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Weyerhaeuser Reports Net Earnings of $733 Million for 2005

Monday, February 06, 2006

Press release from the issuing company

FEDERAL WAY, Wash., Feb. 3 -- Weyerhaeuser Company today reported net earnings of $733 million for 2005, or $2.98 per diluted share, on net sales of $22.6 billion. This compares with net earnings of $1.3 billion, or $5.43 per diluted share, on net sales of $21.9 billion for the full year 2004. For the fourth quarter 2005, Weyerhaeuser reported a net loss of $211 million, or 86 cents per diluted share, on net sales of $5.9 billion. Last year, Weyerhaeuser reported fourth quarter net earnings of $199 million, or 82 cents per diluted share, on net sales of $5.7 billion. The loss for fourth quarter 2005 included the following after-tax items: -- Charges of $438 million, or $1.78 per diluted share, for closure of facilities. -- Charges of $32 million, or 13 cents per diluted share, for additional asset impairment charges. -- A charge of $25 million, or 10 cents per diluted share, associated with the settlement of litigation. -- A loss of $10 million, or 4 cents per diluted share, for early extinguishment of debt. -- A gain of $34 million, or 13 cents per diluted share, on the sale of the company's French composite panels assets. -- Income of $28 million, or 12 cents per diluted share, for the cumulative effect of a change to begin capitalizing Weyerhaeuser interest to assets of Weyerhaeuser Real Estate Company. Fourth quarter 2004 earnings include the following after-tax items: -- A loss of $34 million, or 14 cents per diluted share, for early extinguishment of debt. -- A gain of $24 million, or 10 cents per diluted share, for gains on the sale of facilities. -- A charge of $19 million, or 8 cents per diluted share, for the impairment of assets in the company's French composite panels business. -- A charge of $16 million, or 7 cents per diluted share, recognized in connection with a change in the method of estimating workers' compensation liabilities. -- A charge of $15 million, or 6 cents per diluted share, for the net book value of technology donated to a university. During 2005, Weyerhaeuser's ongoing strategic review resulted in the following significant actions: -- Selling its British Columbia coastal operations and French composite panels business and a laminated beam facility; -- Announcing its intention to sell its North American and Irish composite panels assets, a pulp facility, three corrugated sheet plants and a specialty packaging plant; and -- Closing a paper facility, a specialty pulp mill, a fine paper machine, a containerboard machine, a large-log sawmill, seven corrugated converting plants, two hardwood facilities, a bag plant, an I-joist facility and a veneer and plywood facility. "Despite extremely challenging business conditions, we took significant steps in 2005 to make us more competitive and position us to generate greater returns while returning cash to shareholders," said Steven R. Rogel, chairman, president and chief executive officer. "Our strong cash flow allowed us to pay down debt to our target levels, implement a 25 percent increase in our dividend and initiate a stock buy back program. We also began reorganizing our wood products, containerboard and packaging businesses into integrated supply chains and continued to grow our real estate business. In 2006, we will continue to confront the challenges our businesses face with the goal of creating a stronger company." Fourth quarter earnings decreased slightly from the third quarter due primarily to salvage costs associated with hurricane Katrina and continued high fuel costs for logging and hauling. Fourth quarter results also include $3 million of pre-tax timberland severance costs due to the announced closure of the Prince Albert pulp and paper facility in Saskatchewan, Canada. The continued strength of domestic and export log prices should produce first quarter earnings that are similar to fourth quarter 2005. Earnings in the fourth quarter include $91 million of pre-tax charges associated with the closure of a plywood mill at Wright City, Oklahoma, the closure of a lumber mill at Aberdeen, Washington, and the potential closure of a lumber mill at Big River, Saskatchewan. Third quarter earnings included $6 million of pre-tax charges associated with facility closures. Excluding the charges, earnings decreased $13 million from the third quarter. Demand for structural panels increased following the hurricanes and caused panel prices to surge early in the quarter, but panel prices returned to normal seasonal levels late in the quarter. Prices and volume for softwood lumber declined due to seasonal factors. Shipment volumes for engineered lumber products also declined on average from the third quarter. Manufacturing costs for panels increased in the fourth quarter largely due to a significant rise in natural gas prices. Manufacturing costs for engineered lumber products increased due to the higher prices for oriented strand board. The company incurred $16 million in countervailing and anti-dumping duties and related costs on Canadian softwood lumber the company sold into the United States in the fourth quarter, compared with $19 million in the third quarter. Starting in December, the company is paying a combined duty rate of 13.1 percent, down from the 25.9 percent rate that was in effect since December 2004. At this new rate, the segment expects to incur approximately $10 million per quarter in duties and related costs. Weyerhaeuser expects lower first quarter 2006 earnings compared with fourth quarter 2005 earnings before special charges. During the first quarter, demand for wood products should follow the normal seasonal trends with pricing remaining similar to fourth quarter levels. The company expects manufacturing expenses to increase due to higher energy and raw material costs. In the fourth quarter, Weyerhaeuser recorded $427 million of pre-tax charges related to the announced closures of the Prince Albert pulp and paper operations and a paper machine at Dryden. Manufacturing costs continued to escalate due to higher energy, freight, chemical and raw material costs. Prices for fine paper and pulp remained unchanged. Fine paper volumes increased modestly while pulp experienced a normal seasonal decline in shipments. Announced first quarter price increases for market pulp and fine paper should result in improved earnings in the first quarter 2006 despite continued cost pressures. Fourth quarter earnings include a pre-tax charge of $130 million related to the closure of several facilities and a pre-tax charge of $38 million related to a settlement of linerboard antitrust lawsuits. Earnings, excluding charges, decreased significantly from the third quarter due to lower box prices coupled with higher energy and transportation costs. Costs for old corrugated containers (OCC) were lower in fourth quarter. The company expects higher pricing, increased box shipments and lower OCC costs to result in improved first quarter earnings for the segment. Fourth quarter earnings increased from third quarter primarily due to the expected strong single-family home closings and higher single-family margins, partially offset by a $33 million pre-tax impairment charge related to unimproved land in Northern California. The backlog of homes sold, but not closed, at the end of the fourth quarter was comparable to year-ago levels. Weyerhaeuser expects lower first quarter 2006 earnings due to a normal seasonal decline in single-family home closings.

 

 

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