Weyerhaeuser Reports Record Q2 Earnings of $369 Million on Sales of $5.9 Billion
Monday, July 26, 2004
FEDERAL WAY, Wash., July 23 -- Weyerhaeuser Company today reported record second quarter net earnings of $369 million, or $1.57 per share, on net sales of $5.9 billion. This compares with $157 million, or 71 cents per share, on net sales of $4.9 billion for the second quarter of 2003. Second quarter 2004 earnings include the following after-tax items: * A charge of $14 million, or 6 cents per share, for early extinguishment of debt. * A charge of $10 million, or 4 cents per share, for an adverse judgment in a lawsuit. Second quarter 2003 earnings included 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. Other significant second quarter financial matters include: * Proceeds from an equity offering in the second quarter allowed the company, including Real Estate and Related Assets, to reduce outstanding debt by approximately $1.0 billion to approximately $11.6 billion at the end of the quarter. Strong cash flow from operations also contributed to a net second quarter increase in cash and short-term investments of approximately $650 million, which is expected to be applied to future debt repayment. These debt repayments are expected to reduce interest expense beginning in the third quarter. * Capital spending, excluding acquisitions and Real Estate and Related Assets, for the first six months was approximately $177 million. The company's capital spending budget remains $750 million for the year. "Our record quarterly earnings reflect favorable market conditions for Wood Products and Timberlands, combined with hard work by our employees to improve efficiency and streamline operations," said Steven R. Rogel, chairman, president and chief executive officer. "The robust housing market drove strong earnings in both Wood Products and Real Estate. In addition, the performance of the company's paper-related businesses is improving. "As we look to the third quarter, our businesses are well positioned to take advantage of continued strong market conditions. Despite recent price weakness in some product lines, Wood Products earnings are expected to remain healthy and our single-family home building business has a record backlog of orders. Price increases in pulp, paper and packaging continue to be implemented." Second quarter earnings increased from the first quarter primarily due to seasonally higher fee harvest volume and higher prices for logs in both export and domestic markets. Third quarter earnings, excluding the previously announced sale of 304,000 acres of timberlands in Georgia, are expected to be slightly lower than the second quarter, with reduced harvest and sales activity due to normal seasonal shutdowns. Second quarter earnings of $448 million include a $16 million pre-tax charge resulting from an adverse judgment in a lawsuit. This compares to first quarter earnings of $173 million, which included a pre-tax gain of $33 million on the sale of the company's oriented strand board mill in Slave Lake, Alberta, and a pre-tax charge of $49 million for the settlement of litigation. Strong demand for lumber, structural panels and engineered wood products continued into the second quarter with U.S. housing starts staying near the 2 million seasonally adjusted annual level through the quarter. High industry operating rates in OSB and plywood, combined with transportation issues affecting all products, kept prices at very high levels for much of the quarter. Prices for hardwood lumber, particleboard and medium density fiberboard also increased in response to strong demand from industrial manufacturers. The segment incurred $34 million in countervailing and anti-dumping duties and related costs on Canadian softwood lumber the company sold into the United States in the second quarter. This compares to $26 million in the first quarter. Third quarter earnings are expected to be lower than second quarter, but to remain healthy. Prices for lumber and structural panels are expected to be lower as supply and demand begins to balance and transportation issues abate. Average realizations for engineered lumber and industrial panels are expected to improve. Earnings improved during the quarter as general improvement in the world economy and a weakening dollar increased demand for all products, resulting in higher prices. Transportation disruptions slowed product shipments during the quarter. The segment expects to report improved earnings in the third quarter. Overall prices for pulp are expected to increase modestly. Improvements in fine paper prices are anticipated as demand continues to grow. Earnings increased over first quarter levels primarily due to higher box shipments coupled with rising prices for both containerboard and boxes. Increased productivity also contributed to higher earnings, partially offset by cost increases for recycled fiber during the quarter. Customer demand is expected to remain strong in the third quarter, with industry operating rates remaining high and industry inventories near historic lows. This should result in continued favorable business conditions for this segment. As a result, the company expects higher third quarter earnings due primarily to increasing box prices. Second quarter earnings benefited from increases in single-family home sale closings and margins. First quarter earnings included a $22 million pre- tax gain on a land sale. Housing sales remain strong with a backlog of homes sold, but not closed, exceeding seven months. Third quarter earnings from new home sales are expected to be comparable to the second quarter. Total segment earnings for the third quarter are expected to be higher due to an $18 million pre-tax gain from the sale of a multi-family site.