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WY > SEC Filings for WY > Form 10-Q on 30-Apr-2013All Recent SEC Filings

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Form 10-Q for WEYERHAEUSER CO


30-Apr-2013

Quarterly Report


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ("MD&A")

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:
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 significantly from our forward-looking statements. There is no guarantee that any of the events anticipated by our forward-looking statements will occur. Or 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 other variations of those terms.

STATEMENTS
We make forward-looking statements of our expectations regarding second quarter 2013, including:
improved selling prices for Western domestic and export logs, slightly lower fee harvest volumes, flat realization and somewhat higher fee harvest volumes in the South, seasonally higher silviculture expenses, somewhat higher earnings from dispositions of non-strategic timberlands and comparable earnings in our Timberlands segment excluding disposition of non-strategic timberlands;

higher sales volumes across all product lines, slightly higher sales realization for engineered wood products, potential softening in prices for lumber and oriented strand board, slightly higher log costs, improved operating rates and comparable earnings in our Wood Products segment;

slightly higher pulp price realizations, lower maintenance costs, lower fiber and energy costs and significantly higher earnings in our Cellulose Fiber segment; and

seasonally increased home closings to approximately 600 single-family homes, slight decline in average price of homes closed due to mix, average margins comparable to first quarter 2013, higher selling-related expenses due to additional closing volume and a slight profit from single-family homebuilding in our Real Estate segment.

We base our forward-looking statements on a number of factors, including the expected effect of:
the economy;

regulations;

adverse litigation outcomes and the adequacy of reserves;

changes in accounting principles;

contributions to pension plans;

projected benefit payments;

projected tax rates and credits; and

other related matters.


RISKS, UNCERTAINTIES AND ASSUMPTIONS
The major risks and uncertainties - and assumptions that we make - that affect our business and may cause actual results to differ from these forward-looking statements include, but are not limited to:
the effect of general economic conditions, including employment rates, housing starts, interest rate levels, availability of financing for home mortgages and strength of the U.S. dollar;

market demand for our products, which is related to the strength of the various U.S. business segments and U.S. and international economic conditions;

performance of our manufacturing operations, including maintenance requirements;

the level of competition from domestic and foreign producers;

the successful execution of our internal performance plans, including restructurings and cost reduction initiatives;

raw material prices;

energy prices;

the effect of weather;

the risk of loss from fires, floods, windstorms, hurricanes, pest infestation and other natural disasters;

transportation costs;

federal tax policies;

the effect of forestry, land use, environmental and other governmental regulations;

legal proceedings;

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;

changes in accounting principles; and

other factors described under "Risk Factors" in our annual report on Form 10-K.

EXPORTING ISSUES
We are a large exporter, affected by changes in:
economic activity in Europe and Asia - particularly Japan and China;

currency exchange rates - particularly the relative value of the U.S. dollar to the euro and Canadian dollar and the relative value of the euro and yen; and

restrictions on international trade or tariffs imposed on imports.


RESULTS OF 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 shareholders before interest expense 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 ended March 31, 2013, compared to the quarter ended March 31, 2012.

CONSOLIDATED RESULTS
How We Did in First Quarter 2013
NET SALES / OPERATING INCOME / NET EARNINGS - WEYERHAEUSER COMPANY
Here is a comparison of net sales, operating income and net earnings for the
quarters ended March 31, 2013 and 2012:
                                                                                              AMOUNT OF
                                                                 QUARTER ENDED                 CHANGE
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES      MARCH 2013       MARCH 2012       2013 VS. 2012
Net sales                                               $      1,951     $      1,494     $           457
Operating income                                        $        256     $        101     $           155
Net earnings attributable to Weyerhaeuser common
shareholders                                            $        144     $         41     $           103
Net earnings per share attributable to Weyerhaeuser
common shareholders, basic and diluted                  $       0.26     $       0.08     $          0.18

Comparing First Quarter 2013 with First Quarter 2012 Net sales
Net sales increased $457 million - 31 percent - primarily due to the following:
Wood Products segment sales increased $354 million, primarily due to higher sales volumes across all major product lines and improved selling prices for lumber, oriented strand board (OSB) and plywood.

Real Estate segment sales increased $59 million primarily due to increased home closings and improved average prices for homes closed.

Timberlands segment sales increased $43 million, primarily due to higher export and domestic log prices and increased sales volume.

Net earnings attributable to Weyerhaeuser common shareholders Our net earnings attributable to Weyerhaeuser common shareholders increased $103 million - 251 percent - primarily from a $214 million increase in gross margin in our Wood Products segment due to higher lumber, OSB and plywood price realizations. This increase was partially offset by:
a $56 million increase in income taxes primarily due to higher income in our TRS in 2013 compared to 2012; and

a $52 million pretax gain recognized in 2012 related to a previously announced postretirement plan amendment.


TIMBERLANDS
How We Did First Quarter 2013
Here is a comparison of net sales to unaffiliated customers, intersegment sales,
and net contribution to earnings for the quarters ended March 31, 2013 and 2012:

NET SALES / NET CONTRIBUTION TO EARNINGS - TIMBERLANDS
                                                                                             AMOUNT OF
                                                                 QUARTER ENDED                 CHANGE
DOLLAR AMOUNTS IN MILLIONS                                MARCH 2013       MARCH 2012      2013 VS. 2012
Net sales to unaffiliated customers:
Logs:
West                                                    $     177        $        130     $           47
South                                                          61                  50                 11
Canada                                                          7                   7                  -
Subtotal logs sales                                           245                 187                 58
Pay as cut timber sales                                         1                   3                 (2 )
Chip sales                                                      3                   6                 (3 )
Timberlands exchanges(1)                                        2                   8                 (6 )
Higher and better-use land sales(1)                             3                   4                 (1 )
Minerals, oil and gas                                           8                   7                  1
Products from international operations(2)                      22                  25                 (3 )
Other products                                                  9                  10                 (1 )
Subtotal net sales to unaffiliated customers                  293                 250                 43
Intersegment sales:
United States                                                 127                 112                 15
Other                                                          97                  78                 19
Subtotal intersegment sales                                   224                 190                 34
Total sales                                             $     517        $        440     $           77
Net contribution to earnings                            $     104        $         70     $           34

(1) Significant dispositions of higher and better use timberland and some non-strategic timberlands are made through Forest Products subsidiaries.

(2) Products include logs, plywood and hardwood lumber harvested or produced by our international operations, primarily in South America.

Comparing First Quarter 2013 with First Quarter 2012 Net sales - unaffiliated customers
Net sales to unaffiliated customers increased $43 million - 17 percent - primarily from the following:
Western log sales increased $47 million due to higher export and domestic log prices and a 28 percent increase in sales volume as a result of increased export and domestic demand.

Southern log sales increased $11 million due to higher log prices and a 14 percent increase in sales volumes as the result of increased harvest levels in response to increased third party demand.

Intersegment sales
Intersegment sales increased $34 million - 18 percent - primarily from:
a $19 million increase due to higher log prices and increased sales volumes in Canada; and

a $15 million increase primarily due to higher log prices in the West and South.


Net contribution to earnings
Net contribution to earnings increased $34 million - 49 percent - primarily from:
a $27 million increase due to higher log prices in the West and South; and

an $11 million increase due to higher sales volumes and demand for export and domestic logs in the West; harvest levels increased 19 percent in the West.

Our Outlook for Second Quarter 2013
Excluding dispositions of non-strategic timberlands, we expect earnings from the
segment to be comparable to first quarter. We anticipate improved selling prices
for Western domestic and export logs, offset by seasonally higher silviculture
expenses. Earnings from disposition of non-strategic timberlands should increase
somewhat.

THIRD-PARTY LOG SALES VOLUMES AND FEE HARVEST VOLUMES
                                                                    AMOUNT OF
                                            QUARTER ENDED             CHANGE
VOLUMES IN THOUSANDS                  MARCH 2013    MARCH 2012    2013 VS. 2012
Third party log sales - cubic meters:
West                                     1,674           1,308           366
South                                    1,399           1,228           171
Canada                                     204             205            (1 )
International                               68              78           (10 )
Total                                    3,345           2,819           526
Fee harvest volumes - cubic meters:
West                                     1,995           1,679           316
South                                    2,833           2,714           119
International                              197             172            25
Total                                    5,025           4,565           460

WOOD PRODUCTS
How We Did First Quarter 2013
Here is a comparison of net sales to unaffiliated customers and net contribution
to earnings for the quarters ended March 31, 2013 and 2012:

NET SALES / NET CONTRIBUTION TO EARNINGS - WOOD PRODUCTS
                                                                             AMOUNT OF
                                                   QUARTER ENDED               CHANGE
DOLLAR AMOUNTS IN MILLIONS                   MARCH 2013     MARCH 2012     2013 VS. 2012
Net sales:
Structural lumber                           $    451       $     291      $           160
Engineered solid section                          82              65                   17
Engineered I-joists                               56              41                   15
Oriented strand board                            236             111                  125
Softwood plywood                                  36              23                   13
Other products produced                           43              42                    1
Complementary products purchased for resale       84              61                   23
Total                                       $    988       $     634      $           354
Net contribution to earnings                $    178       $     (13 )    $           191


Overall performance in our Wood Products segment improved year over year. We continue to focus on reducing costs and increasing revenues by broadening our customer base; introducing new products; growing our specialty, as well as commodity building products business; and improving our operational capabilities. These improvement efforts and better market conditions, have resulted in higher production rates in all primary product lines. Comparing First Quarter 2013 with First Quarter 2012 Net sales
Net sales increased $354 million - 56 percent - primarily from the following:
Structural lumber shipment volumes increased 9 percent and average price realizations increased 41 percent.

OSB shipment volumes increased 16 percent and average price realizations increased 82 percent.

Engineered solid section shipment volumes increased 22 percent.

Engineered I-joists shipment volumes increased 34 percent.

Softwood plywood shipment volumes increased 36 percent and average price realizations increased 20 percent.

Other products purchased for resale increased 38 percent.

Net contribution to earnings
Net contribution to earnings increased $191 million primarily from:
a $215 million increase primarily due to higher lumber, OSB and plywood price realizations; and

a $14 million increase in sales volumes across all products.

These increases were partially offset by:
a $23 million increase in log cost due to continued strong lumber demand and increasing log prices; and

a $17 million increase in freight expense due to higher shipment volumes.

Our Outlook for Second Quarter 2013
We anticipate comparable earnings from the Wood Products segment in second
quarter. We expect higher sales volume across all product lines, offset by
slightly lower average selling prices for lumber and OSB and slightly higher raw
material costs.

THIRD-PARTY SALES VOLUMES
                                                                           AMOUNT OF
                                                  QUARTER ENDED              CHANGE
VOLUMES IN MILLIONS(1)                      MARCH 2013     MARCH 2012    2013 VS. 2012
Structural lumber - board feet                1,025               937               88
Engineered solid section - cubic feet           4.4               3.6              0.8
Engineered I-joists - lineal feet                43                32               11
Oriented strand board - square feet (3/8")      657               565               92
Softwood plywood - square feet (3/8")            99                73               26

(1) Sales volumes include sales of internally produced products and products purchased for resale primarily through our distribution business.


PRODUCTION AND OUTSIDE PURCHASE VOLUMES
Outside purchase volumes are primarily purchased for resale through our
distribution business. Production volumes are produced for sale through our own
sales organizations and through our distribution business. Production of OSB and
engineered solid section are also used to manufacture engineered I-joists.
                                                                                         AMOUNT OF
                                                               QUARTER ENDED               CHANGE
VOLUMES IN MILLIONS                                      MARCH 2013      MARCH 2012    2013 VS. 2012
Structural lumber - board feet:
Production                                                 1,021               958               63
Outside purchase                                             102                32               70
Total                                                      1,123               990              133
Engineered solid section - cubic feet:
Production                                                   4.6               3.7              0.9
Outside purchase                                             0.9               1.0             (0.1 )
Total                                                        5.5               4.7              0.8
Engineered I-joists - lineal feet:
Production                                                    44                34               10
Outside purchase                                               3                 2                1
Total                                                         47                36               11
Oriented strand board - square feet (3/8"):
Production                                                   662               601               61
Outside purchase                                              68                32               36
Total                                                        730               633               97
Softwood plywood - square feet (3/8"):
Production                                                    61                51               10
Outside purchase                                              42                25               17
Total                                                        103                76               27

CELLULOSE FIBERS
How We Did in First Quarter 2013
Here is a comparison of net sales and net contribution to earnings for the
quarters ended March 31, 2013 and 2012:

NET SALES / NET CONTRIBUTION TO EARNINGS - CELLULOSE FIBERS
                                                                AMOUNT OF
                                     QUARTER ENDED               CHANGE
DOLLAR AMOUNTS IN MILLIONS    MARCH 2013      MARCH 2012      2013 VS. 2012
Net sales:
Pulp                         $    371        $        367    $           4
Liquid packaging board             85                  83                2
Other products                     18                  23               (5 )
Total                        $    474        $        473    $           1
Net contribution to earnings $     31        $         48    $         (17 )


Comparing First Quarter 2013 with First Quarter 2012 Net sales
Net sales were comparable year over year:
Increased sales volumes of 4 percent for pulp were partially offset by decreased price realizations of $22 per ton - 3 percent as global market conditions remained relatively weak.

Sales volumes for liquid packaging board increased 8,000 tons - 11 percent, which was largely offset by decreased price realizations of $102 per ton - 9 percent.

Net contribution to earnings
Net contribution to earnings decreased $17 million - 35 percent - primarily due to:
a $10 million decrease due to lower pulp price realizations and

an $8 million decrease in liquid packaging board price realizations.

Our Outlook for Second Quarter 2013
We expect significantly higher earnings from the Cellulose Fibers segment in
second quarter. We anticipate reduced fiber and energy costs, lower maintenance
expense and slightly higher pulp price realizations.

THIRD-PARTY SALES VOLUMES
                                                              AMOUNT OF
                                     QUARTER ENDED              CHANGE
VOLUMES IN THOUSANDS           MARCH 2013     MARCH 2012    2013 VS. 2012
Pulp - air-dry metric tons       467                 449               18
Liquid packaging board - tons     78                  70                8



TOTAL PRODUCTION VOLUMES
                                                              AMOUNT OF
                                     QUARTER ENDED              CHANGE
VOLUMES IN THOUSANDS           MARCH 2013     MARCH 2012    2013 VS. 2012
Pulp - air-dry metric tons       445                 438                7
Liquid packaging board - tons     78                  65               13


REAL ESTATE
How We Did First Quarter 2013
Here is a comparison of net sales and net contribution to earnings for the
quarters ended March 31, 2013 and 2012:

NET SALES / NET CONTRIBUTION TO EARNINGS - REAL ESTATE
                                                              AMOUNT OF
                                    QUARTER ENDED               CHANGE
DOLLAR AMOUNTS IN MILLIONS    MARCH 2013     MARCH 2012     2013 VS. 2012
Net sales:
Single-family housing        $    183       $     131      $           52
Land                               11               3                   8
Other                               2               3                  (1 )
Total                        $    196       $     137      $           59
Net contribution to earnings $      -       $      (8 )    $            8

Here is a comparison of key statistics related to our single-family operations for the quarters ended March 31, 2013 and 2012:

SUMMARY OF SINGLE-FAMILY STATISTICS
                                                                                         AMOUNT OF
                                                               QUARTER ENDED               CHANGE
                                                         MARCH 2013     MARCH 2012     2013 VS. 2012
Homes sold                                                     820           697                 123
Homes closed                                                   463           349                 114
Homes sold but not closed (backlog)                          1,131           777                 354
Cancellation rate                                             12.2 %        10.1 %               2.1 %
Traffic                                                     17,764        14,272               3,492
Average price of homes closed (in thousands)            $      394     $     376      $           18
Single-family gross margin(1)                                 19.5 %        17.2 %               2.3 %

(1) Single-family gross margin equals revenue less cost of sales and period costs.

Comparing First Quarter 2013 with First Quarter 2012 Net sales
Net sales increased $59 million - 43 percent - primarily due to:
Single-family housing revenues increased $52 million. Home closings increased 33 percent from 349 in 2012 to 463 in 2013. The average price of homes closed increased 5 percent from $376,000 in 2012 to $394,000 in 2013.

Revenues from land and lot sales increased $8 million. Land and lot sales are a routine part of our land development business but they do not occur evenly from period to period.

Net contribution to earnings
Net contribution to earnings increased $8 million primarily due to a $9 million increase in contribution from single-family housing operations. In addition to the higher revenues discussed above, single-family gross margins improved to 19.5 percent in 2013 compared to 17.2 percent in 2012, due to a change in mix. Changes in mix reflect changes in product lines (entry-level homes versus move-up products), changes in specific communities that are open from period to period and changes in geographic markets where the closings occur.


Our Outlook for Second Quarter 2013
We expect a slight profit from single-family homebuilding in second quarter. Home closings should increase seasonally to approximately 600 single-family homes, with a slightly lower average closing price due to mix. Although input costs are rising, average margins should be comparable to first quarter. We anticipate higher selling-related expenses due to the additional closing volume.

UNALLOCATED ITEMS
Unallocated Items are gains or charges not related to or allocated to an
individual operating segment. They include a portion of items such as:
share-based compensation; pension and postretirement costs; foreign exchange
transaction gains and losses associated with financing; and the elimination of
intersegment profit in inventory and the LIFO reserve.

NET CONTRIBUTION TO EARNINGS - UNALLOCATED ITEMS
                                                                                             AMOUNT OF
                                                                 QUARTER ENDED                CHANGE
. . .
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