Weyerhaeuser Company (WY)
Q2 2009 Earnings Call Transcript
July 31, 2009 10:00 am ET
Kathryn McAuley – VP, IR
Dan Fulton – President and CEO
Tom Gideon – EVP, Forest Products
Larry Burrows – President and CEO, Weyerhaeuser Real Estate Company
Patty Bedient – EVP and CFO
George Staphos – Bank of America-Merrill Lynch
Mark Connelly – Sterne Agee
Gail Glazerman – UBS
Mark Wilde – Deutsche Bank
Chip Dillon – Credit Suisse
Mark Weintraub – Buckingham Research
Peter Ruschmeier – Barclays Capital
Previous Statements by WY
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Thank you, Sharnay. Good morning. Welcome to Weyerhaeuser's second quarter 2009 earnings conference call. I’m 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 material for this call can be found at our 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 for the second quarter of $106 million or $0.50 per share, on net sales of $1.4 billion. The loss includes the following after-tax gains and charges. A gain of $72 million or $0.34 per share for alternative fuel mixture credit, we began mixing at our five US mills in early April; a charge of $36 million or $0.17 per share for real estate impairment and pre-acquisition write-off; a charge of $30 million or $0.14 per share for corporate restructuring and asset impairment; a charge of $14 million or $0.07 per share for closures, restructuring and asset impairment primarily in Wood Products; a gain of $14 million or $0.07 per share on litigation and insurance settlements; a gain of $13 million or $0.06 per share on the sale of a closed box plant we retained from International Paper containerboard sale.
Excluding these items, the company had a net loss of $125 million or $0.59 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 first quarter to the second quarter of 2009. This is presented on the basis of contribution to earnings before special interests and taxes.
Changes in Weyerhaeuser’s segment earnings from the first quarter to the second quarter were as follows. Beginning with the first bar on the left hand side of the page, Weyerhaeuser lost $142 million in first quarter 2009. Proceeding from left to right across the waterfall chart, we begin the discussion with Timberland. Timberland earnings were $31 million higher in Q2. This improvement was driven by more non-strategic land sale, lower harvesting cost and higher volume. Lower log prices partially offset this improvement.
The Wood Products loss improved $29 million in the second quarter. This improvement was driven by lower SG&A, lower manufacturing and lower raw material costs, as well as some model improvement in volume. Cellulose Fibers earnings were $39 million lower in Q2, resulting in a loss for the segment. This was attributable to extended maintenance at two facility and lower prices. Average pulp prices declined $45 from the first quarter.
The Real Estate loss improved by $26 million in Q2. A favorable mix of business, land and lot sales, lower SG&A, and higher volume drove the improvement. Corporate and other expenses were $34 million lower than in the first quarter. This improvement was primarily attributable to foreign exchange gains and pension and post retirement credit. The final bar to the right of the page is second quarter loss of $61 million before special items. Please note chart one in the information package contains actual Q1 and Q2 contributions to earnings by segment and the total special items, interests, expenses and taxes.
I will now turn the call over to Dan Fulton. Dan?
Thanks, Kathy. In our earnings release this morning, I noted that we’ve seen signs of improvement in the housing market, but I also cautioned that it’s too early to declare victory. Despite the encourage headlines about June new home sales and the turnaround in the Case-Shiller Home Price Index, there are indications that the housing market will undergo some minor downturns on its way to recovery. This means that our Timberlands, Wood Products and Real State businesses continued to operate in very uncertain market conditions, as we noted when we announced our dividend action earlier this month.
Later in this morning’s call Larry Burrows will share the hopeful signs we’ve seen in our real estate markets and some of the items tampering our outlook. As Larry goes through his explanation, it’s important to remember that we have multiple lines of business and the timing of improvement will be differential. When homebuilding starts to improve, it will first benefit our Real Estate business, then Wood Products, and finally Timberlands.