SEATTLE (News release) -- Weyerhaeuser Company provided an update on actions it is taking in response to the COVID-19 pandemic.
"We have taken significant steps to protect the health and well-being of our employees, consistent with Weyerhaeuser's core values," said Devin W. Stockfish, president and chief executive officer. "Safety will remain the top priority in every decision we make as we continue to serve our customers."
Mr. Stockfish continued, "Given the broad-based uncertainty regarding the ultimate economic impact of the COVID-19 pandemic, we are taking action to position our businesses for changing market dynamics and prudently enhancing our financial flexibility. Weyerhaeuser is operating from a strong financial position, and we have demonstrated that the company has the cost structure, agility, and resilience to deliver industry-leading performance through rapidly changing market conditions. I am confident that we are well positioned to manage through this disruption and extend Weyerhaeuser's track record of creating long-term value for shareholders."
Actions to Support Employee Safety
Beginning in early March, Weyerhaeuser took proactive steps to safeguard the health of its employees. Such actions have included detailed cleaning and disinfecting procedures, strict processes around social distancing and personal hygiene, clear communication with its contractors, vendors and visitors about its safety protocols, comprehensive guidance for response to any COVID-19 diagnoses or exposures in its operations, suspension of all air travel and non-essential meetings, and a directive that employees work from home if feasible.
With these preventative measures in place, Weyerhaeuser's businesses have been operating efficiently and effectively to serve the solid demand experienced through late March. Weyerhaeuser is experiencing, and actively working to mitigate, minor supply chain disruptions related to transportation and delivery of export logs to certain locations in Asia.
In response to recent changes in customer sentiment and order flow, Weyerhaeuser is dynamically adjusting operating capacity at certain of its manufacturing facilities. For the month of April, the company expects to reduce operating capacity by approximately 20 percent for lumber, 15 percent for oriented strand board, and 15 to 25 percent for engineered wood products through a combination of temporary mill curtailments and reduced shift postures.
The company remains strongly committed to maintaining the safety of its employees and effectively serving its customers and will continue to adjust production volumes to align with customer demand.
The U.S. Department of Homeland Security has designated the forest products industry as an "essential critical infrastructure workforce." This designation recognizes the importance of timber and wood products operations in supporting critical infrastructure and construction projects and the manufacture of important personal hygiene items.
Actions to Enhance Financial Flexibility
Weyerhaeuser is operating from a strong financial position, with excellent liquidity, investment grade credit ratings of BBB/Baa2, and no debt maturities in 2020. The company remains well in compliance with its financial covenants, as disclosed in its 2019 10-K. Weyerhaeuser's 11 million acres of high quality timberlands also provide strong asset coverage.
The company is taking prudent and precautionary steps to further strengthen its balance sheet and maintain financial flexibility and liquidity by:
Limiting or deferring non-essential operating expenses;
Reducing 2020 capital expenditures by approximately $70-90 million; and
Increasing cash on hand by $550 million through a draw on its revolving credit facility, which expires in January 2025 and has $950 million of capacity remaining.
As announced on March 26, 2020, the company also:
Received approximately $145 million of cash following completion of the sale of its Montana timberlands; and
Issued $750 million of 4.0% notes through a public bond offering, with proceeds to be used to refinance the company's outstanding 2021 maturities.
In light of rapidly evolving market conditions, the Weyerhaeuser board of directors continues to review the company's capital allocation plans.
First Quarter 2020 Earnings Call
The company expects to provide an update on business conditions, financial outlook items, and capital allocation during its first quarter earnings call, which is scheduled for Friday, May 1, 2020 at 7 a.m. Pacific time (10 a.m. Eastern time).