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, 1997       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. [X]

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

                       $ 3,137,223,511 at January 30, 1998

          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 January 31, 1998
          -----                                -------------------------------
Common Stock, $.50 par value                            111,356,556 shares

                      DOCUMENTS INCORPORATED BY REFERENCE.

Portions of the  registrant's  definitive  proxy  statement  for its 1998 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              Holders of Common Stock
             Officers of the Registrant         Election of Directors
                                                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
         Pulp and Paper........................................................................2
         Converted Paper Products..............................................................2
         Building Materials....................................................................3
         Timberlands...........................................................................3
         Energy................................................................................4
         Employees.............................................................................4
         Environmental Matters.................................................................4
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 8.  Financial Statements and Supplementary Data..........................................18
Item 9.  Changes in and Disagreements with
             Accountants on Accounting and Financial
             Disclosure.......................................................................18

Part III
--------

Item 10. Directors and Executive Officers of the Registrant...................................19
             (See Part I for Executive Officers of the Registrant)
Item 11. Executive Compensation...............................................................19
Item 12. Security Ownership of Certain Beneficial
             Owners and Management............................................................19
Item 13. Certain Relationships and Related
             Transactions.....................................................................19

Part IV
-------

Item 14. Exhibits, Financial Statement Schedules
             and Reports on Form 8-K..........................................................20
         Signatures...........................................................................21
         Index to Consolidated Financial Statements...........................................23
         Index to Exhibits....................................................................41
</TABLE>
<PAGE>


                                     PART I

Item 1. Business

GENERAL

  Willamette  Industries,  Inc. (the "Company" or  "Willamette")  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. Its
stock  has  been  publicly  traded  since  1968.  Willamette  is a  diversified,
integrated  forest  products  company with 103  manufacturing  facilities  in 23
states, France, Ireland and Mexico.

  The Company's manufacturing  facilities produce kraft linerboard,  corrugating
medium, bag paper, fine paper,  hardwood market pulp, specialty printing papers,
corrugated  containers,  business  forms,  cut sheet  paper,  paper bags,  inks,
lumber,  plywood,  particleboard,  medium density  fiberboard,  oriented  strand
board,  laminated  beams,  laminated  veneer lumber,  wooden  I-joists and other
value-added wood products. We own or manage 1,840,000 acres of timberland in the
United States and employ approximately 13,800 people.

  We are a  medium-sized  firm  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 product range;  our balance among building
materials  and paper  products;  our 56% raw material  self-sufficiency;  and an
organizational   structure  that  encourages  teamwork  as  well  as  individual
initiative.

  Willamette is included in the Fortune 500. The  Company's  common stock trades
on the New York Stock Exchange (NYSE) under the symbol: WLL.

BUSINESS SEGMENT INFORMATION

  The Company has two business segments.  The paper group manufactures and sells
pulp and paper products.  The building  materials group  manufactures  and sells
wood  products.  Sales  and  operating  data for the paper  group  and  building
materials  group  for the  past  five  years  are set  forth  in the  five  year
comparison  captioned  "Supplementary  Business Segment  Information" located on
page 29. The Company is not dependent on any one  significant  customer or group
of  customers.   Approximately  90%  of  the  Company's  total  output  is  sold
domestically.

                                       1
<PAGE>


PULP AND PAPER

Market pulp and fine paper
  Four mills in Kentucky, Pennsylvania, Tennessee and South Carolina manufacture
8% of the nation's  uncoated free sheet  production.  Additionally,  our mill in
Kentucky  produces 4% of the nation's  hardwood  market  pulp,  which is sold to
outside customers.

  Chips from nearby sawmills, plywood plants and chip mills serve as the primary
fiber source for our bleached paper products.

Unbleached paper
  Four paper mills in California,  Kentucky, Louisiana and Oregon manufacture 5%
of the nation's  production  of  linerboard,  corrugating  medium and bag paper.
Nearly all of the  product is used 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 (OCC), provides 55% of our fiber needs.

CONVERTED PAPER PRODUCTS

Office papers
  Seven  business  forms  plants in six states  manufacture  14% of the nation's
production of forms. These forms are mostly long-run  continuous computer forms.
Additionally,  our four cut  sheet  facilities  in four  states  (a fifth  began
production  in  the  first  quarter  of  1998)  make  Willcopy(R),  Willamette's
photocopy  and cut sheet  printer  paper.  Our cut sheets  represent  12% of the
nation's cut sheet production. Our business forms and Willcopy(R) cut sheets are
marketed by our own sales force to a variety of consumers and distributors.

Corrugated containers and sheets
  Corrugated  containers and sheets are  manufactured by 35 plants in 21 states,
including  a 46%  interest in a facility  in Mexico  acquired  in January  1998.
Domestic  output  accounts for 6% of U.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.

                                       2
<PAGE>


Bags

 Four bag plants in four states make 12% of the nation's paper bags, marketed to
grocery,  department, drug and hardware stores in the West, Midwest and South by
our sales force.

BUILDING MATERIALS

Structural panels and lumber
  Plywood  panels are  manufactured  at nine plants in Arkansas,  the Carolinas,
Louisiana and Oregon.  Oriented  strand board (OSB) is manufactured at our plant
in Louisiana. The output of these products accounts for 5% and 3%, respectively,
of the nation's production.

  Seven sawmills in Oregon and Louisiana  manufacture 2% of the nation's  lumber
production.  An additional  small-log sawmill is scheduled for completion in the
third quarter of 1998.

  Lumber  and  structural  panel  products  are  marketed  through   independent
wholesalers and distributors throughout the U.S.

Composite board
  Four  particleboard  plants in  Louisiana  and Oregon  manufacture  13% of the
nation's  particleboard.   Three  medium  density  fiberboard  plants  (MDF)  in
Arkansas, Oregon and South Carolina produce 23% of the nation's MDF. MDF is also
manufactured  at our  facility in Clonmel,  Ireland,  which  accounts  for 6% of
European  production.  Additionally,  we  acquired a new  facility  in  Morcenx,
France,  in the  first  quarter  of 1998.  The MDF  plants  produce  value-added
products    including    color-coated,    woodgrain-printed,    fire-rated   and
moisture-resistant boards.

  Composite board products are sold nationwide through  independent  wholesalers
and distributors.

Engineered wood products
  Three  laminated  beam plants in Oregon and  Louisiana  account for 28% of the
nation's  production.  Two  laminated  veneer lumber (LVL) plants and one wooden
I-joist  plant,  all located in Oregon,  manufacture  6% of the  nation's  total
production of each product.  An additional  integrated LVL and I-joist  facility
under  construction in Louisiana is scheduled for completion by the end of 1998.
Engineered  wood products,  stock and custom made, are sold in both the domestic
and international markets.

TIMBERLANDS

  Willamette's  1,840,000 acres of timberland  supply  approximately  56% of our
long-term log needs. The remainder is purchased through private timber sales and
open market  purchases.  We manage our own  timberlands  to supply 85-90% of the
sawlogs for our  Western  operations  and 30-35% of the  sawlogs  needed for our
Southern  operations.   Our  timberlands  are  comprised  of  735,000  acres  in
Louisiana,  Arkansas  and Texas;  727,000

                                       3
<PAGE>


acres in Oregon and Washington; and 378,000 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 57% of their total energy needs.

EMPLOYEES

  Willamette  employs  approximately  13,800  people,  of whom  about  52.0% are
represented by labor unions with collective  bargaining  agreements.  Agreements
covering  approximately  1,700  employees  were  negotiated in 1997.  Agreements
involving  about  2,000  hourly  employees  are  subject  to  renewal  in  1998.
Approximately 46% of all salaried employees have been with the Company more than
twelve years.

ENVIRONMENTAL MATTERS

  See "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.

Item 2.  Properties

MANUFACTURING FACILITIES

  The  following  table sets  forth  information  regarding  the  Company's  103
manufacturing facilities at December 31, 1997:

Building Materials Group:

         Facility                         1998 Forecast
         --------                         -------------
Western Plywood (3 Plants)          M Square Ft. (3/8" Basis)
  Dallas, Oregon                              100,000
  Foster, Oregon                              159,000
  Springfield, Oregon                         119,000
                                            ---------
    Total Western Plywood                     378,000
                                            ---------

Southern Plywood (4 Plants)
  Dodson, Louisiana                           174,000
  Emerson, Arkansas                           240,000
  Ruston, Louisiana                           177,000
  Zwolle, Louisiana                           237,000
                                            ---------
    Total Southern Plywood                    828,000
                                            ---------

                                       4
<PAGE>


                                            1998 Forecast
                                            -------------
Atlantic Plywood (2 Plants)                 M Square Ft. (3/8" Basis)
  Chester, South Carolina                     255,000
  Moncure, North Carolina                     109,000
                                            ---------
    Total Atlantic Plywood                    364,000
                                            ---------

      Total Plywood                         1,570,000
                                            ---------

Oriented Strand Board (1 plant)
  Arcadia, Louisiana                          309,000
                                            ---------
                                                       (1997 Production-
      Total Structural Panels               1,879,000    1,847,000)
                                            =========

Western Lumber (5 Mills)                    M Board Ft.
  Coburg, Oregon                              136,000
  Dallas, Oregon                              119,000
  Lebanon, Oregon (2 mills)                   147,000
  Warrenton, Oregon                           152,000
                                            ---------
    Total Western Lumber                      554,000
                                            ---------

Southern Lumber (3 Mills)
  Dodson, Louisiana                           119,000
  Taylor, Louisiana1                           12,000
  Zwolle, Louisiana                            55,000
                                            ---------
    Total Southern Lumber                     186,000
                                            ---------
                                                       (1997 Production-
      Total Lumber                            740,000     624,000)
                                            =========

Particleboard (4 Plants)                    M Square Ft. (3/4" Basis)
  Albany, Oregon                              210,000
  Bend, Oregon                                176,000
  Lillie, Louisiana                           115,000
  Simsboro, Louisiana                         104,000
                                            ---------
                                                       (1997 Production-
      Total Particleboard                     605,000    593,000)
                                            =========

Medium Density Fiberboard (5 Plants)
  Bennettsville, South Carolina               127,000
  Clonmel, Ireland                            177,000
  Eugene, Oregon                               64,000
  Malvern, Arkansas                           140,000
  Morcenx, France 2                            42,000
                                                       (1997 Production-
      Total MDF                               550,000     466,000)
                                            =========

Engineered Wood Products (8 Plants)         M Board Ft.
Laminated Beams
  Saginaw, Oregon                              25,000
  Simsboro, Louisiana                          21,000
  Vaughn, Oregon                               56,000
                                            ---------
                                                      (1997 Production-
      Total Laminated Beams                   102,000     93,000)
                                            =========

                                       5
<PAGE>

                                            1998 Forecast
                                            -------------
Laminated Veneer Lumber                     Cubic Ft.
  Albany, Oregon                            1,700,000
  Simsboro, Louisiana3                              0
  Winston, Oregon                           1,500,000
                                            ---------
                                                      (1997 Production-
      Total LVL                             3,200,000    2,700,000)
                                            =========

Structural I-Joists                          M Lineal Ft.
  Woodburn, Oregon                             52,000
  Simsboro, Louisiana(3)                            0
                                            --------- (1997 Production-
      Total I-Joists                           52,000    36,000)
                                            =========

Other Divisions (4 Facilities)
  Coburg Veneer - Coburg, Oregon
  Custom Products - Albany, Oregon
  Lebanon Machine - Lebanon, Oregon
  Finger-jointed Lumber - Lebanon, Oregon

Paper Group:

Pulp and Paper (9 Mills)                        Tons
  Unbleached:
    Albany, Oregon                            518,000
    Campti, Louisiana                         846,000
    Hawesville, Kentucky                      174,000
    Oxnard, California                        192,000
                                            ---------
                                                       (1997 Production-
      Total Unbleached                      1,730,000    1,730,000)
                                            ---------

  Market Pulp and Fine Paper:
    Hawesville, Kentucky
      Market Pulp                             163,000
      Fine Paper 4                            360,000
    Johnsonburg, Pennsylvania                 391,000
    Kingsport, Tennessee                      224,000
    Marlboro, South Carolina                  311,000
                                            ---------
                                                       (1997 Production-
      Total Market Pulp and Fine Paper       1,449,000    1,251,000)
                                                       (1997 Production-
        Total Pulp and Paper                 3,179,000    2,981,000)
                                             =========

                                       6
<PAGE>


                                            1998 Forecast
                                            -------------
 Corrugated Container and Sheets(35 Plants)  M Square Ft.
  Aurora, Illinois                           1,010,000
  Beaverton, Oregon                            958,000
  Bellevue, Washington                         874,000
  Bellmawr, New Jersey                         698,000
  Bowling Green, Kentucky                      859,000
  Cerritos, California                         824,000
  Compton, California                          772,000
  Dallas, Texas                                893,000
  Delaware, Ohio                               636,000
  Elk Grove, Illinois                          515,000
  Fort Smith, Arkansas                         895,000
  Fridley, Minnesota                         1,023,000
  Golden, Colorado                             764,000
  Griffin, Georgia                             970,000
  Huntsville, Alabama                          926,000
  Indianapolis, Indiana                        778,000
  Kansas City, Kansas                          864,000
  Lincoln, Illinois                            545,000
  Louisville, Kentucky                         507,000
  Lumberton, North Carolina                    780,000
  Maryland Heights, Missouri                   674,000
  Matthews, North Carolina                     368,000
  Memphis, Tennessee                            52,000
  Mexico City, Mexico5                         400,000
  Moses Lake, Washington                       870,000
  Newton, North Carolina                       511,000
  Plant City, Florida                          580,000
  Portland, Oregon                             489,000
  Sacramento, California                       693,000
  San Leandro, California                    1,206,000
  Sanger, California                           853,000
  Sealy, Texas                                 800,000
  St. Paul, Minnesota                          609,000
  Tulsa, Oklahoma                               38,000
  West Memphis, Arkansas                       902,000
                                             ---------
                                                       (1997 Production-
      Total Corrugated Containers           25,136,000   22,976,000)
                                            ==========

Business Forms (7 Plants)                         Tons
  Cerritos, California                          57,000
  Dallas, Texas                                 51,000
  DuBois, Pennsylvania                          23,000
  Indianapolis, Indiana                         72,000
  Langhorne, Pennsylvania                       42,000
  Rock Hill, South Carolina                     55,000
  West Chicago, Illinois                        62,000
                                            ----------
                                                      (1997 Production-
      Total Business Forms                     362,000  345,000)
                                            ==========

                                       7
<PAGE>


                                        1998 Forecast
                                        -------------
Cut Sheets and Other Converting (5 Plants)       Tons
  Brownsville, Tennesee (6)                    55,000
  DuBois, Pennsylvania                        144,000
  Kingsport, Tennessee                        122,000
  Owensboro, Kentucky                         164,000
  Tatum, South Carolina                        97,000
                                            ---------
                                                       (1997 Production-
      Total Cut Sheets                        582,000    500,000)
                                            =========

Kraft Bags and Sacks (4 Plants)
  Beaverton, Oregon                            40,000
  Buena Park, California                       33,000
  Dallas, Texas                                22,000
  Kansas City, Missouri                        22,000
                                            ---------
                                                       (1997 Production-
      Total Kraft Bags and Sacks              117,000    113,000)
                                            =========

Preprinted Linerboard (2 Plants)           M Square Ft.
  Richwood, Kentucky                          553,000
  Tigard, Oregon                            1,102,000
                                            ---------
                                                       (1997 Production-
      Total Preprinted Linerboard           1,655,000    1,455,000)
                                            =========

Inks and Specialty Products (2 Plants)           Tons
  Beaverton, Oregon                             5,000
  Delaware, Ohio                                2,000
                                            ---------
                                                       (1997 Production-
                             Total Inks         7,000    7,000)
                                            =========

1  Production to begin in the third quarter of 1998.
2  Acquired in first quarter of 1998.
3  Production to begin in fourth quarter of 1998.
4  Second machine scheduled for start-up in the second quarter of 1998.
5  Acquired in the first quarter of 1998.
6  Production began in the first quarter of 1998.

TIMBERLANDS

  For   information   with   respect   to   the   Company's   timberlands,   see
"Business--Timberlands."

Item 3.  Legal proceedings

  There are no material legal proceedings pending as of the date hereof.

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, 1997.

                                       8
<PAGE>


                      Executive Officers of the Registrant

  The  executive  officers of the  Company are elected  annually by the board of
directors.  At February 12, 1998 the  executive  officers of the Company,  their
ages at December 31, 1997 and their positions with the Company were as follows:

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

William Swindells          67                   Chairman and chief
                                                executive officer

William P. Kinnune         58                   Executive vice president-
                                                corrugated containers and
                                                bags

Duane C. McDougall         45                   Executive vice president-
                                                building materials group

Michael R. Onustock        58                   Executive vice president-
                                                pulp and fine paper marketing

J. A. Parsons              62                   Executive vice president
                                                and chief financial
                                                officer, secretary and
                                                treasurer


  Each  executive  officer has been employed by the Company in his present or in
another managerial capacity for more than five years.

                                       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. Prior to December 31, 1996 the Company's shares traded on NASDAQ
under the symbol  WMTT.  At December  31, 1997 there were  approximately  20,000
holders  (beneficial) of the Company's  common stock. The following table shows,
for the periods indicated, the high and low closing sales prices of, and the per
share  dividends  paid on, the  Company's  common  stock.  All amounts have been
adjusted for the 2-for-1 stock split on September 12, 1997.

<TABLE>
                                  1997                               1996
                    ----------------------------------     ---------------------------
                                       Closing                               Closing
                       Dividends        Price               Dividends         Price
                         Paid          High-Low               Paid          High-Low
                    ----------------------------------     ---------------------------
<S>                  <C>            <C>        <C>           <C>       <C>      <C>
1st Quarter...       $0.160         34 11/16 - 30 11/16      $0.155    30 1/8 - 24 5/8
2nd Quarter...        0.160         38 7/16  - 30 1/16        0.155    32 1/8 - 28 3/4
3rd Quarter...        0.160         42 3/8   - 35 1/4         0.155    34     - 28 1/4
4th Quarter...        0.160         39 3/16  - 30             0.155    35 1/4 - 31 1/4
</TABLE>

  A dividend of $0.16 per share was  declared on the common  stock for the first
quarter of 1998  representing  an indicated  annual  dividend  rate of $0.64 per
share.  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.

                                       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>
                                                             1997           1996           1995          1994          1993
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                <C>            <C>           <C>           <C>      
Net Sales                                              $    3,438,664     3,425,173      3,873,575     3,007,949     2,622,237
===============================================================================================================================
Costs and Expenses:
  Depreciation, amortization and cost
    of fee timber harvested..................          $      338,949       302,937        249,165       217,252       194,202
  Materials, labor and other operating
    expenses.................................               2,628,231     2,495,345      2,528,570     2,239,185     1,997,246
                                                         ----------------------------------------------------------------------
    Gross profit.............................                 471,484       626,891      1,095,840       551,512       430,789
  Selling and administrative expense.........                 245,319       231,862        201,784       184,699       174,413
                                                         ----------------------------------------------------------------------
    Operating earnings.......................                 226,165       395,029        894,056       366,813       256,376
  Interest expense...........................                 116,990        92,804         71,050        71,513        63,290
  Other income (expense).....................                   2,088         3,861            798        (6,377)       (3,918)
                                                         -----------------------------------------------------------------------
    Earnings before provision for income
      taxes..................................                 111,263       306,086        823,804       288,923       189,168
  Provision for income taxes.................                  38,300       114,000        309,000       111,300        78,500
                                                         ----------------------------------------------------------------------
    Earnings before accounting changes.......                  72,963       192,086        514,804       177,623       110,668
  Accounting changes.........................                       -             -              -             -        26,364
                                                         ----------------------------------------------------------------------
    Net earnings.............................                  72,963       192,086        514,804       177,623       137,032
  Cash dividends paid........................                  71,005        68,520         62,874        52,807        48,213
  Earnings retained in the business..........                   1,958       123,566        451,930       124,816        88,819
  Capital expenditures.......................                 527,908       485,769        453,523       393,161       386,864
===============================================================================================================================
Financial Condition:
  Working capital............................          $      308,093       289,134        359,258       138,528       157,576
  Long-term debt (noncurrent portion)........               1,916,001     1,766,917        790,210       915,797       941,710
  Stockholders' equity.......................               1,994,480     1,976,281      1,846,890     1,387,865     1,257,870
  Total assets...............................               4,811,055     4,720,681      3,413,555     3,033,398     2,804,553
===============================================================================================================================
Common Stock:
  Number of stockholders (beneficial)........                  20,000        20,000         19,000        17,000        14,000
  Shares outstanding (in thousands)(1) ......                 111,350       110,707        110,448       110,072       109,794
===============================================================================================================================
Per Share: (1)
  Earnings before accounting changes.........          $         0.66          1.74           4.67          1.62          1.01
  Accounting changes.........................                       -             -              -             -          0.24
                                                         ----------------------------------------------------------------------
    Net earnings.............................                    0.66          1.74           4.67          1.62          1.25
  Cash dividends paid........................                    0.64          0.62           0.57          0.48          0.44
  Stockholders' equity.......................                   17.91         17.85          16.72         12.61         11.46
  Year-end stock price.......................                   32.188        34.813         28.125        23.75         24.75
===============================================================================================================================
Financial Returns:
  Percent return on equity before
    Accounting changes(2)....................                    3.7%         10.4%          37.1%         14.1%          9.5%
  Percent return on net sales before
    Accounting changes.......................                    2.1%          5.6%          13.3%          5.9%          4.2%
===============================================================================================================================
Employment:
  Number of employees........................                  13,800        13,700         13,180        12,260        12,040
  Wages, salaries and cost of employee
    benefits.................................          $      717,693       672,280        627,835       580,561       551,172
===============================================================================================================================
</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.

                                       11
<PAGE>


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

  The Company's two basic businesses, paper products and building materials, are
affected by changes in general  economic  conditions.  Paper  product  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  to  the  availability  and  terms  of  financing  for
construction.  The cost of wood and recycled fiber, basic raw materials for both
industry segments, is sensitive to various supply and demand factors,  including
environmental issues affecting log supply.

RESULTS OF OPERATIONS 1997 VS. 1996
-----------------------------------

  Net sales in 1997 remained  stable compared to 1996 as increases in sales from
building  materials  slightly  exceeded  decreases in sales from paper products.
Total paper product  sales were down 4.5% in 1997,  as sales prices  declined in
all product  lines except  specialty  paper  products and hardwood  market pulp.
While specialty paper products were flat compared to 1996,  hardwood market pulp
prices  increased  in every  quarter and ended the year up 11.0%.  In  addition,
fourth  quarter  price trends were up in all paper  product lines over the third
quarter of 1997. Unit shipment increases  partially offset sales price decreases
as volumes  increased  in every  product line except  grocery bags in 1997.  For
unbleached  products,  corrugated  container unit shipments increased 4.8% while
grocery bags decreased 4.6%. Increases achieved in the corrugated container line
were due to the new Portland,  Oregon,  sheet plant and the new  corrugated  box
plant in Plant  City,  Florida,  both of which came on line in the first half of
1997. Unit shipments of bleached products showed cut sheets increasing 20.3% and
continuous  forms up 1.4%,  while market pulp remained  steady with 1996 levels.
The cut sheet increase is the result of a growing  market share in  anticipation
of the #2 paper machine in  Hawesville,  Kentucky,  which comes on line in April
1998.

  Building  materials  sales  increased  11.0%  in 1997  compared  with  1996 as
increases in unit  shipments  more than offset  decreases in sales prices.  Unit
shipments  increased  in all  product  lines,  except  plywood,  due to capacity
increases  achieved through  acquisitions  and expansion from capital  projects.
Increases were realized from a full year of operation at the Warrenton,  Oregon,
sawmill;  the MDF plant in Clonmel,  Ireland; the converted MDF plant in Eugene,
Oregon;  and the OSB plant in Arcadia,  Louisiana.  As a result,  unit shipments
showed  increases  of 16.0% in lumber,  116.6% in OSB and 64.0% in MDF.  Plywood
incurred an 11.6% decrease in unit  shipments  primarily due to the July closure
of the Taylor, Louisiana,  plywood facility.  Additionally,  the Company entered
the export log market in 1997.  Sales  price  decreases  partially  offset  unit
shipment  increases as prices  declined in all product lines except  plywood and
European MDF. Plywood prices remained stable with a slight increase of 4.0% over
1996.  In addition,  the  European  MDF market  continued to be strong as prices
increased  5.5% over the  fourth  quarter

                                       12
<PAGE>


of 1996. Sales prices in remaining product lines decreased, ranging from 1.8% in
lumber to 15.9% in OSB, as supply and demand  imbalances  kept  prices  trending
downward.

  The gross  profit  margin for all products  was 13.7% for 1997  compared  with
18.3% for the same period in 1996.  Paper  product  gross  margins  decreased to
13.1% in 1997 compared  with 20.3% in 1996,  reflecting  the  depressed  selling
prices in 1997. Also negatively  affecting paper margins was the increase in OCC
costs of 12.2% in 1997  over  1996.  Building  materials  gross  profit  margins
slightly  increased to 14.9% in 1997 from 14.0% in 1996. The increase in margins
resulted primarily from the new market opportunities created in European MDF and
export log sales.

  Selling and  administrative  expenses  increased  to 7.1% of net sales in 1997
compared to 6.8% in 1996. Overall, selling and administrative expenses increased
5.8% over 1996 even with the  assimilation  of the  acquisitions  and expansions
that occurred in 1996.

  Interest expense was $117.0 million in 1997 compared to $92.8 million in 1996.
Interest  expense  increased as a result of  increased  debt related to the 1996
acquisitions  discussed  in  Note 9 to the  consolidated  financial  statements.
Partially offsetting the effects of increased  outstanding debt was the decrease
in the Company's  weighted  average interest rate from 7.12% in 1996 to 7.05% in
1997. In addition,  capitalized interest increased from $10.5 million in 1996 to
$19.9  million in 1997 due  primarily to the capital  expansion  at  Hawesville,
Kentucky.

RESULTS OF OPERATIONS 1996 VS. 1995
-----------------------------------

  Net sales  decreased by 11.6% in 1996 compared with the record levels achieved
in 1995.  Pricing in all paper product lines  decreased  throughout  1996 as the
market adjusted to further corrections of paper inventories.  As a result, paper
product sales  decreased by 16.6% as selling prices  decreased 14.6% or more for
all products. Unit shipments of unbleached products had mixed results in 1996 as
corrugated  containers increased 3.7%, while grocery bag shipments declined 9.0%
from 1995. For bleached products,  cut sheet shipments  increased by 22.0% while
continuous forms remained stable. The cut sheet increase is primarily due to the
sales from the new sheeter  production  at  Owensboro,  Kentucky,  added in late
1995.

  Building  materials  sales  increased  1.6%  in  1996  compared  with  1995 as
increases   in  sales   volume  more  than  offset   decreases  in  sales  price
realizations.  Although  lumber prices  marginally  increased  2.7% during 1996,
prices in the structural  panel and composite board markets saw declines ranging
from 4.1% to 16.0% due to supply and demand  imbalances  created by construction
of new facilities. Unit shipments increased in lumber, MDF and OSB primarily due
to capacity increases in 1996, achieved through  acquisitions and expansion from
capital  projects.  A sawmill in Warrenton,  Oregon,  was acquired in the second
quarter,  and a

                                       13
<PAGE>


new MDF plant in  Clonmel,  Ireland,  was  acquired  in the fourth  quarter.  In
addition,  the newly  converted  MDF plant in  Eugene,  Oregon,  and the new OSB
facility in  Arcadia,  Louisiana,  came on line in the first half of 1996.  As a
result, lumber and MDF sales volumes increased 25.2% and 28.9%, respectively, in
1996.

  The gross  profit  margin for all products  was 18.3% for 1996  compared  with
28.3% for the same period in 1995.  Paper  product  gross  margins  decreased to
20.3% in 1996  compared with 30.4% in 1995,  reflecting  the decrease in selling
prices in 1996 from the record levels in 1995. In addition,  increased  shutdown
days in 1996 to adjust for  inventory  buildup  in the  market  and for  capital
expansion  projects had a negative impact on margins.  Partially  offsetting the
effect of  decreased  sales and down time was the  decline in OCC costs by 40.0%
from 1995.

  Building materials gross margins decreased to 14.0% compared to 22.9% in 1995.
The decrease in building materials margins was the result of declining prices in
the structural panel and composite board markets.  Additionally,  start-up costs
associated  with the new OSB,  MDF and LVL  facilities  and the Custom  Products
relocation at Albany, Oregon, negatively impacted 1996 margins.

  Selling and  administrative  expenses  increased  to 6.8% of net sales in 1996
compared to 5.2% in 1995.  While the  increase  was due  primarily  to lower net
sales, selling and administrative expenses increased 14.9% in 1996 from 1995 due
to expansion of Company operations and costs of new facility start-ups.

  Interest  expense was $92.8 million in 1996 compared to $71.0 million in 1995.
Interest  expense  increased  as a  result  of  increased  debt  related  to the
acquisitions  discussed  in  note 9 to the  consolidated  financial  statements.
Partially  offsetting the increase in  outstanding  debt was the decrease in the
Company's  weighted  average interest rate from 7.67% in 1995 to 7.12% for 1996.
Additionally,  capitalized interest increased from $6.2 million in 1995 to $10.5
million in 1996 due to the significant capital projects underway.

                                       14
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

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

  In 1997,  cash  flows  from  operating  activities  were  $389.4  million  and
represented  a  decrease  of 40.9%  from  comparable  cash  flows in 1996.  This
decrease  was  primarily  due to a  decline  in net  earnings  during  1997  and
increases  in  accounts  receivable  and  inventories  compared  to  prior  year
decreases.  Internally generated cash flows funded 74.0% of capital expenditures
in 1997.

  Net working  capital  increased  to $308.1  million at December  31, 1997 from
$289.1  million at December 31, 1996.  The increase is primarily  attributed  to
increases in  inventories  and  receivables  largely due to new  facilities  and
inventory  buildups at our cut sheet  plants to prepare for the  start-up of the
new paper machine at Hawesville.

  The Company is continually  making capital  expenditures at its  manufacturing
facilities  to improve  fiber  utilization  and labor  efficiency  and to expand
production. In 1997, the Company made $506.3 million in capital expenditures for
property, plant and equipment.

  During 1997 the following major capital projects were completed:

         -    Expansion  of  pulping  capacity  at  the  Hawesville,   Kentucky,
              bleached pulp mill.

         -    Installation  of a recovery  boiler at the  Hawesville,  Kentucky,
              bleached pulp mill.

         -    Construction of a new corrugated box plant in Plant City, Florida.

         -    Modernization of the sawmill at Coburg, Oregon.

  Major capital projects underway at December 31, 1997 include the following:

         -    Addition of a new uncoated free sheet paper machine at Hawesville,
              Kentucky.

         -    Construction  and  installation  of a new  biomass  boiler  at the
              Kingsport, Tennessee, bleached pulp mill.

         -    Expansion of secondary fiber capacity at the paper mill in Campti,
              Louisiana.

         -    Construction of a new cut sheet plant in Brownsville, Tennessee.

         -    Upgrade of a paper machine at Johnsonburg, Pennsylvania.

         -    Relocation of a corrugated facility in Sacramento, California.

         -    Construction  of  a  new  integrated  LVL  and  I-joist  plant  at
              Simsboro, Louisiana.

         -    Construction of a new small-log sawmill at Taylor, Louisiana.

                                       15
<PAGE>


  The cost of all major  capital  projects in  progress at December  31, 1997 is
estimated  to be  approximately  $839.3  million,  of which  $545.7  million has
already been spent. These projects will be funded with internally generated cash
flows and with external borrowings if needed.

  In August 1997,  the Company filed a shelf  registration  statement  under the
Securities Act of 1933,  covering $500.0 million of debt and equity  securities.
In January  1998,  the Company  issued  $200.0  million in  debentures  - $100.0
million at 6.45% due 2005 and $100.0  million at 7.0% due 2018.  The proceeds of
the sale are to  replace  $144.5  million of notes  maturing  in 1998 and reduce
other bank  borrowing.  Thus, the issuance had no effect on the Company's  total
debt-to-capital ratio.

  In May 1996 the Company  acquired  the timber  operations  of Cavenham  Forest
Industries,  Inc.  (the  Cavenham  acquisition)  in  Louisiana  and the  Pacific
Northwest as discussed in Note 9 to the consolidated  financial statements.  The
Company funded the  acquisition  with cash and $1.1 billion of borrowing under a
Credit Agreement. In July 1996, the Company issued $400.0 million in debentures.
The  proceeds  from the sale were used to reduce  indebtedness  under the Credit
Agreement used to fund the Cavenham acquisition. Additionally, in November 1996,
the Company  completed the acquisition of Medite of Europe,  discussed in Note 9
to the  consolidated  financial  statements,  for $61.5  million  in cash,  plus
certain closing costs.

  The total  debt-to-capital ratio remained steady at 50.0% at December 31, 1997
compared  to 49.9%  at  December  31,  1996.  The  Company  believes  it has the
resources available to meet its short-term and long-term liquidity requirements.
Resources include internally  generated funds,  short-term  borrowing agreements
and the  unused  portion  of the  revolving  loan  available  under  the  Credit
Agreement.

  On August 5, 1997,  the Board of Directors  declared a 2-for-1  stock split of
its  outstanding  common stock.  The split was  implemented as a stock dividend,
payable  September  12,  1997 at the rate of one share of common  stock for each
share held of record on August 5, 1997.

  In April 1996, the Company increased the number of authorized shares of common
stock to 150,000,000 from 75,000,000.

                                       16
<PAGE>


OTHER MATTERS

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

  The  Environmental  Protection  Agency (EPA)  recently  signed the final rules
regarding air and water quality  referred to as the "cluster  rules".  The final
rules are  expected  to be released  sometime in the first  quarter of 1998 with
implementation  required  within  three years of the date of  issuance.  Certain
exceptions  to  the  rules  extend  the  time  period  for  specific  compliance
requirements up to eight years. The EPA has also provided an incentives  program
which will lengthen the  compliance  timeline if advanced  technologies  that go
beyond the  cluster  rules are  implemented.  In  addition  to the impact of the
cluster rules on pulp and paper mills,  the Company's other operations are faced
with increasingly stringent environmental regulations. 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 $120.0 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 competitive position.

  Much attention has been given to the controversy concerning  preservationists'
efforts to stop the harvest of timber from Federal timberlands.  Concurrent with
these efforts have come increased  regulations,  limitations and restrictions on
the  harvest  of timber  from  privately-owned  timberlands.  Current  rules and
regulations  do not  significantly  impact the  Company's  ability to manage its
timberlands on a sustained yield basis.

  The Company has been working to convert its  computer  systems to be year 2000
compliant since 1996. The conversion is expected to be completed in 1998 and has
been coordinated  with other  modifications  being made for other purposes.  The
costs  associated  with  conversion are primarily being expensed as incurred and
are not expected to have a material impact on the Company's financial position.

  Over the years,  inflation has resulted in replacement costs higher than those
originally  needed  to  purchase   existing  plants  and  equipment.   Advancing
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.

                                       17
<PAGE>


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 year 2000
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.

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.

                                       18
<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 1998 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.

                                       19
<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.

                  On November  17, 1997 the  Company  filed a current  report on
                  Form 8-K, reporting under Item 5 the resignation of Mr. Steven
                  R. Rogel as Chief Executive Officer and Director of Willamette
                  Industries, Inc.

                  On January 26,  1998,  the Company  filed a current  report on
                  Form  8-K,   reporting   under   Item  5  the   status  of  an
                  environmental   proceeding   and   receipt  of   Section   114
                  information requests from the Environmental  Protection Agency
                  and the filing  under Item 7 of certain  exhibits  relating to
                  the $200.0 million debentures issued in January 1998.

                                       20
<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/ J. A. PARSONS
Dated:   February 12, 1998               (J. A. Parsons)
                                         Executive Vice President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on February 12, 1998, by the  following  persons on behalf
of the registrant in the capacities indicated.


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

Principal Executive Officer
  and Director

/s/  WILLIAM SWINDELLS                 Chairman and Chief Executive Officer
    (William Swindells)

Principal Financial Officer

/s/  J. A. PARSONS                     Executive Vice President and
         (J. A. Parsons)               Chief Financial Officer, Secretary and
                                       Treasurer

Principal Accounting Officer

/s/  G. W. HAWLEY                      Vice President-Controller
         (G. W. Hawley)


/s/  GERARD K. DRUMMOND                Director
         (Gerard K. Drummond)


/s/ KENNETH W. HERGENHAN               Director
         (Kenneth W. Hergenhan)


/s/ C. W. KNODELL                      Director
        (C. W. Knodell)

                                       21
<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/ SAMUEL C. WHEELER                  Director
        (Samuel C. Wheeler)


/s/ BENJAMIN R. WHITELEY               Director
         (Benjamin R. Whiteley)

                                       22
<PAGE>


Index to Consolidated Financial Statements


                                                                        Page No.
                                                                        --------

Independent Auditors' Report.....................................            24

Consolidated Balance Sheets as of December 31, 1997 and 1996 ....            25

Consolidated Statements of Earnings for years ended
  December 31, 1997, 1996 and 1995...............................            26

Consolidated Statements of Stockholders' Equity
  for years ended December 31, 1997, 1996 and 1995...............            27

Consolidated Statements of Cash Flows for years ended
  December 31, 1997, 1996 and 1995...............................            28

Supplementary Business Segment Information.......................            29

Selected Quarterly Financial Data................................            30

Notes to Consolidated Financial Statements.......................         31-40

                                       23
<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, 1997 and 1996 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, 1997.  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 at December 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1997 in conformity with generally accepted  accounting
principles.




                              /s/ KPMG PEAT MARWICK LLP

Portland, Oregon
February 12, 1998

                                       24
<PAGE>


<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
====================================================================================================================================
December 31, 1997 and 1996
(dollar amounts, except per share amounts, in thousands)


Assets                                                                                                 1997               1996
                                                                                                 ---------------   -----------------
Current assets:
<S>                                                                                           <C>                  <C>
  Cash                                                                                        $           27,600              22,222
  Accounts receivable, less allowance for doubtful
    accounts of $4,571 (1996 - $4,460)                                                                   307,002             272,709
  Inventories (note 3)                                                                                   394,595             365,949
  Prepaid expenses and timber deposits                                                                    36,991              38,454
  Assets held for sale (notes 5 and 9)                                                                         -             160,218
                                                                                                 ---------------   -----------------
        Total current assets                                                                             766,188             859,552
                                                                                                 ---------------   -----------------
Timber, timberlands and related facilities, net (note 9)                                               1,396,946           1,444,873
Property, plant and equipment, net (notes 7 and 9)                                                     2,566,291           2,330,469
Other assets                                                                                              81,630              85,787
                                                                                                 ---------------   -----------------
                                                                                              $        4,811,055           4,720,681
                                                                                                 ===============   =================

Liabilities and Stockholders' Equity
Current liabilities:
  Current installments on long-term debt (note 5)                                             $           17,897               4,512
  Notes payable (note 5)                                                                                  64,000             200,000
  Accounts payable, includes book overdrafts of $49,421
      (1996 - $48,005)                                                                                   216,914             185,437
  Accrued payroll and related expenses                                                                    71,842              72,661
  Accrued interest                                                                                        38,339              38,336
  Other accrued expenses                                                                                  45,272              52,365
  Accrued income taxes (note 4)                                                                            3,831              17,107
                                                                                                 ---------------   -----------------
         Total current liabilities                                                                       458,095             570,418
                                                                                                 ---------------   -----------------
Deferred income taxes (note 4)                                                                           402,896             374,246
Other liabilities                                                                                         39,583              32,819
Long-term debt, net of current installments (note 5)                                                   1,916,001           1,766,917
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 111,349,956 shares
     (1996 - 110,707,308 shares)                                                                          55,675              27,677
  Capital surplus                                                                                        294,760             306,517
  Retained earnings                                                                                    1,644,045           1,642,087
                                                                                                 ---------------   -----------------
         Total stockholders' equity                                                                    1,994,480           1,976,281
                                                                                                 ===============   =================
                                                                                              $        4,811,055           4,720,681
                                                                                                 ===============   =================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       25
<PAGE>


<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS
====================================================================================================================================
Years ended December 31, 1997, 1996 and 1995
(dollar  amounts,  except per share amounts, in thousands)


                                                                                   1997              1996              1995
                                                                                 --------          --------          --------
<S>                                                                            <C>                 <C>               <C>      
Net sales                                                                      $ 3,438,664         3,425,173         3,873,575
Cost of sales                                                                    2,967,180         2,798,282         2,777,735
                                                                                 ---------         ---------         ---------
     Gross profit                                                                  471,484           626,891         1,095,840
Selling and administrative expense                                                 245,319           231,862           201,784
                                                                                 ---------         ---------         ---------
     Operating earnings                                                            226,165           395,029           894,056
Other income                                                                         2,088             3,861               798
                                                                                 ---------         ---------         ---------
                                                                                   228,253           398,890           894,854
Interest expense                                                                   116,990            92,804            71,050
                                                                                 ---------         ---------         ---------
     Earnings before provision for income taxes                                    111,263           306,086           823,804
Provision for income taxes (note 4)                                                 38,300           114,000           309,000
     Net earnings                                                              $    72,963           192,086           514,804
                                                                                 =========         =========         =========
Earnings per share(1)                                                          $      0.66              1.74              4.67
                                                                                 =========         =========         =========
Earnings per share - assuming dilution(1)                                      $      0.65              1.73              4.65
                                                                                 =========         =========         =========

Weighted average number of shares
  outstanding (in thousands):
    Earnings per share                                                             110,975           110,536           110,292
                                                                                 =========         =========         =========
    Earnings per share - assuming dilution(2)                                      111,550           111,032           110,826
                                                                                 =========         =========         =========
</TABLE>


(1) Per share  earnings  are based upon the  weighted  average  number of shares
outstanding.

(2) Weighted average shares outstanding, assuming dilution, are calculated using
the treasury stock method assuming all stock options are exercised. See note 8.

See accompanying notes to consolidated financial statements.

                                       26
<PAGE>


<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
====================================================================================================================================
Years ended December 31, 1997, 1996 and 1995
(dollar  amounts,  except per share amounts, in thousands)


                                                                                   1997              1996              1995
                                                                                 --------          --------          --------

Common Stock:
<S>                                                                          <C>               <C>               <C>      
  Balance at beginning of year                                               $    27,677             27,612           27,518
    2-for-1 stock split                                                           27,787                  -                -
    Shares issued for options exercised                                              211                 65              119
    Stock repurchased and cancelled                                                    -                  -              (25)
                                                                               ---------         ----------        ---------
  Balance at end of year                                                     $    55,675             27,677           27,612
                                                                               =========         ==========        =========
Capital Surplus:
  Balance at beginning of year                                               $   306,517            300,757          293,756
    2-for-1 stock split                                                          (27,787)                 -                -
    Shares issued for options exercised                                           16,030              5,760            9,689
    Stock repurchased and cancelled                                                    -                  -           (2,688)
                                                                               ---------         ----------        ---------
  Balance at end of year                                                     $   294,760            306,517          300,757
                                                                               =========         ==========        =========
Retained Earnings:
  Balance at beginning of year                                               $ 1,642,087          1,518,521        1,066,591
    Net earnings                                                                  72,963            192,086          514,804
    Less cash dividends on common stock
      ($.64,$.62, and $.57 per share in
      1997, 1996 and 1995 respectively)                                          (71,005)           (68,520)         (62,874)
                                                                               ---------         ----------        ---------
  Balance at end of year                                                     $ 1,644,045          1,642,087        1,518,521
                                                                               =========         ==========        =========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       27
<PAGE>


<TABLE>
-----------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
===================================================================================================================================
Years ended December 31, 1997, 1996 and 1995
(dollar amounts in thousands)

                                                                                   1997              1996              1995
                                                                                 --------          --------          --------
Cash flows from operating activities:
<S>                                                                           <C>                   <C>               <C>    
  Net earnings                                                                $    72,963           192,086           514,804
  Adjustments to reconcile net earnings
    to net cash from operating activities:
      Depreciation                                                                268,030           246,638           218,580
      Cost of fee timber harvested                                                 52,649            43,381            25,061
      Other amortization                                                           18,270            12,918             5,524
      Increase in deferred income taxes                                            28,650            40,717            98,425
  Changes in working capital items:
      Accounts receivable                                                         (34,293)           56,549           (31,015)
      Inventories                                                                 (28,646)           49,575          (135,267)
      Prepaid expenses and timber deposits                                          1,463            14,282             1,262
      Accounts payable and accrued expenses                                        23,568            11,810            18,229
      Accrued income taxes                                                        (13,276)           (8,692)            1,582
                                                                               ----------         ---------          --------
  Net cash from operating activities                                              389,378           659,264           717,185
                                                                               ----------         ---------          --------

Cash flows from investing activities:
      Proceeds from sale of equipment                                               2,493             1,781             2,000
      Expenditures for property, plant & equipment                               (506,348)         (454,744)         (411,985)
      Expenditures for timber and timberlands                                      (7,782)          (16,991)          (33,776)
      Expenditures for roads and reforestation                                    (13,778)          (14,034)           (7,762)
      Acquisitions (note 9)                                                             -        (1,019,274)                -
      Assets held for sale (notes 5 and 9)                                        160,218          (160,218)                -
      Other                                                                         9,624            (8,517)           (8,602)
                                                                               ----------         ---------          --------
  Net cash from investing activities                                             (355,573)       (1,671,997)         (460,125)
                                                                               ----------         ---------          --------

Cash flows from financing activities:
      Net change in operating lines of credit                                      23,985            28,962           (49,000)
      Debt borrowing                                                              175,415         1,211,950            79,010
      Proceeds from sale of common stock                                           16,109             5,697             9,635
      Repurchased common stock                                                          -                 -            (2,713)
      Cash dividends paid                                                         (71,005)          (68,520)          (62,874)
      Payment on debt                                                            (172,931)         (161,095)         (225,955)
                                                                               ----------         ---------          --------
  Net cash from financing activities                                              (28,427)        1,016,994          (251,897)
                                                                               ----------         ---------          --------

Net change in cash                                                                  5,378             4,261             5,163
Cash at beginning of year                                                          22,222            17,961            12,798
                                                                               ----------         ---------          --------
Cash at end of year                                                           $    27,600            22,222            17,961
                                                                               ==========         =========          ========

Supplemental disclosures of cash flow
information
   Cash paid during the year for:
       Interest (net of amount capitalized)                                   $   116,987            74,896            72,930
                                                                               ==========         =========          ========

      Income taxes                                                            $    22,926            81,663           208,993
                                                                               ==========         =========          ========


See accompanying notes to consolidated financial statements.
</TABLE>

                                       28
<PAGE>


<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTARY BUSINESS SEGMENT INFORMATION
====================================================================================================================================
(dollar amounts in thousands)
                                            1997    %          1996     %         1995    %           1994    %           1993    %
                                      ---------------  ------------------  ----------------  ------------------  ------------------
Sales to outside customers:
  Paper Group:
<S>                                 <C>           <C>     <C>         <C>    <C>        <C>      <C>        <C>      <C>       <C>
    Fabricated paper products       $  1,718,227   50     1,823,652    53    2,128,428   55      1,475,593   49      1,232,311   47

    Pulp and paper                       520,457   15       520,260    15      681,094   18        410,365   14        360,014   14
                                      ----------------  ------------------  ----------------  ------------------  ------------------
  Total Paper Group                    2,238,684   65     2,343,912    68    2,809,522   73      1,885,958   63      1,592,325   61
                                      ----------------  ------------------  ----------------  ------------------  ------------------

  Building Materials Group:
    Lumber                               248,401    7       218,153     7      169,753    4        188,445    6        184,287    7

    Plywood                              366,690   11       378,959    11      428,707   11        441,397   15        425,387   16
    Particleboard and MDF                349,652   10       277,375     8      272,336    7        292,153   10        234,123    9
    Other wood products                  235,237    7       206,774     6      193,257    5        199,996    6        186,115    7
                                      ----------------  ------------------  ----------------  ------------------  ------------------
  Total Building Materials Group       1,199,980   35     1,081,261    32    1,064,053   27      1,121,991   37      1,029,912   39
                                      ----------------  ------------------  ----------------  ------------------  ------------------
Total net sales (1)                 $  3,438,664  100     3,425,173   100    3,873,575  100      3,007,949  100      2,622,237  100
                                      ================  ==================  ================  ==================  ==================
Intersegment sales at market value:
  Building Materials Group          $     47,100             42,692             61,082              36,121              39,113
                                      ===========       ============        ===========       =============       =============
Gross Profit (GP):                                GP%                 GP%               GP%                 GP%                 GP%
                                                 -----              ------             -----               -----               -----
  Paper Group                       $    293,108   13       475,945    20      855,054   30        260,830   14        184,553   12
  Building Materials Group               178,376   15       150,946    14      240,786   23        290,682   26        246,236   24
                                      ================  ==================  ================  ==================  ==================
                                    $    471,484   14       626,891    18    1,095,840   28        551,512   18        430,789   16
                                      ================  ==================  ================  ==================  ==================
Operating earnings:
  Paper Group                       $    112,919   50       306,463    78      707,234   79        124,856   34         53,655   21
  Building Materials Group               113,246   50        88,566    22      186,822   21        241,957   66        202,721   79
                                      ----------------  ------------------  ----------------  ------------------  ------------------
    Total operating earnings             226,165  100       395,029   100      894,056  100        366,813  100        256,376  100
                                      ================  ==================  ================  ==================  ==================
Other income (expense)                     2,088              3,861                798              (6,377)             (3,918)
Interest expense                         116,990             92,804             71,050              71,513              63,290
Earnings before provision for
                                      -----------       ------------        -----------       -------------       -------------
  income taxes                      $    111,263            306,086            823,804             288,923             189,168
                                      ===========       ============        ===========       =============       =============

Depreciation, cost of fee timber
  harvested and amortization:
    Paper Group                     $    204,852            194,816            177,888             152,983             129,069
                                         134,097            108,121             71,277              64,269              65,133
                                      ===========       ------------        -----------       -------------       -------------
                                    $    338,949            302,937            249,165             217,252             194,202
                                      ===========       ============        ===========       =============       =============

Capital Expenditures:
  Paper Group                       $    438,394            342,268            300,145             298,931             323,952
  Building Materials Group                89,514            143,501            153,378              94,230              62,912
                                      -----------       ------------        -----------       -------------       -------------
                                    $    527,908            485,769            453,523             393,161             386,864
                                      ===========       ============        ===========       =============       =============

Identifiable assets:
  Paper Group                       $  2,701,778          2,409,719          2,359,462           2,090,399           1,884,017
  Building Materials Group             1,991,560          2,034,975            967,193             866,351             845,492
  Corporate                              117,717            275,987             86,900              76,648              75,044
                                      -----------       ------------        -----------       -------------       -------------
                                    $  4,811,055          4,720,681          3,413,555           3,033,398           2,804,553
                                      ===========       ============        ===========       =============       =============
</TABLE>


(1) The Company is not  dependent  on any one  significant  customer or group of
    customers.   Approximately  90%  of  the  Company's  total  output  is  sold
    domestically.

                                       29
<PAGE>

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


                                 Net      Gross           Net Earnings
                                                   -----------------------------
1997                            Sales    Profit     Amount      Per Share
--------------------------------------------------------------------------------
1st Quarter.............. $   837,663    109,296     13,317       .12
2nd Quarter..............     857,742    118,815     17,750       .16
3rd Quarter..............     872,823    122,668     20,697       .19
4th Quarter..............     870,436    120,705     21,199       .19
--------------------------------------------------------------------------------
     Total............... $ 3,438,664    471,484     72,963       .66
================================================================================


                                Net       Gross           Net Earnings
                                                   -----------------------------
1996                           Sales      Profit     Amount       Per Share
--------------------------------------------------------------------------------
1st Quarter.............. $   866,112    187,946     73,370       .67
2nd Quarter..............     858,792    153,985     48,254       .43
3rd Quarter..............     862,674    155,142     43,129       .39
4th Quarter..............     837,595    129,818     27,333       .25
--------------------------------------------------------------------------------
     Total............... $ 3,425,173    626,891    192,086      1.74
================================================================================

                                      30
<PAGE>

NOTES TO  CONSOLIDATED  FINANCIAL  STATEMENTS
December 31, 1997, 1996 and 1995 (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 23 states,  France,  Ireland and
Mexico.  The Company produces kraft linerboard,  corrugating  medium, bag paper,
fine  paper,  hardwood  market  pulp,  specialty  printing  papers,   corrugated
containers,  business forms, cut sheet paper, paper bags, inks, lumber, plywood,
particleboard,  medium  density  fiberboard,  oriented  strand board,  laminated
beams,  laminated  veneer lumber,  wooden  I-joists and other  value-added  wood
products.  The  Company's  principal  lines of business  are paper  products and
building  materials.  Based on sales,  paper  products  represent  approximately
two-thirds  of the Company's  business  with the balance  consisting of building
materials.  The Company sells 90% of its products in the United States  domestic
market and 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 which  substantially  increase the useful lives of
existing  plant and  equipment.  Maintenance,  repairs  and minor  renewals  are
expensed as incurred.  When properties are retired or otherwise 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 their  cost  less  the cost of fee  timber
harvested and the  amortization  of logging  roads.  Both the cost of fee timber
harvested and amortization  rates are determined with reference to costs and the
related existing volume of timber estimated to be recoverable.

                                       31
<PAGE>

     The  Company  obtains a portion of its  timber  requirements  from  various
sources under timber harvesting  contracts.  The Company does not incur a direct
liability  for,  or  ownership  of,  this  timber  until it has been  harvested;
therefore, the timber is not recorded until cut.

  (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 1997, 1996 and 1995 was $19,939, $10,534
and  $6,187   respectively  and  is  netted  against  interest  expense  in  the
consolidated statements of earnings. Such capitalized interest will be amortized
over the depreciable life of the related assets.

  (g) 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.

  (h) Business Segments
     The Company operates in two principal business segments: paper products and
building  materials.  Information  with respect to these segments is included in
the five-year comparison labeled "Supplementary Business Segment Information" on
page 29.

  (i) Restatements and Reclassifications
     All share and per share  amounts have been  restated to reflect the 2-for-1
stock split on September 12, 1997. Certain  reclassifications  have been made to
prior years' data to conform with 1997 presentation

  (j) Stock-Based Compensation
     The Company has elected to continue accounting for stock-based compensation
under Accounting  Principles Board Opinion #25 and has determined the effects of
adopting SFAS #123 would not have a material effect on the financial statements.

                                       32
<PAGE>
Note 3. Inventories
  The major components of inventories are as follows:
                                                   December 31,
                                           ----------------------------
                                              1997              1996
                                           ---------          ---------
Finished product.......................    $118,046            108,090
Work in progress.......................       7,404              6,182
Raw material...........................     187,912            175,480
Supplies...............................      81,233             76,197
                                           --------            -------
                                           $394,595            365,949
                                           ========            =======
Valued at:
  LIFO cost............................    $268,447            249,379
  Average cost.........................     126,148            116,570

  If  current  cost  rather  than  LIFO  cost  had  been  used  by the  Company,
inventories would have been approximately $62,662 and $46,261 higher in 1997 and
1996 respectively.

Note 4. Income Taxes
  The provision for income taxes includes the following:

                                            1997      1996      1995
                                          -------   -------   -------

Payable from taxable earnings.......... $  (4,350)   73,283   261,975
Payable (reduction) due to AMT.........    14,000         -   (51,400)
                                          -------   -------   -------
Currently payable......................     9,650    73,283   210,575
Deferred taxes due to temporary
  differences for:
    Accelerated depreciation...........    23,395    37,501    91,766
    Other..............................     5,255     3,216     6,659
                                          -------   -------   -------
      Total deferred ..................    28,650    40,717    98,425
                                          -------   -------   -------
      Total provision.................. $  38,300   114,000   309,000
                                          =======   =======   =======

Federal income taxes................... $  31,600    97,000   265,500
Other income taxes.....................     6,700    17,000    43,500
                                          -------   -------   -------
                                        $  38,300   114,000   309,000
                                          =======   =======   =======

  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:

                                                   1997    1996    1995
                                                   -----   -----   ----

Federal statutory rate.......................      35.0%   35.0%   35.0%
State income taxes, net of
  Federal tax effect.........................       2.3     3.6     3.4
Benefit from foreign taxes...................      (1.3)      -       -
Other........................................      (1.6)   (1.4)    (.9)
                                                   -----   -----   -----
                                                   34.4%   37.2%   37.5%
                                                   =====   =====   =====

                                       33
<PAGE>

  The Company's  consolidated  Federal income tax returns through 1993 have been
examined by the Internal Revenue Service and while final settlement has not been
made,  management  believes  that the Company has provided for all  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 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, 1997, the Company had $14,000 in AMT credits.

Note 5. Long-term Debt 
  Long-term debt consists of the following:
                                                      December 31,
                                                 ----------------------
                                                    1997        1996
                                                 ----------  ----------
Notes payable to public:
  7.00%, due in 1998.......................      $ 100,000    100,000
  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
  9.00%, due in 2021.......................        150,000    150,000
  7.35%, due in 2026(1)....................        200,000    200,000
  7.85%, due in 2026.......................        200,000    200,000

(1) Holders have the option to demand repayment in 2006.

Medium-term notes, with interest
  rates ranging from 5.82% to 7.20%,
  due in varying amounts through 2013......        150,000    150,000

Bank loans, with interest rates
  averaging 6.04% and 5.79%, due
  in varying amounts through 2001..........        709,264    705,766

Revenue bonds, with interest
  rates averaging 4.94% and 4.69%,
  due in varying amounts
  through 2026.............................        121,640    121,749

Other long-term debt, with
  interest rates averaging
  6.76% and 6.50%, due in
  varying amounts through 2006.............          2,994      3,914
                                                ----------  ---------
                                                 1,933,898  1,931,429
Less: Current installments.................         17,897      4,512
      Bank loans classified as Notes Payable             -    160,000
                                               -----------  ---------
                                               $ 1,916,001  1,766,917
                                               ===========  =========

                                       34
<PAGE>

   Principal  payment  requirements  on  the  above  debt  for  the  four  years
subsequent to 1998 are: 1999, $1,005;  2000,  $150,370;  2001,  $300,216;  2002,
$110,216.

   In January 1998,  the Company  issued  $200.0  million in debentures - $100.0
million at 6.45% due 2005 and $100.0  million at 7.0% due 2018.  The proceeds of
the sale were used to replace $144.5 million of notes maturing in 1998 and other
bank  borrowings.  Therefore,  the  related  debt  maturing  in  1998  has  been
classified as long-term at December 31, 1997.

   The  Company has a revolving  loan with a group of banks which  provides  for
borrowings  up to $1.0  billion in principal  amount and  provides  backup for a
Master Note program. At December 31, 1997, the outstanding balance covered under
the  revolving  loan was  $700,000.  At December 31, 1996,  $160,000 of the bank
loans were  classified as "notes payable" and correspond to the 1997 sale of the
"assets held for sale" and concurrent paydown of bank loans.

   The Company utilized short-term  borrowings with a number of banks at various
times  during 1997 and 1996 of which  $64,000 was  outstanding  at December  31,
1997. The weighted  average  interest rate on short-term  borrowings at December
31,  1997 and 1996 was 5.75%  and 5.61%  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  $2,014,421,  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.  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  $10,903,  $10,430  and  $8,857  in  1997,  1996  and  1995
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  noncontributory  defined  benefit  plans.  Retirement
benefits  are based on years of service and  compensation  prior to  retirement.
Total  pension  expense in 1997,  1996 and 1995 for all such plans was  $10,770,
$10,628 and $6,189 respectively.

   As advised by its actuaries,  the Company makes such contributions to provide
not only for benefits  attributed to past service,  but also for those  benefits
expected to be earned in the future.

                                       35
<PAGE>

  The net periodic  pension cost for 1997,  1996 and 1995 included the following
components:

                                                1997         1996        1995
                                                ----         ----        ----
                                                                      
Service cost of benefits earned                                       
  during the period ...................      $ 14,533       13,968      10,278
Interest cost on projected                                            
  benefit obligation ..................        22,576       20,132      18,451
Actual return on assets ...............       (80,136)     (50,017)    (70,087)
Net amortization and deferral .........        48,683       21,538      43,114
                                              -------      -------     -------
Net periodic pension cost .............      $  5,656        5,621       1,756
                                              =======      =======     =======
                                                                   
   Substantially  all  plan  assets  are  invested  in  stocks,  bonds  and cash
equivalents.  The following table sets forth the plans' funded status and amount
recognized in the Company's  consolidated  financial  statements at December 31,
1997 and 1996:

                                         December 31,
              ------------------------------------------------------------------
                           1997                          1996
              ------------------------------------------------------------------
              Assets Exceed     Accumulated     Assets Exceed   Accumulated
               Accumulated       Benefits        Accumulated     Benefits
                 Benefits      Exceed Assets       Benefits    Exceed Assets
              -----------      -------------    -----------    -------------
Actuarial present
  value of benefit
  obligations:
Vested benefit
  obligation     $(274,498)            (953)         (221,382)     (30,435)
                  ========          =======          ========      =======
Accumulated
  benefit
  obligation     $(291,276)          (1,149)         (233,562)     (34,635)
                  ========          =======          ========      =======
Projected
  benefit
  obligation     $(340,916)          (1,149)         (276,637)     (34,635)
Plan assets
  at fair value    459,915              996           358,675       31,701
                  --------          -------          --------      -------
Plan assets
  greater (less)
  than projected
  benefit
  obligation       118,999             (153)           82,038       (2,934)
Unrecognized
  net (gain)      (129,457)            (185)          (81,548)      (2,528)
Prior service
  cost not yet
  recognized in
  net periodic
  pension cost      12,095              285             5,628        3,806

                                       36
<PAGE>

Unrecognized
  obligation,
  net of
  amortization      (1,565)              (3)           (2,060)        (111)
                  --------         ---------         ---------    ---------
Prepaid pension
  cost (pension
  liability)
  recognized            72              (56)            4,058       (1,767)
                  ========         =========         =========    =========
Weighted average
  discount rate      7.25%             7.25%             7.25%        7.25%
                  ========         =========         =========    =========
Future compensation
  increase           5.0%              5.0%              5.0%         5.0%
                  ========         =========         =========    =========
Long-term rate
  of return          9.0%              9.0%              9.0%         9.0%
                  ========         =========         =========    =========

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 Accumulated  Postretirement  Benefit Obligation (APBO) as of December 31,
1997 and 1996 was:
                                                      1997       1996
                                                  --------     -------

Retirees........................................  $ 14,653      12,410
Other fully eligible participants...............     6,870       5,401
    Other active participants...................    12,754      13,865
                                                  --------     -------
                                                    34,277      31,676
Unrecognized loss...............................    (5,942)     (4,998)
                                                  --------     -------
APBO recognized in balance sheet................  $ 28,335      26,678
                                                  ========     =======
Weighted average discount rate..................      7.25%       7.25%
                                                  ========     =======

The components of net periodic postretirement expenses are as follows:

                                                      1997     1996    1995
                                                      ----     ----    ----

Service cost benefits earned in period.........   $  1,182    1,065     867
Interest cost on accumulated benefit obligation      2,290    2,103   2,043
Amortization of loss from earlier periods......        236      166      71
                                                     -----    -----   -----
Net expense....................................   $  3,708    3,334   2,981
                                                     =====    =====   =====
Weighted average discount rate.................       7.25%     7.0%    8.0%
                                                     =====    =====   =====

  For the year 1997, a 9.0% increase in the medical cost trend rate was assumed.
This rate  decreases  incrementally  to an ultimate  annual rate of 5.0%. A 1.0%
increase  in the  medical  trend  rate  would  increase  the APBO by $3,700  and
increase the net periodic postretirement expense by $470.

                                       37
<PAGE>

Note 7. Property, Plant and Equipment

  Property, plant and equipment accounts are summarized as follows:

                               Principal             December 31,
                                range of         ----------------------
                              useful lives       1997              1996
                              ------------       ----              ----

Land........................       -         $   39,389           37,270
Building Materials Group
  manufacturing facilities..    10 - 20         869,320          831,464
Paper Group
  manufacturing and
  converting facilities.....    10 - 30       3,197,338        2,889,067
Office equipment............     3 - 10          85,715           76,870
Leasehold improvements......  life of lease       6,443            6,300
Construction in progress....       -            386,292          256,732
                                              ---------        ---------
                                              4,584,497        4,097,703
Accumulated depreciation....                  2,018,206        1,767,234
                                              ---------        ---------
                                             $2,566,291        2,330,469
                                              =========        =========

Note 8. Stockholders' Equity

   The Company's 1995 Long-Term  Incentive  Compensation Plan (the Plan),  which
replaced an earlier 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. A summary of stock option activity is as follows:

                                         Option             Price
                                         Shares           Per Share
                                         ------           ---------
Outstanding December 31, 1994.......    2,465,622      $ 8.375-22.688
  Granted...........................      599,980          25.75
  Exercised.........................      488,688        8.375-22.688
  Cancelled or surrendered..........       13,306        8.375-25.75
                                      -----------       -------------
Outstanding December 31, 1995.......    2,563,608       11.625-25.75
  Granted ..........................      546,060          30.875
  Exercised.........................      251,494       11.625-25.75
  Cancelled or surrendered..........        9,480       11.625-30.875
Outstanding December 31, 1996.......    2,848,694       11.625-30.875
  Granted ..........................      776,940          30.563
  Exercised.........................      650,092       11.625-30.875
  Cancelled or surrendered..........      126,972       22.685-30.875
                                      -----------       -------------
Outstanding December 31, 1997.......    2,848,570       11.625-30.875
                                      ===========       =============

Shares exercisable..................    1,757,822      $11.625-30.875
                                      ===========       =============

                                       38
<PAGE>

   Restricted shares have been awarded to certain officers at no cost based upon
continued  employment and 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, 1997, 9,278 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 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 2000.

Note 9.  Acquisitions

   In  May  1996,  the  Company  acquired   approximately   1,088,000  acres  of
timberland,  a sawmill and related assets in Louisiana and the Pacific Northwest
from  Cavenham  Forest  Industries,  Inc.,  an  affiliate  of Hanson  PLC.  (the
"Cavenham  acquisition").  The  purchase  price for the  properties  was  $1.588
billion.  The  Company  sold  542,000  acres of the  acquired  property to third
parties for an aggregate  price of $641.0  million.  After giving  effect to the
sales to third parties,  the Company  acquired  546,000 acres of  timberland,  a
sawmill and related  assets for $947.0  million,  plus certain  closing costs of
approximately $10.0 million.

   In November 1996, the Company purchased the capital stock of Medite of Europe
Limited ("Medite") for $61.5 million in cash plus certain closing costs.  Medite
produces medium density fiberboard at its plant in Clonmel, Ireland.

   Both acquisitions were accounted for as purchases.  Supplemental  information
concerning the two acquisitions follows:

                                         Cavenham                    Medite
                                         --------                    ------
Cash purchase price                      $957,274                    62,000
                                         ========                    ======

Purchase price was allocated to:
  Current assets                         $    -                      29,913
  Timber and timberlands                  950,380                       -
  Property, plant and equipment             8,612                    60,569
    Debt assumed                              -                     (20,804)
    Other assets and liabilities           (1,718)                   (7,678)
                                        ----------                 ---------
                                         $957,274                    62,000
                                        ==========                 =========

                                       39
<PAGE>

Note 10.  Contingencies

   There are various 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  from  Exhibit  3A of  the
               registrant's quarterly report on Form 10-Q for the quarter ended
               March 31, 1996. [16]

3B.            Bylaws of the registrant as amended  through  February 12, 1998.
               [21]

4A.            Indenture dated as of March 15, 1983,  between registrant and The
               Chase Manhattan  Bank.  Incorporated by reference from 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 from 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,     authorized
               $1,000,000,000.  Incorporated  by reference from Exhibit 4 of the
               registrant's current report on Form 8-K/A, amendment No. 1, dated
               May 15, 1996.

9.             Not applicable.

10A.           Willamette  Industries,   Inc.  Deferred  Compensation  Plan  for
               Directors.  Incorporated  by  reference  from  Exhibit 10A of the
               registrant's  annual  report  on Form  10-K  for the  year  ended
               December 31, 1996 ("the 1996 Form-K").* [3]

10B.           Willamette   Industries,   Inc.  1986  Stock  Option  and  Stock
               Appreciation Rights Plan, as amended.  Incorporated by reference
               from Exhibit 10B of the 1996 Form 10-K.* [8]

10C.           Willamette  Industries,  Inc.  Retirement  Plan  for  Nonemployee
               Directors. Incorporated by reference from Exhibit 10C of the 1996
               Form 10-K.* [2]

                                       41
<PAGE>


10D.           Willamette  Industries  Inc.  Severance  Agreement with Key
               Management  Group.  Incorporated by reference from Exhibit 10D of
               the 1996 Form 10-K.* [13]

10E.           Willamette   Industries   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.* [16]

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

10G.           Consulting agreement dated October 1, 1997 between the registrant
               and William Swindells.* [4]

10H.           Rights Agreement dated as of February 26, 1990,  amended December
               3,  1996.  Incorporated  by  reference  from  Exhibit  10 of  the
               registrant's  quarterly report on Form 10-Q for the quarter ended
               June 30, 1997. [61]

10I.           Asset sale, purchase and transfer agreement dated March 12, 1996,
               between  Hanson  Natural  Resources   Company,   Cavenham  Energy
               Resources  Inc.,   Cavenham   Forest   Industries  Inc.  and  the
               registrant.  Incorporated  by  reference  from Exhibit 2.1 of the
               registrant's current report on Form 8-K/A, amendment No. 1, dated
               May 15, 1996.

10J.           Asset sale, purchase and transfer agreement dated April 11, 1996,
               between the  registrant  and Crown Pacific  Limited  Partnership.
               Incorporated  by reference  from Exhibit 2.2 of the  registrant's
               current  report on Form  8-K/A,  amendment  No. 1,  dated May 15,
               1996.

10K.           Asset sale, purchase and transfer agreement dated April 23, 1996,
               between  the  registrant  and   Temple-Inland   Forest   Products
               Corporation.  Incorporated  by reference  from Exhibit 2.3 of the
               registrant's current report on Form 8-K/A, amendment No. 1, dated
               May 15, 1996.

10L.           Asset sale, purchase and transfer agreement dated April 26, 1996,
               between the  registrant  and John Hancock  Mutual Life  Insurance
               Company, together with Addendum No. 1 thereto dated May 13, 1996.
               Incorporated  by reference  from Exhibit 2.4 of the  registrant's
               current  report on Form  8-K/A,  amendment  No. 1,  dated May 15,
               1996.

                                       42
<PAGE>

10M.           Management  agreement  dated May 15, 1996,  among the registrant,
               John Hancock Mutual Life Insurance Company,  Willamette  Columbia
               Timber Co. and Hancock Natural Resource Group, Inc.  Incorporated
               by reference from Exhibit 2.5 of the registrant's  current report
               on Form 8-K/A, amendment No. 1, dated May 15, 1996.

10N.           Right of first offer  agreement  dated May 15, 1996,  between the
               registrant  and  John  Hancock  Mutual  Life  Insurance  Company.
               Incorporated  by reference  from Exhibit 2.6 of the  registrant's
               current report on Form 8-K/A, amendment No.
               1, dated May 15, 1996.

10O.           Timber  supply   agreement  dated  May  15,  1996,   between  the
               registrant  and  John  Hancock  Mutual  Life  Insurance  Company.
               Incorporated  by reference  from Exhibit 2.7 of the  registrant's
               current  report on Form  8-K/A,  amendment  No. 1,  dated May 15,
               1996.

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]

13.            Not applicable.

16.            Not applicable.

18.            Not applicable.

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

22.            Not applicable.

23.            Consent of Independent Auditors to the incorporation by reference
               of their report dated  February  12,  1998,  in the  registrant's
               registration statements on Form S-3 and Form S-8. [1]

24.            Not applicable.

27.            Financial Data Schedule.  [1]

28.-98.        Not applicable.

99.            Description  of capital  stock.  Incorporated  by reference  from
               exhibit 99 of the registrant's  quarterly report on Form 10-Q for
               the quarter ended June 30, 1997. [4]

                                       43
<PAGE>

   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 10 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.

                                       44