Weyerhaeuser Reports 1st Quarter Loss on Charges
April 26, 2006 (Press Release) - Weyerhaeuser Company today reported a net loss of $580 million for first quarter
2006, or $2.36 per diluted share, on net sales of $5.4 billion. This includes
an impairment of goodwill associated with the company's fine paper business.
Excluding the goodwill impairment of $746 million, the company earned $166
million, or 67 cents per diluted share. This compares with net earnings of
$239 million, or 98 cents per diluted share, on net sales of $5.4 billion for
the same period last year.
The company also announced today that, as a part of its previously
announced strategic review, it is considering alternatives for its fine paper
business. The alternatives range from continuing to hold and operate the
assets to a possible sale or other disposition. The company said it is in
active discussions with several parties, but there is no assurance that these
discussions will lead to an agreement or result in a transaction.
"This announcement marks an important milestone in our ongoing strategic
review," said Steven R. Rogel, chairman, president and chief executive
officer. "We remain committed to seeking the best alternatives to create value
First quarter 2006 earnings include the following after-tax items:
- A charge of $746 million, or $3.03 per diluted share, for the estimated
amount of a write-off of goodwill associated with the fine paper
business. This estimate represents the full amount of goodwill
associated with that business. This estimate is undergoing further
evaluation and will be adjusted, if necessary, prior to the filing of
the company's 10-Q.
- Income of $12 million in the Real Estate business, or 5 cents per
diluted share, associated with insurance recoveries and recognition of
deferred income in connection with partnership restructurings.
- A charge of $17 million, or 7 cents per diluted share, for foreign
- A charge of $14 million, or 6 cents per diluted share for stock-based
compensation. The company adopted the provisions of FASB Statement
123R, the stock-based compensation accounting standard, in the first
First quarter 2005 earnings include the following after-tax items:
- A charge of $8 million, or 3 cents per diluted share, associated with
the settlement of a linerboard antitrust lawsuit.
- A charge of $5 million, or 2 cents per diluted share associated with the
closure of facilities.
"During the quarter we began to see some improvement in market conditions
for our cellulose fiber, fine paper, containerboard and packaging businesses
which resulted in price improvement in the first quarter," said Steven R.
Rogel, chairman, president and chief executive officer. "We believe this trend
will continue and have a positive effect upon our second quarter earnings."
First quarter earnings increased slightly from the fourth quarter 2005 due
to increasing Western log prices and lower first quarter operating costs in
the West and South. Fourth quarter 2005 included a $6 million pre-tax charge
due to the effects of Hurricane Katrina.
Weyerhaeuser expects second quarter market conditions and earnings to be
similar to first quarter.
Earnings in the first quarter of 2006 were comparable to fourth quarter
2005 after excluding $91 million of pre-tax charges associated with facility
closures taken in the fourth quarter of 2005. Construction activity remained
healthy during the first quarter and prices were mixed.
Prices for oriented strand board were slightly lower than fourth quarter
2005 and shipment volumes were comparable.
Lumber prices trended up during the quarter. However, shipment volume
decreased 7 percent.
Prices and shipment volumes for engineered lumber products were comparable
to the prior quarter.
Manufacturing costs for lumber products remained constant quarter to
quarter, and manufacturing costs for engineered products declined slightly
primarily due to higher productivity.
The company incurred $11 million in countervailing and anti-dumping duties
and related costs on Canadian softwood lumber the company sold into the United
States in the first quarter of 2006, compared with $16 million in the fourth
quarter of 2005.
Weyerhaeuser expects higher second quarter earnings compared with first
quarter due to seasonal increase in building activity and stable raw materials
and manufacturing costs.
CELLULOSE FIBER AND WHITE PAPERS
First quarter includes a goodwill impairment charge of $746 million.
Fourth quarter 2005 includes closure related costs of $427 million for the
Cosmopolis, Wash. pulp operations; Prince Albert, Saskatchewan pulp and paper
operations; and a paper machine at Dryden, Ontario.
Excluding the charges, first quarter performance improved from fourth
Fine paper and cellulose fiber products both experienced stronger market
conditions, with prices increasing on a quarter-to-quarter basis. Fine paper
sales volumes declined modestly with the January closure of Prince Albert
paper operations while cellulose fiber volume improved slightly. Improved
productivity and lower freight costs were offset by increases in raw materials
and chemicals. Energy costs remained stable at their high level.
Weyerhaeuser expects the segment to show improved earnings in second
quarter despite a seasonal increase in annual scheduled maintenance.
CONTAINERBOARD, PACKAGING AND RECYCLING
Earnings improved from the fourth quarter due to containerboard and
packaging price increases. Packaging shipments declined from the strong fourth
quarter levels, but were higher compared with the first quarter of last year.
Fourth quarter 2005 results included pre-tax charges of $130 million for
facility closures and $38 million for a settlement of containerboard antitrust
The company expects continued improvement in earnings from this segment in
the second quarter.
REAL ESTATE AND RELATED ASSETS
Earnings decreased from fourth quarter due to decreased margins and
seasonally lower single-family home closings. The number of single-family
homes closed in first quarter declined 40 percent as compared to fourth
quarter. First quarter results included land sales earnings of approximately
$33 million and $17 million from insurance recoveries and partnership
restructurings. Fourth quarter results included 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 first quarter
represents more than five months' sales. This level is similar to the backlog
at the end of the fourth quarter.
Weyerhaeuser expects increased single-family closing activity in the
second quarter. Total real estate and related earnings, however, are expected
to decline slightly from the first quarter due to lower land sales.
SOURCE: Weyerhaeuser Company