SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1999       Commission file number 1-12545

                           WILLAMETTE INDUSTRIES, INC.
             (Exact name of registrant as specified in its charter)

                 OREGON                                  93-0312940
       (State of incorporation)                      (I.R.S. Employer
                                                     Identification No.)

       1300 S.W. FIFTH AVENUE, SUITE 3800
       PORTLAND, OREGON                                    97201
 (Address of principal executive offices)                  (Zip Code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (503) 227-5581

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

    Title of each class           Name of each exchange on which registered
Common stock, $.50 par value               New York Stock Exchange
Preferred stock purchase rights            New York Stock Exchange

        SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None

       Indicate by check mark whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes -X-  No---

       Indicate by check mark if  disclosure of  delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ ]

       State  the   aggregate   market   value  of  the  voting  stock  held  by
non-affiliates of the registrant.

                       $3,219,380,103 at February 29, 2000

       Indicate  the number of shares  outstanding  of each of the  registrant's
classes of common stock as of the latest practicable date.
          Class                               Outstanding at February 29, 2000
          -----                               --------------------------------
Common Stock, $.50 par value                         111,299,146 shares

                      DOCUMENTS INCORPORATED BY REFERENCE.

Portions of the  registrant's  definitive  proxy  statement  for its 2000 annual
meeting of shareholders are incorporated by reference into Part III hereof.

<PAGE>


                              CROSS REFERENCE SHEET
          Showing Location in Definitive Proxy Statement of Items Required
                                  By Form 10-K


Item No
-------
Caption    Form 10-K Caption                    Definitive Proxy Statement
-------    -----------------                    --------------------------

Item 10    Directors and Executive              Election of Directors
             Officers of the Registrant         Section 16(a) Beneficial
                                                  Ownership Reporting Compliance

Item 11    Executive Compensation               Executive Compensation
                                                Compensation Committee
                                                  Interlocks and Insider
                                                  Participation
                                                Compensation of Directors
                                                Employment Agreements

Item 12    Security Ownership of                Holders of Common Stock
             Certain Beneficial
             Owners and Management

Item 13    Certain Relationships and            Compensation Committee
             Related Transactions                 Interlocks and Insider
                                                  Participation


<PAGE>
                                      INDEX
                                      -----

<TABLE>
                                                                                   Page
                                                                                   ----
Part I
------
<S>      <C>                                                                         <C>
Item 1.  Business.....................................................................1
         General......................................................................1
         Business Segment Information.................................................1
         White Paper..................................................................1
         Brown Paper..................................................................2
         Building Materials...........................................................2
         Timberlands..................................................................3
         Energy.......................................................................3
         Employees....................................................................3
         Environmental Matters........................................................3
Item 2.  Properties...................................................................4
Item 3.  Legal Proceedings............................................................8
Item 4.  Submission of Matters to a Vote of Security Holders..........................8
         Executive Officers of the Registrant.........................................9

Part II
-------

Item 5.  Market for Registrant's Common Equity
          and Related Stockholder Matters............................................10
Item 6.  Selected Financial Data.....................................................11
Item 7.  Management's Discussion and Analysis of
          Financial Condition and Results of Operations..............................12
Item 7A. Quantitative and Qualitative Disclosures About Market Risk..................19
Item 8.  Financial Statements and Supplementary Data.................................19
Item 9.  Changes in and Disagreements with
          Accountants on Accounting and Financial Disclosure.........................19

Part III
--------

Item 10. Directors and Executive Officers of the Registrant..........................20
          (See Part I for Executive Officers of the Registrant)
Item 11. Executive Compensation......................................................20
Item 12. Security Ownership of Certain Beneficial
          Owners and Management......................................................20
Item 13. Certain Relationships and Related
          Transactions...............................................................20

Part IV
-------

Item 14. Exhibits, Financial Statement Schedules
          and Reports on Form 8-K....................................................21
         Signatures..................................................................22
         Index to Consolidated Financial Statements..................................24
         Index to Exhibits...........................................................41
</TABLE>

<PAGE>

                                     PART I

Item 1.  Business

GENERAL

  Willamette  Industries,  Inc.  (the  "company")  was  founded  in  1906 as the
Willamette Valley Lumber Co. in Dallas,  Oregon. In 1967,  Willamette Valley and
several related firms merged to form Willamette  Industries,  Inc. Our stock has
been publicly traded since 1968. Willamette is a diversified,  integrated forest
products company with 103 manufacturing facilities in 24 states, France, Ireland
and Mexico.

  We  operate  in  a  very  competitive  industry  consisting  of  thousands  of
companies, some larger and more diversified, others much smaller, producing only
one or two products. Very competitive conditions exist in every industry segment
in which the company  operates.  The company  competes in its markets  primarily
through  price,  quality and  service.  We feel our  strengths  are our vertical
integration;  our geographically  diverse,  modern,  fiber-and  energy-efficient
facilities; our engineering and construction capabilities;  our concentration on
a focused,  related range of products;  our balance among building materials and
white  and  brown  paper  products;  our  58%  sawlog  self-sufficiency;  and an
organizational   structure  that  encourages  teamwork  as  well  as  individual
initiative.

BUSINESS SEGMENT INFORMATION

  The company operates in three business segments:  white paper, brown paper and
building materials. Sales and operating data for the three segments for the past
five years are set forth in the five-year  comparison  captioned  "Supplementary
Business Segment  Information"  located on page 30. The company is not dependent
on any one significant customer or group of customers.  Approximately 91% of the
company's total output is sold domestically.

WHITE PAPER

Market Pulp and Fine Paper
  Four fine paper mills  manufacture  11% of the  nation's  uncoated  free sheet
production.  The company's pulp mills produce pulp primarily for  consumption at
our fine paper mills, but we also produce 5% of the nation's  bleached  hardwood
market  pulp  which  is  sold to  outside  customers.  Chips  from  nearby  wood
converting  facilities  serve as the  primary  fiber  source for our white paper
products.

Communication Papers and Cut Sheets
  Six  business  forms plants  manufacture  22% of the  nation's  production  of
continuous forms. Additionally,  six cut sheet facilities make private brand and
Willamette  brand  (Willcopy(R))  photocopy and cut sheet printer paper. Our cut
sheets represent 14% of the nation's  production.  Business forms and cut sheets
are marketed by our own sales force to a variety of consumers and distributors.

                                       1
<PAGE>

BROWN PAPER

Brown Paper
  Four paper mills  manufacture  5% of the nation's  production  of  linerboard,
corrugating  medium  and bag  paper.  Nearly  all of the  product is used by, or
traded for,  the needs of  Willamette's  box and bag  manufacturing  plants.  In
Louisiana and Oregon,  our sawmills,  plywood plants and timberlands can provide
nearly all of our chip needs for our linerboard  mills.  Recycled  fiber, in the
form of old corrugated containers, provides 58% of our total fiber needs.

Corrugated Containers and Sheets
  Thirty-six  corrugated  container  and  sheet  plants  manufacture  6% of  the
nation's corrugated box production.  Products range from colorful store displays
to eye-catching  preprinted boxes; from sturdy wax-coated shipping containers to
the plain brown box.  Corrugated  containers are marketed by our own sales force
to a variety of industrial and agricultural customers.

Bags
  Four bag plants make 13% of the  nation's  paper  bags,  marketed by our sales
force to grocery,  department, drug and hardware stores in the West, Midwest and
South.

BUILDING MATERIALS

Lumber
  Nine  sawmills  manufacture  2% of  the  nation's  lumber  production.  Lumber
products  are  marketed   through   independent   wholesalers  and  distributors
throughout the U.S.

Structural Panels
  Plywood  panels  manufactured  at nine plants and oriented  strand board (OSB)
manufactured at one plant account for 9% and 3%,  respectively,  of the nation's
production.   Both  products  are  marketed   nationwide   through   independent
wholesalers and distributors.

Composite Panels
  Four particleboard  plants manufacture 13% of the nation's  particleboard.  In
addition,  the company has a  particleboard  plant in France that produces 1% of
European production. Three medium density fiberboard (MDF) plants produce 22% of
the nation's MDF. MDF is also  manufactured at facilities in Ireland and France,
which account for 6% of European production.  The composite panel plants produce
value-added   products  including   color-coated,   laminated,   fire-rated  and
moisture-resistant  boards. Composite panel products are sold nationwide through
independent wholesalers and distributors.

Engineered Wood Products
  Two laminated  beam plants account for 26% of the nation's  production.  Three
laminated  veneer lumber (LVL) plants and two I-joist  plants  manufacture 9% of
the nation's  total  production for each product.

                                       2
<PAGE>

Engineered  wood  products  are  sold in both  the  domestic  and  international
markets.

TIMBERLANDS

  Willamette's  1,728,000 acres of timberland  supply  approximately  58% of our
long-term sawlog needs. The remainder is purchased  through private timber sales
and open market  purchases.  Our  timberlands  are comprised of 734,000 acres in
Louisiana,  Arkansas and Texas;  610,000  acres in Oregon;  and 384,000 acres in
Tennessee,  Missouri and the Carolinas. We continually look for opportunities to
expand our fee timber base and make purchases when it is profitable to do so.

ENERGY

  Through  cogeneration,  the burning of waste  materials  and the  recycling of
spent  pulping  liquors,  Willamette's  manufacturing  facilities  are  able  to
generate 61% of our total energy needs.

EMPLOYEES

  Willamette  employs  approximately  14,250  people,  of  whom  about  48%  are
represented by labor unions with collective  bargaining  agreements.  Agreements
covering  approximately  1,295 employees expired in 1999.  Agreements  involving
about 1,550 hourly employees are subject to renewal in 2000.  Approximately  47%
of all salaried employees have been with the company for more than twelve years.

ENVIRONMENTAL MATTERS

  See Item 7, "Management's  Discussion and Analysis of Financial  Condition and
Results of  Operations--Other  Matters"  for a  discussion  of the effect on the
company of laws relating to environmental matters.



                                       3
<PAGE>

Item 2.  Properties

MANUFACTURING FACILITIES

  The  following  table sets  forth  information  regarding  the  company's  103
manufacturing facilities at December 31, 1999:


      Facility                              2000 Forecast   1999 Production
      --------                              -------------   ---------------

Building Materials
------------------
Plywood (9 Plants)                     M Square Ft. (3/8" Basis)
    Chester, South Carolina                     246,000
    Dallas, Oregon                              156,000
    Dodson, Louisiana                           227,000
    Emerson, Arkansas                           241,000
    Foster, Oregon                              148,000
    Moncure, North Carolina                     115,000
    Ruston, Louisiana                           148,000
    Springfield, Oregon                         122,000
    Zwolle, Louisiana                           238,000
                                            -----------
        Total Plywood                         1,641,000
                                            -----------
Oriented Strand Board (1 Plant)
    Arcadia, Louisiana                          307,000
                                            -----------
        Total Structural Panels               1,948,000        1,900,000
                                            ================================

Lumber (9 Mills)                            M Board Ft.
    Chester, South Carolina(1)                   24,000
    Coburg, Oregon                              180,000
    Dallas, Oregon                              154,000
    Dodson, Louisiana                            59,000
    Lebanon, Oregon (2 Mills)                   167,000
    Taylor, Louisiana                            51,000
    Warrenton, Oregon                           166,000
    Zwolle, Louisiana                            68,000
                                            -----------
        Total Lumber                            869,000         820,000
                                            ================================

Particleboard (5 Plants)               M Square Ft. (3/4" Basis)
    Albany, Oregon                              221,000
    Bend, Oregon                                180,000
    Lillie, Louisiana                           120,000
    Linxe, France                               169,000
    Simsboro, Louisiana                         110,000
                                            -----------
        Total Particleboard                     800,000         689,000
                                            ================================

(1)  Production to begin in the second quarter of 2000.

                                       4
<PAGE>

      Facility                              2000 Forecast   1999 Production
      --------                              -------------   ---------------

Medium Density Fiberboard (5 Plants)  M Square Ft. (3/4" Basis)
    Bennettsville, South Carolina               130,000
    Clonmel, Ireland                            181,000
    Eugene, Oregon                               65,000
    Malvern, Arkansas                           145,000
    Morcenx, France                              82,000
                                            -----------
        Total MDF                               603,000         573,000
                                            ================================

Engineered Wood Products (7 Plants)         M Board Ft.
Laminated Beams
    Simsboro, Louisiana                          28,000
    Vaughn, Oregon                               59,000
                                            -----------
        Total Laminated Beams                    87,000          83,000
                                            ================================

Laminated Veneer Lumber                    Hundred Cubic Ft.
    Albany, Oregon                               18,800
    Simsboro, Louisiana                          20,300
    Winston, Oregon                              16,200
                                            -----------
        Total LVL                                55,300          46,400
                                            ================================

I-Joists                                     M Lineal Ft.
    Simsboro, Louisiana                          33,000
    Woodburn, Oregon                             47,000
                                            -----------
        Total I-Joists                           80,000          55,000
                                            ================================

Other Divisions (2 Facilities)
    Coburg Veneer - Coburg, Oregon
    Custom Products - Albany, Oregon

Brown Paper
-----------
    Brown Paper (4 mills)                       Tons
      Albany, Oregon                            567,000
      Campti, Louisiana                         936,000
      Hawesville, Kentucky                      176,000
      Oxnard, California                        202,000
                                            -----------
        Total Brown Paper                     1,881,000       1,839,000
                                            ================================


                                       5
<PAGE>

      Facility                              2000 Forecast   1999 Production
      --------                              -------------   ---------------

Corrugated Container and Sheets (36 Plants)  M Square Ft.
    Aurora, Illinois                          1,201,000
    Beaverton, Oregon                           860,000
    Bellevue, Washington                        704,000
    Bellmawr, New Jersey                        718,000
    Bowling Green, Kentucky                     933,000
    Cerritos, California                        866,000
    Compton, California                         825,000
    Dallas, Texas                             1,042,000
    Delaware, Ohio                              666,000
    Elk Grove, Illinois                         542,000
    Fort Smith, Arkansas                      1,020,000
    Fridley, Minnesota                        1,032,000
    Golden, Colorado                            743,000
    Griffin, Georgia                          1,107,000
    Huntsville, Alabama                         987,000
    Indianapolis, Indiana                       781,000
    Kansas City, Kansas                         869,000
    Lincoln, Illinois                           506,000
    Louisville, Kentucky                        608,000
    Lumberton, North Carolina                   881,000
    Maryland Heights, Missouri                  740,000
    Matthews, North Carolina                    385,000
    Memphis, Tennessee                           40,000
    Mexico City, Mexico                         434,000
    Moses Lake, Washington                      769,000
    Newton, North Carolina                      593,000
    Phoenix, Arizona(2)                         265,000
    Plant City, Florida                         834,000
    Portland, Oregon                            256,000
    Sacramento, California                      826,000
    San Leandro, California                   1,186,000
    Sanger, California                          942,000
    Sealy, Texas                                840,000
    St. Paul, Minnesota                         634,000
    Tulsa, Oklahoma                              43,000
    West Memphis, Arkansas                      860,000
                                            -----------
        Total Corrugated Containers          26,538,000        25,709,000
                                            ================================

(2) Production to begin in the third quarter of 2000.

                                       6
<PAGE>

      Facility                             2000 Forecast   1999 Production
      --------                             -------------   ---------------

Kraft Bags and Sacks (4 Plants)               Tons
    Beaverton, Oregon                           36,000
    Buena Park, California                      38,000
    Dallas, Texas                               22,000
    Kansas City, Missouri                       20,000
                                           -----------
        Total Kraft Bags and Sacks             116,000         111,000
                                           =================================

Preprinted Linerboard (2 Plants)           M Square Ft.
    Richwood, Kentucky                         526,000
    Tigard, Oregon                             857,000
                                           -----------
        Total Preprinted Linerboard          1,383,000        1,328,000
                                           =================================

Inks and Specialty Products (2 plants)          Tons
    Beaverton, Oregon                            5,000
    Delaware, Ohio                               3,000
                                           -----------
        Total Inks                               8,000            8,000
                                           =================================

White Paper
-----------
Market Pulp and Fine Paper (5 Mills)            Tons
    Hawesville, Kentucky
      Market Pulp                              136,000
      Fine Paper                               563,000
    Johnsonburg, Pennsylvania                  408,000
    Kingsport, Tennessee                       167,000
    Marlboro, South Carolina                   322,000
                                           -----------
        Total Market Pulp and Fine Paper     1,596,000        1,593,000
                                           =================================

Communication Papers (6 Plants)                 Tons
    Cerritos, California                        59,000
    Dallas, Texas                               43,000
    Indianapolis, Indiana                       61,000
    Langhorne, Pennsylvania                     60,000
    Rock Hill, South Carolina                   53,000
    West Chicago, Illinois                      66,000
                                           -----------
        Total Communication Papers             342,000          334,000
                                           =================================

Cut Sheets and Other Converting (6 Plants)      Tons
    Brownsville, Tennessee                     122,000
    DuBois, Pennsylvania                       159,000
    Kingsport, Tennessee                       126,000
    Owensboro, Kentucky                        203,000
    Tatum, South Carolina                      108,000
    Washington Court House, Ohio                69,000
                                           -----------
        Total Cut Sheets                       787,000          697,000
                                           =================================

                                       7
<PAGE>

TIMBERLANDS

  See  Item 1,  "Business--Timberlands"  for  information  with  respect  to the
company's timberlands.


Item 3.  Legal Proceedings

  See Item 7, "Management's  Discussion and Analysis of Financial  Condition and
Results of  Operations  -- Other  Matters" for a discussion of the effect on the
company of laws  relating  to  environmental  matters  and  pending  proceedings
brought thereunder.

Item 4.  Submission of Matters to a Vote of Security Holders

  There were no  matters  submitted  to a vote of  security  holders  during the
fourth quarter of the year ended December 31, 1999.


                                       8
<PAGE>

                      Executive Officers of the Registrant

  The  executive  officers of the  company are elected  annually by the board of
directors.  At February 10, 2000, the executive  officers of the company,  their
ages at December 31, 1999, and their positions with the company were as follows:

            Name                    Age                     Position
            ----                    ---                     --------

Duane C. McDougall                  47                President and Chief
                                                      Executive Officer

Marvin D. Cooper                    56                Executive Vice President -
                                                      Pulp and paper mills

Greg W. Hawley                      39                Executive Vice President
                                                      and Chief Financial
                                                      Officer, Secretary and
                                                      Treasurer

William P. Kinnune                  60                Executive Vice President-
                                                      Corrugated containers and
                                                      bags

J. Eddie McMillan                   54                Executive Vice President -
                                                      Building materials group

Michael R. Onustock                 60                Executive Vice President-
                                                      Pulp and fine paper
                                                      marketing


  Each executive officer, excluding Mr. Hawley, has been employed by the company
in his  present  or in another  senior  management  capacity  for more than five
years. Mr. Hawley was employed by the company as Vice President - Controller for
the past four  years  until his  promotion  to his  present  position  effective
December 1, 1999.  The previous  five years he was a Vice  President for Nosler,
Inc., a private manufacturing company in Oregon.

                                       9
<PAGE>

                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

  The company's  common stock trades on the New York Stock Exchange (NYSE) under
the symbol WLL. At December 31, 1999,  there were  approximately  23,000 holders
(beneficial) of the company's  common stock. The following table shows quarterly
earnings and dividends per share along with the range of closing prices for 1998
and 1999.  The  company  expects to  continue  paying  regular  cash  dividends,
although there is no assurance as to future dividends as they are dependent upon
earnings, capital requirements and financial condition.

<TABLE>
                              1999                                1998
               ----------------------------------  -------------------------------------
                                    Closing                                Closing
               Diluted  Dividends    Price         Diluted   Dividends      Price
               Earnings Paid(a)    High-Low        Earnings    Paid        High-Low
               -------  ------ ------------------  --------  -------- ------------------
<S>           <C>       <C>    <C>       <C>        <C>       <C>     <C>
1st Quarter   $ 0.28    0.16   39 1/16 - 31 3/4     0.20      0.16     39 3/4  30 13/16
2nd Quarter     0.57    0.18   49 1/16 - 37 13/16   0.21      0.16    40 7/16  29 7/8
3rd Quarter     0.73    0.18   51 3/16 - 39 5/8     0.32      0.16         32  23 1/4
4th Quarter     0.75    0.18   46 9/16 - 38 7/8     0.07      0.16         36  26 1/4
</TABLE>

(a)  The quarterly  dividend was increased to $0.21 per share  commencing in the
     first quarter of 2000.

                                       10
<PAGE>

Item 6.  Selected Financial Data

  The  following  table shows  selected  financial  data for the company for the
periods indicated:

  Financial Results
  (dollar amounts, except per share amounts, in thousands)

<TABLE>
                                              1999       1998       1997       1996        1995
--------------------------------------------------------------------------------------------------
<S>                                     <C>           <C>        <C>         <C>        <C>
Net Sales                               $  4,077,969  3,700,282  3,501,376   3,425,173  3,873,575
==================================================================================================
Costs and Expenses:
   Depreciation, amortization and cost
     of fee timber harvested........... $    303,719    371,141    338,949     302,937    249,165
   Materials, labor and other
     operating expenses................    2,957,583  2,813,887  2,690,943   2,495,345  2,528,570
                                          --------------------------------------------------------
     Gross profit......................      816,667    515,254    471,484     626,891  1,095,840
   Selling and administrative expenses.      266,398    252,510    245,319     231,862    201,784
                                          --------------------------------------------------------
     Operating earnings................      550,269    262,744    226,165     395,029    894,056
   Interest expense....................      125,284    131,990    116,990      92,804     71,050
   Other income (expense)..............      (11,710)     2,029      2,088       3,861        798
                                          --------------------------------------------------------
     Earnings before provision for
       income taxes....................      413,275    132,783    111,263     306,086    823,804
   Provision for income taxes..........      152,800     43,800     38,300     114,000    309,000
                                          --------------------------------------------------------
     Net earnings......................      260,475     88,983     72,963     192,086    514,804
   Cash dividends paid.................       77,984     71,227     71,005      68,520     62,874
   Earnings retained in the business...      182,491     17,756      1,958     123,566    451,930
   Capital expenditures................      290,246    441,839    527,908     485,769    453,523
==================================================================================================
Financial Condition:
   Working capital..................... $    457,471    366,846    308,093     289,134    359,258
   Long-term debt (noncurrent portion).    1,628,843  1,821,083  1,916,001   1,766,917    790,210
   Stockholders' equity................    2,203,712  2,002,431  1,994,480   1,976,281  1,846,890
   Total assets........................    4,797,861  4,697,668  4,811,055   4,720,681  3,413,555
==================================================================================================
Common Stock:
   Number of stockholders..............       23,000     22,000     20,000      20,000     19,000
   Shares outstanding (in thousands) (1)     111,587    110,981    111,350     110,707    110,448
==================================================================================================
Per Share:(1)
   Net earnings-diluted................ $       2.33       0.80       0.65        1.73       4.65
   Cash dividends paid.................         0.70       0.64       0.64        0.62       0.57
   Stockholders' equity................        19.75      18.04      17.91       17.85      16.72
   Year-end stock price................       46.438      33.50     32.188      34.813     28.125
==================================================================================================
Financial Returns:
   Percent return on equity (2)........        13.0%       4.5%       3.7%       10.4%      37.1%
   Percent return on net sales.........         6.4%       2.4%       2.1%        5.6%      13.3%
==================================================================================================
Employment:
   Number of employees.................       14,250     14,000     13,800      13,700     13,180
   Wages, salaries and cost of
     employee benefits................. $    781,392    734,068    717,693     672,280    627,835
==================================================================================================
</TABLE>

(1)  All share and per share amounts have been adjusted for stock splits.
(2)  Calculated on stockholders' equity at the beginning of the year.

[OBJECT OMITTED]

                                       11
<PAGE>

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

  The company's three basic  businesses - white paper,  brown paper and building
materials - are affected by changes in general  economic  conditions.  White and
brown paper sales and earnings tend to follow the general economy. The sales and
earnings of the building  materials  business are closely related to new housing
starts,  remodeling  activity and the  availability  and terms of financing  for
construction. All industry segments are influenced by global economic factors of
supply and demand. In addition,  the costs of wood and recycled fiber, basic raw
materials for the company's three segments,  are sensitive to various supply and
demand factors including environmental issues.

RESULTS OF OPERATIONS 1999 VS. 1998
-----------------------------------

  Consolidated net sales increased 10.2% and operating earnings increased 109.4%
in 1999  compared  to  1998.  Improved  performances  from  all  three  segments
contributed  to the  increase  over the prior  year.  Also  contributing  to the
improvement  in earnings was a change in estimate for the  depreciable  lives of
property,  plant and equipment. The change was based on a study performed by the
company's engineering department,  comparisons to typical industry practices and
the effect of the company's extensive capital investments which have resulted in
a mix of assets with longer productive lives due to technological  advances. The
change in estimate  increased 1999  operating  earnings by $82.4 million and net
income by $51.9 million, or $0.46 per diluted share.

  White paper  struggled  in the early part of 1999 as markets  continued  to be
depressed from the Asian turmoil of 1998.  However, by the third quarter markets
were  rebounding and the upswing  continued into the fourth  quarter.  Net sales
increased 7.1% and operating earnings were up 102.8% (40.3% before the effect of
the  depreciation  change) when compared to the prior year. The  improvement was
due to increased unit shipments which offset average sales price declines. Forms
shipments  increased  11.2% as a result of increasing  market  share.  Cut sheet
volumes  improved  20.0%  primarily due to a continued  focus on sales to office
superstores.  Additionally,  1999  included  a full year of  operation  from the
Brownsville,  Tennessee,  cut sheet plant,  which came on line in February 1998,
and a new cut sheet plant in Washington Court House, Ohio, which came on line in
November  1999.  Hardwood  market  pulp unit  shipments  increased  15.9% as the
company was able to take advantage of pulp markets in 1999.

  While unit shipments were strong in 1999,  average sales prices remained below
1998 levels.  Continuous  forms average sales prices  declined  2.3%, cut sheets
4.8% and fine  paper,  1.1%.  The only  product  line to exceed  1998 levels was
hardwood   market  pulp,   which  increased   18.1%.   While  prices  were  down
year-over-year, third and fourth quarter trends were positive. As a result, 1999
fourth  quarter  average  sales  prices  were above 1998  yearly  averages.  Raw
material  costs  slightly  reduced  operating  margins during the period as chip
costs  increased  1.5%  over  1998.  The gross  profit  margin  for white  paper
increased to 15.5% in 1999 from 10.9% in 1998.

                                       12
<PAGE>

  Brown paper sales and earnings  were solid  throughout  1999, as we once again
out-performed  the industry in  percentage  of volume  growth for the year.  Net
sales  increased 6.5% and earnings  increased 35.2% (21.0% before the effects of
the  depreciation  change)  compared  to 1998.  Unit  shipments  for  corrugated
containers  improved 4.3% and grocery bags increased 5.1% over 1998 levels.  The
increased volume in corrugated  containers  resulted from additional  converting
capacity from capital improvements and strong demand from our expanding customer
base.  Bag unit  shipments  increased  for the first  time since 1994 due to the
continued  growth of the handle  bag,  which is  recapturing  market  share from
plastics.  Average  sales  prices  increased  for all  product  lines  in  1999,
corrugated  containers were up 2.9% and grocery bags were up 1.4% over the prior
year.

  Raw material costs reduced brown paper  earnings as old  corrugated  container
(OCC) prices increased 6.3% from 1998 levels.  The gross profit margin for brown
paper was 22.3% in 1999 compared to 19.1% in 1998.

  Building  materials  posted a strong year in 1999 as net sales  improved 16.9%
and  operating  earnings  increased  215.0%  (187.5%  before  the  effect of the
depreciation  change)  compared to 1998.  Average  sales prices were up in every
product  line in 1999 except for our  international  products.  Oriented  strand
board (OSB) showed the greatest  improvement  as average sales prices  increased
30.1% over 1998.  Other  product  lines  showed  increases of 17.4% for plywood,
16.3% for lumber,  2.6% for  particleboard  and 4.1% for domestic medium density
fiberboard  (MDF).  The only decline in sales price  realizations  came from the
international MDF line, which experienced a decline of 17.2%.

  Unit shipments  increased in 1999 as demand remained strong.  Plywood improved
11.4% and OSB increased 7.4%. The increased  plywood volume  partially  resulted
from a full year of production at the Zwolle, Louisiana,  plant which closed for
six months in 1998 due to fire  damage.  Lumber  shipments  were strong as well,
improving  8.6% over 1998 levels.  Volume  increases were the result of a strong
U.S.  housing  market  through  late fall and a full year of  operation at a new
small-log sawmill in Taylor,  Louisiana.  The company's  composite panel markets
also saw growth in 1999,  as  particleboard  increased  12.0% and MDF  increased
6.2%. These  improvements  were the result of the acquisition of an MDF plant in
Morcenx, France in March 1998 and a particleboard plant in Linxe, France in June
1999. As a result of the favorable  price and volume  changes,  the gross profit
margin for  building  materials  increased  significantly  to 21.3% in 1999 from
10.8% in 1998.

  Selling and  administrative  expenses  increased $13.9 million or 5.5% in 1999
due to the continued expansion of company operations. Selling and administrative
expenses as a percentage of sales decreased to 6.5% in 1999 from 6.8% in 1998.

  Other income  (expense) of $11.7 million was primarily  related to the reserve
set up to  approximate  potential  non-tax  deductible  penalties from a federal
Clean Air Act assessment.

                                       13
<PAGE>

  Interest expense decreased $6.7 million or 5.1% in 1999 to $125.3 million. The
reduction  occurred  despite a decrease in capitalized  interest to $4.0 million
from $13.6 million in 1998.  Interest  expense  declined as a result of reducing
total debt in 1999 by $231.8  million.  The  company's  effective  interest rate
increased to 7.16% from 7.06% in the prior year.

RESULTS OF OPERATIONS 1998 VS. 1997
-----------------------------------

  Consolidated net sales increased 5.7% and operating earnings improved 16.2% in
1998  compared to 1997. A strong  performance  from the brown paper  segment and
increases in unit shipments for many product lines contributed to the results.

  White paper net sales  improved  3.6% over the prior year as increases in unit
shipments more than offset  decreases in average sales prices.  While sales were
up compared to 1997,  operating earnings declined 20.0% in 1998,  primarily as a
result of pricing pressures on market pulp and fine paper.  Average sales prices
for cut sheet and continuous  forms showed slight increases over the prior year,
while hardwood market pulp and fine paper declined 9.0% and 9.6%,  respectively,
from 1997. The price decline resulted from difficulties in Asian economies. Also
negatively  affecting  white paper results were increased chip costs of 6.6% and
start-up costs for the new paper machine at Kentucky Mills in 1998.

  White paper unit  shipments were mixed in 1998 as cut sheets  increased  12.7%
while  continuous  forms  decreased 5.5%. The increased cut sheet volume was the
result of our new Brownsville,  Tennessee, cut sheet plant which came on line in
February  1998.  Hardwood  market  pulp  decreased  6.9%  while  fine paper unit
shipments  increased 12.7%. The fine paper improvement was the result of our new
Kentucky paper machine.

  Brown  paper was the top  performing  segment  in 1998 as  operating  earnings
improved  141.5% when  compared to 1997.  Net sales  increased  14.1% as average
sales prices  improved 7.3% for corrugated  containers and 4.8% for grocery bags
over the prior year. Unit shipment  fluctuations  also played a significant role
in increasing sales and earnings in 1998 as corrugated  container unit shipments
improved  7.9% over the prior year,  while grocery bag unit  shipments  declined
7.3%.  Approximately 50.0% of the improvement in corrugated  container shipments
was due to increased  internal  converting  capacity from capital projects.  The
remainder  of the  increase  was a result of a full year of  operation  at a box
plant in Plant City,  Florida,  and a sheet plant in Portland,  Oregon,  both of
which came on line in the second quarter of 1997.

  Raw material costs had a positive impact on operating  earnings during 1998 as
OCC costs declined 16.5% from the prior year.

  Building  materials  operating  earnings decreased 35.4% in 1998 and net sales
dropped  slightly from the prior year, as average sales prices declined for most
products.  Lumber  reflected the most  dramatic  erosion as average sales prices
dropped 18.7%.  Other price declines  included 4.9% in particleboard and 2.4% in
MDF. The difficulties in Asian economies  created supply and demand  imbalances,
keeping prices  depressed

                                       14
<PAGE>

for  these  products  in 1998.  The  pricing  exception  in 1998 was OSB,  which
realized a price increase of 38.3% over the prior year.

  While prices  declined for most product  lines,  strong housing starts and low
interest  rates helped fuel unit  shipment  increases  for most product lines in
1998.  Lumber was the primary  benefactor as unit shipments  improved 21.0% over
the prior  year.  In  addition,  the  start-up of our new  small-log  sawmill in
Taylor,  Louisiana,  in August 1998 and other capital project completions helped
increase unit shipments. Other unit shipment improvements included particleboard
of 3.8% and MDF of 15.7% over the prior year.  MDF  shipments  increased  due to
capital  projects and the acquisition of a facility in Morcenx,  France in March
1998.  Decreased plywood shipments of 7.7% were the result of the closure of the
Taylor,  Louisiana,  mill in July 1997,  and downtime at our Zwolle,  Louisiana,
mill due to a fire that halted production in April 1998.

  Selling and administrative expenses increased 2.9% in 1998 due to assimilation
of  acquisitions  and  expansions  during the year.  Selling and  administrative
expense as a percentage of sales, however, declined to 6.8% for 1998 compared to
7.0% for 1997.

  Interest  expense was $132.0  million in 1998  compared  to $117.0  million in
1997, a 12.8% increase.  The weighted  average  interest rate remained stable at
7.1% in both years.  The increase in expense was primarily due to an increase of
$166.0  million  in  average  outstanding  debt and a  decrease  in  capitalized
interest to $13.6 million in 1998 from $19.9 million in 1997, resulting from the
completion of the Kentucky expansion in June 1998.

LIQUIDITY AND CAPITAL RESOURCES

  Willamette  generates funds internally via net earnings  adjusted for non-cash
charges against earnings such as depreciation,  amortization, cost of fee timber
harvested and deferred  income taxes.  Funds  generated  externally have usually
been through debt financing.

  In 1999, cash flows from operating  activities were $602.9 million compared to
$435.4  million in 1998,  an increase of 38.4%.  The  improvement  was primarily
achieved through increased earnings.  Internally generated cash flows funded all
of  the  company's  capital  expenditure  program  in  1999.  Excess  cash  from
operations  was used to pay  dividends  and reduce  debt  outstanding  by $231.8
million during the year.

  Net working  capital  increased to $457.5  million at December 31, 1999,  from
$366.8 million at December 31, 1998. The increase was mainly due to increases in
receivables and inventories.

  The company is continually  making capital  expenditures at its  manufacturing
facilities to improve fiber utilization,  achieve labor efficiency and to expand
production. In 1999, the company incurred $267.9 million in capital expenditures
for property, plant and equipment.

                                       15
<PAGE>

  During 1999 the following major capital projects were completed:

      >     Upgrade of the #1 paper machine at Johnsonburg, Pennsylvania.
      >     Construction  of a new cut sheet plant in  Washington  Court  House,
            Ohio.
      >     Expansion of secondary fiber capacity at the paper mill
            in Campti, Louisiana.

  Major capital projects underway at December 31, 1999, include:

      >     Construction  and  installation  of a new recovery  boiler and steam
            turbine generator at the Albany, Oregon, paper mill.
      >     Construction of a new corrugated box plant in Phoenix, Arizona.
      >     Relocation of the Elk Grove, Illinois, corrugated facility.
      >     Installation of a steam turbine generator at Kentucky Mills.
      >     Upgrade of the #5 paper machine at Johnsonburg, Pennsylvania.
      >     Construction of a new particleboard plant near Bennettsville, South
            Carolina.
      >     Construction  of  a  new  small-log  sawmill  near  Chester,   South
            Carolina.
      >     Capacity increase at our particleboard plant in Linxe, France.

  The cost of all major  projects in progress at December 31, 1999, is estimated
to be  approximately  $422.9  million,  of which $179.4 million has already been
spent.  These projects will be funded with  internally  generated cash flows and
external borrowings if needed.

  In December  1998,  the company  sold 117,000  acres of  southwest  Washington
timberland for $234.0 million.  The company acquired the land in 1996 as part of
the purchase of Cavenham Forest  Industries.  The forestlands  were sold as they
were  not  critical  to the  long-term  fiber  supply  needs  of  the  company's
operations. Proceeds of the sale were used to pay down debt during 1998.

  In June 1998,  the company  initiated a  medium-term  note  program and issued
$100.2  million of notes as of December 31, 1998.  The  medium-term  notes carry
interest rates ranging from 6.45% to 6.60% and  maturities  from 11 to 15 years.
In addition,  in January 1998, the company issued $200.0 million in debentures -
$100.0 million at 6.45% due 2005 and $100.0 million at 7.00% due 2018.  Proceeds
from both issuances were used to replace notes maturing in 1998 and reduce other
bank borrowing.

  The total  debt-to-capital  ratio declined to 42.8% at December 31, 1999, from
48.3% at December 31, 1998, representing a debt reduction of $231.8 million. The
company believes it has the resources  available to meet its long-term liquidity
requirements.   Resources  include  internally  generated  funds  and  borrowing
agreements.

  In 1998, the company's  board of directors  authorized the repurchase of $25.0
million of the company's  common stock. The company  repurchased  470,900 shares
for $13.0 million during the third and fourth quarters of 1998.

                                       16
<PAGE>

  On April  20,  1999,  the  company's  board of  directors  voted to raise  the
quarterly  cash  dividend  from  $0.16 to $0.18  per  share,  which  was a 12.5%
increase;  however,  there is no assurance as to future dividends as they depend
on earnings, capital requirements and financial condition.

OTHER MATTERS

  The company believes it is in substantial  compliance with federal,  state and
local laws regarding environmental quality.

  In early 1998,  the U.S.  Environmental  Protection  Agency (EPA) released the
final  rules  regarding  air and water  quality  known as the  "cluster  rules".
Compliance  with  the  cluster  rules is  required  by  2001,  however,  certain
exceptions  to  the  rules  extend  the  time  period  for  specific  compliance
requirements up to eight years from adoption.  The company,  through  previously
completed and future projects,  has made  significant  progress toward upgrading
the mills and plans to have all mills in  compliance  with the cluster  rules by
the required deadlines.

  The  company's  other  operations  are  faced  with   increasingly   stringent
environmental regulations. In the fourth quarter of 1997, the company received a
series of requests for  information  from the EPA under Section 114 of the Clean
Air Act (the Act) with respect to the company's building  materials  operations.
The requests have focused on compliance with regulations under the Prevention of
Significant  Deterioration  (PSD) Program under the Act. On May 7, 1998, the EPA
issued a Notice of Violation  (NOV)  alleging  violations of the Act and related
state  regulations,  and on December 11, 1998, issued a second NOV supplementing
and clarifying the first NOV. The company has responded to the  allegations  and
has had many  meetings and  extensive  correspondence  with the EPA and the U.S.
Department  of Justice to  negotiate a  resolution  of the issues  raised by the
NOVS.  Settlements  by other  companies in the wood products  industry that have
received NOVS under the Act have involved the payment of  substantial  penalties
and agreements to install emission control equipment and undertake  supplemental
environmental  projects.  The company has established a $10.0 million reserve as
an estimate of the potential non-tax deductible  penalties  resulting from these
proceedings.

  In November 1998, the company  received from the EPA a request for information
under  Section  114  of the  Act  requesting  information  with  respect  to the
company's  Johnsonburg,  Pennsylvania,  pulp and paper mill.  This  request also
focused on compliance with PSD regulations. Subsequently, on April 19, 1999, the
company  received  an NOV  relating  to its  Johnsonburg  mill.  The NOV asserts
violations of the Act relating to two alleged major  modifications to the plant,
allegedly  without proper PSD permits and without  complying with applicable PSD
requirements. The company is reviewing the allegations contained in this NOV and
has been meeting with federal and state  officials to discuss the issues  raised
by the NOV. In August 1999, the company received another Section 114 information
request from the EPA relating to the company's paper mill in Campti,  Louisiana.
Also, in March and November 1999, the company  received  Section 114 information
requests  from the EPA  relating  to the  company's  paper  mill in  Hawesville,
Kentucky.

                                       17
<PAGE>

  Based upon either enacted or proposed regulations,  the company estimates that
over the next  five  years,  additional  capital  expenditures  to  comply  with
environmental  regulations  will not  exceed  $100.0  million.  Although  future
environmental  capital  expenditures  cannot  be  predicted  with any  certainty
because of continuing changes in laws, the company believes that compliance with
such environmental  regulations will not have a material adverse effect upon the
company's financial position.

  In 1996, the company began addressing the possible effects of the Y2K issue on
its information,  financial and  manufacturing  systems.  These efforts included
inventory assessment, modification and testing of these key systems.

  Modification, testing and implementation of all critical systems was completed
early in the fourth  quarter of 1999.  With the passing of January 1, 2000,  the
company has  experienced no significant  Y2K problems.  As of December 31, 1999,
the company had spent $8.3 million on Y2K compliance.  These costs were expensed
as incurred. No further significant expenditures are expected.

  Over the years,  inflation has resulted in replacement costs higher than those
originally  needed  to  purchase  existing  plant  and  equipment.  Advances  in
technology  and   environmental   concerns  also  contribute  to  higher  costs.
Productivity  gains because of  technological  improvements may partially offset
these increased costs. Our use of LIFO to value inventories allows us to include
these inflationary costs in the cost of sales.

FORWARD-LOOKING STATEMENTS

  Statements  contained  in this  report  that  are not  historical  in  nature,
including  without  limitation the discussion of forecasted sales and production
volumes, the impact of environmental  regulations,  the impact of Y2K compliance
and the  adequacy of the  company's  liquidity  resources,  are  forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements are subject to risks and uncertainties that may
cause actual future results to differ  materially.  Such risks and uncertainties
with respect to the company include the effect of general  economic  conditions;
the level of new housing starts and remodeling  activity;  the  availability and
terms of financing for  construction;  competitive  factors,  including  pricing
pressures;  the cost and  availability  of wood  fiber;  the  effect of  natural
disasters  on  the  company's   timberlands;   construction   delays;   risk  of
non-performance  by third parties;  and the impact of environmental  regulations
and the  construction  and  other  costs  associated  with  complying  with such
regulations.  In view of these  uncertainties,  investors  are  cautioned not to
place undue reliance on such forward-looking  statements.  The company disclaims
any  obligation  to  publicly  announce  the  results  of any  revisions  to any
forward-looking   statements  contained  herein  to  reflect  future  events  or
developments.

                                       18
<PAGE>

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

  No disclosure is required under this item.

Item 8.  Financial Statements and Supplementary Data

  The financial  statements and supplementary  data filed as part of this report
follow the signature pages of this report.

Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

  None.


                                       19
<PAGE>

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant

  Information  regarding  (i)  directors  of the  company  is set  forth  in the
company's definitive proxy statement (the "Proxy Statement") for its 2000 annual
meeting of  shareholders,  under the heading  "Election of  Directors"  and (ii)
Section  16(a) of the  Securities  Exchange  Act of  1934,  is set  forth  under
"Section  16(a)  Beneficial   Ownership  Reporting   Compliance"  in  the  Proxy
Statement,  which information is incorporated  herein by reference.  Information
regarding the  executive  officers of the company is set forth under the heading
"Executive Officers of the Registrant" in Part I of this report.

Item 11.  Executive Compensation

  Information regarding  compensation of directors and executive officers of the
company  is set  forth in the Proxy  Statement  under  the  headings  "Executive
Compensation,"  "Compensation  Committee Interlocks and Insider  Participation,"
"Compensation  of Directors" and "Employment  Agreements."  Such  information is
incorporated herein by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

  Information  regarding  security  ownership of  management  and certain  other
beneficial owners is in the Proxy Statement under the heading "Holders of Common
Stock" which information is incorporated herein by reference.

Item 13.  Certain Relationships and Related Transactions

  Information  regarding certain  relationships and related  transactions is set
forth  in  the  Proxy  Statement  under  the  heading  "Compensation   Committee
Interlocks and Insider  Participation"  which information is incorporated herein
by reference.


                                       20
<PAGE>

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on
Form 8-K

(a) 1. and 2.     For a list of the financial statements filed herewith, see the
                  index  to  consolidated  financial  statements  following  the
                  signature pages of this report.

(a) 3.            For a list of the exhibits  filed  herewith,  see the index to
                  exhibits  following the financial  statements  filed with this
                  report.  Each  management  contract  or  compensatory  plan or
                  arrangement  required to be filed as an exhibit to this report
                  is identified in the list.

(b)               Reports on Form 8-K.

                  No reports on Form 8-K were filed  during the last  quarter of
                  the period covered by this report.


                                       21
<PAGE>

                                   SIGNATURES

  Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                                 WILLAMETTE INDUSTRIES, INC.
                                                       (Registrant)

                                                 By /s/ GREG W. HAWLEY
                                                    -------------------------
Dated:   February 10, 2000                             (Greg W. Hawley)
                                                    Executive Vice President

  Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,  this
report has been signed below on February 10, 2000, by the  following  persons on
behalf of the registrant in the capacities indicated.


            Signature                                 Title
            ---------                                 -----

Principal Executive Officer

/S/  DUANE C. MCDOUGALL                President and Chief Executive Officer
-----------------------------
    (Duane C. McDougall)

Principal Financial Officer

/S/    GREG W. HAWLEY                  Executive Vice President and
-----------------------------          Chief  Financial  Officer,  Secretary and
      (Greg W. Hawley)                 Treasurer

Principal Accounting Officer

/S/   DONALD S. WADDELL                Corporate Controller
-----------------------------
     (Donald S. Waddell)

/S/   WILLIAM SWINDELLS                Chairman of the Board
-----------------------------
     (William Swindells)

/S/   WINSLOW H. BUXTON                Director
-----------------------------
     (Winslow H. Buxton)

/S/   GERARD K. DRUMMOND               Director
-----------------------------
     (Gerard K. Drummond)

/S/  KENNETH W. HERGENHAN              Director
-----------------------------
    (Kenneth W. Hergenhan)


                                       22
<PAGE>


/S/   PAUL N. McCRACKEN                Director
-----------------------------
       (Paul N. McCracken)

/S/ G. JOSEPH PRENDERGAST              Director
-----------------------------
   (G. Joseph Prendergast)

/S/  STUART J. SHELK, JR.              Director
-----------------------------
    (Stuart J. Shelk, Jr.)

/S/   ROBERT M. SMELICK                Director
-----------------------------
     (Robert M. Smelick)

/S/   MICHAEL G. THORNE                Director
-----------------------------
     (Michael G. Thorne)

/S/  BENJAMIN R. WHITELEY              Director
-----------------------------
    (Benjamin R. Whiteley)


                                       23
<PAGE>

Index to Consolidated Financial Statements



                                                                        Page No.
                                                                        --------

Independent Auditors' Report.....................................          25

Consolidated Balance Sheets as of December 31, 1999 and 1998 ....          26

Consolidated Statements of Earnings for years ended
  December 31, 1999, 1998 and 1997...............................          27

Consolidated Statements of Stockholders' Equity
  for years ended December 31, 1999, 1998 and 1997...............          28

Consolidated Statements of Cash Flows for years ended
  December 31, 1999, 1998 and 1997...............................          29

Supplementary Business Segment Information.......................          30

Selected Quarterly Financial Data................................          31

Notes to Consolidated Financial Statements.......................       32-40


                                       24
<PAGE>

Independent Auditors' Report
----------------------------



The Board of Directors and Stockholders
Willamette Industries, Inc.:

  We have audited the  accompanying  consolidated  balance  sheets of Willamette
Industries,  Inc.  and  subsidiaries  as of  December  31, 1999 and 1998 and the
related consolidated statements of earnings, stockholders' equity and cash flows
for each of the years in the three-year  period ended  December 31, 1999.  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  generally  accepted  auditing
standards.  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 Willamette
Industries,  Inc. and  subsidiaries  as of December  31, 1999 and 1998,  and the
results  of their  operations  and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally accepted
accounting principles.




KPMG LLP
Portland, Oregon
February 10, 2000


                                       25
<PAGE>
<TABLE>
---------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
=======================================================================================
December 31, 1999 and 1998
(dollar amounts, except per share amounts, in thousands)

                                                                 1999         1998
                                                              -----------  ------------
Assets
   Current assets:
<S>                                                         <C>            <C>
     Cash                                                   $     25,557        31,359
     Accounts receivable, less allowance for doubtful
      accounts of $3,222 (1998 - $4,300)                         382,763       306,332
     Inventories (note 3)                                        445,110       411,316
     Prepaid expenses and timber deposits                         36,160        45,316
                                                              -----------  ------------
        Total current assets                                     889,590       794,323
                                                              -----------  ------------
   Timber, timberlands and related facilities, net (note 9)    1,057,529     1,112,180
   Property, plant and equipment, net (note 4)                 2,751,210     2,707,146
   Other assets                                                   99,532        84,019
                                                              -----------  ------------
                                                            $  4,797,861     4,697,668
                                                              ===========  ============

Liabilities and Stockholders' Equity
   Current liabilities:
     Current installments on long-term debt (note 5)        $      3,256         2,267
     Notes payable (note 5)                                       13,617        47,252
     Accounts payable, includes book overdrafts of $53,653
      (1998 - $55,030)                                           212,222       196,134
     Accrued payroll and related expenses                         77,043        70,670
     Accrued interest                                             38,525        39,533
     Other accrued expenses                                       65,256        55,540
     Accrued income taxes (note 6)                                22,200        16,081
                                                              -----------  ------------
        Total current liabilities                                432,119       427,477
                                                              -----------  ------------
   Deferred income taxes (note 6)                                491,374       404,518
   Other liabilities                                              41,813        42,159
   Long-term debt, net of current installments (note 5)        1,628,843     1,821,083
   Stockholders' equity (note 8):
     Preferred stock, cumulative, of $.50 par value
      Authorized 5,000,000 shares                                  -            -
     Common stock of $.50 par value
      Authorized 150,000,000 shares; issued
      111,587,433 shares (1998 - 110,980,768 shares)              55,794        55,490
     Capital surplus                                             303,626       285,140
     Retained earnings                                         1,844,292     1,661,801
                                                              -----------  ------------
        Total stockholders' equity                             2,203,712     2,002,431
                                                              -----------  ------------
                                                            $  4,797,861     4,697,668
                                                              ===========  ============
</TABLE>

See accompanying notes to consolidated financial statements.

                                       26
<PAGE>

<TABLE>
---------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS
=======================================================================================
Years ended December 31, 1999, 1998 and 1997
(dollar and share amounts, except per share amounts, in thousands)

                                                      1999        1998         1997
                                                   -----------  ----------   ----------
<S>                                              <C>            <C>          <C>
Net sales                                        $  4,077,969   3,700,282    3,501,376
Cost of sales                                       3,261,302   3,185,028    3,029,892
                                                   -----------  ----------   ----------
   Gross profit                                       816,667     515,254      471,484
Selling and administrative expense                    266,398     252,510      245,319
                                                   -----------  ----------   ----------
   Operating earnings                                 550,269     262,744      226,165
Other income (expense)                                (11,710)      2,029        2,088
                                                   -----------  ----------   ----------
                                                      538,559     264,773      228,253
Interest expense                                      125,284     131,990      116,990
                                                   -----------  ----------   ----------
   Earnings before provision for income taxes         413,275     132,783      111,263
Provision for income taxes (note 6)                   152,800      43,800       38,300
                                                   -----------  ----------   ----------
   Net earnings                                  $    260,475      88,983       72,963
                                                   ===========  ==========   ==========
Earnings per share - basic                       $       2.34        0.80         0.66
                                                   ===========  ==========   ==========
Earnings per share - diluted                     $       2.33        0.80         0.65
                                                   ===========  ==========   ==========

Weighted average shares outstanding - basic           111,375     111,302      110,975
                                                   ===========  ==========   ==========
Weighted average shares outstanding - diluted         112,001     111,747      111,550
                                                   ===========  ==========   ==========
</TABLE>

Pershare  earnings,  both basic and diluted,  are based on the weighted  average
   number of shares outstanding.

Diluted weighted  average shares  outstanding are calculated  using the treasury
   stock method and assume all stock  options  with a market value  greater than
   the grant price at December 31, 1999, are exercised. See note 8.

See accompanying notes to consolidated financial statements.


                                       27
<PAGE>

<TABLE>
----------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
========================================================================================
Years ended December 31, 1999, 1998 and 1997
(dollar amounts, except per share amounts, in thousands)

                                                      1999         1998         1997
                                                   -----------  -----------  -----------
Common Stock:
<S>                                              <C>            <C>          <C>
    Balance at beginning of year                 $     55,490       55,675       27,677
      2-for-1 stock split                                 -            -         27,787
      Shares issued for options exercised                 304           50          211
      Stock repurchased and canceled                      -           (235)         -
                                                   -----------  -----------  -----------
    Balance at end of year                       $     55,794       55,490       55,675
                                                   ===========  ===========  ===========

Capital Surplus:
    Balance at beginning of year                 $    285,140      294,760      306,517
      2-for-1 stock split                                 -            -        (27,787)
      Shares issued for options exercised              18,486        3,124       16,030
      Stock repurchased and canceled                      -        (12,744)         -
                                                   -----------  -----------  -----------
    Balance at end of year                       $    303,626      285,140      294,760
                                                   ===========  ===========  ===========

Retained Earnings:
    Balance at beginning of year                 $  1,661,801    1,644,045    1,642,087
      Net earnings                                    260,475       88,983       72,963
      Less cash dividends on common stock
       ($.70, $.64 and $.64 per share in
       1999, 1998 and 1997, respectively)             (77,984)     (71,227)     (71,005)
                                                   -----------  -----------  -----------
    Balance at end of year                       $  1,844,292    1,661,801    1,644,045
                                                   ===========  ===========  ===========
</TABLE>


See accompanying notes to consolidated financial statements.

                                       28
<PAGE>

<TABLE>
-----------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
=========================================================================================
Years ended December 31, 1999, 1998 and 1997
(dollar amounts in thousands)
                                                        1999         1998        1997
                                                     -----------  ----------- -----------
Cash Flows from Operating Activities:
<S>                                                  <C>              <C>         <C>
   Net earnings                                      $  260,475       88,983      72,963
   Adjustments to reconcile net earnings
     to net cash from operating activities:
     Depreciation                                       240,374      296,466     268,030
     Cost of fee timber harvested                        46,197       54,376      52,649
     Other amortization                                  17,148       20,299      18,270
     Increase in deferred income taxes                   86,938        7,683      28,650
   Changes in working capital items:
     Accounts receivable                                (69,760)       4,167     (34,293)
     Inventories                                        (31,015)     (14,623)    (28,646)
     Prepaid expenses and timber deposits                23,224       (7,778)      1,463
     Accounts payable and accrued expenses               23,159      (26,381)     23,568
     Accrued income taxes                                 6,126       12,250     (13,276)
                                                     -----------  ----------- -----------
   Net cash from operating activities                   602,866      435,442     389,378
                                                     -----------  ----------- -----------

Cash Flows from Investing Activities:
     Proceeds from sale of assets                         5,965      237,422     162,711
     Expenditures for property, plant & equipment      (267,856)    (417,772)   (506,348)
     Expenditures for timber and timberlands             (8,026)      (8,767)     (7,782)
     Expenditures for roads and reforestation           (14,364)     (15,300)    (13,778)
     Other                                              (33,329)      (9,582)      9,624
                                                     -----------  ----------- -----------
   Net cash from investing activities                  (317,610)    (213,999)   (355,573)
                                                     -----------  ----------- -----------

Cash Flows from Financing Activities:
     Net change in operating lines of credit            (33,635)     (27,630)     23,985
     Debt borrowing                                      27,770          591     175,415
     Proceeds from sale of common stock                  18,725        3,117      16,109
     Repurchased common stock                              -         (12,979)       -
     Cash dividends paid                                (77,984)     (71,227)    (71,005)
     Payment on debt                                   (225,934)    (109,556)   (172,931)
                                                     -----------  ----------- -----------
   Net cash from financing activities                  (291,058)    (217,684)    (28,427)
                                                     -----------  ----------- -----------
   Net change in cash                                    (5,802)       3,759       5,378
   Cash at beginning of year                             31,359       27,600      22,222
                                                     -----------  ----------- -----------
                                                     -----------  ----------- -----------
   Cash at end of year                               $   25,557       31,359      27,600
                                                     ===========  =========== ===========

Supplemental disclosures of cash flow information
   Cash paid during the year for:
     Interest (net of amount capitalized)            $  126,292      130,796     116,987
                                                     ===========  =========== ===========
     Income taxes                                    $   52,916       24,369      22,926
                                                     ===========  =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       29
<PAGE>

<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTARY BUSINESS SEGMENT INFORMATION
====================================================================================================================================
(dollar amounts in thousands)
                                           1999       %      1998       %       1997       %       1996       %      1995       %
                                       ------------------------------------- -------------------------------------------------------
Sales to outside customers:
  White Paper:
<S>                                    <C>             <C> <C>           <C>  <C>          <C>   <C>        <C>    <C>         <C>
   Communication papers and cut sheets $    814,464    20     725,866    20      683,435    19      722,881    21     829,472     22
   Market pulp and fine paper               327,847     8     340,657     9      346,214    10      316,383     9     403,741     10
                                       ------------------ ----------------- ------------------ ------------------ ------------------
    Total White Paper                     1,142,311    28   1,066,523    29    1,029,649    29    1,039,264    30   1,233,213     32
                                       ------------------ ----------------- ------------------ ------------------ ------------------

  Brown Paper:
   Packaging                              1,229,548    30   1,151,366    31    1,007,765    29    1,077,892    31   1,276,901     33
   Other                                    238,892     6     227,644     6      201,270     6      226,756     7     299,408      8
                                       ------------------ ----------------- ------------------ ------------------ ------------------
    Total Brown Paper                     1,468,440    36   1,379,010    37    1,209,035    35    1,304,648    38   1,576,309     41
                                       ------------------ ----------------- ------------------ ------------------ ------------------

  Building Materials:
   Lumber                                   290,233     7     233,997     6      220,822     6      179,323     5     140,842      4
   Structural panels                        465,967    11     361,958    10      366,246    10      380,977    11     431,264     11
   Composite panels                         383,296    10     367,072    10      344,624    10      260,641     8     268,350      7
   Other wood products                      327,722     8     291,722     8      331,000    10      260,320     8     223,597      5
                                       ------------------ ----------------- ------------------ ------------------ ------------------
    Total Building Materials              1,467,218    36   1,254,749    34    1,262,692    36    1,081,261    32   1,064,053     27
                                       ------------------ ----------------- ------------------ ------------------ ------------------
    Total net sales (1)                $  4,077,969   100   3,700,282   100    3,501,376   100    3,425,173   100   3,873,575    100
                                       ================== ================= ================== ================== ==================

Intersegment sales at market value:
  Building Materials                   $     48,279            60,813             47,100             42,692            61,082
                                       =============      ============       ============      =============      ============
Gross Profit (GP):                                   GP%                GP%               GP%                GP%               GP%
                                                    ------            ------             ------             ------            ------
  White Paper                               177,486    16     116,214    11      130,987    13      203,569    20     438,713     36
  Brown Paper                               326,990    22     263,927    19      162,121    13      272,376    21     416,341     26
  Building Materials                        312,191    21     135,113    11      178,376    14      150,946    14     240,786     23
                                       ------------------------------------ --------------------------------------------------------
    Total gross profit                 $    816,667    20     515,254    14      471,484    13      626,891    18   1,095,840     28
                                       ================== ================= ================== ================== ==================

Operating earnings:
  White Paper                          $    118,955            58,654             73,349            149,558           390,208
  Brown Paper                               225,283           166,680             69,017            187,947           338,079
  Building Materials                        253,910            80,601            124,697            102,513           198,158
  Corporate                                 (47,879)          (43,191)           (40,898)           (44,989)          (32,389)
                                       -------------      ------------       ------------      -------------      ------------
    Total operating earnings           $    550,269           262,744            226,165            395,029           894,056
                                       =============      ============       ============      =============      ============
  Other income (expense)                    (11,710)            2,029              2,088              3,861               798
  Interest expense                          125,284           131,990            116,990             92,804            71,050
                                       -------------      ------------       ------------      -------------      ------------
  Earnings before provision
   for income taxes                    $    413,275           132,783            111,263            306,086           823,804
                                       =============      ============       ============      =============      ============

Depreciation, cost of fee timber
  harvested and amortization:(2)
  White Paper                          $    124,175           139,240            114,449            106,250            96,801
  Brown Paper                                68,333            90,484             90,403             88,566            81,242
  Building Materials                        106,496           135,108            128,754            103,354            67,385
  Corporate                                   4,715             6,309              5,343              4,767             3,737
                                       -------------      ------------       ------------      -------------      ------------
                                       $    303,719           371,141            338,949            302,937           249,165
                                       =============      ============       ============      =============      ============

Capital expenditures:
  White Paper                          $     62,269           215,503            371,894            275,726           151,662
  Brown Paper                               161,144           120,827             82,935             82,867           140,861
  Building Materials                         64,426           101,884             72,075            126,932           157,382
  Corporate                                   2,407             3,625              1,004                244             3,618
                                       -------------      ------------       ------------      -------------      ------------
                                       $    290,246           441,839            527,908            485,769           453,523
                                       =============      ============       ============      =============      ============

Identifiable assets:
  White Paper                          $  1,830,043         1,860,673          1,785,493          1,486,842         1,369,101
  Brown Paper                             1,149,123         1,021,180            987,097            968,624         1,027,664
  Building Materials                      1,734,945         1,735,257          1,966,136          2,008,542           946,216
  Corporate                                  83,750            80,558             72,329            256,673            70,574
                                       -------------      ------------       ------------      -------------      ------------
                                       $  4,797,861         4,697,668          4,811,055          4,720,681         3,413,555
                                       =============      ============       ============      =============      ============
</TABLE>

(1)   The company is not dependent on any one  significant  customer or group of
      customers.  Approximately  91% of  the  company's  total  output  is  sold
      domestically.

(2)   See note 4 of Notes to Consolidated Financial Statements for discussion of
      change in accounting estimates for depreciation.

                                       30
<PAGE>

<TABLE>
--------------------------------------------------------------------------------------
SELECTED QUARTERLY FINANCIAL DATA
======================================================================================
(Unaudited) (dollar amounts, except per share amounts, in thousands)

                                                                    Net Earnings
                                                           ---------------------------
                                   Net          Gross                      Per Share
   1999                           Sales        Profit        Amount         Diluted
--------------------------------------------------------------------------------------
<S>                           <C>                <C>           <C>           <C>
1st Quarter.................  $    923,453       145,158        31,594        .28
2nd Quarter.................     1,007,369       198,961        63,314        .57
3rd Quarter.................     1,087,899       242,919        81,958        .73
4th Quarter.................     1,059,248       229,629        83,609        .75
--------------------------------------------------------------------------------------
   Total....................  $  4,077,969       816,667       260,475        2.33
======================================================================================

                                                                    Net Earnings
                                                           ---------------------------
                                   Net          Gross                      Per Share
   1998                           Sales        Profit        Amount         Diluted
--------------------------------------------------------------------------------------
1st Quarter.................  $    900,075       124,252        22,081        .20
2nd Quarter.................       946,390       128,947        24,014        .21
3rd Quarter.................       956,794       151,308        35,735        .32
4th Quarter.................       897,023       110,747         7,153        .07
--------------------------------------------------------------------------------------
   Total....................  $  3,700,282       515,254        88,983        .80
======================================================================================

                                                                    Net Earnings
                                                           ---------------------------
                                   Net          Gross                      Per Share
   1997                           Sales        Profit        Amount         Diluted
--------------------------------------------------------------------------------------
1st Quarter.................  $    855,192       109,296        13,317        .12
2nd Quarter.................       879,348       118,815        17,750        .16
3rd Quarter.................       888,795       122,668        20,697        .18
4th Quarter.................       878,041       120,705        21,199        .19
--------------------------------------------------------------------------------------
        Total...............  $  3,501,376       471,484        72,963        .65
======================================================================================
</TABLE>

                                       31
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997 (dollar amounts,  except per share amounts,  in
thousands)

Note 1.  Nature of Operations

  Willamette  Industries,  Inc. is a  diversified,  integrated  forest  products
company with 103  manufacturing  facilities  in 24 states,  France,  Ireland and
Mexico.  The company's  principal lines of business are white paper, brown paper
and building  materials.  The company produces hardwood market pulp, fine paper,
specialty  printing  papers,  business  forms,  cut  sheets,  kraft  linerboard,
corrugating medium, bag paper, corrugated containers,  paper bags, inks, lumber,
plywood,  particleboard,  MDF, OSB,  laminated  beams,  LVL,  I-joists and other
value-added  wood  products.  Based on 1999  sales,  the  company's  business is
comprised of 28% white paper,  36% brown paper and 36% building  materials.  The
company  sells  approximately  91% of its  products  in the United  States;  its
primary foreign markets are Asia and Europe.

Note 2.  Summary of Significant Accounting Policies

  (a) Principles of Consolidation
    The  consolidated   financial   statements   include  the  accounts  of  all
  majority-owned   subsidiaries.   All   material   intercompany   balances  and
  transactions have been eliminated upon consolidation.

  (b) Inventories
    Inventories are valued at the lower of cost or market. Cost is determined on
  the last-in,  first-out (LIFO) method for all major classes of inventory.  All
  other inventories are valued at average cost.

  (c) Property, Plant and Equipment
    Property,  plant and equipment is carried at cost and includes  expenditures
  for new facilities and those that  substantially  increase the useful lives of
  existing  plant and  equipment.  Maintenance,  repairs and minor  renewals are
  expensed as incurred.  When  properties  are disposed of, the related cost and
  accumulated  depreciation  are removed  from the  respective  accounts and any
  profit or loss on disposition  is credited or charged to income.  Depreciation
  is  computed  using the  straight-line  method  over the  useful  lives of the
  respective assets.  Leasehold improvements are amortized over the terms of the
  respective leases.

  (d) Timber, Timberlands and Related Facilities
    These accounts are stated at cost less the cost of fee timber  harvested and
  the amortization of logging roads. Both are determined with reference to costs
  and the related existing volume of timber estimated to be recoverable.

                                       32
<PAGE>

    The  company  obtains a portion  of its  timber  requirements  from  various
private sources under timber harvesting contracts.  The company does not incur a
direct liability for, or ownership of, this timber until it has been harvested.

  (e) Income Taxes
    The company  utilizes the liability  method of accounting  for income taxes.
  This method  requires that deferred tax  liabilities and assets be established
  based on the difference  between the financial  statement and income tax bases
  of assets and liabilities using existing tax rates.

  (f) Capitalized Interest
    Interest is capitalized on funds borrowed during the construction  period on
  certain  assets.  Capitalized  interest  in 1999,  1998  and 1997 was  $3,998,
  $13,589 and $19,939,  respectively,  and is netted against interest expense in
  the consolidated  statements of earnings.  Such  capitalized  interest will be
  amortized over the depreciable lives of the related assets.

  (g) Business Segments
    The company's various product lines have been aggregated into three segments
  - white  paper,  brown  paper and  building  materials  - based on the similar
  nature of the products,  the economic conditions  affecting those products and
  the management and reporting of those products within the company. Information
  with respect to the segments is included in the Supplementary Business Segment
  Information on page 30.

  (h) Use of Estimates
    Generally  accepted   accounting   principles  require  management  to  make
  estimates  and  assumptions   that  affect  the  reported  amount  of  assets,
  liabilities and contingencies at the date of the financial  statements and the
  amounts of revenues  and  expenses  during the period.  Actual  results  could
  differ from those estimates.

  (i) Reclassifications
    Certain  reclassifications  have been made to prior  years'  data to conform
  with the 1999 presentation.


                                       33
<PAGE>
Note 3.  Inventories

    The major components of inventories are as follows:

<TABLE>
                                                                December 31,
                                                        ------------------------------
                                                           1999              1998
                                                        ------------      ------------

<S>                                                   <C>                     <C>
Finished Product................................      $     139,385           131,383
Work in progress................................              7,722             6,909
Raw material....................................            198,866           184,734
Supplies........................................             99,137            88,290

                                                        ------------      ------------
                                                      $     445,110           411,316
                                                        ============      ============

Valued at:
    LIFO cost...................................      $     288,161           276,549
    Average cost................................            156,949           134,767
</TABLE>

    If  current  cost  rather  than  LIFO  cost  had been  used by the  company,
inventories would have been approximately $57,049 and $49,548 higher in 1999 and
1998, respectively.

Note 4.  Property, Plant and Equipment

  Property, plant and equipment accounts are summarized as follows:

<TABLE>
                                                                 December 31,
                                              Range of   ------------------------------
                                            useful lives      1999            1998
                                            ------------  -------------- ---------------

<S>                                    <C>             <C>                  <C>
Land................................           --      $        41,985          40,446
Buildings...........................     15 -  35              380,967         366,125
Machinery and equipment.............      5 -  25            4,569,273       4,354,789
Furniture and fixtures..............      3 -  15               92,411          90,606
Leasehold improvements..............    life of lease            6,619           7,209
Construction in progress............           --              145,479         101,522
                                                         -------------- ---------------
                                                             5,236,734       4,960,697
Accumulated depreciation............                         2,485,524       2,253,551
                                                         -------------- ---------------
                                                       $     2,751,210       2,707,146
                                                         ============== ===============
</TABLE>

  Effective  January 1, 1999,  the  company  changed  its  accounting  estimates
relating to  depreciation.  The estimated  service lives for most  machinery and
equipment were extended five years.  The change was based upon a study performed
by  the  company's  engineering  department,  comparisons  to  typical  industry
practices and the effect of the company's  extensive  capital  investments which
have  resulted  in  a  mix  of  assets  with  longer  productive  lives  due  to
technological advances. As a result of the change, 1999 net income was increased
$51,900, or $0.46 per diluted share.

                                       34
<PAGE>

Note 5.  Long-term Debt

    Long-term debt consists of the following:

<TABLE>
                                                                 December 31,
                                                         ----------------------------

                                                             1999           1998
                                                         -------------  -------------
Notes payable to public:
<S>                                                    <C>                <C>
    9.625%, due in 2000............................... $      150,000        150,000
    7.75%, due in 2002................................        100,000        100,000
    9.125%, due in 2003...............................         50,000         50,000
    6.45%, due in 2005................................        100,000        100,000
    7.00%, due in 2018................................        100,000        100,000
    9.00%, due in 2021................................        150,000        150,000
    7.35%, due in 2026................................        200,000        200,000
    7.85%, due in 2026................................        200,000        200,000

Medium-term notes, with interest rates
    ranging from 6.45% to 7.20%, due in
    varying amounts through 2013   ...................        205,700        205,700

Bank loans, with interest rates averaging
    6.20% and 5.52%, due in varying amounts
    through 2006......................................        250,625        445,000

Revenue bonds, with interest rates
    averaging 5.04% and 4.59%, due in
    varying amounts through 2026......................        113,440        113,800

Other long-term debt, with interest
    rates averaging 8.62% and 7.43%,
    due in varying amounts through 2006...............         12,334          8,850
                                                         -------------  -------------

                                                            1,632,099      1,823,350
Less:  Current installments...........................          3,256          2,267
                                                         -------------  -------------

                                                       $    1,628,843      1,821,083
                                                         =============  =============
</TABLE>

  Principal payment requirements on the above debt for the four years subsequent
to 2000 are: 2001, $230,088; 2002, $117,503; 2003, $69,852; 2004, $10,458.

  The  company  has a  revolving  loan with a group of banks that  provides  for
borrowings up to $450,000 in principal  amount and provides  backup for a master
note program.  At December 31, 1999, the  outstanding  balance covered under the
revolving loan was $225,000. At December 31, 1999, $150,000 of notes payable due
in 2000 were  classified as long-term debt as the company plans to refinance the
notes in 2000.

  The company utilized  short-term  borrowings with a number of banks at various
times  during 1999 and 1998 of which  $13,617 was  outstanding  at December  31,
1999. The weighted  average  interest rate on short-term  borrowings at December
31,  1999 and 1998,  was 5.65% and 5.46%,

                                       35
<PAGE>

respectively.  Interest is based upon prevailing  short-term  rates in effect at
the time of the transaction.

  The  fair  value  of  the  company's   long-term   debt  is  estimated  to  be
approximately  $1,606,000,  based on the  quoted  market  prices for the same or
similar  issues or on the current rates offered to the company for debt with the
same remaining maturities.

Note 6.  Income Taxes

    The provision for income taxes includes the following:

<TABLE>
                                                    1999          1998         1997
                                                 ------------  ------------ ------------
Payable (receivable) from
<S>                                            <C>                <C>          <C>
    taxable earnings.........................  $      85,563        26,018       (4,350)
Payable (receivable) due to AMT..............        (19,700)       10,100       14,000
                                                 ------------  ------------ ------------
Currently payable............................         65,863        36,118        9,650
Deferred taxes due to temporary
    differences for:
    Accelerated depreciation.................         81,667        26,974       23,395
    Other....................................          5,270       (19,292)       5,255
                                                 ------------  ------------ ------------
    Total deferred...........................         86,937         7,682       28,650
                                                 ------------  ------------ ------------
    Total provision..........................  $     152,800        43,800       38,300
                                                 ============  ============ ============
Federal income taxes.........................  $     135,343        36,664       31,600
Other income taxes...........................         17,457         7,136        6,700
                                                 ------------  ------------ ------------
                                               $     152,800        43,800       38,300
                                                 ============  ============ ============

    The company's  deferred income tax liability is mainly due to  depreciation.
Differences  between the effective tax rate and the federal  statutory  rate are
shown in the following table as a percentage of pretax income:

                                                    1999          1998         1997
                                                 ------------  ------------ ------------

Federal statutory rate.......................          35.0%         35.0%        35.0%
State income taxes, net of
    federal tax effect.......................           2.5%          2.3%         2.3%
Benefit from foreign taxes...................          (0.5%)        (3.6%)       (1.3%)
Estimated non-deductible
    EPA penalty..............................           1.0%            -            -
Other........................................          (1.0%)        (0.7%)       (1.6%)
                                                 ------------  ------------ ------------
                                                       37.0%         33.0%        34.4%
                                                 ============  ============ ============
</TABLE>

  The company's  consolidated  federal income tax returns through 1995 have been
examined by the Internal Revenue Service and while final settlement has not been
made,  management  believes  that the company has provided for any  deficiencies
that ultimately might be assessed.

  The Tax Reform Act of 1986  expanded  the  corporate  alternative  minimum tax
(AMT). Under this Act, the company's tax liability is the greater of

                                       36
<PAGE>

its regular tax or the AMT. To the extent the company's  AMT  liability  exceeds
its regular tax  liability,  the AMT  liability  may be applied  against  future
regular tax  liabilities.  At December 31,  1999,  the company had $4,400 in AMT
credits.

Note 7.     Pension and Retirement Plans

Contributory Plans
  The company  covers all salaried  employees  and some hourly  employees  under
401(k) plans. The amounts  contributed by the company vary for the plans.  Total
plan  expenses  were  $11,515,  $11,221  and  $10,903  in 1999,  1998 and  1997,
respectively.

Defined Benefit Plans
  The company  contributes to multi-employer  retirement plans at fixed payments
per hour for certain hourly employees.  Substantially all other employees of the
company  are  covered by  non-contributory  defined  benefit  plans.  Retirement
benefits  are based on years of service and  compensation  prior to  retirement.
Total  pension  expense in 1999,  1998 and 1997 for all such  plans was  $8,669,
$8,863 and $10,770, respectively.

  As advised by its actuaries,  the company makes  contributions  to provide for
benefits  attributed  to past  service,  and for those  benefits  expected to be
earned in the future.

Postretirement Benefit Plans
  The company has a contributory  postretirement  health plan primarily covering
its salaried  employees.  Employees  become  eligible for these benefits if they
meet minimum age and service requirements.

  The following table sets forth reconciliations of the benefit obligation, plan
assets,  funded status and disclosure of assumptions utilized in the December 31
calculations:

<TABLE>
                                                                      Postretirement
                                            Defined Benefit Plans      Benefit Plans
                                           ----------------------------------------------
                                              1999        1998        1999       1998
                                           ----------------------------------- ----------

Change in Benefit Obligation

Benefit obligation - Beginning
<S>                                      <C>               <C>         <C>        <C>
  of year                                $     386,108     342,065     37,348     34,277
Service cost                                    17,431      15,401      1,203      1,182
Interest cost                                   27,748      24,585      2,426      2,428
Amendments                                      17,186       1,671      -           -
Other                                             (821)        274        783        680
Actuarial (gain) loss                          (24,965)     15,448     (2,078)     3,072
Benefits paid                                  (16,057)    (13,336)    (4,275)    (4,291)
                                           ------------ ----------- ---------- ----------
Benefit obligation - End of year         $     406,630     386,108     35,407     37,348
                                           ============ =========== ========== ==========
</TABLE>

                                       37
<PAGE>
<TABLE>
                                                                                            Postretirement
                                                          Defined Benefit Plans             Benefit Plans
                                                       ----------------------------- -----------------------------
                                                           1999           1998           1999           1998
                                                       -------------- -------------- -------------- --------------

Change in Assets

<S>                                                  <C>                    <C>
Fair value of assets - Beginning of year             $       528,456        460,911            -              -
Actual return on plan assets                                  77,218         77,610            -              -
Employer contribution                                          4,819          2,740          3,381          3,611
Other                                                         (1,194)           531            894            680
Benefits paid                                                (16,057)       (13,336)        (4,275)        (4,291)
                                                       -------------- -------------- -------------- --------------

Fair value of assets - End of year                   $       593,242        528,456              -              -
                                                       ============== ============== ============== ==============

Reconciliation of Funded Status

Funded status                                        $       186,612        142,348        (35,407)       (37,348)
Unrecognized actuarial (gain) loss                          (211,453)      (154,298)         6,127          8,515
Unrecognized prior service cost                               26,201         12,209            251            282
Unrecognized asset                                              (398)          (964)           -              -

                                                       -------------- -------------- -------------- --------------
Prepaid (accrued) benefit cost                       $           962           (705)       (29,029)       (28,551)
                                                       ============== ============== ============== ==============

Assumptions as of December 31

Discount rate                                                  7.50%          7.00%          7.50%          7.00%
Expected return on plan assets                                 9.00%          9.00%           -              -
Rate of increase in compensation
  levels                                                       5.00%          5.00%           -              -
Medical cost trend rate                                         -              -             8.00%          8.50%
</TABLE>

  For the year  1999,  an 8.0%  increase  in the  medical  cost  trend  rate was
assumed.  In the future, the rate decreases  incrementally to an ultimate annual
rate of 5.0%.  A 1.0%  increase in the  medical  trend rate would  increase  the
postretirement  benefit  obligation (PBO) by $3,958 and increase the service and
interest costs by $385. A 1.0% decrease in the medical trend rate would decrease
the PBO by $3,141 and decrease the service and  interest  cost by $306.  Various
pension plans have benefit  obligations in excess of plan assets.  The following
table sets forth the unfunded status of those plans:

                                               Defined Benefit Plans
                                               ---------------------
                                                 1999         1998
                                               ---------    ---------

Benefit obligation                           $   22,381        9,491
                                               =========    =========
Plan assets (fair value)                     $   21,718        8,676
                                               =========    =========

                                       38
<PAGE>

  The components of net periodic benefit cost are as follows:

<TABLE>
                                                      Defined                      Postretirement
                                                    Benefit Plans                   Benefit Plans
                                           -------------------------------  -------------------------------
                                                1999            1998             1999            1998
                                           --------------- ---------------  --------------- ---------------

<S>                                        <C>                     <C>               <C>             <C>
Service cost                               $       17,431          15,401            1,203           1,182
Interest cost                                      27,748          24,585            2,426           2,428
Expected return on plan assets                    (40,754)        (35,138)            -               -
Amortization of prior service cost                  3,194           1,841               31              31
Amortization of net transition
  obligation                                         (566)           (604)            -               -
Recognized actuarial (gain) loss                   (3,901)         (2,625)             199             185
                                           --------------- ---------------  --------------- ---------------
Net periodic benefit cost                  $        3,152           3,460            3,859           3,826
                                           =============== ===============  =============== ===============
</TABLE>

Note 8. Stockholders' Equity

  The company's 1995 Long-Term  Incentive  Compensation Plan (the Plan) provides
for grants of stock options,  awards of stock appreciation rights and restricted
shares of common stock to directors  and key  employees.  Options are granted at
exercise  prices not less than the market  value of the common stock on the date
of  grant.  Options  generally  become  exercisable  after  one  year in 33 1/3%
increments per year and expire ten years from the date of grant. The company has
reserved  5,500,000  shares for  distribution  under the Plan.  The  company has
elected to account for  stock-based  compensation  under  Accounting  Principles
Board Opinion #25.

  A summary of stock option activity is as follows:

<TABLE>
                                                   Option                 Price
                                                   Shares               Per Share
                                                 -----------       -------------------

<S>                                               <C>            <C>
Outstanding December 31, 1996................     2,848,694      $   11.625 - 30.875
    Granted..................................       776,940              30 . 563
    Exercised................................       650,092          11.625 - 30.875
    Canceled or surrendered..................       126,972          22.685 - 30.875
                                                 -----------       -------------------
Outstanding December 31, 1997................     2,848,570          11.625 - 30.875
    Granted..................................       626,370              38 - 6875
    Exercised................................       102,286          13.125 - 30.875
    Canceled or surrendered..................        28,567           25.75 - 38.675
                                                 -----------       -------------------
Outstanding December 31, 1998................     3,344,087          11.625 - 38.6875
    Granted..................................       555,680              47 . 25
    Exercised................................       608,484          11.625 - 38.6875
    Canceled or surrendered..................        10,597          29.719 - 47.25
                                                 -----------       -------------------
Outstanding December 31, 1999................     3,280,686          11.8125 - 47.25
                                                 ===========       ===================
Shares exercisable...........................     2,217,585      $   11.8125 - 38.6875
                                                 ===========       ===================
</TABLE>

                                       39
<PAGE>

  Restricted  shares have been awarded to certain officers at no cost based upon
continued employment, the attainment of performance goals, or both. These shares
will  vest in  one-third  annual  increments  beginning  after  three  years  of
continuous employment. At December 31, 1999, 3,074 restricted shares had not yet
vested.

  The company has a shareholder  rights plan providing for the  distribution  of
rights to shareholders ten days after a person or group becomes the owner of 20%
or more of the company's  common stock or makes a tender or exchange offer which
would  result in the  ownership  of 30% or more of the  common  stock.  Once the
rights are distributed,  each right becomes  exercisable to purchase,  for $280,
1/100th of a share of a new series of company  preferred  stock,  which  1/100th
share is  intended to equal four common  shares in market  value.  Each right is
exercisable  to purchase,  for $280,  common shares with a market value of $560.
The rights will expire in February 2000.

  The board of directors  has approved a new  shareholder  rights plan that will
extend the benefits of the existing  plan. The new plan lowers the percentage of
the company's  common stock that a person can own and the threshold for a tender
or exchange  offer that would  trigger the plan to 15%.  The new stock  purchase
rights will have an exercise price of $200.

  In September  1998, the board of directors  authorized the repurchase of up to
$25,000 of the company's common stock. The company repurchased 470,900 shares of
common stock for $13,000 in the third and fourth quarters of 1998.

Note 9.     Dispositions

  In December 1998, the company sold 117,000 acres of timberland in southwestern
Washington  for  $234,000.  The  timberland  was acquired in 1996 as part of the
Cavenham  acquisition.  The  timberland  was sold as it was not  critical to the
long-term supply needs of the company's  Northwest  operations.  Proceeds of the
sale were used to pay down existing debt.

Note 10.  Contingencies

  The  company  has  established  a $10,000  reserve as an  estimate  of non-tax
deductible  penalties  resulting  from a federal Clean Air Act assessment of the
building materials operations.

  There are various other  lawsuits,  claims and  environmental  matters pending
against  the  company.  While any  proceeding  or  litigation  has an element of
uncertainty,  management  believes that the outcome of any lawsuit or claim that
is  pending or  threatened,  or all of them  combined,  will not have a material
adverse effect on the company's financial condition or operations.

                                       40
<PAGE>

                                INDEX TO EXHIBITS

EXHIBIT
-------

3A.       Third  Restated  Articles  of  Incorporation  of  the  registrant,  as
          amended.  Incorporated  by reference to Exhibit 3 of the  registrant's
          Registration  Statement on Form 8-A filed February 24, 2000 (the "Form
          8-A"). [14]

3B.       Bylaws  of  the  registrant  as  amended  through  December  1,  1998.
          Incorporated  by  reference to Exhibit 3B to the  registrant's  annual
          report on Form 10-K for the year ended  December 31, 1998.  (the "1998
          Form 10-K"). [23]

4A.       Indenture  dated as of March 15, 1983,  between the registrant and The
          Chase Manhattan  Bank.  Incorporated by reference to Exhibit 4A of the
          registration  statement on Form S-3 effective  December 13, 1985 (File
          No. 33-1876). [89]

4B.       Indenture dated as of January 30, 1993, between the registrant and The
          Chase Manhattan  Bank.  Incorporated by reference to Exhibit 4A of the
          registration  statement on Form S-3 effective  March 1, 1993 (File No.
          33-58044). [82]

4C.       Credit Agreement dated as of May 10, 1996, among the registrant,  Bank
          of America National Trust and Savings Association, ABN Amro Bank N.V.,
          Morgan Guaranty Trust Company of New York, Nationsbank, N.A., Wachovia
          Bank of  Georgia,  N.A.,  and  other  financial  institutions  parties
          thereto.  Incorporated  by reference to Exhibit 4 of the  registrant's
          current  report on Form 8-K/A,  amendment  No. 1, dated May 15,  1996.
          [105]

4D.       Letter  Amendment dated August 13, 1999, to Credit  Agreement filed as
          Exhibit 4C. [1]

4E.       Rights Agreement dated as of February 25, 2000, between the registrant
          and ChaseMellon  Shareholder Services,  LLC. Incorporated by reference
          to Exhibit 4.1 of the Form 8-A. [51]

10A.      Willamette  Industries,  Inc.  1999  Deferred  Compensation  Plan  for
          Directors.* [16]

10B.      Willamette  Industries,  Inc. 1986 Stock Option and Stock Appreciation
          Rights Plan, as amended.  Incorporated  by reference to Exhibit 10B of
          the  registrant's  annual  report  on Form  10-K  for the  year  ended
          December 31, 1996 ("1996 Form 10-K").* [8]

10C.      Form of  Willamette  Industries,  Inc.  Severance  Agreement  with Key
          Management Group as revised effective April 20, 1999.

                                       41
<PAGE>

          Incorporated by reference to Exhibit 10A of the registrant's quarterly
          report on Form 10-Q for the quarter ended June 30, 1999.* [15]

10D.      Willamette   Industries,   Inc.  1993  Deferred   Compensation   Plan.
          Incorporated by reference from Exhibit 10E to the registrant's  annual
          report  on Form  10-K  for the  year  ended  December  31,  1993  (No.
          1-12545).* [16]

10E.      Willamette  Industries,  Inc. 1995  Long-Term  Incentive  Compensation
          Plan.  Incorporated  by reference  to Exhibit 10F of the  registrant's
          annual report on Form 10-K for the year ended December 31, 1994.* [12]

10F.      Consulting  agreement  dated December 1, 1998,  between the registrant
          and William Swindells. Incorporated by reference to Exhibit 10G to the
          1998 Form 10-K.* [4]

11.       Computation  of per share  earnings is  obtainable  from the financial
          statements filed with this annual report on Form 10-K.

12.       Computation of Ratio of Earnings to Fixed Charges.  [1]

21.       Omitted  because  the  registrant's  subsidiaries  considered  in  the
          aggregate  as a single  subsidiary  do not  constitute  a  significant
          subsidiary.

23.       Consent of Independent  Auditors to the  incorporation by reference of
          their report dated February 10, 2000, in the registrant's registration
          statements on Form S-3 and Form S-8. [1]

27.       Financial Data Schedule.  [1]

99.       Description  of capital  stock.  Incorporated  by reference to Exhibit
          99.1 to the registrant's  current report on Form 8-K filed on February
          25, 2000. [3]

  The  registrant  will  furnish a copy of any exhibit to this annual  report on
Form  10-K to any  security  holder  for a fee of $0.30  per  page to cover  the
registrant's  expenses  in  furnishing  the  copy.  The  number of pages of each
exhibit is indicated in brackets at the end of each exhibit description.

------------------------
*Management contract or compensatory plan or arrangement.

Note:  Certain  instruments with respect to the long-term debt of the registrant
are  not  filed  herewith  where  the  total  amount  of  securities  authorized
thereunder does not exceed ten percent of the total assets of the registrant and
its  subsidiaries  on a consolidated  basis.  The  registrant  agrees to furnish
copies of such instruments to the Commission on request.

                                       42