Weyerhaeuser Company reported August 5, 2008 a net loss of $96 million for the second quarter of 2008, or 45 cents per diluted share, on net sales of $3.6 billion.
This compares with net earnings of $32 million, or 15 cents per diluted share, on net sales of $4.3 billion for the same period last year.
SIGNIFICANT SECOND QUARTER 2007 AFTER-TAX ITEMS
The company earned $104 million, or 48 cents per diluted share, in the second quarter of 2007.
"We continue to position our company for future growth,” said Daniel S. Fulton, president and chief executive officer. “This week we took a significant step to focus our portfolio by completing the transaction with International Paper, a value-creating move for shareholders."
“Unprecedented conditions in the housing market are reflected in the second quarter results of our Real Estate, Wood Products and Timberlands businesses. In addition, high oil and energy prices have adversely affected all of our businesses. We’re not satisfied with the results and are continuing to take restructuring action consistent with our more focused portfolio.”
SUMMARY OF SECOND QUARTER FINANCIAL HIGHLIGHTS
Weyerhaeuser has reclassified the Containerboard, Packaging and Recycling operations as discontinued due to the Aug. 4 sale of the segment’s assets to International Paper. Weyerhaeuser’s Australia operations have also been reclassified as discontinued operations due to the sale of these assets that occurred in July. The net sales and revenues of these operations are included in net sales from discontinued operations for the second quarters of both 2008 and 2007.
SEGMENT RESULTS FOR SECOND QUARTER
TIMBERLANDS
2Q 2008 Performance – Earnings from higher fee volume in the West, largely due to storm salvage efforts, were offset by rising fuel costs and seasonally higher silviculture costs in all operations. Additionally, the West incurred higher logging costs due to the salvage efforts, and log price realizations were slightly lower.
3Q 2008 Outlook – Weyerhaeuser expects third quarter earnings from Timberlands to be slightly higher than second quarter. We expect lower domestic log prices, a seasonal decline in fee harvest volumes, and higher operating costs, offset by an anticipated increase in non-strategic land sales.
WOOD PRODUCTS
2Q 2008 Performance – Overall demand remained weak as U.S. single-family housing starts fell to a seasonally adjusted annual rate of 670,000 for the second quarter. Excluding the pre-tax items noted below, the segment’s loss was $69 million less in the second quarter.
• Second quarter 2008 included charges of $30 million for facility closures and asset impairments.
• First quarter 2008 included charges of $56 million for facility closures and asset impairments and $18 million for a reserve for oriented strand board litigation.
The lower loss from operations was primarily due to higher price realizations for lumber and OSB.
3Q 2008 Outlook – Weyerhaeuser expects challenging market conditions to continue into the third quarter. Operating losses are anticipated to be slightly less than second quarter.
CELLULOSE FIBERS
2Q 2008 Performance – Average price realizations for both pulp and liquid packaging board increased. However, this was more than offset by higher expenses associated with scheduled annual maintenance and an increase in freight, energy and fiber costs.
3Q 2008 Outlook – Weyerhaeuser expects third quarter earnings for the segment to be significantly higher than second quarter, primarily due to fewer annual maintenance outages. Average price realizations for both pulp and liquid packaging board are expected to increase, but the benefits are expected to be partially offset by higher chemical costs.
CONTAINERBOARD, PACKAGING AND RECYCLING
2Q 2008 Performance – Because of the announced sale of the segment’s assets to International Paper, the segment’s operations are presented as discontinued and depreciation of its assets ceased upon signing the agreement on March 15, 2008. Second quarter results do not include any depreciation. First quarter results included depreciation expense of $61 million. Excluding the effect of depreciation, second quarter earnings for the segment decreased $45 million from first quarter.
The segment had higher expenses for scheduled annual maintenance activities in the second quarter. The segment’s earnings were also negatively affected by flooding in the Midwest, which resulted in downtime at two facilities and increased costs. Average packaging price realizations increased and packaging shipments were seasonally higher.
3Q 2008 Outlook – Weyerhaeuser sold its containerboard, packaging and recycling operations to International Paper on Aug. 4. Third quarter results will only include the segment’s operations for Jly.
REAL ESTATE
2Q 2008 Performance – Pre-tax impairments, reserves and land-related charges for homebuilding assets and real estate investments were $311 million in the second quarter compared to $56 million in the first quarter. Excluding these charges, losses from single-family homebuilding operations increased slightly from the first quarter.
Earnings from single-family homebuilding declined due to significantly lower margins. Closings on single-family home sales increased three percent from first quarter. The backlog of homes sold, but not closed, was approximately three and one-half months.
3Q 2008 Outlook – Excluding second quarter impairments, Weyerhaeuser expects a comparable loss from this segment’s single-family homebuilding operations in the third quarter.
CORPORATE AND OTHER
Second quarter results for the Corporate and Other segment include the following pre-tax items:
• In April 2008, the company completed the restructuring of joint ventures in Uruguay. Assets of the joint ventures were distributed to the partners in a tax-free transaction. The distribution resulted in a non-cash gain to Weyerhaeuser in the second quarter of $101 million. This gain is based on preliminary values and is subject to adjustment.
• During the second quarter, the company changed its post-retirement benefit plans covering salaried employees and retirees in the United States. The plan changes resulted in a $365 million reduction in post-retirement liabilities and a $52 million pre-tax curtailment gain.
• The company recognized a pre-tax charge of $34 million related to corporate restructuring activities.
• The company recognized a pre-tax charge of $23 million to write off capitalized interest related to impaired Real Estate homebuilding assets.
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