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Management Side
Weyerhaeuser
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Federal Way, Washington, USA, 25 July 2006 -— Weyerhaeuser Company (NYSE: WY) today reported second quarter net earnings of USD 314 million, or USD 1.26 per diluted share, on net sales of USD 5.7 billion. This compares with USD 420 million, or USD 1.71 per diluted share, on net sales of USD 5.7 billion for the second quarter 2005.

Second quarter 2006 earnings include the following after-tax items:

A charge of USD 12 million, or 5 cents per diluted share, related to the restructuring of the Containerboard, Packaging, and Recycling business model.
A charge of USD 11 million, or 4 cents per diluted share, related to the closure of facilities.

In addition, net earnings for second quarter 2006 include a one-time tax benefit of USD 48 million, or 19 cents per diluted share, related to a change in Texas state income tax law, a reduction in the Canadian federal income tax rate, and a deferred tax adjustment related to the Medicare Part D subsidy.

Second quarter 2005 earnings include the following after-tax items:

A gain of USD 110 million, or 45 cents per diluted share, related to the sale of the company's operations in coastal British Columbia.

A charge of USD 44 million, or 18 cents per diluted share, related to a planned repatriation of USD 1.1 billion of eligible Canadian earnings under the provisions of the American Jobs Creation Act of 2004.

The recognition of USD 37 million, or 15 cents per diluted share of a deferred gain from previous timberlands sales.

A charge of USD 12 million, or 5 cents per diluted share, related to litigation.

"The recovery in the paper markets was welcomed after a period of challenging quarters for those businesses," said Steven R. Rogel, chairman, president, and chief executive officer. "At the same time, we can't rely on market conditions to improve our earnings performance. That's why we're being proactive and taking steps such as changing the business model of our integrated packaging business. This exciting initiative is starting to pay dividends and provides a glimpse into other changes we're making in how we go to market."

Summary of SECOND quarter financial highlights

Millions (except per share data)
2Q 2006 2Q 2005 Change

Net earnings... $314.............. $420............... ($106)

Earnings per
diluted share.. $1.26............... $1.71............. ($0.45)

Net sales..... $5687............. $5713................ ($26)

Segment results for SECOND quarter

(Contributions to Pre-Tax Earnings)

Millions 2Q 2006 2Q 2005 Change

Timberlands........$224................ $210................ $14

Wood Products..... $131................ $204................ ($73)

Cellulose Fiber
and White Papers... $23............... $16.................. $7

Containerboard,
Packaging and
Recycling......... $74................ $99................ ($25)

Real Estate and
Related Assets.... $123................ $156................ ($33)


Timberlands
2Q 2006 1Q 2006 Change

Contribution to
pre-tax earnings
(millions).............. $224.............. $198............... $26

Second quarter earnings improved from first quarter due to the realization of slightly higher log prices and the timing of portfolio improvement sales of non-strategic properties. Operating costs increased in both the West and South primarily due to higher fuel prices.

Third quarter earnings are expected to be lower than the second quarter due to seasonally reduced harvest and sales activity, softening domestic log prices and lower sales of non-strategic properties.

Wood Products
2Q 2006 1Q 2006 Change

Contribution to
pre-tax earnings
(millions)............... $131.............. $117................ $14

Earnings in the second quarter of 2006 improved from first quarter due to seasonal increases in shipment volumes for all major product lines despite a decline in residential construction activity. Average prices realized for oriented strand board and engineered lumber declined from the first quarter, partially offset by an increase for composite panels. Average prices realized for lumber were unchanged from first quarter.

Manufacturing costs for lumber and oriented strand board remained constant quarter to quarter, and manufacturing costs for composite products declined, primarily due to moderating natural gas and resin prices.

The company incurred USD 10 million in countervailing and antidumping duties and related costs on Canadian softwood lumber the company sold into the United States in the second quarter of 2006, compared with USD 11 million in the first quarter.

Weyerhaeuser expects substantially lower third quarter earnings from ongoing wood products operations compared with second quarter due to declining prices. The company expects to recognize a gain on the sale of the North American composite mills during the third quarter.

Cellulose Fiber and White Papers
2Q 2006 1Q 2006 Change

Contribution (charge)
to pre-tax earnings
(millions).................. $23.............. ($763)............... $786

First quarter 2006 results included a USD 746 million impairment of fine paper goodwill. Second quarter included pre-tax charges of USD 11 million associated with the closure of the Prince Albert facility. Excluding these items, earnings improved USD 51 million from first quarter.

Fine paper and cellulose fiber products both experienced stronger market conditions, resulting in the realization of higher prices. Fine paper sales volumes reflected the closures of the Prince Albert and Dryden No.1 paper machine operations. Cellulose fiber sales volumes were flat compared to first quarter.

Second quarter manufacturing costs for fine paper increased significantly due to extended annual maintenance mill shutdowns and major power interruptions at Plymouth, North Carolina. Energy and chip costs improved across the segment; however this was partially offset by the continued negative effect of the Canadian exchange rate on the cost of Canadian operations.

Weyerhaeuser expects the segment to show continued improved performance in third quarter. The company expects to realize the full effect of price increases implemented during second quarter and the additional benefit of price increases announced for third quarter. Manufacturing costs are expected to decrease due to fewer scheduled maintenance shutdowns and improved operating performance.

Containerboard, Packaging, and Recycling
2Q 2006 1Q 2006 Change

Contribution to
pre-tax earnings
millions).................... $74................. $22.............. $52

Second quarter 2006 results included pre-tax charges of USD 18 million for charges associated with changes to the segment's business model and pre-tax charges of USD 5 million related to facility closures. Excluding these items, earnings improved USD 75 million compared with first quarter.

Second quarter earnings improved primarily due to the realization of containerboard and packaging price increases coupled with higher packaging shipments. Packaging shipments increased despite the closure of seven packaging facilities since December. Manufacturing costs declined from first quarter levels mainly due to moderating natural gas costs and increased asset utilization. The market conditions for OCC (old corrugated containers) drove costs significantly higher during the second quarter.

Weyerhaeuser expects continued earnings improvement from this segment in the third quarter due primarily to the full realization of previous price increases, partially offset by escalating OCC costs.

Real Estate an dRelated Assets
2Q 2006 1Q 2006 Change

Contribution to pre-tax
earnings (millions).......... $123................ $172.............. ($49)

First quarter results included pre-tax land sales earnings of approximately USD 33 million and pre-tax gains related to insurance recoveries and partnership restructuring of USD 17 million. Excluding these items, total earnings were relatively unchanged from first quarter.

The number of single-family homes closed in second quarter increased seasonally compared with first quarter. Despite lower margins, single family earnings increased seasonally but were offset by higher operating costs. The backlog of homes sold, but not closed, at the end of the second quarter represents more than five months' sales.

Weyerhaeuser expects third quarter real estate and related earnings to approximate second quarter activity.

About Weyerhaeuser

Weyerhaeuser Company, one of the world's largest integrated forest products companies, was incorporated in 1900. In 2005, sales were USD 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. Additional information about Weyerhaeuser's businesses, products, and practices is available at http://www.weyerhaeuser.com.

Earnings Call Information

The company will hold a live conference call at 7 a.m. Pacific Time (10 a.m. Eastern Time) on 25 July to discuss second quarter results.

To access the conference call from within North America, dial 1-888-221-5699 at least 15 minutes before the call. Those calling from outside North America should dial 1-706-643-3795. Replays will be available for one week at 1-800-642-1687 (access code – 2336060) from within North America and at 1-706-645-9291 (access code – 2336060) from outside North America.

The call is being webcast through Weyerhaeuser's Internet site at http://investor.weyerhaeuser.com; click on the "Q2 2006 Earnings Conference Call" link.

The webcast is available through the Thomson StreetEvents Network to both institutional and individual investors. Individual investors can listen to the call at http://www.fulldisclosure.com, Thomson/CCBN's individual investor portal, powered by StreetEvents. Institutional investors can access the call via Thomson's password-protected site, StreetEvents (http://www.streetevents.com).

 

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