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, 1996        Commission file number 0-3730

                           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.

                       $ 2,909,491,000 at January 31, 1997

                Indicate  the  number  of  shares  outstanding  of  each  of the
registrant's classes of common stock as of the latest practicable date.
           CLASS                         OUTSTANDING AT JANUARY 31, 1997
Common Stock, $.50 par value                     55,363,867 shares

                      DOCUMENTS INCORPORATED BY REFERENCE.
Portions of the  registrant's  definitive  proxy  statement  for its 1997 annual
meeting of shareholders are incorporated by reference into Part III hereof.

<PAGE>




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


Item No
Caption     Form 10-K Caption                  Definitive Proxy Statement
-------     -----------------                  --------------------------
<S>         <C>                                <C>
Item 10     Directors and Executive            Holders of Common Stock
              Officers of the Registrant       Election of Directors
                                               Section 16(a) Beneficial
                                                 Ownership Reporting Compliance

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

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

Item 13     Certain Relationships and          Compensation Committee
              Related Transactions               Interlocks and Insider
                                                   Participation
</TABLE>







<PAGE>



                                      INDEX
<TABLE>
<CAPTION>

                                                                                                               Page
Part I

<S>                                                                                                              <C>
Item 1.  Business.................................................................................................1
General...........................................................................................................1
Business Segment Information......................................................................................1
Pulp and Paper....................................................................................................2
Converted Paper Products..........................................................................................2
Building Materials................................................................................................3
Timberlands.......................................................................................................3
Energy............................................................................................................4
Employees.........................................................................................................4
Environmental Matters.............................................................................................4
Item 2.  Properties...............................................................................................4
Item 3.  Legal Proceedings........................................................................................8
Item 4.  Submission of Matters to a Vote of Security Holders......................................................8
           Executive Officers of the Registrant...................................................................9

Part II

Item 5.  Market for Registrant's Common Equity
           and Related Stockholder Matters.......................................................................10
Item 6.  Selected Financial Data.................................................................................11
Item 7.  Management's Discussion and Analysis of
           Financial Condition and Results of Operations.........................................................12
Item 8.  Financial Statements and Supplementary Data.............................................................17
Item 9.  Changes in and Disagreements with
           Accountants on Accounting and Financial
           Disclosure............................................................................................17

Part III

Item 10. Directors and Executive Officers of the Registrant......................................................18
            (See Part I for Executive Officers of the Registrant)
Item 11. Executive Compensation..................................................................................18
Item 12. Security Ownership of Certain Beneficial
           Owners and Management.................................................................................18
Item 13. Certain Relationships and Related
           Transactions..........................................................................................18

Part IV

Item 14. Exhibits, Financial Statement Schedules
           and Reports on Form 8-K...............................................................................19
           Signatures............................................................................................20

         Index to Consolidated Financial Statements..............................................................22

         Index to Exhibits.......................................................................................41
</TABLE>

<PAGE>




                                     PART I

Item 1. Business

GENERAL

   Willamette  Industries,  Inc. (the "Company" or "Willamette")  was founded in
1906 as the Willamette Valley Lumber Co. in Dallas,  Oregon. In 1967, Willamette
Valley and several related firms merged to form Willamette Industries,  Inc. Its
stock  has  been  publicly  traded  since  1968.   Willamette  Industries  is  a
diversified, integrated forest products company with 99 manufacturing facilities
(96 operating and 3 under construction) in 22 states and in Ireland.

  The  Company's  manufacturing  facilities  produce  kraft  liner,  corrugating
medium, bag paper, fine paper,  hardwood market pulp, specialty printing papers,
corrugated  containers,  business  forms,  cut sheet  paper,  paper bags,  inks,
lumber,  plywood,  particleboard,  medium density  fiberboard,  oriented  strand
board,  laminated  beams,  laminated  veneer lumber,  wooden  I-joists and other
value-added wood products. We own or manage 1,838,000 acres of timberland in the
United States and employ approximately 13,700 people.

  We are a  medium-sized  firm  in a very  competitive  industry  consisting  of
thousands of companies,  some larger and more diversified,  others much smaller,
producing only one or two products.  Very competitive  conditions exist in every
industry  segment in which the Company  operates.  The  Company  competes in its
markets primarily through price,  quality and service. We feel our strengths are
our  vertical  integration;  our  geographically  diverse,  modern,  fiber-  and
energy-efficient facilities; our engineering and construction capabilities;  our
concentration  on a focused,  related product range;  our balance among building
materials,  fine paper and unbleached paper manufacturing;  our 57% raw material
self-sufficiency  and an  organizational  structure that encourages  teamwork as
well as individual initiative.

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

BUSINESS SEGMENT INFORMATION

   The Company has two business segments. The paper group manufactures and sells
pulp and paper products.  The building  materials group  manufactures  and sells
wood  products.  Sales  and  operating  data for the paper  group  and  building
materials  group  for the  past  five  years  are set  forth  in the  five  year
comparison  captioned  "Supplementary  Business Segment  Information" located on
page 28. The Company is not dependent on any one  significant  customer or group
of  customers.   Approximately  95%  of  the  Company's  total  output  is  sold
domestically.

                                       1
<PAGE>



PULP AND PAPER

Market pulp and fine paper
  Four mills in Kentucky, Pennsylvania, Tennessee and South Carolina manufacture
8.0% of the nation's fine paper production.  Additionally,  our mill in Kentucky
produces  4.3% of the nation's  hardwood  market pulp,  which is sold to outside
customers.

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

Unbleached paper
  Four  paper  mills  in  Oxnard,  California;   Hawesville,  Kentucky;  Campti,
Louisiana  and Albany,  Oregon  manufacture  4.8% of the nation's  production of
linerboard,  corrugating medium and bag paper. Nearly all of the product is used
or traded for the needs of Willamette's box and bag manufacturing plants.

  In Louisiana and Oregon,  our sawmills,  plywood  plants and  timberlands  can
provide our chip needs for our linerboard mills.

  Recycled fiber, in the form of used corrugated  containers,  provides 59.7% of
our fiber needs.

CONVERTED PAPER PRODUCTS

Office papers
  Seven  business  forms plants in six states  manufacture  8.1% of the nation's
production of forms. These forms are mostly long-run  continuous computer forms.
Additionally,  our four cut sheet  facilities (a fifth is under  construction to
begin producing in the spring of 1998) make Willcopy(R),  Willamette's photocopy
and cut sheet printer paper.  Our cut sheets represent 10.9% of the nation's cut
sheet production.  Our business forms and Willcopy(R) cut sheets are marketed by
73 sales and distribution centers.

Corrugated containers and sheets
   Corrugated containers and sheets are manufactured by 34 plants (including two
to begin  production in 1997) in 19 states,  accounting for 5.6% of the nation's
corrugated  box  production.  Products  range from  colorful  store  displays to
eye-catching preprinted boxes; from sturdy wax coated shipping containers to the
plain brown box. Corrugated  containers are marketed by our own sales force to a
variety of industrial and agricultural customers.



                                       2
<PAGE>



Bags
 Four bag plants located in California, Missouri, Oregon and Texas make 12.1% of
the  nation's  paper bags,  marketed to grocery,  department,  drug and hardware
stores in the West, Midwest and South by our sales force.

BUILDING MATERIALS

Structural panels and lumber
  Plywood  panels are  manufactured  at 10 plants in  Arkansas,  the  Carolinas,
Louisiana  and Oregon.  Our new oriented  strand board plant in Louisiana  began
production in April of 1996.  The output of these  products total 6.5% and 1.5%,
respectively, of the nation's production.

  Seven sawmills manufacture 1.6% of the nation's lumber production.

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

Composite board
  Four  particleboard  plants in Louisiana and Oregon  manufacture  12.3% of the
nation's  particleboard.   Three  medium  density  fiberboard  plants  (MDF)  in
Arkansas,  Oregon and South Carolina made 21.5% of the nation's MDF in 1996. The
MDF   plants    produce    value-added    products    including    color-coated,
woodgrain-printed, fire-rated and moisture-resistant boards.

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

  The newly  acquired MDF  facility in Clonmel,  Ireland  accounted  for 6.4% of
European production in 1996. The facility operates as "Medite of Europe Limited"
(Medite)  and has strong name brand  recognition  in the  European  marketplace.
Medite produces specialty grade MDF which includes exterior, moisture-resistant,
fire-retardant, and high density board.

Engineered wood products
  Three  laminated beam plants in Oregon and Louisiana  account for 31.2% of the
nation's  production.  Two  laminated  veneer lumber (LVL) plants and one wooden
I-joist plant, all located in Oregon,  manufacture 5.2% and 3.9% of the nation's
total  production of each respective  product.  Engineered  wood products,  both
stock and custom made, are sold in both the domestic and international markets.

TIMBERLANDS

  Willamette's  1,838,000 acres of timberland  supply  approximately  57% of our
long-term log needs. The remainder is purchased through private timber sales and
open market purchases.  In Oregon,  we are able to provide  approximately 90% of
our log needs from timberlands we own or 


                                       3
<PAGE>


control.  Our timberlands are comprised of 734,000 acres in Louisiana,  Arkansas
and  Texas;  728,000  acres in  Oregon  and  Washington;  and  376,000  acres in
Tennessee,  Missouri and the Carolinas. We continually look for opportunities to
expand our fee timber base and make purchases when it is profitable to do so.

ENERGY

  Through  cogeneration,  the burning of waste  materials  and the  recycling of
spent  pulping  liquors,  Willamette's  manufacturing  facilities  are  able  to
generate 57% of their total energy needs.

EMPLOYEES

  Willamette  employs  approximately  13,700  people,  of  whom  about  52%  are
represented by labor unions with collective  bargaining  agreements.  Agreements
covering  approximately  2,419  employees  were  negotiated in 1996.  Agreements
involving  about  1,974  hourly  employees  are  subject  to  renewal  in  1997.
Approximately 46% of all salaried employees have been with the Company more than
twelve years.

ENVIRONMENTAL MATTERS

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

Item 2.  Properties
MANUFACTURING FACILITIES

The  following  table  sets  forth   information   regarding  the  Company's  99
manufacturing facilities at December 31, 1996:

        FACILITY                        1997 FORECAST
        --------                        -------------
Western Plywood (3 Plants)   M Square Ft. (3/8" Basis)
  Dallas, Oregon                               96,000
  Foster, Oregon                              127,000
  Springfield, Oregon                         120,000
    Total Western Plywood                     343,000

Southern Plywood (5 Plants)
  Dodson, Louisiana                           227,000
  Emerson, Arkansas                           234,000
  Ruston, Louisiana                           174,000
  Taylor, Louisiana                           208,000
  Zwolle, Louisiana                           231,000
                                            ---------
    Total Southern Plywood                  1,074,000



                                       4
<PAGE>




Atlantic Plywood (2 Plants)             1997 FORECAST
                                        -------------
  Chester, South Carolina                     256,000
  Moncure, North Carolina                     115,000
                                            ---------
    Total Atlantic Plywood                    371,000

      Total Plywood                         1,788,000

Oriented Strand Board (1 plant)
  Arcadia, Louisiana                          323,000
                                                      (1996 Production-
      Total Structural Panels               2,111,000  1,881,000 M)
                                            =========

Western Lumber (5 Mills)                 M Board Feet
  Coburg, Oregon                              146,000
  Dallas, Oregon                              117,000
  Lebanon, Oregon-2 mills                     134,000
  Warrenton, Oregon                           140,000
                                            ---------
    Total Western Lumber                      537,000
                                            ---------

Southern Lumber (2 Mills)
  Dodson, Louisiana                            64,000
  Zwolle, Louisiana                            51,000
    Total Southern Lumber                     115,000
                                            ---------
                                                      (1996 Production-
      Total Lumber                            652,000  538,000 M)
                                            =========

Particleboard (4 Plants)                M Square Ft. (3/4" Basis)
  Albany, Oregon                              210,000
  Bend, Oregon                                161,000
  Lillie, Louisiana                           113,000
  Simsboro, Louisiana                          99,000
                                            ---------
                                                      (1996 Production-
    Total Particleboard                       583,000  546,000 M)
                                            =========


Medium Density Fiberboard (4 Plants)  M Square Ft. (3/4" Basis)
  Bennettsville, South Carolina               141,000
  Eugene, Oregon                               59,000
  Malvern, Arkansas                           156,000
  Clonmel, Ireland                            158,000
                                                      (1996 Production-
    Total MDF                                 514,000  284,000 M)
                                            =========



                                       5
<PAGE>








                                        1997 FORECAST
                                        -------------
Engineered Wood Products (6 Plants)       M Board Ft.
Laminated Beams
  Saginaw, Oregon                              26,000
  Simsboro, Louisiana                          16,000
  Vaughn, Oregon                               59,000
                                            ---------
                                                      (1996 Production-
    Total Laminated Beams                     101,000  99,000 M)
                                            =========

Laminated Veneer Lumber                   Cubic Ft.
  Albany, Oregon                            1,477,000
  Winston, Oregon                           1,600,000
                                                      (1996 Production-
    Total LVL                               3,077,000  1,571,000 CF)
                                            =========

Structural I-Joists                      M Lineal Ft. (1996 Production-
  Woodburn, Oregon                             42,000  24,000 M)


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

Pulp and Paper (9 Mills)                         Tons
  Unbleached:
    Albany, Oregon                            504,000
    Campti, Louisiana                         793,000
    Hawesville, Kentucky                      177,000
    Oxnard, California                        190,000
                                            ---------
                                                      (1996 Production-
        Total Unbleached Pulp and Paper     1,664,000  1,629,000 Tons)

  Market Pulp and Fine Paper:
    Hawesville, Kentucky
      Market Pulp                             158,000
      Fine Paper(1)                           203,000
    Johnsonburg, Pennsylvania                 382,000
    Kingsport, Tennessee                      217,000
    Marlboro County, South Carolina           295,000
                                            ---------
                                                      (1996 Production-
        Total Market Pulp and Fine Paper    1,255,000  1,174,000 Tons)
                                                      (1996 Production-
        Total Pulp and Paper                2,919,000  2,803,000 Tons)
                                            =========



                                       6
<PAGE>



                                        1997 FORECAST
                                        -------------
 Corrugated Container and Sheets(34 Plants)  M Square Ft.
  Aurora, Illinois                            955,000
  Beaverton, Oregon                           813,000
  Bellevue, Washington                        627,000
  Bellmawr, New Jersey                        673,000
  Bowling Green, Kentucky                     815,000
  Cerritos, California                        871,000
  Compton, California                         710,000
  Dallas, Texas                               934,000
  Delaware, Ohio                              659,000
  Elk Grove, Illinois                         475,000
  Fort Smith, Arkansas                        816,000
  Fridley, Minnesota                          980,000
  Golden, Colorado                            720,000
  Griffin, Georgia                          1,030,000
  Huntsville, Alabama                         905,000
  Indianapolis, Indiana                       776,000
  Kansas City, Kansas                         842,000
  Lincoln, Illinois                           520,000
  Louisville, Kentucky                        441,000
  Lumberton, North Carolina                   761,000
  Maryland Heights, Missouri                  674,000
  Matthews, North Carolina                    448,000
  Memphis, Tennessee                           58,000
  Moses Lake, Washington                      705,000
  Newton, North Carolina                      504,000
  Plant City, Florida(2)                      344,000
  Portland, Oregon(3)                         225,000
  Sacramento, California                      730,000
  San Leandro, California                   1,184,000
  Sanger, California                          811,000
  Sealy, Texas                                787,000
  St. Paul, Minnesota                         598,000
  Warrensville Heights, Ohio                   69,000
  West Memphis, Arkansas                      734,000
                                           ----------
                                                      (1996 Production-
    Total Corrugated Containers            23,194,000  21,528,000 M)
                                           ==========

Business Forms (7 Plants)                        Tons
  Cerritos, California                         55,000
  Dallas, Texas                                48,000
  DuBois, Pennsylvania                          6,000
  Indianapolis, Indiana                        71,000
  Langhorne, Pennsylvania                      65,000
  Rock Hill, South Carolina                    53,000
  West Chicago, Illinois                       54,000
                                            ---------
                                                      (1996 Production-
    Total Business Forms                      352,000  326,000 Tons)
                                            =========



                                       7
<PAGE>




                                        1997 FORECAST
                                        -------------
Cut Sheets and Other Converting (5 Plants)       Tons
  DuBois, Pennsylvania                        138,000
  Kingsport, Tennessee                        111,000
  Brownsville, Tennessee4                           -
  Owensboro, Kentucky                         158,000
  Tatum, South Carolina                        92,000
                                                      (1996 Production-
    Total Cut Sheets                          499,000  423,000 Tons)
                                            =========

Kraft Bags and Sacks (4 Plants)                  Tons
  Beaverton, Oregon                            46,000
  Buena Park, California                       33,000
  Dallas, Texas                                26,000
  North Kansas City, Missouri                  22,000
                                                      (1996 Production-
    Total Kraft Bags and Sacks                127,000  118,000 Tons)
                                            =========

Preprinted Linerboard (2 Plants)          M Square Ft.
  Richwood, Kentucky                          553,000
  Tigard, Oregon                              505,000
                                            ---------
                                                      (1996 Production-
    Total Preprinted Linerboard             1,058,000  846,000 M)
                                            =========

Inks and Specialty Products (2 Plants)           Tons
  Beaverton, Oregon                             4,000
  Delaware, Ohio                                2,000
                                            ---------
                                                      (1996 Production-
    Total Inks                                  6,000  6,000 Tons)
                                            =========


1  Second machine scheduled for start-up in the spring of 1998.
2  Production to begin in first quarter of 1997.
3  Production to begin in summer of 1997.
4  Production to begin in spring of 1998.

TIMBERLANDS
   For  information  respecting  the  Company's  timberlands,   see  "Business--
Timberlands."

Item 3.  Legal proceedings

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

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

  There were no  matters  submitted  to a vote of  security  holders  during the
fourth quarter of the year ended December 31, 1996.


                                       8
<PAGE>



                      Executive Officers of the Registrant

  The  executive  officers of the  Company are elected  annually by the board of
directors.  At February 13, 1997, the executive  officers of the Company,  their
ages at December 31, 1996, and their positions with the Company were as follows:

       Name               Age                  Position
       ----               ---                  --------
Steven R. Rogel           54        President and chief
                                    executive officer

William P. Kinnune        57        Executive vice president-
                                    corrugated containers and bags

Michael R. Onustock       57        Executive vice president-
                                    pulp and fine paper marketing

J. A. Parsons             61        Executive vice president and chief financial
                                    officer, secretary and treasurer

Duane C. McDougall        44        Executive vice president-
                                    building materials group

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



                                       9
<PAGE>



                                     PART II

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

  The Company's  common stock trades on the New York Stock Exchange (NYSE) under
the symbol: WLL. At December 31, 1996, there were approximately 6,500 holders of
record of the Company's common stock. The following table shows, for the periods
indicated, the high and low closing sales prices of, and the per share dividends
paid on, the Company's  common stock.  Prior to December 31, 1996, the Company's
shares traded on NASDAQ under the symbol: WMTT.

<TABLE>
<CAPTION>
                                  1996                                    1995
                      -----------------------------            --------------------------
                                        Closing                                  Closing
                      Dividends          Price                 Dividends          Price 
                        Paid            High-Low                 Paid            High-Low 
                        ----            --------                 ----            -------- 
                                                               
<S>                   <C>             <C>                      <C>             <C>
1st Quarter...        $0.31           60 1/4-49 1/4            $0.27           55 - 46 3/4
2nd Quarter...         0.31           64 1/4-57 1/2             0.27           56 1/4-48 1/4
3rd Quarter...         0.31           68 - 56 1/2               0.30           72 3/8-55 1/2
4th Quarter...         0.31           70 1/2-62 1/2             0.30           66 1/2-54 1/4
</TABLE>

A dividend  of $.32 per share was  declared  on the  common  stock for the first
quarter of 1997  representing  an indicated  annual  dividend  rate of $1.28 per
share.  The Company expects to continue paying regular cash dividends,  although
there  is no  assurance  as to  future  dividends  as they  are  dependent  upon
earnings, capital requirements and financial condition.


                                       10
<PAGE>


Item 6.  Selected Financial Data

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

Financial Results
(dollar amounts, except per share amounts, in thousands)
<TABLE>
<CAPTION>
                                                     1996          1995          1994          1993          1992

---------------------------------------------------------------------------------------------------------------------
<S>                                            <C>               <C>           <C>           <C>           <C>      
Net sales                                      $   3,425,173     3,873,575     3,007,949     2,622,237     2,372,396

=====================================================================================================================
Cost and expenses:

  Depreciation, amortization and cost
    of fee timber harvested..................        302,937       249,165       217,252       194,202       173,784

  Materials, labor and other operating
    expenses.................................      2,495,345     2,528,570     2,239,185     1,997,246     1,833,919

                                                 --------------------------------------------------------------------
    Gross profit.............................        626,891     1,095,840       551,512       430,789       364,693

  Selling and administrative expenses........        231,862       201,784       184,699       174,413       167,094
                                                 --------------------------------------------------------------------
    Operating earnings.......................        395,029       894,056       366,813       256,376       197,599

  Interest expense...........................         92,804        71,050        71,513        63,290        66,422

  Other income (expense).....................          3,861           798        (6,377)       (3,918)       (1,725)
                                                 ---------------------------------------------------------------------
    Earnings before provision for income
    taxes..................................          306,086       823,804       288,923       189,168       129,452
  Provision for income taxes.................        114,000       309,000       111,300        78,500        47,900
                                                 --------------------------------------------------------------------
    Earnings before accounting changes.......        192,086       514,804       177,623       110,668        81,552
  Accounting changes.........................              -             -             -        26,364             -
                                                 --------------------------------------------------------------------
    Net earnings.............................        192,086       514,804       177,623       137,032        81,552
  Cash dividends paid........................         68,520        62,874        52,807        48,213        45,200
  Earnings retained in the business..........        123,566       451,930       124,816        88,819        36,352
  Capital expenditures.......................        485,769       453,523       393,161       386,864       367,173
=====================================================================================================================
Financial Condition:
  Working capital............................  $     289,134       359,258       138,528       157,576       157,822
   (noncurrent portion)......................      1,766,917       790,210       915,797       941,710       843,618
  Stockholders' equity.......................      1,976,281     1,846,890     1,387,865     1,257,870     1,164,828

  Total assets...............................      4,720,681     3,413,555     3,033,398     2,804,553     2,527,416
=====================================================================================================================
Common Stock:
  Number of stockholders (beneficial)........         23,000        19,000        17,000        14,000        11,500
  Shares outstanding (in thousands)..........         55,354        55,224        55,036        54,897        54,770
=====================================================================================================================
Per Share: (1)
  Earnings before accounting changes.........  $        3.48          9.34          3.23          2.02          1.52
  Accounting changes.........................              -             -             -          0.48             -
                                                 --------------------------------------------------------------------
    Net earnings.............................           3.48          9.34          3.23          2.50          1.52
  Cash dividends paid........................           1.24          1.14          0.96          0.88          0.84
  Stockholders' equity.......................          35.70         33.44         25.22         22.91         21.27
  Year-end Stock Price.......................         69.625         56.25         47.50         49.50         41.25
=====================================================================================================================
Financial Returns:
  Percent return on equity before
   accounting changes (2)....................          10.4%         37.1%         14.1%          9.5%          8.2%
  Percent return on net sales before
   accounting changes........................           5.6%         13.3%          5.9%          4.2%          3.4%
=====================================================================================================================
Employment:
  Number of employees........................         13,700        13,180        12,260        12,040        12,000
  Wages, salaries and cost of employee
 benefits..................................    $     672,280       627,835       580,561       551,172       507,469
=====================================================================================================================

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

                                       11
<PAGE>



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

  The Company's two basic businesses, paper products and building materials, are
affected by changes in general  economic  conditions.  Paper  product  sales and
earnings  tend to follow the  general  economy.  The sales and  earnings  of the
building   materials  business  are  closely  related  to  new  housing  starts,
remodeling  activity  and  to  the  availability  and  terms  of  financing  for
construction.  The cost of wood and recycled fiber, basic raw materials for both
industry segments, is sensitive to various supply and demand factors,  including
environmental issues affecting log supply.

RESULTS OF OPERATIONS 1996 VS. 1995

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

   Building  materials  sales  increased  1.6% in  1996  compared  with  1995 as
increases   in  sales   volume  more  than  offset   decreases  in  sales  price
realizations.  Although  lumber prices  marginally  increased  2.7% during 1996,
prices in the structural panel and composite board markets  continued to decline
due to supply and demand  imbalances  created by construction of new facilities.
As a result,  structural panel and composite board product lines had sales price
decreases  ranging from 4.1% to 16.0%  compared to 1995 levels.  Unit  shipments
increased in lumber,  MDF and OSB primarily  due to capacity  increases in 1996,
achieved through  acquisitions and expansion from capital projects. A sawmill in
Warrenton,  Oregon was  acquired in the second  quarter,  and a new MDF plant in
Clonmel,  Ireland was acquired in the fourth  quarter.  In  addition,  the newly
converted  MDF plant in Eugene,  Oregon  and the new OSB  facility  in  Arcadia,
Louisiana  came on line in the first half of 1996.  As a result,  lumber and MDF
sales volumes increased 25.2% and 28.9% respectively, in 1996.

  The gross  profit  margin for all products  was 18.3% for 1996  compared  with
28.3% for the same period in 1995.  Paper  product  gross  margins




                                       12
<PAGE>



decreased to 20.3% in 1996 compared with 30.4% in 1995,  reflecting the decrease
in selling prices in 1996 from the record levels in 1995. In addition, increased
shutdown  days in 1996 to adjust  for  inventory  buildup  in the market and for
capital  expansion  projects  had  a  negative  impact  on  margins.   Partially
offsetting  the effect of  decreased  sales and down time was the decline in old
corrugated container (OCC) prices, a raw material recycled to manufacture paper,
which decreased 40.0% compared to 1995.

  Building materials gross margins decreased to 14.0% compared to 22.9% in 1995.
The decrease in building  materials margins is the result of declining prices in
the structural panel and composite board markets.  Additionally,  start up costs
associated  with  the new OSB and  MDF  facilities,  as well as the 4th  quarter
start-up  of the new LVL  facility  and Custom  Products  relocation  at Albany,
Oregon negatively affected 1996 margins.

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

  Interest  expense was $92.8 million in 1996 compared to $71.0 million in 1995.
Interest  expense  increased  as a  result  of  increased  debt  related  to the
acquisitions  discussed  in note 10 to the  consolidated  financial  statements.
Partially  offsetting the increase in  outstanding  debt was the decrease in the
Company's  weighted  average interest rate from 7.67% in 1995 to 7.12% for 1996.
Additionally,  capitalized interest increased from $6.2 million in 1995 to $10.5
million in 1996 due to the significant capital projects underway.

RESULTS OF OPERATIONS 1995 VS. 1994

   Net sales  increased  28.8% in 1995 compared  with 1994.  Paper product sales
increased  49.0% as  selling  prices  increased  by  30.0% or more in all  paper
product lines. Except for grocery bags and corrugated container shipments,  unit
sales volumes increased by 5.7% or more in all paper product lines.  Grocery bag
and corrugated  container  shipments were down 11.7% and 2.5%  respectively from
1994 mainly due to  exceptionally  strong demand for these products during 1994.
During the fourth  quarter of 1995,  selling  prices for all paper product lines
declined from record levels achieved in the third quarter of 1995.

  Building  materials sales decreased 5.2% in 1995 compared with 1994 mostly due
to lower unit shipments in all building  materials product lines. Unit shipments
declined  primarily due to weaker  building  materials  markets,  downtime taken
associated with the completion of capital expansion  projects and the closure of
the Sweet Home,  Oregon




                                       13
<PAGE>



plywood plant in the fourth quarter of 1994.  Except for lumber,  selling prices
in all building materials product lines were higher in 1995 than 1994;  however,
prices in the fourth  quarter of 1995 were lower in all  product  lines than for
the first three quarters of 1995.

  The gross profit margin was 28.3% for 1995 compared with 18.3% for 1994. Paper
product  gross  margins  increased to 30.4% in 1995 compared with 13.8% for 1994
reflecting the record level selling prices achieved for all paper product lines.
In  addition,  gross  margins in 1995 were not  impacted by the  start-up  costs
incurred  in 1994 for the  installation  of a new  pulping  facility  and  paper
machine at the Company's  Johnsonburg,  Pennsylvania mill.  Another  significant
improvement  to gross margins in 1995 was the start-up of the second  linerboard
machine at Campti,  Louisiana,  which allowed the Company to replace  linerboard
previously  purchased  outside with internally  produced product at a much lower
cost.  Partially  offsetting the increase in gross margins was the escalation of
old corrugated container (OCC) prices by 47.3% compared with 1994.

  Building materials gross profit margins decreased to 22.9% compared with 25.9%
in 1994.  The drop in building  materials  margins is mainly due to decreases in
unit shipments coupled with higher log costs and increased glue and resin costs.

  Selling  and  administrative  expenses  declined  to 5.2% of net sales in 1995
compared with 6.1% for 1994. The drop was due to higher net sales as selling and
administrative  expenses  increased  9.3%  between  1995 and 1994  mainly due to
expansion of the Company's operations.

  Other income (expense) was $.8 million in 1995 versus $(6.4) million for 1994.
The  expense  in 1994 was mostly due to the  closure of the Sweet  Home,  Oregon
plywood plant with a related charge of $5.0 million.

  Interest  expense was $71.0  million in 1995  compared  with $71.5  million in
1994.  Because the Company's  average  outstanding debt decreased $105.2 million
between 1995 and 1994,  gross interest  declined to $77.2 million in 1995 versus
$80.8  million in 1994.  Capitalized  interest  declined to $6.2 million in 1995
versus $9.3 million in 1994. The weighted  average interest rate of all debt was
7.67% at December 31, 1995 compared with 7.75% at December 31, 1994.

LIQUIDITY AND CAPITAL RESOURCES

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

  In 1996,  cash  flows  from  operating  activities  were  $659.3  million  and
represented a decrease of 8.1% from comparable cash flows in 1995. This 




                                       14
<PAGE>



decrease  was  primarily  due to a decline from the record level of net earnings
achieved in 1995.  Internally  generated  cash flows  continued  to fund 100% of
capital expenditures in 1996.

  Net working  capital  decreased  to $289.1  million at December  31, 1996 from
$359.3 million at December 31, 1995. The decrease is primarily due to reductions
in inventories and receivables. The decrease in inventories of $25.4 million was
due to quantities  being unusually high at December 31, 1995 and the receivables
decrease of $41.4 million was primarily due to lower net sales.

  The Company is continually  making capital  expenditures at its  manufacturing
facilities  to  improve  fiber  utilization,  labor  efficiency  and  to  expand
production. In 1996, the Company made capital expenditures of $454.7 million.

  During 1996 the following major capital projects were completed:

        o      Construction of an OSB facility in Arcadia, Louisiana.
        o      Construction  of a new LVL and custom  products  plant in Albany,
               Oregon.
        o      Conversion  of  the  Eugene,   Oregon   particleboard   plant  to
               manufacture MDF.
        o      Upgrade of recovery  boiler and  chemical  and fiber  recovery at
               Kingsport, Tennessee bleached pulp mill.
        o      Expansion  of pulping  capacity  at the  Marlboro  County,  South
               Carolina fine paper mill.

  Major capital projects underway at December 31, 1996 include the following:

        o      Addition of new fine paper machine and related  pulping  capacity
               at Hawesville, Kentucky.
        o      Construction  of a  new  corrugated  box  plant  in  Plant  City,
               Florida.
        o      Construction  and  installation of a new boiler at the Kingsport,
               Tennessee bleached pulp mill.
        o      Expansion  of  secondary  fiber  capacity  at the  paper  mill in
               Campti, Louisiana.
        o      Construction of a new cut sheet plant in Brownsville, Tennessee.
        o      Modernization of the sawmill at Coburg, Oregon.

  The cost of all major  capital  projects in  progress at December  31, 1996 is
estimated to be approximately $923.8 million of which $384.9 million has already
been spent.  These projects will be funded with internally  generated cash flows
and with external borrowings if needed.



                                       15
<PAGE>



  In May 1996 the Company  acquired  the timber  operations  of Cavenham  Forest
Industries,  Inc.  (the  Cavenham  acquisition),  in  Louisiana  and the Pacific
Northwest as discussed in note 10 to the consolidated financial statements.  The
Company funded the  acquisition  with cash and $1.1 billion of borrowing under a
Credit  Agreement  between  the  Company  and a group of banks  providing  for a
revolving loan and a term loan. On July 1, 1996, the Company issued $400 million
in debentures. The proceeds from the sale were used to reduce indebtedness under
the term loan used to fund the Cavenham acquisition, thus the debenture issuance
had no effect on the  Company's  total  debt-to-capital  ratio at that time.  In
November,  1996,  the Company  completed  the  acquisition  of Medite of Europe,
discussed in note 10 to the consolidated financial statements, for $61.5 million
in cash, plus certain closing costs.  The transaction was financed by borrowings
from the revolving loan under the Credit Agreement.

  The total  debt-to-capital  ratio has  increased to 49.9% at December 31, 1996
from 32.0% at December 31, 1995 due to the  acquisitions  discussed  above.  The
Company  anticipates it can maintain its present course of capital spending over
the next three years and still reduce its debt-to-capital  ratio to below 40% by
1999.  Despite a significant  increase in the Company's  debt-to-capital  ratio,
rating  agencies have  maintained the Company's  credit rating in the "A" range,
thereby  preserving its cost of capital.  Additionally,  the Company believes it
has the  resources  available to meet its  short-term  and  long-term  liquidity
requirements. Resources include internally generated funds, short-term borrowing
agreements  and the unused  portion of the revolving  loan  available  under the
Credit Agreement.

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

OTHER MATTERS

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

  The Environmental Protection Agency previously issued proposed rules regarding
air and water quality  referred to as the "cluster  rules".  The final rules are
expected to be  released  sometime  in 1997 with  implementation  expected to be
required by the year 2000.  In  addition  to the impact of the cluster  rules on
pulp and paper mills, the Company's other operations are faced with increasingly
stringent  environmental  regulations.  Based upon  either  enacted or  proposed
regulations,  the Company  estimates  that over the next five years,  additional
capital  expenditures which are not yet in progress to comply with environmental
regulations will not exceed $120 million.  Although future environmental capital
expenditures cannot be predicted with any certainty because of


                                       16
<PAGE>



continuing  changes in laws, we believe that compliance with such  environmental
regulations  will  not  have  a  material  adverse  effect  upon  the  Company's
competitive position.

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

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

FORWARD-LOOKING STATEMENTS

   Statements  contained  in this  report  that are not  historical  in  nature,
including without limitation the discussion of the anticipated  reduction in the
Company's debt-to-capital ratio, forecasted sales and production volumes and the
adequacy of the Company's liquidity  resources,  are forward-looking  statements
within the  meaning of the  Private  Securities  Litigation  Reform Act of 1995.
Forward-looking statements are subject to risks and uncertainties that may cause
actual future results to differ  materially.  Such risks and uncertainties  with
respect to the Company include the effect of general  economic  conditions;  the
level of new housing starts and remodeling activity;  the availability and terms
of financing for construction; competitive factors, including pricing pressures;
the cost and availability of wood fiber; the effect of natural  disasters on the
Company's  timberlands;  and the  impact of  environmental  regulations  and the
construction and other costs associated with complying with such regulations.

Item 8.  Financial Statements and Supplementary Data

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

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

  None.


                                       17
<PAGE>



                                    PART III

Item 10.  Directors and Executive Officers of the Registrant

  Information  regarding  (i)  directors  of the  Company  is set  forth  in the
Company's definitive proxy statement (the "Proxy Statement") for its 1997 annual
meeting of shareholders,  under the heading "Election of Directors" and (ii) the
failure by an officer of the  Company  to file,  on a timely  basis,  one report
required by Section 16 (a) of the Securities  Exchange Act of 1934, is set forth
under "Section 16(a)  Beneficial  Ownership  Reporting  Compliance" in the Proxy
Statement,  which information is incorporated  herein by reference.  Information
regarding the  executive  officers of the Company is set forth under the heading
"Executive Officers of the Registrant" in Part I of this report.

Item 11.  Executive Compensation

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

Item 12.  Security Ownership of Certain Beneficial Owners and Management

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

Item 13.  Certain Relationships and Related Transactions

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


                                       18
<PAGE>



                                     PART IV

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

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

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

(b)                   Reports on Form 8-K.

                      No reports on Form 8-K were  filed for the  quarter  ended
                      December 31, 1996.


                                       19
<PAGE>



                                   SIGNATURES

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

                                               WILLAMETTE INDUSTRIES, INC.
                                                      (Registrant)

                                               By /S/ J. A. PARSONS
Dated:  February 13, 1997                             (J. A. Parsons)
                                               Executive Vice President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on February 13, 1997, by the  following  persons on behalf
of the registrant in the capacities indicated.


           SIGNATURE                               TITLE

Principal Executive Officer
  and Director

/S/  STEVEN R. ROGEL                       President and Chief Executive Officer
        (Steven R. Rogel)                  and Director

Principal Financial Officer

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

Principal Accounting Officer

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


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


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


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



                                       20
<PAGE>



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


/S/ PAUL N. MCCRACKEN                      Director
       (Paul N. McCracken)


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


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


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


/S/ SAMUEL C. WHEELER                      Director
       (Samuel C. Wheeler)


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


                                       21
<PAGE>



Index to Consolidated Financial Statements



                                                                 PAGE NO.

Independent Auditors' Report.....................................   23

Consolidated Balance Sheets as of December 31, 1996 and 1995.....   24

Consolidated Statements of Earnings for years ended
  December 31, 1996, 1995 and 1994...............................   25

Consolidated Statements of Stockholders' Equity
  for years ended December 31, 1996, 1995 and 1994...............   26

Consolidated Statements of Cash Flows for years ended
  December 31, 1996, 1995 and 1994...............................   27

Supplementary Business Segment Information.......................   28

Selected Quarterly Financial Data................................   29

Notes to Consolidated Financial Statements.......................30-40



                                       22
<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, 1996 and 1995 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, 1996.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

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

  In our  opinion,  the  consolidated  financial  statements  referred  to above
present fairly, in all material  respects,  the financial position of Willamette
Industries, Inc. and subsidiaries at December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996 in conformity with generally accepted  accounting
principles.





                              KPMG PEAT MARWICK LLP
Portland, Oregon
February 13, 1997


                                       23
<PAGE>



<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------
Consolidated Balance Sheets
===================================================================================================================
December 31, 1996 and 1995
(dollar amounts, except per share amounts, in thousands)


Assets                                                                                1996              1995
                                                                                     ------            ------
Current assets:
<S>                                                                           <C>                           <C>   
  Cash                                                                        $         22,222              17,961
  Accounts receivable, less allowance for doubtful
     accounts of $4,460 (1995 - $5,446)                                                272,709             314,070
  Inventories (note 3)                                                                 365,949             391,358
  Prepaid expenses and deposits on timber cutting contracts                             38,454              51,448
  Assets held for sale (notes 5 and 10)                                                160,218                   -
                                                                                 --------------  ------------------
        Total current assets                                                           859,552             774,837
                                                                                 --------------  ------------------
Timber, timberlands and related facilities, net (note 10)                            1,444,873             518,873
Property, plant and equipment, net (notes 9 and 10)                                  2,330,469           2,054,868

Other assets                                                                            85,787              64,977
                                                                                 --------------  ------------------
                                                                              $      4,720,681           3,413,555
                                                                                 ==============  ==================


Liabilities and Stockholders' Equity
Current liabilities:
  Current installments on long-term debt (note 5)                             $          4,512              29,598
  Notes payable (note 5)                                                               200,000              51,000
  Accounts payable, includes book overdrafts of $48,005
           (1995 - $58,158)                                                            185,437             180,176
  Accrued payroll and related expenses                                                  72,661              65,335
  Accrued interest                                                                      38,336              20,428
  Other accrued expenses                                                                52,365              44,506
  Accrued income taxes (note 4)                                                         17,107              24,536
                                                                                 --------------  ------------------
         Total current liabilities                                                     570,418             415,579
                                                                                 --------------  ------------------
Deferred income taxes (note 4)                                                         374,246             330,142
Other liabilities                                                                       32,819              30,734
Long-term debt, net of current installments (note 5)                                 1,766,917             790,210
Stockholders' equity (note 7):
  Preferred stock, cumulative, of $.50 par value.                                            -                   -
    Authorized 5,000,000 shares
  Common stock of $.50 par value.  Authorized 150,000,000
    shares; issued 55,353,654 shares
      (1995 - 55,223,706 shares)                                                        27,677              27,612
  Capital surplus                                                                      306,517             300,757
  Retained earnings                                                                  1,642,087           1,518,521
                                                                                 --------------  ------------------
          Total stockholders' equity                                                 1,976,281           1,846,890
                                                                                 --------------  ------------------
                                                                              $      4,720,681           3,413,555
                                                                                 ==============  ==================


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


                                       24
<PAGE>



<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS
====================================================================================================================
Years ended December 31, 1996, 1995 and 1994
(dollar amounts, except per share amounts, in thousands)



                                                                        1996            1995               1994
                                                                       ------          ------             ------
<S>                                                           <C>                     <C>                 <C>      
Net sales                                                     $       3,425,173       3,873,575           3,007,949
Cost of sales                                                         2,798,282       2,777,735           2,456,437
                                                                 ---------------  --------------  ------------------
     Gross profit                                                       626,891       1,095,840             551,512
Selling and administrative expense                                      231,862         201,784             184,699
                                                                 ---------------  --------------  ------------------
     Operating earnings                                                 395,029         894,056             366,813
Other income (expense)                                                    3,861             798             (6,377)
                                                                 ---------------  --------------  ------------------
                                                                        398,890         894,854             360,436
Interest expense                                                         92,804          71,050              71,513
                                                                 ---------------  --------------  ------------------
     Earnings before provision for income taxes                         306,086         823,804             288,923
Provision for income taxes (note 4)                                     114,000         309,000             111,300
                                                                 ---------------  --------------  ------------------
     Net earnings                                             $         192,086         514,804             177,623
                                                                 ===============  ==============  ==================
Earnings per share                                            $            3.48            9.34                3.23
                                                                 ===============  ==============  ==================
Weighted average number of shares
  outstanding (in thousands)                                            55,268          55,146              55,019
                                                                ===============  ==============  ==================



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



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



                                       25
<PAGE>



<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
==============================================================================================================
Years ended December 31, 1996, 1995 and 1994
(dollar amounts, except per share amounts, in thousands)



                                                                    1996                 1995                1994
                                                                   ------               ------              -----
Common Stock:
<S>                                                     <C>                               <C>                 <C>   
   Balance at beginning of year                         $            27,612               27,518              27,449
       Shares issued for options exercised                               65                  119                  69
       Stock repurchased and cancelled                                    -                 (25)                   -
                                                           -----------------    -----------------  ------------------
  Balance at end of year                                $            27,677               27,612              27,518
                                                           =================    =================  ==================
Capital Surplus:
  Balance at beginning of year                          $           300,757              293,756             288,646
       Shares issued for options exercised                            5,760                9,689               5,110
       Stock repurchased and cancelled                                    -              (2,688)                   -
                                                           -----------------    -----------------  ------------------
  Balance at end of year                                $           306,517              300,757             293,756
                                                           =================    =================  ==================
Retained Earnings:
  Balance at beginning of year                          $         1,518,521            1,066,591             941,775
       Net earnings                                                 192,086              514,804             177,623
       Less cash dividends on common stock
         ($1.24,$1.14, and $.96 per share in
          1996, 1995 and 1994 respectively)                         (68,520)             (62,874)            (52,807)
                                                           -----------------    -----------------  ------------------
  Balance at end of year                                $         1,642,087            1,518,521           1,066,591
                                                           =================    =================  ==================


See accompanying notes to consolidated financial statements.

</TABLE>





                                       26
<PAGE>



<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
=====================================================================================================================
Years ended December 31, 1996, 1995 and 1994
(dollar amounts in thousands)
                                                                            1996             1995            1994
                                                                            ----             ----            ----

Cash flows from operating activities:
<S>                                                               <C>                      <C>             <C>    
  Net earnings                                                    $         192,086          514,804         177,623

  Adjustments to reconcile net earnings to net cash from operating activities:
      Depreciation                                                          246,638          218,580         192,378
      Cost of fee timber harvested                                           43,381           25,061          19,810
      Other amortization                                                     12,918            5,524           5,064
      Increase in deferred income taxes                                      40,717           98,425          33,422
  Changes in working capital items:
      Accounts receivable                                                    56,549          (31,015)        (75,894)
      Inventories                                                            49,575         (135,267)         12,972
      Prepaid expenses and timber deposits                                   14,282            1,262          (5,265)
      Accounts payable and accrued expenses                                  11,810           18,229          26,648
      Accrued income taxes                                                   (8,692)           1,582          10,164
                                                                   -----------------  --------------- ---------------
  Net cash from operating activities                                        659,264          717,185         396,922
                                                                   -----------------  --------------- ---------------

Cash flows from investing activities:
      Proceeds from sale of equipment                                         1,781            2,000           2,415
      Expenditures for property, plant and equipment                       (454,744)        (411,985)       (340,278)
      Expenditures for timber and timberlands                               (16,991)         (33,776)        (45,676)
      Expenditures for roads and reforestation                              (14,034)          (7,762)         (7,207)
      Acquisitions (note 10)                                             (1,019,274)               -               -
      Assets held for sale (notes 5 and 10)                                (160,218)               -               -
      Other                                                                  (8,517)          (8,602)         17,110
                                                                   -----------------  --------------- ---------------
  Net cash from investing activities                                     (1,671,997)        (460,125)       (373,636)
                                                                   -----------------  --------------- ---------------

Cash flows from financing activities:
      Debt borrowing                                                      1,245,226           79,010          29,000
      Proceeds from sale of common stock                                      5,697            9,635           5,011
      Repurchased common stock                                                    -           (2,713)              -
      Cash dividends paid                                                   (68,520)         (62,874)        (52,807)
      Payment on debt                                                      (165,409)        (274,955)         (1,235)
                                                                   -----------------  --------------- ---------------
  Net cash from financing activities                                      1,016,994         (251,897)        (20,031)
                                                                   -----------------  --------------- ---------------

Net change in cash                                                            4,261            5,163           3,255
Cash at beginning of year                                                    17,961           12,798           9,543
                                                                   -----------------  --------------- ---------------
Cash at end of year                                               $          22,222           17,961          12,798

                                                                   =================  =============== ===============

Supplemental  disclosures  of cash flow  information:  
  Cash paid during the year for:
      Interest (net of amount capitalized)                       $           74,896           72,930          70,791
                                                                   =================  =============== ===============

      Income taxes                                               $           81,663          208,993          67,714
                                                                   =================  =============== ===============

See accompanying notes to consolidated financial statements.

</TABLE>


                                       27
<PAGE>



<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------
SUPPLEMENTARY BUSINESS SEGMENT INFORMATION
================================================================================================================
(dollar amounts in thousands)
                                            1996    %          1995    %         1994    %         1993    %         1992     %
                                    ------------------   ----------------  ----------------  ----------------  -----------------
Sales to outside customers:
     Paper Group:
<S>                                 <C>            <C>    <C>         <C>   <C>         <C>   <C>         <C>   <C>          <C>
          Fabricated paper products $  1,823,652   53     2,128,428   55    1,475,593   49    1,232,311   47    1,098,777    46

          Pulp and paper                 520,260   15       681,094   18      410,365   14      360,014   14      381,529    16
                                    ------------------   ----------------  ----------------  ----------------  -----------------
     Total Paper Group                 2,343,912   68     2,809,522   73    1,885,958   63    1,592,325   61    1,480,306    62
                                    ------------------   ----------------  ----------------  ----------------  -----------------

     Building Materials Group:
          Lumber                         218,153    7       169,753    4      188,445    6      184,287    7      147,886     6

          Plywood                        378,959   11       428,707   11      441,397   15      425,387   16      397,332    17

          Particleboard and MDF          277,375    8       272,336    7      292,153   10      234,123    9      186,973     8

          Other wood products            206,774    6       193,257    5      199,996    6      186,115    7      159,899     7
                                    ------------------   ----------------  ----------------  ----------------  -----------------
     Total Building Materials Group    1,081,261   32     1,064,053   27    1,121,991   37    1,029,912   39      892,090    38
                                    ------------------   ----------------  ----------------  ----------------  -----------------
Total net sales (1)               $    3,425,173  100     3,873,575  100    3,007,949  100    2,622,237  100    2,372,396   100
                                    ==================   ================  ================  ================  =================
Intersegment sales at market value:
     Building Materials Group     $       42,692             61,082            36,121            39,113            38,128
                                    =============        ===========       ===========       ===========       ===========
Gross Profit (GP):                                GP%                GP%               GP%               GP%                GP%
                                                ------             ------            ------            ------             ------
    Paper Group                   $      475,945   20       855,054   30      260,830   14      184,553   12      219,354    15
    Building Materials Group             150,946   14       240,786   23      290,682   26      246,236   24      145,339    16
                                    ------------------   ----------------  ----------------  ----------------  -----------------
                                  $      626,891   18     1,095,840   28      551,512   18      430,789   16      364,693    15
                                    ==================   ================  ================  ================  =================
Contribution to earnings:
    Paper Group                   $      306,463   78       707,234   79      124,856   34       53,655   21       95,970    49

    Building Materials Group              88,566   22       186,822   21      241,957   66      202,721   79      101,629    51
                                    ------------------   ----------------  ----------------  ----------------  -----------
        Contribution to earnings(2)      395,029  100       894,056  100      366,813  100      256,376  100      197,599   100
                                    ==================   ================  ================  ================  =================
Other income (expense)                     3,861                798            (6,377)           (3,918)           (1,725)

Interest expense                          92,804             71,050            71,513            63,290            66,422
Earnings before provision for
                                    -------------        -----------       -----------       -----------       -----------
 income taxes                     $      306,086            823,804           288,923           189,168           129,452
                                    =============        ===========       ===========       ===========       ===========

Identifiable assets:
     Paper Group                  $    2,409,719          2,359,462         2,090,399         1,884,017         1,663,990

     Building Materials Group            590,102            448,320           357,276           362,184           346,882
     Timber, timberlands and
        related facilities, net        1,444,873            518,873           509,075           483,308           448,721
     Corporate                           275,987             86,900            76,648            75,044            67,823
                                    -------------        -----------       -----------       -----------       -----------
                                  $    4,720,681          3,413,555         3,033,398         2,804,553         2,527,416
                                    =============        ===========       ===========       ===========       ===========



(1) The Company is not  dependent  on any one  significant  customer or group of
    customers.   Approximately  95%  of  the  Company's  total  output  is  sold
    domestically.

(2) "Contribution  to  earnings"  is  defined  to be  that  amount  of  earnings
    generated  before (a) other income  (expense),  (b) interest expense and (c)
    provisions for income taxes.

</TABLE>



                                       28
<PAGE>



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




                                                                                            Net Earnings
                                                 Net                 Gross         -------------------------------
1996                                            Sales                Profit            Amount          Per Share
------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                         <C>               <C>                  <C> 
1st Quarter..............               $          866,112            187,946           73,370               1.33
2nd Quarter..............                          858,792            153,985           48,254                .87
3rd Quarter..............                          862,674            155,142           43,129                .78
4th Quarter..............                          837,595            129,818           27,333                .50
------------------------------------------------------------------------------------------------------------------
     Total...............               $        3,425,173            626,891          192,086               3.48
==================================================================================================================


                                                                                            Net Earnings
                                                 Net                 Gross         -------------------------------
1995                                            Sales                Profit            Amount          Per Share
------------------------------------------------------------------------------------------------------------------
1st Quarter..............               $          900,638            229,829           99,083               1.80
2nd Quarter..............                        1,003,547            288,989          134,347               2.44
3rd Quarter..............                        1,019,420            311,956          150,705               2.73
4th Quarter..............                          949,970            265,066          130,669               2.37
------------------------------------------------------------------------------------------------------------------
     Total...............               $        3,873,575          1,095,840          514,804               9.34
==================================================================================================================


</TABLE>



                                       29
<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994 (dollar amounts,  except per share amounts,  in
thousands)

1.      NATURE OF OPERATIONS
  Willamette  Industries,  Inc. is a  diversified,  integrated  forest  products
company with 99  manufacturing  plants in 22 states and in Ireland.  The Company
produces kraft liner, corrugating medium, bag paper, fine paper, hardwood market
pulp,  specialty  printing papers,  corrugated  containers,  business forms, cut
sheet paper, paper bags, inks, lumber,  plywood,  particleboard,  medium density
fiberboard,  oriented strand board,  laminated  beams,  laminated veneer lumber,
wooden I-joists and other  value-added  wood products.  The Company's  principal
lines of business are paper  products and  building  materials.  Based on sales,
paper products represent approximately two-thirds of the Company's business with
the  balance  consisting  of  building  materials.  The  primary  market for the
Company's  products  is the  United  States  domestic  market and Europe for MDF
produced  by Medite of Europe,  a wholly  owned  subsidiary.  Products  are sold
through wholesalers and distributors as well as directly to end users.

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

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

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

        (d) Timber, Timberlands and Related Facilities
          These  accounts  are  stated at their cost less the cost of fee timber
        harvested and the  amortization  of logging roads.  Both the cost of fee
        timber harvested and amortization rates are determined 


                                       30
<PAGE>



        with  reference  to costs  and the  related  existing  volume  of timber
        estimated to be recoverable.

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

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

        (f) Capitalized Interest
          Interest is  capitalized  on funds  borrowed  during the  construction
        period on certain  assets.  Capitalized  interest in 1996, 1995 and 1994
        was  $10,534,  $6,187  and  $9,294  respectively  and is netted  against
        interest  expense  in the  consolidated  statements  of  earnings.  Such
        capitalized  interest will be amortized over the depreciable life of the
        related assets.

        (g) Repurchase of Company Common Stock
          The Oregon  Business  Corporation  Act  requires the Company to cancel
        common stock shares repurchased by the Company.  The excess of cost over
        par value is charged to capital surplus.

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

3. INVENTORIES
   The major components of inventories are as follows:

                                                   DECEMBER 31,
                                                   ------------
                                              1996             1995
                                              ----             ----

Finished product.......................    $108,090           98,055
Work in progress.......................       6,182            7,712
Raw material...........................     175,480          212,651
Supplies...............................      76,197           72,940
                                           --------          -------
                                           $365,949          391,358
                                           ========          =======



                                       31
<PAGE>



Valued at:
  LIFO cost............................    $249,379          289,341
  Average cost.........................     116,570          102,017

  If  current  cost  rather  than  LIFO  cost  had  been  used  by the  Company,
inventories would have been approximately $46,261 and $87,707 higher in 1996 and
1995 respectively.

4. INCOME TAXES
   The provision for income taxes includes the following:

                                               1996         1995          1994
                                              ------       ------        ------

Payable from taxable earnings ..........     $ 73,283      261,975        77,478
Payable (reduction) due to AMT .........            -      (51,400)          400
                                             --------     --------      --------
Currently payable ......................       73,283      210,575        77,878
Deferred taxes due to temporary
   differences for:
     Accelerated depreciation ..........       37,501       91,766        32,213
        Other ..........................        3,216        6,659         1,209
                                             --------     --------      --------
        Total deferred .................       40,717       98,425        33,422
                                             --------     --------      --------
        Total provision ................     $114,000      309,000       111,300
                                             ========     ========      ========

Federal income taxes ...................     $ 97,000      265,500        95,000
State income taxes .....................       17,000       43,500        16,300
                                             --------     --------      --------
                                             $114,000      309,000       111,300
                                             ========     ========      ========

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

                                                 1996         1995         1994
                                                 ----         ----         ----

Federal statutory rate ................          35.0%        35.0%        35.0%
State income taxes, net of
  Federal tax effect ..................           3.6          3.4          3.7
Other .................................          (1.4)         (.9)         (.2)
                                                 ----         ----         ----
                                                 37.2%        37.5%        38.5%
                                                 ====         ====         ====

   The Company's  consolidated  Federal income tax returns for 1978 through 1991
have been examined by the Internal  Revenue  Service and while final  settlement
has not been made,  management  believes  that the Company has  provided for all
deficiencies that ultimately might be assessed.

   The Tax Reform Act of 1986  expanded the  corporate  alternative  minimum tax
(AMT). Under this Act, the Company's tax liability is the greater of its regular
tax or the AMT. To the extent the Company's  AMT  liability  exceeds its regular
tax  liability,  the AMT liability  may be applied  against  future  regular tax
liabilities.  The Company  utilized AMT credits of $51,400 in 1995.  At December
31, 1996, the Company had no AMT credits.


                                       32
<PAGE>



5.  LONG-TERM DEBT
   Long-term debt consists of the following:
                                                      DECEMBER 31,
                                                      ------------
                                                   1996        1995
                                                   ----        ----
Notes payable to public:
  7.00%, due in 1998.......................      $100,000     100,000
  9.625%, due in 2000......................       150,000     150,000
  7.75%, due in 2002.......................       100,000     100,000
  9.125%, due in 2003......................        50,000      50,000
  9.00%, due in 2021.......................       150,000     150,000
  7.35%, due in 20261......................       200,000           -
  7.85%, due in 2026.......................       200,000           -

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

Medium-term notes, with interest
  rates ranging from 5.66% to 7.30%,
  due in varying amounts through 2013......       150,000     150,000

Bank loans, with interest rates
  averaging 5.79% and 6.38% due
  in varying amounts through 2000..........       705,766      25,000

Revenue bonds, with interest
  rates averaging 4.69% and 5.11%,
  due in varying amounts
  through 2026.............................       121,749      89,265

Other long-term debt, with
  interest rates averaging
  6.50% and 8.03%, due in
  varying amounts through 2006.............         3,914       5,543
                                                ---------     -------
                                                1,931,429     819,808
Less: Current installments.................         4,512      29,598
     Bank loans classified as Notes Payable       160,000           -
                                                ---------     -------
                                               $1,766,917     790,210
                                               ==========     =======

  Principal payment requirements on the above debt for the four years subsequent
to 1997 are: 1998, $165,631; 1999, $4,247; 2000, $151,990; 2001, $240,240.

 In connection  with the  acquisition  discussed in note 10, the Company entered
into a Credit Agreement with a group of banks providing for a revolving loan and
a term loan.  The revolving  loan provides for  borrowings up to $1.0 billion in
principal  amount,  matures  on May 15,  2001 and at  December  31,  1996 had an
outstanding balance of $300,000.  The revolving loan also provides backup credit
for a Master Note program, which at December 31, 1996 had an


                                       33
<PAGE>



outstanding  balance of  $285,000.  The term loan matures on May 15, 1998 and at
December 31, 1996 had an outstanding balance of $100,000.  At December 31, 1996,
$160,000 of the revolving and term loans are  classified as "notes  payable" and
correspond to the anticipated  sale of the "assets held for sale" and concurrent
paydown of the term loan with the net  proceeds  therefrom  as  required  by the
Credit Agreement.

  The Company utilized  short-term  borrowings with a number of banks at various
times  during 1996 and 1995 of which  $40,000 was  outstanding  at December  31,
1996. The weighted  average  interest rate on short-term  borrowings at December
31, 1996 and 1995 was 5.61% and 5.58%  respectively.  Other uncommitted lines of
credit are  available.  Interest is based upon  prevailing  short-term  rates in
effect at the time of the transaction.

  The  fair  value  of  the  Company's   long-term   debt  is  estimated  to  be
approximately  $1,834,395  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.

6.      PENSION AND RETIREMENT PLANS

DEFINED BENEFIT PLANS

  The Company  contributes to multi-employer  retirement plans at fixed payments
per hour for certain hourly employees.  Substantially all other employees of the
Company are covered by noncontributory defined benefit plans. Under the salaried
plans,  retirement  benefits  are based on both years of service and the highest
five  consecutive  years of  compensation  prior to  retirement.  Plans covering
hourly  employees  provide  benefits of stated amounts for each year of service.
Total  pension  expense in 1996,  1995 and 1994 for all such plans was  $10,628;
$6,189 and $9,580 respectively.

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

  The net periodic  pension cost for 1996,  1995 and 1994 included the following
components:
                                            1996            1995          1994
                                            ----            ----          ----
Service cost of benefits earned
  during the period ..................     $ 13,968        10,278        11,061
Interest cost on projected
  benefit contribution ...............       20,132        18,451        16,843
Actual return on assets ..............      (50,017)      (70,087)       (2,071)
Net amortization and deferral ........       21,538        43,114       (21,470)
                                           --------      --------      --------
Net periodic pension cost ............     $  5,621         1,756         4,363
                                           ========      ========      ========


                                       34
<PAGE>



  The following table sets forth the plans' funded status and amount  recognized
in the  Company's  consolidated  financial  statements  at December 31, 1996 and
1995:
                                   DECEMBER 31
              ----------------------------------------------------------
                           1996                         1995
              ---------------------------  -----------------------------
              Assets Exceed    Accumulated   Assets Exceed   Accumulated
               Accumulated      Benefits      Accumulated     Benefits
                 Benefits     Exceed Assets     Benefits    Exceed Assets
                 --------    -------------     --------    -------------
Actuarial present
 value of benefit
 obligations:
Vested benefit
  obligation     $(221,382)     (30,435)        (211,992)     (30,234)
                  ========       ======         ========      =======
Accumulated
  benefit
  obligation     $(233,562)     (34,635)        (215,243)     (30,621)
                  ========       ======         ========      =======
Projected
  benefit
  obligation     $(276,637)     (34,635)        (255,903)     (30,621)
Plan assets
  at fair value    358,675       31,701          316,589       24,594
                   -------       ------         --------      -------
Plan assets
  greater (less)
  than projected
  benefit
  obligation        82,038       (2,934)          60,686       (6,027)
Unrecognized
  net (gain)loss   (81,548)      (2,528)        ( 56,751)          96
Prior service
  cost not yet
  recognized in
  net periodic
  pension cost       5,628        3,806            5,900        3,535
Unrecognized
  obligation,
  net of
  amortization      (2,060)        (111)         ( 4,079)      (  181)
                    ------        -----          -------       ------
Prepaid pension
  cost (pension
  liability)
  recognized     $   4,058       (1,767)           5,756       (2,577)
                    ======       ======          =======       ======

  The weighted average discount rate and rate of increase in future compensation
levels used in determining the actuarial  present value of the projected benefit
obligation  were  7.25%  and 5.0% in 1996  versus  7.0%  and  5.0% in 1995.  The
expected  long-term  rate of return on assets was 9.0%.  Substantially  all plan
assets are invested in stocks, bonds and cash equivalents.


                                       35
<PAGE>



CONTRIBUTORY PLANS

  The Company  covers all salaried  employees  and some hourly  employees  under
401(k) plans. The salaried plan allows employees to contribute up to 7% of their
salary  (which the Company  matches up to 6%).  The amounts  contributed  by the
Company vary for the hourly plans. Total plan expenses were $10,430;  $8,857 and
$8,925 in 1996, 1995 and 1994 respectively.

POSTRETIREMENT BENEFIT PLANS

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

The Accumulated Postretirement Benefit Obligation (APBO) as of December 31, 1996
and 1995 was:
                                                           1996          1995
                                                           ----          ----
Retirees..........................                 $      12,410        13,001
Other fully eligible participants.                         5,401         5,339
Other active participants.........                        13,865        12,421
                                                          ------        ------
                                                          31,676        30,761
Unrecognized loss.................                        (4,998)       (5,056)
                                                          ------        ------
APBO recognized in balance sheet..                 $      26,678        25,705
                                                          ======        ======
Weighted average discount rate....                         7.25%          7.0%
                                                           =====          ====

The components of net periodic postretirement expenses are as follows:

                                                    1996         1995      1994
                                                    ----         ----      ----

Service cost benefits earned in period ...........   $1,065       867       826
Interest cost on accumulated benefit obligation ..    2,103     2,043     1,811
Amortization of (gain)loss from earlier periods ..      166        71        60
                                                     ------     -----     -----
Net expense ......................................   $3,334     2,981     2,697
                                                     ======     =====     =====
Weighted average discount rate ...................      7.0%      8.0%      7.0%
                                                     ======     =====     ===== 

   For the year  1996,  a 9.5%  increase  in the  medical  cost  trend  rate was
assumed.  This rate decreases  incrementally to an annual rate of 5% in the year
2000.  A 1.0%  increase in the  medical  trend rate would  increase  the APBO by
$3,000 and increase the net periodic postretirement expense by $390.


                                       36
<PAGE>



7.      STOCKHOLDERS' EQUITY
  The Company's 1995 Long-Term  Incentive  Compensation  Plan (the Plan),  which
replaced an earlier plan,  provides for grants of stock options to directors and
key employees  and awards of stock  appreciation  rights  (SARS) and  restricted
shares of common stock to key employees.  Options are granted at exercise prices
not less than the market value of the common stock on the date of grant. Options
generally become  exercisable  after one year in 33 1/3% increments per year and
expire ten years from the date of grant.  The  Company  has  reserved  2,750,000
shares for distribution under the Plan. A summary of stock option activity is as
follows:
                                                                   Option Price
                                                    Shares          Per Share
                                                    ------          ---------
Outstanding December 31, 1993 ..............       1,126,803       $16.75-39.25
   Granted .................................         259,420       45.375
   Exercised ...............................         143,045       16.75-39.25
   Cancelled or surrendered ................          10,367       16.75-45.375
                                                   ---------       -------------
Outstanding December 31, 1994 ..............       1,232,811       16.75-45.375
   Granted .................................         299,990       51.50
   Exercised ...............................         244,344       16.75-45.375
   Cancelled or surrendered ................           6,653       16.75-51.50
                                                   ---------       -------------
Outstanding December 31, 1995 ..............       1,281,804       23.25-51.50
   Granted .................................         273,030       61.75
   Exercised ...............................         125,747       23.25-51.50
   Cancelled or surrendered ................           4,740       23.25-61.75
                                                   ---------       -------------
Outstanding December 31, 1996 ..............       1,424,347       24.25-61.75
                                                   =========       =============

Shares exercisable .........................         911,431       $24.25-61.75
                                                   =========       =============

  In addition,  SARs which have been awarded and are  outstanding to officers of
the  Company  amount to 53,030  shares,  of these  7,340 with a basis of $24.25;
19,350 with a basis of $23.25 and 26,340  with a basis of $26.25 were  available
for exercise at December 31, 1996.  On exercise of the SAR, the holder  receives
in cash an amount equal to the difference between the market price of the common
stock at the date the SAR is exercised and the basis of the SAR.

  Restricted  shares vest based upon  continued  employment,  the  attainment of
performance  goals,  or both,  and are  subject to transfer  restrictions  until
vested.  The Company has awarded 44,794 restricted shares to certain officers at
no cost. These shares will vest in one-third annual  increments  beginning after
three years of continuous  employment.  At December 31, 1996,  9,612  restricted
shares had not yet vested and 35,182 shares had been either issued or cancelled.
Unearned  compensation,  representing the fair market value of the shares at the
date of issuance, is charged to income over the vesting period.


                                       37
<PAGE>



  The Company has a shareholder  rights plan providing for the  distribution  of
rights to shareholders ten days after a person or group (an "acquiring  person")
becomes the owner of 20% or more of the Company's common stock or makes a tender
offer or exchange  offer which would  result in the  ownership of 30% or more of
the  common  stock.  Once  the  rights  are  distributed,   each  right  becomes
exercisable to purchase,  for $175,  1/100th of a share of new series of Company
preferred  stock,  which  1/100th share is intended to equal one common share in
market  value.  Ten days after an acquiring  person  becomes the owner of 20% or
more of the Company's  common  stock,  each right (other than rights held by the
acquiring person) becomes exercisable to purchase,  for $175, common shares with
a market  value of $350.  The rights  will expire in 2000 and may be redeemed at
$.01 per right any time prior to the tenth day after an acquiring person becomes
the owner of 20% or more of the common stock.

  In  August  1995,  the  Board  of  Directors  of the  Company  authorized  the
repurchase of up to $100,000 of the Company's  common  stock.  During 1995,  the
Company purchased 50,000 shares of its common stock for $2,713.

  The Financial  Accounting  Standards  Board has issued  Statement of Financial
Accounting Standards #123 (SFAS #123) on accounting for stock-based compensation
that is effective for years  beginning  after December 15, 1995. As permitted by
SFAS #123,  the  Company  has elected to  continue  accounting  for  stock-based
compensation  under  Accounting  Principles  Board  Opinion #25. The Company has
determined the effects of adopting SFAS #123 would not have a material effect on
the financial statements.

8.      BUSINESS SEGMENTS
  The Company operates in two principal  business  segments:  paper products and
building  materials.  Timber,  timberlands and related  facilities have not been
allocated to the two segments  because they are managed to supply raw  materials
to both segments.  Information  with respect to the sales,  operating income and
identifiable assets of these segments is included in the five-year comparison on
page 28. Information with respect to depreciation, cost of fee timber harvested,
amortization  and capital  expenditures  for the years ended  December 31, 1996,
1995 and 1994 is shown below:

                                                Depreciation,
                                         Cost of Fee Timber Harvested
                                               and Amortization
                                               ----------------
                                           1996      1995       1994
                                           ----      ----       ----
Paper products......................     $194,816   177,888    152,983
Building materials..................       64,740    46,216     44,459
Timber, timberlands and
  related facilities................       43,381    25,061     19,810
                                         --------   -------     ------
                                         $302,937   249,165    217,252
                                         ========   =======    =======


                                       38
<PAGE>



                                           Capital Expenditures
                                           --------------------
                                         1996     1995      1994
                                         ----     ----      ----
Paper products.............           $342,268  300,145   298,931
Building materials.........            112,476  111,840    41,347
Timber, timberlands and
   related facilities......             31,025   41,538    52,883
                                       -------  -------   -------
                                      $485,769  453,523   393,161
                                       =======  =======   =======


9. Property, Plant and Equipment
   Property, plant and equipment accounts are summarized as follows:

                                       Principal                 December 31
                                        range of            ------------------
                                      useful lives          1996          1995
                                      ------------          ----          ----

Land ..............................       -             $   37,270        32,680
Building materials
   manufacturing facilities .......    10 - 20             831,464       534,646
Paper products
   manufacturing and
   converting facilities ..........    10 - 30           2,889,067     2,726,554
Office equipment ..................    3 - 10               76,870        67,504
Leasehold improvements ............    life of lease         6,300         6,286
Construction in progress ..........       -                256,732       181,581
                                                        ----------    ----------
                                                         4,097,703     3,549,251
Accumulated depreciation ..........                      1,767,234     1,494,383
                                                        ----------    ----------
                                                        $2,330,469     2,054,868
                                                        ==========    ==========

10.     ACQUISITIONS

  In  May,  1996,  the  Company  acquired   approximately   1,088,000  acres  of
timberland,  a sawmill and related assets in Louisiana and the Pacific Northwest
from  Cavenham  Forest  Industries,  Inc.,  an  affiliate  of Hanson  PLC.  (the
"Cavenham  acquisition").  The  purchase  price for the  properties  was  $1.588
billion and was funded through cash and $1.1 billion of borrowing under a Credit
Agreement  between the Company  and a group of banks  providing  for a revolving
loan and a term loan. Simultaneous with the purchase, the Company agreed to sell
542,000 acres of the acquired  property to third parties for an aggregate  price
of $641 million. Of that acreage, approximately 56,000 acres in Oregon was to be
conveyed to a third party for  approximately  $198 million plus certain expenses
incurred by the Company. At December 31, 1996, approximately $160 million of the
Oregon  timberlands  remain to be  conveyed  to a third  party and is  reflected
herein as "assets  held for  sale."  After  giving  effect to the sales to third
parties, the Company acquired 546,000 acres of timberland, a sawmill and related
assets  for $947  million,  plus  certain  closing  costs of  approximately  $10
million.


                                       39
<PAGE>



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

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

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

Purchase price was allocated to:
     Current assets                              $        -         29,913
     Timber and timberlands                         950,380              -
     Property, plant and equipment                    8,612         60,569
     Debt assumed                                         -        (20,804)
     Other assets and liabilities                    (1,718)        (7,678)
                                                   --------         ------
                                                   $957,274         62,000
                                                   ========         ======
11.  CONTINGENCIES
   There are various lawsuits,  claims and environmental matters pending against
the Company.  While any proceeding or litigation has an element of  uncertainty,
management  believes that the outcome of any lawsuit or claim that is pending or
threatened,  or all of them combined, will not have a material adverse effect on
the Company's financial condition or operations.




                                       40
<PAGE>



                                INDEX TO EXHIBITS


EXHIBIT

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

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

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

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

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

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

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


                                       41
<PAGE>



3A.         Third  Restated  Articles of  Incorporation  of the  registrant,  as
            amended.   Incorporated   by  reference   from  Exhibit  3A  of  the
            registrant's  quarterly  report on Form 10-Q for the  quarter  ended
            March 31, 1996. [16]

3B.         Bylaws  of  the  registrant  as  amended  through  August  1,  1996.
            Incorporated  by  reference  from  Exhibit  3.2 of the  registrant's
            quarterly  report on Form 10-Q for the quarter  ended June 30, 1996.
            [27]

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

4A1.        Form of Note for the series of 9.625% Notes due 2000.  [4]

4A2.        Form of Note for the series of 9.125% Notes due 2003.  [4]

4A3.        Form of Note for the series of 9.0% Debentures due 2021.  [4]

4A4.        Terms of the  series  of 7.75%  Notes  due 2002 and form of Note for
            such  series.  Incorporated  by  reference  from  Exhibit 4A8 of the
            registrant's  annual report on Form 10-K for the year ended December
            31, 1992. [5]

4A5.        Form of Note for the series of 7.0% Notes due 1998 in the  aggregate
            principal  amount of  $100,000,000.  Incorporated  by reference from
            Exhibit  4D of the  registrant's  current  report  on Form 8-K dated
            December 29, 1992. [5]

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

4B1.        Form of  Medium-Term  Note (fixed rate) for the  Medium-Term  Notes,
            Series A. Incorporated by reference from Exhibit 4D to the 1993 Form
            S-3. [2]

4B2.        Terms  of  the   Medium-Term   Notes,   Series  A,  due   1998-2013.
            Incorporated  by  reference  from  Exhibit  4B2 to the  registrant's
            annual report on Form 10-K for the year ended December 31, 1993. [1]

4B3.        Form of Note for series of 7.35% Debentures and 7.85% Debentures due
            2026 in the  aggregate  principal  amount of  $200,000,000  for each
            series. [6]


                                       42
<PAGE>



4C.         Credit  Agreement  dated as of May 10, 1996,  among the  registrant,
            Bank of America  National  Trust and Savings  Association,  Abn Amro
            Bank N.V.,  Morgan Guaranty Trust Company of New York,  Nationsbank,
            N.A.,   Wachovia  Bank  of  Georgia,   N.A.,  and  other   financial
            institutions    parties    thereto,    authorized    $1,000,000,000.
            Incorporated by reference from Exhibit 4 of the registrant's current
            report on Form 8-K/A, amendment No. 1, dated May 15, 1996.

9.          Not applicable.

10A.        Willamette   Industries,   Inc.   Deferred   Compensation  Plan  for
            Directors.* [3]

10B.        Willamette Industries, Inc. 1986 Stock Option and Stock Appreciation
            Rights Plan, as amended.* [8]

10C.        Willamette   Industries,   Inc.   Retirement  Plan  for  Nonemployee
            Directors.* [2]

10D.        Willamette  Industries Inc. Severance  Agreement with Key Management
            Group.* [13]

10E.        Willamette Industries 1993 Deferred Compensation Plan.  Incorporated
            by reference from Exhibit 10E to the  registrant's  annual report on
            Form 10-K for the year ended December 31, 1993.* [16]

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

10G.        Consulting  agreement  dated October 1, 1995 between the  registrant
            and William Swindells. Incorporated by reference from Exhibit 10G of
            the  registrant's  annual  report  on Form  10-K for the year  ended
            December 31, 1996.* [4]

10H.        Preferred  Stock  Purchase  Rights of  Willamette  Industries,  Inc.
            Incorporated  by reference from Exhibit 2 of the  registrant's  Form
            8-A filed February 26, 1990. [61]

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

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

13.         Not applicable.


                                       43
<PAGE>



16.         Not applicable.

18.         Not applicable.

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

22.         Not applicable.

23.         Consent of Independent Auditors to the incorporation by reference of
            their  report  dated   February  13,  1997,   in  the   registrant's
            registration statements on Form S-8. [1]

24.         Not applicable.

27.         Financial Data Schedule.  [1] 

28.-98.     Not applicable.

99.         Description   of  the   registrant's   common  stock,   as  amended.
            Incorporated  by  reference  from  exhibit  99 of  the  registrant's
            quarterly  report on Form 10-Q for the quarter ended March 31, 1996.
            [4]

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

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

Note:       Certain  instruments  with  respect  to the  long-term  debt  of the
            registrant  are  not  filed  herewith  where  the  total  amount  of
            securities  authorized  thereunder does not exceed 10 percent of the
            total  assets  of  the   registrant  and  its   subsidiaries   on  a
            consolidated  basis. The registrant agrees to furnish copies of such
            instruments to the Commission on request.


                                       44