Weyerhaeuser Reports Q2 Earnings of $157 Million
Monday, July 28, 2003
FEDERAL WAY, Wash., July 25 -- Weyerhaeuser Company today reported second quarter net earnings of $157 million, or 71 cents per share, on net sales of $4.9 billion. This compares with $72 million, or 32 cents per share, on net sales of $4.9 billion for the second quarter of 2002. Second quarter 2003 earnings include the following after-tax items: A charge of $19 million, or 8 cents per share, for closure or impending sale of facilities; A charge of $17 million, or 8 cents per share, for integration and restructuring activities; A gain of $95 million, or 43 cents per share, for the sale of timberlands in Western Washington; A gain of $7 million, or 3 cents per share, for the settlement of an insurance claim relating to the company's Cemwood litigation. Second quarter 2002 earnings include the following after-tax items: -- A charge of $18 million, or 8 cents per share, for closure or impending closure of facilities; -- A charge of $17 million, or 8 cents per share, for integration and restructuring activities; -- A gain of $19 million, or 9 cents per share, for the reversal of a countervailing duty accrual. The company also announced that it has achieved its annualized run rate goal of $300 million in pre-tax synergies related to the acquisition of Willamette Industries. Weyerhaeuser originally estimated it would reach this synergy goal by first quarter 2005. Other significant second quarter financial matters include: Reduced total company debt, which includes Real Estate and related operations, to approximately $13.6 billion at the end of the quarter. This is a reduction of approximately $334 million from the prior quarter. Maintained capital spending discipline. Capital spending, excluding acquisitions and Real Estate and related operations, for the first six months was approximately $319 million, in line with the annual goal of $750 million. Incurred approximately $26 million in countervailing and anti-dumping duties and related costs in the second quarter on Canadian softwood lumber the company imports into the United States compared with the $24 million Weyerhaeuser incurred in the first quarter. "Our ability to achieve our synergy goal more than one year ahead of schedule, despite challenging market conditions, is a tribute to our employees," said Steven R. Rogel, chairman, president and chief executive officer. "They have embraced the concept of increased frugality and have made substantial progress in improving the overall efficiency of our manufacturing systems. Through their hard work, we are positioned to take advantage of future improvements in the economy. "Late in the second quarter we saw some promising signs in the prices for wood products, a trend that should continue into the third quarter," Rogel said. "Unfortunately, the markets for pulp, uncoated free sheet and containerboard are expected to remain challenging." Excluding a pre-tax gain of $144 million from the sale of timberlands in Western Washington to Hancock Timber Resources, second quarter earnings were up slightly from the first quarter due to increased log sales volumes in the West in both export and domestic markets on somewhat lower prices. In the South, slightly higher prices partially offset lower harvest volumes due to weather conditions. Third quarter harvest results are expected to be lower than second quarter due to normal reductions in harvest levels during the fire season, which is expected to result in slightly lower earnings in the segment. Excluding a $79 million pre-tax first quarter charge taken for damages awarded by a jury on April 18 in U.S. District Court in Oregon, operating losses in the second quarter were lower than first quarter. The improvement was due to significantly stronger prices late in the quarter for oriented strand board and plywood. Market conditions for structural softwood lumber also improved late in the quarter, leading to stronger prices and higher sales volumes. The improvements were offset by higher costs in the company's Canadian operations associated with the strengthening Canadian dollar. Wood Products recognized pre-tax charges of $24 million in the first quarter and $29 million in the second quarter for integration and restructuring, and closure or impending sale of facilities. Third quarter results for Wood Products are expected to be better than second quarter due primarily to the continued strength in the wood products markets. Weyerhaeuser will continue to be adversely affected by countervailing and anti-dumping duties, and related costs on Canadian softwood lumber the company imports into the United States. Pulp prices benefited from the weaker U.S. dollar, but the benefits from this increase were more than offset by a decrease in fine paper prices. Weyerhaeuser took approximately 60,000 tons of combined market and annual maintenance downtime during the second quarter. Costs associated with the downtime and higher costs in the company's Canadian operations associated with the strengthening Canadian dollar negatively affected the second quarter performance. In addition, the second quarter earnings include charges of approximately $10 million for an impending facility closure and costs associated with work force reductions. First quarter earnings included integration and restructuring costs of $6 million. Third quarter earnings are expected to be lower than second quarter due to weak demand for pulp and fine paper. A seasonal increase in the demand for packaging resulted in higher second quarter earnings compared with first quarter results. This increase was partially offset by lower prices for corrugated boxes and higher costs for old corrugated containers, commonly referred to as OCC. During the quarter, Weyerhaeuser took 70,000 tons of market and maintenance downtime. Third quarter earnings are expected to be lower than second quarter due to continued weak markets. The business benefited from the continued strong housing market and a $12 million pre-tax gain on a commercial property sale in Southern California in the second quarter. First quarter earnings included a pre-tax gain of $18 million for the sale of an apartment complex and two office buildings. Third quarter earnings are expected to be higher than second quarter due to increased closings of single-family homes. The company currently has a backlog of more than six months of homes sold, but not closed.