Weyerhaeuser Posts 4th Quarter Loss on Charges
Feb. 3, 2006 - 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
-- 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'
-- 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
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.
CELLULOSE FIBER AND WHITE PAPERS
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
Announced first quarter price increases for market pulp and fine paper
should result in improved earnings in the first quarter 2006 despite continued
CONTAINERBOARD, PACKAGING AND RECYCLING
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.
REAL ESTATE AND RELATED ASSETS
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
Weyerhaeuser Company, one of the world's largest integrated forest
products companies, was incorporated in 1900. In 2005, sales were $22.6
billion. It has offices or operations in 18 countries, with customers
worldwide. Weyerhaeuser is principally engaged in the growing and harvesting
of timber; the manufacture, distribution and sale of forest products; and real
estate construction, development and related activities.
SOURCE: Weyerhaeuser Company