Weyerhaeuser Reports Q3 Net Earnings of $285 Million
Monday, October 24, 2005
FEDERAL WAY, Wash., Oct. 21 -- Weyerhaeuser Company today reported third quarter net earnings of $285 million, or $1.16 per diluted share, on net sales of $5.6 billion. This compares with $594 million, or $2.45 per diluted share, on net sales of $5.7 billion for the third quarter of 2004. Third quarter 2005 earnings include the following after-tax items: * A gain of $75 million, or 31 cents per diluted share, for the sale of MAS Capital Management Partners, LP, a joint venture. * A charge of $19 million, or 8 cents per diluted share, for closure of facilities. * A loss of $14 million, or 6 cents per diluted share, for the early extinguishment of debt. In addition, net earnings for third quarter 2005 include a one-time tax benefit of $14 million, or 6 cents per diluted share, related to a change in the Ohio state income tax law. Third quarter 2004 earnings include the following after-tax items: * A gain of $179 million, or 74 cents per diluted share, from a sale of timberlands in Georgia. * A gain of $16 million, or 7 cents per diluted share, from a tenure reallocation agreement with the British Columbia government. * A gain of $13 million, or 5 cents per diluted share, due to the reduction of the reserve for hardboard siding claims. * A charge of $7 million, or 3 cents per diluted share, related to the sale or closure of facilities. "Our results in the third quarter reflect the difficult business conditions we face in certain segments," said Steven R. Rogel, chairman, president and chief executive officer. "Although the recent hurricanes did not significantly affect our operations, we expect to experience residual effects of the storms in terms of higher energy, chemical and transportation costs. This will put additional pressure on our businesses in the fourth quarter." Rogel said the company's strategic review of its business portfolio has resulted in the previously announced indefinite shutdown of the Prince Albert pulp and paper facility in Canada and the closure of two facilities -- a specialty pulp mill and a large-log sawmill -- in Washington. "These are the first, but by no means the final steps," Rogel said. "We will continue to take the actions necessary to make Weyerhaeuser a more competitive company and generate greater returns while returning cash to our shareholders. To that end, we are pleased to have announced today that the board of directors authorized the repurchase of up to 18 million shares, or 7.4 percent of Weyerhaeuser's outstanding common stock." Third quarter earnings decreased from the second quarter due to higher fuel prices that affected logging and hauling costs, and a $5 million pre-tax charge related to timber damage caused by Hurricane Katrina. In addition, second quarter results include $6 million earnings from the British Columbia Coastal operations, which were sold in May. The segment expects fourth quarter earnings to be lower than the third quarter, reflecting decreased Western profits due to normal seasonal slowdowns, and expected lower domestic sales prices. Export log markets are expected to remain firm. In the South, the segment expects log prices to decline from third quarter. Costs are expected to increase due to hurricane salvage operations. Earnings decreased from second quarter due primarily to lower average price realizations for lumber and oriented strand board. Second quarter earnings included $18 million in pre-tax charges related to litigation. Demand for building products remained strong throughout the quarter. However, readily available supply caused prices to decline during the first two months of the quarter. Despite temporary price increases in September following the hurricanes, average prices for the entire quarter were lower for Weyerhaeuser lumber and oriented strand board. Lumber realizations declined $31 per thousand board feet and oriented strand board declined $30 per thousand square feet (3/8" basis). Average price realizations for engineered products increased from the second quarter, partially offsetting the effects from lumber and oriented strand board. The hurricanes had a minimal effect on total production for the segment. The segment incurred $19 million in countervailing and anti-dumping duties and related costs on Canadian softwood lumber the company sold into the United States in the third quarter, compared with $27 million in the second quarter. The segment expects normal seasonal slowing in the fourth quarter resulting in price decreases in commodity building products and reduced shipment volumes. The segment also expects to incur continued increased costs for energy, resin and transportation. As a result, fourth quarter earnings are expected to follow their normal seasonal decrease. In addition, the segment will be affected by an estimated $25 million pre-tax charge associated with the Big River sawmill in Saskatchewan. Segment earnings declined from second quarter due to a third quarter pre- tax charge of $22 million primarily related to the closure of the Cosmopolis, Wash., pulp facility. Papergrade pulp prices declined during the quarter due to continued strong supply coupled with the normal seasonal slowdown in demand. Fluff pulp prices remained relatively stable. Fine paper prices declined due to lower demand in North America for fine paper products. Manufacturing costs were lower due to fewer scheduled third quarter maintenance shutdowns. The negative effects of the strengthening Canadian dollar and increased costs for transportation, energy and raw material partially offset this cost reduction. The company expects fourth quarter results to decline due to lower fine paper prices, seasonally lower shipments, and higher transportation, chemical and energy costs. In addition, the segment will be affected by an estimated $350 to $375 million pre-tax charge associated with the previously announced indefinite closure of the Prince Albert pulp and paper facility as the company continues the portfolio improvement strategy in this segment. Earnings decreased from second quarter levels primarily due to lower prices for containerboard and boxes, and increased transportation and energy costs. The hurricanes had a minimal effect on the segment's operating results for the third quarter. The segment expects fourth quarter earnings to decrease to near break-even levels due to a continued decline in box prices resulting from earlier declines in containerboard prices, a seasonal decline in box shipments and higher energy costs, partially offset by lower costs for old corrugated containers. The recently announced containerboard and box price increase will not materially affect earnings in the fourth quarter. Single-family home closings declined slightly from second quarter due to delays in providing utility services in Las Vegas, Hurricane Rita in Texas and fewer lot closings. The backlog of homes sold, but not closed, increased and represents slightly more than six months' sales. The segment expects fourth quarter earnings to be significantly higher than third quarter due to seasonally stronger single-family closings, which will exceed the fourth quarter of 2004.