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WY > SEC Filings for WY > Form 10-Q on 4-Nov-2013All Recent SEC Filings

Show all filings for WEYERHAEUSER CO

Form 10-Q for WEYERHAEUSER CO


4-Nov-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 in this report, including with respect to estimated tax rates, future dividends, future pretax charges, expected results of litigation and the sufficiency of litigation reserves, anticipated effects of regulatory rulemaking, our expected capital expenditures for 2013, our expectations relating to pension contributions and benefit payments, and recognition of certain tax benefits in the future. Such forward-looking statements also include statements regarding the proposed transaction with TRI Pointe relating to our homebuilding and real estate development business, the anticipated timing and benefits of such transaction, assets that may be excluded from such transaction and any potential impairments relating thereto, and tax implications relating to such transaction.
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;

our and TRI Pointe's ability to complete the transaction relating to our homebuilding and real estate development business, as described above, on the anticipated terms and schedule, including the ability to obtain shareholder and regulatory approvals and the anticipated tax treatment of the transactions and related transactions; and

other factors described under "Risk Factors" in our Form 10-Q for the period ended June 30, 2013 and 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 to the 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:
Sales 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, sales realizations, shipment volumes, and net contributions to earnings are based on the quarter and year-to-date periods ended September 30, 2013, compared to the quarter and year-to-date periods ended September 30, 2012.

CONSOLIDATED RESULTS
How We Did in Third Quarter and Year-to Date 2013
NET SALES / OPERATING INCOME / NET EARNINGS - WEYERHAEUSER COMPANY
Here is a comparison of net sales, operating income and net earnings for the
quarters and year-to-date periods ended September 30, 2013 and 2012:
                                                                              AMOUNT OF                                                    AMOUNT OF
                                             QUARTER ENDED                     CHANGE                   YEAR-TO-DATE ENDED                  CHANGE
DOLLAR AMOUNTS IN MILLIONS,
EXCEPT PER-SHARE FIGURES          SEPTEMBER 2013       SEPTEMBER 2012       2013 VS. 2012      SEPTEMBER 2013       SEPTEMBER 2012       2013 VS. 2012
Net sales                       $          2,181     $          1,772     $           409     $     6,273         $          5,059     $         1,214
Operating income                $            277     $            202     $            75     $       844         $            479     $           365
Net earnings attributable to
Weyerhaeuser common
shareholders                    $            157     $            117     $            40     $       497         $            242     $           255
Basic earnings per share
attributable to Weyerhaeuser
common shareholders             $           0.27     $           0.22     $          0.05     $      0.89         $           0.45     $          0.44
Diluted earnings per share
attributable to Weyerhaeuser
common shareholders             $           0.27     $           0.22     $          0.05     $      0.88         $           0.45     $          0.43

Comparing Third Quarter 2013 with Third Quarter 2012 Net sales
Net sales increased $409 million - 23 percent - primarily due to the following:
Wood Products segment sales increased $214 million, primarily due to higher sales realizations and higher sales volumes across most major product lines.

Real Estate segment sales increased $94 million, primarily due to increased home closings and improved average prices for homes closed.

Timberlands segment sales increased $86 million, primarily due to higher export and domestic log prices, increased sales volume and the purchase of Longview Timber.

Net earnings attributable to Weyerhaeuser common shareholders Our net earnings attributable to Weyerhaeuser common shareholders increased $40 million - 34 percent - primarily from a $91 million increase in gross margin in our Wood Products, Timberlands and Real Estate segments. Our Wood Products and Timberlands segment increases were primarily due to higher sales realizations and sales volumes. Increased gross margin in our Real Estate segment was primarily due to increased single-family home closings.


This was partially offset by:
a $27 million decrease in gross margin in our Cellulose Fibers segment, primarily due to lower sales realizations and higher manufacturing and maintenance related costs; and

a $23 million increase in income taxes primarily due to higher income in our TRS in 2013 compared to 2012.

Comparing Year-to-Date 2013 with Year-to-Date 2012 Net sales
Net sales increased $1,214 million - 24 percent - primarily due to the following:
Wood Products segment sales increased $857 million, primarily due to higher sales realizations and higher sales volumes across all major product lines.

Timberlands segment sales increased $200 million, primarily due to higher export and domestic log prices, increased sales volume and the purchase of Longview Timber.

Real Estate segment sales increased $124 million primarily due to increased home closings and improved average prices for homes closed.

Cellulose Fibers segment sales increased $33 million primarily due to increased sales volumes.

Net earnings attributable to Weyerhaeuser common shareholders Our net earnings attributable to Weyerhaeuser common shareholders increased $255 million primarily from a $490 million increase in gross margin in our Wood Products, Timberlands and Real Estate segments. Our Wood Products and Timberlands segment increases were primarily due to higher sales realizations and sales volumes. Increased gross margin in our Real Estate segment was primarily due to increased single-family home closings. This was partially offset by:
a $104 million increase in income taxes, primarily due to higher income in our TRS in 2013 compared to 2012; and

a $103 million pretax gain recognized in 2012 related to a previously announced postretirement plan amendment.


TIMBERLANDS
How We Did Third Quarter and Year-to Date 2013
Here is a comparison of net sales to unaffiliated customers, intersegment sales,
and net contribution to earnings for the quarters and year-to-date periods ended
September 30, 2013 and 2012:

NET SALES / NET CONTRIBUTION TO EARNINGS - TIMBERLANDS
                                                                           AMOUNT OF
                                            QUARTER ENDED                   CHANGE                  YEAR-TO-DATE ENDED               AMOUNT OF CHANGE
DOLLAR AMOUNTS IN MILLIONS       SEPTEMBER 2013      SEPTEMBER 2012      2013 VS. 2012     SEPTEMBER 2013       SEPTEMBER 2012         2013 VS. 2012
Net sales to unaffiliated
customers:
Logs:
West                            $       213        $            132     $          81     $       598         $            408     $            190
South                                    66                      60                 6             192                      166                   26
Canada                                    6                       5                 1              15                       14                    1
Subtotal logs sales                     285                     197                88             805                      588                  217
Pay as cut timber sales                   2                       3                (1 )             7                        9                   (2 )
Chip sales                                2                       4                (2 )             7                       14                   (7 )
Timberlands exchanges(1)                 28                      24                 4              44                       39                    5
Higher and better-use land
sales(1)                                  2                       4                (2 )            10                       13                   (3 )
Minerals, oil and gas                     9                       8                 1              26                       22                    4
Products from international
operations(2)                            24                      26                (2 )            68                       80                  (12 )
Other products                            1                       1                 -              12                       14                   (2 )
Subtotal net sales to
unaffiliated customers                  353                     267                86             979                      779                  200
Intersegment sales:
United States                           130                     103                27             380                      330                   50
Other                                    64                      59                 5             204                      168                   36
Subtotal intersegment sales             194                     162                32             584                      498                   86
Total sales                     $       547        $            429     $         118     $     1,563         $          1,277     $            286
Net contribution to earnings    $       118        $             80     $          38     $       336         $            227     $            109

(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.

On July 23, 2013, we purchased 100 percent of the equity interests in Longview Timber LLC (Longview Timber) for cash and assumed debt. The sales and net contribution to earnings of our acquired entity from the acquisition date to the end of the quarter are included in the West results of our Timberlands segment. Longview Timber was and continues to be a supplier to our Wood Products segment and those sales are shown in intersegment sales.

Comparing Third Quarter 2013 with Third Quarter 2012 Net sales - unaffiliated customers
Net sales to unaffiliated customers increased $86 million - 32 percent - primarily from the following:
Western log sales increased $81 million due to higher export and domestic log prices and a 38 percent increase in sales volume as a result of increased export and domestic demand and the purchase of Longview Timber; and

Southern log sales increased $6 million due to higher log prices and a 6 percent increase in sales volumes as the result of increased harvest levels in response to increased third party demand.


Intersegment sales
Intersegment sales increased $32 million - 20 percent - primarily from:
a $27 million increase, primarily due to higher log prices in our legacy Western timberlands and the South and the purchase of Longview Timber; and

a $5 million increase due to higher log prices and increased sales volumes in Canada.

Net contribution to earnings
Net contribution to earnings increased $38 million - 48 percent - primarily from:
a $33 million increase due to higher log prices in our legacy Western timberlands and the South,

a $16 million increase due to the purchase of Longview Timber and

a $12 million increase due to higher sales volumes and demand for export and domestic logs in our legacy Western timberlands. Harvest levels increased 29 percent in our legacy Western timberlands.

The above items were partially offset by a $20 million increase in operating costs in our legacy Western timberlands primarily due to a higher mix of higher cost logs from internal and outside purchases.

Comparing Year-to-Date 2013 with Year-to-Date 2012 Net sales - unaffiliated customers
Net sales to unaffiliated customers increased $200 million - 26 percent - primarily from the following:
Western log sales increased $190 million due to higher export and domestic log prices and a 27 percent increase in sales volume as a result of increased export and domestic demand and the purchase of Longview Timber; and

Southern log sales increased $26 million due to higher log prices and a 10 percent increase in sales volume as the result of increased harvest levels in response to increased third party demand.

These increases were partially offset by a $12 million decrease in sales from our International operations, due to no longer selling products purchased for resale.
Intersegment sales
Intersegment sales increased $86 million - 17 percent - primarily from:
a $50 million increase, primarily due to higher log prices in our legacy Western timberlands and the South, increased sales volume in our legacy Western timberlands and the purchase of Longview Timber; and

a $36 million increase due to higher log prices and total increased sales volume in Canada.

Net contribution to earnings
Net contribution to earnings increased $109 million - 48 percent - primarily from:
a $92 million increase due to higher log prices in our legacy Western timberlands and the South;

a $39 million increase due to higher sales volumes and demand for export and domestic logs in our legacy Western timberlands. Harvest levels increased 18 percent in our legacy Western timberlands; and

a $16 million increase due to the purchase of Longview Timber.

These increases were partially offset by a $36 million increase in operating costs in our legacy Western timberlands primarily due to a higher mix of higher cost logs from internal and outside purchases.


THIRD-PARTY LOG SALES VOLUMES AND FEE HARVEST VOLUMES
                                                                       AMOUNT OF
                                         QUARTER ENDED                  CHANGE                YEAR-TO-DATE ENDED            AMOUNT OF CHANGE
VOLUMES IN THOUSANDS           SEPTEMBER 2013     SEPTEMBER 2012     2013 VS. 2012    SEPTEMBER 2013     SEPTEMBER 2012      2013 VS. 2012
Third party log sales - cubic
meters:
West                                2,037                 1,480               557         5,523                  4,339              1,184
South                               1,514                 1,430                84         4,420                  4,012                408
Canada                                141                   133                 8           383                    392                 (9 )
International                         100                    99                 1           245                    259                (14 )
Total                               3,792                 3,142               650        10,571                  9,002              1,569
Fee harvest volumes - cubic
meters:
West                                2,305                 1,784               521         6,221                  5,294                927
South                               2,928                 2,809               119         8,589                  8,311                278
International                         415                   198               217           779                    531                248
Total                               5,648                 4,791               857        15,589                 14,136              1,453

WOOD PRODUCTS
How We Did Third Quarter and Year-to Date 2013
Here is a comparison of net sales to unaffiliated customers and net contribution
to earnings for the quarters and year-to-date periods ended September 30, 2013
and 2012:

NET SALES / NET CONTRIBUTION TO EARNINGS - WOOD PRODUCTS
                                                                              AMOUNT OF
                                             QUARTER ENDED                     CHANGE                   YEAR-TO-DATE ENDED              AMOUNT OF CHANGE
DOLLAR AMOUNTS IN MILLIONS        SEPTEMBER 2013       SEPTEMBER 2012       2013 VS. 2012      SEPTEMBER 2013       SEPTEMBER 2012        2013 VS. 2012
Net sales:
Structural lumber               $            480     $            363     $           117     $     1,433         $          1,024     $             409
Engineered solid section                      97                   76                  21             263                      211                    52
Engineered I-joists                           68                   53                  15             184                      143                    41
Oriented strand board                        188                  169                  19             648                      418                   230
Softwood plywood                              38                   34                   4             115                       83                    32
Other products produced                       42                   41                   1             129                      127                     2
Complementary products
purchased for resale                         117                   80                  37             311                      220                    91
Total                           $          1,030     $            816     $           214     $     3,083         $          2,226     $             857
Net contribution to earnings    $             79     $             59     $            20     $       393         $             82     $             311

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 Third Quarter 2013 with Third Quarter 2012 Net sales
Net sales increased $214 million - 26 percent - primarily from the following:
Structural lumber shipment volumes increased 17 percent and average sales realizations increased 13 percent.

OSB shipment volumes increased 21 percent.

Engineered solid section shipment volumes increased 17 percent and average sales realizations increased 9 percent.

Engineered I-joists shipment volumes increased 12 percent and average sales realizations increased 14 percent.

Complementary products purchased for resale increased 46 percent.

These items were partially offset by a decrease of 8 percent in OSB average sales realizations.
Net contribution to earnings
Net contribution to earnings increased $20 million - 34 percent - primarily from:
a $61 million increase due to higher sales realizations in structural lumber, engineered solid section, engineered I-joists, and softwood plywood; and

a $28 million increase in sales volumes across all major products.

These increases were partially offset by:
a $16 million decrease in OSB sales realizations;

a $16 million increase in freight expense due to higher shipment volumes;

a $15 million increase in log cost due to continued strong lumber demand and increasing log prices;

an $8 million increase in selling, general and administrative costs; and

a $6 million increase in manufacturing costs due to higher raw material, maintenance and labor costs.

Comparing Year-to-Date 2013 with Year-to-Date 2012 Net sales
Net sales increased $857 million - 38 percent - primarily from the following:
Structural lumber shipment volumes increased 12 percent and average sales realizations increased 25 percent.

OSB shipment volumes increased 14 percent and average sales realizations increased 36 percent.

Engineered solid section shipment volumes increased 17 percent and average sales realizations increased 6 percent.

Engineered I-joists shipment volumes increased 17 percent and average sales realizations increased 9 percent.

Softwood plywood shipment volumes increased 27 percent and average sales realizations increased 9 percent.

Complementary products purchased for resale increased 41 percent.


Net contribution to earnings
Net contribution to earnings increased $311 million primarily from:
a $435 million increase, primarily due to higher sales realizations across all major products;

a $46 million increase in sales volumes across all major products; and

a $14 million increase in profit margins in our distribution business.

These increases were partially offset by:
a $69 million increase in log cost due to continued strong lumber demand and increasing log prices;

a $43 million increase in manufacturing costs due to higher raw material, maintenance and labor costs;

a $42 million increase in freight expense due to higher shipment volumes; and

a $30 million increase in selling, general and administrative costs.

THIRD-PARTY SALES VOLUMES
                                                                       AMOUNT OF
                                         QUARTER ENDED                  CHANGE              YEAR-TO-DATE ENDED          AMOUNT OF CHANGE
                                                                                       SEPTEMBER
VOLUMES IN MILLIONS(1)         SEPTEMBER 2013     SEPTEMBER 2012     2013 VS. 2012       2013        SEPTEMBER 2012      2013 VS. 2012
Structural lumber - board
feet                                1,189                 1,013               176         3,370              3,006                  364
Engineered solid section -
cubic feet                            4.9                   4.2               0.7          13.7               11.7                  2.0
Engineered I-joists - lineal
feet                                   48                    43                 5           135                115                   20
Oriented strand board -
square feet (3/8")                    762                   630               132         2,094              1,838                  256
Softwood plywood - square
feet (3/8")                           108                    95                13           315                249                   66

(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
. . .
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