<PAGE>
                       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, 2001       Commission file number 1-12545

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

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

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

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

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

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

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

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

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

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

                        $106,822,511 at February 22, 2002

          Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of the latest practicable date.

                Class                        Outstanding at February 22, 2002
     Common Stock, $.50 par value                   110,180,527 shares

                      DOCUMENTS INCORPORATED BY REFERENCE.
                                      NONE.

<PAGE>
                                      INDEX

<TABLE>
<CAPTION>
                                                                                                  Page
                                                                                                  ----
<S>                                                                                               <C>
Part I

Item 1.  Business.................................................................................. 1
         General..................................................................................  1
         Acquisition of the Company...............................................................  1
         Business Segment Information.............................................................  2
         White Paper..............................................................................  2
         Brown Paper..............................................................................  2
         Building Materials.......................................................................  3
         Timberlands..............................................................................  3
         Energy ..................................................................................  4
         Employees................................................................................  4
         Environmental Matters....................................................................  4
Item 2.  Properties...............................................................................  5
Item 3.  Legal Proceedings........................................................................  9
Item 4.  Submission of Matters to a Vote of Security Holders...................................... 11

Part II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.................... 12
Item 6.  Selected Financial Data.................................................................. 13
Item 7.  Management's Discussion and Analysis of Financial Condition and Results
           of Operations.......................................................................... 14
Item 7A. Quantitative and Qualitative Disclosures About Market Risk............................... 24
Item 8.  Financial Statements and Supplementary Data.............................................. 24
Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial
           Disclosure............................................................................. 24

Part III

Item 10. Directors and Executive Officers of the Registrant....................................... 25
Item 11. Executive Compensation................................................................... 28
Item 12. Security Ownership of Certain Beneficial Owners and Management........................... 38
Item 13. Certain Relationships and Related Transactions........................................... 39

Part IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.......................... 40
         Index to Consolidated Financial Statements............................................... 41
         Signatures............................................................................... 66
         Index to Exhibits........................................................................ 68
</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.
Willamette is a diversified, integrated forest products company with 106
manufacturing facilities in 24 states, France, Ireland and Mexico.

We operate in a very competitive industry consisting of hundreds of companies,
some larger and more diversified, others much smaller, producing only one or two
products. 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 believe our business operations have been characterized
by the following factors:

     -   our vertical integration.

     -   a decentralized organizational structure that encourages teamwork as
         well as individual initiative.

     -   our geographically diverse facilities.

     -   our focus on capital improvements directed to increasing the fiber and
         energy efficiency of our plants.

     -   our concentration on a focused, related range of products.

     -   our balance among white paper, brown paper and building materials.

     -   our 66% sawlog self-sufficiency and stewardship of our resources.

ACQUISITION OF THE COMPANY

In November 2000, Weyerhaeuser Company (Weyerhaeuser) launched an attempt to
acquire the company by means of an unsolicited tender offer. On January 28,
2002, the board of directors of the company amended the shareholder rights plan
so that it would not apply to an acquisition of the company's common stock by
Weyerhaeuser and entered into a definitive merger agreement with Weyerhaeuser.
Under the terms of the agreement, Weyerhaeuser will acquire all of the
outstanding shares of the company for $55.50 per share in cash. Weyerhaeuser
acquired control of the company on February 11, 2002, and the merger of a
subsidiary of Weyerhaeuser into the company is expected to be completed in
mid-March 2002 with the result that the company becomes a wholly owned
subsidiary of Weyerhaeuser. A transition team led by Richard E. Hanson,
Executive Vice President, Timberlands, for Weyerhaeuser, will be addressing
issues raised by the integration of the two companies over the next several
months.


                                       1
<PAGE>
BUSINESS SEGMENT INFORMATION

The company operates in three business segments: white paper, brown paper and
building materials. Sales and operating data for the three segments for the past
five years are set forth in the five-year comparison located on page 47 of this
report. The company is not dependent on any one significant customer or group of
customers. Approximately 89% of the company's total revenue is derived
domestically.

WHITE PAPER

Market Pulp and Fine Paper

Our four white paper mills manufacture uncoated free sheet. The company's two
pulp mills produce pulp for consumption at our fine paper mills, and also
produce bleached market pulp which is sold to outside customers. Chips from
nearby mostly non-controlled wood converting facilities serve as the primary
fiber source for our white paper products.

Communication Papers

Our five business forms plants manufacture continuous forms, generally with
pin-hole edges and usually separated by perforation, that are used by many
businesses, banks and commercial establishments for their computer-generated
form printing. Additionally, six cut sheet facilities make private brand and
Willamette brand (Willcopy(R) and PennCopy(R)) photocopy and cut sheet printer
paper. Business forms and cut sheets are marketed by our own sales force to a
variety of consumers and distributors.

BROWN PAPER

Brown Paper Mills

Our four brown paper mills located in the U.S. manufacture linerboard,
corrugating medium and bag paper. Our brown paper mills supply 98% of the needs
of our box and bag manufacturing plants. We acquire the remaining 2% of the
rollstock required by our converting operations from other brown paper
producers.

Recycled fiber, in the form of old corrugated containers, provides 60% of the
total fiber needs of our brown paper mills. The remaining 40% of our
requirements are in the form of wood chips. In Louisiana and Oregon, our
sawmills, plywood plants and timberlands can provide nearly all of our chip
needs for our linerboard mills. The remaining chip supply is purchased from
external sources.

In addition to our domestic brown paper mills, we also operate a small recycled
linerboard and corrugating medium mill in Mexico which supplies rollstock to our
converting operations in Mexico.


                                       2
<PAGE>
Corrugated Containers and Sheets

Our thirty-six domestic corrugated container and sheet plants manufacture
products ranging from colorful store displays to eye-catching preprinted boxes
to 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.

In addition, we operate four converting facilities in Mexico.

Bags

Our four bag plants make paper bags, marketed by our sales force to grocery,
department, drug and hardware stores as well as fast food chains in the West,
Midwest and South.

BUILDING MATERIALS

Lumber

Our nine sawmills manufacture lumber, which is marketed through independent
wholesalers and distributors throughout the United States.

Structural Panels

Plywood panels are manufactured at seven plants and oriented strand board (OSB)
is manufactured at one plant. Both products are marketed nationwide through
independent wholesalers and distributors.

Composite Panels

Our composite panel plants produce value-added products including color-coated,
laminated, fire-rated and moisture-resistant boards. In the U.S., we have five
particleboard plants and three medium density fiberboard (MDF) plants. Composite
panel products manufactured domestically are sold nationwide through independent
wholesalers and distributors.

We manufacture MDF at a facility in Ireland and a facility in France. The
company also manufactures particleboard at a facility in France. Nearly all
production from our European facilities is sold outside the United States.

Engineered Wood Products

We have two laminated beam plants, three laminated veneer lumber (LVL) plants,
and two I-joist plants. These engineered wood products are sold in both the
domestic and international markets.

TIMBERLANDS

Our 1,691,000 acres of timberland supply approximately 66% of our long-term
sawlog needs. The remainder is purchased through private timber sales and open
market purchases. Our timberlands are comprised of 732,000 acres in Louisiana,
Arkansas and Texas; 610,000 acres in Oregon; 177,000 acres in Tennessee; and
172,000 acres in the Carolinas.


                                       3
<PAGE>
ENERGY

Our manufacturing facilities are able to generate 61% of our total energy needs
by recovering energy from the burning of waste materials and the recycling of
spent pulping liquors.

EMPLOYEES

The company employs approximately 15,000 people, of whom 46% are represented by
labor unions with collective bargaining agreements. Agreements covering 867
employees expired in 2001 and were renegotiated and ratified. Agreements
involving about 595 hourly employees are subject to renewal in 2002.

Approximately 48% of all salaried employees have been with the company for more
than twelve years.

ENVIRONMENTAL MATTERS

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


                                       4
<PAGE>
Item 2. Properties

MANUFACTURING FACILITIES

The following table sets forth information regarding the company's 106
manufacturing facilities at December 31, 2001. All units of measure for building
materials facilities are volume-based, that is to say, length by width by
thickness, or basis. "M" refers to one thousand.

<TABLE>
<CAPTION>
           Facility                                       2001 Production
           --------                                       ---------------
<S>                                                  <C>
Building Materials
Plywood (7 Plants)                                   M Square Feet (3/8" Basis)
    Chester, South Carolina
    Dodson, Louisiana
    Emerson, Arkansas
    Foster, Oregon
    Moncure, North Carolina
    Springfield, Oregon
    Zwolle, Louisiana
Oriented Strand Board (1 Plant)
    Arcadia, Louisiana
          Total Structural Panels                              1,510,000
                                                               =========

Lumber (9 Mills)                                        M Board Feet (1" Basis)
    Chester, South Carolina
    Coburg, Oregon
    Dallas, Oregon
    Dodson, Louisiana
    Lebanon, Oregon (2 Mills)
    Taylor, Louisiana
    Warrenton, Oregon
    Zwolle, Louisiana
          Total Lumber                                           932,000
                                                               =========

Particleboard (6 Plants)                              M Square Feet (3/4" Basis)
    Albany, Oregon
    Bend, Oregon
    Bennettsville, South Carolina(1)
    Lillie, Louisiana
    Linxe, France
    Simsboro, Louisiana
          Total Particleboard                                    790,000
                                                               =========
</TABLE>

(1)  Production commenced in the third quarter of 2001.


                                       5
<PAGE>

<TABLE>
<CAPTION>
       Facility                                    2001 Production
       --------                                    ---------------
<S>                                           <C>
Medium Density Fiberboard (5 Plants)          M Square Feet (3/4" Basis)
    Bennettsville, South Carolina
    Clonmel, Ireland
    Eugene, Oregon
    Malvern, Arkansas
    Morcenx, France
          Total MDF                                      591,000
                                                       =========
Engineered Wood Products (7 Plants)
Laminated Beams                                      M Board Feet
    Simsboro, Louisiana
    Vaughn, Oregon
          Total Laminated Beams                           81,000
                                                       =========

Laminated Veneer Lumber                            Hundred Cubic Feet
    Albany, Oregon
    Simsboro, Louisiana
    Winston, Oregon
          Total LVL                                       50,000
                                                       =========

I-Joists                                             M Lineal Feet
    Simsboro, Louisiana
    Woodburn, Oregon
          Total I-Joists                                  60,000
                                                       =========

Veneer Plant
    Coburg, Oregon

Brown Paper
Linerboard & Corrugating Medium (5 Mills)                Tons
    Albany, Oregon
    Campti, Louisiana
    Hawesville, Kentucky
    Oxnard, California
    Xalapa, Mexico
       Total Brown Paper                               1,869,000
                                                       =========
</TABLE>


                                       6
<PAGE>

<TABLE>
<S>                                                          <C>
Corrugated Container and Sheets (40 Plants)                  M Square Feet
    Aurora, Illinois
    Beaverton, Oregon
    Bedford Park, Illinois
    Bellevue, Washington
    Bellmawr, New Jersey
    Bowling Green, Kentucky
    Cerritos, California
    Compton, California
    Dallas, Texas
    Delaware, Ohio
    Fort Smith, Arkansas
    Fridley, Minnesota
    Golden, Colorado
    Griffin, Georgia
    Huntsville, Alabama
    Indianapolis, Indiana
    Ixtac, Mexico
    Kansas City, Kansas
    Lincoln, Illinois
    Louisville, Kentucky
    Lumberton, North Carolina
    Maryland Heights, Missouri
    Matthews, North Carolina
    Memphis, Tennessee
    Mexico City, Mexico
    Monterey, Mexico
    Moses Lake, Washington
    Newton, North Carolina
    Oklahoma City, Oklahoma(2)
    Phoenix, Arizona
    Plant City, Florida
    Portland, Oregon
    Sacramento, California
    San Leandro, California
    Sanger, California
    Sealy, Texas
    St. Paul, Minnesota
    Tehuacan, Mexico
    Tulsa, Oklahoma
    West Memphis, Arkansas
          Total Corrugated Containers                           26,361,000
                                                                ==========
</TABLE>

(2)  Production commenced in December, 2001.


                                       7
<PAGE>

<TABLE>
<S>                                                <C>
Kraft Bags and Sacks (4 Plants)                            Tons
    Beaverton, Oregon
    Buena Park, California
    Dallas, Texas
    Kansas City, Missouri
          Total Kraft Bags and Sacks                       99,000
                                                        =========

Preprinted Linerboard (2 Plants)                      M Square Ft.
    Tigard, Oregon
    Richwood, Kentucky
          Total Preprinted Linerboard                   1,097,000
                                                        =========

Inks and Specialty Products (2 plants)                    Tons
    Beaverton, Oregon
    Delaware, Ohio
          Total Inks                                        7,200
                                                        =========

White Paper
Fine Paper (4 Mills)                                      Tons
    Hawesville, Kentucky
    Johnsonburg, Pennsylvania
    Kingsport, Tennessee
    Marlboro County, South Carolina
          Total Fine Paper                              1,451,000
                                                        =========

Market Pulp (2 Mills)                                     Tons
    Hawesville, Kentucky
    Port Wentworth, Georgia
          Total Market Pulp                               240,000
                                                        =========

Forms (5 Plants)                                          Tons
    Cerritos, California
    Chicago, Illinois(3)
    Dallas, Texas
    Indianapolis, Indiana
    Langhorne, Pennsylvania
    Rock Hill, South Carolina
          Total Forms                                     282,000
                                                        =========

Cut Sheets and Other Converting (6 Plants)                Tons
    Brownsville, Tennessee
    DuBois, Pennsylvania
    Kingsport, Tennessee
    Owensboro, Kentucky
    Tatum, South Carolina
    Washington Court House, Ohio
          Total Cut Sheets                                881,000
                                                        =========
</TABLE>

(3) Closing in the first quarter of 2002.


                                       8
<PAGE>
TIMBERLANDS

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

Item 3.  Legal Proceedings

On November 14, 2000, two shareholders of Willamette filed actions against
Willamette and its Board of Directors in Multnomah County (Oregon) Circuit
Court, entitled Crandon Capital Partners v. Shelk, et al., Multnomah County Case
No. 0011-11691, and Ray Ann Brown v. Willamette Industries, Inc., et al.,
Multnomah County Case No. 0011-11695. The original complaints alleged that
Willamette and the Board breached fiduciary duties in responding to and
rejecting an offer from Weyerhaeuser. Willamette and the Board moved to dismiss
the complaints, and plaintiffs filed a consolidated amended complaint on January
4, 2001. The amended complaint asserted claims for breach of fiduciary duty,
abuse of control, waste and unjust enrichment, and sought an injunction
preventing the Board from engaging in conduct designed to deter offers from
Weyerhaeuser and requiring Willamette to dismantle its rights plan and retention
benefits. Plaintiffs sought expedited discovery in support of their request for
preliminary injunctive relief and defendants moved to stay discovery. On January
25, 2001, the court entered an order staying discovery until such time as the
court determines that plaintiffs have stated a claim for relief. In response to
the court's order, plaintiffs stated that they would again amend their
complaint.

Plaintiffs filed a second amended complaint on December 18, 2001. In the second
amended complaint, plaintiffs assert derivative and class action claims against
Willamette and the Board for breach of fiduciary duty, abuse of control, waste,
and unjust enrichment stemming from the Board's rejection of Weyerhaeuser's
offers. Plaintiffs seek a declaration that the Willamette directors have
breached their fiduciary duties, an injunction requiring the directors to
negotiate with Weyerhaeuser and prohibiting them from acting to deter offers, an
accounting of unlawful corporate expenditures, undisclosed compensatory and
punitive damages, and attorney fees. Willamette and the Board have not yet
responded to the second amended complaint.

On January 4, 2002, two shareholders of Willamette filed a putative class and
derivative action against Willamette, its Chief Executive Officer, and certain
members of its Board of Directors in Multnomah County (Oregon) Circuit Court,
entitled Wyser-Pratte Management Co., Inc. v. Swindells, Multnomah County Case
No. 0211-00085 (the "Wyser-Pratte Complaint"). The Wyser-Pratte Complaint
alleges that the Willamette directors breached their fiduciary duties to the
Company and its shareholders by, among other things, rejecting Weyerhaeuser's
acquisition proposals without engaging in good faith negotiations and without
informed consideration of Weyerhaeuser's proposals. Plaintiffs seek (1) an
injunction preventing Willamette from consummating a


                                       9
<PAGE>
transaction with Georgia-Pacific and from thwarting Weyerhaeuser's tender offer,
(2) monetary damages for alleged injuries suffered as a result of the
aforementioned breach of fiduciary duties and (3) an award of costs and attorney
fees. The defendants' response to the second amended complaint is due March 4,
2002.

On January 8, 2002, plaintiffs in Wyser-Pratte filed a Motion for Leave to
Shorten Time to Take Discovery and a Motion for Preliminary Injunction seeking
to preliminarily enjoin (1) the consummation of any business combination between
Willamette and Georgia-Pacific, and (2) any agreement to a termination fee with
Georgia-Pacific or the taking of any other action that would have the effect of
discouraging Weyerhaeuser from pursuing and consummating a business combination
with Willamette. On January 10, 2002, Willamette filed a Motion to Consolidate
this action with Crandon Capital Partners and Brown. On January 10, 2002, all
pending motions were assigned to Judge Janice Wilson, who presides over the
Crandon Capital Partners and Brown actions, for consideration.

A hearing on the Motion for Leave to Shorten Time to Take Discovery and Motion
to Consolidate took place on January 16, 2002. At the hearing, the Court granted
Willamette's Motion to Consolidate. The Court also denied the plaintiffs' Motion
for Leave to Shorten Time to Take Discovery. A briefing schedule was arranged
for Willamette to move to dismiss the complaint. Willamette filed its motion to
dismiss on January 18, 2002. The plaintiffs' response to the motion to dismiss
is due March 25, 2002, and a hearing on the motion to dismiss is scheduled for
April 17, 2002.

On December 18, 2001, a Willamette shareholder filed a derivative action against
Willamette, its Chief Executive Officer, its Board of Directors, and
Georgia-Pacific in the United States District Court for the District of Oregon,
entitled Van Zwoll v. Swindells, Case No. CV01-1829 AS. Plaintiff claims that
the Willamette directors breached their fiduciary duties and entrenched
themselves by proceeding with a plan to acquire assets of Georgia-Pacific and by
refusing to negotiate with Weyerhaeuser. Plaintiff alleges that Georgia-Pacific
aided and abetted the Board's breach of its fiduciary duties. Plaintiff also
alleges that the directors violated Section 14(e) of the Exchange Act by failing
to disclose the existence of negotiations with Georgia-Pacific in a timely
manner. Plaintiff seeks a declaration that defendants have breached their
fiduciary duties and have violated Rule 14-9(c) under the Exchange Act, an
injunction preventing Willamette from consummating a transaction with
Georgia-Pacific and from thwarting Weyerhaeuser's tender offer, and an award of
costs and attorney fees.

Plaintiffs moved for a temporary restraining order preventing any transaction
with Georgia-Pacific from going forward on January 15, 2002. The motion was
withdrawn on January 16, 2002. Georgia-Pacific filed a Motion to Dismiss on
January 16, 2002. Plaintiff submitted to the Court a stipulation of dismissal of
Georgia-Pacific from this action on January 25, 2002. Willamette filed a motion
to dismiss the complaint on January 28, 2002. The plaintiffs' response to the
motion to dismiss is


                                       10
<PAGE>
due on March 8, 2002, and a hearing on the motion to dismiss is scheduled for
March 25, 2002.

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

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

There were no matters submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 2001.


                                       11
<PAGE>
                                     PART II

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

The company's common stock presently trades on the New York Stock Exchange
(NYSE) under the symbol WLL. At February 26, 2002, there were 1,114 record
holders of the company's common stock. The following table shows quarterly
dividends per share and the range of closing prices for 2001 and 2000. As of
February 14, 2002, Weyerhaeuser purchased approximately 97% of the company's
outstanding stock and expects to complete a merger of the company with another
Weyerhaeuser subsidiary in mid-March. Following the merger, Weyerhaeuser will
own 100% of the company's outstanding stock of the surviving corporation, and
holders of the company's stock other than Weyerhaeuser or its subsidiaries will
have the right to receive $55.50 in cash for each share of company common stock
outstanding immediately prior to the merger. The company expects that it will
pay no further cash dividends to unaffiliated shareholders.

<TABLE>
<CAPTION>
                         2001                         2000
              --------------------------  --------------------------
                               Closing                     Closing
              Dividends         Price      Dividends        Price
                Paid          High-Low       Paid          High-Low
              ---------   --------------  ----------   --------------
<S>           <C>        <C>              <C>          <C>
1st Quarter    $0.23      $48.14 - 44.80     $0.21     $48.25 - 33.19
2nd Quarter     0.23       50.65 - 45.45      0.21      41.69 - 27.25
3rd Quarter     0.23       50.47 - 40.75      0.21      33.69 - 26.13
4th Quarter     0.23       52.25 - 44.00      0.21      50.06 - 26.13
</TABLE>


                                       12
<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>
<CAPTION>
                                                            2001            2000            1999           1998          1997
                                                        -----------      ----------      ----------      ---------     ---------
<S>                                                     <C>              <C>             <C>             <C>           <C>
Net Sales ..........................................    $ 4,453,942       4,651,761       4,272,957      3,880,249     3,669,088
                                                        ===========      ==========      ==========      =========     =========
Costs and Expenses
      Depreciation, amortization and cost
          of fee timber harvested ..................    $   332,178         314,999         303,719        371,141       338,949
      Materials, labor and other
          operating expenses .......................      3,381,656       3,414,686       3,165,275      3,006,572     2,870,549
                                                        -----------      ----------      ----------      ---------     ---------
          Gross profit .............................        740,108         922,076         803,963        502,536       459,590
      Selling and administrative expenses ..........        274,372         268,819         253,694        239,792       233,425
      Non-recurring and other
          income (expense) - net ...................        (25,245)        (19,737)        (11,710)         2,029         2,088
                                                        -----------      ----------      ----------      ---------     ---------
          Operating earnings .......................        440,491         633,520         538,559        264,773       228,253
      Interest expense .............................         95,087         119,133         125,284        131,990       116,990
                                                        -----------      ----------      ----------      ---------     ---------
          Earnings before provision for
            income taxes ...........................        345,404         514,387         413,275        132,783       111,263
      Provision for income taxes ...................         96,600         169,500         152,800         43,800        38,300
                                                        -----------      ----------      ----------      ---------     ---------
          Net earnings .............................        248,804         344,887         260,475         88,983        72,963
      Cash dividends paid ..........................        100,974          92,443          77,984         71,227        71,005
                                                        -----------      ----------      ----------      ---------     ---------
      Earnings retained in the business ............        147,830         252,444         182,491         17,756         1,958
      Earnings before interest, taxes,
          depreciation & amortization (EBITDA) .....        772,669         948,519         842,278        635,914       567,202
      Capital expenditures .........................        593,742         398,888         290,246        441,839       527,908
                                                        ===========      ==========      ==========      =========     =========
Financial Condition
      Working capital ..............................    $   352,674         396,094         457,471        366,846       308,093
      Long-term debt (non-current portion) .........      1,530,881       1,542,926       1,628,843      1,821,083     1,916,001
      Total debt ...................................      1,649,964       1,670,425       1,645,716      1,870,602     1,997,898
      Stockholders' equity .........................      2,549,485       2,381,043       2,203,712      2,002,431     1,994,480
      Total assets .................................      5,325,149       5,129,107       4,797,861      4,697,668     4,811,055
      Debt-to-capital ratio ........................           39.3%           41.2%           42.8%          48.3%         50.0%
                                                        ===========      ==========      ==========      =========     =========
Common Stock
      Shares outstanding (in thousands)(1) .........        110,009         109,417         111,587        110,981       111,350
                                                        ===========      ==========      ==========      =========     =========
Per Share:(1)
      Net earnings-diluted .........................    $      2.26            3.12            2.33           0.80          0.65
      Cash dividends paid ..........................           0.92            0.84            0.70           0.64          0.64
      Stockholders' equity .........................          23.18           21.76           19.75          18.04         17.91
      Year-end stock price .........................          52.12           46.94           46.44          33.50         32.19
                                                        ===========      ==========      ==========      =========     =========
Financial Returns:
      Return on equity(2) ..........................           10.4%           15.7%           13.0%           4.5%          3.7%
      EBITDA return on average total assets ........           14.8%           19.1%           17.7%          13.4%         11.9%
      Return on average total assets ...............            4.8%            6.9%            5.5%           1.9%          1.5%
      Return on net sales ..........................            5.6%            7.4%            6.1%           2.3%          2.0%
                                                        ===========      ==========      ==========      =========     =========
Employment
      Number of employees ..........................         14,900          14,975          14,250         14,000        13,800
      Wages, salaries and cost of
          employee benefits ........................    $   814,966         807,183         781,392        734,068       717,693
                                                        ===========      ==========      ==========      =========     =========
</TABLE>

----------

(1)     All share amounts and per share amounts have been adjusted for stock
        splits.

(2)     Calculated on stockholders' equity at the beginning of the year.


                                       13
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

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

                       RESULTS OF OPERATIONS 2001 VS. 2000

Fiscal year 2001 reflected particularly weak economic trends and the events of
September 11, 2001 only compounded further the effects of a fragile economy.
Willamette was not immune to this downturn as consolidated net sales declined
$197.8 million, or 4.3%, and operating earnings declined $193.0 million, or
30.5%, in 2001 compared to 2000. However, despite these difficult times and the
significant distraction of the unsolicited tender offer initiated by
Weyerhaeuser during the fourth quarter of 2000, we continued to focus on the
management of our business.

WHITE PAPER operating earnings declined $84.8 million, or 40.9%, in 2001
compared to 2000, and net sales declined $30.1 million, or 2.1%. The decline in
white paper earnings was primarily driven by the weak economy, which put pricing
pressure on all product lines. Market pulp pricing was hit hardest due to
worldwide demand imbalances. Changes in unit shipments and net selling prices by
product were as follows:

<TABLE>
<CAPTION>
                                 Average Net             Unit
                                Selling Price          Shipments
                                -------------          ---------
<S>                             <C>                    <C>
Forms                                 0.5%                (6.8)%
Cut sheets                           (2.0)%               10.7%
Fine paper                           (1.3)%              (13.0)%
Hardwood market pulp                (36.6)%               32.9%
</TABLE>

Highlights and events significantly impacting the white paper segment in 2001
include:

-    Full year operation of our bleached pulp mill in Port Wentworth, Georgia.
     This acquisition allowed the company to reduce outside pulp purchases by
     78% in 2001.

-    Pricing remained stable for business forms, while volumes continued to
     decline year over year in this shrinking market.


                                       14
<PAGE>
-    Our cut sheet business realized double digit unit shipment increases
     despite overall industry declines from 2000, due to our strategy of
     developing new sales ahead of the completion of the Kingsport paper machine
     modernization scheduled for completion in the fall of 2002.

-    Higher energy and chemical costs reduced earnings for 2001 13.5% compared
     to 2000.

The effect of all these changes contributed to the decline in white paper gross
profit margins to 12.5% in 2001 from 18.1% in 2000.

BROWN PAPER operating earnings declined $38.2 million, or 10.7%, driven by a
decline in net sales of $36.4 million, or 2.1%, in 2001 compared to 2000. While
brown paper results were lower than in 2000, the segment still generated 72.0%
of the company's operating earnings. Net selling prices and unit shipments
changed in 2001 compared to 2000 as follows:

<TABLE>
<CAPTION>
                                              Average Net             Unit
                                             Selling Price          Shipments
                                             -------------          ---------
<S>                                          <C>                    <C>
Corrugated containers                            (1.0)%               (1.6)%
Grocery bags                                      0.1%                (5.1)%
</TABLE>

Notable trends and events impacting the brown paper segment in 2001 were as
follows:

-    International corrugated container volumes increased 36.3% from 2000 due to
     the impact of a full year of production from Mexican operations acquired in
     May 2000.

-    Domestic corrugated container volumes decreased 3.2% due to weakening
     industry-wide conditions in 2001.

-    OCC costs decreased 34.1% from 2000.

-    Manufacturing costs increased in 2001 over 2000, primarily due to energy
     costs. Energy costs were high throughout the first half of 2001, but began
     to stabilize late in the third quarter and ended the year on a downward
     trend.

-    Operation of our cogeneration facilities reduced our exposure to market
     spikes in energy prices.

-    For the year 2001, the brown paper segment's gross profit margin decreased
     to 24.6% from 26.1% in 2000.

BUILDING MATERIALS operating earnings declined $47.4 million, or 37.4%, in 2001
when compared to 2000. Net sales declined $131.3 million, or 9.1%, over the same
period. The building materials segment experienced extremely difficult markets
in 2001 and was the most influenced by the events of September 11, 2001. Our
results of operations reflected the following changes in net selling prices and
unit shipments:


                                       15
<PAGE>
<TABLE>
<CAPTION>
                                            Average Net              Unit
                                           Selling Price           Shipments
                                           -------------           ---------
<S>                                        <C>                     <C>
Oriented strand board                         (22.0)%                 11.6%
Plywood                                        (2.4)%                (17.5)%
Lumber                                         (7.9)%                  8.1%
Domestic particleboard                        (11.5)%                 (2.4)%
Domestic MDF                                    1.3%                   3.0%
International MDF                              (6.5)%                  1.7%
International Particleboard                    (4.8)%                 24.4%
</TABLE>

The building materials segment was affected in 2001 by the following factors:

-    Plywood volumes decreased due, in part, to closures of two facilities
     during 2000.

-    Pricing pressures affected most product lines in 2001, reflecting the
     struggling economy.

-    Energy costs were higher in 2001, although these costs began to stabilize
     late in the year.

-    Log costs declined 9.4% during the year.

As a result of these factors, building materials gross profit margins decreased
to 10.6% in 2001 from 13.8% in 2000.

SELLING AND ADMINISTRATIVE EXPENSES increased $5.6 million, or 2.1%. Selling and
administrative expense as a percentage of sales increased to 6.2% from 5.8% in
2000, mainly due to declining sales.

NONRECURRING AND OTHER INCOME/EXPENSE -- NET for the year 2001 includes the
following:

-    Pretax charge for unsolicited takeover defense costs of $24.3 million.

-    Pretax charge of $2.0 million for the costs of the partial closure of our
     Bend, Oregon, particleboard facility.

-    Pretax charge of $2.9 million related to equipment abandonments due to the
     modernization of our Dodson, Louisiana, sawmill.

-    $5.3 million pretax gain on the sale of non-strategic timberlands.

INTEREST EXPENSE decreased $24.0 million, or 20.2%, as a result of a decrease in
our weighted-average debt outstanding of $9.1 million and a decline in the
weighted average interest rate from 7.46% in 2000 to 6.65% in 2001. In addition,
capitalized interest increased to $15.0 million in 2001 from $5.2 million in
2000.

PROVISION FOR INCOME TAXES reflects an annual tax rate decline from 33.0% in
2000 to 28.0% in 2001 primarily due to energy tax credits earned by the company
and a reduction in earnings. In the fourth quarter of 2001, the company reduced
the estimated annual tax rate from 29.0% to 28.0%, resulting in a $0.03 per
share improvement in earnings for the fourth quarter.


                                       16
<PAGE>
                       RESULTS OF OPERATIONS 2000 VS. 1999

Consolidated net sales increased 8.9% and operating earnings increased 17.6% in
2000 compared to 1999. These positive results were attributable to improved net
sales and operating results in our white and brown paper segments, which
outpaced weak pricing in our building materials segment.

WHITE PAPER operating earnings increased 74.6% in 2000 compared to 1999,
reflecting the improvement in sales as follows:

<TABLE>
<CAPTION>
                                             Average Net           Unit
                                            Selling Price        Shipments
                                            -------------        ---------
<S>                                         <C>                  <C>
Forms                                           10.9%              (1.4)%
Cut sheets                                      11.7%              12.5%
Fine paper                                      13.3%               1.5%
Bleached market pulp                            29.6%              46.8%
</TABLE>

Year 2000 highlights for the white paper segment included:

     -   Commencement of a fine paper and pulp mill modernization project at
         Kingsport, Tennessee.

     -   Acquisition and start-up of a bleached pulp mill in Port Wentworth,
         Georgia.

     -   Operation of our Washington Court House, Ohio, cut sheet facility for
         its first full year.

     -   Permanent shutdown of the #2 specialty fine paper machine at
         Johnsonburg, Pennsylvania.

     -   Increased gross profit margin to 18.1% for the year, up from 14.0% in
         1999, despite increases in chip and energy costs.

     -   Strength in pulp pricing through most of 2000, despite softening
         beginning late in the third quarter of 2000 and continuing into the
         first quarter of 2001.

     -   Improved selling price trends from the third to the fourth quarter of
         2000, resulting in selling price improvements in all converted paper
         product lines.

BROWN PAPER operating earnings for 2000 increased 57.6% over 1999 on increased
sales of 15.9%. The sales results of our brown paper operations were as follows:

<TABLE>
<CAPTION>
                                           Average Net            Unit
                                          Selling Price        Shipments
                                          -------------        ---------
<S>                                       <C>                  <C>
Corrugated containers                         13.1%               4.3%
Grocery bags                                   6.8%              (4.7)%
</TABLE>


                                       17
<PAGE>
Notable trends and events affecting our brown paper segment in 2000 included:

     -   Acquisition of two converting operations and a small paper mill in
         Mexico.

     -   Start-up of our Phoenix corrugated facility.

     -   Increased old corrugated container (OCC) costs of 12.6% for the year as
         a result of high costs for the first five months of the year. However,
         a downward trend in OCC costs began in June 2000, favorably impacting
         the brown paper operating results in the second half of 2000.

Our cogeneration capabilities allowed us to decrease the impact of rising energy
costs during 2000.

BUILDING MATERIALS operating earnings decreased 45.9% in 2000 compared to record
levels set in 1999, reflecting the erosion in prices for lumber, structural
panels and international composite panel products, which began early in the
second quarter of 2000. Net sales in 2000 declined 7.5% from the prior year as
average sales prices and unit shipments changed as follows:

<TABLE>
<CAPTION>
                                           Average Net         Unit
                                          Selling Price      Shipments
                                          -------------      ---------
<S>                                       <C>                <C>
Oriented strand board                         (14.4)%          (7.8)%
Plywood                                       (16.0)%          (9.3)%
Lumber                                        (14.4)%           5.2%
Domestic particleboard                          2.7%            1.6%
Domestic MDF                                    4.2%            0.0%
International MDF                             (12.8)%           1.7%
</TABLE>

Items of significance impacting our building materials segment in 2000 included:

     -   Independent certification of our timberlands in Tennessee, North and
         South Carolina, Louisiana, Arkansas and Texas in compliance with the
         American Forest and Paper Association's Sustainable Forestry
         Initiativesm Program.

     -   The substantial decline in selling prices beginning in the second
         quarter of 2000 and continuing into 2001 due to rising interest rates,
         slowing housing starts, excess industry capacity, and an import/export
         trade imbalance as a result of the strong dollar.

     -   The first full year of operation of our particleboard plant in France,
         which was acquired in June 1999, and the expansion of the particleboard
         line at that facility, completed in December 2000.

     -   The start-up of a new small log sawmill in Chester, South Carolina, to
         utilize residual fiber from our adjacent plywood mill.

     -   The closure of our Dallas, Oregon, plywood plant in June 2000 and the
         closure of our Ruston, Louisiana, plywood plant in December 2000.


                                       18
<PAGE>
     -   An overall rise in energy costs affecting many building materials
         facilities.

     -   A decrease in log costs of 2.6% year-over-year and 15.2% from the
         fourth quarter of 1999 to the fourth quarter of 2000 as a result of
         lower purchased log costs and increased fee timber cut.

Our diversified product line and access to our own timberlands helps mitigate
the impact of lower average selling prices and unit volumes on the building
materials segment's earnings.

SELLING AND ADMINISTRATIVE EXPENSES increased $15.1 million or 6.0% in 2000 due
to the continued expansion of company operations. However, selling and
administrative expenses as a percentage of sales decreased to 5.8% in 2000 from
5.9% in 1999.

NON-RECURRING AND OTHER INCOME (EXPENSE) - NET for the year 2000 reflects the
following:

     -   A second quarter pretax charge totaling $5.1 million for the closure of
         the Dallas, Oregon, plywood plant and the final settlement costs for
         Clean Air Act allegations involving the company's building materials
         operations.

     -   A fourth quarter pretax charge of $4.0 million for the closure of the
         Ruston, Louisiana, plywood plant.

     -   A fourth quarter pretax charge of $8.0 million for unsolicited tender
         offer defense costs.

INTEREST EXPENSE decreased $6.2 million, or 4.9%, in 2000 to $119.1 million. The
reduction is a result of the offsetting impact of a $127.9 million decrease in
weighted average debt outstanding and an increase in the weighted average
interest rate from 7.16% in 1999 to 7.46% in 2000. In addition, capitalized
interest for 2000 increased to $5.2 million from $4.0 million in 1999.

PROVISION FOR INCOME TAXES reflects an annual tax rate decline from 37.0% in
1999 to 33.0% in 2000, mostly due to energy tax credits earned by the company.
In the fourth quarter of 2000, we reduced our estimated annual tax rate from
34.5% to 33.0%. The change in the tax rate resulted in a $.05 per share
improvement in earnings for the fourth quarter of 2000.

                         LIQUIDITY AND CAPITAL RESOURCES

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


                                       19
<PAGE>
Key financial measures for the company for the year ended December 31, 2001, as
compared to 2000, are as follows:

<TABLE>
<CAPTION>
                                              2001                2000
                                         --------------       --------------
<S>                                      <C>                  <C>
Cash flows fromoperating activities      $687.7 million       $690.5 million
Return on equity                               10.4%               15.7%
Return on average total assets                  4.8%                7.0%
Total debt-to-capital ratio                    39.3%               41.2%
</TABLE>

Cash flows from operations remained stable year over year even as net earnings
declined 27.9%. Internally generated cash funded substantially all of the
company's capital expenditures and dividends of $101.0 million in 2001.

Net working capital declined to $352.7 million from $396.1 million, primarily as
a result of a decrease in accounts receivable.

As of December 31, 2001, the company has two committed revolving loans with a
group of banks that provide for borrowings up to a total of $450 million. In
addition, at December 31, 2001, the company has available various uncommitted
lines totaling $495 million. Outstanding borrowings under these uncommitted
lines totaled $385 million including $110 million, which is classified as
short-term borrowing.

The company has classified $100 million of notes due in 2002 as long-term due to
the company's ability and intent to refinance this debt before maturity.

The company is generally able to meet its liquidity requirements through
internally generated funds. As a result of the change in control of the company,
effective February 11, 2002, any additional short-term liquidity needs are
provided by Weyerhaeuser Company.

                              CAPITAL EXPENDITURES

The company has historically made capital expenditures at its manufacturing
facilities to improve fiber utilization, labor efficiency, and energy
self-sufficiency and to expand production capability when market conditions
warranted. During the year 2001, the company incurred a total of $574.9 million
in capital expenditures for property, plant and equipment. Major capital
projects completed in 2001 included:

     -   Construction of a particleboard plant in Bennettsville, South Carolina.

     -   Construction and installation of a steam turbine generator at
         Hawesville, Kentucky.

     -   Expansion and relocation of both the Elk Grove, Illinois, corrugated
         container facility and the Tigard, Oregon, preprint facility.


                                       20
<PAGE>
     -   Modification of the Dodson, Louisiana, sawmill to allow utilization of
         small logs.

Major capital projects underway at the end of 2001 included:

     -   Modernization of the Kingsport, Tennessee, fine paper and pulp
         facility.

     -   Upgrade of our Port Wentworth, Georgia, bleached pulp mill to lower
         cost production of softwood pulp.

     -   Modernization of our MDF plant in Clonmel, Ireland with the
         installation of a new continuous press.

     -   Modernization of the Surepine, Louisiana, particleboard plant with the
         installation of a new continuous press.

     -   Modernization of the Albany, Oregon, pulp mill, including the
         installation of a continuous digester.

Our largest capital project underway is the Kingsport, Tennessee, facility
modernization. We expect the paper machine portion of the project to be
completed in the fall of 2002. We expect the pulp mill to be operational in the
latter part of the third quarter of 2003.

The cost of all major projects in progress at December 31, 2001 is estimated to
be approximately $819.6 million, of which $401.1 million has already been spent.
We expect to spend approximately $317.2 million on significant approved projects
in 2002, and approximately $89.8 million in 2003. These projects will be funded
with internally generated cash flows and, if necessary, external borrowings.

                                    DIVIDENDS

In 2001, the board declared a cash dividend of $.23 per share for each quarter,
representing a 9.5% increase from the quarterly dividend paid in 2000. As of
February 14, 2002, Weyerhaeuser had purchased approximately 97% of the company's
outstanding stock and expects to complete a merger of the company with another
Weyerhaeuser subsidiary in mid-March. The company expects that it will pay no
further cash dividends to unaffiliated shareholders.

                                  OTHER MATTERS

The company is committed to complying with federal, state, and local laws
regarding environmental quality. The company believes it is in substantial
compliance with these regulations.

In April 1998, the U.S. Environmental Protection Agency (EPA) published the
final rules regarding air and water quality known as the "cluster rules."
Requirements for the first significant compliance date, April 2001, were met by
all affected company mills through previously completed projects. Future
projects have been planned to ensure


                                       21
<PAGE>
compliance with all remaining cluster rule deadlines, which continue through
2006.

Whenever possible, the company chooses to comply with the cluster rules in
conjunction with capital upgrades, including plant modifications and
modernizations. We expect to spend approximately $92.0 million to achieve
compliance with the cluster rules. Of this amount, $53.0 million has already
been spent, including $5.0 million in 2001.

The company's operations are faced with increasingly stringent environmental
regulations. In 1997, the company received a series of requests for information
from the EPA under Section 114 of the Clean Air Act (CAA) with respect to the
company's building materials operations. The requests focused on compliance with
regulations under the Prevention of Significant Deterioration (PSD) Program
under the CAA. On May 7, 1998, the EPA issued a Notice of Violation (NOV)
alleging violations of the CAA and related state regulations, and on December
11, 1998, issued a second NOV supplementing and clarifying the first NOV. The
company signed a consent decree in June 2000 providing for implementation of a
compliance program, installation of pollution control technology at several
facilities at an estimated cost of $28.0 million, implementation of supplemental
environmental projects at a cost of $8.0 million, and payment of a civil penalty
of $11.0 million, plus interest. As of December 31, 2000, approximately $20.5
million had been paid for installation of the required pollution control
technology, penalties and interest. In January 2001, the company paid $4.0
million to certain states for supplemental environmental projects. During 2001,
the company spent $14.5 million to install required pollution control
technology.

In November 1998, the company received an information request from the EPA under
Section 114 of the Clean Air Act (CAA) for information related to the company's
Johnsonburg, Pa., pulp and paper mill. This request focused on compliance with
regulations under the Prevention of Significant Deterioration (PSD) program
under the CAA. Subsequently, on April 19, 1999, the company received an Notice
Of Violation (NOV) relating to the mill. The NOV alleges violations of the PSD
permit program under the CAA relating to two plant modifications. In December
1999, the company received a demand letter from the EPA to correct the alleged
violations contained in this NOV. Management has met with federal and state
officials to resolve the matters alleged in the NOV; however, there were no
significant developments in the matter during 2001.

In August 1999, the company received a Section 114 information request from the
EPA relating to the company's paper mill in Campti, La. The company responded to
the request in November 1999 and has met with state and federal officials
regarding the Campti mill.

Also, in March and November 1999, the company received Section 114 information
requests from the EPA relating to the company's paper mills


                                       22
<PAGE>
in Hawesville, Ky. In April 1999 and January 2000, the company provided the
requested information to the EPA.

In March 2000, the company received requests for information from the EPA under
Section 114 of the CAA related to the Bennettsville, S. C., and Kingsport,
Tenn., fine paper mills. The company responded to the requests in June 2000 and
has requested a meeting with the EPA to discuss the responses. The EPA issued
supplemental requests for the Bennettsville mill in November 2000, the Kingsport
mill in December 2000, and the Hawesville mills in January 2001. The company
submitted responses to these supplemental requests during the first four months
of 2001. The company met with the EPA in December 2001 to discuss the responses.
Future meetings are expected during 2002.

The company believes that the outcome of the foregoing proceedings and other
proceedings to which the company is a party will not have a material adverse
effect on the company's financial position.

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

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

                          CRITICAL ACCOUNTING POLICIES

Management considers its accounting policies for environmental accruals and
income taxes critical to the portrayal of the company's financial condition and
results of operations. These financial statement items require significant
judgment on the part of management. The uncertainty and estimates required in
each of these areas can affect operating earnings, as a result of charges for
environmental losses, and the provision for income taxes. The final outcome of
these uncertainties could be different from current estimations or have a
material impact on the results of operations of future periods.


                                       23
<PAGE>
                           FORWARD-LOOKING STATEMENTS

Forward-looking statements contained in this report are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements are subject to risks and uncertainties and
actual results could differ materially from those projected. Such risks and
uncertainties include, but are not limited to, 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; the impact of environmental regulations,
including the costs associated with complying with such regulations; and the
integration of the company's operations with those of Weyerhaeuser following
Weyerhaeuser's acquisition of control of the company in February 2002. 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 7A. Quantitative and Qualitative Disclosures About Market Risk

We believe we do not have any material exposure to market risk sensitive
instruments, positions, or transactions.

Item 8. Financial Statements and Supplementary Data

The financial statements and supplementary data filed as part of this report
immediately precede the signature page.

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

None.


                                       24
<PAGE>
                                    PART III

Item 10. Directors and Executive Officers of the Registrant

DIRECTORS

Under the definitive merger agreement between the company and Weyerhaeuser,
Weyerhaeuser became entitled to designate a number of directors of the company
representing a percentage of the company's board of directors approximately
equal to the percentage of shares purchased by Weyerhaeuser and its affiliates
in the tender offer. Accordingly, on February 11, 2002, Robert A. Dowdy, Richard
E. Hanson, Steven R. Rogel, and William C. Stivers became directors of the
company. The merger agreement also provides that the company's board of
directors will include at least three independent directors until the
effectiveness of the merger. Accordingly, Gerard K. Drummond, Stuart J. Shelk,
Jr., and Michael G. Thorne will continue to serve as directors of the company
until the merger.

Information regarding Willamette's current directors appears below.

Robert A. Dowdy, age 60, has been a director and Vice President and General
Counsel of the company since February 2002. Mr. Dowdy has also been Vice
President and General Counsel of Weyerhaeuser since 1997 and was Deputy General
Counsel from 1991 to 1997. He joined Weyerhaeuser in 1972. He is a member of the
Association of General Counsel; the American Forest and Paper Association,
General Counsel's Committee; the Advisory Counsel of the Kitsap County
Foundation; and the board of the Law Fund.

Gerard K. Drummond, age 64, has been a director of the company since 1991. From
July 1993 to June 1998, Mr. Drummond was of counsel to the law firm of Stoel
Rives LLP. Previously, he was Chairman of the Board of NERCO, Inc., a natural
resources company, its Chief Executive Officer (except during the period
February 1992 to November 1992), and Executive Vice President of PacifiCorp, a
public utility company.

Richard E. Hanson, age 58, has been a director and Executive Vice President and
Chief Operating Officer of the company since February 2002. He has been Senior
Vice President, Timberlands, of Weyerhaeuser since 1999 and was its Vice
President, Western Timberlands from 1996 to 1998. He joined Weyerhaeuser in 1970
and has held numerous management positions in the timberlands, wood products and
paper businesses. Mr. Hanson is a member of the advisory committee of the Oregon
State University Forest Research Laboratory and is a board member of Mountains
to Sound Greenway. He is also a member of the board of trustees for the Oregon
Zoo.

Steven R. Rogel, age 59, has been a director of the company since February 2002.
He has been a director of Weyerhaeuser since 1997 and chairman of the board
since 1999. Mr. Rogel has been Weyerhaeuser's President and Chief Executive
Officer since 1997. Prior to joining Weyerhaeuser, he served as the President
and Chief Executive Officer of


                                       25
<PAGE>
the company from 1995 to 1997 and as President and Chief Operating Officer of
the company from 1991 to 1995. He is a director of the Kroger Company, Union
Pacific Corporation and serves on the National Executive Board of the Boy Scouts
of America. He is also Chairman of the American Forest & Paper Association and
the National Council of the Paper Industry for Air Stream Improvement, Inc. and
is a trustee of Pacific University.

Stuart J. Shelk, Jr., age 57, has been a director of the company since 1983. Mr.
Shelk is Managing Director of Ochoco Management, Inc., which is the managing
general partner of Ochoco Lumber Company, a lumber manufacturer. Mr. Shelk has
been responsible for managing Ochoco Lumber Company for more than five years.
Mr. Shelk is also a director of Prineville Bancorp.

William C. Stivers, age 63, has been a director and Executive Vice President of
the company since February 2002. He has been Executive Vice President and Chief
Financial Officer of Weyerhaeuser since 1998 and was Senior Vice President and
Chief Financial Officer from 1990 to 1998. He joined Weyerhaeuser in 1970 and
has held numerous management positions in finance with both Weyerhaeuser and its
subsidiaries. Mr. Stivers is also a director of the Factory Mutual Insurance Co.

Michael G. Thorne, age 61, has been a director of the company since February
2000. Mr. Thorne became Executive Director of Washington State Ferries, a ferry
system operated by the State of Washington, in January 2002. From 1991 to May
2001, he was Executive Director of the Port of Portland. Mr. Thorne is also a
director of StanCorp Financial Group, Inc.

EXECUTIVE OFFICERS

The executive officers of the company are elected annually by the board of
directors. Upon the acquisition of control of the company by Weyerhaeuser on
February 11, 2002, Richard E. Hanson, C. Graham Kennedy, and William C. Stivers
were appointed officers of the company. At February 22, 2002, the executive
officers of the company, their ages at December 31, 2001, and their positions
with the company were as follows:

<TABLE>
<CAPTION>
Name                               Age               Position
----                               ---               --------
<S>                                <C>      <C>
Duane C. McDougall                  49      President and Chief
                                            Executive Officer

Marvin D. Cooper                    58      Executive Vice President -
                                            Pulp and paper mills

Richard E. Hanson                   58      Executive Vice President
                                            and Chief Operating Officer

Greg W. Hawley                      41      Executive Vice President

C. Graham Kennedy                   52      Chief Financial Officer
</TABLE>


                                       26
<PAGE>

<TABLE>
<S>                                <C>      <C>
William P. Kinnune                  62      Executive Vice President-
                                            Corrugated containers and bags

J. Eddie McMillan                   56      Executive Vice President -
                                            Building materials group

Michael R. Onustock                 62      Executive Vice President-
                                            Pulp and fine paper marketing

William C. Stivers                  63      Executive Vice President
</TABLE>

Each executive officer, excluding Messers. Hanson, Kennedy and Stivers, has been
employed by the company in his present or other senior management capacity for
more than five years. Mr. Hawley was also chief financial officer of the company
from 1999 until February 2002. Please see "Directors" above for additional
information about Messrs. Hanson and Stivers.

C. GRAHAM KENNEDY has been Chief Financial Officer since February 20, 2002 and
was Vice President from February 11, 2002 to February 20, 2002. He joined
Weyerhaeuser Company as its vice president, finance for Canada in 1999. Prior to
that time, he was vice president tax and controller for MacMillan Bloedel from
1998 until its acquisition by Weyerhaeuser in 1999, was vice president tax and
risk management of MacMillan Bloedel from 1997 to 1998 and its vice president,
taxation from 1995 to 1997. He joined MacMillan Bloedel in 1979.

There are no family relationships among the directors and executive officers of
the company.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Under Section 16 of the Securities Exchange Act of 1934, holders of more than 10
percent of the common stock and directors and certain officers of the company
are required to file reports ("Section 16 Statements") of beneficial ownership
of common stock and changes in such ownership with the Securities and Exchange
Commission and the New York Stock Exchange. The company is required to identify
in its proxy statements those persons who to the company's knowledge were
required to file Section 16 Statements and did not do so on a timely basis.
Based solely on a review of copies of Section 16 Statements furnished to the
company during and with respect to its most recent fiscal year and on written
representations from reporting persons, the company believes that each person
who at any time during the most recent fiscal year was a reporting person filed
all required Section 16 Statements on a timely basis, except that William
Swindells, a former director, filed one report relating to one transaction after
its due date.


                                       27
<PAGE>

Item 11.  Executive Compensation

                             EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth certain information concerning the compensation
of the company's chief executive officer and each of the company's four other
most highly compensated executive officers (the "named executive officers") for
each of the years in the three-year period ended December 31, 2001.


<TABLE>
<CAPTION>
                                                                  Long-Term
                                                              Compensation Awards
                                                     -------------------------------------
                                                                           Number of
                                                        Annual             Securities
                                                     Compensation       Underlying Options       All Other
Name and Principal Position(1)     Year                 Salary                (#)             Compensation (2)
------------------------------     ----              ------------       ------------------    ----------------
<S>                                <C>               <C>                <C>                   <C>
Duane C. McDougall                 2001               $1,266,667            170,010               $26,648
President and Chief Executive      2000                1,033,333             80,030                25,807
Officer                            1999                  866,667             50,800                26,936
--------------------------------------------------------------------------------------------------------------
William P. Kinnune                 2001                  564,000             45,530                30,129
Executive Vice President           2000                  528,000             32,010                30,390
                                   1999                  498,333             20,620                32,401
--------------------------------------------------------------------------------------------------------------
Michael R. Onustock                2001                  564,000             45,530                24,389
Executive Vice President           2000                  528,000             32,010                23,493
                                   1999                  497,667             20,530                24,607
--------------------------------------------------------------------------------------------------------------
Marvin D. Cooper                   2001                  520,000             40,470                22,971
Executive Vice President           2000                  453,333             25,410                21,729
                                   1999                  383,333             14,820                20,728
--------------------------------------------------------------------------------------------------------------
J.E. McMillan                      2001                  510,000             37,940                22,229
Executive Vice                     2000                  416,667             22,230                20,891
President                          1999                  333,333             12,700                21,751
--------------------------------------------------------------------------------------------------------------
</TABLE>
(1)  Includes principal capacities in which each officer served during 2001.

(2)  The amounts shown for 2001 represent (i) company contributions to its
     Stock Purchase Plan ("401(k) Plan"), a qualified plan under Section 401(a)
     of the Internal Revenue Code of 1986, as amended (the "Internal Revenue
     Code"), for the benefit of each of the named executive officers and to its
     1993 Deferred Compensation Plan for the benefit of such officers to the
     extent contributions would have been made to the 401(k) Plan had
     compensation subject to such plan included deferred compensation and had
     the Internal Revenue Code limits not been applicable and (ii) the imputed
     value to the named executives of a portion of the premiums paid for life
     insurance policies under which they are entitled to receive an interest in
     the cash surrender value. The amounts attributable to (i) 401(k) Plan and
     1993 Deferred Compensation Plan contributions and (ii) the imputed value of
     premiums, respectively, for each of the named executives for 2001 are as
     follows: Mr. McDougall, $17,500, $9,148; Mr. Kinnune, $17,500, $12,629; Mr.
     Onustock, $17,500, $6,889; Mr. Cooper, $17,500, $5,471; and Mr. McMillan,
     $17,500, $4,729.


                                       28
<PAGE>

Option Grants in Last Fiscal Year

The following table provides information as to options to purchase Common Stock
granted to the named executive officers during 2001 pursuant to the company's
1995 Plan. No stock appreciation rights ("SARs") were granted to any named
executive officers during 2001.

<TABLE>
<CAPTION>
                                                Individual Grants (1)
--------------------------------------------------------------------------------------------------------------------
                                                                                       Potential Realizable Value at
                                                                                       Assumed Annual Rates of Stock
                         Number of       Percent of                                    Price Appreciation for Option
                         Securities     Total Options                                             Term (4)
                         Underlying      Granted to                                    -----------------------------
                      Options Granted   Employees in    Exercise Price   Expiration
       Name                 (2)         Fiscal Year      Per Share(3)       Date
       ----           ---------------   ------------    --------------   ----------
                                                                                            5%             10%
                                                                                        ----------     -----------
<S>                   <C>               <C>             <C>              <C>            <C>            <C>
Duane C. McDougall        170,010         15.55%           $47.16          3/7/11       $5,042,271     $12,778,104
William P. Kinnune         45,530          4.17%            47.16          3/7/11        1,350,359       3,422,076
Michael R. Onustock        45,530          4.17%            47.16          3/7/11        1,350,359       3,422,076
Marvin D. Cooper           40,470          3.70%            47.16          3/7/11        1,200,286       3,041,761
J.E. McMillan              37,940          3.47%            47.16          3/7/11        1,125,250       2,851,604
</TABLE>

--------
(1)  On January 28, 2002, pursuant to the recommendation of the Compensation
     Committee and consistent with industry practices and in the ordinary course
     of business, the board determined to grant to eligible employees options to
     acquire shares of Common Stock and granted executive officers of Willamette
     options to acquire an aggregate of 422,880 shares of Common Stock. These
     options are not reflected in the table above because they were granted
     subsequent to the company's 2001 fiscal year end.

(2)  Options were granted for the numbers of shares indicated at an exercise
     price equal to the fair market value of the Common Stock on the date of
     grant. The options, which have terms of ten years and two days, become
     exercisable as follows: 33 1/3 percent after one year, an additional 33 1/3
     percent after two years, and the remainder after three years; provided,
     that the options will become exercisable in full upon the officer's death,
     disability or retirement. See "Termination of Employment and Change in
     Control Arrangements and Related Matters."

(3)  Subject to certain conditions, the exercise price and tax withholding
     obligations related to exercise may be paid by delivery of previously
     acquired shares of Common Stock.

(4)  The amounts shown are hypothetical gains based on the indicated assumed
     rates of appreciation of the Common Stock compounded annually over the full
     term of the options.


                                       29
<PAGE>

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values

Information regarding exercises of stock options by the named executive officers
during 2001 and unexercised options held by them as of December 31, 2001, is
summarized in the table set forth below. The named executives did not exercise
any SARs during 2001 and did not hold any in-the-money SARs at year-end.

<TABLE>
<CAPTION>
                                                           Number of Shares Underlying            Value of Unexercised
                                                             Unexercised Options at              In-the-Money Options at
                                                               December 31, 2001                  December 31, 2001(2)
                                                           -----------------------------      ----------------------------
                              Number of
                               Shares        Value
                             Acquired on    Realized
Name                           Exercise       (1)          Exercisable     Unexercisable      Exercisable    Unexercisable
----                         -----------    --------       -----------     -------------      -----------    -------------
<S>                          <C>            <C>            <C>             <C>                <C>            <C>
Duane C. McDougall                0             $0           180,657          183,633         $2,106,472      $1,451,394
William P. Kinnune                0             $0           127,291           58,569          2,096,425         506,707
Michael R. Onustock            16,000        $367,022        113,891           58,539          1,810,850         506,561
Marvin D. Cooper                5,720        $165,094         96,098           48,862          1,742,330         414,028
J.E. McMillan                     0             $0           127,291           44,348            871,604         370,165
</TABLE>

(1)  Represents the difference between the fair market value of the shares of
     Common Stock received on exercise of stock options at the date of exercise
     and the option exercise price.

(2)  Calculated based on the difference between the closing sale price of the
     Common Stock, $52.12, reported on the New York Stock Exchange on December
     31, 2001, and the aggregate exercise price of the unexercised options. All
     options reflected in the table were granted at an exercise price equal to
     the fair market value of a share of Common Stock on the date of grant.

Pension Plan

The retirement plan ("Retirement Plan") that the company maintains for its
salaried employees (including officers) provides for payment of retirement
benefits generally based upon an employee's years of service with the company
and compensation level. Funding of the Retirement Plan is actuarially
determined. The company also maintains a supplemental retirement plan
("Supplemental Plan") under which salaried employees (including officers)
receive retirement benefits substantially equal to those the Retirement Plan
would have provided but for certain limitations required by the Internal Revenue
Code. On January 28, 2002, the company's board of directors approved an
amendment to the Supplemental Plan to enable four employees without 15 years of
vesting credits to begin drawing benefits at age 55 at a reduced rate.


                                       30
<PAGE>

The following table shows the aggregate estimated annual benefits payable under
the Retirement Plan and the Supplemental Plan upon retirement (assuming normal
retirement at age 65) for unmarried employees at specified compensation levels
(based upon the highest average of five consecutive years) with various years of
service (assuming continuous full-time employment with the company from date of
hire to date of retirement):

<TABLE>
<CAPTION>
                                                  Years of Service
-----------------------------------------------------------------------------------------------------------------
Remuneration                15              20              25              30              35              40
-----------------------------------------------------------------------------------------------------------------
<S>                      <C>             <C>             <C>              <C>             <C>             <C>
    $ 400,000             96,042         128,056         160,070          192,083         224,097         254,097
      500,000            120,792         161,056         201,320          241,583         281,847         319,347
      600,000            145,542         194,056         242,570          291,083         339,597         384,597
      700,000            170,292         227,056         283,820          340,583         397,347         449,847
      800,000            195,042         260,056         325,070          390,083         455,097         515,097
      900,000            219,792         293,056         366,320          439,583         512,847         580,347
    1,000,000            244,542         326,056         407,570          489,083         570,597         645,597
    1,100,000            269,292         359,056         448,820          538,583         628,347         710,847
    1,200,000            294,042         392,056         490,070          588,083         686,097         776,097
    1,300,000            318,792         425,056         531,320          637,583         743,847         841,347
    1,400,000            343,542         458,056         572,570          687,083         801,597         906,597
    1,500,000            368,292         491,056         613,820          736,583         859,347         971,847
-----------------------------------------------------------------------------------------------------------------
</TABLE>

Compensation used in determining retirement benefits consists of the employee's
regular fixed salary, including amounts deferred at the election of the employee
and contributed to the company's 401(k) Plan. With respect to the named
executive officers, such compensation is the amount shown for the officers under
"Salary" in the Summary Compensation Table above.

The credited years of service for each of the named executive officers is as
follows: Mr. McDougall, 22; Mr. Kinnune, 40; Mr. Onustock, 29; Mr. Cooper, 22;
and Mr. McMillan, 30.

The benefits payable upon retirement are single-life annuity amounts and are not
subject to any deduction for Social Security or other offset amounts. The level
of benefits is based in part upon the average of the Social Security wage bases
for the 35 years ending with Social Security retirement age. Amounts shown in
the table are based upon the Social Security covered compensation for an
employee attaining age 65 in 2001. Retirement benefits may be reduced from the
amounts shown in the case of early retirement (or other early termination of
employment), in the case of a married employee whose benefits are paid in the
form of a joint and survivor annuity and in the case of an employee whose
employment with the company has not been continuous. Special provisions in the
Retirement Plan may apply in the case of death or disability or upon a change in
control of the company; there are also provisions relating to the computation of
years of service for vesting or benefit purposes in the case of service with
certain employers acquired by the company at various times in the past.


                                       31
<PAGE>

           COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Compensation Committee

During 2001, Messrs. Drummond and Thorne served on the Company's Compensation
Committee, as well as former directors Kenneth W. Hergenhan and Benjamin R.
Whiteley, who served until June 2001, and Winslow H. Buxton, who served until
February 2002.

Transactions and Relationships

Ochoco Lumber Co. sells wood products to, and purchases such products from, the
company in the ordinary course of business at prevailing market prices. During
2001, such transactions amounted to approximately $726,000. Mr. Shelk is
Managing Director of the managing general partner of Ochoco Lumber Co.

In the ordinary course of business at prevailing market prices, the company
obtained credit and other banking and financial services from Wachovia
Corporation. For the year 2001, such financial services amounted to
approximately $323,000. Mr. G. Joseph Prendergast, a former director of the
company, retired from his position as President and Chief Operating Officer of
Wachovia Corporation in 2001.


                            COMPENSATION OF DIRECTORS

Fees

Each director of the company who is not also an employee of the company or a
subsidiary (a "non-employee director") receives a retainer fee of $30,000 per
year. Committee chairs receive an additional retainer of $2,500 per year. In
addition, each non-employee director receives a fee of $1,500 for each board
meeting attended and $1,000 for each committee meeting attended.

Under the 1999 Deferred Compensation Plan for non-employee directors, they may
elect to defer directors' fees. The plan, which is unfunded, replaced a prior
deferred compensation plan; amounts deferred under the prior plan as well as
amounts accrued under a prior retirement plan have been transferred to accounts
under the new plan. Deferred amounts accrue increases or decreases as if they
were invested in one or more of the investment funds available under the
company's 401(k) Plan as specified by a participating director.

Stock Options

Under the 1995 Plan, each person who was a non-employee director at the date of
the 1995 annual meeting of shareholders was granted an option to purchase 2,000
shares of Common Stock (an "Initial Option") and each person who subsequently
became a non-employee director, other than a former officer of the company or a
subsidiary, was also granted an

                                       32
<PAGE>

Initial Option. In addition, on the date of each subsequent annual meeting of
shareholders, an option for 1,200 shares of Common Stock (2,000 shares
commencing with the 2001 annual meeting) (an "Annual Option") has been granted
to each person who was then a non-employee director and who was continuing to
serve as a director, including former officers of the company or its
subsidiaries.

Options granted to non-employee directors under the 1995 Plan were granted at an
exercise price equal to the fair market value of the Common Stock on the date of
grant, had terms of ten years and two days, and were exercisable as specified
(i) in note (2) to the table under "Option Grants in Last Fiscal Year" above and
(ii) under the heading "Termination of Employment and Change in Control
Arrangements and Related Matters" below. The Annual Options granted to the
non-employee directors on the date of the 2001 annual meeting were granted at an
exercise price of $48.78 per share, the fair market value of the Common Stock on
that date. The Initial Options granted to Messrs. Robert C. Lane and Thomas M.
Luthy and Ms. Evelyn C. Sroufe, all former directors of the company, in July of
2001 were granted at an exercise price of $49.49, the fair market value of the
Common Stock on the date of grant.

Consulting Agreement

The company entered into a consulting agreement with Mr. Swindells effective
upon his ceasing to be chief executive officer of the company under which Mr.
Swindells agreed to provide consulting services to the company. Under the
consulting agreement, Mr. Swindells received consulting fees equal to $120,000
during 2001 as well as certain secretarial services and office space, and was
reimbursed for certain expenses including dues for a business club. The
consulting agreement provides that, while Mr. Swindells receives fees under the
agreement, he will not receive the annual retainer fees payable to other
non-employee directors of the company. The consulting agreement was renewed in
December 2001 and is renewable for an additional year unless terminated by
either party upon 30 days' notice prior to renewal.

TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS AND RELATED MATTERS

Change in Control Agreements

The company has agreements (the "CIC Agreements") with certain of its key
employees, including the named executive officers, all other officers, and the
Senior Employees (defined below), that provide for severance compensation for
the employees in the event their employment with the company is terminated
subsequent to a Change in Control (defined below) of the company under the
circumstances set forth in the CIC Agreements. Pursuant to the CIC Agreements,
each employee has agreed to remain in the company's employ following a tender
offer or exchange offer for more than 20 percent of the company's outstanding
voting securities until such offer has been abandoned or terminated or a Change

                                       33
<PAGE>

in Control has occurred and unless the company reduces the employee's
compensation.

If, within 36 months following a Change in Control, the employee's employment
with the company is terminated by the company without Cause (defined below) and
other than by reason of disability or death or by the employee with Good Reason
(defined below), then the company is required to pay to the employee, upon
demand, his full base salary through the date of termination at the rate in
effect on the date of the Change in Control, together with all benefits to which
the employee is then entitled under the terms of all benefit plans in which he
is then a participant, including without limitation all amounts due to or
accrued to the employee's benefit (including benefits designated as change in
control benefits) under the company's Supplemental Benefits Plan and 1993
Deferred Compensation Plan, plus severance compensation in an amount equal to
the Applicable Percentage (defined below) multiplied by the sum of (a) his
annual base salary at the above-specified rate, plus (b) the average of the two
most recent annual incentive compensation grants (if any) paid or accrued for
his benefit (prior to any deferrals) prior to the date on which the Change in
Control occurs, including compensation attributable to the value of stock
options or SARs (based on the Black-Scholes option pricing model) and restricted
stock granted during those two grant periods, plus (c) the average annual
matching contributions made by the company on his behalf to the company's Stock
Purchase Plan and 1993 Deferred Compensation Plan in respect of the two fiscal
years of the company last ended prior to the fiscal year in which the Change in
Control occurs. The employee will also be entitled to a cash payment equal to
the sum of (A) the excess of the Change in Control Price (defined below) over
the option price for each share covered by outstanding unexercised options
(whether or not then exercisable) to purchase Common Stock held by the employee
on the date the Change in Control occurs (unless exercised before the payment is
made) plus (B) the product of the Change in Control Price and the number of
shares covered by outstanding restricted stock awards. Any severance payments
otherwise payable under the CIC Agreements will be reduced by amounts payable
under other company plans or employment agreements providing for severance
benefits. Special payment provisions apply in the event of the employee's death
or disability.

The CIC Agreements further provide for the continuation of all employee benefit
plans and arrangements, with certain exceptions, until the earlier of the
expiration of the Benefit Term (defined below) or attaining the age of 65
following termination of employment after a Change in Control except by death,
by the company for Cause or disability or by the employee other than for Good
Reason. Each employee party to a CIC Agreement is also entitled to be reimbursed
for reasonable amounts incurred for outplacement services and for any reasonable
legal fees and expenses he may incur in enforcing his rights under the CIC
Agreement. The CIC Agreements also provide for reimbursement for any excise tax
imposed on such benefits plus any related federal, state, and local income and
excise taxes imposed on such reimbursement payments.

                                       34
<PAGE>

For all employees covered by a CIC Agreement who remained an employee of the
company on the date the change in control occurred, the CIC Agreements are
automatically extended to the earlier of December 31, 2005, or the date of the
employee's normal retirement date under the company's Retirement Plan.

The total amount that may be payable to employees of the company covered by CIC
Agreements if, within 36 months following a Change in Control, all of such
employees' employment is terminated without Cause or with Good Reason, is
$92,712,000 plus additional payments that may be necessary to reimburse the
employees for any excise tax liabilities on such benefits and any related income
and excise taxes imposed on such reimbursement payments.

Complete definitions of Applicable Percentage, Cause, Change in Control, Change
in Control Price and Good Reason are included in the CIC Agreements. Summaries
of those definitions, which are necessarily incomplete, as well as the
definitions of Benefit Term and Senior Employees, are set forth below.

"Applicable Percentage" means (i) in the case of 24 key employees, 300 percent,
(ii) in the case of the Senior Employees, 200 percent and (iii) in the case of
one additional employee, 100 percent, in each case reduced (if the employee is
age 62 or older as of the date of termination of employment) by 8.33 percent for
each full month that his age exceeds 62 at that date.

"Benefit Term" means (i) in the case of 24 employees, 36 months, (ii) in the
case of the Senior Employees, 24 months and (iii) in the case of one additional
employee, 12 months.

"Cause" with respect to the termination of an employee's employment by the
company means termination because, and only because, the employee committed an
act of fraud, embezzlement or theft constituting a felony, or an act
intentionally against the interest of the company which causes it material harm,
or because of his repeated failure, after written notice, to perform his
responsibilities under the CIC Agreement. For this purpose, an employee cannot
be deemed to have been terminated for Cause unless and until the board of
directors of the company (by an affirmative vote of not less than 75 percent of
the entire board membership) adopts a resolution (after an opportunity for the
employee and his counsel to appear and be heard before the board) expressly
finding that the employee was guilty of conduct constituting Cause and
specifying in detail the particulars of such finding.

"Change in Control" means, (a) subject to certain exceptions, the acquisition by
a person or group of beneficial ownership of 20 percent or more of the combined
voting power of the company's outstanding voting securities, (b) a change in the
composition of the board such that the directors at the date of the CIC
Agreement cease to constitute at least a majority of the board, unless the
election or nomination of each new

                                       35
<PAGE>

director was approved by two-thirds of the directors then in office other than
directors whose initial assumption of office occurs as the result of an actual
or threatened election contest or solicitation of proxies other than on behalf
of the board of directors, (c) with certain exceptions, any reorganization,
consolidation or merger of the company or any sale or other transfer of
substantially all its assets or (d) approval by the shareholders of the company
of a plan or proposal for its liquidation or dissolution. For purposes of the
CIC Agreements, the acquisition of the company common stock by Weyerhaeuser
pursuant to the closing of its tender offer constituted a Change in Control.

"Change in Control Price" means the greater of (a) the highest per share sale
price for the common stock as traded on the New York Stock Exchange on the date
of the Change in Control or (b) the total market value of the highest amount of
consideration to be received for a share of Common Stock by any shareholder of
the company in connection with the Change in Control. For this purpose, the
Change in Control Price is $55.50 per share of the company's common stock.

"Good Reason" with respect to the termination by an employee of his employment
with the company means (a) subject to certain exceptions, any change in the
employee's status or position with the company which in his reasonable judgment
represents a demotion, (b) a reduction in the employee's base salary, (c) the
failure by the company to continue in effect for the employee certain benefit
plans and policies or a material reduction in the employee's future benefits
thereunder, (d) the failure of the company to credit the number of paid vacation
days to which the employee is entitled under the company's normal vacation
policy, (e) the transfer of the employee to a different location, (f) the
failure of any successor to the company to expressly assume the company's
obligations under the CIC Agreement, (g) a purported termination by the company
of the employee's employment which is not effected in accordance with the CIC
Agreement, (h) a refusal by the company to continue to allow the employee to
engage in certain activities not related to the company's business, or (i) (with
respect to 10 employees only, including the named executive officers, and Greg
W. Hawley, Executive Vice President and Chief Financial Officer) the employee's
voluntary termination of employment during the 30-day period commencing with the
first anniversary of the Change in Control.

"Senior Employees" means 37 non-officer employees of the company that receive an
annual salary equal to or greater than $144,000 and certain other employees
deemed advisable by the Board.

1995 Long-Term Incentive Compensation Plan (1995 Plan)

Under the 1995 Plan, the acquisition of the company by Weyerhaeuser constituted
a change in control of the company that was approved by the company's board of
directors. Under the change in control provisions of the 1995 Plan and the
provisions of the merger agreement, each employee holding stock options (and any
stock appreciation right related to a stock option) granted under the 1995 Plan
and outstanding prior to the

                                       36
<PAGE>

consummation of Weyerhaeuser's tender offer for the company's common stock,
became entitled to surrender each outstanding option (and stock appreciation
right) in exchange for a cash payment equal to the excess of $55.50 over the per
share exercise price under the option. Any outstanding options under the 1995
Plan that are not exchanged for cash will be automatically converted (as of the
closing of the merger) into fully vested options to purchase Weyerhaeuser common
stock (Adjusted Options). The number of shares of Weyerhaeuser common stock
subject to each Adjusted Option will equal the product of the number of shares
of the company's common stock remaining subject to the option immediately before
the merger multiplied by a Conversion Ratio (as defined in the merger
agreement). The per share exercise price of each Adjusted Option will be the per
share exercise price of the original option divided by the Conversion Ratio. The
merger agreement also addresses (i) the length of time the Adjusted Option will
remain exercisable, (ii) the treatment of a termination for good reason or other
than for cause (as those terms are defined in the merger agreement) within one
year after the merger as a positive elimination, and (iii) treatment of any
termination of employment after the merger and after the option holder reaches
age 55 as coincident with early retirement (as defined in the merger agreement),
and (iv) termination of employment after the merger and after the option holder
reaches age 65 as coincident with retirement (as defined in the merger
agreement).

Employee Retention Plans

Following commencement of Weyerhaeuser's initial tender offer, the board and the
Compensation Committee continued to consider the recommendations of the
company's human resources consultants, Towers Perrin, and continued to review
industry practices concerning change in control severance benefits. In view of
the continuing need to minimize employee distraction, to retain employee loyalty
and dedication to the company, to assure their attention to the company's
performance and to provide an incentive to prospective employees to accept
offers, the board and the Compensation Committee approved two employee retention
plans in late 2000, a Management Retention Benefits Plan and a Broad-Based
Retention Benefits Plan for Salaried Employees, that provide enhanced change in
control severance benefits to Willamette's salaried employees other than
officers and top management personnel. Under these plans a covered employee will
be provided severance protection, continuation of medical benefits, and
outplacement assistance if the employee's employment ends (due to involuntary
termination without "cause" or resignation for "good reason," as those terms are
defined in the plans) after a change in control of Willamette. Severance
benefits under the two plans range from three weeks pay per year of service
(with a minimum of nine weeks) to six weeks pay per year of service (with a
maximum of 104 weeks).


                                       37
<PAGE>

Stock Purchase Plan (401(k) Plan)

The 401(k) Plan provides that upon a change in control of the company, all
participants' accounts under the 401(k) Plan become immediately and fully
vested.

Indemnification and Personal Liability

Pursuant to the provisions of the company's Restated Articles of Incorporation
and the provisions of indemnification agreements between the company and each of
its directors and officers, the company is obligated (subject to certain
conditions) to hold harmless and indemnify its directors and officers, to the
fullest extent authorized under the Oregon Business Corporation Act, against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlements actually and reasonably incurred by such indemnified person. In
addition, as permitted by its Restated Articles of Incorporation, the company
maintains director and officer liability insurance coverage for its directors
and officers. In the merger agreement with the company, Weyerhaeuser agreed to
honor the company's indemnification obligations for acts or omissions by the
company's directors and officers prior to effectiveness of the merger.

Under the provisions of the company's Restated Articles of Incorporation, no
director of the company shall have any personal liability to the company or its
shareholders for monetary damages for conduct as a director, except that the
liability of a director for monetary damages is not eliminated or limited for
any breach of the director's duty of loyalty to the company or its shareholders,
for acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law, for any distributions that are unlawful under the
Oregon Business Corporation Act, for any transaction from which the director
derived an improper personal benefit, or for any act or omission that occurred
prior to April 21, 1988.

See Item 3 above for a description of pending legal proceedings against the
company, its president and chief executive officer, and certain of its current
and former directors.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

As of February 14, 2002, Weyerhaeuser purchased approximately 97% of the
company's outstanding common stock and expects to complete a merger of the
company with another Weyerhaeuser subsidiary in mid-March that will result in
Weyerhaeuser owning 100% of the company's outstanding stock. Following the
merger, the holders of the company's stock other than Weyerhaeuser or its
subsidiaries will have the right to receive $55.50 in cash for each share of
company common stock . Pursuant to a merger agreement entered into with the
company, all options to acquire company stock became fully vested as of February
11, 2002 and were either surrendered for cash or, as of the effective date of
the merger, will become options to purchase Weyerhaeuser stock in an amount and
at an

                                       38
<PAGE>

exercise price per share adjusted by a conversion ratio based on the merger
price of $55.50 per share and the market price of Weyerhaeuser stock.

The following table provides information regarding shares of company common
stock beneficially owned by each of the company's directors, each of the named
executive officers referred to in the Summary Compensation Table in Item 11
above, and the company's current directors and executive officers as a group.
The total shares shown as beneficially owned represent less than 1 percent of
the outstanding shares of company common stock at February 25, 2002. All of the
shares listed in the table represent shares of common stock subject to employee
stock options which are immediately exercisable, but as to which the holders
have agreed to accept options to purchase shares of common stock of Weyerhaeuser
as of the effective date of the merger as described above.

<TABLE>
<CAPTION>
                                         Shares of Common Stock Beneficially
       Name                                  Owned at February 25, 2002
       ----                              -----------------------------------
<S>                                      <C>
Marvin D. Cooper                                     124,730
Robert A. Dowdy                                         0
Gerard K. Drummond                                      0
Richard E. Hanson                                       0
William P. Kinnune                                   113,110
Duane C. McDougall                                   422,580
J. E. McMillan                                        94,670
Michael R. Onustock                                  113,020
Steven R. Rogel                                         0
Sturat J. Shelk, Jr.                                    0
William C. Stivers                                      0
Michael G. Thorne                                       0

All directors and executive officers
as a group (14 persons)                              964,450
</TABLE>

Item 13.  Certain Relationships and Related Transactions

Information regarding certain relationships and related transactions is be set
forth above under the heading "Compensation Committee Interlocks and Insider
Participation

                                       39
<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 on page 41.

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

(b)               Reports on Form 8-K.

                  No reports on Form 8-K were filed during the quarter ended
                  December 31, 2001.







                                       40
<PAGE>

Index to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                                   Page No.
                                                                   --------
<S>                                                                <C>
Independent Auditors' Report.....................................      42

Consolidated Balance Sheets as of December 31, 2001 and 2000 ....      43

Consolidated Statements of Earnings for years ended
  December 31, 2001, 2000 and 1999...............................      44

Consolidated Statements of Stockholders' Equity
  for years ended December 31, 2001, 2000 and 1999...............      45

Consolidated Statements of Cash Flows for years ended
  December 31, 2001, 2000 and 1999...............................      46

Supplementary Business Segment Information.......................      47

Selected Quarterly Financial Data................................      48

Notes to Consolidated Financial Statements.......................   49-65
</TABLE>







                                       41
<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, 2001 and 2000 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, 2001. 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Willamette
Industries, Inc. and subsidiaries as of December 31, 2001 and 2000, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America.




KPMG LLP
Portland, Oregon
February 11, 2002


                                       42
<PAGE>
-----------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
================================================================================
December 31, 2001 and 2000
(dollar amounts, except per share amounts, in thousands)



<TABLE>
<CAPTION>
                                                                        2001                2000
                                                                     ----------         ----------
<S>                                                                  <C>                    <C>
Assets
   Current assets:
     Cash                                                            $   21,777             24,284
     Accounts receivable, less allowance for doubtful
       accounts of $4,334 (2000 - $4,490)                               399,735            459,591
     Inventories (note 3)                                               472,952            473,788
     Prepaid expenses and timber deposits                                33,334             35,154
                                                                     ----------         ----------
         Total current assets                                           927,798            992,817
                                                                     ----------         ----------
   Timber, timberlands and related facilities, net                      964,716          1,014,285
   Property, plant and equipment, net (note 4)                        3,304,970          3,017,593
   Other assets                                                         127,665            104,412
                                                                     ----------         ----------
                                                                     $5,325,149          5,129,107
                                                                     ==========         ==========

Liabilities and Stockholders' Equity
   Current liabilities:
     Current installments on long-term debt (note 5)                 $    9,083              5,499
     Notes payable (note 5)                                             110,000            122,000
     Accounts payable, includes book overdrafts of
       $67,486 (2000 - $79,708)                                         255,181            253,292
     Accrued payroll and related expenses                                84,290             85,084
     Accrued interest                                                    32,399             33,910
     Other accrued expenses                                              73,053             77,754
     Accrued income taxes (note 6)                                       11,118             19,184
                                                                     ----------         ----------
         Total current liabilities                                      575,124            596,723
                                                                     ----------         ----------
   Deferred income taxes (note 6)                                       631,609            568,273
   Other liabilities                                                     38,050             40,142
   Long-term debt, net of current installments (note 5)               1,530,881          1,542,926
   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 and outstanding
        110,008,733 shares (2000 - 109,417,087 shares)                   55,004             54,709
     Capital surplus                                                    249,915            229,598
     Retained earnings                                                2,244,566          2,096,736
                                                                     ----------         ----------
         Total stockholders' equity                                   2,549,485          2,381,043
                                                                     ----------         ----------
                                                                     $5,325,149          5,129,107
                                                                     ==========         ==========
</TABLE>


See accompanying notes to consolidated financial statements.



                                       43
<PAGE>

--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS
================================================================================
Years ended December 31, 2001, 2000 and 1999
(dollar and share amounts, except per share amounts, in thousands)



<TABLE>
<CAPTION>
                                                           2001                2000                  1999
                                                       -----------          -----------          -----------
<S>                                                    <C>                    <C>                  <C>
Net sales                                              $ 4,453,942            4,651,761            4,272,957
Cost of sales                                            3,713,834            3,729,685            3,468,994
                                                       -----------          -----------          -----------
   Gross profit                                            740,108              922,076              803,963
Selling and administrative expense                         274,372              268,819              253,694
Non-recurring and other income (expense) - net             (25,245)             (19,737)             (11,710)
                                                       -----------          -----------          -----------
   Operating earnings                                      440,491              633,520              538,559
Interest expense                                            95,087              119,133              125,284
                                                       -----------          -----------          -----------
   Earnings before provision for income taxes              345,404              514,387              413,275
Provision for income taxes (note 6)                         96,600              169,500              152,800
                                                       -----------          -----------          -----------
   Net earnings                                        $   248,804              344,887              260,475
                                                       ===========          ===========          ===========
Earnings per share - basic                             $      2.27                 3.14                 2.34
                                                       ===========          ===========          ===========
Earnings per share - diluted                           $      2.26                 3.12                 2.33
                                                       ===========          ===========          ===========
Weighted average shares outstanding - basic                109,744              109,982              111,375
                                                       ===========          ===========          ===========
Weighted average shares outstanding - diluted              110,326              110,717              112,001
                                                       ===========          ===========          ===========
</TABLE>


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

Diluted weighted average shares outstanding are calculated using the treasury
stock method which assumes that all stock options with a market value greater
than the grant price at the balance sheet date are exercised.

See accompanying notes to consolidated financial statements.



                                       44
<PAGE>

--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
================================================================================
Years ended December 31, 2001, 2000 and 1999
(dollar amounts, except per share amounts, in thousands)


<TABLE>
<CAPTION>
                                           Common Stock Issued                                                         Total
                                      -------------------------------         Capital            Retained         Stockholders'
                                         Shares             Amount            Surplus            Earnings              Equity
                                      ------------       ------------       ------------       ------------       -------------
<S>                                   <C>               <C>                  <C>              <C>                <C>
Balance, January 1, 1999               110,980,768       $     55,490            285,140          1,661,801          2,002,431
  Net earnings                                  --                 --                 --            260,475            260,475
  Cash dividends on common stock
     ($.70 per share)                           --                 --                 --            (77,984)           (77,984)
  Options exercised                        606,665                304             18,486                 --             18,790
                                      ------------       ------------       ------------       ------------       ------------
Balance, December 31, 1999             111,587,433             55,794            303,626          1,844,292          2,203,712
  Net earnings                                  --                 --                 --            344,887            344,887
  Cash dividends on common stock
     ($.84 per share)                           --                 --                 --            (92,443)           (92,443)
  Options exercised                        276,754                139              8,819                 --              8,958
  Stock repurchased and canceled        (2,447,100)            (1,224)           (82,847)                --            (84,071)
                                      ------------       ------------       ------------       ------------       ------------
Balance, December 31, 2000             109,417,087             54,709            229,598          2,096,736          2,381,043
  Net earnings                                  --                 --                 --            248,804            248,804
  Cash dividends on common stock
     ($.92 per share)                           --                 --                 --           (100,974)          (100,974)
  Options exercised                        591,646                295             20,317                 --             20,612
                                      ------------       ------------       ------------       ------------       ------------
Balance, December 31, 2001             110,008,733       $     55,004            249,915          2,244,566          2,549,485
                                      ============       ============       ============       ============       ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                       45
<PAGE>

--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
Years ended December 31, 2001, 2000 and 1999
(dollar amounts in thousands)


<TABLE>
<CAPTION>
                                                           2001            2000           1999
                                                        ---------       ---------       ---------
<S>                                                     <C>               <C>             <C>
Cash Flows from Operating Activities:
Net earnings                                            $ 248,804         344,887         260,475
    Adjustments to reconcile net earnings
    to net cash from operating activities:
      Depreciation                                        270,406         250,988         240,374
      Cost of fee timber harvested                         44,456          44,774          46,197
      Other amortization                                   17,316          19,237          17,148
      Increase in deferred income taxes                    62,778          70,011          86,938
    Changes in working capital items:
      Accounts receivable                                  59,856         (69,524)        (69,760)
      Inventories                                             312         (17,468)        (31,015)
      Prepaid expenses and timber deposits                  1,820           1,511          23,224
      Accounts payable and accrued expenses                (9,969)         49,073          23,159
      Accrued income taxes                                 (8,066)         (3,016)          6,126
                                                        ---------       ---------       ---------
    Net cash from operating activities                    687,713         690,473         602,866
                                                        ---------       ---------       ---------
Cash Flows from Investing Activities:
      Proceeds from sale of assets                         23,385           5,704           5,965
      Expenditures for property, plant & equipment       (574,941)       (379,667)       (267,856)
      Expenditures for timber and timberlands                (249)         (2,516)         (8,026)
      Expenditures for roads and reforestation            (18,552)        (16,705)        (14,364)
      Acquisitions                                             --        (169,334)             --
      Other                                               (18,819)         13,646         (33,329)
                                                        ---------       ---------       ---------
    Net cash from investing activities                   (589,176)       (548,872)       (317,610)
                                                        ---------       ---------       ---------
Cash Flows from Financing Activities:
      Net change in operating lines of credit             (12,000)        108,383         (33,635)
      Debt borrowing                                        9,210         115,038          27,770
      Proceeds from sale of common stock                   20,391           8,931          18,725
      Repurchased common stock                                 --         (84,071)             --
      Cash dividends paid                                (100,974)        (92,443)        (77,984)
      Payment on debt                                     (17,671)       (198,712)       (225,934)
                                                        ---------       ---------       ---------
    Net cash from financing activities                   (101,044)       (142,874)       (291,058)
                                                        ---------       ---------       ---------
    Net change in cash                                     (2,507)         (1,273)         (5,802)
    Cash at beginning of year                              24,284          25,557          31,359
                                                        ---------       ---------       ---------
    Cash at end of year                                 $  21,777          24,284          25,557
                                                        =========       =========       =========
Supplemental disclosures of cash flow information
   Cash paid during the year for:
      Interest (net of amount capitalized)              $  96,598         123,748         126,292
                                                        =========       =========       =========
      Income taxes                                      $  41,888         102,505          52,916
                                                        =========       =========       =========
</TABLE>


See accompanying notes to consolidated financial statements.


                                       46
<PAGE>

--------------------------------------------------------------------------------
SUPPLEMENTARY BUSINESS SEGMENT INFORMATION
================================================================================
(dollar amounts in thousands)


<TABLE>
<CAPTION>
                                     2001       %       2000       %        1999       %       1998         %         1997     %
                                  ---------    --     ---------    --     ---------    --    ----------     --      -------   --
<S>                              <C>         <C>     <C>          <C>     <C>         <C>   <C>           <C>      <C>       <C>
Sales to outside
  customers:
White Paper:
Communication papers             $1,045,578    23     1,017,899    22       851,818    20       757,938     20      714,461   19
Market pulp and fine paper          375,577     8       433,390     9       346,205     8       360,391      9      361,791   10
                                 ----------   ---     ---------   ---     ---------   ---    ----------    ---    ---------  ---
    Total White Paper             1,421,155    32     1,451,289    31     1,198,023    28     1,118,329     29    1,076,252   29
                                 ----------   ---     ---------   ---     ---------   ---    ----------    ---    ---------  ---
Brown Paper:
Packaging                         1,435,366    32     1,474,145    32     1,270,163    30     1,190,482     31    1,043,530   28
Other                               292,130     7       289,747     6       252,032     6       241,543      6      215,471    6
                                 ----------   ---     ---------   ---     ---------   ---    ----------    ---    ---------  ---
    Total Brown Paper             1,727,496    39     1,763,892    38     1,522,195    36     1,432,025     37    1,259,001   34
                                 ----------   ---     ---------   ---     ---------   ---    ----------    ---    ---------  ---

Building Materials:
Lumber                              272,750     6       301,952     6       305,672     7       246,732      6      229,579    6
Structural panels                   309,881     7       424,313     9       488,527    11       380,799     10      387,645   11
Composite panels                    422,437     9       444,162    10       423,828    10       405,428     10      380,467   10
Other wood products                 300,223     7       266,153     6       334,712     8       296,936      8      336,144    9
                                 ----------   ---     ---------   ---     ---------   ---    ----------    ---    ---------  ---
    Total Building Materials      1,305,291    29     1,436,580    31     1,552,739    36     1,329,895     34    1,333,835   37
                                 ----------   ---     ---------   ---     ---------   ---    ----------    ---    ---------  ---

    Total net sales (1)          $4,453,942   100     4,651,761   100     4,272,957   100     3,880,249    100    3,669,088  100
                                 ==========           =========           =========          ==========           =========

Intersegment sales at
  market value:

Building Materials                $  52,957              43,423              48,279              60,813              47,100
                                 ----------           ---------           ---------          ----------           ---------

Gross Profit (GP):                            GP%                  GP%                GP%                  GP%               GP%
                                              ---                  ---                ---                  ---               ---
White Paper                      $  177,211    12       263,338    18       167,952    14       107,037     10      122,323   11
Brown Paper                         424,380    25       460,709    26       323,820    21       260,386     18      158,891   13
Building Materials                  138,517    11       198,029    14       312,191    20       135,113     10      178,376   13
                                 ----------   ---     ---------   ---     ---------   ---    ----------    ---    ---------  ---
    Total gross profit           $  740,108    17       922,076    20       803,963    19       502,536     13      459,590   13
                                 ==========   ===     =========   ===     =========   ===    ==========    ===    =========  ===

Operating earnings:
White Paper                      $  122,754             207,702             118,955              58,654              73,349
Brown Paper                         317,386             355,011             225,283             166,680              69,017
Building Materials                   78,274             137,259             253,910              80,601             124,697
Corporate                           (52,678)            (46,715)            (47,879)            (43,191)            (40,898)
Non-recurring and other
 income (expense) - net             (25,245)            (19,737)            (11,710)              2,029               2,088
                                 ----------           ---------           ---------          ----------           ---------
    Operating earnings              440,491             633,520             538,559             264,773             228,253
Interest expense                     95,087             119,133             125,284             131,990             116,990
                                 ----------           ---------           ---------          ----------           ---------
Earnings before provision
 for income taxes                $  345,404             514,387             413,275             132,783             111,263
                                 ==========           =========           =========          ==========           =========

Depreciation, cost of fee timber
harvested and amortization: (2)
White Paper                      $  130,036             126,516             124,175             139,240             114,449
Brown Paper                          84,431              74,807              68,333              90,484              90,403
Building Materials                  113,727             109,493             106,496             135,108             128,754
Corporate                             3,984               4,183               4,715               6,309               5,343
                                 ----------           ---------           ---------          ----------           ---------
                                 $  332,178             314,999             303,719             371,141             338,949
                                 ==========           =========           =========          ==========           =========

Capital expenditures:
White Paper                      $  263,357              88,866              62,269             215,503             371,894
Brown Paper                         139,868             156,494             161,144             120,827              82,935
Building Materials                  184,634             148,905              64,426             101,884              72,075
Corporate                             5,883               4,623               2,407               3,625               1,004
                                 ----------           ---------           ---------          ----------           ---------
                                 $  593,742             398,888             290,246             441,839             527,908
                                 ==========           =========           =========          ==========           =========

Identifiable assets:
White Paper                      $2,033,413           1,909,374           1,830,043           1,860,673           1,785,493
Brown Paper                       1,375,668           1,353,453           1,149,123           1,021,180             987,097
Building Materials                1,838,404           1,797,550           1,734,945           1,735,257           1,966,136
Corporate                            77,664              68,730              83,750              80,558              72,329
                                 ----------           ---------           ---------          ----------           ---------
                                 $5,325,149           5,129,107           4,797,861           4,697,668           4,811,055
                                 ==========           =========           =========          ==========           =========
</TABLE>

----------

(1)   The company is not dependent on any one significant customer or group of
      customers. Approximately 89% of the company's revenue is derived
      domestically.



                                       47
<PAGE>

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


<TABLE>
<CAPTION>
                                                                                                   Net Earnings
                                                                                           ----------------------------
                                              Net                    Gross                                    Per Share
2001                                         Sales                   Profit                Amount               Diluted
-----------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                      <C>                    <C>                      <C>
1st Quarter ...................            $1,131,664               192,628                66,647                   .61
2nd Quarter ...................             1,136,314               197,674                70,764                   .64
3rd Quarter ...................             1,124,786               192,732                65,755                   .60
4th Quarter ...................             1,061,178               157,074                45,638                   .41
-----------------------------------------------------------------------------------------------------------------------
                                           $4,453,942               740,108               248,804                  2.26
=======================================================================================================================
</TABLE>


<TABLE>
<CAPTION>
                                                                                                   Net Earnings
                                                                                           ----------------------------
                                              Net                    Gross                                    Per Share
2000                                         Sales                   Profit                Amount               Diluted
-----------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                      <C>                    <C>                      <C>
1st Quarter ...................            $1,167,126               224,163                85,304                   .76
2nd Quarter ...................             1,188,060               240,358                90,192                   .82
3rd Quarter ...................             1,169,585               226,052                83,436                   .76
4th Quarter ...................             1,126,990               231,503                85,955                   .78
-----------------------------------------------------------------------------------------------------------------------
                                           $4,651,761               922,076               344,887                  3.12
=======================================================================================================================
</TABLE>


<TABLE>
<CAPTION>
                                                                                                   Net Earnings
                                                                                           ----------------------------
                                              Net                    Gross                                    Per Share
1999                                         Sales                   Profit                Amount               Diluted
-----------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                      <C>                    <C>                      <C>
1st Quarter ...................            $  970,483               141,942                31,594                   .28
2nd Quarter ...................             1,056,319               195,757                63,314                   .57
3rd Quarter ...................             1,137,615               239,780                81,958                   .73
4th Quarter ...................             1,108,540               226,484                83,609                   .75
-----------------------------------------------------------------------------------------------------------------------
                                           $4,272,957               803,963               260,475                  2.33
=======================================================================================================================
</TABLE>



                                       48
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000 and 1999
(dollar amounts, except per share amounts, in thousands)


Note 1. Nature of Operations

Willamette Industries, Inc. is a diversified, integrated forest products company
with 106 manufacturing facilities in 24 states, France, Ireland and Mexico. The
company's principal lines of business are white paper, brown paper and building
materials. The company produces market pulp, fine paper, specialty printing
papers, business forms, cut sheets, kraft linerboard, corrugating medium, bag
paper, corrugated containers, paper bags, inks, lumber, plywood, particleboard,
medium density fiberboard (MDF), oriented strand board (OSB), laminated beams,
laminated veneer lumber (LVL), I-joists and other value-added wood products.
Based on 2001 sales, the company's business is comprised of 32% white paper, 39%
brown paper and 29% building materials. The company sells approximately 89% of
its products in the United States; its primary foreign markets are Asia, Europe
and Central America.

Note 2. Summary of Significant Accounting Policies

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.

Revenue Recognition The company recognizes revenue when ownership risk passes to
the buyer, which in nearly all cases is at the time of shipment. Occasionally,
the company ships its product under consignment agreements. In these instances,
ownership risk passes when the product is shipped to or is consumed by the
ultimate customer.

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.

Property, Plant and Equipment Property, plant and equipment accounts are carried
at cost and include expenditures for new facilities and those that substantially
increase the useful lives of existing plant and equipment. Maintenance, repairs
and minor renewals are expensed as incurred. When properties are disposed of,
the related cost and accumulated depreciation are removed from the respective
accounts and any profit or loss on disposition is credited or charged to income.

Depreciation is computed using the straight-line method over the useful lives of
the respective assets. Leasehold improvements are amortized over the terms of
the respective leases.



                                       49
<PAGE>

Timber, Timberlands and Related Facilities Timber, timberlands and related
facilities are valued at cost less the cost of fee timber harvested and
amortization of roads. Cost of fee timber harvested is determined annually based
on costs incurred and the related recoverable timber volume based upon the
current stage in the growth cycle. Recoverable volume includes growth that has
occurred to date and does not include any anticipated future cost or future
growth.

Capitalized costs include the initial acquisition cost of land and timber.
Capitalized costs also include reforestation, or the initial planting, which
includes site preparation, the costs of seeds or seedlings, and planting. Costs
incurred after the first plantings and costs to maintain timber and timberlands,
such as fertilization, pest trapping, thinning, additional replanting costs, and
harvesting costs are expensed as incurred. Carrying costs for timber,
timberlands and related facilities are expensed as incurred.

We distinguish our stands of timber, or timber pools, by region or logging
district. A separate composite depletion rate is used for each designated area.
Capitalized costs, excluding land, are charged to expense at the time the timber
is harvested and are presented as "cost of fee timber harvested" in the
consolidated statements of cash flow and in cost of sales in the consolidated
statements of earnings.

Logging roads are amortized on a straight-line basis over an estimated five-year
useful life.

Upon retirement or other disposition of property, applicable cost and
accumulated depletion or amortization are removed from the accounts. Any gains
or losses are included in earnings.

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

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.

Capitalized Interest Interest is capitalized on funds borrowed during the
construction period on certain assets. Capitalized interest was $14,999 in 2001,
$5,163 in 2000 and $3,998 in 1999 and is netted against interest expense in the
consolidated statements of earnings. Such



                                       50
<PAGE>

capitalized interest will be amortized over the depreciable lives of the related
assets.

Business Segments The company's various product lines have been aggregated into
three segments - white paper, brown paper and building materials - based on the
similar nature of the products, the economic conditions affecting those
products, and the management and reporting of those products within the company.
Information with respect to the segments is included in the Supplementary
Business Segment Information on page 47.

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.

Reclassifications Certain reclassifications have been made to prior years' data
to conform to the 2001 presentation.

Recently Issued and Prospective Accounting Pronouncements In June 1998, the
Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and
Hedging Activities. In June 1999, the FASB issued SFAS No. 137, Accounting for
Derivative Instruments and Hedging Activities -- Deferral of the Effective Date
of FASB Statement No. 133. In June 2000, the FASB issued SFAS No. 138,
Accounting for Certain Derivative Instruments and Certain Hedging Activities, an
amendment of FASB Statement No. 133. SFAS No. 133, as amended, establishes
accounting and reporting standards requiring that every derivative instrument be
recorded in the balance sheet as either an asset or liability measured at its
fair value. The statement requires that changes in the fair value of the
derivative instrument be recognized currently in earnings unless specific hedge
accounting criteria are met. Special accounting for qualifying hedges allows a
derivative instrument's gains and losses to offset related results on the hedged
item in the income statement, to the extent effective, and requires that a
company formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. SFAS No. 138 expanded the definition
of "normal purchases and normal sales" to allow more instruments to meet the
exceptions to the provisions of SFAS No. 133. SFAS No. 133, as amended, is
effective for fiscal years beginning after June 15, 2000, and was adopted by the
company on January 1, 2001.



                                       51
<PAGE>

We have considered the impact of SFAS No. 133, as amended. Nearly all of the
company's contracts meet the definition of "normal purchases or normal sales"
and, therefore, are not be considered derivative instruments under SFAS No. 133,
as amended. The effects of implementation of this statement as of January 1,
2001, did not have a material impact on the company's financial position,
results of operations or cash flows.

In September 2000, the FASB issued SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities a replacement
of FASB Statement 125. SFAS No. 140 provides accounting and reporting standards
for transfers and servicing of financial assets and extinguishments of
liabilities focused on control. Under the control approach, after a transfer of
financial assets, an entity recognizes the financial and servicing assets it
controls and the liabilities it has incurred, derecognizes financial assets when
control has been surrendered, and derecognizes liabilities when extinguished.
This statement is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 31, 2001 and for
disclosures relating to securitization transactions and collateral for fiscal
years after December 15, 2000. We have considered the impact of SFAS No. 140. We
do not have any transactions that result in the transfer and servicing of
financial assets. This statement does not have a material impact on the
financial position, results of operations, or cash flows of the company.

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 141, Business Combinations, and
SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires all
business combinations initiated after June 30, 2001, to be accounted for using
the purchase method of accounting. SFAS No. 141 also specifies certain criteria
intangible assets must meet to be recognized and reported apart from goodwill.
Under SFAS No. 142, goodwill and intangible assets with indefinite useful lives
will no longer be amortized, but instead tested at least annually for impairment
by applying a fair-value-based test. In addition, SFAS No. 142 requires separate
recognition for intangible assets with estimable useful lives that will continue
to be amortized over their useful lives, and reviewed for impairment in
accordance with SFAS No. 121 Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of. Implementation of SFAS No. 142,
which is effective for fiscal 2002, is currently expected to increase the
company's annual net earnings by $2.8 million due to the cessation of goodwill
amortization. The company believes that implementation of this statement will
not have a material impact on its financial position, results of operations or
cash flows.


                                       52
<PAGE>

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143 requires entities to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred. The associated asset retirement costs are capitalized as part of the
carrying amount of the long-lived asset and subsequently charged to expense
using a systematic and rational method over the asset's useful life. SFAS No.
143 will be effective for fiscal 2003. The company is in the process of
evaluating the impact of implementation on its financial position, results of
operations or cash flows.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and eliminates the
exception to consolidation of a subsidiary for which control is likely to be
temporary. SFAS No. 144 supercedes SFAS No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of and supercedes
the accounting and reporting provisions of Accounting Principles Board Opinion
No. 30, Reporting the Results of Operations -- Reporting the Effects of Disposal
of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions, for segments of a business to be disposed of.
Implementation of SFAS No. 144, which is effective for fiscal 2002, is not
expected to have a material impact on the company's financial position, results
of operations or cash flows.



                                       53
<PAGE>

Note 3. Inventories

The major components of inventories are as follows:


<TABLE>
<CAPTION>
                                              December 31,
                                      ----------------------------
                                         2001               2000
                                      --------            --------
<S>                                   <C>                  <C>
Finished product .........            $156,309             154,261
Work in progress .........               8,817               8,792
Raw material .............             199,266             205,014
Supplies .................             108,560             105,721
                                      --------            --------
                                      $472,952             473,788
                                      ========            ========
Valued at:
    LIFO cost ............            $308,325             304,519
    Average cost .........             164,627             169,269
</TABLE>

If current cost rather than LIFO cost had been used by the company, inventories
would have been approximately $48,336 higher in 2001 and $62,282 higher in 2000.

Note 4. Property, Plant and Equipment

Property, plant and equipment accounts are summarized as follows:
<TABLE>
<CAPTION>
                                                                                December 31,
                                             Range of                  --------------------------------
                                           useful lives                  2001                   2000
                                           -------------               ----------             ---------
<S>                                       <C>                         <C>                    <C>
Land .............................               -                     $   53,412                48,436
Buildings ........................            15 - 35                     462,102               417,700
Machinery and equipment ..........             5 - 25                   5,206,214             4,924,423
Furniture and fixtures ...........             3 - 15                      96,993                96,597
Leasehold improvements ...........         life of lease                    8,986                 8,023
Construction in progress .........               -                        388,885               236,950
                                                                        6,216,592             5,732,129
Accumulated depreciation .........                                      2,911,622             2,714,536
                                                                       ----------             ---------
                                                                       $3,304,970             3,017,593
                                                                       ==========             =========
</TABLE>



                                       54
<PAGE>

Note 5. Long-term Debt

Long-term debt consists of the following:


<TABLE>
<CAPTION>
                                                                          December 31,
                                                               --------------------------------
                                                                  2001                   2000
                                                               ----------             ---------
<S>                                                           <C>                    <C>
Notes payable to public:
  7.75%, due in 2002 ..............................               100,000               100,000
  9.125%, due in 2003 .............................                50,000                50,000
  6.45%, due in 2005 ..............................               100,000               100,000
  7.00%, due in 2018 ..............................               100,000               100,000
  9.00%, due in 2021 ..............................               150,000               150,000
  7.35%, due in 2026 ..............................               200,000               200,000
  7.85%, due in 2026 ..............................               200,000               200,000

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

Bank loans, with interest rates averaging
  2.4% and 6.72%, due in varying amounts
  through 2007 ....................................               308,545               313,820

Revenue bonds, with interest rates
  averaging 3.69% and 5.32%, due in
  varying amounts through 2026 ....................               113,440               113,440

Other long-term debt, with interest
  rates averaging 6.96% and 6.81%,
  due in varying amounts through 2006 .............                12,279                15,465
                                                               ----------             ---------
                                                                1,539,964             1,548,425
Less:  Current installments .......................                 9,083                 5,499
                                                               ----------             ---------
                                                               $1,530,881             1,542,926
                                                               ==========             =========
</TABLE>


Principal payment requirements on the above debt for the four years subsequent
to 2002 are: 2003, $71,841; 2004, $17,512; 2005, $131,165; 2006, $5,223.

The company has two committed revolving loans with a group of banks that provide
for borrowings up to a total of $450,000 in principal amount. In addition, at
December 31, 2001, the company has available various uncommitted lines.
Outstanding borrowing under these uncommitted lines totaled $385,000 million,
including $275,000, which is classified as long-term debt and $110,000, which is
classified as short-term borrowing.

At December 31, 2001, the company has classified $100,000 of notes due in 2002
as long-term due to the company's intent and ability to refinance this debt
before maturity.

The weighted average interest rate on short-term borrowings at December 31, 2001
and 2000, was 2.17% and 6.75%, respectively.



                                       55
<PAGE>

The fair value of the company's long-term debt is estimated to be approximately
$1,562,992, based on the quoted market prices for the same or similar issues or
on the current rates offered to the company for debt with the same remaining
maturities.

Note 6. Income Taxes

The provision for income taxes includes the following:


<TABLE>
<CAPTION>
                                      2001         2000          1999
                                    -------       -------       -------
<S>                                 <C>            <C>          <C>
Currently payable                   $33,816        99,481        65,863
Deferred provision
  for income taxes                   62,784        70,019        86,937
                                    -------       -------       -------
   Provision for income taxes       $96,600       169,500       152,800
                                    =======       =======       =======
Federal income taxes                $84,388       151,476       135,343
Other income taxes                   12,212        18,024        17,457
                                    -------       -------        -------
   Provision for income taxes       $96,600       169,500       152,800
                                    =======       =======       =======
</TABLE>

Differences between the effective tax rate and the federal statutory rate are
shown in the following table as a percentage of pretax income:


<TABLE>
<CAPTION>
                                            2001        2000         1999
                                           -----        ----         ----
<S>                                       <C>          <C>          <C>
Federal statutory rate                     35.0%        35.0%        35.0%
State income taxes, net of
  federal tax effect                        2.1%         2.1%         2.5%
Benefit from foreign taxes                   --         (0.6%)       (0.5%)
Estimated non-deductible EPA penalty         --          0.3%         1.0%
Tax credits                                (10.8%)      (5.6%)       (0.5%)
Other                                       1.7%         1.8%        (0.5%)
                                         ------       ------       ------
                                           28.0%        33.0%        37.0%
                                         ======       ======       ======
</TABLE>



                                       56
<PAGE>

The net deferred tax liability as of December 31, 2001 and 2000, includes the
following components:

<TABLE>
<CAPTION>
                                           December 31
                                    --------------------------
                                       2001            2000
                                    ---------        ---------
<S>                                 <C>                 <C>
Deferred tax assets:
State tax credits                   $  92,495           79,495
Other, net                                 --            4,607
Valuation allowance for state
  tax credits                         (72,085)         (63,895)
                                    ---------        ---------
                                       20,410           20,207
                                    ---------        ---------
Deferred tax liabilities:
Depreciation and depletion           (639,025)        (588,480)
Other, net                            (12,994)              --
                                    ---------        ---------
   Net deferred tax liability       $(631,609)        (568,273)
                                    =========        =========
</TABLE>

At December 31, 2001, the company had various state tax credits and credit
carryforwards of approximately $142,300 of which $121,500 have no expiration and
the remainder expire in various years through 2016.

A valuation allowance has been established due to the uncertainty of realizing
certain state tax credit carryforwards. During 2001 the valuation allowance
increased $8,190. During 2000, the valuation allowance decreased $1,105.

The company's consolidated federal income tax returns through 1997 have been
examined by the Internal Revenue Service and while final settlement has not been
made, management believes that the company has provided for any deficiencies
that ultimately might be assessed.

Note 7. Pension and Retirement Plans

Contributory Plans The company covers all salaried employees and some hourly
employees under 401(k) plans. The amounts contributed by the company vary for
the plans. Total plan expenses were $13,274 in 2001; $12,484 in 2000 and $11,515
in 1999.

Defined Benefit Plans The company contributes to multi-employer retirement plans
at fixed payments per hour for certain hourly employees. Substantially all other
employees of the company are covered by non-contributory defined benefit plans.
Retirement benefits are based on years of service and compensation prior to
retirement. Total pension expense (income) for all such plans was $(3,873) in
2001; $976 in 2000 and $8,669 in 1999.

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



                                       57
<PAGE>


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

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

<TABLE>
<CAPTION>
                                                  Defined                    Post-retirement
                                               Benefit Plans                  Benefit Plans
                                          ------------------------      ------------------------
                                             2001           2000           2001           2000
                                          ---------      ---------      ---------      ---------
<S>                                       <C>            <C>            <C>            <C>
Change in Benefit Obligation

Benefit obligation - beginning
  of year                                 $ 440,697        406,630         37,023         35,407
Service cost                                 17,626         16,683          1,511          1,112
Interest cost                                32,740         30,181          3,336          2,586
Amendments                                    2,508          3,180          9,663             --
Other                                          (343)          (243)         1,374          1,127
Actuarial loss                               19,895          2,200            971          1,267
Benefits paid                               (18,653)       (17,934)        (4,984)        (4,476)
                                          ---------      ---------      ---------      ---------
Benefit obligation - end of year          $ 494,470        440,697         48,894         37,023
                                          =========      =========      =========      =========

Change in Assets

Fair value of assets - beginning
  of year                                 $ 594,846        593,242             --             --
Actual return on plan assets                 (7,575)        15,150             --             --
Employer contribution                        11,362          4,712          3,610          3,349
Other                                          (288)          (324)         1,374          1,127
Benefits paid                               (18,653)       (17,934)        (4,984)        (4,476)
                                          ---------      ---------      ---------      ---------
Fair value of assets - end of year        $ 579,692        594,846             --             --
                                          =========      =========      =========      =========

Reconciliation of Funded Status

Funded status                             $  85,222        154,149        (48,894)       (37,023)
Unrecognized actuarial (gain) loss          (76,290)      (168,489)         7,928          7,134
Unrecognized prior service cost              24,594         25,508          9,160            220
Unrecognized asset                               --             --             --             --
                                          ---------      ---------      ---------      ---------
Prepaid (accrued) benefit cost            $  33,526         11,168        (31,806)       (29,669)
                                          =========      =========      =========      =========

Assumptions as of December 31:

Discount rate                                  7.25%          7.50%          7.25%          7.50%
Expected return on plan assets                 9.50%          9.00%            --             --
Rate of increase in compensation
  levels                                       5.00%          5.00%            --             --
Medical cost trend rate                          --             --           7.00%          7.50%
</TABLE>


                                       58
<PAGE>
For the year 2001, a 7.0% increase in the medical cost trend rate was assumed.
In the future, the rate decreases incrementally to an ultimate annual rate of
5.0%. A 1.0% increase in the medical trend rate would increase the
post-retirement benefit obligation (PBO) by $1,209 and increase the service and
interest costs by $137. A 1.0% decrease in the medical trend rate would decrease
the PBO by $1,081 and decrease the service and interest cost by $120. Various
pension plans have benefit obligations in excess of plan assets. The following
table sets forth the unfunded status of those plans as of December 31:

<TABLE>
<CAPTION>
                                                    Defined Benefit Plans
                                                    ---------------------
                                                     2001          2000
                                                    -------        ------
<S>                                                 <C>            <C>
Benefit obligation                                  $68,009        37,304
                                                    =======        ======
Plan assets (fair value)                            $64,102        34,268
                                                    =======        ======
</TABLE>

The components of net periodic benefit cost are as follows:

<TABLE>
<CAPTION>
                                                         Defined                      Post-retirement
                                                      Benefit Plans                   Benefit Plans
                                             --------------------------------    ------------------------
                                               2001        2000        1999       2001     2000     1999
                                             --------     -------     -------     -----    -----    -----
<S>                                          <C>           <C>         <C>        <C>      <C>      <C>
Service cost                                 $ 17,626      16,683      17,431     1,511    1,112    1,203
Interest cost                                  32,740      30,181      27,748     3,337    2,586    2,426
Expected return on plan assets                (55,102)    (46,970)    (40,754)       --       --       --
Amortization of prior service cost              3,422       3,429       3,194       722       31       31
Amortization of net transition obligation           0        (398)       (566)       --       --       --
Recognized actuarial (gain) loss               (9,650)     (8,953)     (3,901)      177      260      199
                                             --------     -------     -------     -----    -----    -----
                                             $(10,964)     (6,028)      3,152     5,747    3,989    3,859
                                             ========     =======     =======     =====    =====    =====
</TABLE>

Note 8. Stockholders' Equity

The company's 1995 Long-Term Incentive Compensation Plan (the Plan) provides for
grants of stock options, 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 one-third increments per
year and expire ten years from the date of grant. The company has reserved
5,500,000 shares for distribution under the Plan. The company has elected to
account for stock-based compensation under Accounting Principles Board Opinion
#25. Under the intrinsic-value method, compensation cost is the excess, if any,
of the quoted market price of the stock at the grant date over the amount an
employee must pay to acquire the stock.


                                       59
<PAGE>
Had the compensation cost for the company's stock been determined based upon the
fair value at the grant date, the company's pro forma net income and earnings
per share amounts would be as follows:

<TABLE>
<CAPTION>
                                                    2001       2000       1999
                                                   ------     ------     ------
<S>                                                <C>        <C>        <C>
Net Income
    As reported                                    248,804    344,887    260,475
    Pro forma                                      243,230    338,637    255,029

Earnings per share
    Basic                                            2.27       3.14       2.34
    Diluted                                          2.26       3.12       2.33

Pro forma
     Basic                                           2.22       3.08       2.29
     Diluted                                         2.20       3.06       2.28
</TABLE>

Pro forma disclosure for stock option accounting may not be representative of
the effects on reported net income in future years.

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model. The weighted-average fair value of options
granted during 2001, 2000, and 1999 were $17.66, $15.32, and $19.28,
respectively. The following assumptions were used to calculate fair value of
options granted:

<TABLE>
<CAPTION>
                                                    2001       2000       1999
                                                   ------     ------     ------
<S>                                                <C>        <C>        <C>
Risk-free interest rate                              4.88%      6.29%      5.21%
Expected volatility                                 37.55%     41.91%     38.64%
Expected dividend                                  $ 0.92       0.84       0.70
Expected life (years)                                6.41       6.41       6.41
</TABLE>


                                       60
<PAGE>

A summary of stock option activity is as follows:

<TABLE>
<CAPTION>
                                                                          Weighted
                                                                           Average
                                                         Option           Price per
                                                         Shares             Share
                                                       ---------          ---------
<S>                                                    <C>                <C>
Outstanding December 31, 1998                          3,344,087              27.17
    Granted                                              555,680              47.25
    Exercised                                            608,484              21.70
    Canceled or surrendered                               10,597              18.64
                                                       ---------          ---------
Outstanding December 31, 1999                          3,280,686              31.71
    Granted                                              777,460              37.00
    Exercised                                            279,061              23.00
    Canceled or surrendered                               67,873              35.52
                                                       ---------          ---------
Outstanding December 31, 2000                          3,711,212              33.44
    Granted                                            1,093,040              47.16
    Exercised                                            618,262              26.51
    Canceled or surrendered                               30,766              43.56
                                                       ---------          ---------

Outstanding December 31, 2001                          4,155,224              38.04
                                                       =========          =========

Shares exercisable                                     2,456,953          $   33.64
                                                       =========          =========
</TABLE>



The following table summarizes information about stock options outstanding at
December 31, 2001:

<TABLE>
<CAPTION>
                                   Options Outstanding                Options Exercisable
                        ---------------------------------------     -----------------------
                                        Weighted-
                                         Average       Weighted                    Weighted
                                        Remaining      Average                     Average
Range of                   Number      Contractual     Exercise        Number      Exercise
Exercise Prices         Outstanding    Life (Years)      Price      Exercisable      Price
---------------         -----------    ------------    --------     -----------    --------
<S>                     <C>            <C>             <C>          <C>            <C>
$11.81 - $30.00            594,850         2.4          $23.11         594,850      $23.11
$30.01 - $40.00          1,970,387         6.5          $35.03       1,493,900      $34.39
$40.01 - $47.25          1,589,987         8.5          $47.19         368,203      $47.19
                         ---------                                   ---------
                         4,155,224                                   2,456,953
                         =========                                   =========
</TABLE>

The company also issues stock appreciation rights (SARs) to certain key
employees at its foreign operations. The strike price of SARs at the grant date
equals the fair value of the company's stock on the date of grant. The
difference between the grant price and the current stock price is the cash
obligation of the company. Accordingly, no compensation expense is recorded on
the grant date. As the stock price of the company exceeds the strike price of
the right, the company records a liability and recognizes compensation expense
for the vested portion of the stock appreciation right. Compensation expense
related to stock appreciation rights was $329 in 2001, $105 in 2000, and $239 in
1999. As of December 31, 2001, 76,910 SARs were outstanding. The weighted
average strike price of SARs outstanding was $41.71 per share.


                                       61
<PAGE>

Occasionally, the company grants restricted shares to certain key employees.
These shares vest in one-third increments after three, four and five years of
service following date of grant. The shares are issued to the employee once
vested. Compensation expense, equal to the fair market value of the restricted
shares on the date of grant, is recognized as the shares vest. As of December
31, 2001, no restricted shares were outstanding.

The company has a shareholder rights plan under which one right has been issued
for each outstanding share of common stock. The rights are initially represented
by the common stock certificates and are not exercisable. With certain
exceptions, the rights become exercisable if a person or group acquires 15% or
more of the common stock. Such an acquisition causes each right to be adjusted
to permit the holder to purchase $400 worth of common stock for $200. Rights
held by the acquiring person or group become void. The company may also redeem
the rights for $.0025 per right or may exchange each right for one share of
common stock, subject to restrictions set forth in the plan. The rights are
scheduled to expire in February 2010. The board of directors of the company
amended the shareholder rights plan on January 28, 2002. See Note 12.

In 1995, the board of directors authorized a $100,000 stock repurchase program.
The board re-instituted the program in the first quarter of 2000. In the first
half of 2000, the company completed the $100,000 program by repurchasing
2,447,100 shares of common stock for $84,071.

In 2001, the board of directors authorized a 10 million share stock repurchase
program. No purchases were made under this program in 2001.

Note 9.  Acquisitions

In May 2000, the company purchased all of the outstanding stock of Corrugados
Tehuacan, S.A. de C.V. Corrugados Tehuacan operates a state-of-the-art
corrugated container plant, a solid fiber box plant and a small recycled
linerboard and corrugating medium mill, all located in Mexico. Also in May 2000,
the company purchased a pulp mill in Port Wentworth, Georgia.

In June 1999, the company acquired a particleboard facility in Linxe, France.


                                       62
<PAGE>

These acquisitions were accounted for using the purchase method. The purchase
price for these acquisitions was allocated as follows:

<TABLE>
<CAPTION>
                                                              PORT
                                            CORRUGADOS     WENTWORTH,    LINXE,
                                             TEHUACAN       GEORGIA      FRANCE
                                             --------       -------      ------
<S>                                          <C>             <C>        <C>
Cash purchase price                          $ 70,258        94,346      40,677
Purchase price was allocated to:
     Current assets                            19,091                    14,215
     Property, plant & equipment               44,402        94,346      23,388
     Other assets and liabilities             (13,821)                  (16,430)
                                             --------       -------      ------
     Goodwill                                $ 20,586             0      19,504
                                             ========       =======      ======
</TABLE>


The operating results of these acquisitions have been included in the
consolidated statements of earnings from the date of acquisition. Goodwill
associated with the Corrugados and Linxe acquisitions is amortized over twenty
years.

Note 10. Dispositions

In the first quarter of 2001, the company sold approximately 27,000 acres of
timberland in Missouri. The timberland was sold, as it was not critical to the
long-term supply needs of the company's operations. The pretax gain on this sale
was approximately $5,300.

Note 11. Commitments and Contingencies

In 2000, the company signed a consent decree to settle alleged violations of the
federal Clean Air Act (CAA) and related state regulations related to the
company's Building Materials Group. Prior to December 31, 2000, the company paid
$11,231 in penalties and interest. In January 2001, an additionally $4,000 was
paid for supplemental environmental projects, as required by the consent decree.
The company established reserves in 1999 and 2000 to provide for these final
settlement costs. The consent decree further requires the installation of
various pollution control equipment at certain facilities.

In April 1999, our Johnsonburg, Pennsylvania, paper and pulp mill received a
notice of violation (NOV) from the U.S. Environmental Protection Agency (EPA)
for alleged violations of the CAA and has since received a demand letter to
correct the alleged violations. Management has met with federal and state
officials to resolve the matters alleged in the NOV; however, there were no
significant developments in the matter during 2001. Management believes that a
settlement will be reached at a future date, but does not believe the magnitude
or likely range of this settlement can be reasonably estimated as historical
experience has


                                       63
<PAGE>

demonstrated the unpredictability of assessments. Management believes it is
unlikely that recovery of the contingent loss through insurance or other
indemnification will occur and is unable to predict with any certainty when any
unasserted claim will be asserted as the timing of any future actions rests with
the EPA.

Several of our other U.S. mills have received information requests under Section
114 of the CAA from the EPA. The company has responded to these requests. To
date, the EPA has not issued NOVs related to these mills.

As of December 31, 2001, the company was involved in a contingent liability
relating to a landfill operated by a third party that has required remediation.
The operator of the landfill is defunct and the group of contributors to the
landfill is paying for site remediation. The company has approximately $500
accrued in relation to the remaining obligation in this matter and payment is
expected to be made prior to the close of the second quarter of 2002 at an
amount that approximates the accrual. Management believes there are very few
circumstances that may arise that would cause the loss estimate to be materially
different from our current estimates. The company has entered into a cost
sharing agreement with other potentially responsible parties; pursuant to this
agreement the company's contingent liability is limited. Management believes
that recovery of the contingent loss through insurance or other indemnification
is unlikely.

There are various other lawsuits, claims and environmental matters pending
against the company. While any proceeding or litigation has an element of
uncertainty, management believes that the outcome of any lawsuit or claim that
is pending or threatened, or all of them combined, will not have a material
adverse effect on the company's financial condition or results of operation.
With the exception of the aforementioned landfill contingency, management is not
aware of any potential joint and several liability that may affect the magnitude
of any contingency or of sites that require environmental remediation of a
material amount.

In the fourth quarter of 2000, Weyerhaeuser Company initiated an unsolicited
tender offer for the common stock of the company. Under a contract with the
company's investment banker, fees for services rendered in connection with the
defense against the tender offer were subject to a floor of $30,000. These fees
are charged against earnings ratably over the expected benefit period, which
commenced in September 2000. Management expected the benefit period to extend
until the fall of 2002.

All other fees for services rendered by the company's professional advisors in
conjunction with the defense against the tender offer, and all out of pocket
expenses incurred by the company's professional advisors,


                                       64
<PAGE>

are expensed as incurred. The company recorded charges of $24,300 in 2001 and
$8,000 in 2000 relating to the defense costs.

Note 12. Subsequent Event

On January 28, 2002, the board of directors of the company amended the
shareholder rights plan and entered into a definitive merger agreement with
Weyerhaeuser so that it would not apply to an acquisition of the company's
common stock by Weyerhaeuser. Under the terms of the agreement, Weyerhaeuser
will acquire all of the outstanding shares of common stock of the company for
$55.50 per share in cash. Weyerhaeuser acquired control of the company on
February 11, 2002, by purchasing approximately 97% of the company's outstanding
shares of common stock in the tender offer.

As a result of the acquisition of the company by Weyerhaeuser, the company will
recognize approximately $21,000 in costs associated with professional advisory
fees in the first quarter of 2002, including the unexpensed portion of the
investment banker fees.


                                       65
<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/ Duane C. McDougall
Dated: February 27, 2002                      --------------------------------
                                                   (Duane C. McDougall)
                                                    President and Chief
                                                     Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on February 27, 2002, by the following persons on behalf
of the registrant in the capacities indicated.

<TABLE>
<CAPTION>
                  Signature                             Title
                  ---------                             -----
<S>                                        <C>
Principal Executive Officer:

/s/Richard E. Hanson                        Chairman of the Interim Operating
-----------------------------               Committee, Executive Vice President
      (Richard E. Hanson)                   and Chief Operating Officer

Principal Financial Officer:

/s/C. Graham Kennedy                        Chief Financial Officer
-----------------------------
      (C. Graham Kennedy)

Principal Accounting Officer:

/s/Donald S. Waddell                        Corporate Controller
-----------------------------
      (Donald S. Waddell)

A majority of the Board of Directors:

/s/Robert A. Dowdy                          Director
-----------------------------
      (Robert A. Dowdy)

                                            Director
-----------------------------
      (Gerard K. Drummond)

/s/Richard E. Hanson                        Director
-----------------------------
      (Richard E. Hanson)

/s/Steven R. Rogel                          Director
------------------------------
      (Steven R. Rogel)
</TABLE>


                                       66
<PAGE>

<TABLE>
<S>                                        <C>
                                            Director
-----------------------------
      (Stuart H. Shelk, Jr.)

/s/William C. Stivers                       Director
-----------------------------
      (William C. Stivers)

                                            Director
-----------------------------
      (Michael G. Thorne)
</TABLE>


                                       67
<PAGE>

                                INDEX TO EXHIBITS


<TABLE>
EXHIBIT
-------
<S>       <C>
2.        Agreement and Plan of Merger, dated as of January 28, 2002, among
          Weyerhaeuser Company, Company Holdings, Inc. and the registrant.
          Incorporated by reference to Exhibit (e)(9) to Amendment No. 83 to the
          registrant's Schedule 14D-9 filed January 29, 2002.

3A.       Third Restated Articles of Incorporation of the registrant, as amended.
          Incorporated by reference to Exhibit 3 of the registrant's Registration
          Statement on Form 8-A filed February 25, 2000 (the "Form 8-A"). [14]

3B.       Bylaws of the registrant as amended through February 11, 2002.

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

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

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

4D.       Amendment No. 1 to Rights Agreement dated as of February 25, 2000 by and
          between Willamette Industries, Inc. and Mellon Investor Services LLC
          (f/k/a Chase Mellon Shareholder Services, L.L.C.). Incorporated by
          reference to Exhibit (a)(5)(i) to Amendment No. 1 to the registrant's
          Schedule 14D-9 filed December 12, 2000. [1]

4E.       Amendment No. 2 to Rights Agreement dated as of February 25, 2000 by and
          between Willamette Industries, Inc. and Mellon Investor Services LLC
          (f/k/a Chase Mellon Shareholder Services L.L.C.). Incorporated by
          reference to Exhibit (a)(5)(xxiv) to Amendment No. 83 of the registrant's
          Schedule 14D-9 filed January 29, 2002.

10A.      Willamette Industries, Inc. 1999 Deferred Compensation Plan for Directors.
          Incorporated by reference to Exhibit 10A of the registrant's annual report
          on Form 10-K for the year ended December 31, 1999.* [16]
</TABLE>


                                       68
<PAGE>

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

10C.      Form of Willamette Industries, Inc. Severance Agreement with Key
          Management Group as revised effective April 20, 1999. Incorporated by
          reference to Exhibit 10A of the registrant's quarterly report on Form
          10-Q for the quarter ended June 30, 1999.* [15]

10D.      Form of Amendment to Severance Agreement (Exhibit 10C) between the
          registrant and eleven executives. Incorporated by reference to Exhibit
          (e)(7) to Amendment No. 3 to the registrant's Schedule 14D-9 filed
          December 22, 2000.* [1]

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

10F.      Willamette Industries, Inc. Amended and Restated 1995 Long-Term
          Incentive Compensation Plan, as amended effective December 21, 2000.
          Incorporated by reference to Exhibit 10F of the registrant's annual
          report on Form 10-K for the year ended December 31, 2000.* [10]

10G.      Amendment No. 1 effective July 1, 2001, to Willamette Industries, Inc.
          Amended and Restated 1995 Long-Term Incentive Compensation Plan.
          Incorporated by reference to Exhibit 10.1 to the registrant's
          quarterly report on Form 10-Q for the quarter ended June 30, 2001.*

10H.      Consulting agreement dated December 1, 1998, between the registrant
          and William Swindells. Incorporated by reference to Exhibit 10G to the
          registrant's annual report on Form 10-K for the year ended December
          31, 1998.* [4]

10I.      Form of letter agreements with selected key employees that receive
          annual salary above a specified level providing for severance payments
          in the event of a change in control of the registrant. Incorporated by
          reference to Exhibit (e)(4) to the registrant's Schedule 14D-9 filed
          December 5, 2000* [14]

10J.      Form of amendment dated January 19, 2001, to all individual severance
          agreements (including Exhibits 10D and 10I) between the registrant and
          selected key employees. Incorporated by reference
</TABLE>


                                       69
<PAGE>

<TABLE>
<S>       <C>
          to Exhibit 10I to the registrant's annual report on Form 10-K for the
          year ended December 31, 2000.* [1]

10K.      Form of amendment dated March 16, 2001,to all individual severance
          agreements (including Exhibits 10D and 10I) between the registrant and
          selected key employees.* [2]

10L.      Willamette Industries, Inc., Supplemental Benefits Plan, as amended
          through January 28, 2002.* [45]

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

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

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

23.       Consent of Independent Auditors to the incorporation by reference of
          their report dated February 11, 2002, in the registrant's registration
          statements on Form S-3 and Form S-8. [1]

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

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


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.

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


                                       70