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| WY > SEC Filings for WY > Form 10-Q on 6-Nov-2009 | All Recent SEC Filings |
6-Nov-2009
Quarterly Report
FORWARD-LOOKING STATEMENTS
This report contains statements concerning our future results and performance that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements:
• use forward-looking terminology,
• are based on various assumptions we make and
• may not be accurate because of risks and uncertainties surrounding the assumptions that we make.
Factors listed in this section - as well as other factors not included - may cause our actual results to differ from our forward-looking statements. There is no guarantee that any of the events anticipated by our forward-looking statements will occur. If any of the events occur, there is no guarantee what effect they will have on our operations or financial condition.
We will not update our forward-looking statements after the date of this report.
FORWARD-LOOKING TERMINOLOGY
Some forward-looking statements discuss our plans, strategies and intentions. They use words such as expects, may, will, believes, should, approximately, anticipates, estimates, and plans. In addition, these words may use the positive or negative or a variation of those terms.
STATEMENTS
We make forward-looking statements of our expectations regarding fourth quarter 2009, including:
• our markets,
• fee timber harvest levels and operating costs in the Timberlands segment,
• sales of non-strategic timberlands,
• demand and pricing for our wood products in the Wood Products segment,
• increased expenses for annual planned maintenance and raw materials costs in the Cellulose Fibers segment,
• average pulp price realizations,
• home sale closings and prices,
• cost control measures and
• earnings and performance of our business segments.
We base our forward-looking statements on a number of factors, including the expected effect of:
• the economy;
• foreign exchange rates, primarily the Canadian dollar and Euro;
• adverse litigation outcomes and the adequacy of reserves;
• regulations;
• changes in accounting principles;
• the effect of implementation or retrospective application of accounting methods;
• contributions to pension plans;
• projected benefit payments;
• projected tax rates;
• IRS audit outcomes and timing of settlements; and
• other related matters.
RISKS, UNCERTAINTIES AND ASSUMPTIONS
The major risks and uncertainties - and assumptions that we make - that affect our business include, but are not limited to:
• general economic conditions, including the level of interest rates, appraised values, availability of financing for home mortgages, strength of the U.S. dollar, employment rates and housing starts;
• market demand for our products, which is related to the strength of the various U.S. business segments and economic conditions;
• raw material prices;
• energy prices;
• transportation costs;
• successful execution of our internal performance plans including restructurings, operating efficiencies and cost reduction initiatives;
• changes in our business support functions and support costs;
• performance of our manufacturing operations, including maintenance requirements;
• changes in legislation or tax rules;
• level of competition from domestic and foreign producers;
• forestry, land use, environmental and other governmental regulations;
• legal proceedings;
• weather;
• loss from fires, floods, windstorms, hurricanes, pest infestation and other natural disasters;
• changes in accounting principles;
• performance of pension fund investments and related derivatives;
• the effect of timing of retirements and changes in the market price of our common stock on charges for share-based compensation; and
• the other factors described under "Risk Factors" in this report and our annual report on Form 10-K.
EXPORTING ISSUES
We are a large exporter and are affected by changes in:
• economic activity in Europe and Asia - especially Japan, China and Korea;
• currency exchange rates - particularly the relative value of the U.S. dollar to the Euro and the Canadian dollar; and
• restrictions on international trade or tariffs imposed on imports.
RESULTS OF OPERATIONS
As disclosed in "Notes to Consolidated Financial Statements - Note 3:
Discontinued Operations," the following operations are classified as
discontinued operations in the accompanying consolidated financial statements in
the 2008 periods presented:
• Containerboard, Packaging, and Recycling operations; and
• Australian operations included in the Corporate and Other segment.
There are no operations classified as discontinued operations in 2009.
In reviewing our results of operations, it is important to understand the following:
• Net sales and revenues and operating loss included in Consolidated Results below exclude the results of discontinued operations.
• Net sales and revenues and net contribution to earnings reported in the individual segment discussions that follow include the results of discontinued operations.
In reviewing our results of operations, it is important to understand these terms:
• Price realizations refer to net selling prices - this includes selling price plus freight, minus normal sales deductions.
• Net contribution to earnings can be positive or negative and refers to earnings (loss) attributable to Weyerhaeuser's shareholders before interest expense not capitalized and income taxes.
In the following discussion, unless otherwise noted, references to increases or decreases in income and expense items, price realizations, shipment volumes, and net contributions to earnings are based on the quarter and year-to-date periods ended September 30, 2009, compared to the quarter and year-to-date periods ended September 28, 2008.
CONSOLIDATED RESULTS
How We Did Third Quarter and Year-to-Date 2009
Here is a comparison of net sales and revenues to unaffiliated customers and net contribution to earnings for the quarters and year-to-date periods ended September 30, 2009, and September 28, 2008:
NET SALES AND REVENUES / OPERATING INCOME (LOSS) / NET EARNINGS (LOSS) -
WEYERHAEUSER COMPANY
AMOUNT OF AMOUNT OF
QUARTER ENDED CHANGE YEAR-TO-DATE ENDED CHANGE
DOLLAR AMOUNTS IN MILLIONS, SEPTEMBER 30, SEPTEMBER 28, SEPTEMBER 30, SEPTEMBER 28,
EXCEPT PER-SHARE FIGURES 2009 2008 2009 VS. 2008 2009 2008 2009 VS. 2008
Net sales and revenues $ 1,407 $ 2,107 $ (700 ) $ 4,073 $ 6,323 $ (2,250 )
Operating income (loss) $ 123 $ (356 ) $ 479 $ (269 ) $ (1,020 ) $ 751
Earnings from discontinued
operations, net of tax $ - $ 480 $ (480 ) $ - $ 678 $ (678 )
Net earnings (loss)
attributable to Weyerhaeuser
common shareholders $ - $ 280 $ (280 ) $ (370 ) $ 36 $ (406 )
Net earnings (loss)
attributable to Weyerhaeuser
common shareholders per
share, basic and diluted $ - $ 1.33 $ (1.33 ) $ (1.75 ) $ 0.17 $ (1.92 )
Comparing 2009 with 2008
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In 2009:
• Net sales and revenues decreased $700 million - 33 percent - during third quarter and $2.3 billion - 36 percent - year-to-date.
• Net earnings (loss) attributable to Weyerhaeuser common shareholders decreased $280 million - 100 percent - during third quarter and $406 million year-to-date.
Net sales and revenues
Net sales and revenues decreased primarily due to the continued market challenges for the U.S. homebuilding industry and weak pulp markets, reflected in the following:
• lower demand and prices for residential building products - refer to the Wood Products segment discussion;
• declines in the number of single-family homes closed and average selling prices - refer to the Real Estate segment discussion;
• decreased western log sales due to weaker export and domestic markets - refer to the Timberlands segment discussion; and
• lower pulp sales realizations - refer to the Cellulose Fibers segment discussion.
Net earnings (loss) attributable to Weyerhaeuser common shareholders
Net earnings (loss) attributable to Weyerhaeuser common shareholders decreased during third quarter 2009 primarily due to the following:
• net gains from the sale of our Containerboard, Packaging and Recycling business and the sale of our Australian operations recognized in 2008 that did not recur in 2009 - refer to the Corporate and Other segment discussion and "Notes to Consolidated Financial Statements - Note 3: Discontinued Operations";
• decreased sales prices in all segments and harvest deferrals in Timberlands - refer to the individual segment discussions;
• increased Corporate restructuring and impairment charges - refer to the Corporate and Other segment discussion; and
• decreased income tax benefits related to our improved results from continuing operations as compared with 2008 and income tax adjustments - refer to the Income Taxes discussion.
These decreases during third quarter were partially offset by the following:
• decreased Real Estate asset impairment charges - refer to the Real Estate segment discussion;
• recognition of a gain on sale of 140,000 acres of non-strategic timberlands - refer to the Timberlands segment discussion;
• recognition of alternative fuel mixture credits - refer to the Cellulose Fibers segment and the Other Liquidity Related Disclosures discussions; and
• decreased costs in all segments as a result of our cost reduction initiatives, portfolio changes and operating efficiencies - refer to the individual segment discussions.
Net earnings (loss) attributable to Weyerhaeuser common shareholders for year-to-date 2009 decreased due to third quarter items noted above and:
• loss of earnings due to the sale of our Containerboard, Packaging and Recycling business - refer to the Containerboard, Packaging and Recycling discussion; and
• gains from the restructuring of our investments in Uruguay and from changes in our U.S. postretirement benefit plans recognized in 2008 that did not recur in 2009 - refer to the Corporate and Other segment discussion.
TIMBERLANDS
How We Did Third Quarter and Year-to-Date 2009
Here is a comparison of net sales and revenues to unaffiliated customers, intersegment sales, and net contribution to earnings for the quarter and year-to-date periods ended September 30, 2009, and September 28, 2008:
NET SALES AND REVENUES / NET CONTRIBUTION TO EARNINGS - TIMBERLANDS
AMOUNT OF AMOUNT OF
QUARTER ENDED CHANGE YEAR-TO-DATE ENDED CHANGE
SEPTEMBER 30, SEPTEMBER 28, SEPTEMBER 30, SEPTEMBER 28,
DOLLAR AMOUNTS IN MILLIONS 2009 2008 2009 VS. 2008 2009 2008 2009 VS. 2008
Net sales and revenues to
unaffiliated customers:
Logs:
West $ 84 $ 149 $ (65 ) $ 253 $ 418 $ (165 )
South 39 29 10 115 60 55
Canada 5 2 3 7 16 (9 )
Subtotal log sales and revenues 128 180 (52 ) 375 494 (119 )
Pay as cut timber sales 10 9 1 24 21 3
Timberlands sales and
exchanges(1) 15 29 (14 ) 59 66 (7 )
Higher and better use land
sales(1) 5 1 4 10 9 1
Minerals, oil and gas 21 18 3 49 42 7
Products from international
operations(2) 13 14 (1 ) 30 27 3
Other products 1 3 (2 ) 11 16 (5 )
Subtotal net sales and revenues
to unaffiliated customers 193 254 (61 ) 558 675 (117 )
Intersegment sales:
United States 93 203 (110 ) 314 655 (341 )
Other 29 50 (21 ) 94 166 (72 )
Subtotal intersegment sales 122 253 (131 ) 408 821 (413 )
Total sales and revenues $ 315 $ 507 $ (192 ) $ 966 $ 1,496 $ (530 )
Net contribution to earnings $ 219 $ 107 $ 112 $ 325 $ 322 $ 3
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(1) Higher and better use timberland and other non-strategic timberland are sold through Forest Products subsidiaries.
(2) Includes logs, plywood and hardwood lumber harvested or produced by our international operations, primarily in South America.
Comparing Third Quarter 2009 with Third Quarter 2008
In third quarter 2009:
• Net sales and revenues to unaffiliated customers decreased $61 million - 24 percent.
• Intersegment sales decreased $131 million - 52 percent.
• Net contribution to earnings increased $112 million - 105 percent.
Net sales and revenues - unaffiliated customers
The $61 million decrease in net sales and revenues to unaffiliated customers resulted primarily from:
• 41 percent decrease in Western log sales volumes and 3 percent decrease in price realizations due to weaker domestic and export markets; and
• $10 million decrease in land sales and exchanges, including higher and better use lands.
These were partially offset by a 46 percent increase in southern log sales volumes, primarily due to sales of fiber logs to International Paper for use at locations that previously were owned by Weyerhaeuser and grade log sales to domestic customers.
Intersegment sales
The $131 million decrease in intersegment sales was primarily due to the following:
• fewer Weyerhaeuser mills in operation as a result of closures and curtailments of Wood Products operations in the United States; and
• sales to Containerboard, Packaging and Recycling operations became third-party sales after we sold the business to International Paper in August 2008.
Net contribution to earnings
The $112 million increase in net contribution to earnings resulted primarily from:
• $163 million pre-tax gain on the third quarter 2009 sale of 140,000 acres of non-strategic timberland in northwestern Oregon; and
• $19 million reduction of operating costs, including less salvage logging, lower diesel costs and reduced spending on roads and silviculture.
These increases were partially offset by:
• $36 million due to 43 percent reduced harvest in the West and 25 percent reduced harvest in the South and
• $33 million due to lower domestic and export prices.
Comparing Year-to-Date 2009 with Year-to-Date 2008
During year-to-date 2009:
• Net sales and revenues to unaffiliated customers decreased $117 million - 17 percent.
• Intersegment sales decreased $413 million - 50 percent.
• Net contribution to earnings increased $3 million - 1 percent.
Net sales and revenues - unaffiliated customers
The $117 million decrease in net sales and revenues to unaffiliated customers resulted primarily from the following:
• Western log sales volumes decreased 35 percent and price realizations decreased 7 percent due to weaker domestic and export markets.
• Canadian log sales volumes decreased 51 percent due to lower logging levels in all provinces as a result of fewer manufacturing operations and production curtailments.
These were partially offset by an 89 percent increase in southern log sales volumes, primarily due to sales of fiber logs to International Paper for use at locations that previously were owned by Weyerhaeuser, and higher grade log sales to domestic customers.
Intersegment sales
The $413 million decrease in intersegment sales was primarily due to the following:
• fewer Weyerhaeuser mills in operation as a result of closures and curtailments of Wood Products operations in the United States; and
• sales to Containerboard, Packaging and Recycling operations became third-party sales after we sold the business to International Paper in August 2008.
Net contribution to earnings
The $3 million increase in net contribution to earnings was primarily due to:
• $163 million pre-tax gain on third quarter 2009 sale of 140,000 acres of non-strategic timberland in northwestern Oregon;
• $33 million reduction of operating costs which includes less salvage logging, lower diesel costs and reduced spending on roads and silviculture; and
• $17 million reduction in selling, general and administrative costs as a result of cost cutting measures.
These were partially offset by:
• $112 million due to 38 percent reduced harvest in the West and 25 percent reduced harvest in the South and
• $97 million due to lower domestic and export prices in the West and South.
Our Outlook
We expect fourth quarter earnings to be lower than third quarter primarily due to additional harvest deferrals and seasonally higher silviculture costs. No significant non-strategic land sales are anticipated in fourth quarter.
THIRD-PARTY LOG SALES VOLUMES AND FEE HARVEST VOLUMES
AMOUNT OF AMOUNT OF
QUARTER ENDED CHANGE YEAR-TO-DATE ENDED CHANGE
SEPTEMBER 30, SEPTEMBER 28, SEPTEMBER 30, SEPTEMBER 28,
VOLUMES IN THOUSANDS 2009 2008 2009 VS. 2008 2009 2008 2009 VS. 2008
Third party log sales -
cubic meters:
West 1,156 1,970 (814 ) 3,529 5,401 (1,872 )
South 981 672 309 2,812 1,486 1,326
Canada 144 83 61 211 432 (221 )
International 84 53 31 234 181 53
Total 2,365 2,778 (413 ) 6,786 7,500 (714 )
Fee depletion - cubic
meters:
West 1,603 2,813 (1,210 ) 5,191 8,412 (3,221 )
South 2,258 3,021 (763 ) 7,133 9,505 (2,372 )
Total 3,861 5,834 (1,973 ) 12,324 17,917 (5,593 )
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WOOD PRODUCTS
How We Did Third Quarter and Year-to-Date 2009
Here is a comparison of net sales and revenues to unaffiliated customers and net contribution to earnings for the quarters and year-to-date periods ended September 30, 2009, and September 28, 2008:
NET SALES AND REVENUES / NET CONTRIBUTION TO EARNINGS - WOOD PRODUCTS
AMOUNT OF AMOUNT OF
QUARTER ENDED CHANGE YEAR-TO-DATE ENDED CHANGE
SEPTEMBER 30, SEPTEMBER 28, SEPTEMBER 30, SEPTEMBER 28,
DOLLAR AMOUNTS IN MILLIONS 2009 2008 2009 VS. 2008 2009 2008 2009 VS. 2008
Net sales and revenues:
Softwood lumber $ 226 $ 393 $ (167 ) $ 677 $ 1,157 $ (480 )
Engineered solid section 67 114 (47 ) 184 340 (156 )
Engineered I-joists 47 79 (32 ) 123 238 (115 )
Oriented strand board 63 113 (50 ) 176 328 (152 )
Plywood 25 48 (23 ) 71 164 (93 )
Hardwood lumber 54 72 (18 ) 161 232 (71 )
Other products produced 37 63 (26 ) 119 163 (44 )
Other products purchased for resale 69 124 (55 ) 213 421 (208 )
Total $ 588 $ 1,006 $ (418 ) $ 1,724 $ 3,043 $ (1,319 )
Net contribution to earnings $ (97 ) $ (146 ) $ 49 $ (525 ) $ (587 ) $ 62
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Comparing Third Quarter 2009 with Third Quarter 2008
In third quarter 2009:
• Net sales and revenues decreased $418 million - 42 percent.
• Net contribution to earnings improved $49 million - 34 percent.
Net sales and revenues
We have announced the closure and curtailment of a number of facilities. See "Notes to Consolidated Financial Statements - Note 6: Charges for Forest Products Restructuring, Closures and Asset impairments" for additional information. Demand for wood products was significantly weaker in 2009 compared to 2008 resulting in significant decreases in shipment volumes and prices for all product lines. The $418 million decrease in net sales and revenues was primarily due to the following:
• Softwood lumber average price realizations decreased 15 percent and shipment volumes decreased 33 percent.
• Engineered solid section average price realizations decreased 6 percent and shipment volumes decreased 38 percent.
• Engineered I-joists average price realizations decreased 11 percent and shipment volumes decreased 32 percent.
• Oriented strand board (OSB) average price realizations decreased 8 percent and shipment volumes decreased 39 percent.
• Plywood average price realizations decreased 17 percent and shipment volumes decreased 38 percent.
• Hardwood lumber average price realizations decreased 5 percent and shipment volumes decreased 20 percent.
• Sales of other products purchased for resale decreased 44 percent primarily due to reduced market demand and closed distribution facilities.
Net contribution to earnings
Third quarter 2009 results improved compared to third quarter 2008 results. The $49 million increase in net contribution to earnings was primarily due to the following:
• $48 million decrease in raw materials, mainly due to decreased log costs;
• $40 million decrease in manufacturing and other cost of sales primarily due to closures, curtailments and increased operating efficiencies;
• $28 million decrease in selling and administrative costs as a result of facility closures and our continued focus on reducing costs; and
• $24 million decrease in restructuring, closure and asset impairment charges.
These cost improvements were partially offset by:
• $69 million decrease due to lower sales price realizations and lower shipment volumes for all product lines,
• $13 million decrease due to the 2008 reduction in the hardboard siding claims reserve and
. . .
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