Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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, 2016 and 2015, 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, 2016. 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, 2016 and 2015, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2016, 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, 2016, 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 24, 2017 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Our report dated February 24, 2017, on the effectiveness of internal control over financial reporting as of December 31, 2016, contains an explanatory paragraph that states Weyerhaeuser Company acquired Plum Creek Timber Company, Inc. during 2016, and management excluded from its assessment of the effectiveness of Weyerhaeuser’s internal control over financial reporting as of December 31, 2016, certain components of Plum Creek Timber Company, Inc.’s internal control over financial reporting associated with less than 10% of total assets and less than 10% of net sales included in the consolidated financial statements of Weyerhaeuser Company and subsidiaries as of and for the year ended December 31, 2016. Our audit of internal control over financial reporting of Weyerhaeuser Company also excluded an evaluation of the internal control over financial reporting of certain components of Plum Creek Timber Company, Inc.

/s/ KPMG LLP

Seattle, Washington

February 24, 2017

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 57

CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2016

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES
	2016			2015			2014
Net sales	$	6,365		$	5,246		$	5,489
Costs of products sold	4,926			4,121			4,183
Gross margin	1,439			1,125			1,306
Selling expenses	89			99			97
General and administrative expenses	332			259			306
Research and development expenses	19			18			20
Charges for integration and restructuring, closures and asset impairments (Note 17)	170			39			44
Other operating costs (income), net (Note 18)	(41		)	52			(148		)
Operating income	870			658			987
Equity earnings from joint ventures (Note 8)	22			—			—
Interest income and other	43			36			38
Interest expense, net of capitalized interest	(431		)	(341		)	(338		)
Earnings from continuing operations before income taxes	504			353			687
Income taxes (Note 19)	(89		)	58			(71		)
Earnings from continuing operations	415			411			616
Earnings from discontinued operations, net of income taxes (Note 3)	612			95			1,210
Net earnings	1,027			506			1,826
Dividends on preference shares	(22		)	(44		)	(44		)
Net earnings attributable to Weyerhaeuser common shareholders	$	1,005		$	462		$	1,782
Basic earnings per share attributable to Weyerhaeuser common shareholders (Note 5):
Continuing operations	$	0.55		$	0.71		$	1.03
Discontinued operations	0.85			0.18			2.17
Net earnings per share	$	1.40		$	0.89		$	3.20
Diluted earnings per share attributable to Weyerhaeuser common shareholders (Note 5):
Continuing operations	$	0.55		$	0.71		$	1.02
Discontinued operations	0.84			0.18			2.16
Net earnings per share	$	1.39		$	0.89		$	3.18
Dividends paid per common share	$	1.24		$	1.20		$	1.02
Weighted average shares outstanding (in thousands) (Note 5):
Basic	718,560			516,371			556,705
Diluted	722,401			519,618			560,899

See accompanying Notes to Consolidated Financial Statements.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 58

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2016

DOLLAR AMOUNTS IN MILLIONS
	2016			2015			2014
Comprehensive income:
Net earnings	$	1,027		$	506		$	1,826
Other comprehensive income (loss):
Foreign currency translation adjustments	25			(97		)	(50		)
Changes in unamortized net pension and other postretirement benefit gain (loss), net of tax expense (benefit) of ($151) in 2016, $131 in 2015, and ($323) in 2014	(269		)	282			(554		)
Changes in unamortized prior service cost, net of tax benefit of $0 in 2016, $1 in 2015 and $64 in 2014	(4		)	(4		)	(103		)
Unrealized gains on available-for-sale securities	1			—			—
Total comprehensive income	$	780		$	687		$	1,119

See accompanying Notes to Consolidated Financial Statements.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 59

CONSOLIDATED BALANCE SHEET

DOLLAR AMOUNTS IN MILLIONS
	DECEMBER 31, 2016			DECEMBER 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	676		$	1,011
Receivables, less discounts and allowances of $1 and $1	390			276
Receivables for taxes	84			30
Inventories (Note 6)	358			325
Prepaid expenses and other current assets	114			63
Assets of discontinued operations (Note 3)	—			1,934
Total current assets	1,622			3,639
Property and equipment, less accumulated depreciation of $3,306 and $3,287 (Note 7)	1,562			1,233
Construction in progress	213			144
Timber and timberlands at cost, less depletion charged to disposals	14,299			6,552
Minerals and mineral rights, less depletion	319			14
Investments in and advances to joint ventures (Note 8)	56			—
Goodwill	40			40
Deferred tax assets (Note 19)	293			254
Other assets	224			229
Restricted financial investments held by variable interest entities (Note 8)	615			615
Total assets	$	19,243		$	12,720
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt (Notes 12 and 13)	$	281		$	—
Notes payable	1			4
Accounts payable	233			204
Accrued liabilities (Note 10)	691			427
Liabilities of discontinued operations (Note 3)	—			690
Total current liabilities	1,206			1,325
Long-term debt (Notes 12 and 13)	6,329			4,787
Long-term debt (nonrecourse to the company) held by variable interest entities (Note 8)	511			511
Deferred pension and other postretirement benefits (Note 9)	1,322			987
Deposit received from contribution of timberlands to related party (Note 8)	426			—
Other liabilities	269			241
Commitments and contingencies (Note 14)
Total liabilities	10,063			7,851
Equity:
Weyerhaeuser shareholders’ interest (Notes 15 and 16):
Mandatory convertible preference shares, series A: $1.00 par value; $50.00 liquidation; authorized 40,000,000 shares; issued and outstanding: 0 and 13,799,711 shares	—			14
Common shares: $1.25 par value; authorized 1,360,000,000 shares; issued and outstanding: 748,528,131 and 510,483,285 shares	936			638
Other capital	8,282			4,080
Retained earnings	1,421			1,349
Cumulative other comprehensive loss	(1,459		)	(1,212		)
Total equity	9,180			4,869
Total liabilities and equity	$	19,243		$	12,720

See accompanying Notes to Consolidated Financial Statements.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 60

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2016

DOLLAR AMOUNTS IN MILLIONS
	2016			2015			2014
Cash flows from operations:
Net earnings	$	1,027		$	506		$	1,826
Noncash charges (credits) to income:
Depreciation, depletion and amortization	565			479			500
Basis of real estate sold	109			18			17
Deferred income taxes, net	(159		)	—			205
Pension and other postretirement benefits	5			42			(152		)
Share-based compensation expense (Note 16)	60			31			40
Charges for impairment of assets	37			15			2
Equity (earnings) loss from joint ventures	(18		)	105			1
Net gains on disposition of discontinued operations (Note 3)	(789		)	—			(972		)
Net gains on sale of nonstrategic assets	(73		)	(38		)	(78		)
Foreign exchange transaction (gains) losses (Note 18)	(5		)	47			27
Change in, net of acquisition:
Receivables less allowances	(54		)	17			29
Receivable for taxes	106			(5		)	76
Inventories	61			10			(66		)
Real estate and land	—			—			(133		)
Prepaid expenses	5			3			17
Accounts payable and accrued liabilities	11			(35		)	(98		)
Deposits on land positions and other assets	—			—			15
Pension and postretirement contributions / benefit payments	(99		)	(83		)	(101		)
Distributions received from joint ventures	14			15			4
Other	(68		)	(52		)	(50		)
Net cash from operations	735			1,075			1,109
Cash flows from investing activities:
Capital expenditures for property and equipment	(451		)	(443		)	(354		)
Capital expenditures for timberlands reforestation	(59		)	(40		)	(41		)
Acquisition of timberlands	(10		)	(36		)	—
Proceeds from disposition of discontinued operations (Note 3)	2,486			—			707
Proceeds from sale of nonstrategic assets	104			19			28
Proceeds from contribution of timberlands to related party	440			—			—
Distributions received from joint ventures	46			—			—
Other	3			13			21
Net cash from investing activities	2,559			(487		)	361
Cash flows from financing activities:
Cash dividends on common shares	(932		)	(619		)	(563		)
Cash dividends on preference shares	(22		)	(44		)	(44		)
Proceeds from issuance of long-term debt	1,698			—			—
Payments of debt	(2,423		)	—			—
Proceeds from exercise of stock options	61			34			119
Repurchase of common stock	(2,003		)	(518		)	(203		)
Net proceeds from issuance of WRECO debt (Note 3)	—			—			887
Deposit of WRECO debt proceeds into escrow (Note 3)	—			—			(887		)
Other	(9		)	(9		)	(34		)
Net cash from financing activities	(3,630		)	(1,156		)	(725		)
Net change in cash and cash equivalents	$	(336	)	$	(568	)	$	745
Cash and cash equivalents from continuing operations at beginning of year	$	1,011		$	1,577		$	822
Cash and cash equivalents from discontinued operations at beginning of year	1			3			13
Cash and cash equivalents at beginning of year	$	1,012		$	1,580		$	835
Cash and cash equivalents from continuing operations at end of year	$	676		$	1,011		$	1,577
Cash and cash equivalents from discontinued operations at end of year	—			1			3
Cash and cash equivalents at end of year	$	676		$	1,012		$	1,580
Cash paid (received) during the year for:
Interest, net of amounts capitalized of $8 in 2016, $7 in 2015 and $13 in 2014	$	446		$	347		$	319
Income taxes	$	485		$	14		$	(37	)

See accompanying Notes to Consolidated Financial Statements.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 61

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2016

DOLLAR AMOUNTS IN MILLIONS
	2016			2015			2014
Mandatory convertible preference shares, series A:
Balance at beginning of year	$	14		$	14		$	14
Conversion to common shares	(14		)	—			—
Balance at end of year	$	—		$	14		$	14
Common shares:
Balance at beginning of year	$	638		$	656		$	729
Preference shares converted to common shares	29			—			—
Shares tendered (Note 3)	—			—			(73		)
Issued for exercise of stock options	3			2			7
Repurchases of common shares	(85		)	(20		)	(7		)
Release of vested restricted stock units	2			—			—
Plum Creek acquisition	349			—			—
Balance at end of year	$	936		$	638		$	656
Other capital:
Balance at beginning of year	$	4,080		$	4,519		$	6,444
Shares tendered (Note 3)	—			—			(1,881		)
Issued for exercise of stock options	61			32			112
Repurchase of common shares	(1,918		)	(498		)	(196		)
Share-based compensation	35			32			35
Plum Creek acquisition	6,046			—			—
Other transactions, net	(22		)	(5		)	5
Balance at end of year	$	8,282		$	4,080		$	4,519
Retained earnings:
Balance at beginning of year	$	1,349		$	1,508		$	294
Net earnings	1,027			506			1,826
Dividends on common shares	(933		)	(621		)	(568		)
Cash dividends on preference shares	(22		)	(44		)	(44		)
Balance at end of year	$	1,421		$	1,349		$	1,508
Cumulative other comprehensive loss:
Balance at beginning of year	$	(1,212	)	$	(1,393	)	$	(686	)
Annual changes – net of tax:
Foreign currency translation adjustments	25			(97		)	(50		)
Changes in unamortized net pension and other postretirement benefit gain (loss) (Note 9)	(269		)	282			(554		)
Changes in unamortized prior service credit (cost) (Note 9)	(4		)	(4		)	(103		)
Unrealized gains on available-for-sale securities	1			—			—
Balance at end of year	$	(1,459	)	$	(1,212	)	$	(1,393	)
Total Weyerhaeuser shareholders’ interest:
Balance at end of year	$	9,180		$	4,869		$	5,304
Noncontrolling interests:
Balance at beginning of year	$	—		$	—		$	37
New consolidations, de-consolidations and other transactions	—			—			(37		)
Balance at end of year	$	—		$	—		$	—
Total equity:
Balance at end of year	$	9,180		$	4,869		$	5,304

See accompanying Notes to Consolidated Financial Statements.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 62

INDEX FOR NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1:	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	64
NOTE 2:	BUSINESS SEGMENTS	70
NOTE 3:	DISCONTINUED OPERATIONS	71
NOTE 4:	MERGER WITH PLUM CREEK	74
NOTE 5:	NET EARNINGS PER SHARE	76
NOTE 6:	INVENTORIES	77
NOTE 7:	PROPERTY AND EQUIPMENT	78
NOTE 8:	RELATED PARTIES	78
NOTE 9:	PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS	80
NOTE 10:	ACCRUED LIABILITIES	93
NOTE 11:	LINES OF CREDIT	93
NOTE 12:	LONG-TERM DEBT	93
NOTE 13:	FAIR VALUE OF FINANCIAL INSTRUMENTS	95
NOTE 14:	LEGAL PROCEEDINGS, COMMITMENTS AND CONTINGENCIES	96
NOTE 15:	SHAREHOLDERS’ INTEREST	98
NOTE 16:	SHARE-BASED COMPENSATION	99
NOTE 17:	CHARGES FOR INTEGRATION AND RESTRUCTURING, CLOSURES AND ASSET IMPAIRMENTS	106
NOTE 18:	OTHER OPERATING COSTS (INCOME), NET	107
NOTE 19:	INCOME TAXES	107
NOTE 20:	GEOGRAPHIC AREAS	111
NOTE 21:	SELECTED QUARTERLY FINANCIAL INFORMATION (unaudited)	112

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 63

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. REIT income can be distributed to shareholders without first paying corporate level tax, substantially eliminating the double taxation on income. 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.

We were no longer subject to the REIT built-in gains tax as of December 31, 2014. Our built-in gains tax period expired in 2015 due to a change in U.S. tax law that statutorily shortened the built-in gains tax period to 5 years from 10 years. This means we are no longer subject to federal corporate level income taxes on sales of REIT property that had a fair market value in excess of tax basis when we converted to a REIT on January 1, 2010. We continue to be required to pay federal corporate income taxes on earnings of our Taxable REIT Subsidiary (TRS), which includes our Wood Products segment and portions of our Timberlands and Real Estate, Energy and Natural Resources (Real Estate & ENR) segments.

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 "Equity earnings from joint ventures" 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

Reportable business segments are determined based on the company's management approach. The management approach, as defined by FASB ASC 280, "Segment Reporting," is based on the way the chief operating decision maker organizes the segments within a company when making decisions about resources to be allocated and assessing their performance.

During fiscal year 2016, the company's chief operating decision maker changed the information regularly reviewed when making decisions to allocate resources and assess performance. As a result, the company will report its financial performance based on three business segments: Timberlands, Real Estate & ENR, and Wood Products. Prior to revising our segment structure, activities related to the Real Estate & ENR business segment were reported as part of the Timberlands business segment.

Amounts for all periods presented have been reclassified throughout the consolidated financial statements and disclosures to conform to the new segment structure.

We are principally engaged in:

•	growing and harvesting timber;

•	manufacturing, distributing and selling products made from trees;

•	maximizing the value of every acre we own through the sale of higher and better use (HBU) properties; and

•	monetizing reserves of minerals, oil, gas, coal, and other natural resources on our timberlands.

Our business segments are organized based primarily on products and services.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 64

Our Business Segments and Products

SEGMENT	PRODUCTS AND SERVICES
Timberlands	Logs, timber, and recreational access via leases
Real Estate & ENR	Sales of timberlands; rights to explore for and extract hard minerals, oil and gas production, and coal; and equity interests in our Real Estate Development Ventures
Wood Products	Softwood lumber, engineered wood products, structural panels, medium density fiberboard and building materials distribution

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; the elimination of intersegment profit in inventory and the LIFO reserve.

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 2016 reporting. This makes year-to-year comparisons easier. Our reclassifications had no effect on net earnings or equity.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 65

Our reclassifications present:

•	our adoption of new accounting pronouncements.

•	the results of discontinued operations separately from results of continuing operations on our Consolidated Statement of Operations, Consolidated Balance Sheet and in the related footnotes. Note 3: Discontinued Operations provides more information about our discontinued operations.

•	our revised business segments. Note 2: Business Segments provides information about our revised business segments.

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, FASB issued ASU 2015-14, which deferred the effective date for an additional year. In March 2016, FASB issued ASU 2016-08, which does not change the core principle of the guidance; however, it does clarify the implementation guidance on principal versus agent considerations. In April 2016, FASB issued ASU 2016-10, which clarifies two aspects of ASU 2014-09: identifying performance obligations and the licensing implementation guidance. In May 2016, FASB issued ASU 2016-12, which amends ASU 2014-09 to provide improvements and practical expedients to the new revenue recognition model. Finally, in December 2016, the FASB issued ASU 2016-20, which amends ASU 2014-09 for technical corrections and to correct for unintended application of the guidance.

The company expects to adopt and implement the new revenue recognition guidance effective January 1, 2018. The new standard is required to be applied retrospectively to each prior reporting period presented (full retrospective transition method) or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application (cumulative effect method). We expect to adopt using the cumulative effect method. We expect that the adoption of the new revenue recognition guidance will not materially impact our operating results, balance sheet, cash flows or financial reporting aside from adding expanded disclosures.

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 adopted on January 1, 2016, and have reclassified balances of debt issuance costs accordingly in our consolidated balance sheet and in related disclosures for all periods presented.

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. This new guidance removes the requirement to categorize within the fair value hierarchy investments for which fair value is measured using the net asset value per share as a practical expedient and, instead, permits separate disclosure. Upon adoption these investments are presented separately from the fair value hierarchy and reconciled to total investments in our consolidated financial statements and related disclosures. We adopted on January 1, 2016. We have included all new required disclosures in Note 9: Pension and Other Postretirement Benefit Plans.

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 adopted on January 1, 2017, and determined this pronouncement does not have a material impact on our consolidated financial statements and related disclosures.

In September 2015, FASB issued ASU 2015-16, which results in the ability to recognize, in current period earnings, any changes in provisional amounts during the measurement period after the closing of an acquisition, instead of restating prior periods for these changes. We adopted on January 1, 2016. Measurement period adjustments related to our merger with Plum Creek did not have a material impact to earnings or cash flows for the year ended December 31, 2016.

In February 2016, FASB issued ASU 2016-02, which requires lessees to recognize assets and liabilities for the rights and obligations created by those leases and requires both capital and operating leases to be recognized on the balance sheet. The new guidance is effective for fiscal years beginning after December 15, 2018, and early adoption is permitted. We expect to adopt on January 1, 2019, and are evaluating the impact on our consolidated financial statements and related disclosures.

In March 2016, FASB issued ASU 2016-09, which simplifies several aspects of accounting for share-based payment transactions, including income tax consequences, award classification, cash flows reporting, and forfeiture rate application. Specifically, the update requires all excess tax benefits and tax deficiencies to be recognized as income tax expense or benefit in the income statement with a cumulative-effect adjustment to equity as of the beginning of the period of adoption. The update allows excess tax benefits to be classified along with other income tax cash flows as an operating activity on the statement of cash flows. When accruing compensation cost, an entity can make an entity-wide accounting policy election to either estimate the number of awards expected to vest or to account for forfeitures as they occur with a cumulative-effect adjustment to equity as of the beginning of the period of adoption. The update requires cash paid by an employer when directly withholding shares for tax-withholding purposes to be classified as a financing activity on the statement of cash flows, applied retrospectively. This guidance is effective for fiscal years beginning after December 15, 2016. As permitted, we elected to adopt early, and applied the different aspects as prescribed by the standard effective January 1, 2016. The adoption of this guidance represents a change in accounting policy and did not have a material impact on our consolidated financial statements. Shares withheld by the employer for tax-withholding purposes for the years ended December 31, 2015, and December 31, 2014, of $11 million and $21 million, respectively, were retrospectively reclassified from an operating activity to a financing activity in the Consolidated Statement of Cash Flows.

In August 2016, FASB issued ASU 2016-15, which reduces diversity in practice in how certain transactions are classified in the statement of cash flows. These transactions include: debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investments, beneficial interests in securitization transactions,

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 66

and separately identifiable cash flows and application of the predominance principle. The new guidance is effective for fiscal years beginning after December 15, 2017, and early adoption is permitted. We have adopted this update effective July 1, 2016, and our adoption did not materially impact our Consolidated Statement of Cash Flows.

In October 2016, FASB issued ASU 2016-16, which requires immediate recognition of the income tax consequences upon intra-entity transfers of assets other than inventory. The new guidance is effective for annual periods beginning after December 15, 2017, and early adoption is permitted. We adopted this accounting standard update on January 1, 2017, which does not materially impact our consolidated financial statements or related disclosures. In general, we do not have material intra-entity taxable sales of assets other than inventory.

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. This 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.

Timber 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,

•	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 manage 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.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 67

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 2016, 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 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, 2016 and December 31, 2015.

Concentration of Risk

We disclose customers that represent a concentration of credit risk. As of December 31, 2016 and December 31, 2015, no customer accounted for 10 percent or more of our net sales.

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-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 "Costs of products sold" on 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.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 68

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 16: 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 plan 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 2016 and 2015.

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.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 69

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.

KEY FINANCIAL DATA BY BUSINESS SEGMENT

Sales and Contribution (Charge) to Earnings

DOLLAR AMOUNTS IN MILLIONS
	TIMBERLANDS			REAL ESTATE & ENR(1)			WOOD PRODUCTS			UNALLOCATED ITEMS(2) AND INTERSEGMENT ELIMINATIONS			CONSOLIDATED
Sales to unaffiliated customers
2016	$	1,805		$	226		$	4,334		$	—		$	6,365
2015	$	1,273		$	101		$	3,872		$	—		$	5,246
2014	$	1,415		$	104		$	3,970		$	—		$	5,489
Intersegment sales
2016	$	840		$	1		$	68		$	(909	)	$	—
2015	$	830		$	—		$	82		$	(912	)	$	—
2014	$	867		$	—		$	80		$	(947	)	$	—
Contribution (charge) to earnings from continuing operations
2016	$	499		$	55		$	512		$	(131	)	$	935
2015	$	470		$	79		$	258		$	(113	)	$	694
2014	$	532		$	81		$	327		$	85		$	1,025
(1) The Real Estate & ENR segment includes the equity earnings from, investments in and advances to our Real Estate Development Ventures (as defined and described in Note 8: Related Parties), which are accounted for under the equity method. (2) 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, equity earnings from our Timberland Venture (as defined and described in Note 8: Related Parties), the elimination of intersegment profit in inventory and the LIFO reserve. As a result of reclassifying our former Cellulose Fibers segment as discontinued operations, Unallocated items also includes retained indirect corporate overhead costs previously allocated to the former segment.

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

DOLLAR AMOUNTS IN MILLIONS
	2016			2015			2014
Net contribution to earnings from continuing operations	$	935		$	694		$	1,025
Net contribution to earnings from discontinued operations	957			156			1,349
Total contribution to earnings	1,892			850			2,374
Interest expense, net of capitalized interest (continuing and discontinued operations)	(436		)	(347		)	(347		)
Income before income taxes (continuing and discontinued operations)	1,456			503			2,027
Income taxes (continuing and discontinued operations)	(429		)	3			(201		)
Net earnings	$	1,027		$	506		$	1,826

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 70

Additional Financial Information

DOLLAR AMOUNTS IN MILLIONS
	TIMBERLANDS			REAL ESTATE & ENR			WOOD PRODUCTS			UNALLOCATED ITEMS			CONSOLIDATED
Depreciation, depletion and amortization
2016	$	366		$	13		$	129		$	4		$	512
2015	$	208		$	1		$	106		$	10		$	325
2014	$	207		$	—		$	119		$	12		$	338
Net pension and postretirement cost (credit)(1)
2016	$	8		$	—		$	22		$	(43	)	$	(13	)
2015	$	9		$	—		$	27		$	(11	)	$	25
2014	$	10		$	—		$	24		$	(45	)	$	(11	)
Charges for integration and restructuring, closures and asset impairments(2)
2016	$	—		$	15		$	7		$	148		$	170
2015	$	—		$	—		$	10		$	29		$	39
2014	$	1		$	—		$	2		$	41		$	44
Equity earnings (loss) from joint ventures
2016	$	—		$	2		$	—		$	20		$	22
2015	$	—		$	—		$	—		$	—		$	—
2014	$	—		$	—		$	—		$	—		$	—
Capital expenditures
2016	$	116		$	1		$	297		$	11		$	425
2015	$	75		$	—		$	287		$	3		$	365
2014	$	71		$	3		$	190		$	4		$	268
Investments in and advances to joint ventures
2016	$	—		$	56		$	—		$	—		$	56
2015	$	—		$	—		$	—		$	—		$	—
2014	$	—		$	—		$	—		$	—		$	—
(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 17: Charges for Integration and Restructuring, Closures and Asset Impairments for more information.

Total Assets

DOLLAR AMOUNTS IN MILLIONS
	TIMBERLANDS and REAL ESTATE & ENR			WOOD PRODUCTS			UNALLOCATED ITEMS			CONSOLIDATED
Total assets(1)(2)
2016	$	15,608		$	1,910		$	1,725		$	19,243
2015	$	7,260		$	1,541		$	3,919		$	12,720
2014	$	7,327		$	1,430		$	4,846		$	13,603
(1) Assets attributable to the Real Estate & ENR business segment are combined with total assets for the Timberlands segment because we do not produce separate balance sheets internally. (2) Unallocated Items total assets includes assets of discontinued operations.

DISCONTINUED OPERATIONS

During 2016, we disposed of our former Cellulose Fibers segment, and during 2014 we disposed of Weyerhaeuser Real Estate Company (WRECO), both of which are excluded from the segment results above unless otherwise noted. See Note 3: Discontinued Operations for information regarding our discontinued operations and the segments affected.

NOTE 3: DISCONTINUED OPERATIONS

We have made certain reclassifications in our consolidated financial statements to reflect discontinued operations related to our former Cellulose Fibers businesses and WRECO. These results have been summarized in "Earnings from discontinued operations, net of income taxes" on our Consolidated Statement of Operations for each period presented. The related assets and liabilities of these operations have been reclassified as discontinued operations on our Consolidated Balance Sheet for each date presented. We did not reclassify our Consolidated Statement of Cash Flows to reflect discontinued operations.

Cellulose Fibers was previously disclosed as a separate reportable business segment, and WRECO and its subsidiaries were previously reported as the Real Estate segment. Retained indirect corporate overhead costs previously allocated to Cellulose Fibers and WRECO are now reported as part of Unallocated Items.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 71

On October 12, 2016, we announced the exploration of strategic alternatives for our timberlands and manufacturing operations in Uruguay. We intend to consider a broad range of alternatives, including continuing to hold and operate the business, or a sale. The related assets and liabilities of our Uruguay operations have not met the criteria for classification as "held for sale" and are not included in our results of discontinued operations for the year ended December 31, 2016.

OPERATIONS INCLUDED IN DISCONTINUED OPERATIONS

Cellulose Fibers Divestitures

On November 8, 2015, Weyerhaeuser announced that the board authorized the exploration of strategic alternatives for its Cellulose Fibers business segment.

On May 1, 2016, we entered into an agreement to sell our Cellulose Fibers pulp business to International Paper for $2.2 billion in cash. The pulp business consists of five pulp mills located in Columbus, Mississippi; Flint River, Georgia; New Bern, North Carolina; Port Wentworth, Georgia and Grand Prairie, Alberta, and two modified fiber mills located in Columbus, Mississippi and Gdansk, Poland. On December 1, 2016, we completed the sale and recognized a pretax gain of $735 million, which is included in "Earnings from discontinued operations, net of income taxes" on the Consolidated Statement of Operations.

On June 15, 2016, we entered into an agreement to sell our Cellulose Fibers liquid packaging board business to Nippon Paper Industries Co., Ltd., for $285 million in cash. Our liquid packaging board business consisted of one mill located in Longview, Washington. On August 31, 2016, we completed the sale. We recognized a pretax gain of $53 million, which is included in "Earnings from discontinued operations, net of income taxes" on the Consolidated Statement of Operations.

On October 4, 2016, we entered into an agreement to sell our interest in our printing papers joint venture to One Rock Capital Partners, LLC, for $42 million of cash proceeds. The transaction included the printing papers mill located in Longview, Washington. On November 1, 2016, we completed the sale.

We used $1.7 billion of the after-tax proceeds from the sale of our Cellulose Fibers business segment for repayment of debt.

The following table presents the components of the net gain on the divestiture of Cellulose Fibers:

DOLLAR AMOUNTS IN MILLIONS
	2016
Proceeds, net of cash and cash equivalents disposed of	$	2,486
Less:
Net book value of assets and liabilities disposed of	(1,678		)
Transaction costs, net of reimbursement	(19		)
	(1,697		)
Pretax gain on Cellulose Fibers divestitures	789
Income taxes	(243		)
Net gain on Cellulose Fibers divestitures	$	546

WRECO Divestiture

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 “WRECO 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 WRECO 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 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 WRECO 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.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 72

The following table presents the components of the net gain on the divestiture of WRECO:

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 WRECO 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

DOLLAR AMOUNTS IN MILLIONS
	2016(1)			2015(2)			2014 (3)
Total net sales	$	1,537		$	1,860		$	2,509
Costs of products sold	1,283			1,573			2,030
Gross margin	254			287			479
Selling expenses	12			14			61
General and administrative expenses	29			30			57
Research and development expenses	5			6			7
Charges for integration and restructuring, closures and asset impairments(4)	63			2			3
Other operating income, net	(27		)	(26		)	(27		)
Operating income	172			261			378
Equity loss from joint venture	(4		)	(105		)	(1		)
Interest expense, net of capitalized interest	(5		)	(6		)	(9		)
Earnings from discontinued operations before income taxes	163			150			368
Income taxes	(97		)	(55		)	(130		)
Net earnings from operations	66			95			238
Net gain on divestiture of Cellulose Fibers	546			—			—
Net gain on divestiture of WRECO	—			—			972
Net earnings from discontinued operations	$	612		$	95		$	1,210
(1) Discontinued operations in 2016 includes 335 days of the pulp business, 305 days of our printing papers joint venture operations, and 244 days of the liquid packaging board business. (2) Discontinued operations in 2015 includes a full year of the Cellulose Fibers business segment operations. (3) Discontinued operations in 2014 includes a full year of the Cellulose Fibers business segment operations and 188 days of WRECO operations. (4) Charges for integration and restructuring, closures and asset impairments consist of costs related to our strategic evaluation of the Cellulose Fibers businesses and transaction-related costs.

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.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 73

CARRYING VALUE OF ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS

The following table shows carrying values for assets and liabilities classified as discontinued operations as of December 31, 2015.

Carrying Value of Assets and Liabilities of Discontinued Operations

DOLLAR AMOUNTS IN MILLIONS
	DECEMBER 31, 2015
Assets
Cash and cash equivalents	$	1
Receivables, less discounts and allowances	211
Inventories	243
Prepaid expenses	14
Property and equipment, net	1,339
Construction in progress	51
Timber and timberlands at cost, less depletion charged to disposals	1
Investments in and advances to equity affiliates	74
Total assets of discontinued operations	$	1,934
Liabilities
Accounts payable	$	122
Accrued liabilities	118
Long-term debt	88
Deferred income taxes	336
Other liabilities	26
Total liabilities of discontinued operations	$	690

CASH FLOWS FROM DISCONTINUED OPERATIONS

The following table shows cash flows from discontinued operations for the three-year period ended December 31, 2016.

Cash Flows from Discontinued Operations

DOLLAR AMOUNTS IN MILLIONS
	2016(1)			2015(2)			2014(3)
Net cash provided by (used in) operating activities	$	196		$	429		$	399
Net cash provided by (used in) investing activities	$	2,356		$	(118	)	$	581
(1) Discontinued operations in 2016 includes 335 days of the pulp business, 305 days of our printing papers joint venture operations, and 244 days of the liquid packaging board business, and the cash flows associated with the CF divestitures. (2) Discontinued operations in 2015 includes a full year of the Cellulose Fibers business segment operations. (3) Discontinued operations in 2014 includes a full year of the Cellulose Fibers business segment operations, 188 days of WRECO operations and the cash flows associated with the WRECO divestiture.

RELATED PARTY TRANSACTIONS WITH PRINTING PAPERS JOINT VENTURE

Prior to November 1, 2016, we held a 50 percent ownership interest in North Pacific Paper Corporation (NORPAC), our printing papers joint venture, which we considered a related party. We provided goods and services to NORPAC, including raw materials and support services. The amount paid to Weyerhaeuser by this joint venture for goods and services were:

•	$126 million in 2016,

•	$197 million in 2015 and

•	$195 million in 2014.

Prior to the divestiture, we managed cash for NORPAC under a services agreement. Weyerhaeuser held the cash and recorded a payable balance to NORPAC, which is included in "Accounts payable" in the accompanying Consolidated Balance Sheet. We had $46 million payable to NORPAC at December 31, 2015.

NOTE 4: MERGER WITH PLUM CREEK

MERGER WITH PLUM CREEK

On February 19, 2016, we merged with Plum Creek Timber Company, Inc. (Plum Creek). Plum Creek was a REIT that primarily owned and managed timberlands in the United States. Plum Creek also produced wood products, developed opportunities for mineral and other natural resource extraction, and sold real estate properties. The merger combined two industry leaders. The breadth and diversity of our combined timberlands, real estate, energy and natural resources assets, and wood products operations position Weyerhaeuser to capitalize on the improving housing market and to continue to capture premium land values across the combined portfolio.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 74

Under the merger agreement, each issued and outstanding share of Plum Creek common stock was exchanged for 1.60 Weyerhaeuser common shares, with cash paid in lieu of any fractional shares. Upon consummation of the merger, all outstanding Plum Creek stock options (all fully vested as of the merger date) and restricted stock units were converted into Weyerhaeuser stock options and restricted stock units, after giving effect to the 1.60 exchange ratio. Because the Plum Creek stock options were fully vested and relate to services rendered to Plum Creek prior to the merger, the replacement stock options were also fully vested and their fair value is included in the consideration transferred. Replacement restricted stock units relate to services to be performed post-merger and therefore were not included in consideration transferred. See additional details about replacement share-based payment awards in Note 16: Share-based Compensation.

The acquisition of total assets of $10.0 billion was a noncash investing and financing activity comprised of $6.4 billion in equity consideration transferred and $3.6 billion of liabilities assumed. See Note 12: Long-term Debt for additional details of indebtedness assumed.

The following table summarizes the equity consideration transferred in the merger:

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES
Number of Plum Creek common shares outstanding(1)	174,307,267
Exchange ratio per the merger agreement	1.60
Weyerhaeuser shares issued in exchange for Plum Creek equity(2)	278,886,704
Price per Weyerhaeuser common share(3)	$	22.87
Aggregate value of Weyerhaeuser common stock issued				$	6,378
Fair value of stock options(4)				5
Estimated equity consideration transferred				$	6,383
(1) The number of shares of Plum Creek common stock issued and outstanding as of February 19, 2016. (2) Total shares issued net of partial shares settled in cash. (3) The closing price of Weyerhaeuser common stock on the NYSE on February 19, 2016. (4) The estimated fair value of Plum Creek stock options for pre-merger services rendered.

We recognized $146 million of merger-related costs that were expensed during the year ended December 31, 2016. We also recognized $14 million of merger-related costs that were expensed during the fourth quarter 2015. See Note 17: Charges for Integration and Restructuring, Closures, and Asset Impairments for descriptions of the components of merger-related costs. These costs are included in "Charges for integration and restructuring, closures and asset impairments" in our Consolidated Statement of Operations.

As a result of progress made to integrate financial systems since the merger date, the amount of revenue and loss before income taxes from acquired Plum Creek operations is no longer practicable to disclose for the year-to-date period ended December 31, 2016.

Summarized Unaudited Pro Forma Information that Presents Combined Amounts as if this Merger Occurred at the Beginning of 2015

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES
	2016			2015
Net sales	$	6,525		$	6,664
Net earnings from continuing operations attributable to Weyerhaeuser common shareholders	$	519		$	487
Net earnings from continuing operations per share attributable to Weyerhaeuser common shareholders, basic	$	0.69		$	0.61
Net earnings from continuing operations per share attributable to Weyerhaeuser common shareholders, diluted	$	0.68		$	0.61

Pro forma net earnings attributable to Weyerhaeuser common shareholders exclude $155 million of non-recurring merger-related costs (net of tax) incurred in the year ended December 31, 2016. During the year ended December 31, 2015 we incurred $22 million of non-recurring merger-related costs. Pro forma data may not be indicative of the results that would have been obtained had these events occurred at the beginning of the periods presented, nor is it intended to be a projection of future results.

Weyerhaeuser has accounted for the merger transaction as the acquirer and has applied the acquisition method of accounting. Under the acquisition method, the assets acquired and liabilities assumed by Weyerhaeuser from Plum Creek were recorded as of the date of the acquisition at their respective estimated fair values.

The fair values of the assets acquired and liabilities assumed were determined using the income, cost or market approaches. The fair value measurements were generally based on significant inputs that are not observable in the market and thus represent Level 3 measurements as defined in ASC 820, Fair Value Measurement, with the exception of certain long-term debt instruments assumed in the acquisition that were valued using observable market inputs and are therefore Level 2 measurements. The income approach was primarily used to value acquired timberlands, minerals and mineral rights, equity investments in the Timberland Venture (as defined and described in Note 8: Related Parties) and Real Estate Development Ventures (as defined and described in Note 8: Related Parties), and the Note Payable to Timberland Venture (as defined and described in Note 12: Long-term Debt). The income approach estimates fair value for an asset based on the present value of cash flow projected to be generated by the asset. Projected cash flows are discounted at rates of return that reflect the relative risk of achieving the cash flows and the time value of money. The cost approach, which estimates value by determining the current cost of replacing an asset with another of equivalent economic utility, was used, as appropriate, for property and equipment. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the property, less an allowance for loss in value due to depreciation. The market approach was primarily used to value higher and better use real estate tracts included within acquired timberlands, certain land and building assets included within acquired property and equipment, and long-term debt instruments. The market approach estimates fair value for an asset based on values of recent comparable transactions.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 75

Initial and Final Estimated Fair Value of Identifiable Assets Acquired and Liabilities Assumed as of the Merger Date

DOLLAR AMOUNTS IN MILLIONS
	PRELIMINARY ALLOCATION			MEASUREMENT PERIOD ADJUSTMENTS			FINAL ALLOCATION
Current assets	$	128		$	10		$	138
Timber and timberlands	8,124			2			8,126
Minerals and mineral rights	312			6			318
Property and equipment	272			5			277
Equity investment in Timberland Venture	876			(29		)	847
Equity investment in Real Estate Development Ventures	88			(3		)	85
Other assets	163			4			167
Total assets acquired	9,963			(5		)	9,958
Current liabilities	610			—			610
Long-term debt	2,056			—			2,056
Note payable to Timberland Venture	837			1			838
Other liabilities	77			(6		)	71
Total liabilities assumed	3,580			(5		)	3,575
Net assets acquired	$	6,383		$	—		$	6,383

The initial allocation of purchase price was recorded using preliminary estimated fair value of assets acquired and liabilities assumed based upon the best information available to management at the time. The purchase price allocation was finalized as of December 31, 2016. 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. Measurement period adjustments reflected above did not have a material impact to earnings or cash flows for the year ended December 31, 2016.

NOTE 5: NET EARNINGS PER SHARE

Our basic earnings per share attributable to Weyerhaeuser common shareholders for the last three years were:

•	$1.40 in 2016,

•	$0.89 in 2015 and

•	$3.20 in 2014.

Our diluted earnings per share attributable to Weyerhaeuser common shareholders for the last three years were:

•	$1.39 in 2016,

•	$0.89 in 2015 and

•	$3.18 in 2014.

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.

"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.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 76

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:

SHARES IN THOUSANDS
	2016		2015		2014
Weighted average number of outstanding shares - basic	718,560		516,371		556,705
Dilutive potential common shares:
Stock options	2,672		2,342		3,190
Restricted stock units	756		381		510
Performance share units	413		524		494
Total effect of outstanding dilutive potential common shares	3,841		3,247		4,194
Weighted average number of outstanding common shares - dilutive	722,401		519,618		560,899

We use the treasury stock method to calculate the dilutive 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 issued 13.8 million 6.375 percent Mandatory Convertible Preference Shares, Series A on June 24, 2013. For all periods presented, the Preference Shares were antidilutive as determined using the if-converted method. In applying the if-converted method, conversion was not assumed for purposes of computing diluted earnings per share if the effect was antidilutive. Preference shares were antidilutive whenever the amount of the dividend declared in or accumulated for the current period per common share obtainable on conversion exceeded diluted earnings per share exclusive of the preference shares.

Preference shares were evaluated for participation on a quarterly basis to determine whether two-class presentation was required. Preference shares were 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 were not considered participating for the years ended December 31, 2015 and December 31, 2014. Under the provisions of the two-class method, basic and diluted earnings per share would be presented for both preference and common shareholders.

All remaining outstanding preference shares were converted to common shares on July 1, 2016. See further information at Note 15: Shareholders' Interest.

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.

Potential Shares Not Included in the Computation of Diluted Earnings per Share

SHARES IN THOUSANDS
	2016		2015		2014
Stock options	1,462		5,016		—
Performance share units	384		155		—
Preference Shares	—		25,307		24,988

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, 2016			DECEMBER 31, 2015
LIFO inventories:
Logs	$	18		$	5
Lumber, plywood and panels	51			48
Other products	20			11
FIFO or moving average cost inventories:
Logs	21			36
Lumber, plywood, panels and engineered wood products	71			75
Other products	92			84
Materials and supplies	85			66
Total	$	358		$	325

LIFO — the last-in, first-out method — applies to major inventory products held at our U.S. domestic locations. The FIFO — the first-in, first-out method — or moving average cost methods apply to the balance of our domestic raw material and product inventories as well as for all material and supply inventories and all foreign inventories. If we used FIFO for all LIFO inventories, our stated inventories would have been higher by $71 million as of December 31, 2016, and $67 million as of December 31, 2015, respectively.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 77

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.

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, 2016			DECEMBER 31, 2015
Property and equipment, at cost:
Land	N/A	$	90		$	99
Buildings and improvements	15-35	789			791
Machinery and equipment	5-25	3,022			2,811
Roads	10-25	773			624
Other	3-10	194			195
Total cost		4,868			4,520
Allowance for depreciation and amortization		(3,306		)	(3,287		)
Property and equipment, net		$	1,562		$	1,233

SERVICE LIVES AND DEPRECIATION

In general, additions are classified into components, each with its own estimated useful life as determined at the time of purchase. 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 15 years to 35 years, depending on the type and performance of construction.

Depreciation expense, excluding discontinued operations, was:

•	$198 million in 2016,

•	$160 million in 2015 and

•	$178 million in 2014.

NOTE 8: RELATED PARTIES

This note provides details about and our transactions with related parties. Our related parties consist of:

•	joint ventures accounted for using the equity method,

•	our Twin Creeks Venture and

•	special-purpose entities (SPEs).

JOINT VENTURES ACCOUNTED FOR USING THE EQUITY METHOD

We have investments in unconsolidated joint ventures over which we have significant influence that we account for using the equity method. We record our share of net earnings within "Equity earnings from joint ventures" in our Consolidated Statement of Operations in the period in which earnings are recorded by the affiliates. Through our merger with Plum Creek on February 19, 2016, we acquired equity interests in the Real Estate Development Ventures and the Timberland Venture.

Real Estate Development Ventures

WestRock-Charleston Land Partners, LLC (WR-CLP) is a limited liability company which holds residential and commercial real estate development properties, currently under development (Class A Properties) and higher-value timber and development lands (Class B Properties) (referred to collectively as the Real Estate Development Ventures). We have a 3 percent interest in Class A Properties and a 50 percent interest in Class B Properties. WestRock Company is the other member of WR-CLP and owns 97 percent of the Class A Properties and 50 percent of the Class B Properties. The company uses the equity method for both its Class A and Class B interests. Our share of the equity earnings are included in the net contribution to earnings of our Real Estate & ENR segment.

WR-CLP is a variable interest entity and is financed by regular capital calls from the manager of WR-CLP in proportion to a member’s ownership interest. If a member does not make a capital contribution, the member’s ownership interest is diluted. We are not committed to make any material capital contributions during the remaining term of the venture, which expires in 2020. We do not intend to provide any additional sources of financing for WR-CLP.

We are not the primary beneficiary of WR-CLP. We consider the activities that most significantly impact the economic performance of WR-CLP to be the day-to-day operating decisions along with the oversight responsibilities for the real estate development projects and properties. WestRock Company (the other equity member) has the power to direct the activities of WR-CLP that most significantly impact its economic performance through its ability to manage the day-to-day operations of WR-CLP. WestRock Company also has the ability to control all management decisions associated with all Class A and Class B Properties through its majority representation on the board of directors for the Class A Properties and due to its equal representation on the board of directors for the Class B Properties.

Our maximum exposure to loss is $56 million, the carrying amount of our investment in WR-CLP at December 31, 2016, plus any required future capital contributions.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 78

Timberland Venture

Beginning on the date of our merger with Plum Creek until August 31, 2016, we held preferred and common interests in Southern Diversified Timber, LLC, a timberland joint venture (Timberland Venture), which included 100 percent of the preferred interests and 9 percent of the common interests. The Timberland Venture’s other member, an affiliate of Campbell Global LLC (TCG Member), held 91 percent of the Timberland Venture’s common interests.

The activities of the Timberland Venture consisted primarily of:

•	owning, growing, managing and sustaining its timberlands;

•	entering into cutting contracts with an affiliate of Campbell Global LLC for the sale and harvest of timber; and

•	owning a promissory note payable to the Timberland Venture (Note Payable to Timberland Venture) and collecting interest thereon.

Our investment in and share of the equity earnings of the Timberland Venture was not attributed to one of our business segments, and was reported in Unallocated Items.

On August 31, 2016, the Timberland Venture redeemed TCG Member’s interest. Upon the redemption, the Timberland Venture distributed all of the timberlands, a portion of the cash balance, and other net assets to TCG Member equal in total to the fair value of TCG Member's adjusted capital account. Following the redemption and distribution of assets to TCG Member, the Timberland Venture's remaining assets consisted of cash and a note receivable from Weyerhaeuser.

As we now hold all of the equity interests in the Timberland Venture, we have consolidated it as a wholly-owned subsidiary and eliminated our equity method investment in the Timberland Venture. As a result, the note payable to Timberland Venture is now eliminated for financial reporting purposes in consolidation as it is now intercompany indebtedness and therefore no longer appears on our Consolidated Balance Sheet.

In conjunction with the redemption of TCG Member, we remeasured our previously held equity interest to fair value at August 31, 2016, resulting in recognition of a gain of $6 million in "Interest income and other" on our Consolidated Statement of Operations during third quarter 2016.

Other Joint Ventures

During 2016, we sold our interest in North Pacific Paper Corporation (NORPAC). See Note 3: Discontinued Operations for additional information.

During 2014, Catchlight Energy was dissolved. We received no proceeds from the dissolution.

OUR TWIN CREEKS VENTURE

Through the merger with Plum Creek, Weyerhaeuser assumed the benefits and obligations associated with the formation of Twin Creeks Timber, LLC, a timberland venture (Twin Creeks Venture).

On April 1, 2016, we contributed approximately 260,000 acres of our southern timberlands with an agreed-upon value of approximately $560 million to Twin Creeks Timber, LLC (Twin Creeks Venture), in exchange for cash of approximately $440 million and a 21 percent ownership interest. The other members contributed cash of approximately $440 million for a combined 79 percent ownership interest.

The Twin Creeks Venture is expected to raise total committed capital of up to $950 million from its investors over the next several years. We expect to maintain a 21 percent ownership interest and to contribute additional capital of up to $85 million during the next several years. Unless extended by unanimous vote of all the investors, the term of the Twin Creeks Venture is 15 years.

In conjunction with contributing to the venture, we entered into a separate agreement to manage the timberlands owned by the Twin Creeks Venture, including harvesting activities, marketing and log sales activities, and replanting and silviculture activities. This management agreement guarantees the Twin Creeks Venture an annual return equal to three percent of the contributed value of the managed timberlands in the form of minimum quarterly payments from Weyerhaeuser. We are also required to annually distribute 75 percent of any profits earned by us in excess of the minimum quarterly payments. The management agreement is cancellable at any time by Twin Creeks Timber, LLC, and otherwise will expire on April 1, 2019.

The guaranteed return that the management agreement requires Weyerhaeuser to provide to the Twin Creeks Venture constitutes continuing involvement in the timberlands we contributed to the venture. This continuing involvement prohibits recognition of the contribution as a sale and requires application of the deposit method to account for the cash payment received. By applying the deposit method to the contribution of timberlands to the venture:

•	Our receipt of $440 million proceeds from the contribution of timberlands to the venture was recorded as a noncurrent liability - "Deposit from contribution of timberlands to related party" - on our Consolidated Balance Sheet.

•	The contributed timberlands will continue to be reported within the "Timber and timberlands at cost, less depletion charged to disposals" on our Consolidated Balance Sheet with no change in value.

•	No gain or loss was recognized in our Consolidated Statement of Operations.

•	Our balance sheet does not reflect our 21 percent ownership interest in the Twin Creeks Venture.

The receipt of $440 million was classified as a cash flow from investing activities in our Consolidated Statement of Cash Flows. The cash proceeds from our contribution of timberlands were used to fund our share repurchases.

Changes in our deposit from contribution of timberlands to related party balance during 2016 were as follows:

DOLLAR AMOUNTS IN MILLIONS
Balance at December 31, 2015	$	—
Initial cash receipt upon contribution of timberlands to Twin Creeks Venture	440
Lease payments to Twin Creeks Venture	(17		)
Distributions from Twin Creeks Venture	3
Balance at December 31, 2016	$	426

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 79

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.

Our Consolidated Statement of Operations includes:

•	Interest expense on SPE notes of:

– $29 million in 2016,

– $29 million in 2015 and

– $29 million in 2014.

•	Interest income on SPE investments of:

– $34 million in 2016,

– $34 million in 2015 and

– $34 million in 2014.

Sales proceeds paid to buyer-sponsored SPEs were invested in restricted financial investments with a balance of $615 million as of both December 31, 2016, and December 31, 2015. The weighted average interest rate was 5.5 percent during 2016 and 2015. Maturities of the financial investments at the end of 2016 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, 2016, and December 31, 2015. The weighted average interest rate was 5.6 percent during 2016 and 2015. Maturities of the notes at the end of 2016 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, 2016, our net equity in the three SPEs was approximately $105 million and the deferred tax liability was estimated to be approximately $180 million.

NOTE 9: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

We sponsor several retirement programs for our employees.

This note provides details about:

•	defined benefit plans we sponsor, including:

◦	overview of plans,

◦	funded status of plans,

◦	pension assets,

◦	actuarial assumptions and

◦	activity of plans;

•	union-administered multiemployer plans; and

•	defined contribution plans.

DEFINED BENEFIT PLANS WE SPONSOR

OVERVIEW OF PLANS

The defined benefit 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.

Upon our merger with Plum Creek, we assumed one qualified pension plan and two nonqualified pension plans. Refer to "Assumed Plans from Merger with Plum Creek," below, for further information.

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.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 80

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 refine our estimated benefit obligation.

Assumed Plans from Merger with Plum Creek

Upon our merger with Plum Creek, we assumed one qualified pension plan and two nonqualified pension plans. All active participants in these plans became fully vested and the plans were frozen as of February 19, 2016.

The fair value of these items as of February 19, 2016, were as follows:

•	$137 million qualified pension plan assets,

•	$149 million qualified pension plan projected benefit obligation and

•	$50 million nonqualified pension plan projected benefit obligation.

We also assumed assets of $47 million related to the nonqualified plans held in a grantor trust. These assets are subject to the claims of creditors in the event of bankruptcy. As a result, these are not considered plan assets and have not been netted against the nonqualified pension liability. These assets are included in "Other assets" in our Consolidated Balance Sheet. Subsequent to the merger date, we redeemed and paid $38 million of nonqualified pension benefits payments, which included $4 million of the enhanced benefits triggered by change in control provisions. An additional $4 million of grantor trust assets were sold during fourth quarter 2016 in anticipation of benefit payments in early 2017. The balance of assets held in the grantor trust was $5 million as of December 31, 2016.

During first quarter 2016, we recognized $5 million of pension benefit costs from change in control provisions for certain Plum Creek executives. These enhanced pension benefits were triggered by changes in control and retention decisions made after the completion of the merger (see Note 17: Charges for Integration and Restructuring, Closures and Asset Impairments).

Effective December 31, 2016, the Plum Creek Pension Plan was merged into the Weyerhaeuser Pension Plan. Similarly, the Plum Creek Supplemental Pension Plan and the Plum Creek Supplemental Benefits Plan were both merged into the Weyerhaeuser Supplemental Retirement Plan.

Amendments of Pension and Other Postretirement Benefit Plans for Salaried Employees

Pension Benefit Plan Amendments

Aside from the December 31, 2016, amendments to merge the Plum Creek plans into the Weyerhaeuser plans as described above, there were no material plan amendments in 2016. There were also no material pension benefit plan amendments in 2015 or 2014.

Postretirement Medical and Life Insurance Benefit Plan Amendments

There were no material postretirement medical or life insurance benefit plan amendments in 2016, 2015 and 2014.

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.

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. There were no midyear remeasurements during 2016 or 2015. In 2014 we recorded a midyear remeasurement to capture the impacts of the WRECO Divestiture and our SG&A reduction initiatives. See the "Activity of Plans" section below for additional details about the impact of the 2014 midyear remeasurement.

FUNDED STATUS OF PLANS

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. The following table demonstrates how our plans' funded status is reflected on the Consolidated Balance Sheet.

DOLLAR AMOUNTS IN MILLIONS
	PENSION						OTHER POSTRETIREMENT BENEFITS
	2016			2015			2016			2015
Funded status:
Fair value of plan assets	$	5,351		$	5,491		$	—		$	—
Projected benefit obligations	(6,469		)	(6,211		)	(225		)	(240		)
Funded status	$	(1,118	)	$	(720	)	$	(225	)	$	(240	)
Presentation on our Consolidated Balance Sheet:
Noncurrent assets	$	27		$	70		$	—		$	—
Current liabilities	(28		)	(21		)	(21		)	(22		)
Noncurrent liabilities	(1,117		)	(769		)	(204		)	(218		)
Funded status	$	(1,118	)	$	(720	)	$	(225	)	$	(240	)

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 81

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 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 15: Shareholder's Interest details changes in the amounts included in cumulative other comprehensive income (loss) by component.

Changes in Fair Value of Plan Assets

DOLLAR AMOUNTS IN MILLIONS
	PENSION						OTHER POSTRETIREMENT BENEFITS
	2016			2015			2016			2015
Fair value of plan assets at beginning of year (estimated)	$	5,491		$	5,643		$	—		$	—
Adjustment for final fair value of plan assets	7			57			—			—
Actual return on plan assets	27			226			—			—
Foreign currency translation	29			(155		)	—			—
Employer contributions and benefit payments	78			60			21			23
Plan participants’ contributions	—			—			7			9
Plan transfers	1			2			—			—
Plan acquisitions	137			—			—			—
Benefits paid (includes lump sum settlements)	(419		)	(342		)	(28		)	(32		)
Fair value of plan assets at end of year (estimated)	$	5,351		$	5,491		$	—		$	—

The values reported for our pension plan assets at year end are estimated using information available at the time. Additional information regarding the year-end values generally becomes available to us during the first half of the following year. To reflect additional information that became available in the first half of 2016, the fair value of plan assets as of December 31, 2015 was increased by $7 million.

See additional details about the changes in the fair value of plan assets in the "Pension Assets" section below.

Changes in Projected Benefit Obligations of Our Pension and Other Postretirement Benefit Plans

DOLLAR AMOUNTS IN MILLIONS
	PENSION						OTHER POSTRETIREMENT BENEFITS
	2016			2015			2016			2015
Reconciliation of projected benefit obligation:
Projected benefit obligation beginning of year	$	6,211		$	6,698		$	240		$	303
Service cost	48			57			—			—
Interest cost	277			265			8			9
Plan participants’ contributions	—			—			7			9
Actuarial (gains) losses	120			(309		)	(5		)	(34		)
Foreign currency translation	27			(159		)	3			(15		)
Benefits paid (includes lump sum settlements)	(419		)	(342		)	(28		)	(32		)
Plan amendments and other	—			(1		)	—			—
Special/contractual termination benefits	—			—			—			—
Plan transfers	1			2			—			—
Plan acquisitions	199			—			—			—
Change in control enhanced benefits	5			$	—		$	—		$	—
Projected benefit obligation at end of year	$	6,469		$	6,211		$	225		$	240

Changes in actuarial assumptions increased liabilities by $115 million as of the end of 2016. The increase was primarily attributable to decreases in discount rates applied. Discount rates decreased from 4.50 percent at the end of 2015 to 4.30 percent at the end of 2016 for the U.S. pension plans, and decreased from 4.00 percent at the end of 2015 to 3.70 percent at the end of 2016 for U.S. postretirement. The discount rates decreased from 4.00 percent at the end of 2015 to 3.70 percent at the end of 2016 for the Canadian pension plans, and decreased from 3.90 percent at the end 2015 to 3.60 percent at the end of 2016 for Canadian postretirement.

During 2016, we contributed $16 million for our Canadian registered plans, we made contributions and benefit payments of $2 million for our Canadian nonregistered pension plans and made benefit payments of $60 million for our nonqualified pension plans, including $4 million of

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 82

enhanced pension benefit payments from change in control provisions. There was no minimum required contribution for our U.S. qualified plan for 2016, nor were any contributions made to this plan in 2016.

See additional details about the actuarial assumptions and changes in the projected benefit obligation in the "Actuarial Assumptions" section below.

Accumulated Benefit Obligations Greater Than Plan Assets

As of December 31, 2016, pension plans with accumulated benefit obligations greater than plan assets had:

•	$5.7 billion in projected benefit obligations,

•	$5.6 billion in accumulated benefit obligations and

•	assets with a fair value of $4.5 billion.

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.

The accumulated benefit obligation for all of our defined benefit pension plans was:

•	$6.4 billion at December 31, 2016; and

•	$6.1 billion at December 31, 2015.

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,

•	common and preferred stocks,

•	hedge funds and related investments and

•	private equity and related investments.

Our indirect investments include:

•	equity and fixed income index derivatives,

•	foreign currency derivatives and

•	total return swaps.

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, margin requirements or to meet regulatory requirements.

Common and preferred stocks are equity instruments that have been purchased directly or resulted from transactions related to private equity investment holdings.

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. Exposure to 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.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 83

Derivative instruments generally are comprised of swaps, futures, forwards or options. Equity and fixed income index derivatives are utilized to achieve target equity and bond asset exposure or to reduce exposure to certain market risks. Foreign currency derivatives are utilized to reduce exposure to certain currency risks. Total return swaps are designed to gain exposure to the return characteristics of specific financial strategies with limited exchange of principal. All derivative instruments 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.

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 and

•	limiting 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 have 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 wherein 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 affected 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 S&P.

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 their 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 entered into 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.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 84

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

	DECEMBER 31, 2016		DECEMBER 31, 2015
Cash and short-term investments	13.7	%	13.2	%
Common and preferred stock	0.1		—
Hedge funds and related investments	56.6		54.4
Private equity and related investments	22.7		24.2
Derivative instruments, net	7.1		8.3
Accrued liabilities	(0.2	)	(0.1	)
Total	100.0	%	100.0	%

Assets within our Canadian nonregistered plans were invested as follows:

	DECEMBER 31, 2016		DECEMBER 31, 2015
Cash and short-term investments	53.4	%	55.9	%
Common and preferred stock	46.6		44.1
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 investments, common and preferred stock and fund units. The fund units are typically limited liability interests in hedge funds, private equity and related investments. Each of these assets participates in its own unique principal market.

Cash and short-term investments when held directly are valued at cost, which approximates market.

Common and preferred stocks are valued at exit prices quoted in the public markets.

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.

Derivative instruments 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.

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 $455 million, or 8.5 percent, of our pension plan assets were classified as Level 3 assets as of December 31, 2016.

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 second quarter 2016 by $7 million, or less than 1.0 percent.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 85

The net pension plan assets, when categorized in accordance with this fair value hierarchy, are as follows:

DOLLAR AMOUNTS IN MILLIONS
2016	LEVEL 1			LEVEL 2			LEVEL 3			TOTAL
Pension trust investments:
Cash and short-term investments	$	715		$	16		$	—		$	731
Common and preferred stock	7			—			—			7
Hedge fund and related investments:
Measured within the fair value hierarchy	62			—			4			66
Measured at net asset value(1)										2,957
Private equity and related investments:
Measured within the fair value hierarchy	—			—			75			75
Measured at net asset value(1)										1,138
Derivative instruments:
Assets	—			10			376			386
Liabilities	—			(8		)	—			(8		)
Total pension trust investments	784			18			455			5,352
Accrued liabilities, net										(11		)
Pension trust net assets										5,341
Canadian nonregistered plan assets:
Cash and short-term investments	5			—			—			5
Common and preferred stock	5			—			—			5
Total Canadian nonregistered plan assets	10			—			—			10
Total plan assets										$	5,351
(1) As a result of adopting ASU 2015-07, investments for which fair value is measured using the net asset value per share as a practical expedient are not categorized within the fair value hierarchy. See Note 1: Summary of Significant Accounting Polices for additional information.

DOLLAR AMOUNTS IN MILLIONS
2015	LEVEL 1			LEVEL 2			LEVEL 3			TOTAL
Pension trust investments:
Cash and short-term investments	$	676		$	46		$	—		$	722
Common and preferred stock	—			—			—			—
Hedge fund and related investments:
Measured within the fair value hierarchy	87			—			3			90
Measured at net asset value(1)										2,893
Private equity and related investments:
Measured within the fair value hierarchy	—			—			52			52
Measured at net asset value(1)										1,275
Derivative instruments:
Assets	—			4			491			495
Liabilities	—			(41		)	—			(41		)
Total pension trust investments	763			9			546			5,486
Accrued liabilities, net										(5		)
Pension trust net investments										5,481
Canadian nonregistered plan assets:
Cash and short-term investments	6			—			—			6
Common and preferred stock	4			—			—			4
Total Canadian nonregistered plan assets	10			—			—			10
Total plan assets										$	5,491
(1) As a result of adopting ASU 2015-07, investments for which fair value is measured using the net asset value per share as a practical expedient are not categorized within the fair value hierarchy. See Note 1: Summary of Significant Accounting Polices for additional information.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 86

This table shows the fair value of the derivative instruments held by our pension trusts at the end of the last two years.

DOLLAR AMOUNTS IN MILLIONS
	DECEMBER 31, 2016			DECEMBER 31, 2015
Equity and fixed income index derivatives, net	$	10		$	3
Foreign currency derivatives, net	(5		)	(37		)
Total return swaps, net	373			488
Total	$	378		$	454

This table shows the aggregate notional amount of the derivative instruments held by our pension trusts at the end of the last two years.

DOLLAR AMOUNTS IN MILLIONS
	DECEMBER 31, 2016			DECEMBER 31, 2015
Equity and fixed income index derivatives	$	405		$	449
Foreign currency derivatives	2,811			1,023
Total return swaps	1,515			1,609
Total	$	4,731		$	3,081

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 and related investments			Private equity and related investments			Derivative instruments, net			Total
Balance as of December 31, 2014	$	5		$	65		$	425		$	495
Net realized gains (losses)	—			1			35			36
Net change in unrealized gains (losses)	(2		)	(15		)	67			50
Purchases	—			4			—			4
Sales	—			(3		)	—			(3		)
Issuances	—			—			48			48
Settlements	—			—			(84		)	(84		)
Transfers into Level 3	—			—			—			—
Transfers out of Level 3	—			—			—			—
Balance as of December 31, 2015	3			52			491			546
Net realized gains (losses)	(1		)	(2		)	134			131
Net change in unrealized gains (losses)	2			(3		)	(121		)	(122		)
Purchases	—			21			—			21
Sales	—			(18		)	—			(18		)
Issuances	—			—			39			39
Settlements	—			—			(167		)	(167		)
Transfers into Level 3	—			25			—			25
Transfers out of Level 3	—			—			—			—
Balance as of December 31, 2016	$	4		$	75		$	376		$	455

Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers into Level 3 in the hedge fund and private equity classifications relate to investments for which net asset value was used to measure fair value at the end of the prior period, but not at the end of the current period. Transfers out of Level 3 in the hedge fund and private equity classifications were investments for which net asset value was used to measure fair value at the end of the current period, but not at the end of the prior period.

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.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 87

Discount Rates and Rates of Compensation Increase Used in Estimating Our Pension and Other Postretirement Benefit Obligation

	PENSION		OTHER POSTRETIREMENT BENEFITS
	DECEMBER 31, 2016	DECEMBER 31, 2015	DECEMBER 31, 2016	DECEMBER 31, 2015
Discount rates:
United States	4.30%	4.50%	3.70%	4.00%
Canada	3.70%	4.00%	3.60%	3.90%
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	13.00% to 2.00% decreasing with participant's age	13.00% to 2.00% decreasing with participant's age	N/A	N/A
Canada	—	2.50% for 2015 and 3.50% thereafter	N/A	N/A
Hourly:
United States	13.00% to 2.30% decreasing with participant's age	13.00% to 2.30% decreasing with participant's age	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.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 88

Rates Used to Estimate Our Net Periodic Benefit Costs

	PENSION			OTHER POSTRETIREMENT BENEFITS
	2016	2015	2014	2016	2015	2014
Discount rates:
United States	4.50%	4.10%	4.90% for the first half of 2014 and 4.40% for the second half of 2014	4.00%	3.60%	4.00%
Salaried – lump sum distributions (U.S. salaried and nonqualified plan only)(1)	PPA Table	PPA Table	PPA Table	N/A	N/A	N/A
Canada	4.00%	3.90%	4.70%	3.90%	3.80%	4.60%
Expected return on plan assets:
Qualified/registered plans	9.00% for all plans except 7.00% for plans assumed from Plum Creek(2)	9.00%	9.00%	N/A	N/A	N/A
Nonregistered plans (Canada only)	3.50%	3.50%	3.50%	N/A	N/A	N/A
Rate of compensation increase:
Salaried:
United States	13.00% to 2.00% decreasing with participant's age	2.50% for 2015 and 3.50% thereafter	2.50% for 2014 and 3.50% thereafter	N/A	N/A	N/A
Canada	3.50%	2.50% for 2015 and 3.50% thereafter	2.50% for 2014 and 3.50% thereafter	N/A	N/A	N/A
Hourly:
United States	13.00% to 2.30% decreasing with participant age	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%	60.00%	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. (2) Beginning in 2017 we will use an assumed expected return on plan assets of 8.00% for qualified and registered pension plans.

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. We have assumed a long-term rate of return on plan assets of 9 percent for the year ended December 31, 2016. As part of our annual evaluation of key assumptions which includes consideration of actual pension fund performance over multiple years and current and expected valuation levels in the global equity and credit markets, we have determined that we will reduce our assumption of long-term rate of return on plan assets to 8 percent for estimated 2017 net periodic benefit cost.

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 32 years it has been in place, our U.S. pension trust investment strategy has achieved a 13.8 percent net compound annual return rate. The past 5 years, our net compounded annual return was 8.1 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.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 89

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.

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 $27 million in 2016. These trusts fund our qualified, registered and a portion of our nonregistered pension plans.

DOLLAR AMOUNTS IN MILLIONS
	2016			2015			2014
Direct investments	$	12		$	175		$	258
Derivative instruments	15			51			110
Total	$	27		$	226		$	368

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 2016, the assumed weighted health care cost trend rate was:

•	7.2 percent for U.S. Pre-Medicare

•	4.5 percent for U.S. HRA

•	5.0 percent for 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

	2016		2015
	U.S.	CANADA	U.S.	CANADA
Weighted health care cost trend rate assumed for next year	8.90% for Pre-Medicare and 4.50% for HRA	4.90%	7.20% for Pre-Medicare and 4.50% for HRA	5.00%
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	2037	2028	2036	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 one percent change in assumed health care cost trend rates would have with all other assumptions remaining constant.

Effect of a One Percent Change in Health Care Costs

AS OF DECEMBER 31, 2016 (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	$	8		$	(7	)

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 90

ACTIVITY OF PLANS

Net Periodic Benefit Cost (Credit)

DOLLAR AMOUNTS IN MILLIONS
	PENSION									OTHER POSTRETIREMENT BENEFITS
	2016			2015			2014			2016			2015			2014
Net periodic benefit cost (credit):
Service cost(1)	$	48		$	57		$	53		$	—		$	—		$	1
Interest cost	277			265			271			8			9			10
Expected return on plan assets	(495		)	(476		)	(467		)	—			—			—
Amortization of actuarial loss	156			182			125			9			10			12
Amortization of prior service cost (credit)(2)	4			4			5			(7		)	(9		)	(161		)
Recognition of curtailments, settlements and special termination benefits due to closures, restructuring or divestitures(3)	—			—			9			—			—			—
Accelerated pension costs for Plum Creek merger-related change-in-control provisions	5			—			—			—			—			—
Other	—			—			—			—			—			(4		)
Net periodic benefit cost (credit)	$	(5	)	$	32		$	(4	)	$	10		$	10		$	(142	)
(1) Service cost includes $13 million in 2016, $17 million in 2015, and $11 million in 2014 for employees that were part of our Cellulose Fibers divestitures. Service cost includes $2 million in 2014 for employees that were part of the WRECO 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 WRECO 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. (3) As a result of the WRECO Divestiture as well as our selling, general and administrative cost reduction initiative, we remeasured our U.S. qualified pension plan during third quarter 2014. 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 WRECO 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.

Estimated Amortization from Cumulative Other Comprehensive Loss in 2017

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 2017. 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 2017.

DOLLAR AMOUNTS IN MILLIONS
	PENSION			OTHER POSTRETIREMENT BENEFITS			TOTAL
Net actuarial loss	$	219		$	8		$	227
Prior service cost (credit)	4			(8		)	(4		)
Net effect cost	$	223		$	—		$	223

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 2017, based on estimated year-end asset values and projections of plan liabilities, we expect to:

•	be required to contribute approximately $19 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 $26 million for our U.S. nonqualified pension plans.

We do not anticipate a contribution being required for our U.S. qualified pension plan for 2017.

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 $21 million for our U.S. and Canadian other postretirement benefit plans in 2017, including $7 million expected to be required to cover benefit payments under collectively bargained contractual obligations.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 91

Estimated Projected Benefit Payments for the Next 10 Years

DOLLAR AMOUNTS IN MILLIONS
	PENSION			OTHER POSTRETIREMENT BENEFITS
2017(1)	$	478		$	21
2018	362			20
2019	366			19
2020	370			18
2021	371			17
2022-2026	1,873			75
(1) The estimate of projected benefit payments in 2017 assumes that former employees of our divested Cellulose Fibers businesses that participate in sponsored pension plans and are eligible to take a lump sum payment will do so during 2017, using our current assumption.

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.

As of December 31, 2016, these plans covered approximately 1,200 of our employees.

Our contributions were:

•	$4 million in 2016,

•	$4 million in 2015 and

•	$4 million in 2014.

There have been no significant changes that affect the comparability of the 2016, 2015 and 2014 contributions. None of our contributions exceeded more than 5 percent of any plan's total contributions during 2016, 2015 or 2014.

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:

•	$27 million in 2016,

•	$21 million in 2015 and

•	$20 million in 2014.

Upon our merger with Plum Creek, we assumed one defined contribution plan, the Plum Creek Thrift and Profit Sharing Plan. Effective July 15, 2016, the assets and liabilities of this plan were merged into the Weyerhaeuser 401(k) Plan.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 92

NOTE 10: ACCRUED LIABILITIES

Accrued liabilities were comprised of the following:

DOLLAR AMOUNTS IN MILLIONS
	DECEMBER 31, 2016			DECEMBER 31, 2015
Wages, salaries and severance pay	$	178		$	117
Pension and other postretirement benefits	49			44
Vacation pay	33			30
Taxes – Social Security and real and personal property	20			17
Interest	120			102
Customer rebates and volume discounts	39			31
Deferred income	40			28
Accrued income taxes	139			—
Other	73			58
Total	$	691		$	427

NOTE 11: 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 $1 billion 5-year senior unsecured revolving credit facility that expires in September 2018. 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 2016. 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, 2016, 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, 2016			DECEMBER 31, 2015
Letters of credit	$	38		$	47
Surety bonds	$	125		$	113

Our compensating balance requirements for our letters of credit were $6 million as of December 31, 2016.

NOTE 12: LONG-TERM DEBT

This note provides details about:

•	long-term debt assumed in the Plum Creek merger,

•	term loans issued and extinguished,

•	long-term debt and the portion due within one year and

•	long-term debt maturities.

Our long-term debt includes notes, debentures and other borrowings.

LONG-TERM DEBT ASSUMED IN THE PLUM CREEK MERGER

Through our merger with Plum Creek, we assumed long-term debt instruments consisting of:

•	two issuances of publicly traded Senior Notes,

•	an Installment Note (defined and described below) and

•	the Note Payable to Timberland Venture (defined and described below).

Concurrent with the merger, we repaid in full the outstanding balances of Plum Creek's Revolving Line of Credit and Term Loan using $720 million of cash on hand.

Senior Notes

The assumed Senior Notes are publicly traded and were issued by Plum Creek Timberlands, L.P. (PC Timberlands) and were fully and unconditionally guaranteed by Weyerhaeuser Company as of the acquisition date. During third quarter 2016, PC Timberlands was merged into Weyerhaeuser Company and Weyerhaeuser Company assumed the obligations. There were two separate Senior Notes: $569 million (principal) of 4.70 percent notes which mature in 2021 and $325 million (principal) of 3.25 percent notes which mature in 2023. The Senior Notes are

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 93

redeemable prior to maturity; however, they are subject to a premium on redemption, which is based upon interest rates of U.S. Treasury securities having similar average maturities.

Through acquisition accounting the Senior Notes were recognized at estimated fair values of $614 million for the 4.70 percent notes and $324 million for the 3.25 percent notes as of the acquisition date. The differences between cash interest payments and the amounts recorded as interest expense at the effective market rates will adjust the carrying values of the notes to the principal amounts at maturity.

Installment Note

We assumed an installment note (Installment Note) payable to WestRock Land and Development, LLC (WR LD) that was issued in connection with Plum Creek's acquisition of certain timberland assets. The principal balance of the Installment Note is $860 million. Following the issuance, WR LD pledged the installment note to certain banks. The annual interest rate on the Installment Note is fixed at 5.207 percent. Interest is paid semi-annually with the principal due upon maturity in December 2023. The term may be extended at the request of the holder if the company at the time of the request intends to refinance all or a portion of the Installment Note for a term of five years or more. The Installment Note is generally not redeemable prior to maturity except in certain limited circumstances and could be subject to a premium on redemption.

We receive patronage refunds under the Installment Note. Patronage refunds are distributions of profits from banks in the farm credit system, which are cooperatives that are required to distribute profits to their members. Patronage distributions, which are made in either cash or stock, are received in the year after they were earned and are recorded as offsets to interest expense.

Through acquisition accounting, the Installment Note was recognized at an estimated fair value of $893 million as of the acquisition date. The difference between the cash interest payments and the amount being recorded as interest expense at the effective market rate will reduce the carrying value of the Installment Note to the principal amount at the maturity date.

Note Payable to Timberland Venture

We assumed the Note Payable to Timberland Venture, which has a principal balance of $783 million. The annual interest rate on the Note Payable to Timberland Venture is fixed at 7.375 percent. Interest is paid quarterly with the principal due upon maturity. The note matures on October 1, 2018, but may be extended until October 1, 2020, at our election. The note is not redeemable prior to maturity.

Through acquisition accounting, the Note Payable to Timberland Venture was recognized at an estimated fair value of $838 million as of the acquisition date. The difference between the cash interest payments and the amount being recorded as interest expense at the effective market rate will reduce the carrying value of the note to the principal amount at the maturity date.

On August 31, 2016, the Timberland Venture redeemed TCG Member's interest and Weyerhaeuser obtained full ownership of the Timberland Venture's equity. As a result, we consolidated the Timberland Venture as a wholly-owned subsidiary and the Note Payable to Timberland Venture is therefore eliminated for financial reporting purposes upon consolidation as it is now intercompany indebtedness. The redemption transaction and consolidation is described in Note 8: Related Parties.

TERM LOANS ISSUED AND EXTINGUISHED

During February 2016, and subsequent to completion of the Plum Creek merger, we entered into a $600 million 18-month senior unsecured term loan maturing in August 2017. Borrowings were at LIBOR plus 1.05 percent. The $600 million outstanding under this facility was repaid in full and terminated during fourth quarter 2016.

During March 2016, we entered into a $1.9 billion 18-month senior unsecured term loan maturing in September 2017. Borrowings were at LIBOR plus 1.05 percent. The $1.1 billion outstanding under this facility was repaid in full and terminated during fourth quarter 2016.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 94

LONG-TERM DEBT AND LONG-TERM DEBT MATURITIES

The following table lists our long-term 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, 2016			DECEMBER 31, 2015
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
4.70% debentures due 2021	606			—
7.125% debentures due 2023	191			191
5.207% debentures due 2023	889			—
4.625% notes due 2023	500			500
3.25% debentures due 2023	324			—
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
Other	2			1
	6,628			4,808
Less unamortized discounts	(5		)	(5		)
Less unamortized debt expense	(13		)	(16		)
Total	$	6,610		$	4,787
Portion due within one year	$	281		$	—

Amounts of Long-Term Debt Due Annually for the Next Five Years and the Total Amount Due After 2021

DOLLAR AMOUNTS IN MILLIONS
	DECEMBER 31, 2016
2017	$	281
2018	$	62
2019	$	500
2020	$	550
2021	$	756
Thereafter	$	4,479

NOTE 13: 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, 2016						DECEMBER 31, 2015
	CARRYING VALUE			FAIR VALUE (LEVEL 2)			CARRYING VALUE			FAIR VALUE (LEVEL 2)
Long-term debt (including current maturities):
Fixed rate	$	6,061		$	6,925		$	4,238		$	4,967
Variable rate	549			550			549			550
Total Debt	$	6,610		$	7,475		$	4,787		$	5,517

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 95

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.

We believe that our variable rate long-term debt instruments have net carrying values that approximate their fair values with only insignificant differences.

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, mutual fund investments held in grantor trusts, 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 and the allowance for doubtful accounts.

NOTE 14: 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. See Note 19: Income Taxes for a discussion of a tax proceeding involving Plum Creek REIT's 2008 U.S. federal income tax return.

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 from the Environmental Protection Agency (the EPA) 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 EPA to negotiate an administrative order on consent for a contaminant removal action for a portion of the site comprising 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, and two other parties received the same invitations. On April 14, 2016, the EPA issued an administrative order to the company and the other parties, the terms and scope of which are generally consistent with the company’s and the other parties’ discussions with the EPA. The company and the other parties have begun to jointly implement the administrative order. On December 16, 2016, the EPA issued a Unilateral Administrative Order to the company and the other parties requiring response action for Area 1 of Operable Unit 5 of the Kalamazoo River Superfund site. The parties and the EPA are currently in discussion regarding implementation of the order. At this time we do not expect to incur material losses related to the implementation of the administrative orders.

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.

Changes in the Reserve for Environmental Remediation

DOLLAR AMOUNTS IN MILLIONS
Reserve balance as of December 31, 2015	$	37
Reserve charges and adjustments, net	7
Payments	(10		)
Reserve balance as of December 31, 2016	$	34
Total active sites as of December 31, 2016	35

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.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 96

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 $110 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 party’s 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, 2015(1)	$	29
Reserve charges and adjustments, net	8
Payments	(10		)
Other adjustments(2)	2
Reserve balance as of December 31, 2016	$	29
(1) Reserve balance for continuing operations (2) 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 $14 million.

Operating Leases

Our rent expense for continuing operations was:

DOLLAR AMOUNTS IN MILLIONS
	2016			2015			2014
Rent expense	$	37		$	24		$	25

We have operating leases for:

•	various equipment, including logging equipment, lift trucks, automobiles and office equipment; and

•	office and wholesale space.

Future Commitments on Operating Leases

Our operating lease commitments as of December 31, 2016 were:

DOLLAR AMOUNTS IN MILLIONS
	DECEMBER 31, 2016
2017	$	34
2018	$	32
2019	$	27
2020	$	24
2021	$	21
Thereafter	$	131

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 97

NOTE 15: 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 2016 or 2015. However, we have authorization to issue 7 million preferred shares with a par value of $1 per share.

On June 24, 2013, 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, for net proceeds of $669 million, which remained outstanding at December 31, 2015. Dividends were 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 could 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 automatically converted to common shares on July 1, 2016. At any time prior to that date, holders could elect to convert each share into common shares at the minimum conversion rate of 1.5283 common shares, subject to anti-dilution adjustments.

On July 1, 2016, all outstanding 6.375 percent Mandatory Convertible Preference Shares, Series A (Preference Shares) converted into Weyerhaeuser common shares at a rate of 1.6929 Weyerhaeuser common shares per Preference Share. The company issued a total of 23.2 million Weyerhaeuser common shares in conjunction with the conversion, based on 13.7 million Preference Shares outstanding as of the conversion date.

In accordance with the terms of the Preference Shares, the number of Weyerhaeuser common shares issuable on conversion was determined based on the average volume weighted average price of $29.54 for Weyerhaeuser common shares over the 20-trading-day period beginning June 1, 2016, and ending on June 28, 2016.

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 rights and amounts,

•	redemption rights,

•	conversion terms,

•	sinking-fund provisions,

•	values in liquidation and

•	voting rights.

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

SHARES IN THOUSANDS
	2016		2015		2014
Outstanding at beginning of year	510,483		524,474		583,548
Issuance from merger with Plum Creek (Note 4)	278,887		—		—
New issuance	—		—		—
Shares tendered (Note 3)	—		—		(58,813	)
Stock options exercised	2,571		1,592		5,134
Issued for restricted stock units	840		365		451
Issued for performance shares	219		242		217
Preference shares converted to common	23,345		—		—
Repurchased	(67,817	)	(16,190	)	(6,063	)
Outstanding at end of year	748,528		510,483		524,474

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

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 98

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.

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.

In November 2015, our board of directors approved a stock repurchase program under which we were authorized to repurchase up to $2.5 billion of outstanding shares subsequent to the closing of our merger with Plum Creek (the 2016 Repurchase Program). This new authorization replaced the August 2015 share repurchase authorization. Transaction fees incurred for repurchases are not counted as use of funds authorized for repurchases under the 2016 Share Repurchase Authorization. During 2016, we repurchased 67,816,810 shares of common stock for $2 billion under the 2016 Share Repurchase Authorization. As of December 31, 2016, we had remaining authorization of $500 million for future stock repurchases. We had 748,528,131 shares of common stock outstanding as of December 31, 2016.

All common stock purchases under the 2016, 2015, and 2014 Repurchase Programs were made in open-market transactions.

We record share repurchases upon trade date as opposed to the settlement date when cash is disbursed. We record a liability to account for repurchases that have not been cash settled. There were no unsettled repurchases as of December 31, 2016, or December 31, 2015.

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, 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
Beginning balance as of January 1, 2016	207			(1,372		)	(11		)	(77		)	35			6			(1,212		)
Other comprehensive income (loss) before reclassifications	25			(590		)	—			5			—			1			(559		)
Income taxes	—			208			—			(1		)	—			—			207
Net other comprehensive income (loss) before reclassifications	25			(382		)	—			4			—			1			(352		)
Amounts reclassified from cumulative other comprehensive income (loss)(1)	—			156			4			9			(7		)	—			162
Income taxes	—			(53		)	(2		)	(3		)	1			—			(57		)
Net amounts reclassified from cumulative other comprehensive income (loss)	—			103			2			6			(6		)	—			105
Total other comprehensive income (loss)	25			(279		)	2			10			(6		)	1			(247		)
Ending balance as of December 31, 2016	$	232		$	(1,651	)	$	(9	)	$	(67	)	$	29		$	7		$	(1,459	)
(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 16: SHARE-BASED COMPENSATION

Share-based compensation expense was:

•	$60 million in 2016,

•	$31 million in 2015 and

•	$40 million in 2014.

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The amounts above contain awards to employees of the divested Cellulose Fibers businesses and WRECO and are included in our results of discontinued operations. These amounts are:

•	$6 million in 2016,

•	$6 million in 2015 and

•	$10 million in 2014.

This note provides details about:

•	our Long-Term Incentive Compensation Plan (2013 Plan),

•	share-based compensation resulting from our merger with Plum Creek,

•	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,

•	performance shares and

•	performance share units.

We may issue future grants of up to 21,646,924 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 39 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, 2016 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.

SHARE-BASED COMPENSATION RESULTING FROM OUR MERGER WITH PLUM CREEK

Replacement awards were granted as a result of the merger with Plum Creek. Eligible outstanding Plum Creek stock options, restricted stock units and deferred stock unit awards were converted into equivalent equity awards with respect to Weyerhaeuser Common Shares, after giving effect to the appropriate adjustments to reflect the consummation of the merger. In total, we issued replacement awards consisting of 1,953,128 stock options and 1,248,006 RSUs. We also assumed 289,910 value management awards (VMAs) through the merger with Plum Creek.

Replacement Stock Option Awards

The replacement stock option awards issued as a result of the merger with Plum Creek have similar exercise provisions as the terms of our current awards. All replacement stock option awards were fully vested prior to the date of the merger, so no expense will be recorded. The value of the replacement stock option awards was $5 million, which was included in the equity consideration issued in the merger as described in Note 4: Merger with Plum Creek.

Replacement Restricted Stock Unit Awards

The replacement RSUs issued as a result of the merger with Plum Creek have similar vesting provisions as the terms of existing Weyerhaeuser restricted stock unit awards. Expense for replacement RSUs will continue to be recognized over the remaining service period unless a qualifying termination occurs. A qualifying termination of an awardee will result in acceleration of vesting and expense recognition in the period that the qualifying termination occurs. Qualifying terminations during 2016 resulted in accelerated vesting of 705,394 of the replacement RSUs and recognition of $15 million of expense. The accelerated expense is included in the merger-related integration costs as described in Note 17: Charges for Integration and Restructuring, Closures and Asset Impairments.

Value Management Awards

Following the merger, the VMAs assumed were valued at target. All outstanding VMAs, if earned, will vest December 31, 2017, and will be paid in the first quarter 2018. The VMAs are classified and accounted for as liabilities, as they will be settled in cash upon vesting. The expense recognized over the remaining performance period will equal the cash value of an award as of the last day of the performance period multiplied by the number of awards that are earned. Expense for VMAs will continue to be recognized over the remaining service period unless a qualifying termination occurs. A qualifying termination of an awardee will result in the acceleration of vesting and expense recognition in the period that the qualifying termination occurs. Qualifying terminations during 2016 resulted in $6 million of expense recognized. This accelerated expense is

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 100

included in merger-related integration costs as described in Note 17: Charges for Integration and Restructuring, Closures and Asset Impairments.

HOW WE ACCOUNT FOR SHARE-BASED AWARDS

When accounting 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:

•	$12 million in 2016,

•	$8 million in 2015 and

•	$11 million in 2014.

The amounts above contain income tax benefit from share-based awards to employees that were part of the Cellulose Fibers divestitures and WRECO Divestiture and are included in our results of discontinued operations. These amounts are:

•	$2 million in 2016,

•	$2 million in 2015 and

•	$4 million in 2014.

Tax benefits from share-based awards are accrued as stock compensation expense is recognized in the Consolidated Statement of Operations. Tax benefits from 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.

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,

•	deferred compensation stock equivalent units and

•	value management awards assumed in merger with Plum Creek.

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 2016, 2015 and 2014 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

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 101

•	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

	2016 GRANTS			2015 GRANTS			2014 GRANTS
Expected volatility	25.43		%	25.92		%	31.71		%
Expected dividends	5.37		%	3.28		%	2.92		%
Expected term (in years)	4.95			4.77			4.97
Risk-free rate	1.28		%	1.54		%	1.57		%
Weighted average grant-date fair value	$	2.73		$	5.85		$	6.62

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.

Activity

The following table shows our option unit activity for 2016.

	OPTIONS (IN THOUSANDS)	WEIGHTED AVERAGE EXERCISE PRICE			WEIGHTED AVERAGE REMAINING CONTRACTUAL TERM (IN YEARS)	AGGREGATE INTRINSIC VALUE (IN MILLIONS)
Outstanding at December 31, 2015	12,763	$	25.88
Granted(1)	6,122	$	23.47
Exercised	(2,570)	$	25.01
Forfeited or expired	(1,603)	$	25.98
Outstanding at December 31, 2016(2)	14,712	$	24.96		5.47	$	528
Exercisable at December 31, 2016	9,152	$	23.63		3.65	$	338
(1) Includes 1,953 thousand stock option replacement awards issued as a result of the merger with Plum Creek. (2) As of December 31, 2016, there were approximately 1,624 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:

•	$18 million in 2016,

•	$13 million in 2015 and

•	$55 million in 2014.

The total grant-date fair value of stock options vested was:

•	$14 million in 2016,

•	$14 million in 2015 and

•	$16 million in 2014.

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 2016, 2015 and 2014 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.

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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 2016.

	STOCK UNITS (IN THOUSANDS)	WEIGHTED AVERAGE GRANT-DATE FAIR VALUE
Nonvested at December 31, 2015	1,104	$	31.37
Granted(1)	1,925	$	30.25
Vested	(1,202)	$	32.94
Forfeited	(244)	$	27.04
Nonvested at December 31, 2016(2)	1,583	$	26.49
(1) Includes 1,248 thousand restricted stock unit replacement awards issued as a result of the merger with Plum Creek. (2) As of December 31, 2016, there were approximately 385 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:

•	$30.25 in 2016,

•	$35.41 in 2015 and

•	$30.14 in 2014.

The total grant-date fair value of restricted stock units vested was:

•	$36 million in 2016,

•	$14 million in 2015 and

•	$16 million in 2014.

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 2016, the ultimate number of performance share units earned is based on three measures:

•	our relative total shareholder return (TSR) ranking measured against the S&P 500 over a three year period,

•	our relative TSR ranking measured against an industry peer group of companies over a three year period and

•	achievement of Plum Creek merger cost synergy targets.

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 2016 and 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, 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.

•	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.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 103

For shares granted in 2014, 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 awards contain 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

	2016 GRANTS			2015 GRANTS			2014 GRANTS
Performance period	1/1/2016 – 12/31/2018			1/1/2015 – 12/31/2017			1/1/2014 – 12/31/2015
Expected dividends	3.92% - 5.37%			3.26		%	2.91		%
Risk-free rate	0.45% - 0.97%			0.05% - 1.07%			0.03% - 0.79%
Volatility	21.87% - 28.09%			16.33% - 20.89%			20.74% - 23.53%
Weighted average grant-date fair value	$	22.58		$	34.75		$	30.62

Activity

The following table shows our performance share unit activity for 2016.

	GRANTS (IN THOUSANDS)		WEIGHTED AVERAGE GRANT-DATE FAIR VALUE
Nonvested at December 31, 2015	680		$	31.42
Granted at target	493		$	22.58
Vested	(261	)	$	21.26
Forfeited	(151	)	$	25.72
Nonvested at December 31, 2016(1)	761		$	25.23
(1) As of December 31, 2016, there were approximately 89 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:

•	$8 million in 2016,

•	$9 million in 2015 and

•	$7 million in 2014.

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.

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.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 104

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

	2016 GRANTS			2015 GRANTS			2014 GRANTS
Expected volatility	24.12		%	22.10		%	18.20		%
Expected dividends	4.04		%	4.20		%	3.21		%
Expected term (in years)	2.20			1.94			1.32
Risk-free rate	1.36		%	0.99		%	0.45		%
Weighted average fair value	$	7.84		$	6.96		$	12.70

Activity

The following table shows our stock appreciation rights activity for 2016.

	RIGHTS (IN THOUSANDS)		WEIGHTED AVERAGE EXERCISE PRICE			AVERAGE REMAINING CONTRACTUAL TERM (IN YEARS)	AGGREGATE INTRINSIC VALUE (IN MILLIONS)
Outstanding at December 31, 2015	382		$	24.25
Granted	107		$	23.09
Exercised	(66	)	$	23.42
Forfeited or expired	(37	)	$	26.90
Outstanding at December 31, 2016	386		$	23.82		5.24	$	3
Exercisable at December 31, 2016	233		$	21.85		3.03	$	2

The total liabilities paid for stock appreciation rights was:

•	$1 million in 2016,

•	$1 million in 2015 and

•	$2 million in 2014.

UNRECOGNIZED SHARE-BASED COMPENSATION

As of December 31, 2016, our unrecognized share-based compensation cost for all types of share-based awards included $41 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 665,774.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 105

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:

•	1,004,448 as of December 31, 2016,

•	1,003,053 as of December 31, 2015 and

•	944,966 as of December 31, 2014.

NOTE 17: CHARGES FOR INTEGRATION AND RESTRUCTURING, CLOSURES AND ASSET IMPAIRMENTS

Items Included in Our Charges for Integration and Restructuring, Closures, and Asset Impairments

DOLLAR AMOUNTS IN MILLIONS
	2016			2015			2014
Integration and restructuring charges related to our merger with Plum Creek(1):
Termination benefits	$	54		$	—		$	—
Acceleration of share-based compensation related to qualifying terminations (Note 16)	21			—			—
Acceleration of pension benefits related to qualifying terminations (Note 9)	5			—			—
Professional services	52			14			—
Other integration and restructuring costs	14			—			—
Total integration and restructuring charges related to our merger with Plum Creek	146			14			—
Charges related to closures and other restructuring activities:
Termination benefits	4			4			27
Pension and postretirement charges	—			—			3
Other closures and restructuring costs	4			6			12
Total charges related to closures and other restructuring activities	8			10			42
Impairment of long-lived assets	16			15			2
Total charges for integration and restructuring, closures and asset impairments	$	170		$	39		$	44
(1) 2015 integration and restructuring charges related to our merger with Plum Creek were classified within "Other operating costs (income), net" in the Consolidated Statement of Operations. We reclassified these costs to "Charges for integration and restructuring, closures and asset impairments" to align with current period classification.

INTEGRATION, RESTRUCTURING AND CLOSURES

During 2016, we incurred and accrued for termination benefits (primarily severance), accelerated share-based payment costs, and accelerated pension benefits based upon actual and expected qualifying terminations of certain employees as a result of restructuring decisions made subsequent to the merger. We also incurred non-recurring professional services costs for investment banking, legal and consulting, and certain other fees directly attributable to our merger with Plum Creek.

During 2015, we incurred non-recurring professional services costs for banking, legal and consulting fees directly attributable to our merger with Plum Creek. We also incurred restructuring and closure charges 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.

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 2016 were as follows:

DOLLAR AMOUNTS IN MILLIONS
Accrued severance as of December 31, 2015	$	5
Charges	58
Payments	(37		)
Accrued severance as of December 31, 2016	$	26

In addition to the amounts shown above, there were severance charges and payments of $8 million related to the Cellulose Fibers divestitures during 2016.

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.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 106

Long-Lived Assets

Our long-lived asset impairments were primarily related to the following:

•

2016 — We reviewed all of our development projects during 2016. As a result, we ceased development and initiated plans to sell certain projects. We plan to continue to develop or hold for future development our other projects and did not identify any indicators of impairment for these projects. We analyzed each of the projects we ceased development and initiated plans to sell and determined which had a book value greater than fair value. We recognized a $15 million impairment charge in Real Estate & ENR which represents the fair value less direct selling costs of these projects. The fair values of the projects were determined using significant unobservable inputs (Level 3) based on broker opinion of value reports.

Our remaining projects did not have any indicators of impairment; however, we corroborated this evaluation with an assessment of the undiscounted cash flows for the legacy Weyerhaeuser projects or noted that projects acquired from Plum Creek were recorded at estimated fair value when acquired in 2016.

•	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.

NOTE 18: 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
	2016			2015			2014
Gain on disposition of nonstrategic assets	$	(60	)	$	(12	)	$	(27	)
Foreign exchange losses (gains), net	(6		)	47			28
Litigation expense, net	24			23			9
Gain on postretirement plan amendment (Note 9)	—			—			(151		)
Other, net	1			(6		)	(7		)
Total other operating costs (income), net	$	(41	)	$	52		$	(148	)

Gain on disposition of nonstrategic assets in 2016 included a $36 million pretax gain recognized in first quarter 2016 on the sale of our Federal Way, Washington headquarters campus.

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 gains and losses result from changes in exchange rates primarily related to our U.S. dollar denominated debt that is held by our Canadian subsidiary.

NOTE 19: 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.

The Income Taxes section of Note 1: Summary of Significant Accounting Policies provides details about how we account for our income taxes.

Following the merger with Plum Creek in first quarter 2016, our income tax receivables and deferred income tax balances for our TRSs have been adjusted to include Plum Creek’s TRSs. The Plum Creek TRS balances as of the merger date were $11 million in income tax receivables and $67 million in deferred income tax assets arising from temporary differences between the tax bases and book bases of assets acquired and liabilities assumed in the merger. See Note 4: Merger with Plum Creek for additional details.

EARNINGS BEFORE INCOME TAXES

Domestic and Foreign Earnings From Continuing Operations Before Income Taxes

DOLLAR AMOUNTS IN MILLIONS
	2016			2015			2014
Domestic earnings	$	353		$	326		$	679
Foreign earnings	151			27			8
Total earnings before income taxes	$	504		$	353		$	687

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 107

PROVISION FOR INCOME TAXES

Provision (Benefit) for Income Taxes From Continuing Operations

DOLLAR AMOUNTS IN MILLIONS
	2016			2015			2014
Current:
Federal	$	1		$	7		$	(49	)
State	1			(2		)	7
Foreign	11			(5		)	3
Total current	13			—			(39		)
Deferred:
Federal	37			(69		)	107
State	(3		)	(3		)	—
Foreign	42			14			3
Total deferred	76			(58		)	110
Total income tax provision (benefit)	$	89		$	(58	)	$	71

EFFECTIVE INCOME TAX RATE

Effective Income Tax Rate Applicable to Continuing Operations

DOLLAR AMOUNTS IN MILLIONS
	2016			2015			2014
U.S. federal statutory income tax	$	177		$	123		$	240
State income taxes, net of federal tax benefit	(3		)	(5		)	5
REIT income not subject to federal income tax	(99		)	(158		)	(161		)
REIT benefit from change to tax law	—			(13		)	—
Foreign taxes	(4		)	4			2
Provision for unrecognized tax benefits	—			(7		)	(4		)
Repatriation of Canadian earnings	24			—			—
Other, net	(6		)	(2		)	(11		)
Total income tax provision (benefit)	$	89		$	(58	)	$	71
Effective income tax rate	17.6		%	(16.4		)%	10.3		%

DEFERRED TAX ASSETS AND LIABILITIES

Deferred tax assets and liabilities reflect the future tax impact created by differences between the timing of when income or deductions are recognized for pretax financial book reporting purposes versus income tax purposes. Deferred tax assets represent a future tax benefit (or reduction to income taxes in a future period), while deferred tax liabilities represent a future tax obligation (or increase to income taxes in a future period).

Balance Sheet Classification of Deferred Income Tax Assets (Liabilities) Related to Continuing Operations

DOLLAR AMOUNTS IN MILLIONS
	DECEMBER 31, 2016			DECEMBER 31, 2015
Net noncurrent deferred tax asset	$	293		$	254
Net noncurrent deferred tax liability	—			—
Net deferred tax asset (liability)	$	293		$	254

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 108

Items Included in Our Deferred Income Tax Assets (Liabilities)

DOLLAR AMOUNTS IN MILLIONS
	DECEMBER 31, 2016			DECEMBER 31, 2015
Postretirement benefits	$	76		$	80
Pension	395			260
State tax credits	46			49
Net operating loss carryforwards	25			64
Cellulosic biofuel producers credit	—			78
Other	232			178
Gross deferred tax assets	774			709
Valuation allowance	(56		)	(65		)
Net deferred tax assets	718			644
Property, plant and equipment	(214		)	(169		)
Timber installment notes	(180		)	(180		)
Other	(31		)	(41		)
Deferred tax liabilities	(425		)	(390		)
Net deferred tax asset (liability)	$	293		$	254

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 2016 totaled $1.1 billion as follows:

•	U.S. REIT - $742 million, which expire from 2027 through 2036;

•	State - $335 million, which expire from 2017 through 2036; and

•	Foreign - $40 million, which expire from 2017 through 2021.

Our gross state credit carryforwards at the end of 2016 totaled $71 million, which includes $24 million that expire from 2017 through 2030 and $47 million that do not expire. We have no federal or foreign credit carryforwards.

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 $56 million at the end of 2016, primarily related to state credits and state and foreign net operating losses.

Reinvestment of Undistributed Earnings

The balance of our foreign undistributed earnings was approximately $35 million at the end of 2016, 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.

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, 2016 and 2015, is $6 million, which does not include related interest of $1 million. This amount represents the gross amount of exposure in individual jurisdictions and does not reflect any additional benefits expected to be realized if such positions are not sustained, such as the federal deduction that could be realized if an unrecognized state deduction is not sustained.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 109

Reconciliation of the Beginning and Ending Amount of Unrecognized Tax Benefits

DOLLAR AMOUNTS IN MILLIONS
	DECEMBER 31, 2016			DECEMBER 31, 2015
Balance at beginning of year	$	6		$	11
Settlements	—			(4		)
Lapse of statute	—			(1		)
Balance at end of year	$	6		$	6

The net liability recorded in our Consolidated Balance Sheet related to unrecognized tax benefits is $5 million as of December 31, 2016, which includes interest of $1 million and is net of $2 million in loss carryforwards available to offset the liability. The net liability as of December 31, 2015, was $4 million, 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 recorded for tax positions across all jurisdictions that, if sustained, would affect our effective tax rate is $5 million as of December 31, 2016 and 2015, which includes interest of $1 million.

In accordance with our accounting policy, we accrue interest and penalties related to unrecognized tax benefits as a component of income tax expense. See Note 1: Summary of Significant Accounting Policies.

As of December 31, 2016, none of our U.S. federal income tax returns are under examination, with years 2013 forward open to examination. The 2014 U.S. federal income tax return for NORPAC is currently under examination, and we held a 50 percent ownership interest in the entity that year. See Note 3: Discontinued Operations. We are undergoing examinations in state jurisdictions for tax years 2012 through 2014, with tax years 2009 forward open to examination. We are also undergoing examinations in foreign jurisdictions for tax years 2010-2011 and 2013-2014, with tax years 2010 forward open to examination. 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 $2 million in unrecognized tax benefits due to the lapse of applicable statutes of limitation.

ONGOING IRS MATTER

We received a Notice of Final Partnership Administrative Adjustment (FPAA), dated July 20, 2016, from the Internal Revenue Service (IRS) in regard to Plum Creek REIT’s 2008 U.S. federal income tax treatment of the transaction forming the Timberland Venture. The IRS is asserting that the transfer of the timberlands to the Timberland Venture was a taxable transaction to the company at the time of the transfer rather than a nontaxable capital contribution. We have filed a petition in the U.S. Tax Court and will vigorously contest this adjustment.

In the event that we are unsuccessful in this tax litigation, we could be required to recognize and distribute gain to shareholders of approximately$600 million and pay built-in gains tax of approximately $100 million. We would also be required to pay interest on both of those amounts, which would be substantial. We expect that as much as 80 percent of any such distribution could be made with our common stock, and shareholders would be subject to tax on the distribution at the applicable capital gains tax rate. Alternatively, we could elect to retain the gain and pay corporate-level tax to minimize interest costs to the company.

Although the outcome of this process cannot be predicted with certainty, we are confident in our position based on U.S. tax law and believe we will be successful in defending it. Accordingly, no reserve has been recorded related to this matter.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 110

NOTE 20: 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 and Japan. Our export sales include:

•	logs, lumber and wood chips to Japan;

•	logs and lumber to other Pacific Rim countries; and

•	plywood to South America and Europe.

Sales by Geographic Area

DOLLAR AMOUNTS IN MILLIONS
	2016			2015			2014
Sales to unaffiliated customers:
U.S.	$	5,451		$	4,362		$	4,377
Japan	369			363			412
China	108			99			176
Korea	30			34			53
Canada	341			307			382
Europe	9			10			13
South America	16			23			31
Other foreign countries	41			48			45
Total	$	6,365		$	5,246		$	5,489
Export sales from the U.S.:
Japan	$	314		$	309		$	350
China	103			97			174
Other	98			91			116
Total	$	515		$	497		$	640

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:

•	property and equipment, including construction in progress;

•	timber and timberlands;

•	minerals and mineral rights; and

•	goodwill.

Long-Lived Assets by Geographic Area

DOLLAR AMOUNTS IN MILLIONS
	DECEMBER 31, 2016			DECEMBER 31, 2015(1)			DECEMBER 31, 2014(1)
U.S.	$	15,700		$	8,260		$	8,069
Canada	206			460			579
Other foreign countries	527			654			676
Total	$	16,433		$	9,374		$	9,324
(1) Includes assets of discontinued operations.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 111

NOTE 21: 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(1)			FULL YEAR
2016:
Net sales	$	1,405		$	1,655		$	1,709		$	1,596		$	6,365
Operating income from continuing operations	$	153		$	258		$	274		$	185		$	870
Earnings from continuing operations before income taxes	$	72		$	161		$	184		$	87		$	504
Net earnings	$	81		$	168		$	227		$	551		$	1,027
Net earnings attributable to Weyerhaeuser common shareholders	$	70		$	157		$	227		$	551		$	1,005
Basic net earnings per share attributable to Weyerhaeuser common shareholders	$	0.11		$	0.21		$	0.30		$	0.74		$	1.40
Diluted net earnings per share attributable to Weyerhaeuser common shareholders	$	0.11		$	0.21		$	0.30		$	0.73		$	1.39
Dividends paid per share	$	0.31		$	0.31		$	0.31		$	0.31		$	1.24
Market prices - high/low	$31.38 - $22.06			$32.56 - $26.55			$33.17 - $29.52			$33.28 - $28.58			$33.28 - $22.06
2015:
Net sales	$	1,280		$	1,345		$	1,355		$	1,266		$	5,246
Operating income from continuing operations	$	150		$	200		$	166		$	142		$	658
Earnings from continuing operations before income taxes	$	77		$	124		$	88		$	64		$	353
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
(1) Third and fourth quarter 2016 include a gain on our Cellulose Fibers divestitures. Refer to Note 3: Discontinued Operations for further information.

WEYERHAEUSER COMPANY > 2016 ANNUAL REPORT AND FORM 10-K 112