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NOTE 10: CONSOLIDATION OF VARIABLE INTEREST
ENTITIES This note provides details about: • Weyerhaeuser’s special-purpose entities (SPEs); and • our variable interests in Real Estate. We account for special-purpose entities under FASB Interpretation No. 46, Consolidation of Variable Interest Entities (Interpretation 46R). Interpretation 46R addresses consolidation of certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. SPECIAL-PURPOSE ENTITIES From 2002 through 2004, Weyerhaeuser sold certain nonstrategic timberlands. We consolidate the assets and liabilities of certain SPEs involved in these transactions. The following disclosures refer to assets of buyer-sponsored SPEs and liabilities of monetized SPEs. However, because these SPEs are distinct legal entities: • assets of the SPEs are not available to satisfy our liabilities or obligations; and • liabilities of the SPEs are not our liabilities or obligations. Our consolidated statement of earnings includes: • Interest expense on SPE debt for the last three years of: • $44 million in 2007; • $44 million in 2006; and • $45 million in 2005. • Interest income on SPE investments for the last three years of: • $55 million in 2007; • $54 million in 2006; and • $52 million in 2005. Results for 2005 also include recognition of a $57 million pretax gain that had been deferred on previous timberland sales. See Note 21: Other Operating Costs (Income), Net. Sales proceeds paid to buyer-sponsored SPEs were invested in restricted bank financial instruments with a balance of $909 million as of December 30, 2007 and December 31, 2006. The weighted average interest rate was 5.43 percent during both years. Maturities of the bank financial instruments at the end of our fiscal year 2007 were: • $110 million in 2012; • $184 million in 2013; • $253 million in 2019; and • $362 million in 2020. The long-term debt of our monetized SPEs was $757 million as of December 30, 2007 and December 31, 2006. The weighted average interest rate was 5.79 percent during both years. Maturities of the bank financial instruments at the end of our fiscal year 2007 were: • $92 million in 2012; • $154 million in 2013; • $209 million in 2019; and • $302 million in 2020. The monetization SPEs are exposed to credit-related losses that would result in the event of nonperformance by the banks. However, we do not expect any banks to fail to meet their obligations. REAL ESTATE VARIABLE INTEREST ENTITIES Our Real Estate segment has subsidiaries with two types of variable interests under Interpretation 46R: • Fixed-price purchase options – real estate development subsidiaries that enter into options to acquire lots at fixed prices, primarily for building single-family homes; and • Subordinated financing – a subsidiary that provides subordinated financing to third-party developers and homebuilders. Information Related to Entities Consolidated by Our Real Estate Segment  PURCHASE OPTIONS ACTIVITY NOT CONSOLIDATED We do not consolidate some of the purchase options that we have on lots. These include lot option purchase agreements we entered into: • prior to December 31, 2003; and • after December 31, 2003. Prior to December 31, 2003 After exhaustive efforts, we have not been able to obtain the information needed to determine whether we are required to consolidate any of the purchase options which we entered into prior to December 31, 2003 under Interpretation 46R. These represent: • 5 lot option purchase agreements; • $18 million in deposits at risk; and • $58 million to be paid if fully exercised. After December 31, 2003 Certain purchase options entered into after December 31, 2003 are not required to be consolidated as we are not the primary beneficiary. These options represent: • 14 lot option purchase agreements; • $15 million in deposits at risk; and • $226 million to be paid if fully exercised. SUBORDINATED FINANCING ACTIVITY As of December 30, 2007, our real estate subsidiary that provides subordinated financing has approximately $14 million in subordinated loans at risk in 37 variable interest entities. |