Weyerhaeuser Reports Q4 Net Earnings of $92 Million
Press release from the issuing company
FEDERAL WAY, Wash., Jan. 23 -- Weyerhaeuser Company today reported fourth quarter net earnings of $92 million, or 41 cents per share, on net sales of $5.1 billion. This compares with $126 million, or 57 cents per share, on net sales of $4.7 billion for the fourth quarter of 2002.
Fourth quarter 2003 earnings include the following after-tax items:
-- A charge of $29 million, or 14 cents per share, for closure of facilities.
-- A charge of $17 million, or 8 cents per share, for integration and restructuring activities.
-- A charge of $5 million, or 2 cents per share, associated with the settlement of litigation.
-- A gain of $40 million, or 18 cents per share, on the sale of timberlands in Tennessee and the Carolinas.
Fourth quarter 2002 earnings include the following after-tax items:
-- Gains of $95 million, or 42 cents per share, on the sale of timberlands in Washington state net of costs associated with the closure of related Wood Products and Timberlands operations, a reduction in depreciation resulting from an adjustment to the preliminary purchase price allocation for the Willamette acquisition and the benefit from insurance proceeds covering a business disruption.
-- Charges of $57 million, or 26 cents per share, for the termination of the former MacMillan Bloedel pension plan for U.S. employees, acquisition and integration of Willamette Industries and the closure of other facilities.
Net sales in 2003 were $19.9 billion compared with $18.5 billion in 2002. For the full year 2003, Weyerhaeuser reported net earnings of $277 million, or $1.25 per share, compared with $241 million, or $1.09 per share for the full year 2002.
Significant 2003 accomplishments:
-- Reduced Weyerhaeuser Company debt, excluding Real Estate and Related Assets, by approximately $1.1 billion to $11.6 billion. Total company debt, which includes Real Estate and Related Assets, was reduced by approximately $1.1 billion to $12.5 billion at year-end. Weyerhaeuser continues to make excellent progress toward achieving its target financial ratios.
-- Captured $300 million in synergies from the Willamette acquisition in half the projected time.
-- Sold approximately 444,000 acres of non-strategic timberlands.
-- Reduced capital spending, excluding Real Estate and Related Assets, to approximately $626 million, a 35 percent decrease from $960 million the prior year.
-- Continued to rationalize the company's manufacturing system by closing 12 facilities. In addition, Weyerhaeuser significantly improved the productivity of its remaining manufacturing operations.
"Thanks to the hard work of our employees, during 2003 we successfully completed the integration of Willamette, captured the synergies and continued to reduce debt despite very challenging economic conditions," said Steven R. Rogel, chairman, president and chief executive officer. "Continuing consolidation and a changing customer base are driving significant changes within the forest products industry. These changes underscore the importance of the strategies we pursued in 2003 to aggressively reduce costs, increase productivity, and maintain strong relationships with our customers and suppliers. We're pleased with the progress we made this year, but we recognize that we must constantly improve if we are going to successfully respond to these market challenges.
"In 2004, we plan to become even more efficient and to continue working closely with customers to meet their needs," Rogel said. "This will mean developing the most productive manufacturing system in the industry. We'll also continue reducing debt and maximizing our return on assets to position Weyerhaeuser to compete successfully in our evolving industry."
Excluding the pre-tax gain of $61 million in the fourth quarter on the sale of non-strategic timberlands in Tennessee and the Carolinas, fourth quarter earnings were down slightly from third quarter. Stronger log prices and improved export markets in the West were offset by lower seasonal fee harvest and lower domestic sales volumes. Log prices in the South remained flat, but lower seasonal fee harvest caused a reduction in earnings.
First quarter earnings are expected to be higher than the fourth quarter -- adjusted for the sale of non-strategic timberlands in the fourth quarter -- due to higher domestic log sales volumes and prices in the West, and higher
planned fee harvest in the South.
The net reduction in earnings from the third quarter was due primarily due to volatile prices for wood products. Prices increased for oriented strand board and plywood before declining sharply late in the quarter. Declines in Western lumber prices, lower volumes and higher raw material costs reduced lumber results. Higher OSB prices negatively affected margins for engineered wood products. The late quarter decline in structural panel prices negatively affected earnings in the company's building products distribution centers. Wood Products recognized pre-tax charges of $13 million in the fourth quarter compared with $31 million in the third quarter for the closure of facilities. The segment also incurred $22 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. This compares to $25 million in the third quarter. For the year, Weyerhaeuser incurred $97 million in countervailing and anti-dumping duties.
First quarter results are expected to be lower than fourth quarter due primarily to price decreases in lumber and structural panels. The company expects the Canadian softwood lumber issue to continue to affect earnings.
A weak paper market combined with pre-tax charges of $30 million associated with the closure of the paper machine at Longview, Wash., resulted in significantly lower earnings compared with the prior quarter. Paper prices were slightly lower during the quarter. To balance supply to demand, the paper business took 96,000 tons of market-related downtime during the quarter. Pulp earnings were steady as higher pulp prices were mostly offset by higher manufacturing costs.
First quarter losses are expected to narrow from fourth quarter due to increased demand for fine paper and improving softwood pulp prices.
Excluding pre-tax charges of $40 million in the third quarter associated with the closure of facilities and settlement of litigation, fourth quarter earnings were down $50 million from third quarter. Prices for boxes and containerboard declined through the quarter. Packaging volumes declined seasonally, but were higher than levels a year ago. Manufacturing costs rose modestly during the quarter. The mills took 71,000 tons of market-related downtime to adjust production to the seasonal decline in shipments.
Earnings in the first quarter are expected to be down slightly due primarily to higher raw material costs for old corrugated containers (OCC). This is expected to be partially offset by anticipated containerboard price increases late in the quarter. Volumes should improve seasonally and year-over-year. Increases in operating rates are expected to result in lower manufacturing costs.
A continued strong housing market, low interest rates and a quarterly record for closings produced increased earnings from the prior quarter.
Continued strong markets are expected to produce first quarter earnings that are comparable to fourth quarter. The company currently has a backlog of approximately six months of homes sold, but not closed.
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