics of distributions to shareholders for the years ended December 31:
AMOUNTS PER SHARE
  
2015

2014

2013

Preference - capital gain distribution
$
3.19

$
3.19

$
1.66

Common - capital gain distribution
$
1.20

$
1.02

$
0.81


LIQUIDITY AND CAPITAL RESOURCES
We are committed to maintaining a sound, conservative capital structure that enables us to:
protect the interests of our shareholders and lenders and
have access at all times to major financial markets.

CASH FROM OPERATIONS
Cash from operations includes:
cash received from customers;
cash paid to employees and suppliers;
cash paid for interest on our debt; and
cash paid or received for taxes.
Consolidated net cash provided by our operations was:
$1,064 million in 2015,
$1,088 million in 2014 and
$1,004 million in 2013.
COMPARING 2015 WITH 2014
Net cash provided by operations decreased $24 million in 2015 as compared with 2014, primarily due to:
Cash received from customers decreased $296 million as sales decreased in our Timberlands, Wood Products, and Cellulose Fibers segments.
Net cash outflows related to income taxes decreased $66 million. We paid income taxes of $14 million in 2015 and received tax refunds of $52 million in 2014.
Cash paid for interest increased $28 million, primarily due to interest received related to tax refunds in 2014.
These outflows were partially offset by a $393 million decrease in cash paid to employees and suppliers.
COMPARING 2014 WITH 2013
Net cash provided by operations increased $84 million in 2014 as compared with 2013, primarily due to:
Cash received from customers increased $180 million as sales increased in our Timberlands and Cellulose Fibers segments.
Net cash inflows related to income taxes increased $70 million. We received income tax refunds of $52 million in 2014 and paid $18 million in 2013.
Cash paid for interest decreased $43 million, primarily due to interest received related to tax refunds in 2014 and refinancing of debt in 2013.
These inflows were partially offset by a $189 million increase in cash paid to employees and suppliers primarily due to increased production and the acquisition of Longview Timber.
Pension Contributions and Benefit Payments Made and Expected
During 2015, we:
contributed $33 million for our Canadian registered plan in accordance with minimum funding rules and respective provincial regulations;
contributed to or made benefit payments for our Canadian nonregistered pension plans of $3 million;
made benefit payments of $24 million for our U.S. nonqualified pension plans; and
made benefit payments of $23 million for our U.S. and Canadian other postretirement plans.
There was no minimum required contribution for our U.S. qualified plan for 2015, nor were any contributions made to this plan in 2015.

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During 2016, based on estimated year-end assets and projections of plan liabilities, we expect to:
be required to contribute approximately $16 million for our Canadian registered plan;
be required to contribute or make benefit payments for our Canadian nonregistered plans of $3 million;
make benefit payments of $19 million for our U.S. nonqualified pension plans; and
make benefit payments of $22 million for our U.S. and Canadian other postretirement plans.
We do not anticipate a contribution being required to our U.S. qualified pension plan for 2016.

INVESTING IN OUR BUSINESS
Cash from investing activities includes:
acquisitions of property, equipment, timberlands and reforestation;
investments in or distribution from equity affiliates;
proceeds from sale of assets and operations; and
purchases and redemptions of short-term investments.
Consolidated net cash provided by (used in) investing activities was:
$(487) million in 2015,
$361 million in 2014 and
$(1,829) million in 2013.
COMPARING 2015 WITH 2014
Net cash from investing activities changed $848 million to an outflow in 2015 as compared with an inflow in 2014, primarily due to:
net proceeds from the Real Estate Divestiture, net of cash divested in 2014; and
higher capital spending in 2015.
COMPARING 2014 WITH 2013
Net cash from investing activities changed $2,190 million to an inflow in 2014 as compared with an outflow in 2013, primarily due to:
the acquisition of Longview Timber in 2013;
net proceeds from the Real Estate Divestiture, net of cash divested in 2014; and
higher capital spending in 2014.
LONGVIEW TIMBER PURCHASE
On July 23, 2013, we purchased 100 percent of the equity interests in Longview Timber LLC (Longview Timber) for $1.58 billion cash and assumed debt of $1.07 billion, for an aggregate purchase price of $2.65 billion. More information can be found in Note 4: Acquisitions in the Notes to Consolidated Financial Statements and the "Cash from financing activities" section below.
REAL ESTATE DIVESTITURE
At the close of the Real Estate Divestiture in July 2014, WRECO used $744 million of the debt proceeds to repay intercompany debt and interest to Weyerhaeuser Company. The newly issued debt, remaining proceeds and other WRECO assets and liabilities, including $5 million cash on hand, were acquired by TRI Pointe Homes, Inc. (TRI Pointe) when WRECO became a wholly-owned subsidiary of TRI Pointe at the closing of the transaction. Additionally, $32 million related to the adjustment amount payable pursuant to the terms of the transaction agreement was paid to TRI Pointe. Our net cash proceeds in connection with the Real Estate Divestiture totaled $707 million. More information can be found in Note 3: Discontinued Operations and the "Cash from Financing Activities" section below.
Three-Year Summary of Capital Spending by Business Segment
DOLLAR AMOUNTS IN MILLIONS
  
2015

2014

2013

Timberlands
$
75

$
74

$
73

Wood Products
287

190

113

Cellulose Fibers
118

123

92

Unallocated Items
3

4

5

Discontinued operations

4

10

Total
$
483

$
395

$
293

We expect our net capital expenditures for 2016 to be down slightly compared to 2015, subject to the outcome of the strategic review of the Cellulose Fibers business and our transaction with Plum Creek. The amount we spend on capital expenditures could change due to:
future economic conditions,
environmental regulations,
changes in the composition of our business,
weather and
timing of equipment purchases.

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NOTE RECEIVABLE
In 2014, we received $25 million in full payment of a note receivable and interest of $7 million made in connection with the divestiture of our hardwoods operations in 2011, which is recorded in "Other" in the "Cash flows from investing activities" in our Consolidated Statement of Cash Flows.
VARIABLE INTEREST ENTITIES
In 2013, we repaid a $162 million note and received $184 million related to one of our timber monetization special-purpose entities (SPEs) undertaken in 2003. Net proceeds were $22 million. More information about these entities, which were formed in connection with the sale of nonstrategic timberlands in 2003, can be found in Note 10: Variable Interest Entities in the Notes to Consolidated Financial Statements and our annual report on Form 10-K for 2003.
EQUITY AFFILIATES
In 2013, we sold part of our investment in Liaison Technologies Inc. and received $10 million in cash, which is recorded in "Other" in the "Cash flows from investing activities" in our Consolidated Statement of Cash Flows. See Note 8: Equity Affiliates in the Notes to Consolidated Financial Statements for more information.
PROCEEDS FROM THE SALE OF NONSTRATEGIC ASSETS
Proceeds received from the sale of various nonstrategic assets over the last three years were:
$19 million in 2015,
$28 million in 2014 and
$20 million in 2013.

FINANCING
Cash from financing activities includes:
issuances and payments of long-term debt,
borrowings and payments under revolving lines of credit,
changes in book overdrafts,
proceeds from stock offerings and option exercises and
payments of cash dividends and repurchasing stock.
Consolidated net cash provided by (used in) financing activities was:
$(1,145) million in 2015,
$(704) million in 2014 and
$762 million in 2013.
COMPARING 2015 WITH 2014
Net cash used in financing activities increased $441 million in 2015, primarily due to an increase in share repurchases and common stock dividends. This was partially offset by a decrease in stock option exercises.
COMPARING 2014 WITH 2013
Net cash provided by financing activities changed $1,466 million to an outflow in 2014 as compared with an inflow in 2013, primarily due to the issuance of common and preference shares and debt in 2013. This was partially offset by a decrease in payments on debt and share repurchases in 2014. We had no payments on debt in 2014 and $1,567 million in 2013. We repurchased $203 million of shares in 2014 and none in 2013.

LONGVIEW TIMBER PURCHASE
In order to finance our purchase of Longview Timber, see Note 4: Acquisitions in the Notes to Consolidated Financial Statements for more information, we issued the following:
29 million common shares on June 24, 2013, at the price of $27.75 per share for net proceeds of $781 million;
4.4 million common shares on July 8, 2013, at the price of $27.75 per share for net proceeds of $116 million, in connection with the exercise of an overallotment option; and
13.8 million of our 6.375 percent Mandatory Convertible Preference Shares, Series A, par value $1.00 and liquidation preference of $50.00 per share on June 24, 2013, for net proceeds of $669 million.
We paid $11 million in fees related to a bridge loan in 2013, which is recorded in "Other" in the "Cash flows from financing activities" in our Consolidated Statement of Cash Flows. As of the close of the Longview Timber purchase, we did not draw from the loan and these fees were expensed in 2013.
In order to repay the debt that we assumed in the acquisition of Longview Timber, in 2013 we issued $500 million of 4.625 percent notes due September 15, 2023. The net proceeds after deducting the discount, underwriting fees and issuance costs were $495 million. We also entered into a $550 million 7-year senior unsecured term loan credit facility maturing in September 2020 and borrowed $550 million. Borrowings are at LIBOR plus a spread or at other interest rates mutually agreed upon between the borrower and the lending banks.
On October 15, 2013, we repaid the $1,118 million carrying value of the debt that we assumed in the acquisition of Longview Timber and related fees, expenses and premiums using the proceeds from the notes issued and the borrowings from our term loan credit facility borrowed in 2013. A pretax charge of $25 million was included in our net interest expense in 2013, for early retirement premiums, unamortized debt issuance costs and other miscellaneous charges in connection with the early extinguishment of debt. See Note 4: Longview Timber Purchase in the Notes to Consolidated Financial Statements for more information.

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DEBT
Our consolidated long-term debt was $4.9 billion as of December 31, 2015, December 31, 2014 and December 31, 2013. Long-term debt proceeds were $1,050 million in 2013.
During 2014, our wholly-owned subsidiary, WRECO, issued $450 million of unsecured and unsubordinated senior debt obligations bearing an interest rate of 4.375 percent due June 15, 2019 and $450 million of unsecured and unsubordinated senior debt obligations bearing an interest rate of 5.875 percent due June 15, 2024. The net proceeds were deposited into an escrow account. Upon closure of the transaction, the newly issued debt and remaining proceeds were acquired by TRI Pointe, along with other WRECO assets and liabilities.
There were no long-term debt retirements in 2015 and 2014. We retired $409 million of long-term debt according to its scheduled maturity in 2013. Additionally, we retired $1,158 million of long-term debt in 2013 prior to its scheduled maturity. The loss recognized on early extinguishment of debt and included in our net interest expense was $25 million.
There are no debt maturities in the next twelve months.
See Note 3: Discontinued Operations and Note 13: Long-Term Debt in the Notes to Consolidated Financial Statements for more information.
REVOLVING CREDIT FACILITIES
During September 2013, Weyerhaeuser Company and WRECO entered into a new $1 billion 5-year senior unsecured revolving credit facility that expires in September 2018. This replaced a $1 billion revolving credit facility that was set to expire June 2015. As of June 16, 2014, WRECO terminated its participation as a borrower in the facility.
There were no net proceeds from the issuance of debt or from borrowings (repayments) under our available credit facility in 2015, 2014 or 2013.
Debt covenants:
As of December 31, 2015, Weyerhaeuser Company:
had no borrowings outstanding under our credit facility and
was in compliance with the credit facility covenants.
Weyerhaeuser Company Covenants:
Key covenants related to Weyerhaeuser Company include the requirement to maintain:
a minimum defined net worth of $3.0 billion;
a defined debt-to-total-capital ratio of 65 percent or less; and
ownership of, or long-term leases on, no less than four million acres of timberlands.
Weyerhaeuser Company’s defined net worth is comprised of:
total Weyerhaeuser shareholders’ interest,
excluding accumulated comprehensive income (loss) related to pension and postretirement benefits,
minus Weyerhaeuser Company’s investment in our unrestricted subsidiaries.
Total Weyerhaeuser Company capitalization is comprised of:
total Weyerhaeuser Company debt
plus total defined net worth.
As of December 31, 2015, Weyerhaeuser Company had:
a defined net worth of $6.3 billion and
a defined debt-to-total-capital ratio of 44 percent.
There are no other significant financial debt covenants related to our third party debt. See Note 12: Lines of Credit in the Notes to Consolidated Financial Statements for more information.
CREDIT RATINGS
On January 21, 2015, Standard & Poor's upgraded our long-term issuer credit ratings from BBB- to BBB and short-term issuer credit ratings from A-3 to A-2. On November 9, 2015, Standard & Poor's announced that our credit rating would likely be lowered from BBB to BBB- upon completion of our merger with Plum Creek.
On April 14, 2015, Moody's Investors Service upgraded our long-term issuer credit ratings from Baa3 to Baa2. On June 12, 2014, Moody's Investors Service changed their outlook on our senior unsecured notes to positive. On April 22, 2013, Moody's Investors Service upgraded our senior unsecured note rating to Baa3 from Ba1 and changed their outlook to stable.
OPTION EXERCISES
Our cash proceeds from the exercise of stock options were:
$34 million in 2015,
$119 million in 2014 and
$162 million in 2013.
Our average stock price was $31.67, $31.89 and $29.69 in 2015, 2014 and 2013, respectively.

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DIVIDENDS
We paid cash dividends on commons shares of:
$619 million in 2015,
$563 million in 2014 and
$458 million in 2013.
Changes in the amount of dividends we paid were primarily due to:
an increase in our quarterly dividend from 17 cents per share to 20 cents per share in April 2013;
an increase in our quarterly dividend from 20 cents per share to 22 cents per share in August 2013;
an increase in our quarterly dividend from 22 cents per share to 29 cents per share in August 2014; and
an increase in our quarterly dividend from 29 cents per share to 31 cents per share in August 2015.
We paid cash dividends on preference shares of $44 million in 2015.
Our dividends declared on preference shares were:
85.88 cents per share in August 2013 and
79.69 cents per share in October 2013; February, April, August and October 2014; and February, May, August and October 2015.
On February 10, 2016, our board of directors declared a dividend of 31 cents per share, payable on March 18, 2016, to shareholders of record at the close of business March 8, 2016. Additionally, our board of directors declared a dividend of 79.69 cents per share on our 6.375 percent Mandatory Convertible Preference Shares, Series A, payable on April 1, 2016, to shareholders of record at the close of business March 15, 2016.
STOCK REPURCHASES
On August 13, 2014, our board of directors approved a stock repurchase program under which we were authorized to repurchase up to $700 million of outstanding shares (the 2014 Repurchase Program). The 2014 Repurchase Program replaced the prior 2011 stock repurchase program. During 2014, we repurchased 6,062,993 shares of common stock for $203 million under the 2014 Repurchase Program. During 2015 we completed the 2014 Repurchase Program by repurchasing 15,471,962 shares of common stock for $497 million. All common stock purchases under the stock repurchase program were made in open-market transactions.
On August 27, 2015 our board of directors approved a new share repurchase program of up to $500 million on outstanding shares (the 2015 Repurchase Program), commencing upon completion of the 2014 Repurchase Program. During 2015, we repurchased 717,464 shares of common stock for $22 million under the 2015 Repurchase Program. As of December 31, 2015 we had remaining authorization of $478 million for future stock repurchases. All common stock purchases under the stock repurchase program were made in open-market transactions. We had 510,483,285 shares of common stock outstanding as of December 31, 2015.
On November 8, 2015 Weyerhaeuser announced it intends to execute a $2.5 billion share repurchase shortly after closing the merger with Plum Creek Timber Company, Inc. As of December 31, 2015 no portion of this announced repurchase has been completed. The remaining $478 million authorized for the 2015 Repurchase Program is expected to be used in the announced post-merger repurchase.

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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 13: Long-Term Debt, Note 15: Legal Proceedings, Commitments and Contingencies and Note 20: Income Taxes in the Notes to Consolidated Financial Statements.
Significant Contractual Obligations as of December 31, 2015
DOLLAR AMOUNTS IN MILLIONS
  
  
  
PAYMENTS DUE BY PERIOD
 
  
TOTAL

LESS THAN
1 YEAR

1–3
YEARS

3–5
YEARS

MORE THAN
5 YEARS

Long-term debt obligations
$
4,896

$

$
343

$
1,050

$
3,503

Interest(1)
3,380

321

619

554

1,886

Operating lease obligations
210

27

47

31

105

Purchase obligations(2)
146

84

41

4

17

Harvest commitments(3)
1




1

Employee-related obligations(4)
486

155

56

41

91

Liabilities related to unrecognized tax benefits(5)
7





Total
$
9,126

$
587

$
1,106

$
1,680

$
5,603

(1)   Amounts presented for interest payments assume that all long-term debt obligations outstanding as of December 31, 2015 will remain outstanding until maturity, and interest rates on variable-rate debt in effect as of December 31, 2015 will remain in effect until maturity.
(2)   Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on the company and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude arrangements that the company can cancel without penalty.
(3)   Harvest commitments are purchased at market value and can be resold at market value in the future.
(4)   The timing of certain of these payments will be triggered by retirements or other events. These payments can include workers' compensation, deferred compensation and banked vacation, among other obligations. When the timing of payment is uncertain, the amounts are included in the total column only. Minimum pension funding is required by established funding standards and estimates are not made beyond 2016. Estimated payments of contractually obligated postretirement benefits are not included due to the uncertainty of payment timing.
(5)   We have recognized total liabilities related to unrecognized tax benefits of $7 million as of December 31, 2015, including interest of $1 million. The timing of payments related to these obligations is uncertain; however, none of this amount is expected to be paid within the next year.

OFF-BALANCE SHEET ARRANGEMENTS
Off-balance sheet arrangements have not had — and are not reasonably likely to have — a material effect on our current or future financial condition, results of operations or cash flows. Note 10: Variable Interest Entities and Note 12: Lines of Credit in the Notes to Consolidated Financial Statements contain our disclosures of:
surety bonds,
letters of credit and guarantees and
information regarding variable interest entities.

ENVIRONMENTAL MATTERS, LEGAL PROCEEDINGS AND OTHER CONTINGENCIES
See Note 15: Legal Proceedings, Commitments and Contingencies in the Notes to Consolidated Financial Statements.

ACCOUNTING MATTERS

CRITICAL ACCOUNTING POLICIES
Our critical accounting policies involve a higher degree of judgment and estimates. They also have a high degree of complexity.
In accounting, we base our judgments and estimates on:
historical experience and
assumptions we believe are appropriate and reasonable under current circumstances.
Actual results, however, may differ from the estimated amounts we have recorded.
Our most critical accounting policies relate to our:
pension and postretirement benefit plans;
potential impairments of long-lived assets; and
legal, environmental and product liability reserves.
Details about our other significant accounting policies — what we use and how we estimate — are in Note 1: Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements.

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PENSION AND POSTRETIREMENT BENEFIT PLANS
We sponsor several pension and postretirement benefit plans for our employees. Key assumptions we use in accounting for the plans include our:
expected long-term rate of return on plan assets,
discount rates,
anticipated trends in health care costs,
assumed increases in salaries and
mortality rates.
At the end of every year, we review our assumptions with external advisers and make adjustments as appropriate. Actual experience that differs from our assumptions or any changes in our assumptions could have a significant effect on our financial position, results of operations and cash flows.
Other factors that affect our accounting for the plans include:
actual pension fund performance,
level of lump sum distributions,
plan changes and amendments,
changes in plan participation or coverage and
portfolio changes and restructuring.
This section provides more information about our:
expected long-term rate of return and
discount rates.
Expected Long-Term Rate of Return on Plan Assets
Plan assets are assets of the pension plan trusts that fund the benefits provided under the pension plans. The expected long-term rate of return is our estimate of the long-term rate of return that our plan assets will earn. Our expected long-term rate of return is important in determining the net periodic benefit or cost we recognize for our plans.
Over the 30 years it has been in place, our U.S. pension trust investment strategy has achieved a 14.2 percent net compound annual return rate.
After considering available information at the end of 2015, we continue to assume an expected long-term rate of return of 9.0 percent. Factors we considered include:
the net compounded annual return of 8.0 percent achieved by our U.S. pension trust investment strategy the past 5 years and
current and expected valuation levels in the global equity and credit markets.
Our expected long-term rate of return is important in determining the net periodic benefit or cost we recognize for our plans. Every 0.5 percent decrease in our expected long-term rate of return would increase expense or reduce a credit by approximately:
$24 million for our U.S. qualified pension plans and
$4 million for our Canadian registered pension plans.
The actual return on plan assets in any given year may vary from our expected long-term rate of return. Actual returns on plan assets affect the funded status of the plans. Differences between actual returns on plan assets and the expected long-term rate of return are reflected as adjustments to cumulative other comprehensive income (loss), a component of total equity.
Discount Rates
Our discount rates as of December 31, 2015, are:
4.5 percent for our U.S. pension plans — compared with 4.1 percent at December 31, 2014;
4.0 percent for our U.S. postretirement plans — compared with 3.6 percent at December 31, 2014;
4.0 percent for our Canadian pension plans — compared with 3.9 percent at December 31, 2014; and
3.9 percent for our Canadian postretirement plans — compared with 3.8 percent at December 31, 2014.
We review our discount rates annually and revise them as needed. The discount rates are selected at the measurement date by matching current spot rates of high-quality corporate bonds with maturities similar to the timing of expected cash outflows for benefits.
Pension and postretirement benefit expenses for 2016 will be based on the 4.5 percent and 4.0 percent assumed discount rates for U.S. plans and 4 percent and 3.9 percent assumed discount rates for the Canadian plans.
Our discount rates are important in determining the cost of our plans. A 0.5 percent decrease in our discount rate would increase expense or reduce a credit by approximately:
$35 million for our U.S. qualified pension plans and
$5 million for our Canadian registered pension plans.

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LONG-LIVED ASSETS
We review the carrying value of our long-lived assets whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable through future operations. The carrying value is the amount assigned to long-lived assets in our financial statements.
An impairment occurs when the carrying value of long-lived assets will not be recovered from future cash flows and is more than fair market value. Fair market value is the estimated amount we would receive if we were to sell the assets.
In determining fair market value and whether impairment has occurred, we are required to estimate:
future cash flows,
residual values and
fair values of the assets.
Key assumptions we use in developing the estimates include:
probability of alternative outcomes,
product pricing,
raw material costs,
product sales and
discount rate.
CONTINGENT LIABILITIES
We are subject to lawsuits, investigations and other claims related to environmental, product and other matters, and are required to assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses.
We record contingent liabilities when:
it becomes probable that we will have to make payments and
the amount of loss can be reasonably estimated.
Assessing probability of loss and estimating probable losses requires analysis of multiple factors, including:
historical experience,
judgments about the potential actions of third party claimants and courts and
recommendations of legal counsel.
In addition to contingent liabilities recorded for probable losses, we disclose contingent liabilities when there is a reasonable possibility that an ultimate loss may occur.
While we do our best in developing our projections, recorded contingent liabilities are based on the best information available and actual losses in any future period are inherently uncertain. If estimated probable future losses or actual losses exceed our recorded liability for such claims, we would record additional charges in other (income) expense, net. These exposures and proceedings can be significant and the ultimate negative outcomes could be material to our operating results or cash flow in any given quarter or year. See Note 15: Legal Proceedings, Commitments and Contingencies in the Notes to Consolidated Financial Statements for more information.

PROSPECTIVE ACCOUNTING PRONOUNCEMENTS
A summary of prospective accounting pronouncements is in Note 1: Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements.

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PERFORMANCE MEASURES

We use Adjusted Earnings before Interest, Taxes, Depreciation, Depletion and Amortization (Adjusted EBITDA) as a key performance measure to evaluate the performance of the consolidated company and our business segments. This measure should not be considered in isolation from and is not intended to represent an alternative to our results reported in accordance with U.S. generally accepted accounting principles (U.S. GAAP). However, we believe Adjusted EBITDA provides meaningful supplemental information about our operating performance, better facilitates period to period comparisons, and is widely used by analysts, lenders, rating agencies and other interested parties.Our definition of Adjusted EBITDA may be different from similarly titled measures reported by other companies. Adjusted EBITDA, as we define it, is operating income from continuing operations adjusted for depreciation, depletion, amortization, pension and postretirement costs not allocated to business segments (primarily interest cost, expected return on plan assets, amortization of actuarial loss and amortization of prior service cost/credit), special items and discontinued operations.
Adjusted EBITDA by Segment
DOLLAR AMOUNTS IN MILLIONS
  
2015

2014

2013

Timberlands
$
758

$
820

$
632

Wood Products
372

446

574

Cellulose Fibers
378

447

353

 
1,508

1,713

1,559

Unallocated Items
(86
)
(79
)
(61
)
Total
$
1,422

$
1,634

$
1,498


We reconcile Adjusted EBITDA to net earnings for the consolidated company and to operating income for the business segments, as those are the most directly comparable U.S. GAAP measures for each.

The table below reconciles Adjusted EBITDA to net income by segment during the year ended 2015:
DOLLAR AMOUNTS IN MILLIONS
  
Timberlands

Wood Products

Cellulose Fibers

Unallocated Items

Total

Net earnings
$
506

Earnings from discontinued operations, net of taxes

Interest expense, net of capitalized interest
347

Income taxes
(3
)
Net contribution to earnings
$
549

$
258

$
119

$
(76
)
$
850

Loss from equity affiliates


105


105

Interest income and other



(36
)
(36
)
Operating income
549

258

224

(112
)
919

Depreciation, depletion and amortization
209

106

154

10

479

Non-operating pension and postretirement credits



(11
)
(11
)
Special items(1)(2)

8


27

35

Total
$
758

$
372

$
378

$
(86
)
$
1,422

(1)    Special items included in Wood Products are pre-tax restructuring charges related to the closure of four distribution centers.
(2)    Special items included in Unallocated Items consist of a $13 million noncash impairment charge related to a nonstrategic asset that was sold in the second quarter and $14 million of Plum Creek merger-related costs.



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The table below reconciles Adjusted EBITDA to net income by segment during the year ended 2014:
DOLLAR AMOUNTS IN MILLIONS
  
Timberlands

Wood Products

Cellulose Fibers

Unallocated Items

Total

Net earnings
$
1,826

Earnings from discontinued operations, net of taxes
(998
)
Interest expense, net of capitalized interest
344

Income taxes
185

Net contribution to earnings
$
613

$
327

$
291

$
126

$
1,357

Loss from equity affiliates


1


1

Interest income and other



(38
)
(38
)
Operating income
613

327

292

88

1,320

Depreciation, depletion and amortization
207

119

155

12

493

Non-operating pension and postretirement credits



(45
)
(45
)
Special items(1)



(134
)
(134
)
Total
$
820

$
446

$
447

$
(79
)
$
1,634

(1)    Special items include: a $151 million pretax gain related to a previously announced postretirement plan amendment, $39 million in restructuring and closure charges related to our selling, general and administrative cost reduction initiative and a $22 million pretax gain on the sale of a landfill in Washington State.


The table below reconciles Adjusted EBITDA to net income by segment during the year ended 2013:
DOLLAR AMOUNTS IN MILLIONS
  
Timberlands

Wood Products

Cellulose Fibers

Unallocated Items

Total

Net earnings
$
563

Earnings from discontinued operations, net of taxes
(72
)
Interest expense, net of capitalized interest
369

Income taxes
(171
)
Net contribution to earnings
$
470

$
441

$
200

$
(422
)
$
689

(Earnings) loss from equity affiliates


(3
)
2

(1
)
Interest income and other
(4
)


(50
)
(54
)
Operating income
466

441

197

(470
)
634

Depreciation, depletion and amortization
166

123

156

13

458

Non-operating pension and postretirement costs



40

40

Special items(1)(2)

10


356

366

Total
$
632

$
574

$
353

$
(61
)
$
1,498

(1) Special Items included in Wood Products consist of a $9 million noncash impairment charge and $1 million of restructuring charges related to the closure of our engineered wood products facility in Colbert, Georgia.
(2)    Special items included in Unallocated Items consists of a $356 million noncash impairment charge for Coyote Springs, a nonstrategic asset that was sold in 2014.


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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

LONG-TERM DEBT OBLIGATIONS
The following summary of our long-term debt obligations includes:
scheduled principal repayments for the next five years and after,
weighted average interest rates for debt maturing in each of the next five years and after and
estimated fair values of outstanding obligations.
We estimate the fair value of long-term debt based on quoted market prices we received for the same types and issues of our debt or on the discounted value of the future cash flows using market yields for the same type and comparable issues of debt. Changes in market rates of interest affect the fair value of our fixed-rate debt.
SUMMARY OF LONG-TERM DEBT OBLIGATIONS AS OF DECEMBER 31, 2015
DOLLAR AMOUNTS IN MILLIONS
  
2016

2017

2018

2019

2020

THEREAFTER

TOTAL

FAIR VALUE

Fixed-rate debt
$

$
281

$
62

$
500

$

$
3,503

$
4,346

$
5,070

Average interest rate
%
6.95
%
7.00
%
7.38
%
%
7.09
%
7.12
%
N/A

Variable-rate debt
$

$

$

$

$
550

$

$
550

$
550

Average interest rate
%
%
%
%
2.07
%
%
2.07
%
N/A

 

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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Weyerhaeuser Company:

We have audited the accompanying consolidated balance sheets of Weyerhaeuser Company and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income, cash flows, and changes in equity for each of the years in the three-year period ended December 31, 2015. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Weyerhaeuser Company and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Weyerhaeuser Company’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 17, 2016 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
/s/ KPMG LLP
Seattle, Washington
February 17, 2016


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CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2015
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES
  
2015

2014

2013

Net sales
$
7,082

$
7,403

$
7,254

Costs of products sold
5,694

5,763

5,716

Gross margin
1,388

1,640

1,538

Selling expenses
113

112

125

General and administrative expenses
289

338

404

Research and development expenses
24

27

33

Charges for restructuring, closures and impairments (Note 18)
25

44

377

Other operating costs (income), net (Note 19)
18

(201
)
(35
)
Operating income
919

1,320

634

Earnings (loss) from equity affiliates (Note 8)
(105
)
(1
)
1

Interest income and other
36

38

54

Interest expense, net of capitalized interest
(347
)
(344
)
(369
)
Earnings from continuing operations before income taxes
503

1,013

320

Income taxes (Note 20)
3

(185
)
171

Earnings from continuing operations
506

828

491

Earnings from discontinued operations, net of income taxes (Note 3)

998

72

Net earnings
506

1,826

563

Dividends on preference shares
(44
)
(44
)
(23
)
Net earnings attributable to Weyerhaeuser common shareholders
$
462

$
1,782

$
540

Basic earnings per share attributable to Weyerhaeuser common shareholders (Note 5):
 
 
 
Continuing operations
$
0.89

$
1.41

$
0.82

Discontinued operations

1.79

0.13

Net earnings per share
$
0.89

$
3.20

$
0.95

Diluted earnings per share attributable to Weyerhaeuser common shareholders (Note 5):
 
 
 
Continuing operations
$
0.89

$
1.40

$
0.82

Discontinued operations

1.78

0.13

Net earnings per share
$
0.89

$
3.18

$
0.95

Dividends paid per common share
$
1.20

$
1.02

$
0.81

Weighted average shares outstanding (in thousands) (Note 5):
 
 
 
Basic
516,371

556,705

566,329

Diluted
519,618

560,899

571,239

See accompanying Notes to Consolidated Financial Statements.



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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2015
DOLLAR AMOUNTS IN MILLIONS
  
2015

2014

2013

Comprehensive income:
 
 
 
Net earnings
$
506

$
1,826

$
563

Other comprehensive income (loss):
 
 
 
Foreign currency translation adjustments
(97
)
(50
)
(59
)
Changes in unamortized net pension and other postretirement benefit gain (loss), net of tax expense (benefit) of $131 in 2015, ($323) in 2014, and $480 in 2013
282

(554
)
902

Changes in unamortized prior service credit (cost), net of tax expense (benefit) of ($1) in 2015, ($64) in 2014 and $23 in 2013
(4
)
(103
)
27

Unrealized gains on available-for-sale securities


2

Total comprehensive income attributable to Weyerhaeuser shareholders
$
687

$
1,119

$
1,435

See accompanying Notes to Consolidated Financial Statements.

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CONSOLIDATED BALANCE SHEET
ASSETS
 
 
DOLLAR AMOUNTS IN MILLIONS
  
DECEMBER 31,
2015

DECEMBER 31,
2014

Current assets:
 
 
Cash and cash equivalents
$
1,012

$
1,580

Receivables, less discounts and allowances of $3 and $3
487

525

Receivables for taxes
30

25

Inventories (Note 6)
568

595

Prepaid expenses
77

80

Total current assets
2,174

2,805

Property and equipment, less accumulated depreciation of $6,294 and $6,324 (Note 7)
2,586

2,623

Construction in progress
195

131

Timber and timberlands at cost, less depletion charged to disposals
6,480

6,530

Investments in and advances to equity affiliates (Note 8)
74

188

Goodwill
40

40

Deferred tax assets (Note 20)
4

44

Other assets
318

289

Restricted financial investments held by variable interest entities (Note 10)
615

615

Total assets
$
12,486

$
13,265

LIABILITIES AND EQUITY
Current liabilities:
 
 
Accounts payable
326

331

Accrued liabilities (Note 11)
549

587

Total current liabilities
875

918

Long-term debt (Notes 13 and 14)
4,891

4,891

Long-term debt (nonrecourse to the company) held by variable interest entities (Note 10)
511

511

Deferred income taxes (Note 20)
86

14

Deferred pension and other postretirement benefits (Note 9)
987

1,319

Other liabilities
267

308

Commitments and contingencies (Note 15)
 
 
Total liabilities
7,617

7,961

Equity:
 
 
Weyerhaeuser shareholders’ interest (Notes 16 and 17):
 
 
Mandatory convertible preference shares, series A: $1.00 par value; $50.00 liquidation; authorized 40,000,000 shares; issued and outstanding: 13,799,711 and 13,800,000 shares (Note 4)
14

14

Common shares: $1.25 par value; authorized 1,360,000,000 shares; issued and outstanding: 510,483,285 and 524,474,315 shares (Note 4)
638

656

Other capital (Note 4)
4,080

4,519

Retained earnings
1,349

1,508

Cumulative other comprehensive loss
(1,212
)
(1,393
)
Total equity
4,869

5,304

Total liabilities and equity
$
12,486

$
13,265

See accompanying Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENT OF CASH FLOWS
 FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2015
DOLLAR AMOUNTS IN MILLIONS
  
2015

2014

2013

Cash flows from operations:
 
 
 
Net earnings
$
506

$
1,826

$
563

Noncash charges (credits) to income:
 
 
 
Depreciation, depletion and amortization
479

500

472

Deferred income taxes, net (Note 20)

205

(29
)
Pension and other postretirement benefits (Note 9)
42

(152
)
101

Share-based compensation expense (Note 17)
31

40

42

Charges for impairment of assets (Note 18)
15

2

372

(Earnings) loss from equity affiliates
105

1

(1
)
Net gains on dispositions of assets and operations(1) (Note 3)
(38
)
(1,050
)
(58
)
Foreign exchange transaction losses (Note 19)
47

27

7

Change in, net of acquisition:
 
 
 
Receivables less allowances
17

29

(27
)
Receivable for taxes
(5
)
76

(6
)
Inventories
10

(66
)
(13
)
Real estate and land

(133
)
(166
)
Prepaid expenses
3

17

(26
)
Accounts payable and accrued liabilities
(35
)
(98
)
(51
)
Deposits on land positions and other assets

15

(18
)
Pension and postretirement contributions / benefit payments
(83
)
(101
)
(137
)
Other
(30
)
(50
)
(21
)
Net cash from operations
1,064

1,088

1,004

Cash flows from investing activities:
 
 
 
Property and equipment
(443
)
(354
)
(261
)
Timberlands reforestation
(40
)
(41
)
(32
)
Acquisition of timberlands
(36
)


Acquisition of Longview Timber LLC, net of cash acquired (Note 4)


(1,581
)
Net proceeds from Real Estate Divestiture, net of cash divested (Note 3)

707


Proceeds from sale of assets and operations
19

28

20

Net proceeds of investments held by special purpose entities (Note 10)


22

Other
13

21

3

Cash from investing activities
(487
)
361

(1,829
)
Cash flows from financing activities:
 
 
 
Net proceeds from issuance of common shares (Note 4)


897

Net proceeds from issuance of preference shares (Note 4)


669

Net proceeds from issuance of debt (Note 13)


1,044

Net proceeds from issuance of Weyerhaeuser Real Estate Company (WRECO) debt (Note 3)

887


Deposit of WRECO debt proceeds into escrow (Note 3)

(887
)

Cash dividends on common shares
(619
)
(563
)
(458
)
Cash dividends on preference shares
(44
)
(44
)
(23
)
Change in book overdrafts

(17
)
7

Payments on debt (Note 13)


(1,567
)
Exercises of stock options
34

119

162

Repurchase of common stock (Note 16)
(518
)
(203
)

Other
2

4

31

Cash from financing activities
(1,145
)
(704
)
762

Net change in cash and cash equivalents
(568
)
745

(63
)
Cash and cash equivalents at beginning of year
1,580

835

898

Cash and cash equivalents at end of year
$
1,012

$
1,580

$
835

Cash paid (received) during the year for:
 
 
 
Interest, net of amounts capitalized of $7 in 2015, $13 in 2014 and $21 in 2013
$
347

$
319

$
366

Income taxes
$
14

$
(37
)
$
8

Noncash investing and financing activity:
 
 
 
Acquisition of Longview Timber LLC, debt assumed (Note 4)
$

$

$
1,070

Common shares tendered in WRECO divestiture (Note 3)
$

$
1,954

$

(1) Includes gain on timberland exchanges.
See accompanying Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2015
DOLLAR AMOUNTS IN MILLIONS
  
2015

2014

2013

Mandatory convertible preference shares, series A:
 
 
 

Balance at beginning of year
$
14

$
14

$

New issuance


14

Balance at end of year
$
14

$
14

$
14

Common shares:
 
 
 

Balance at beginning of year
$
656

$
729

$
678

New issuance


42

Shares tendered (Note 3)

(73
)

Issued for exercise of stock options
2

7

9

Share repurchases
(20
)
(7
)

Balance at end of year
$
638

$
656

$
729

Other capital:
 
 
 
Balance at beginning of year
$
4,519

$
6,444

$
4,731

New issuance


1,509

Shares tendered (Note 3)

(1,881
)

Exercise of stock options
32

112

152

Repurchase of common shares
(498
)
(196
)

Share-based compensation
32

35

42

Other transactions, net
(5
)
5

10

Balance at end of year
$
4,080

$
4,519

$
6,444

Retained earnings:
 
 
 
Balance at beginning of year
$
1,508

$
294

$
219

Net earnings attributable to Weyerhaeuser
506

1,826

563

Dividends on common shares (Note 16)
(621
)
(568
)
(465
)
Cash dividends on preference shares (Note 16)
(44
)
(44
)
(23
)
Balance at end of year
$
1,349

$
1,508

$
294

Cumulative other comprehensive loss:
 
 
 
Balance at beginning of year
$
(1,393
)
$
(686
)
$
(1,558
)
Annual changes – net of tax:
 
 
 
Foreign currency translation adjustments
(97
)
(50
)
(59
)
Changes in unamortized net pension and other postretirement benefit loss (Note 9)
282

(554
)
902

Changes in unamortized prior service credit (cost) (Note 9)
(4
)
(103
)
27

Unrealized gains on available-for-sale securities


2

Balance at end of year
$
(1,212
)
$
(1,393
)
$
(686
)
Total Weyerhaeuser shareholders’ interest:
 
 
 
Balance at end of year
$
4,869

$
5,304

$
6,795

Noncontrolling interests:
 
 
 
Balance at beginning of year
$

$
37

$
43

New consolidations, de-consolidations and other transactions

(37
)
(6
)
Balance at end of year
$

$

$
37

Total equity:
 
 
 
Balance at end of year
$
4,869

$
5,304

$
6,832

See accompanying Notes to Consolidated Financial Statements.

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INDEX FOR NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1:
NOTE 2:
NOTE 3:
NOTE 4:
ACQUISITIONS
NOTE 5:
NOTE 6:
NOTE 7:
NOTE 8:
NOTE 9:
NOTE 10:
NOTE 11:
NOTE 12:
NOTE 13:
NOTE 14:
NOTE 15:
NOTE 16:
NOTE 17:
NOTE 18:
NOTE 19:
OTHER OPERATING COSTS (INCOME), NET
NOTE 20:
NOTE 21:
NOTE 22:
 


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Our significant accounting policies describe:
our election to be taxed as a real estate investment trust,
how we report our results,
changes in how we report our results and
how we account for various items.
OUR ELECTION TO BE TAXED AS A REAL ESTATE INVESTMENT TRUST (REIT)
Starting with our 2010 fiscal year, we elected to be taxed as a REIT. We expect to derive most of our REIT income from investments in timberlands, including the sale of standing timber through pay-as-cut sales contracts. REIT income can be distributed to shareholders without first paying corporate level tax, substantially eliminating the double taxation on income. A significant portion of our timberland segment earnings receives this favorable tax treatment. We are no longer subject to corporate taxes on built-in-gains (the excess of fair market value over tax basis at January 1, 2010) due to a change in tax law in the fourth quarter 2015, which statutorily shortened the built-in-gains tax period from 10 years to 5 years following the REIT conversion.  We continue to be required to pay federal corporate income taxes on earnings of our Taxable REIT Subsidiary (TRS), which includes our manufacturing businesses and the portion of our Timberlands segment income included in the TRS.
HOW WE REPORT OUR RESULTS
Our report includes:
consolidated financial statements,
our business segments,
foreign currency translation,
estimates, and
fair value measurements.
CONSOLIDATED FINANCIAL STATEMENTS
Our consolidated financial statements provide an overall view of our results and financial condition. They include our accounts and the accounts of entities that we control, including:
majority-owned domestic and foreign subsidiaries and
variable interest entities in which we are the primary beneficiary.
They do not include our intercompany transactions and accounts, which are eliminated, and noncontrolling interests are presented as a separate component of equity.
We account for investments in and advances to unconsolidated equity affiliates using the equity method. We record our share of equity in net earnings of equity affiliates within "Earnings (loss) from equity affiliates" in our Consolidated Statement of Operations in the period in which the earnings are recorded by our equity affiliates.
Throughout these Notes to Consolidated Financial Statements, unless specified otherwise, references to “Weyerhaeuser,” "the company," “we” and “our” refer to the consolidated company.
OUR BUSINESS SEGMENTS
We are principally engaged in:
growing and harvesting timber; and
manufacturing, distributing and selling products made from trees.
Our business segments are organized based primarily on products and services.
Our Business Segments and Products
SEGMENT
PRODUCTS AND SERVICES
Timberlands
Logs, timber, minerals, oil and gas and international wood products
Wood Products
Softwood lumber, engineered wood products, structural panels and building materials distribution
Cellulose Fibers
Pulp, liquid packaging board and an equity interest in a newsprint joint venture
We also transfer raw materials, semifinished materials and end products among our business segments. Because of this intracompany activity, accounting for our business segments involves:
pricing products transferred between our business segments at current market values and
allocating joint conversion and common facility costs according to usage by our business segment product lines.

Gains or charges not related to or allocated to an individual operating segment are held in Unallocated Items. This includes a portion of items such as: share-based compensation; pension and postretirement costs; foreign exchange transaction gains and losses associated with financing; and the elimination of intersegment profit in inventory and the LIFO reserve.

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FOREIGN CURRENCY TRANSLATION
Local currencies are the functional currencies for most of our operations outside the U.S. We translate foreign currencies into U.S. dollars in two ways:
assets and liabilities — at the exchange rates in effect as of our balance sheet date; and
revenues and expenses — at average monthly exchange rates throughout the year.
ESTIMATES
We prepare our financial statements according to U.S. generally accepted accounting principles (U.S. GAAP). This requires us to make estimates and assumptions during our reporting periods and at the date of our financial statements. The estimates and assumptions affect our:
reported amounts of assets, liabilities and equity;
disclosure of contingent assets and liabilities; and
reported amounts of revenues and expenses.
While we do our best in preparing these estimates, actual results can and do differ from those estimates and assumptions.
FAIR VALUE MEASUREMENTS
We use a fair value hierarchy in accounting for certain nonfinancial assets and liabilities including:
long-lived assets (asset groups) measured at fair value for an impairment assessment,
reporting units measured at fair value in the first step of a goodwill impairment test,
nonfinancial assets and nonfinancial liabilities measured at fair value in the second step of a goodwill impairment assessment,
assets acquired and liabilities assumed in a business acquisition and
asset retirement obligations initially measured at fair value.
The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions.
The fair value hierarchy consists of the following three levels:
Level 1 — Inputs are quoted prices in active markets for identical assets or liabilities.
Level 2 — Inputs are:
– quoted prices for similar assets or liabilities in an active market;
– quoted prices for identical or similar assets or liabilities in markets that are not active; or
– inputs other than quoted prices that are observable and market-corroborated inputs, which are derived principally from or corroborated by observable market data.
Level 3 — Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.
CHANGES IN HOW WE REPORT OUR RESULTS
Changes in how we report our results come from:
accounting changes made upon our adoption of new accounting guidance and
our reclassification of certain balances and results from prior years to make them consistent with our current reporting.
RECLASSIFICATIONS
We have reclassified certain balances and results from the prior years to be consistent with our 2015 reporting. This makes year-to-year comparisons easier. Our reclassifications had no effect on net earnings or Weyerhaeuser shareholders’ interest. Our reclassifications present the results of operations discontinued in 2014 separately on our Consolidated Statement of Operations and in the related footnotes. Note 3: Discontinued Operations provides more information about our discontinued operations.
NEW ACCOUNTING PRONOUNCEMENTS
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, a comprehensive new revenue recognition model that requires an entity to recognize revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration it expects to receive in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09 for an additional year. We plan to adopt the standard on January 1, 2018 and may use either the retrospective or cumulative effect transition method. We are evaluating the impact that ASU 2014-09 will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor determined the effect of the standard on our ongoing financial reporting.
In April 2015, FASB issued ASU 2015-03, which amends the presentation of debt issuance costs on the consolidated balance sheet. Under the new guidance, debt issuance costs are presented as a direct deduction from the carrying amount of the debt liability rather than as an asset. The new guidance is effective retrospectively for fiscal periods starting after December 15, 2015 and early adoption is permitted. We expect to adopt ASU 2015-03 on January 1, 2016 and have determined that its adoption will not have a material impact on our consolidated financial statements and related disclosures at that time.
In May 2015, FASB issued ASU 2015-07, which clarifies the presentation within the fair value hierarchy of certain investments held within our pension plan. The new guidance is effective retrospectively for fiscal periods starting after December 15, 2015 and early adoption is permitted. We expect to adopt ASU 2015-07 on January 1, 2016. This new guidance eliminates the requirement to categorize certain pension investments

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in the fair value hierarchy. Upon adoption these investments will be presented separately from the fair value hierarchy and reconciled to total investments in our consolidated financial statements and related disclosures.
In July 2015, FASB issued ASU 2015-11, which simplifies the measurement of inventories valued under most methods, including our inventories valued under FIFO – the first-in, first-out – and moving average cost methods. Inventories valued under LIFO – the last-in, first-out method – are excluded. Under this new guidance, inventories valued under these methods would be valued at the lower of cost or net realizable value, with net realizable value defined as the estimated selling price less reasonable costs to sell the inventory. The new guidance is effective prospectively for fiscal periods starting after December 15, 2016 and early adoption is permitted. We expect to adopt ASU 2015-11 on January 1, 2017 and are evaluating the impact on our consolidated financial statements and related disclosures.
In September 2015, FASB issued ASU 2015-16, which requires an acquirer in a business combination to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The update also requires the acquirer to record, in the same period's financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects that result from the change to provisional amounts, calculated as if the accounting had been completed at the acquisition date, and to disclose the portion of the amount recorded in current period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The new guidance is effective prospectively for fiscal periods starting after December 15, 2015 and early adoption is permitted. We expect to adopt ASU 2015-16 on January 1, 2016 and have determined that its adoption will not have a material impact on our consolidated financial statements and related disclosures at that time.
In November 2015, FASB issued ASU 2015-17, which simplifies the presentation of deferred income taxes by no longer requiring deferred tax assets and liabilities to be classified as current or noncurrent, instead requiring that all deferred tax assets and liabilities be classified as noncurrent. The new guidance is effective for annual periods starting after December 15, 2017 and early adoption is permitted. We elected to adopt ASU 2015-17 effective October 1, 2015 and have reclassified deferred tax assets and liabilities accordingly in our consolidated balance sheet and in related disclosures for all periods presented.
HOW WE ACCOUNT FOR VARIOUS ITEMS
This section provides information about how we account for certain key items related to:
capital investments,
financing our business and
operations.
ITEMS RELATED TO CAPITAL INVESTMENTS
Key items related to accounting for capital investments pertain to property and equipment, timber and timberlands, impairment of long-lived assets and goodwill.
Property and Equipment
We maintain property accounts on an individual asset basis. Here is how we handle major items:
Improvements to and replacements of major units of property are capitalized.
Maintenance, repairs and minor replacements are expensed.
Depreciation is calculated using a straight-line method at rates based on estimated service lives.
Logging roads are generally amortized — as timber is harvested — at rates based on the volume of timber estimated to be removed.
Cost and accumulated depreciation of property sold or retired are removed from the accounts and the gain or loss is included in earnings.
Timber and Timberlands
We carry timber and timberlands at cost less depletion charged to disposals. Depletion refers to the carrying value of timber that is harvested, lost as a result of casualty, or sold.
Key activities affecting how we account for timber and timberlands include:
reforestation,
depletion and
forest management in Canada.
Reforestation. Generally, we capitalize initial site preparation and planting costs as reforestation. We transfer reforestation to a merchantable timber classification when the timber is considered harvestable. That generally occurs after:
15 years in the South and
30 years in the West.
Generally, we expense costs after the first planting as they are incurred or over the period of expected benefit. These costs include:
fertilization,
vegetation and insect control,
pruning and precommercial thinning,
property taxes and
interest.
Accounting practices for these costs do not change when timber becomes merchantable and harvesting starts.
Depletion. To determine depletion rates, we divide the net carrying value of timber by the related volume of timber estimated to be available over the growth cycle. To determine the growth cycle volume of timber, we consider:
regulatory and environmental constraints,
our management strategies,

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inventory data improvements,
growth rate revisions and recalibrations and
known dispositions and inoperable acres.
We include the cost of timber harvested in the carrying values of raw materials and product inventories. As these inventories are sold to third parties, we include them in the cost of products sold.
Forest management in Canada. We managed timberlands under long-term licenses in various Canadian provinces that are:
granted by the provincial governments;
granted for initial periods of 15 to 25 years; and
renewable provided we meet reforestation, operating and management guidelines.
Calculation of the fees we pay on the timber we harvest:
varies from province to province,
is tied to product market pricing and
depends upon the allocation of land management responsibilities in the license.
Impairment of Long-Lived Assets
We review long-lived assets — including certain identifiable intangibles — for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Impaired assets held for use are written down to fair value. Impaired assets held for sale are written down to fair value less cost to sell. We determine fair value based on:
appraisals,
market pricing of comparable assets,
discounted value of estimated cash flows from the asset and
replacement values of comparable assets.
Goodwill
Goodwill is the purchase price minus the fair value of net assets acquired when we buy another entity. We assess goodwill for impairment:
using a fair-value-based approach and
at least annually — at the beginning of the fourth quarter.
In 2015 the fair value of the reporting unit with goodwill substantially exceeded its carrying value.
ITEMS RELATED TO FINANCING OUR BUSINESS
Key items related to financing our business include financial instruments, cash and cash equivalents, accounts payable and concentration of risk.
Financial Instruments
We estimate the fair value of financial instruments where appropriate. The assumptions we use — including the discount rate and estimates of cash flows — can significantly affect our fair-value amounts. Our fair values are estimates and may not match the amounts we would realize upon sale or settlement of our financial positions.
Cash and Cash Equivalents
Cash equivalents are investments with original maturities of 90 days or less. We state cash equivalents at cost, which approximates market.
Accounts Payable
Our banking system replenishes our major bank accounts daily as checks we have issued are presented for payment. As a result, we have negative book cash balances due to outstanding checks that have not yet been paid by the bank. These negative balances are included in accounts payable on our Consolidated Balance Sheet. Changes in these negative cash balances are reported as financing activities in our Consolidated Statement of Cash Flows. We had no negative book cash balances as of December 31, 2015 and December 31, 2014.
Concentration of Risk
We disclose customers that represent a concentration of credit risk. As of December 31, 2015, no customer accounted for 10 percent or more of our net sales or accounts receivable balances.
ITEMS RELATED TO OPERATIONS
Key items related to operations include revenue recognition, inventories, shipping and handling costs, income taxes, share-based compensation, pension and other postretirement plans, and environmental remediation.
Revenue Recognition
Operations generally recognize revenue upon shipment to customers. For certain export sales, revenue is recognized when title transfers at the foreign port.
For timberland sales, we recognize revenue when title and possession have been transferred to the buyer and all other criteria for sale and profit recognition have been satisfied.
Inventories
We state inventories at the lower of cost or market. Cost includes labor, materials and production overhead. LIFO — the last-in, first-out method — applies to major inventory products held at our U.S. domestic locations. We began to use the LIFO method for domestic products in the 1940s as required to conform with the tax method elected. Subsequent acquisitions of entities added new products under the FIFO — the first-in, first-

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out method — or moving average cost methods that have continued under those methods. The FIFO or moving average cost methods applies to the balance of our domestic raw material and product inventories as well as for all material and supply inventories and all foreign inventories.
Shipping and Handling Costs
We classify shipping and handling costs in the costs of products sold in our Consolidated Statement of Operations.
Income Taxes
We account for income taxes under the asset and liability method. Unrecognized tax benefits represent potential future funding obligations to taxing authorities if uncertain tax positions the company has taken on previously filed tax returns are not sustained. In accordance with the company’s accounting policy, accrued interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense.
We recognize deferred tax assets and liabilities to reflect:
future tax consequences due to differences between the carrying amounts for financial purposes and the tax bases of certain items and
operating loss and tax credit carryforwards.
To measure deferred tax assets and liabilities, we:
determine when the differences between the carrying amounts and tax bases of affected items are expected to be recovered or resolved and
use enacted tax rates expected to apply to taxable income in those years.
Share-Based Compensation
We generally measure the fair value of share-based awards on the dates they are granted or modified. These measurements establish the cost of the share-based awards for accounting purposes. We then recognize the cost of share-based awards in our Consolidated Statement of Operations over each employee’s required service period. Note 17: Share-Based Compensation provides more information about our share-based compensation.
Pension and Other Postretirement Benefit Plans
We recognize the overfunded or underfunded status of our defined benefit pension and other postretirement plans on our Consolidated Balance Sheet and recognize changes in the funded status through comprehensive income (loss) in the year in which the changes occur.
Actuarial valuations determine the amount of the pension and other postretirement benefit obligations and the net periodic benefit cost we recognize. The net periodic benefit cost includes:
cost of benefits provided in exchange for employees’ services rendered during the year;
interest cost of the obligations;
expected long-term return on fund assets;
gains or losses on plan settlements and curtailments;
amortization of prior service costs and plan amendments over the average remaining service period of the active employee group covered by the plans or the average remaining life expectancy in situations where the plan participants affected by the plan amendment are inactive; and
amortization of cumulative unrecognized net actuarial gains and losses — generally in excess of 10 percent of the greater of the benefit obligation or market-related value of plan assets at the beginning of the year — over the average remaining service period of the active employee group covered by the plans or the average remaining life expectancy in situations where the plan participants are inactive.
Pension plans. We have pension plans covering most of our employees. Determination of benefits differs for salaried, hourly and union employees:
Salaried employee benefits are based on each employee’s highest monthly earnings for five consecutive years during the final 10 years before retirement.
Hourly and union employee benefits generally are stated amounts for each year of service.
Union employee benefits are set through collective-bargaining agreements.
We contribute to our U.S. and Canadian pension plans according to established funding standards. The funding standards for the plans are:
U.S. pension plans — according to the Employee Retirement Income Security Act of 1974; and
Canadian pension plans — according to the applicable provincial pension act and the Income Tax Act.
Postretirement benefits other than pensions. We provide certain postretirement health care and life insurance benefits for some retired employees. In some cases, we pay a portion of the cost of the benefit. Note 9: Pension and Other Postretirement Benefit Plans provides additional information about changes made in our postretirement benefit plans during 2015 and 2014.
Environmental Remediation
We accrue losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when the recovery is deemed probable and does not exceed the amount of losses previously recorded.


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NOTE 2: BUSINESS SEGMENTS
Our business segments and how we account for those segments are discussed in Note 1: Summary of Significant Accounting Policies. This note provides key financial data by business segment.
DISCONTINUED OPERATIONS
In 2014 we disposed of Weyerhaeuser Real Estate Company (WRECO) that is excluded from the segment results below. See Note 3: Discontinued Operations for information regarding our discontinued operations and the segments affected.
KEY FINANCIAL DATA BY BUSINESS SEGMENT
Sales and Contribution (Charge) to Earnings
DOLLAR AMOUNTS IN MILLIONS
  
TIMBERLANDS

WOOD
PRODUCTS

CELLULOSE
FIBERS

UNALLOCATED ITEMS(1) AND INTERSEGMENT ELIMINATIONS

CONSOLIDATED

Sales to unaffiliated customers
2015
$
1,350

$
3,872

$
1,860

$

$
7,082

2014
$
1,497

$
3,970

$
1,936

$

$
7,403

2013
$
1,343

$
4,009

$
1,902

$

$
7,254

Intersegment sales
2015
$
830

$
82

$

$
(912
)
$

2014
$
867

$
80

$

$
(947
)
$

2013
$
799

$
71

$

$
(870
)
$

Contribution (charge) to earnings from continuing operations
2015
$
549

$
258

$
119

$
(76
)
$
850

2014
$
613

$
327

$
291

$
126

$
1,357

2013
$
470

$
441

$
200

$
(422
)
$
689

(1) Unallocated Items are gains or charges not related to or allocated to an individual operating segment. They include a portion of items such as: share-based compensation, pension and postretirement costs, foreign exchange transaction gains and losses associated with financing, and the elimination of intersegment profit in inventory and the LIFO reserve.
Management evaluates segment performance based on the contributions to earnings of the respective segments. An analysis and reconciliation of our business segment information to the consolidated financial statements follows:
Reconciliation of Contribution to Earnings to Net Earnings Attributable to Weyerhaeuser
DOLLAR AMOUNTS IN MILLIONS
  
2015

2014

2013

Net contribution to earnings from continuing operations
$
850

$
1,357

$
689

Net contribution to earnings from discontinued operations

1,017

116

Total contribution to earnings
850

2,374

805

Interest expense, net of capitalized interest (continuing and discontinued operations)
(347
)
(347
)
(371
)
Income before income taxes (continuing and discontinued operations)
503

2,027

434

Income taxes (continuing and discontinued operations)
3

(201
)
129

Net earnings attributable to Weyerhaeuser
$
506

$
1,826

$
563

 

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Additional Financial Information
DOLLAR AMOUNTS IN MILLIONS
  
TIMBERLANDS

WOOD
PRODUCTS

CELLULOSE
FIBERS

UNALLOCATED
ITEMS

CONSOLIDATED

Depreciation, depletion and amortization
2015
$
209

$
106

$
154

$
10

$
479

2014
$
207

$
119

$
155

$
12

$
493

2013
$
166

$
123

$
156

$
13

$
458

Net pension and postretirement cost (credit)(1)
2015
$
9

$
27

$
17

$
(11
)
$
42

2014
$
10

$
24

$
11

$
(45
)
$

2013
$
10

$
28

$
18

$
40

$
96

Charges for restructuring, closures and impairments(2)
2015
$

$
10

$

$
15

$
25

2014
$
1

$
2

$

$
41

$
44

2013
$
2

$
13

$

$
362

$
377

Earnings (loss) from equity affiliates
2015
$

$

$
(105
)
$

$
(105
)
2014
$

$

$
(1
)
$

$
(1
)
2013
$

$

$
3

$
(2
)
$
1

Capital expenditures
2015
$
75

$
287

$
118

$
3

$
483

2014
$
74

$
190

$
123

$
4

$
391

2013
$
73

$
113

$
92

$
5

$
283

Investments in and advances to equity affiliates and unconsolidated entities
2015
$

$

$
74

$

$
74

2014
$

$

$
188

$

$
188

2013
$

$

$
190

$

$
190

Total assets(3)
2015
$
7,260

$
1,541

$
1,984

$
1,701

$
12,486

2014
$
7,327

$
1,430

$
2,214

$
2,294

$
13,265

2013
$
7,578

$
1,326

$
2,299

$
3,169

$
14,372

(1) Net pension and postretirement cost (credit) excludes special items, as well as the recognition of curtailments, settlements and special termination benefits due to closures, restructuring or divestitures. See Note 9: Pension and Other Postretirement Benefit Plans for more information.
(2)   See
Note 18: Charges for Restructuring, Closures and Asset Impairments for more information
(3) Unallocated Items total assets includes assets of discontinued operations in 2013.
STRATEGIC EVALUATION OF CELLULOSE FIBERS
On November 8, 2015 Weyerhaeuser announced that the board of directors authorized the exploration of strategic alternatives for its Cellulose Fibers business segment. At this time there can be no assurance that the board's evaluation process will result in any transaction or that any transaction, if pursued, will be consummated.

NOTE 3: DISCONTINUED OPERATIONS
We have made certain reclassifications in our consolidated financial statements to reflect discontinued operations related to WRECO which was previously reported under the Real Estate segment and Unallocated Items.
OPERATIONS INCLUDED IN DISCONTINUED OPERATIONS
Divestiture of WRECO
On July 7, 2014, we completed the following set of transactions resulting in our homebuilding and real estate development business becoming wholly-owned by TRI Pointe Homes, Inc. (TRI Pointe):
the distribution of shares of WRECO to our shareholders in exchange for 59 million shares of our common stock; and
the merger of WRECO into a special purpose subsidiary of TRI Pointe, with WRECO surviving the merger and becoming a wholly-owned subsidiary of TRI Pointe.
Collectively, these transactions are referred to as the “Real Estate Divestiture”.
During June 2014, our wholly-owned subsidiary, WRECO, issued $900 million of unsecured and unsubordinated senior debt obligations. The net proceeds after deducting the discount, underwriting fees and issuance costs were $870 million. At the close of the Real Estate Divestiture in July 2014, WRECO used $744 million of the debt proceeds to repay intercompany debt and interest to Weyerhaeuser Company. The newly issued

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debt, remaining proceeds and other WRECO assets and liabilities, including $5 million cash on hand, were acquired by TRI Pointe when WRECO became a wholly-owned subsidiary of TRI Pointe at the closing of the transaction. Additionally, $32 million related to the adjustment amount payable pursuant to the terms of the transaction agreement was paid to TRI Pointe. Our net cash proceeds in connection with the Real Estate Divestiture totaled $707 million.
Prior to the distribution of WRECO shares to our shareholders, WRECO was a wholly-owned subsidiary. Concurrent with the distribution to shareholders, WRECO ceased being a subsidiary.
The following table presents the components of the net gain on divestiture:
DOLLAR AMOUNTS IN MILLIONS
  
2014

Proceeds:
 
Common shares tendered (58,813,151 shares at $33.22 per share)
$
1,954

Cash
707

 
2,661

Less:
 
Net book value of contributed assets
(1,671
)
Transaction costs, net of reimbursement
(18
)
 
(1,689
)
Gain on WRECO divestiture
$
972

The net gain on the Real Estate Divestiture of $972 million is not taxable and was recognized in 2014 in discontinued operations.
NET EARNINGS FROM DISCONTINUED OPERATIONS
Sales and Net Earnings from Discontinued Operations
 
  
2014(1)

2013

Net sales from discontinued operations
$
573

$
1,275

Income from discontinued operations
42

114

Income taxes
(16
)
(42
)
Net income from operations
26

72

Net gain on divestiture
972


Net earnings from discontinued operations
998

72

(1) Discontinued operations in 2014 covered only 188 days.
Results of discontinued operations exclude certain general corporate overhead costs that have been allocated to and are included in contribution to earnings for the operating segments.

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CARRYING VALUE OF ASSETS AND LIABILITES OF DISCONTINUED OPERATIONS
The following table shows carrying values for assets and liabilities classified as discontinued operations as of December 31, 2013.
Carrying Value of Assets and Liabilities of Discontinued Operations
DOLLAR AMOUNTS IN MILLIONS

December 31, 2013

Assets
 
Cash and cash equivalents
$
5

Receivables, less discounts and allowances
51

Prepaid expenses
11

Total current assets
67

Property and equipment, net
15

Real estate in process of development and for sale
851

Land being processed for development
596

Investments in and advances to equity affiliates
21

Deferred tax assets
136

Other assets
96

Total noncurrent assets
1,715

Total assets
$
1,782

Liabilities
 
Accounts payable
$
41

Accrued liabilities
113

Total current liabilities
154

Long-term debt (nonrecourse to the company) held by variable interest entities
5

Other liabilities
27

Total noncurrent liabilities
32

Total liabilities
$
186

Noncontrolling interests
$
34


NOTE 4: ACQUISITIONS
PENDING MERGER WITH PLUM CREEK
On November 6, 2015 Weyerhaeuser Company and Plum Creek Timber, Inc., entered into an Agreement and Plan of Merger (“Merger Agreement”) pursuant to which Plum Creek will merge with and into Weyerhaeuser Company with Weyerhaeuser continuing as the surviving corporation. Under the terms of the Merger Agreement, Plum Creek shareholders will receive 1.60 shares of Weyerhaeuser common shares for each share of Plum Creek common stock at the closing date. Plum Creek is a REIT that owns and manages timberlands in the United States. In addition Plum Creek produces wood products, develops opportunities for mineral and other natural resource extraction, and develops and sells real estate properties.
Because the exchange ratio was fixed at the time of the merger agreement and the market value of our common stock will continue to fluctuate, the total value of the consideration exchanged will not be determinable until the closing date. The number of shares to be issued with respect to Plum Creek stock awards will not be determinable until the closing of the transaction. We have estimated the total consideration expected to be issued to Plum Creek shareholders in the merger to be 278 million shares of our common stock based on the 1.60 exchange ratio and the number of shares of Plum Creek common stock issued and outstanding as of November 30, 2015.
The merger agreement has been approved by both companies' board of directors. The closing of the merger is subject to approval by the shareholders of Plum Creek, the approval by our shareholders of the issuance of Weyerhaeuser Company common stock to Plum Creek's shareholders, receipt of certain regulatory approvals and other conditions specified in the merger agreement. The merger is expected to close in the first quarter of 2016.
LONGVIEW TIMBER PURCHASE
On July 23, 2013, we purchased 100 percent of the equity interests in Longview Timber LLC (Longview Timber) for $1.58 billion cash and assumed debt of $1.07 billion, for an aggregate purchase price of $2.65 billion. Longview Timber was a privately-held Delaware limited liability company engaged in the ownership and management of approximately 645,000 acres of timberlands in Oregon and Washington. We believe Longview Timber has productive lands with favorable age class distribution that will provide us with optionality for harvest. Earnings, assets and liabilities from this business are reported as part of the Timberlands segment beginning in third quarter 2013.

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Summarized Unaudited Pro Forma Information that Presents Combined Amounts as if this Acquisition Occurred at the Beginning of 2012
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES
  
2013

Net sales
$
7,371

Net earnings from continuing operations attributable to Weyerhaeuser common shareholders
$
485

Net earnings from continuing operations per share attributable to Weyerhaeuser common shareholders, basic
$
0.84

Net earnings from continuing operations per share attributable to Weyerhaeuser common shareholders, diluted
$
0.83

Estimated Fair Values of Identifiable Assets Acquired and Liabilities Assumed as of the Acquisition Date
DOLLAR AMOUNTS IN MILLIONS
  
July 23,
2013

Measurement Period Adjustments

December 31,
2013

Current assets
$
46

$

$
46

Property and equipment
39

1

40

Timber and timberlands
2,654

2

2,656

Other assets
2


2

Total assets acquired
2,741

3

2,744

Current liabilities
10


10

Long-term debt
1,122


1,122

Other liabilities
5

3

8

Total liabilities assumed
1,137

3

1,140

Net assets acquired
$
1,604

$

$
1,604

The initial allocations of purchase price were recorded at the estimated fair value of assets acquired and liabilities assumed based upon the best information available to management. The purchase price allocation was finalized in the fourth quarter 2013. The measurement period adjustments reflect additional information obtained to record the fair value of certain assets acquired and liabilities assumed based on facts and circumstances existing as of the acquisition date.
In order to finance our purchase of Longview Timber, we issued the following:
29 million common shares on June 24, 2013, at the price of $27.75 per share for net proceeds of $781 million;
4.4 million common shares on July 8, 2013, at the price of $27.75 per share for net proceeds of $116 million, in connection with the exercise of an overallotment option; and
13.8 million of our 6.375 percent Mandatory Convertible Preference Shares, Series A, par value $1.00 and liquidation preference of $50.00 per share on June 24, 2013, for net proceeds of $669 million. See Note 16: Shareholders' Interest for more information.
For issuances of shares, excess of par value is recorded in "Other capital" in our Consolidated Balance Sheet.
Proceeds were used to finance the acquisition and pay related fees and expenses. We paid $11 million in fees related to a bridge loan in 2013. As of the close of the Longview Timber purchase, we did not draw from the loan and these fees were expensed in 2013, which is recorded in "Interest expense" in our Consolidated Statement of Operations.
We obtained additional debt financing in 2013 which was used to repay all of the assumed debt in 2013. See Note 13: Long-term Debt.

NOTE 5: NET EARNINGS PER SHARE
Our basic earnings per share attributable to Weyerhaeuser common shareholders for the last three years were:
$0.89 in 2015,
$3.20 in 2014 and
$0.95 in 2013.
Our diluted earnings per share attributable to Weyerhaeuser common shareholders for the last three years were:
$0.89 in 2015,
$3.18 in 2014 and
$0.95 in 2013.
This note discloses:
how we calculate basic and diluted net earnings per share and
shares excluded from dilutive effect.
HOW WE CALCULATE BASIC AND DILUTED NET EARNINGS PER SHARE
"Basic earnings" per share is net earnings available to common shareholders divided by the weighted average number of our outstanding common shares, including stock equivalent units where there is no circumstance under which those shares would not be issued.

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"Diluted earnings" per share is net earnings available to common shareholders divided by the sum of the:
weighted average number of our outstanding common shares and
the effect of our outstanding dilutive potential common shares.
Dilutive potential common shares may include:
outstanding stock options,
restricted stock units,
performance share units and
preference shares.
We use the treasury stock method to calculate the effect of our outstanding stock options, restricted stock units and performance share units. Share-based payment awards that are contingently issuable upon the achievement of specified performance or market conditions are included in our diluted earnings per share calculation in the period in which the conditions are satisfied.
We use the if-converted method to calculate the effect of our outstanding preference shares. In applying the if-converted method, conversion is not assumed for purposes of computing diluted earnings per share if the effect would be antidilutive. Preference shares are antidilutive whenever the amount of the dividend declared in or accumulated for the current period per common share obtainable on conversion exceeds diluted earnings per share exclusive of the preference shares.
Preference shares are evaluated for participation on a quarterly basis to determine whether two-class presentation is required. Preference shares are considered to be participating as of the financial reporting period end to the extent they would participate in dividends paid to common shareholders. Preference shares are not considered participating for the years ended December 31, 2015 and 2014. Under the provisions of the two-class method, basic and diluted earnings per share would be presented for both preference and common shareholders.
SHARES EXCLUDED FROM DILUTIVE EFFECT
The following shares were not included in the computation of diluted earnings per share because they were either antidilutive or the required performance or market conditions were not met. Some or all of these shares may be dilutive potential common shares in future periods.
We issued 13.8 million 6.375 percent Mandatory Convertible Preference Shares, Series A on June 24, 2013. We do not include these shares in our calculation of diluted earnings per share because they are antidilutive. See Note 4: Acquisitions.
Potential Shares Not Included in the Computation of Diluted Earnings per Share
Shares in thousands
2015

2014

2013

Stock options
5,016


4,618

Performance share units
155



Preference Shares
25,307

24,988

24,865


NOTE 6: INVENTORIES
Inventories include raw materials, work-in-process and finished goods.
Inventories as of the End of Our Last Two Years
DOLLAR AMOUNTS IN MILLIONS
  
DECEMBER 31,
2015

DECEMBER 31,
2014

LIFO inventories:
 
 
Logs and chips
$
15

$
9

Lumber, plywood and panels
48

55

Pulp and paperboard
111

122

Other products
11

11

FIFO or moving average cost inventories:
 
 
Logs and chips
38

38

Lumber, plywood, panels and engineered wood products
75

80

Pulp and paperboard
32

35

Other products
90

96

Materials and supplies
148

149

Total
$
568

$
595

If we used FIFO for all inventories, our stated inventories would have been $124 million and $120 million higher as of December 31, 2015 and December 31, 2014, respectively.
HOW WE ACCOUNT FOR OUR INVENTORIES
The Inventories section of Note 1: Summary of Significant Accounting Policies provides details about how we account for our inventories.
 

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NOTE 7: PROPERTY AND EQUIPMENT
Property and equipment includes land, buildings and improvements, machinery and equipment, roads and other items.
Carrying Value of Property and Equipment and Estimated Service Lives
DOLLAR AMOUNTS IN MILLIONS
  
RANGE OF LIVES
DECEMBER 31,
2015

DECEMBER 31,
2014

Property and equipment, at cost:
 
 
 
Land
N/A  
$
121

$
127

Buildings and improvements
10–40
1,208

1,220

Machinery and equipment
2–25
6,675

6,706

Roads
10–20
624

609

Other
3–10
252

285

Total cost
 
8,880

8,947

Allowance for depreciation and amortization
 
(6,294
)
(6,324
)
Property and equipment, net
 
$
2,586

$
2,623

SERVICE LIVES AND DEPRECIATION
Buildings and improvements for property and equipment have estimated lives that are generally at either the high end or low end of the range from 10 years to 40 years, depending on the type and performance of construction.
The maximum service lives for machinery and equipment varies among our operations:
Timberlands — 15 years;
Wood products manufacturing facilities — 20 years; and
Pulp mills — 25 years.
Depreciation expense, excluding discontinued operations, was:
$314 million in 2015,
$332 million in 2014 and
$332 million in 2013.

NOTE 8: EQUITY AFFILIATES
We have investments in unconsolidated equity affiliates over which we have significant influence that we account for using the equity method with taxes provided on undistributed earnings. We record our share of net earnings within "Earnings (loss) from equity affiliates" in our Consolidated Statement of Operations in the period in which earnings are recorded by the affiliates.
Details About Our Equity Affiliates
As of December 31, 2015, we hold a 50 percent ownership interest in North Pacific Paper Corporation (NORPAC). NORPAC owns and operates a newsprint manufacturing facility in Longview, Washington. Our share of the net earnings of NORPAC is reported in our Cellulose Fibers segment.
In the fourth quarter of 2015, it was determined that the joint venture’s book value of certain long-lived assets was not recoverable and an impairment charge was recorded to measure these assets at fair value. The fair value of the asset group was estimated based on a combination of income and market approaches using significant unobservable inputs. Key assumptions include (a) the timing and amounts of future cash flows related to the asset group’s operations, (b) discount rates applicable to the future cash flows ranging from 10.5 percent to 14 percent and (c) earnings multiples of other entities’ asset groups deemed to be similar to the asset group. Weyerhaeuser’s earnings include an $84 million charge for our share of this asset impairment. Weyerhaeuser also recorded a related additional tax benefit of $28 million in its provision for income taxes as a result of the reduction of deferred tax liabilities associated with the reduction in the book basis of the investment in this equity affiliate. As such, the net charge to Weyerhaeuser related to this item was $56 million in the fourth quarter of 2015.
During 2014, Catchlight Energy was dissolved. We received no proceeds from the dissolution.
During 2013, we sold part of our investment in Liaison Technologies Inc. and recognized a $10 million pretax gain, which is recorded in "Interest income and other" on our Consolidated Statement of Operations and within Unallocated Items. Our remaining investment is accounted for under the cost method.
Unconsolidated Financial Information of Equity Affiliates
Aggregated assets, liabilities and operating results of the entities that we accounted for as equity affiliates are provided below.
Assets and Liabilities of Equity Affiliates
DOLLAR AMOUNTS IN MILLIONS
  
DECEMBER 31,
2015

DECEMBER 31,
2014

Current assets
$
89

$
123

Noncurrent assets
$
101

$
413

Current liabilities
$
25

$
30

Noncurrent liabilities
$
6

$
109


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Operating Results of Equity Affiliates
DOLLAR AMOUNTS IN MILLIONS
  
2015

2014

2013

Net sales
$
462

$
501

$
534

Operating income (loss)
$
(311
)
$
(2
)
$
3

Net income (loss)
$
(197
)
$

$
3

Doing Business with Affiliates
We provide goods and services to NORPAC, including raw materials and support services. The amounts paid to Weyerhaeuser by NORPAC for goods and services were:
$197 million in 2015,
$195 million in 2014 and
$203 million in 2013.
In addition, we manage cash for NORPAC under a services agreement. Weyerhaeuser holds the cash and records a payable balance to NORPAC, which is included in accounts payable in the accompanying Consolidated Balance Sheet. We had the following payable balances to NORPAC:
$46 million at December 31, 2015; and
$75 million at December 31, 2014.

NOTE 9: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
We sponsor several retirement programs for our employees.
This note provides details about:
types of plans we sponsor,
significant transactions and events affecting plans we sponsor,
funded status of plans we sponsor,
pension assets,
activity of plans we sponsor and
actuarial assumptions.
TYPES OF PLANS WE SPONSOR
The plans we sponsor in the U.S. and Canada differ according to each country’s requirements.
In the U.S., our pension plans are:
qualified — plans that qualify under the Internal Revenue Code; and
nonqualified — plans for select employees that provide additional benefits not qualified under the Internal Revenue Code.
In Canada, our pension plans are:
registered — plans that are registered under the Income Tax Act and applicable provincial pension acts; and
nonregistered — plans for select employees that provide additional benefits that may not be registered under the Income Tax Act or provincial pension acts.
We also offer retiree medical and life insurance plans in the U.S. and Canada. These plans are referred to as other postretirement benefit plans in the following disclosures.
Employee Eligibility and Accounting
The Pension and Other Postretirement Benefit Plans section of Note 1: Summary of Significant Accounting Policies provides information about employee eligibility for pension plans and postretirement health care and life insurance benefits, as well as how we account for the plans and benefits. See "Effects of Significant Transactions and Events" below for changes to eligibility in the pension and other postretirement benefit plans.
Measurement Date
We measure the fair value of pension plan assets and pension and other postretirement benefit obligations as of the end of our fiscal year. The fair value of pension plan assets are estimated at the end of the year and are revised in the first half of the following year when the information needed to finalize fair values is received. Additionally, we receive updated census data that is used to estimate our projected benefit obligation. As a result of the Real Estate Divestiture as well as our selling, general and administrative cost reduction initiative, we remeasured our U.S. qualified pension plan during third quarter 2014. There were no significant events that triggered a special remeasurement in 2015 or 2013.
EFFECTS OF SIGNIFICANT TRANSACTIONS AND EVENTS
The information that is provided in this note is affected by the following transactions and events.
Amendments of Pension and Other Postretirement Benefit Plans for Salaried Employees
Pension Benefit Plan Amendments
During fourth quarter 2013, we ratified an amendment to the Weyerhaeuser Pension Plan that closes the plan to newly hired and rehired salaried or non union employees effective January 1, 2014. Certain union employee groups adopted similar amendments effective at other dates. Beginning at the effective date, new hires and rehires into groups affected by these amendments will receive a company contribution for retirement in their 401(k) plan. The change was announced in December 2013.

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During fourth quarter 2013, we ratified amendments to the Weyerhaeuser Company Limited Retirement Plan for Non-Union Employees and the Retirement Plan for Non-Union Employees of Weyerhaeuser Company Limited at Grand Prairie, Alberta and Grande Cache, Alberta that (1) closes these plans to new hires and rehires effective January 1, 2014 and (2) changes the early retirement reduction for current employees enrolled in these plans, effective for future years of service beginning January 1, 2016. These changes were announced to participants in December 2013.
There were no material pension benefit plan amendments in 2014 or 2015.
Postretirement Medical and Life Insurance Benefit Plan Amendments
During fourth quarter 2014, the decision was ratified to reinstate or modify available options for U.S. and Canadian postretirement benefits for certain retirees. As a result, our postretirement obligation increased by $45 million.
During fourth quarter 2013, the decision was ratified to eliminate Company funding of the Post-Medicare Health Reimbursement Account (HRA) for certain salaried retirees after 2014. This change was communicated to affected retirees during January 2014. As a result, we recognized a pretax gain of $151 million in 2014 from this plan amendment.
There were no material postretirement medical or life insurance benefit plan amendments in 2015.
Midyear Remeasurement of Assets and Liabilities
Our pension plans are typically remeasured as of fiscal year-end unless a significant event occurs that requires remeasurement. As a result of the Real Estate Divestiture as well as our selling, general and administrative cost reduction initiative, we remeasured our U.S. qualified pension plan during third quarter 2014. There were no midyear remeasurements during 2015.
The net effect of the 2014 remeasurement was as follows:
We recognized a $9 million charge in third quarter 2014 for curtailments and special termination benefits. Of this amount, $6 million is included in the net gain on the Real Estate Divestiture and is presented in "Earnings from discontinued operations, net of income taxes" in our Consolidated Statement of Operations. The remaining $3 million is included in "Charges for restructuring, closures and impairments" in our Consolidated Statement of Operations.
The funded status of our U.S. qualified pension plan was reduced by $291 million primarily as a result of a decline in the discount rate used to calculate the projected benefit obligation and also due to asset performance and curtailment and special terminations. The discount rate used to remeasure the pension plans’ liabilities was changed from a rate of 4.9 percent at December 31, 2013 to rates reflective of current bond rates on the remeasurement date. A discount rate of 4.4 percent was used as of July 7, 2014. There was no change to the expected rate of return assumption.
Deferred tax liabilities decreased $108 million.
Total equity decreased $183 million for changes in "Cumulative other comprehensive loss", reflecting the net effect of the items discussed above. Amounts deferred in cumulative other comprehensive loss will be amortized into net periodic pension cost (credits) in future periods.
FUNDED STATUS OF PLANS WE SPONSOR
The funded status of the plans we sponsor is determined by comparing the projected benefit obligation with the fair value of plan assets at the end of the year.
Changes in Projected Benefit Obligations of Our Pension and Other Postretirement Benefit Plans
DOLLAR AMOUNTS IN MILLIONS
  
PENSION
OTHER
POSTRETIREMENT
BENEFITS
  
2015

2014

2015

2014

Reconciliation of projected benefit obligation:
 
 
 
 
Projected benefit obligation beginning of year
$
6,698

$
5,834

$
303

$
321

Service cost
57

53


1

Interest cost
265

271

9

10

Plan participants’ contributions


9

13

Actuarial (gains) losses
(309
)
1,006

(34
)
4

Foreign currency translation
(159
)
(87
)
(15
)
(7
)
Benefits paid (includes lump sum settlements)
(342
)
(391
)
(32
)
(44
)
Plan amendments and other
(1
)
1


2

Special/contractual termination benefits

7



Plan transfer/Acquisitions
2

4


3

Projected benefit obligation at end of year
$
6,211

$
6,698

$
240

$
303


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Changes in Fair Value of Plan Assets
DOLLAR AMOUNTS IN MILLIONS
  
PENSION
OTHER
POSTRETIREMENT
BENEFITS
  
2015

2014

2015

2014

Fair value of plan assets at beginning of year (estimated)
$
5,643

$
5,614

$

$

Adjustment for final fair value of plan assets
57

53



Actual return on plan assets
226

368



Foreign currency translation
(155
)
(75
)


Employer contributions and benefit payments
60

70

23

31

Plan participants’ contributions


9

13

Plan transfer/Acquisitions
2

4



Benefits paid (includes lump sum settlements)
(342
)
(391
)
(32
)
(44
)
Fair value of plan assets at end of year (estimated)
$
5,491

$
5,643

$

$

Funded Status of Our Pension and Other Postretirement Benefit Plans
DOLLAR AMOUNTS IN MILLIONS
  
PENSION
OTHER
POSTRETIREMENT
BENEFITS
  
2015

2014

2015

2014

Noncurrent assets
$
70

$
8

$

$

Current liabilities
(21
)
(21
)
(22
)
(26
)
Noncurrent liabilities
(769
)
(1,042
)
(218
)
(277
)
Funded status
$
(720
)
$
(1,055
)
$
(240
)
$
(303
)
Changes in actuarial assumptions decreased liabilities by $343 million as of the end of 2015 and had a positive effect on the funded status of the pension and postretirement plans. The primary drivers were the adoption of updated mortality tables for the U.S. pension and postretirement plans and changes in discount rates. The Company elected to implement the longevity assumption published by the Society of Actuaries in October 2015, effective December 31, 2015. Discount rates increased from 4.10 percent at the end of 2014 to 4.50 percent at the end of 2015 for the U.S. pension plans, and increased from 3.60 percent at the end of 2014 to 4.00 percent at the end of 2015 for U.S. postretirement. The discount rates increased from 3.90 percent at the end of 2014 to 4.00 percent at the end of 2015 for the Canadian pension plans, and increased from 3.80 percent at the end of 2014 to 3.90 percent at the end of 2015 for Canadian postretirement.
Our qualified and registered pension plans and a portion of our nonregistered pension plans are funded. We contribute to these plans according to established funding standards. The nonqualified pension plan, a portion of the nonregistered pension plans, and the other postretirement benefit plans are unfunded. For the unfunded plans, we pay benefits to retirees from our general assets as they come due.
The values reported for our pension plan assets at the end of 2015 and 2014 were estimated. Additional information regarding the year-end values generally becomes available to us during the first half of the following year. We increased the fair value of plan assets by $57 million to reflect final valuations as of December 31, 2014.
During 2015, we contributed $33 million for our Canadian registered plans, we made contributions and benefit payments of $3 million for our Canadian nonregistered pension plans and made benefit payments of $24 million for our nonqualified pension plans.
The asset or liability on our Consolidated Balance Sheet representing the funded status of the plans is different from the cumulative income or expense that we have recorded related to these plans. These differences are actuarial gains and losses and prior service costs and credits that are deferred and will be amortized into our periodic benefit costs in future periods. These unamortized amounts are recorded in "Cumulative Other Comprehensive Loss", which is a component of total equity on our Consolidated Balance Sheet. The Cumulative Other Comprehensive Income (Loss) section of Note 16: Shareholder's Interest details changes in the amounts included in cumulative other comprehensive income (loss) by component.
Accumulated Benefit Obligations Greater Than Plan Assets
As of December 31, 2015, pension plans with accumulated benefit obligations greater than plan assets had:
$5.5 billion in projected benefit obligations,
$5.4 billion in accumulated benefit obligations and
assets with a fair value of $4.7 billion.
As of December 31, 2014, pension plans with accumulated benefit obligations greater than plan assets had:
$6.6 billion in projected benefit obligations,
$6.5 billion in accumulated benefit obligations and
assets with a fair value of $5.6 billion.

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The accumulated benefit obligation for all of our defined benefit pension plans was:
$6.1 billion at December 31, 2015; and
$6.5 billion at December 31, 2014.
PENSION ASSETS
Our Investment Policies and Strategies
Our investment policies and strategies guide and direct how we manage funds for the benefit plans we sponsor. These funds include our:
U.S. Pension Trust — funds our U.S. qualified pension plans;
Canadian Pension Trust — funds our Canadian registered pension plans; and
Retirement Compensation Arrangements — fund a portion of our Canadian nonregistered pension plans.
U.S. and Canadian Pension Trusts
Our U.S. pension trust holds the funds for our U.S. qualified pension plans, while our Canadian pension trust holds the funds for our Canadian registered pension plans.
Our strategy within the trusts is to invest:
directly in a diversified mix of nontraditional investments; and
indirectly through derivatives to promote effective use of capital, increase returns and manage associated risk.
Consistent with past practice and in accordance with investment guidelines established by the company’s investment committee, the investment managers of the company’s pension plan asset portfolios utilize a diversified set of investment strategies.
Our direct investments include:
cash and short-term investments,
hedge funds,
private equity,
real estate fund investments and
common and preferred stocks.
Our indirect investments include:
equity index derivatives,
fixed income derivatives and
swaps and other derivative instruments.
The overall return for our pension trusts includes:
returns earned on our direct investments and
returns earned on the derivatives we use.
Cash and short-term investments generally consist of highly liquid money market and government securities and are primarily held to fund benefit payments, capital calls and margin requirements.
Hedge fund investments generally consist of privately-offered managed pools primarily structured as limited liability entities, with the general members or partners of such limited liability entities serving as portfolio manager and thus being responsible for the fund’s underlying investment decisions. Generally, these funds have varying degrees of liquidity and redemption provisions. Underlying investments within these funds may include long and short public and private equities, corporate, mortgage and sovereign debt, options, swaps, forwards and other derivative positions. These funds may also use varying degrees of leverage.
Private equity investments consist of investments in private equity, mezzanine, distressed, co-investments and other structures. Private equity funds generally participate in buyouts and venture capital of limited liability entities through unlisted equity and debt instruments. These funds may also employ borrowing at the underlying entity level. Mezzanine and distressed funds generally follow strategies of investing in the debt of public or private companies with additional participation through warrants or other equity type options.
Real estate fund investments in real property may be initiated through private transactions between principals or public market vehicles such as real estate investment trusts and are generally held in limited liability entities.
Common and preferred stocks are equity instruments that generally have resulted from transactions related to private equity investment holdings.
Swaps and other derivative instruments generally are comprised of swaps, futures, forwards or options. In accordance with our investment risk and return objectives, some of these instruments are utilized to achieve target equity and bond asset exposure or to reduce exposure to certain market risks or to help manage the liquidity of our investments. The resulting asset mix achieved is intended to allow the assets to perform comparably with established benchmarks. Others, mainly total return swaps with limited exchange of principal, are designed to gain exposure to the return characteristics of specific financial strategies.
All swap, forward and option contracts are executed in a diversified manner through a number of financial institutions and in accordance with our investment guidelines.
Retirement Compensation Arrangements
Retirement Compensation Arrangements fund a portion of our Canadian nonregistered pension plans.
Under Retirement Compensation Arrangements, our contributions are split:
50 percent to our investments in a portfolio of equities; and
50 percent to a noninterest-bearing refundable tax account held by the Canada Revenue Agency — as required by Canadian tax rules.

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The Canadian tax rules requirement means that — on average, over time — approximately 50 percent of our Canadian nonregistered pension plans’ assets do not earn returns.
Managing Risk
Investments and contracts, in general, are subject to risk, including market price, liquidity, currency, interest rate and credit risks. We have established governance practices to manage certain risks. The following provides an overview of these risks and describes actions we take to mitigate the potential adverse effects of these risks on the performance of our pension plan assets. Generally, we manage these risks through:
selection and diversification of managers and strategies,
use of limited-liability vehicles,
diversification and
constraining risk profiles to predefined limits on the percentage of pension trust assets that can be invested in certain categories.
Market price risk is the risk that the future value of a financial instrument will fluctuate as a result of changes in its market price, whether caused by factors specific to the individual investment, its issuer, or any other market factor that may affect its price. We attempt to mitigate market price risk on the company’s pension plan asset portfolios by investing in a diversified set of assets whose returns exhibit low correlation to those of traditional asset classes and each other. In addition, we and our investment advisers monitor the investments on a regular basis to ensure the decision to invest in particular assets continues to be suitable, including performing ongoing qualitative and quantitative assessments and comprehensive investment and operational due diligence. Special attention is paid to organizational changes made by the underlying fund managers and to changes in policy relative to their investment objectives, valuation, hedging strategy, degree of diversification, leverage, alignment of fund principles and investors, risk governance and costs.
Liquidity risk is the risk that the pension trusts will encounter difficulty in meeting obligations associated with their financial liabilities. Our financial obligations as they relate to the pension plans generally consist of distributions and redemptions payable to pension plan participants, payments to counterparties and fees to service providers. As established, pension plan assets primarily consist of investments in limited liability pools for which there is no active secondary market. As a result, the investments may be illiquid. Further, hedge funds are subject to potential restrictions that may affect the timing of the realization of pending redemptions. Private equity funds, including those private equity funds that invest in real estate assets, are subject to distribution and funding schedules that are set by the private equity funds’ respective managers and market activity, and the period over which the funds are expected to liquidate is uncertain and dependent upon realization of the respective funds' underlying investments which will vary over time. To mitigate liquidity risk on the company’s pension plan asset portfolios, private equity portfolios has been diversified across different vintage years and strategies and hedge fund portfolios have been diversified across investment fund managers, strategies and funds that possess varying liquidity provisions. By doing so, the company seeks to maintain a liquidity profile wherin the potential liquidity offered by the pension plan assets is diversified over time. For instance, under normal operating conditions, the frequency by which investments in hedge funds may be redeemed ranges from daily to every three years with notice periods as few as five days to as much as a year. This liquidity profile, however, can be impacted by existing terms that permit redemption restrictions and decisions by underlying fund managers to create illiquid side pockets, adopt a fund liquidation strategy or suspend redemptions altogether. In addition, the investment committee regularly reviews cash flows of the pension trusts and sets appropriate guidelines to address liquidity needs.
Currency risk arises from holding pension plan assets denominated in a currency other than the currency in which its liabilities are settled. Such risk is managed generally through notional contracts designed to hedge the net exposure to non-functional currencies.
Interest rate risk is the risk that a change in interest rates will adversely affect the fair value of fixed income securities. The pension trust’s primary exposure to interest rate risk is indirect and through their investments in limited liability pools. Such indirect exposure is managed by the respective fund managers in conjunction with their investment level decisions and predefined investment mandates.
Credit risk relates to the extent to which failures by counterparties to discharge their obligations could reduce the amount of future cash flows on hand at the balance sheet date. The pension trusts’ exposure to counterparty credit risk is reflected in settlement receivables from derivative contracts within the pension plan assets. In evaluating credit risk, we will often be dependent upon information provided by the counterparty or a rating agency, which may be inaccurate. We decrease exposure to credit risk by only dealing with highly-rated financial counterparties, and as of year-end, our counterparties each had a credit rating of at least A from Standard and Poor’s.
We further manage this risk through:
diversification of counterparties,
predefined settlement and margining provisions and
documented agreements.
We expect that none of our counterparties will fail to meet its obligations. Also, no principal is at risk as a result of these types of investments. Only the amount of unsettled net receivables is at risk.
We are also exposed to credit risk indirectly through counterparty relationships struck by the underlying managers of investments in limited liability pools. This indirect exposure is mitigated through a due diligence process, which focuses on monitoring each investment fund to ensure the decision to invest in or maintain exposure to a fund continues to be suitable for the pension plans’ asset portfolios.
While we do not target specific direct investment or derivative allocations, we have established guidelines on the percentage of pension trust assets that can be invested in certain categories to provide diversification by investment type fund and investment managers, as well as to manage overall liquidity.

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Assets within our qualified and registered pension plans in our U.S. and Canadian pension trusts were invested as follows:
 
December 31, 2015

December 31, 2014

Fixed income
13.1
 %
12.2
 %
Hedge funds
62.7

60.6

Private equity and related funds
23.0

25.3

Real estate and related funds
1.2

1.4

Common and preferred stock and equity index instruments
0.1

0.7

Accrued liabilities
(0.1
)
(0.2
)
Total
100.0
 %
100.0
 %
Assets within our nonregistered plans that we are allowed to manage were invested as follows:
 
December 31, 2015

December 31, 2014

Cash and cash equivalents
55.9
%
52.8
%
Equities
44.1

47.2

Total
100.0
%
100.0
%
Valuation of Our Plan Assets
The pension assets are stated at fair value based upon the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the reporting date. We do not value pension investments based upon a forced or distressed sale scenario. Instead, we consider both observable and unobservable inputs that reflect assumptions applied by market participants when setting the exit price of an asset or liability in an orderly transaction within the principal market of that asset or liability.
We value the pension plan assets based upon the observability of exit pricing inputs and classify pension plan assets based upon the lowest level input that is significant to the fair value measurement of the pension plan assets in their entirety. The fair value hierarchy we follow is outlined below;
Level 1: Inputs are unadjusted quoted prices for identical assets and liabilities traded in an active market.
Level 2: Inputs are quoted prices in non-active markets for which pricing inputs are observable either directly or indirectly at the reporting date.
Level 3: Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.
The pension assets are comprised of cash and short-term investments, derivative contracts, common and preferred stock and fund units. The fund units are typically limited liability interests in hedge funds, private equity funds, real estate funds and cash funds. Each of these assets participates in its own unique principal market.
Cash and short-term investments, when held directly, are valued at cost.
Common and preferred stocks are valued at exit prices quoted in the public markets.
Derivative contracts held by our pension trusts are not publicly traded and each derivative contract is specifically negotiated with a unique financial counterparty and references either illiquid fund units or a unique number of synthetic units of a publicly reported market index. The derivative contracts are valued based upon valuation statements received from the financial counterparties.
Fund units are valued based upon the net asset values of the funds which we believe represent the per-unit prices at which new investors are permitted to invest and the prices at which existing investors are permitted to exit. To the degree net asset values as of the end of the year have not been received, we use the most recently reported net asset values and adjust for market events and cash flows that have occurred between the interim date and the end of the year to estimate the fair values as of the end of the year.
Assets that do not have readily available quoted prices in an active market require a higher degree of judgment to value and have a higher degree of risk that the value that could have been realized upon sale as of the valuation date could be different from the reported value than assets with observable pricing inputs. It is possible that the full extent of market price, liquidity, currency, interest rate, or credit risks may not be fully factored into the fair values of our pension plan assets that use significant unobservable inputs. Approximately $4.7 billion, or 86.0 percent, of our pension plan assets were classified as Level 3 assets as of December 31, 2015.
We estimate the fair value of pension plan assets based upon the information available during the year-end reporting process. In some cases, primarily private equity funds, the information available consists of net asset values as of an interim date, cash flows between the interim date and the end of the year, and market events. When the difference is significant, we revise the year-end estimated fair value of pension plan assets to incorporate year-end net asset values received after we have filed our annual report on Form 10-K. We increased the fair value of pension assets in the second quarter of 2015 by $57 million, or 1.0 percent.

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The net pension plan assets, when categorized in accordance with this fair value hierarchy, are as follows:
DOLLAR AMOUNTS IN MILLIONS
2015
Level 1

Level 2

Level 3

Total

Pension trust investments:
 
 
 
 

Fixed income instruments
$
668

$
46

$

714

Hedge funds
87

(37
)
3,388

3,438

Private equity and related funds


1,267

1,267

Real estate and related funds


67

67

Common and preferred stock and equity index instruments

3


3

Total pension trust investments
$
755

$
12

$
4,722

$
5,489

Accrued liabilities, net
 
 
 
(8
)
Pension trust net assets
 
 
 
5,481

Canadian nonregistered plan assets:
 
 
 
 
Cash
$
6

$

$

6

Investments
4



4

Total Canadian nonregistered plan assets
$
10

$

$

$
10

Total plan assets
 
 
 
$
5,491

DOLLAR AMOUNTS IN MILLIONS
2014
Level 1

Level 2

Level 3

Total

Pension trust investments:
 
 
 
 

Fixed income instruments
$
646

$
36

$
3

685

Hedge funds
103

(22
)
3,333

3,414

Private equity and related funds

3

1,422

1,425

Real estate and related funds


82

82

Common and preferred stock and equity index instruments
25

12


37

Total pension trust investments
$
774

$
29

$
4,840

$
5,643

Accrued liabilities, net
 
 
 
(13
)
Pension trust net investments
 
 
 
5,630

Canadian nonregistered plan assets:
 
 
 
 
Cash
$
7

$

$

7

Investments
6



6

Total Canadian nonregistered plan assets
$
13

$

$

$
13

Total plan assets
 
 
 
$
5,643


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A reconciliation of the beginning and ending balances of the pension plan assets measured at fair value using significant unobservable inputs (Level 3) is presented below:
DOLLAR AMOUNTS IN MILLIONS
 
  
INVESTMENTS
  
Hedge funds

Private equity  and
related funds

Real estate and
related funds

Fixed Income

Total

Balance as of December 31, 2013
$
3,225

$
1,606

$
101

$
3

$
4,935

Net realized gains (losses)
186

128

8


322

Net change in unrealized appreciation (depreciation)
76

(130
)
(4
)

(58
)
Purchases
541

177

5


723

Sales
(540
)
(359
)
(28
)

(927
)
Issuances
52




52

Settlements
(132
)



(132
)
     Transfers, Out(1)
(75
)



(75
)
Balance as of December 31, 2014
$
3,333

$
1,422

$
82

$
3

$
4,840

Net realized gains (losses)
143

100

9

1

253

Net change in unrealized appreciation (depreciation)
47

(117
)
(11
)

(81
)
Purchases
441

141

6


588

Sales
(539
)
(279
)
(19
)
(4
)
(841
)
Issuances
47




47

Settlements
(84
)



(84
)
     Transfers, Out(1)





Balance as of December 31, 2015
$
3,388

$
1,267

$
67

$

$
4,722

(1) One hedge fund completed an initial public offering during 2014; as such the security was transferred from Level 3 to Level 1 in 2014.
This table shows the fair value of the derivatives held by our pension trusts — which fund our qualified and registered plans — at the end of the last two years.
DOLLAR AMOUNTS IN MILLIONS
 
 
  
DECEMBER 31,
2015

DECEMBER 31,
2014

Equity index instruments
$
13

$
13

Forward contracts
(51
)
(32
)
Swaps
492

436

Total
$
454

$
417

This table shows the aggregate notional amount of the derivatives held by our pension trusts — which fund our qualified and registered plans — at the end of the last two years.
DOLLAR AMOUNTS IN MILLIONS
 
 
  
DECEMBER 31,
2015

DECEMBER 31,
2014

Equity index instruments
$
500

$
361

Forward contracts
523

535

Swaps
2,058

1,824

Total
$
3,081

$
2,720


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ACTIVITY OF PLANS WE SPONSOR
Net Periodic Benefit Cost (Credit)
DOLLAR AMOUNTS IN MILLIONS
  
PENSION
OTHER POSTRETIREMENT
BENEFITS
  
2015

2014

2013

2015

2014

2013

Net periodic benefit cost (credit):
 
 
 
 
 
 
Service cost(1)
$
57

$
53

$
64

$

$
1

$
1

Interest cost
265

271

244

9

10

12

Expected return on plan assets
(476
)
(467
)
(439
)



Amortization of actuarial loss
182

125

221

10

12

14

Amortization of prior service cost (credit)(2)
4

5

7

(9
)
(161
)
(23
)
Recognition of curtailments, settlements and special termination benefits due to closures, restructuring or divestitures(1)

9





Other




(4
)

Net periodic benefit cost (credit)
$
32

$
(4
)
$
97

$
10

$
(142
)
$
4

(1)  Service cost includes $2 million in 2014 and $4 million in 2013 for employees that were part of the Real Estate Divestiture. These charges are included in our results of discontinued operations. Curtailment and special termination benefits are related to involuntary terminations, due to restructuring activities, as well as the Real Estate Divestiture.
(2) During fourth quarter 2013, the decision was ratified to eliminate Company funding of the Post-Medicare Health Reimbursement Account (HRA) for certain salaried retirees after 2014. This change was communicated to affected retirees during January 2014. As a result, we recognized a pretax gain of $151 million in 2014 from this plan amendment.
Estimated Amortization from Cumulative Other Comprehensive Loss in 2016
Amortization of the net actuarial loss and prior service cost (credit) of our pension and postretirement benefit plans will affect our other comprehensive income in 2016. The net effect of the estimated amortization will be an increase in net periodic benefit costs or a decrease in net periodic benefit credits in 2016.
DOLLAR AMOUNTS IN MILLIONS
  
PENSION

OTHER POSTRETIREMENT BENEFITS

TOTAL

Net actuarial loss
$
152

$
9

$
161

Prior service cost (credit)
4

(8
)
(4
)
Net effect cost
$
156

$
1

$
157

Expected Pension Funding
Established funding standards govern the funding requirements for our qualified and registered pension plans. We fund the benefit payments of our nonqualified and nonregistered plans as benefit payments come due.
During 2016, based on estimated year-end asset values and projections of plan liabilities, we expect to:
be required to contribute approximately $16 million for our Canadian registered plan;
be required to contribute or make benefit payments for our Canadian nonregistered plans of $3 million; and
make benefit payments of approximately $19 million for our U.S. nonqualified pension plans.

We do not anticipate a contribution being required for our U.S. qualified pension plan for 2016.
Expected Postretirement Benefit Funding
Our retiree medical and life insurance plans are unfunded. Benefits for these plans are paid from our general assets as they come due. We expect to make benefit payments of $22 million for our U.S. and Canadian other postretirement benefit plans in 2016, including $7 million expected to be required to cover benefit payments under collectively bargained contractual obligations.

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Estimated Projected Benefit Payments for the Next 10 Years
DOLLAR AMOUNTS IN MILLIONS
 
 
  
PENSION

OTHER
POSTRETIREMENT
BENEFITS

2016
$
334

$
22

2017
$
340

$
21

2018
$
347

$
20

2019
$
354

$
19

2020
$
360

$
19

2021-2025
$
1,858

$
81

ACTUARIAL ASSUMPTIONS
We use actuarial assumptions to estimate our benefit obligations and our net periodic benefit costs.
Rates We Use in Estimating Our Benefit Obligations
We use assumptions to estimate our benefit obligations that include:
discount rates in the U.S. and Canada, including discount rates used to value lump sum distributions;
rates of compensation increases for our salaried and hourly employees in the U.S. and Canada; and
estimated percentages of eligible retirees who will elect lump sum payments of benefits.
Discount Rates and Rates of Compensation Increase Used in Estimating Our Pension and Other Postretirement Benefit Obligation
  
PENSION
OTHER POSTRETIREMENT
BENEFITS
  
DECEMBER 31,
2015

DECEMBER 31,
2014

DECEMBER 31,
2015

DECEMBER 31,
2014

Discount rates:
 
 
 
 
United States
4.50
%
4.10
%
4.00
%
3.60
%
Canada
4.00
%
3.90
%
3.90
%
3.80
%
Lump sum distributions (US salaried and nonqualified plans only)(1)
PPA Table
PPA Table
N/A

N/A

Rate of compensation increase:
 

 

 

 

Salaried:
 

 

 

 

United States
Determined by participant age, ranging from 2.00% to 13.00%
2.50% for 2014, 2015
and 3.50% thereafter
N/A

N/A

Canada
2.50% for 2015
and 3.50% thereafter
2.50% for 2014, 2015
and 3.50% thereafter
N/A

N/A

Hourly:
 
 
 
 
United States
Determined by participant age, ranging from 2.30% to 13.00%
3.00
%
N/A

N/A

Canada
3.25
%
3.25
%
N/A

N/A

Election of lump sum or installment distributions (US salaried and nonqualified plans only)
60.00
%
60.00
%
N/A

N/A

(1) The PPA Phased Table: Interest and mortality assumptions as mandated by Pension Protection Act of 2006 including the phase out of the prior interest rate basis in 2013.
Estimating Our Net Periodic Benefit Costs
The assumptions we use to estimate our net periodic benefit costs include:
discount rates in the U.S. and Canada, including discount rates used to value lump sum distributions;
expected returns on our plan assets;
rates of compensation increases for our salaried and hourly employees in the U.S. and Canada; and
estimated percentages of eligible retirees who will elect lump sum payments of benefits.
This table shows the discount rates, expected returns on our plan assets and rates of compensation increases we used the last three years to estimate our net periodic benefit costs.

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Rates Used to Estimate Our Net Periodic Benefit Costs
  
PENSION
OTHER
POSTRETIREMENT
BENEFITS
  
2015
2014
2013
2015
2014
2013
Discount rates:
 
 
 
 
 
 
United States
4.10%
4.90% for the first half of 2014 and 4.40% for the second half of 2014
3.70%
3.60%
4.00%
3.00%
Salaried – lump sum distributions (U.S. salaried and nonqualified plan only)(1)
PPA Table
PPA Table
PPA phased
Table
N/A
N/A
N/A
Canada
3.90%
4.70%
4.10%
3.80%
4.60%
4.00%
Expected return on plan assets:
 
 
 
 
 
 
Qualified/registered plans
9.00%
9.00%
9.00%
 
 
 
Nonregistered plans (Canada only)
3.50%
3.50%
3.50%
 
 
 
Rate of compensation increase:
 
 
 
 
 
 
Salaried:
 
 
 
 
 
 
United States
2.50% for 2015 and 3.50% thereafter
2.50% for 2014
and 3.50% thereafter
2.50% for 2013
and 3.50% thereafter
N/A
N/A
N/A
Canada
2.50% for 2015
and 3.50%  thereafter
2.50% for 2014
and 3.50%  thereafter
2.50% for 2013
and 3.50%  thereafter
N/A
N/A
N/A
Hourly:
 
 
 
 
 
 
United States
3.00%
3.00%
3.00%
N/A
N/A
N/A
Canada
3.25%
3.25%
3.25%
N/A
N/A
N/A
Election of lump sum distributions (U.S. salaried and nonqualified plans only)
60.00%
60.00%
56.00%
N/A
N/A
N/A
(1) PPA Phased Table: Interest and mortality assumptions as mandated by Pension Protection Act of 2006 including the phase out of the prior interest rate basis in 2013.
Expected Return on Plan Assets
We estimate the expected long-term return on assets for our:
qualified and registered pension plans and
nonregistered plans.
Qualified and Registered Pension Plans. Our expected long-term rate of return for plan assets as of December 31, 2015, is comprised of:
a 7.2 percent assumed return from direct investments and
a 1.7 percent assumed return from derivatives.
Determining our expected return:
requires a high degree of judgment,
uses our historical fund returns as a base and
places added weight on more recent pension plan asset performance.
Over the 31 years it has been in place, our U.S. pension trust investment strategy has achieved a 14.2 percent net compound annual return rate. The past 5 years, our net compounded annual return was 8.0 percent.
Nonregistered plans. Canadian tax rules require that 50 percent of the assets for nonregistered plans go to a noninterest-bearing refundable tax account. As a result, the return we earn investing the other 50 percent is spread over 100 percent of the assets.
Our expected long-term annual rate of return on the equity portion of this portfolio — the portion we are allowed to invest and manage — is 7 percent. We base that expected rate of return on:
historical experience and
future return expectations.
Our expected overall annual return on assets that fund our nonregistered plans is 3.5 percent.

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Actual Returns on Assets Held by Our Pension Trusts
Based on valuations received as of year-end, our total actual return on assets held by our pension trusts was a gain of approximately $226 million in 2015. These trusts fund our qualified, registered and a portion of our nonregistered pension plans.
DOLLAR AMOUNTS IN MILLIONS
  
2015

2014

2013

Direct investments
$
175

$
258

$
568

Derivatives
51

110

240

Total
$
226

$
368

$
808

HEALTH CARE COSTS
Rising costs of health care affect the costs of our other postretirement plans.
Health Care Cost Trend Rates
We use assumptions about health care cost trend rates to estimate the cost of benefits we provide. In 2015, the assumed weighted health care cost trend rate was:
6.3 percent in the U.S. and
5.6 percent in Canada.
This table shows the assumptions we use in estimating the annual cost increase for health care benefits we provide.
Assumptions We Use in Estimating Health Care Benefit Costs
  
2015
2014
  
U.S.

CANADA

U.S.

CANADA

Weighted health care cost trend rate assumed for next year
7.20% for Pre Medicare and 4.50% for HRA

5.00
%
6.30
%
5.60
%
Rate to which cost trend rate is assumed to decline (ultimate trend rate)
4.50
%
4.30
%
4.50
%
4.30
%
Year that the rate reaches the ultimate trend rate
2036

2028

2029

2028

The assumed health care cost trend rate can significantly influence projected postretirement benefit plan payments. Some of the benefits are defined dollar amounts and are unaffected by changes in health care costs. To determine the health care cost trend rate, we look at historical market experience, current environment and future expectations. The following table demonstrates the effect a 1 percent change in assumed health care cost trend rates would have with all other assumptions remaining constant.
Effect of a 1 Percent Change in Health Care Costs
AS OF DECEMBER 31, 2015 (DOLLAR AMOUNTS IN MILLIONS)
  
1% INCREASE

1% DECREASE

Effect on total service and interest cost components
less than $1

less than $(1)

Effect on accumulated postretirement benefit obligation
$
10

$
(8
)
UNION-ADMINISTERED MULTIEMPLOYER BENEFIT PLANS
We contribute to multiemployer defined benefit plans under the terms of collective-bargaining agreements that cover some of our union-represented employees.
The U.S. plans are established to provide retirement income for eligible employees who meet certain age and service requirements at retirement. The benefits are generally based on:
a percentage of the employer contributions paid into the plan on the eligible employee's behalf or
a formula considering an eligible employee's service, the total contributions paid on their behalf plus a benefit based on the value of an eligible employee's account.
The Canadian plan is a negotiated cost defined benefit plan. The plan is established to provide retirement income for members based on their number of years of service in the industry, and the benefit rate that applied to that service. 

The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:
Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.
If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.
If we choose to stop participating in some of the multiemployer plans, we may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

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As of December 31, 2015, these plans covered approximately 1,200 of our employees.
Our contributions were:
$4 million in 2015,
$4 million in 2014 and
$4 million in 2013.
There have been no significant changes that affect the comparability of the 2015, 2014 and 2013 contributions. None of our contributions exceeded more than 5 percent of any plan's total contributions during 2015, 2014 or 2013.
DEFINED CONTRIBUTION PLANS
We sponsor various defined contribution plans for our U.S. and Canadian salaried and hourly employees. Our contributions to these plans were:
$21 million in 2015,
$20 million in 2014 and
$20 million in 2013.
 
NOTE 10: VARIABLE INTEREST ENTITIES
This note provides details about special-purpose entities (SPEs).
SPECIAL-PURPOSE ENTITIES
From 2002 through 2004, we sold certain nonstrategic timberlands in five separate transactions. We are the primary beneficiary and consolidate the assets and liabilities of certain monetization and buyer-sponsored SPEs involved in these transactions. We have an equity interest in the monetization SPEs, but no ownership interest in the buyer-sponsored SPEs. The following disclosures refer to assets of buyer-sponsored SPEs and liabilities of monetization SPEs. However, because these SPEs are distinct legal entities:
Assets of the SPEs are not available to satisfy our liabilities or obligations.
Liabilities of the SPEs are not our liabilities or obligations.
In 2013, we repaid a $162 million note and received $184 million related to one of our timber monetization SPEs undertaken in 2003. Net proceeds were $22 million.
Our Consolidated Statement of Operations includes:
Interest expense on SPE notes of:
$29 million in 2015,
$29 million in 2014 and
$29 million in 2013.
Interest income on SPE investments of:
$34 million in 2015,
$34 million in 2014 and
$34 million in 2013.
Sales proceeds paid to buyer-sponsored SPEs were invested in restricted financial investments with a balance of $615 million as of both December 31, 2015, and December 31, 2014. The weighted average interest rate was 5.5 percent during 2015 and 2014. Maturities of the financial investments at the end of 2015 were:
$253 million in 2019 and
$362 million in 2020.
The long-term notes of our monetization SPEs were $511 million as of both December 31, 2015, and December 31, 2014. The weighted average interest rate was 5.6 percent during 2015 and 2014. Maturities of the notes at the end of 2015 were:
$209 million in 2019 and
$302 million in 2020.
Financial investments consist of bank guarantees backed by bank notes for three of the SPE transactions. Interest earned from each financial investment is used to pay interest accrued on the corresponding SPE’s note. Any shortfall between interest earned and interest accrued reduces our equity in the monetization SPEs.
Upon dissolution of the SPEs and payment of all obligations of the entities, we would receive any net equity remaining in the monetization SPEs and would be required to report deferred tax gains on our income tax return. In the event that proceeds from the financial investments are insufficient to settle all of the liabilities of the SPEs, we are not obligated to contribute any funds to any of the SPEs. As of December 31, 2015, our net equity in the three SPEs was approximately $105 million and the deferred tax liability was estimated to be approximately $180 million.


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NOTE 11: ACCRUED LIABILITIES
Accrued liabilities were comprised of the following:
DOLLAR AMOUNTS IN MILLIONS
  
DECEMBER 31,
2015

DECEMBER 31,
2014

Wages, salaries and severance pay
$
150

$
161

Pension and postretirement
44

47

Vacation pay
46

47

Taxes – Social Security and real and personal property
24

24

Interest
104

105

Customer rebates and volume discounts
46

46

Deferred income
52

75

Other
83

82

Total
$
549

$
587

 
NOTE 12: LINES OF CREDIT
This note provides details about our:
lines of credit and
other letters of credit and surety bonds.
OUR LINES OF CREDIT
During September 2013, we entered into a new $1 billion 5-year senior unsecured revolving credit facility that expires in September 2018. This replaces a $1 billion revolving credit facility that was set to expire June 2015. As of June 16, 2014, WRECO terminated its participation as a borrower in the facility. There were no changes to our lines of credit during 2015.
Borrowings are at LIBOR plus a spread or at other interest rates mutually agreed upon between the borrower and the lending banks. As of December 31, 2015, there were no borrowings outstanding under the facility and we were in compliance with the credit facility covenants.
OTHER LETTERS OF CREDIT AND SURETY BONDS
The amounts of other letters of credit and surety bonds we have entered into as of the end of our last two years are included in the following table:
DOLLAR AMOUNTS IN MILLIONS
  
DECEMBER 31,
2015

DECEMBER 31,
2014

Letters of credit
$
47

$
44

Surety bonds
$
113

$
231

Our compensating balance requirements for our letters of credit were $17 million as of December 31, 2015.


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NOTE 13: LONG-TERM DEBT
This note provides details about:
long-term debt and the portion due within one year and
long-term debt maturities.
Our long-term debt includes notes, debentures, revenue bonds and other borrowings. The following table lists our long-term debt, which includes Weyerhaeuser Company debt, by types and interest rates at the end of our last two years and includes the current portion.
Long-Term Debt by Types and Interest Rates (Includes Current Portion)
DOLLAR AMOUNTS IN MILLIONS
  
DECEMBER 31,
2015

DECEMBER 31,
2014

6.95% debentures due 2017
$
281

$
281

7.00% debentures due 2018
62

62

7.375% notes due 2019
500

500

Variable rate term loan credit facility matures 2020
550

550

9.00% debentures due 2021
150

150

7.125% debentures due 2023
191

191

4.625% notes due 2023
500

500

8.50% debentures due 2025
300

300

7.95% debentures due 2025
136

136

7.70% debentures due 2026
150

150

7.35% debentures due 2026
62

62

7.85% debentures due 2026
100

100

6.95% debentures due 2027
300

300

7.375% debentures due 2032
1,250

1,250

6.875% debentures due 2033
275

275

Industrial revenue bonds, rates from 6.7% to 6.8%, due 2022
88

88

Other
1

1

 
4,896

4,896

Less unamortized discounts
(5
)
(5
)
Total
$
4,891

$
4,891

Portion due within one year
$

$

In order to repay the debt that we assumed in the acquisition of Longview Timber, in 2013 we issued $500 million of 4.625 percent notes due September 15, 2023. The net proceeds after deducting the discount, underwriting fees and issuance costs were $495 million. We also entered into a $550 million 7-year senior unsecured term loan credit facility maturing in September 2020 and borrowed $550 million. Borrowings are at LIBOR plus a spread or at other interest rates mutually agreed upon between the borrower and the lending banks.
On October 15, 2013, we repaid the $1,118 million carrying value of the debt that we assumed in the acquisition of Longview Timber and related fees, expenses and premiums using the proceeds from the notes issued and the borrowings from our term loan credit facility borrowed in 2013. A pretax charge of $25 million was included in our net interest expense in 2013, for early retirement premiums, unamortized debt issuance costs and other miscellaneous charges in connection with the early extinguishment of debt. See Note 4: Acquisitions for more information.
Amounts of Long-Term Debt Due Annually for the Next Five Years and the Total Amount Due After 2020
DOLLAR AMOUNTS IN MILLIONS
  
DECEMBER 31, 2015

Long-term debt maturities:
 

2016
$

2017
$
281

2018
$
62

2019
$
500

2020
$
550

Thereafter
$
3,503



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NOTE 14: FAIR VALUE OF FINANCIAL INSTRUMENTS
This note provides information about the fair value of our:
debt and
other financial instruments.
FAIR VALUE OF DEBT
The estimated fair values and carrying values of our long-term debt consisted of the following:
DOLLAR AMOUNTS IN MILLIONS
  
DECEMBER 31, 2015
 
DECEMBER 31, 2014
 
  
CARRYING
VALUE

FAIR VALUE
 (LEVEL 2)

CARRYING
VALUE

FAIR VALUE
(LEVEL 2)

Long-term debt (including current maturities)
$
4,891

$
5,620

$
4,891

$
5,922

To estimate the fair value of long-term debt, we used the following valuation approaches:
market approach — based on quoted market prices we received for the same types and issues of our debt; or
income approach — based on the discounted value of the future cash flows using market yields for the same type and comparable issues of debt.
The inputs to these valuations are based on market data obtained from independent sources or information derived principally from observable market data.
The difference between the fair value and the carrying value represents the theoretical net premium or discount we would pay or receive to retire all debt at the measurement date.
FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS
We believe that our other financial instruments, including cash and cash equivalents, short-term investments, receivables, and payables, have net carrying values that approximate their fair values with only insignificant differences. This is primarily due to:
the short-term nature of these instruments,
carrying short-term investments at expected net realizable value and
the allowance for doubtful accounts.

NOTE 15: LEGAL PROCEEDINGS, COMMITMENTS AND CONTINGENCIES
This note provides details about our:
legal proceedings,
environmental matters and
commitments and other contingencies.
LEGAL PROCEEDINGS
We are party to various legal proceedings arising in the ordinary course of business. We are not currently a party to any legal proceeding that management believes could have a material adverse effect on our long-term consolidated financial position, results of operations or cash flows.
ENVIRONMENTAL MATTERS
Our environmental matters include:
site remediation and
asset retirement obligations.
Site Remediation
Under the Comprehensive Environmental Response, Compensation and Liability Act — commonly known as the Superfund — and similar state laws, we:
are a party to various proceedings related to the cleanup of hazardous waste sites and
have been notified that we may be a potentially responsible party related to the cleanup of other hazardous waste sites for which proceedings have not yet been initiated.
We have received notification and have acknowledged that we are a potentially responsible party in a portion of the Kalamazoo River Superfund site in southwest Michigan. Our involvement in the remediation site is based on our former ownership of the Plainwell, Michigan mill located within the remediation site. In 2015 we received invitations from the Environmental Protection Agency (the “EPA”) to negotiate an administrative order on consent for a contaminant removal action for a portion of the site. Two other parties received the same invitations. All parties are in contact with the EPA as to the work required and the terms of any consent order. According to the EPA, this Superfund site encompasses 77 miles of the Kalamazoo River from a location east of the city of Kalamazoo to the river mouth at Lake Michigan. The EPA’s 2015 invitations concern a stretch of the river approximately 1.7 miles long that the EPA refers to as the Otsego Township Dam Area. Several other companies also operated upstream pulp mills. At this time we are unable to estimate the timing and extent of future cash flows related to our involvement in this site remediation.
Our established reserves. We have established reserves for estimated remediation costs on the active Superfund sites and other sites for which we are responsible. These reserves are recorded in "Accrued liabilities" and "Other liabilities" in our Consolidated Balance Sheet.

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Changes in the Reserve for Environmental Remediation
DOLLAR AMOUNTS IN MILLIONS
Reserve balance as of December 31, 2014
$
29

Reserve charges and adjustments, net
15

Payments
(7
)
Reserve balance as of December 31, 2015
$
37

Total active sites as of December 31, 2015
38

We change our accrual to reflect:
new information on any site concerning implementation of remediation alternatives,
updates on prior cost estimates and new sites and
costs incurred to remediate sites.
Estimates. We believe it is reasonably possible, based on currently available information and analysis, that remediation costs for all identified sites may exceed our existing reserves by up to $116 million.
This estimate, in which those additional costs may be incurred over several years, is the upper end of the range of reasonably possible additional costs. The estimate:
is much less certain than the estimates on which our accruals currently are based, and
uses assumptions that are less favorable to us among the range of reasonably possible outcomes.
In estimating our current accruals and the possible range of additional future costs, we:
assumed we will not bear the entire cost of remediation of every site,
took into account the ability of other potentially responsible parties to participate, and
considered each partys financial condition and probable contribution on a per-site basis.
We have not recorded any amounts for potential recoveries from insurance carriers.
Asset Retirement Obligations
We have obligations associated with the retirement of tangible long-lived assets consisting primarily of reforestation obligations related to forest management licenses in Canada and obligations to close and cap landfills. Some of our sites have asbestos containing materials. We have met our current legal obligation to identify and manage these materials. In situations where we cannot reasonably determine when asbestos containing materials might be removed from the sites, we have not recorded an accrual because the fair value of the obligation cannot be reasonably estimated. These obligations are recorded in "Accrued liabilities" and "Other liabilities" in our Consolidated Balance Sheet.
Changes in the Reserve for Asset Retirement Obligations
DOLLAR AMOUNTS IN MILLIONS
Reserve balance as of December 31, 2014
$
40

Reserve charges and adjustments, net
10

Payments
(11
)
Other adjustments(1)
(5
)
Reserve balance as of December 31, 2015
34

(1) Primarily related to a foreign currency remeasurement gain for our Canadian reforestation obligation.
 
COMMITMENTS AND OTHER CONTINGENCIES
Our commitments and contingencies include:
guarantees of debt and performance,
purchase obligations for goods and services and
operating leases.
Guarantees
We have guaranteed the performance of the buyer/lessee of a timberlands lease we sold in 2005. Future payments on the lease — which expires in 2023 — are $15 million.
Purchase Obligations
Our purchase obligations as of December 31, 2015 were:
DOLLAR AMOUNTS IN MILLIONS
  
DECEMBER 31, 2015

2016
$
84

2017
$
33

2018
$
8

2019
$
2

2020
$
2

Thereafter
$
17


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Purchase obligations for goods or services are agreements that:
are enforceable and legally binding,
specify all significant terms and
cannot be canceled without penalty.
The terms include:
fixed or minimum quantities to be purchased,
fixed, minimum or variable price provisions, and
an approximate timing for the transaction.
Our purchase obligations include items such as:
stumpage and log purchases,
energy and
other service and supply contracts.
Operating Leases
Our rent expense was:
DOLLAR AMOUNTS IN MILLIONS
  
2015

2014

2013

Rent expense
$
31

$
32

$
38

We have operating leases for:
various equipment, including logging equipment, lift trucks, automobiles and office equipment; and
office and wholesale space.
Commitments
Our operating lease commitments as of December 31, 2015 were:
DOLLAR AMOUNTS IN MILLIONS
  
DECEMBER 31, 2015

2016
$
27

2017
$
26

2018
$
21

2019
$
17

2020
$
14

Thereafter
$
105


NOTE 16: SHAREHOLDERS’ INTEREST
This note provides details about:
preferred and preference shares,
common shares,
share-repurchase programs and
cumulative other comprehensive income (loss).
PREFERRED AND PREFERENCE SHARES
We had no preferred shares outstanding at the end of 2015 or 2014. However, we have authorization to issue 7 million preferred shares with a par value of $1 per share.
As part of our purchase of Longview Timber, we issued 13.8 million of our 6.375 percent Mandatory Convertible Preference Shares, Series A, par value $1.00 and liquidation preference of $50.00 per share on June 24, 2013, for net proceeds of $669 million, which remained outstanding at year-end 2015. Dividends will be payable on a cumulative basis when, as and if declared by our board of directors, at an annual rate of 6.375 percent on the liquidation preference. We may pay declared dividends in cash or, subject to certain limitations, in common shares or by delivery of any combination of cash and common shares on January 1, April 1, July 1 and October 1 of each year, commencing on October 1, 2013, through, and including, July 1, 2016. These shares will automatically convert on July 1, 2016 into between 1.5283 and 1.8339 of our common shares, subject to anti-dilution adjustments. At any time prior to that date, holders may elect to convert each share into common shares at the minimum conversion rate of 1.5283 common shares, subject to anti-dilution adjustments. In April 2015, 289 preference shares were converted into 436 common shares. See Note 4: Acquisitions for more information.
We may issue preferred or preference shares at one time or through a series of offerings. The shares may have varying rights and preferences that can include:
dividend rates,
redemption rights,
conversion terms,
sinking-fund provisions,
values in liquidation and
voting rights.

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When issued, outstanding preferred and preference shares rank senior to outstanding common shares. That means preferred and preference shares would receive dividends and assets available on liquidation before any payments are made to common shares.
COMMON SHARES
The number of common shares we have outstanding changes when:
new shares are issued,
stock options are exercised,
restricted stock units or performance share units vest,
stock-equivalent units are paid out,
shares are tendered,
shares are repurchased or
shares are canceled.
Reconciliation of Our Common Share Activity
IN THOUSANDS
  
2015

2014

2013

Outstanding at beginning of year
524,474

583,548

542,393

New issuance (Note 4)


33,350

Shares tendered (Note 3)

(58,813
)

Stock options exercised
1,592

5,134

7,209

Issued for restricted stock units
365

451

462

Issued for performance shares
242

217

134

Repurchased
(16,190
)
(6,063
)

Outstanding at end of year
510,483

524,474

583,548

OUR SHARE REPURCHASE PROGRAMS
On August 13, 2014, our board of directors approved a stock repurchase program under which we were authorized to repurchase up to $700 million of outstanding shares (the 2014 Repurchase Program). The 2014 Repurchase Program replaced the prior 2011 stock repurchase program. During 2014, we repurchased 6,062,993 shares of common stock for $203 million under the 2014 Repurchase Program. During 2015 we completed the 2014 Repurchase Program by repurchasing 15,471,962 shares of common stock for $497 million. All common stock purchases under the stock repurchase program were made in open-market transactions.
On August 27, 2015 our board of directors approved a new share repurchase program of up to $500 million on outstanding shares (the 2015 Repurchase Program), commencing upon completion of the 2014 Repurchase Program. During 2015, we repurchased 717,464 shares of common stock for $22 million under the 2015 Repurchase Program. As of December 31, 2015 we had remaining authorization of $478 million for future stock repurchases. All common stock purchases under the stock repurchase program were made in open-market transactions. We had 510,483,285 shares of common stock outstanding as of December 31, 2015.
On November 8, 2015 Weyerhaeuser announced it intends to execute a $2.5 billion share repurchase shortly after closing the merger with Plum Creek. As of December 31, 2015 no portion of this intended repurchase has been completed. The remaining $478 million authorized for the 2015 Repurchase Program is expected to be used in the intended post-merger repurchase.

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CUMULATIVE OTHER COMPREHENSIVE INCOME (LOSS)
Changes in amounts included in our cumulative other comprehensive income (loss) by component are:
DOLLAR AMOUNTS IN MILLIONS
 
 
PENSION
OTHER POSTRETIREMENT BENEFITS
 
 
  
Foreign currency translation adjustments
Actuarial losses
Prior service costs
Actuarial losses
Prior service credits
Unrealized gains on available-for-sale securities
Total
Beginning balance as of January 1, 2014
$
354

$
(1,066
)
$
(19
)
$
(111
)
$
150

$
6

$
(686
)
Other comprehensive income (loss) before reclassifications
(50
)
(1,008
)
1

(6
)
(12
)

(1,075
)
Income taxes

369


1

7


377

Net other comprehensive income (loss) before reclassifications
(50
)
(639
)
1

(5
)
(5
)

(698
)
Amounts reclassified from cumulative other comprehensive income (loss)(1)

125

5

12

(161
)

(19
)
Income taxes

(43
)
(2
)
(4
)
59


10

Net amounts reclassified from cumulative other comprehensive income (loss)

82

3

8

(102
)

(9
)
Total other comprehensive income (loss)
(50
)
(557
)
4

3

(107
)

(707
)
Beginning balance as of January 1, 2015
304

(1,623
)
(15
)
(108
)
43

6

(1,393
)
Other comprehensive income (loss) before reclassifications
(97
)
184

2

37

(2
)

124

Income taxes

(52
)

(12
)


(64
)
Net other comprehensive income (loss) before reclassifications
(97
)
132

2

25

(2
)

60

Amounts reclassified from cumulative other comprehensive income (loss)(1)

182

4

10

(9
)

187

Income taxes

(63
)
(2
)
(4
)
3


(66
)
Net amounts reclassified from cumulative other comprehensive income (loss)

119

2

6

(6
)

121

Total other comprehensive income (loss)
(97
)
251

4

31

(8
)

181

Ending balance as of December 31, 2015
$
207

$
(1,372
)
$
(11
)
$
(77
)
$
35

$
6

$
(1,212
)
(1) Actuarial losses and prior service credits (costs) are included in the computation of net periodic benefit costs (credits). See Note: 9 Pension and Other Postretirement Benefit Plans.

NOTE 17: SHARE-BASED COMPENSATION
Share-based compensation expense was:
$31 million in 2015,
$40 million in 2014 and
$42 million in 2013.
The amounts above contain awards to employees that were part of the Real Estate Divestiture and are included in our results of discontinued operations. These amounts are:
$3 million in 2014 and
$5 million in 2013.
This note provides details about:
our Long-Term Incentive Compensation Plan (2013 Plan),
how we account for share-based awards,
tax benefits of share-based awards,
types of share-based compensation and
unrecognized share-based compensation.
OUR LONG-TERM INCENTIVE COMPENSATION PLAN
Our long-term incentive plans provide for share-based awards that include:
stock options,
stock appreciation rights,
restricted stock,
restricted stock units,

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performance shares and
performance share units.
We may issue future grants of up to 17,317,903 shares under the 2013 Plan. We also have the right to reissue forfeited and expired grants.
For stock options and stock appreciation rights:
An individual participant may receive a grant of up to 2 million shares in any one calendar year.
The exercise price is required to be the market price on the date of the grant.
For restricted stock, restricted stock units, performance shares, performance share units or other equity grants:
An individual participant may receive a grant of up to 1 million shares annually.
No participant may be granted awards that exceed $10 million earned in a 12 month period.
The Compensation Committee of our board of directors (the Committee) annually establishes an overall pool of stock awards available for grants based on performance.
For stock-settled awards, we:
issue new stock into the marketplace and
generally do not repurchase shares in connection with issuing new awards.
Our common shares would increase by approximately 32 million shares if all share-based awards were exercised or vested. These include:
all options, restricted stock units, and performance share units outstanding at December 31, 2015 under the 2013 Plan and 2004 Plan; and
all remaining options, restricted stock units, and performance share units that could be granted under the 2013 Plan.
HOW WE ACCOUNT FOR SHARE-BASED AWARDS
We:
use a fair-value-based measurement for share-based awards, and
recognize the cost of share-based awards in our consolidated financial statements.
We recognize the cost of share-based awards in our Consolidated Statement of Operations over the required service period — generally the period from the date of the grant to the date when it is vested. Special situations include:
Awards that vest upon retirement — the required service period ends on the date an employee is eligible for retirement, including early retirement.
Awards that continue to vest following job elimination or the sale of a business — the required service period ends on the date the employment from the company is terminated.
In these special situations, compensation expense from share-based awards is recognized over a period that is shorter than the stated vesting period.
TAX BENEFITS OF SHARE-BASED AWARDS
Our total income tax benefit from share-based awards — as recognized in our Consolidated Statement of Operations — for the last three years was:
$8 million in 2015,
$11 million in 2014, and
$10 million in 2013.
The amounts above contain income tax benefit from share-based awards to employees that were part of the Real Estate Divestiture and are included in our results of discontinued operations. These amounts are:
$1 million in 2014 and
$2 million in 2013.
Tax benefits for share-based awards are accrued as stock compensation expense is recognized in the Consolidated Statement of Operations. Tax benefits on share-based awards are realized when:
restricted shares and restricted share units vest,
performance shares and performance share units vest,
stock options are exercised and
stock appreciation rights are exercised.
When actual tax benefits realized exceed the tax benefits accrued for share-based awards, we realize an excess tax benefit. We report the excess tax benefit as financing cash inflows rather than operating cash inflows. We had excess tax benefits of:
$4 million in 2015,
$10 million in 2014 and
$13 million in 2013.
The amounts above contain excess tax benefits from share-based awards to employees that were part of the Real Estate Divestiture and are included in our results of discontinued operations. These amounts are:
$2 million in 2014 and
$2 million in 2013.

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TYPES OF SHARE-BASED COMPENSATION
Our share-based compensation is in the form of:
stock options,
restricted stock units,
performance share units,
stock appreciation rights and
deferred compensation stock equivalent units.
STOCK OPTIONS
Stock options entitle award recipients to purchase shares of our common stock at a fixed exercise price. We grant stock options with an exercise price equal to the market price of our stock on the date of the grant.
The Details
Our stock options generally:
vest over four years of continuous service and
must be exercised within 10 years of the grant-date.
The vesting and post-termination vesting terms for stock options granted in 2015, 2014 and 2013 were as follows:
vest ratably over four years;
vest or continue to vest in the event of death while employed or disability;
continue to vest upon retirement at an age of at least 62, but a portion of the grant is forfeited if retirement occurs before the one year anniversary of the grant;
continue to vest for one year in the event of involuntary termination when the retirement criteria has not been met; and
stop vesting for all other situations including early retirement prior to age 62.
Our Accounting
We use a Black-Scholes option valuation model to estimate the fair value of every stock option award on its grant-date.
In our estimates, we use:
historical data — for option exercise time and employee terminations;
a Monte-Carlo simulation — for how long we expect granted options to be outstanding; and
the U.S. Treasury yield curve — for the risk-free rate. We use a yield curve over a period matching the expected term of the grant.
The expected volatility in our valuation model is based on:
implied volatilities from traded options on our stock,
historical volatility of our stock and
other factors.
Weighted Average Assumptions Used in Estimating Value of Stock Options Granted
  
2015 
 GRANTS

2014 
 GRANTS

2013 
 GRANTS

Expected volatility
25.92
%
31.71
%
38.00
%
Expected dividends
3.28
%
2.92
%
2.23
%
Expected term (in years)
4.77

4.97

4.97

Risk-free rate
1.54
%
1.57
%
0.92
%
Weighted average grant-date fair value
$
5.85

$
6.62

$
8.40

Share-based compensation expense for stock options is generally recognized over the vesting period. There are exceptions for stock options awarded to employees who:
are eligible for retirement;
will become eligible for retirement during the vesting period; or
whose employment is terminated during the vesting period due to job elimination or the sale of a business.

In these cases, we record the share-based compensation expense over a required service period that is less than the stated vesting period.

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Activity
The following table shows our option unit activity for 2015.
 
OPTIONS
(IN
THOUSANDS)
WEIGHTED
AVERAGE
EXERCISE
PRICE

WEIGHTED
AVERAGE
REMAINING
CONTRACTUAL
TERM
(IN YEARS)
AGGREGATE
INTRINSIC
VALUE (IN
MILLIONS)

Outstanding at December 31, 2014
12,285
$
24.19

 
 
Granted
2,123
$
35.40

 
 
Exercised
(1,376)
$
24.46

 
 
Forfeited or expired
(269)
$
31.34

 
 
Outstanding at December 31, 2015(1)
12,763
$
25.88

5.20
$
65

Exercisable at December 31, 2015
8,442
$
22.78

3.62
$
62

(1) As of December 31, 2015, there were approximately 1,034 thousand stock options that had met the requisite service period and will be released as identified in the grant terms.
The total intrinsic value of stock options exercised was:
$13 million in 2015,
$55 million in 2014 and
$61 million in 2013.
The total grant-date fair value of stock options vested was:
$14 million in 2015,
$16 million in 2014 and
$14 million in 2013.
RESTRICTED STOCK UNITS
Through the Plan, we award restricted stock units — grants that entitle the holder to shares of our stock as the award vests.
The Details
Our restricted stock units granted in 2015, 2014 and 2013 generally:
vest ratably over four years;
immediately vest in the event of death while employed or disability;
continue to vest upon retirement at an age of at least 62, but a portion of the grant is forfeited if retirement occurs before the one year anniversary of the grant;
continue vesting for one year in the event of involuntary termination when the retirement has not been met; and
will be forfeited upon termination of employment in all other situations including early retirement prior to age 62.
Our Accounting
The fair value of our restricted stock units is the market price of our stock on the grant-date of the awards.
We generally record share-based compensation expense for restricted stock units over the four-year vesting period. Generally for restricted stock units that continue to vest following the termination of employment, we record the share-based compensation expense over a required service period that is less than the stated vesting period.
Activity
The following table shows our restricted stock unit activity for 2015.
 
STOCK UNITS
(IN THOUSANDS)
WEIGHTED
AVERAGE
GRANT-DATE
FAIR VALUE

Nonvested at December 31, 2014
1,227
$
28.06

Granted
433
$
35.41

Vested
(489)
$
26.70

Forfeited
(67)
$
31.11

Nonvested at December 31, 2015(1)
1,104
$
31.37

(1) As of December 31, 2015, there were approximately 232 thousand restricted stock units that had met the requisite service period and will be released as identified in the grant terms.
The weighted average grant-date fair value for restricted stock units was:
$30.14 in 2014 and
$30.54 in 2013.

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The total grant-date fair value of restricted stock units vested was:
$14 million in 2015,
$16 million in 2014 and
$14 million in 2013.
Nonvested restricted stock units accrue dividends that are paid out when restricted stock units vest. Any restricted stock units forfeited will not receive dividends.
As restricted stock units vest, a portion of the shares awarded is withheld to cover employee taxes. As a result, the number of stock units vested and the number of common shares issued will differ.
PERFORMANCE SHARE UNITS
Through the Plan, we award performance share units — grants that entitle the holder to shares of our stock as the award vests.
The Details
The final number of shares awarded will range from 0 percent to 150 percent of each grant’s target, depending upon actual company performance.

For shares granted in 2015 the ultimate number of performance share units earned is based on two measures:

our relative total shareholder return (TSR) ranking measured against the S&P 500 over a three year period and
our relative TSR ranking measured against an industry peer group of companies over a three year period.

The vesting provisions for performance share units granted in 2015 were as follows:

vest 100 percent on the third anniversary of the grant date as long as the individual remains employed by the company;
fully vest in the event the participant dies or becomes disabled while employed;
continue to vest upon retirement at an age of at least 62, but a portion of the grant is forfeited if retirement occurs before the one year anniversary of the grant;
continue vesting for one year in the event of involuntary termination when the retirement criteria has not been met and the employee has met the second anniversary of the grant date; and
will be forfeited upon termination of employment in all other situations including early retirement prior to age 62.
For shares granted in 2014 and 2013 the ultimate number of performance share units earned is based on two measures:
Weyerhaeuser’s cash flow during the first year determined the initial number of units earned and
Weyerhaeuser’s relative total shareholder return (TSR) ranking in the S&P 500 during the first two years is used to adjust the initial number of units earned up or down by 20 percent.
At the end of the two-year performance period and over a further two-year vesting period, performance share units would be paid in shares of our stock. Performance share units granted and that are earned vest as follows:
vest 50 percent, 25 percent and 25 percent on the second, third and fourth anniversaries of the grant-date, respectively, as long as the individual remains employed by the company;
fully vest in the event the participant dies or becomes disabled while employed;
continue to vest upon retirement at an age of at least 62, but a portion of the grant is forfeited if retirement occurs before the one year anniversary of the grant;
continue vesting for one year in the event of involuntary termination when the retirement has not been met; and
will be forfeited upon termination of employment in all other situations including early retirement prior to age 62.
Our Accounting
Since the award contains a market condition, the effect of the market condition is reflected in the grant-date fair value which is estimated using a Monte Carlo simulation model. This model estimates the TSR ranking of the company over the performance period. Compensation expense is based on the estimated probable number of earned awards and recognized over the vesting period on an accelerated basis. Generally, compensation expense would be reversed if the performance condition is not met unless the requisite service period has been achieved.
Weighted Average Assumptions Used in Estimating the Value of Performance Share Units
  
2015 
 GRANTS

2014 
 GRANTS

2013 
 GRANTS

Performance period
1/1/2015 – 12/31/2017

1/1/2014 – 12/31/2015

1/1/2013 – 12/31/2014

Valuation date closing stock price
$
35.41

$
30.16

$
30.48

Expected dividends
3.26
%
2.91
%
2.23
%
Risk-free rate
0.05% - 1.07%

0.03% - 0.79%

0.09% - 0.46%

Volatility
16.33% - 20.89%

20.74% - 23.53%

22.09% - 29.57%

Weighted average grant-date fair value
$
34.75

$
30.62

$
31.59


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Activity
The following table shows our performance share unit activity for 2015.
 
GRANTS (IN 
THOUSANDS)

WEIGHTED
AVERAGE
GRANT-DATE
FAIR VALUE

Nonvested at December 31, 2014
890

$
29.46

Granted at target
239

$
34.75

Vested
(395
)
$
29.08

Forfeited
(23
)
$
31.34

Performance adjustment
(31
)
$
30.62

Nonvested at December 31, 2015(1)
680

$
31.42

(1) As of December 31, 2015, there were approximately 134 thousand performance share units that had met the requisite service period and will be released as identified in the grant terms.
The total grant-date fair value of performance share units vested was:
$9 million in 2015
$7 million in 2014
$5 million in 2013
For 2014 grants, the company exceeded the cash flow target, resulting in an initial number of shares earned equal to 114 percent of target. Because the company's two-year TSR ranking was between the 25th and 50th percentile, the initial number of performance shares granted decreased 11 percent.
For 2013 grants, the company exceeded the cash flow target, resulting in an initial number of shares earned equal to 150 percent of target. Because the company's two-year TSR ranking was between the 25th and 50th percentile, the initial number of performance shares granted decreased 15 percent.
As performance share units vest, a portion of the shares awarded is withheld to cover participant taxes. As a result, the number of stock units vested and the number of common shares issued will differ.
STOCK APPRECIATION RIGHTS
Through the Plan, we grant cash-settled stock appreciation rights as part of certain compensation awards.
The Details
Stock appreciation rights are similar to stock options. Employees benefit when the market price of our stock is higher on the exercise date than it was on the date the stock appreciation rights were granted. The differences are that the employee:
receives the benefit as a cash award and
does not purchase the underlying stock.
The vesting conditions and exceptions are the same as for 10-year stock options. Details are in the Stock Options section earlier in this note.
Stock appreciation rights are generally issued to employees outside of the U.S.
Our Accounting
We use a Black-Scholes option-valuation model to estimate the fair value of a stock appreciation right on its grant-date and every subsequent reporting date that the right is outstanding. Stock appreciation rights are liability-classified awards and the fair value is remeasured at every reporting date.
The process used to develop our valuation assumptions is the same as for the 10-year stock options we grant. Details are in the Stock Options section earlier in this note.
Weighted Average Assumptions Used to Re-measure Value of Stock Appreciation Rights at Year-End
  
2015 
 GRANTS

2014 
 GRANTS

2013 
 GRANTS

Expected volatility
22.10
%
18.20
%
24.02
%
Expected dividends
4.20
%
3.21
%
2.81
%
Expected term (in years)
1.94

1.32

1.16

Risk-free rate
0.99
%
0.45
%
0.19
%
Weighted average fair value
$
6.96

$
12.70

$
8.68


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Activity
The following table shows our stock appreciation rights activity for 2015.
 
RIGHTS
(IN
THOUSANDS)

WEIGHTED
AVERAGE
EXERCISE
PRICE

AVERAGE
REMAINING
CONTRACTUAL
TERM
(IN YEARS)
AGGREGATE
INTRINSIC
VALUE (IN
MILLIONS)

Outstanding at December 31, 2014
417

$
22.85

 
 
Granted
58

$
35.40

 
 
Exercised
(79
)
$
23.91

 
 
Forfeited or expired
(14
)
$
31.01

 
 
Outstanding at December 31, 2015
382

$
24.25

4.34
$
14

Exercisable at December 31, 2015
289

$
21.63

2.98
$
11

The total liabilities paid for stock appreciation rights was:
$1 million in 2015,
$2 million in 2014 and
$4 million in 2013.
UNRECOGNIZED SHARE-BASED COMPENSATION
As of December 31, 2015, our unrecognized share-based compensation cost for all types of share-based awards included $40 million related to non-vested equity-classified share-based compensation arrangements — expected to be recognized over a weighted average period of approximately 2.3 years.

DEFERRED COMPENSATION STOCK EQUIVALENT UNITS
Certain employees and our board of directors may defer compensation into stock-equivalent units.
The Details
The plan works differently for employees and directors.
Eligible employees:
may choose to defer all or part of their bonus into stock-equivalent units;
may choose to defer part of their salary, except for executive officers; and
receive a 15 percent premium if the deferral is for at least five years.
Our directors:
receive a portion of their annual retainer fee in the form of restricted stock units, which vest over one year and may be deferred into stock-equivalent units;
may choose to defer some or all of the remainder of their annual retainer fee into stock-equivalent units; and
do not receive a premium for their deferrals.
Employees and directors also choose when the deferrals will be paid out although no deferrals may be paid until after the separation from service of the employee or director.
Our Accounting
We settle all deferred compensation accounts in cash for our employees. Our directors receive shares of common stock as payment for stock-equivalent units. In addition, we credit all stock-equivalent accounts with dividend equivalents. The number of common shares to be issued in the future to directors is 651,729.
Stock-equivalent units are:
liability-classified awards and
re-measured to fair value at every reporting date.
The fair value of a stock-equivalent unit is equal to the market price of our stock.
Activity
The number of stock-equivalent units outstanding in our deferred compensation accounts was:
1,003,053 as of December 31, 2015;
944,966 as of December 31, 2014; and
915,160 as of December 31, 2013.


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NOTE 18: CHARGES FOR RESTRUCTURING, CLOSURES AND ASSET IMPAIRMENTS
Items Included in Our Restructuring, Closure and Asset Impairment Charges
DOLLAR AMOUNTS IN MILLIONS
  
2015

2014

2013

Restructuring and closure charges:
 
 
 
Termination benefits
$
4

$
27

$
1

Pension and postretirement charges

3


Other restructuring and closure costs
6

12

4

Charges for restructuring and closures
10

42

5

Impairment of long-lived assets
15

2

372

Total charges for restructuring, closures and impairments
$
25

$
44

$
377

RESTRUCTURING AND CLOSURES
During 2015, our restructuring and closure charges were primarily related to the closure of four distribution centers for our Wood Products business. During 2014, our restructuring and closure charges were primarily related to our selling, general and administrative cost reduction initiative to support achieving our competitive performance goals. During 2013, our restructuring and closure charges were primarily related to various Wood Products operations we closed or curtailed and restructuring our corporate staff functions to support achieving our competitive performance goals.
Other restructuring and closure costs include lease termination charges, dismantling and demolition of plant and equipment, gain or loss on disposition of assets, environmental cleanup costs and incremental costs to wind down operating facilities.
ACCRUED TERMINATION BENEFITS
Changes in accrued severance related to restructuring during 2015 were as follows:
DOLLAR AMOUNTS IN MILLIONS
Accrued severance as of December 31, 2014
$
10

Charges
4

Payments
(9
)
Accrued severance as of December 31, 2015
$
5

ASSET IMPAIRMENTS
The Impairment of Long-Lived Assets and Goodwill sections of Note 1: Summary of Significant Accounting Policies provide details about how we account for these impairments. Additional information can also be found in our Critical Accounting Policies.
Long-Lived Assets
Our long-lived asset impairments were primarily related to the following:
2015 — We recognized an impairment charge of $13 million related to a nonstrategic asset held in Unallocated Items. The fair value of the asset was determined using significant unobservable inputs (Level 3) based on a discounted cash flow model. The asset was subsequently sold for no gain during 2015.
2013 — charges include:
$356 million impairment of the Coyote Springs Property. Under the terms of the TRI Pointe transaction, certain assets and liabilities of WRECO and its subsidiaries were excluded from the transaction and retained by Weyerhaeuser, including assets and liabilities relating to the Coyote Springs Property. During fourth quarter 2013, following the announcement of the TRI Pointe transaction, WRECO and Weyerhaeuser began exploring strategic alternatives for the Coyote Springs Property and determined that Weyerhaeuser’s strategy for development of the Coyote Springs Property will likely differ from WRECO’s current development plan. WRECO’s development plan was long-term in nature with development and net cash flows covering at least 15-20 years. The undiscounted cash flows for the Coyote Springs Property under the WRECO development plan remained above the carrying value of the property. Weyerhaeuser Company’s strategy was to cease holding the Coyote Springs Property for development, and we initiated activities to market the assets to potential third-party buyers. The undiscounted cash flows under the Weyerhaeuser Company asset sale strategy were below the carrying value of the property. Consequently, we recorded a noncash charge of $356 million in fourth quarter 2013 for the impairment of the Coyote Springs Property in Unallocated Items. The fair value of the property was primarily based on an independent appraisal that was determined using both other observable inputs (Level 2) related to other market transactions and significant unobservable inputs (Level 3) such as the timing and amounts of future cash flows related to the development of the property, timing and amounts of proceeds from acreage sales, access to water for use on the property and discount rates applicable to the future cash flows.
$9 million related to the decision to permanently close our Colbert, Georgia engineered wood products facility in our Wood Products segment that was previously indefinitely closed. The fair value of the facility was determined using significant unobservable inputs (Level 3) based on liquidation values.



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NOTE 19: OTHER OPERATING COSTS (INCOME), NET
Other operating costs (income), net:
includes both recurring and occasional income and expense items and
can fluctuate from year to year.
Various Income and Expense Items Included in Other Operating Costs (Income), Net
DOLLAR AMOUNTS IN MILLIONS
  
2015

2014

2013

Gain on postretirement plan amendment (Note 9)
$

$
(151
)
$

Gain on disposition of nonstrategic assets
(12
)
(27
)
(19
)
Foreign exchange losses, net
47

27

7

Land management income
(37
)
(34
)
(28
)
Litigation expense, net
23

9

16

Plum Creek merger-related costs
14



Other, net
(17
)
(25
)
(11
)
Total
$
18

$
(201
)
$
(35
)
Gain on disposition of nonstrategic assets in 2014 included a $22 million pretax gain on the sale of a landfill in Washington State.
Foreign exchange losses result from changes in exchange rates primarily related to our U.S. dollar denominated debt that is held by our Canadian subsidiary.
Land management income includes income from recreational activities, land permits, grazing rights, firewood sales and other miscellaneous income related to land management activities.

NOTE 20: INCOME TAXES
This note provides details about our income taxes applicable to continuing operations:
earnings before income taxes,
provision for income taxes,
effective income tax rate,
deferred tax assets and liabilities and
unrecognized tax benefits.
Income taxes related to discontinued operations are discussed in Note 3: Discontinued Operations.
EARNINGS BEFORE INCOME TAXES
Domestic and Foreign Earnings From Continuing Operations Before Income Taxes
DOLLAR AMOUNTS IN MILLIONS
  
2015

2014

2013

Domestic earnings
$
421

$
970

$
198

Foreign earnings
82

43

122

Total
$
503

$
1,013

$
320

PROVISION FOR INCOME TAXES
Provision (Benefit) for Income Taxes From Continuing Operations
DOLLAR AMOUNTS IN MILLIONS
  
2015

2014

2013

Current:
 

 

 

Federal
$
3

$
(26
)
$
(80
)
State
(1
)
12

(18
)
Foreign
(5
)
3

(21
)
 
(3
)
(11
)
(119
)
Deferred:
 

 

 

Federal
(30
)
178

(79
)
State
2

6

6

Foreign
28

12

21

 

196

(52
)
Total income tax provision (benefit)
$
(3
)
$
185

$
(171
)

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EFFECTIVE INCOME TAX RATE
Effective Income Tax Rate Applicable to Continuing Operations
DOLLAR AMOUNTS IN MILLIONS
  
2015

2014

2013

U.S. federal statutory income tax
$
176

$
354

$
112

State income taxes, net of federal tax benefit
1

14

7

REIT income not subject to federal income tax
(158
)
(161
)
(101
)
REIT benefit from change to tax law
(13
)


Foreign taxes

(2
)
(8
)
Provision for unrecognized tax benefits
(7
)
(4
)
(193
)
Repatriation of Canadian earnings


21

Domestic production activities deduction


(13
)
Other, net
(2
)
(16
)
4

Total income tax provision (benefit)
$
(3
)
$
185

$
(171
)
Effective income tax rate
(0.5
)%
18.3
%
(53.4
)%
DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets and liabilities reflect temporary differences between pretax book income and taxable income. Deferred tax assets represent tax benefits that have already been recorded for book purposes but will be recorded for tax purposes in the future. Deferred tax liabilities represent income that has been recorded for book purposes but will be reported as taxable income in the future.
Balance Sheet Classification of Deferred Income Tax Assets (Liabilities) Related to Continuing Operations
DOLLAR AMOUNTS IN MILLIONS
  
DECEMBER 31,
2015

DECEMBER 31,
2014

Net noncurrent deferred tax asset
4

44

Net noncurrent deferred tax liability
(86
)
(14
)
Net deferred tax asset (liability)
$
(82
)
$
30

Items Included in Our Deferred Income Tax Assets (Liabilities)
DOLLAR AMOUNTS IN MILLIONS
  
DECEMBER 31,
2015

DECEMBER 31,
2014

Postretirement benefits
$
80

$
101

Pension
260

369

State tax credits
56

56

Net operating loss carryforwards
59

86

Cellulosic biofuel producers credit
78

100

Other
203

223

Gross deferred tax assets
736

935

Valuation allowance
(72
)
(72
)
Net deferred tax assets
664

863

Property, plant and equipment
(496
)
(523
)
Timber installment notes
(180
)
(180
)
Other
(70
)
(130
)
Deferred tax liabilities
(746
)
(833
)
Net deferred tax asset (liability)
$
(82
)
$
30


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OTHER INFORMATION ABOUT OUR DEFERRED INCOME TAX ASSETS (LIABILITIES)
Other information about our deferred income tax assets (liabilities) include:
net operating loss and credit carryforwards,
valuation allowances and
reinvestment of undistributed earnings.
Net Operating Loss and Credit Carryforwards
Our gross federal, state and foreign net operating loss carryforwards as of the end of 2015 totaled $903 million as follows:
U.S. REIT - $433 million, which expire from 2030 through 2035,
U.S. TRS - $29 million, which expires in 2035,
State - $299 million, which expire from 2024 through 2035; and
Foreign - $142 million, which expire from 2016 through 2032.
Our gross federal, state and foreign credit carryforwards as of the end of 2015 totaled $188 million as follows:
U.S. TRS - $93 million, which expire from 2019 through 2035,
State - $43 million, which expire from 2016 through 2029, and $46 million, which do not expire; and
Foreign - $6 million, which expire from 2016 through 2032.
Valuation Allowances
With the exception of the valuation allowance discussed below, we believe it is more likely than not that we will have sufficient future taxable income to realize our deferred tax assets.
Our valuation allowance on our deferred tax assets was $72 million as of the end of 2015, primarily related to foreign and state net operating losses and state and provincial credits.
Reinvestment of Undistributed Earnings
The balance of our foreign undistributed earnings was approximately $34 million at the end of 2015, all of which is permanently reinvested; therefore, it is not subject to U.S. income tax. Generally, such earnings become subject to U.S. tax upon the remittance of dividends and under certain other circumstances. It is not practicable to estimate the amount of deferred tax liability related to investments in our foreign subsidiaries.
HOW WE ACCOUNT FOR INCOME TAXES
The Income Taxes section of Note 1: Summary of Significant Accounting Policies provides details about how we account for our income taxes.
UNRECOGNIZED TAX BENEFITS
Unrecognized tax benefits represent potential future obligations to taxing authorities if uncertain tax positions we have taken on previously filed tax returns are not sustained. The total amount of unrecognized tax benefits as of December 31, 2015 and 2014, are $6 million and $11 million, respectively, which does not include related interest of $1 million and $3 million, respectively. These amounts represent the gross amount of exposure in individual jurisdictions and do not reflect any additional benefits expected to be realized if such positions were not sustained, such as the federal deduction that could be realized if an unrecognized state deduction was not sustained.
Reconciliation of the Beginning and Ending Amount of Unrecognized Tax Benefits
DOLLAR AMOUNTS IN MILLIONS
  
DECEMBER 31,
2015

DECEMBER 31,
2014

Balance at beginning of year
$
11

$
26

Settlements
(4
)

Lapse of statute
(1
)
(15
)
Balance at end of year
$
6

$
11

The net liability recorded in our Consolidated Balance Sheet related to unrecognized tax benefits was $4 million as of December 31, 2015, which includes interest of $1 million and is net of $3 million in credits and loss carryovers available to offset the liability. The net liability as of December 31, 2014, was $4 million, which includes interest of $3 million and is net of $6 million in payments made in advance of settlements and $4 million in credits and loss carryovers available to offset the liability.
The net liability recorded for tax positions across all jurisdictions that, if sustained, would affect our effective tax rate was $5 million as of December 31, 2015, and $12 million as of December 31, 2014, which includes interest of $1 million and $3 million, respectively.
In accordance with our accounting policy, we accrue interest and penalties related to unrecognized tax benefits as a component of income tax expense.
As of December 31, 2015, no U.S. federal income tax returns are under examination, with years 2012 forward open to examination. We are undergoing examinations in state jurisdictions for tax years 2011 through 2013, with tax years 2009 forward open to examination. We are also undergoing and are open to examinations in foreign jurisdictions for tax years 2010 forward. We expect that the outcome of any examination will not have a material effect on our consolidated financial statements; however, audit outcomes and the timing of audit settlements are subject to significant uncertainty.
In the next 12 months, we estimate a decrease of $1 million in unrecognized tax benefits due to the lapse of applicable statutes of limitation.
 

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NOTE 21: GEOGRAPHIC AREAS
This note provides selected key financial data according to the geographical locations of our customers. The selected key financial data includes:
sales to unaffiliated customers,
export sales from the U.S., and
long-lived assets.
SALES
Our sales to unaffiliated customers outside the U.S. are primarily to customers in Canada, China, Japan and Europe. Our export sales include:
pulp, liquid packaging board, logs, lumber and wood chips to Japan;
pulp, logs and lumber to other Pacific Rim countries; and
pulp and plywood to Europe.
Sales by Geographic Area
FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2014
(DOLLAR AMOUNTS IN MILLIONS)
  
2015

2014

2013

Sales to unaffiliated customers:
 
 
 
U.S.
$
4,819

$
4,889

$
4,761

Japan
612

682

758

China
397

477

453

Canada
353

424

418

Europe
308

328

298

South America
82

87

80

Other foreign countries
511

516

486

Total
$
7,082

$
7,403

$
7,254

Export sales from the U.S.:
 
 
 
Japan
$
558

$
620

$
676

China
333

416

411

Other
828

856

804

Total
$
1,719

$
1,892

$
1,891

LONG-LIVED ASSETS
Our long-lived assets — used in the generation of revenues in the different geographical areas — are nearly all in the U.S. and Canada. Our long-lived assets include:
goodwill,
timber and timberlands and
property and equipment, including construction in progress.
Long-Lived Assets by Geographic Area
DOLLAR AMOUNTS IN MILLIONS
  
December 31,
2015

December 31,
2014

December 31,
2013

Long-lived assets:
 
 
 
U.S.(1)
$
8,187

$
8,069

$
8,116

Canada
460

579

652

Other foreign countries
654

676

670

Total
$
9,301

$
9,324

$
9,438

(1) Includes assets of discontinued operations in 2013.


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NOTE 22: SELECTED QUARTERLY FINANCIAL INFORMATION (unaudited)
Quarterly financial data provides a review of our results and performance throughout the year. Our earnings per share for the full year do not always equal the sum of the four quarterly earnings-per share amounts because of common share activity during the year.
Key Quarterly Financial Data for the Last Two Years
DOLLAR AMOUNTS IN MILLIONS EXCEPT PER-SHARE FIGURES
  
First
Quarter
Second
Quarter
Third
Quarter(1)
Fourth
Quarter
Full Year
2015:
 
 
 
 
 
Net sales
$
1,721

$
1,807

$
1,820

$
1,734

$
7,082

Operating income
$
200

$
243

$
259

$
217

$
919

Earnings from continuing operations before income taxes
$
120

$
157

$
175

$
51

$
503

Net earnings
$
101

$
144

$
191

$
70

$
506

Net earnings attributable to Weyerhaeuser common shareholders
$
90

$
133

$
180

$
59

$
462

Basic net earnings per share attributable to Weyerhaeuser common shareholders
$
0.17

$
0.26

$
0.35

$
0.11

$
0.89

Diluted net earnings per share attributable to Weyerhaeuser common shareholders
$
0.17

$
0.26

$
0.35

$
0.11

$
0.89

Dividends paid per share
$
0.29

$
0.29

$
0.31

$
0.31

$
1.20

Market prices - high/low
$37.04 - $32.74

$33.19 - $31.06

$32.34 - $26.76

$32.72 - $26.73

$37.04 - $26.73

2014:
 
 
 
 
 
Net sales
$
1,736

$
1,964

$
1,915

$
1,788

$
7,403

Operating income
$
308

$
400

$
318

$
294

$
1,320

Earnings from continuing operations before income taxes
$
234

$
328

$
237

$
214

$
1,013

Net earnings
$
194

$
291

$
1,164

$
177

$
1,826

Net earnings attributable to Weyerhaeuser common shareholders
$
183

$
280

$
1,153

$
166

$
1,782

Basic net earnings per share attributable to Weyerhaeuser common shareholders
$
0.31

$
0.48

$
2.17

$
0.32

$
3.20

Diluted net earnings per share attributable to Weyerhaeuser common shareholders
$
0.31

$
0.47

$
2.15

$
0.31

$
3.18

Dividends paid per share
$
0.22

$
0.22

$
0.29

$
0.29

$
1.02

Market prices - high/low
$31.59 - $28.63

$33.26 - $27.48

$34.60 - $31.09

$36.88 - $31.61

$36.88 - $27.48

(1) Third Quarter 2014 includes a $972 million net gain on the Real Estate Divestiture recognized in 2014. See Note 3: Discontinued Operations for more information.



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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.

CONTROLS AND PROCEDURES
 
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
The company’s principal executive officer and principal financial officer have evaluated the effectiveness of the company’s disclosure controls and procedures as of the end of the period covered by this annual report on Form 10-K. Disclosure controls are controls and other procedures that are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s (SEC) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosure.
Based on their evaluation, the company’s principal executive officer and principal financial officer have concluded that the company’s disclosure controls and procedures are effective to ensure that information required to be disclosed complies with the SEC’s rules and forms.
 
CHANGES IN INTERNAL CONTROL
No changes occurred in the company’s internal control over financial reporting during the period that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.
 
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal control over financial reporting as is defined in the Securities and Exchange Act of 1934 rules. Management, under our supervision, conducted an evaluation of the effectiveness of the company’s internal control over financial reporting based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation under the framework in Internal Control — Integrated Framework (2013), management concluded that the company’s internal control over financial reporting was effective as of December 31, 2015. The effectiveness of the company’s internal control over financial reporting as of December 31, 2015, has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report, which is included herein.


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Weyerhaeuser Company:
We have audited Weyerhaeuser Company’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) . Weyerhaeuser Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Weyerhaeuser Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Weyerhaeuser Company and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income, cash flows, and changes in equity for each of the years in the three-year period ended December 31, 2015, and our report dated February 17, 2016 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP
Seattle, Washington
February 17, 2016
 


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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
A list of our executive officers and biographical information are found in the Our Business — Executive Officers of the Registrant section of this report. Information with respect to directors of the company and other governance matters, as required by this item is included in the Notice of the 2016 Annual Meeting and Proxy Statement for the company’s Annual Meeting of Shareholders to be held May 20, 2016 under the headings “Nominees for Election,” “Board of Directors and Committee Information,” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Potential Payment upon Termination or Change in Control — Change in Control,” and “ — Severance,” and is incorporated herein by reference.

EXECUTIVE AND DIRECTOR COMPENSATION
Information with respect to executive and director compensation contained in the Notice of the 2016 Annual Meeting and Proxy Statement for the company’s Annual Meeting of Shareholders to be held May 20, 2016, under the headings “Board of Directors and Committee Information — Directors’ Compensation,” “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Compensation Committee Interlocks and Insider Participation,” “Summary Compensation Table,” “Grants of Plan-Based Awards,” “Outstanding Equity Awards at Fiscal Year-End,” “Option Exercises and Stock Vested in Fiscal 2015,” “Pension Benefits,” “Nonqualified Deferred Compensation,” and “Potential Payments Upon Termination or Change of Control” is incorporated herein by reference.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information with respect to security ownership of certain beneficial owners and management contained in the Notice of the 2016 Annual Meeting and Proxy Statement for the company’s Annual Meeting of Shareholders to be held May 20, 2016 under the heading “Beneficial Ownership of Common Shares” is incorporated herein by reference.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with regard to certain relationships and related transactions contained in the Notice of the 2016 Annual Meeting and Proxy Statement for the company’s Annual Meeting of Shareholders to be held May 20, 2016 under the headings “Review, Approval or Ratification of Transactions with Related Persons” and “Board of Directors and Committee Information” is incorporated herein by reference.

PRINCIPAL ACCOUNTING FEES AND SERVICES
Information with respect to principal accounting fees and services in the Notice of the 2016 Annual Meeting and Proxy Statement for the company’s Annual Meeting of Shareholders to be held May 20, 2016 under the heading “Ratification of Selection of Independent Registered Public Accounting Firm” is incorporated herein by reference.
 

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EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

All financial statement schedules have been omitted because they are not applicable or the required information is included in the consolidated financial statements, or the notes thereto, in Financial Statements and Supplementary Data above.
 
EXHIBITS
  
2
Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
 
 
(a)
Stock Purchase Agreement, dated as of June 14, 2013, by and among Longview Timber Holdings, Corp., the securityholders listed on the signature pages thereto, Weyerhaeuser Columbia Holding Co., LLC and Weyerhaeuser Company (incorporated by reference to Current Report on Form 8-K filed with the Securities and Exchange Commission June 17, 2013 — Commission File Number 1-4825)
 
 
(b)
Transaction Agreement, dated as of November 3, 2013, among Weyerhaeuser Company, Weyerhaeuser Real Estate Company, TRI Pointe Homes, Inc. and Topaz Acquisition, Inc. (incorporated by reference to Current Report on Form 8-K filed with the Securities and Exchange Commission November 4, 2013 — Commission File Number 1-4825)
 
 
(c)
Agreement and Plan of Merger, dated as of November 6, 2015, between Weyerhaeuser Company and Plum Creek Timber Company, Inc. (incorporated by reference to Current Report on Form 8-K filed with the Securities and Exchange Commission November 9, 2015 - Commission File Number 1-4825)
3
Articles of Incorporation
 
 
(a)
Articles of Incorporation (incorporated by reference to Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission May 6, 2011 — Commission File Number 1-4825 and Current Report on Form 8-K filed with the Securities and Exchange Commission June 20, 2013 — Commission File Number 1-4825)
 
 
(b)
Bylaws (incorporated by reference to Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission May 6, 2011 — Commission File Number 1-4825)
4
Instruments Defining the Rights of Security Holders, Including Indentures
 
 
(a)
Indenture dated as of April 1, 1986 between Weyerhaeuser Company and The Bank of New York Mellon Trust Company, N.A. (as successor to JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank and Chemical Bank), a national banking association, as Trustee (incorporated by reference from the Registration Statement on Form S‑3, Registration No. 333-36753).
 
 
(b)
First Supplemental Indenture dated as of February 15, 1991 between Weyerhaeuser Company and The Bank of New York Mellon Trust Company, N.A. (as successor to JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank and Chemical Bank), a national banking association, as Trustee (incorporated by reference from the Registration Statement on Form S‑3, Registration No. 33-52982).
 
 
(c)
Second Supplemental Indenture dated as of February 1, 1993 between Weyerhaeuser Company and The Bank of New York Mellon Trust Company, N.A. (as successor to JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank and Chemical Bank), a national banking association, as Trustee (incorporated by reference from the Registration Statement on Form S‑3, Registration No. 33-59974).
 
 
(d)
Third Supplemental Indenture dated as of October 22, 2001 between Weyerhaeuser Company and The Bank of New York Mellon Trust Company, N.A. (as successor to JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank and Chemical Bank), a national banking association, as Trustee (incorporated by reference from the Registration Statement on Form S-3, Registration No. 333-72356).
 
 
(e)
Fourth Supplemental Indenture dated as of March 12, 2002 between Weyerhaeuser Company and The Bank of New York Mellon Trust Company, N.A. (as successor to JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank and Chemical Bank), a national banking association, as Trustee (incorporated by reference from the Registration Statement on Form S-4, Registration No. 333-82376).
10
Material Contracts
 
 
(a)
Form of Executive Change of Control Agreement (incorporated by reference to Form 8-K filed with the Securities and Exchange Commission February 13, 2015 — Commission File Number 1-4825) *
 
 
(b)
Form of Executive Severance Agreement (incorporated by reference to Form 8-K filed with the Securities and Exchange Commission March 9, 2015 — Commission File Number 1-4825) *
 
 
(c)
Weyerhaeuser Company 2013 Long-Term Incentive Plan (incorporated by reference to Form 8-K filed with the Securities and Exchange Commission February 19, 2013 — Commission File Number 1-4825) *
 
 
(d)
Form of Weyerhaeuser Company 2013 Long-Term Incentive Plan Stock Option Award Terms and Conditions (incorporated by reference to Current Report on Form 8-K filed with the Securities and Exchange Commission April 16, 2013 — Commission File Number 1-4825) *
 
 
(e)
Form of Weyerhaeuser Company 2013 Long-Term Incentive Plan Performance Share Unit Award Terms and Conditions (incorporated by reference to Current Report on Form 8-K filed with the Securities and Exchange Commission April 16, 2013 — Commission File Number 1-4825) *
 
 
(f)
Form of Weyerhaeuser Company 2013 Long-Term Incentive Plan Performance Share Unit Award Terms and Conditions (incorporated by reference to Current Report on Form 8-K filed with the Securities and Exchange Commission
December 22, 2014 — Commission File Number 1-4825) *
 
 
(g)
Form of Weyerhaeuser Company 2013 Long Term Incentive Plan Performance Share Unit Award Terms and Conditions (incorporated by reference to Current Report on Form 8-K filed with the Securities and Exchange Commission January 22, 2016 — Commission File Number 1-4825) *

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(h)
Form of Weyerhaeuser Company 2013 Long-Term Incentive Plan Restricted Stock Unit Award 2013 Terms and Conditions (incorporated by reference to Form 8-K filed with the Securities and Exchange Commission April 16, 2013 — Commission File Number 1-4825) *
 
 
(i)
Form of Weyerhaeuser Company 2013 Long-Term Incentive Plan Restricted Stock Unit Award Terms and Conditions (incorporated by reference to Current Report on Form 8-K filed with the Securities and Exchange Commission January 22, 2016 - Commission File Number 1-4825) *

 
 
(j)
Form of Weyerhaeuser Company 2004 Long-Term Incentive Plan Stock Option Award 2013 Terms and Conditions (incorporated by reference to Form 8-K filed with the Securities and Exchange Commission February 11, 2013 — Commission File Number 1-4825) *
 
 
(k)
Form of Weyerhaeuser Company 2004 Long-Term Incentive Plan Performance Share Award 2013 Terms and Conditions (incorporated by reference to Form 8-K filed with the Securities and Exchange Commission February 11, 2013 — Commission File Number 1-4825) *
 
 
(l)
Form of Weyerhaeuser Company 2004 Long-Term Incentive Plan Restricted Stock Award 2013 Terms and Conditions (incorporated by reference to Form 8-K filed with the Securities and Exchange Commission February 11, 2013 — Commission File Number 1-4825) *
 
 
(m)
Weyerhaeuser Company Annual Incentive Plan for Salaried Employees (Amended and Restated Effective January 1, 2015) (incorporated by reference to Current Report on Form 8-K filed with the Securities and Exchange Commission December 22, 2014 — Commission File Number 1-4825) *
 
 
(n)
Weyerhaeuser Company 2015 Deferred Compensation Plan (incorporated by reference to Form 8-K filed with the Securities and Exchange Commission December 22, 2014 — Commission File Number 1-4825) *
 
 
(o)
Weyerhaeuser Company Salaried Employees Supplemental Retirement Plan (incorporated by reference to 2004 Form 10-K filed with the Securities and Exchange Commission January 27, 2009 — Commission File Number 1-4825) *
 
 
(p)
2016 Fee Deferral Plan for Directors of Weyerhaeuser Company (Amended and Restated Effective January 1, 2016) *
 
 
(q)
Form of Weyerhaeuser Company 2013 Long-Term Incentive Plan Restricted Stock Unit Award for Directors Grant Notice and Terms and Conditions *
 
 
(r)
Revolving Credit Facility Agreement among Weyerhaeuser Company, Weyerhaeuser Real Estate Company, JP Morgan Chase Bank, N.A. as administrative agent, Citibank, N.A., as syndication agent, CoBank, ACB, PNC Bank, National Association, The Bank of Tokyo-Mitsubishi UFJ, Ltd, and Wells Fargo Bank, N.A., as documentation agents, and the lenders, swing-line banks and initial fronting banks named therein (incorporated by reference to Current Report on Form 8-K filed with the Securities and Exchange Commission September 12, 2013 — Commission File Number 1-4825)
 
 
(s)
Credit Agreement among Weyerhaeuser Company, CoBank, ACB as administrative agent, and the lenders party thereto (incorporated by reference to Current Report on Form 8-K filed with the Securities and Exchange Commission September 16, 2013 — Commission File Number 1-4825)
 
 
(t)
Form of Tax Sharing Agreement to be entered into by and among Weyerhaeuser Company, Weyerhaeuser Real Estate Company and TRI Pointe Homes, Inc. (incorporated by reference to Current Report on Form 8-K filed with the Securities and Exchange Commission November 4, 2013 — Commission File Number 1-4825)
 
 
(u)
First Amendment to Tax Sharing Agreement dated as of July 7, 2015 by and among Weyerhaeuser Company, TRI Pointe Holdings, Inc. (f/k/a Weyerhaeuser Real Estate Company) and TRI Pointe Homes, Inc. (incorporated by reference to Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission July 31, 2015)

 
 
(v)
Executive Employment Agreement with Doyle R. Simons dated February 17, 2016 *
 
 
(w)
Retention Agreement with Catherine I. Slater dated effective November 4, 2015 *
12
Statements regarding computation of ratios
14
Code of Business Conduct and Ethics (incorporated by reference to Form 8-K filed with the Securities and Exchange Commission April 20, 2010 — Commission File Number 1-4825)
21
Subsidiaries of the Registrant
23
Consent of Independent Registered Public Accounting Firm
31
Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended
32
Certification pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document

* Denotes a management contract or compensatory plan or arrangement.


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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized February 17, 2016.
WEYERHAEUSER COMPANY
 
/s/    DOYLE R. SIMONS
Doyle R. Simons
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities indicated February 17, 2016.
/s/    DOYLE R. SIMONS
  
/s/    JOHN I. KIECKHEFER   
   Doyle R. Simons
Principal Executive Officer and Director
  
 John I. Kieckhefer
Director
 
 
 
/s/    PATRICIA M. BEDIENT   
 
/s/    WAYNE W. MURDY        
   Patricia M. Bedient
Principal Financial Officer
  
    Wayne W. Murdy
Director
 
 
 
/s/    JEANNE M. HILLMAN
 
/s/    NICOLE W. PIASECKI  
 Jeanne M. Hillman
Principal Accounting Officer
  
  Nicole W. Piasecki
Director
 
 
 
/s/    DAVID P. BOZEMAN
 
/s/    D. MICHAEL STEUERT 
   David P. Bozeman
Director
  
 D. Michael Steuert
Director
 
 
 
/s/    DEBRA A. CAFARO  
 
/s/    KIM WILLIAMS   
   Debra A. Cafaro
Director
  
     Kim Williams
Director
 
 
 
/s/    MARK A. EMMERT 
 
/s/    CHARLES R. WILLIAMSON
    Mark A. Emmert
Director
  
Charles R. Williamson
Chairman of the Board and Director
 


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