Weyerhaeuser Company (WY)

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Weyerhaeuser Company (WY)

Q1 2009 Earnings Call

May 5, 2009 10:00 am ET


Kathy McAuley - VP of IR

Dan Fulton - President and CEO

Patty Bedient - EVP and CFO

Tom Gideon - EVP, Forest Products

Larry Burrows - President, Weyerhaeuser Real Estate Company


George Staphos - Banc of America-Merrill Lynch

Gail Glazerman - UBS

Richard Skidmore - Goldman Sachs

Peter Ruschmeier - Barclays Capital

Mark Connelly

Chip Dillon - Credit Suisse

Christopher Chun - Deutsche Bank

Mark Weintraub - Buckingham Research

Steve Chercover - D.A. Davidson



Ladies and gentlemen, thank you for standing by and welcome to the Weyerhaeuser 2009 First Quarter Earnings Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions). This conference is being recorded today, Tuesday, May 5th, 2009. And now I’d like to turn the conference over to Ms. Kathy McAuley. Please go ahead, ma’am.

Kathy McAuley

Good morning. Welcome to Weyerhaeuser's first quarter 2009 earnings conference call. I am Kathy McAuley, Vice President of Investor Relations. Joining me this morning are Dan Fulton, President and Chief Executive Officer; Patty Bedient, Executive Vice President and Chief Financial Officer; Tom Gideon, Executive Vice President, Forest Products; and Larry Burrows, President, Weyerhaeuser Real Estate Company.

This call is being webcast at www.weyerhaeuser.com. The earnings release and material for this call can be found at the website or by contacting April Meier at 253-924-2937. Please review the warning statements in our press release and on the presentation slides concerning the risks associated with forward-looking statements. Forward-looking statements will be made during this conference call.

This morning Weyerhaeuser reported a net loss in the first quarter of $264 million or $1.25 per share; a net sales of $1.3 billion. This includes an after-tax charge of $46 million or $0.22 per share for forest products closures, restructuring and asset impairments primarily in wood products, an after-tax charge of $45 million or $0.21 per share for impairments and reserves for real estate assets. An after tax charge of $17 million or $0.08 per share for corporate restructuring and asset impairments.

An after tax charge of $12 million or $0.06 per share for a reserve for an agreement in principle to settle the litigation. Excluding these items, the company had a net loss of $44 million or $0.68 per share. A GAAP reconciliation of special items is available on our website in the earnings information package. Please turn to chart four in the earnings information package, as I will next discuss this waterfall chart.

Chart four is the bar chart detailing the changes in contribution to earnings by segment from the fourth quarter of 2008 to the first quarter of 2009. This is presented on the basis of contribution to earnings before special items, interest and taxes. As noted in the first bar on chart four in the fourth quarter of 2008, the company lost $213 million before special items, interest and taxes. Changes in Weyerhaeuser's segment earnings from the fourth quarter to the first quarter were as follows.

Proceeding from left to right across the waterfall chart, we begin the discussion with Timberland. Timberland’s earnings were $21 million lower in Q1. This decline was the result of a lower fee harvest due to market conditions and lower log prices, particularly in the West. These factors more than offset improvements in fuel and silviculture cost. Q1 earnings included a $14 million gain on the land donation on behalf of the Weyerhaeuser Company foundation.

The wood products loss decreased by $23 million in Q1. Costs were lower due to facility closure, cost controlling measures, lower raw material costs and a decrease in SG&A. These cost reductions were offset by lower lumber and OSB prices and lower volumes in all product lines. Sale of fibers earnings were $33 million lower than in Q4. This decline was primarily driven by a $100 per ton drop in pulp prices, which offset lower costs for fiber, freight and maintenance.

The real estate loss decreased by $121 million in Q1. This change was largely due to a loss of $130 million on land sales in Q4. There were no major land or lot sales in Q1. Corporate and other expense was $19 million higher than in Q4, an improvement in corporate overhead and lower foreign exchange losses were more than offset by lower pension income, a higher variable comp expense primarily due to a higher stock price, and a donation to the Weyerhaeuser Company foundation.

The final bar to the right of this page is the first quarter 2009 loss of $142 million before special items. Please note chart one in the information package contains the actual Q4 and Q1 contribution to earnings by segment and the total of special items, interest expense and taxes. I will now turn the call over to Dan Fulton. Dan?

Dan Fulton

Thanks, Kathy, and good morning. When I first participated on this call as President of Weyerhaeuser Company, back in February 2008, I commented that our real estate business was in for a tough year. That may have been the understatement of my career. Although we had already seen some weakening in our wood products business, no one expected the housing market to plummet to the levels we haven't seen for decades and become [mired] in a downturn that continues today. In a moment, Tom Gideon, our Executive Vice President of Forest Products, will outline the significant action that we've taken to address the challenges of this market.

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