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Q4 2013 Earnings Call
January 31, 2014 10:00 am ET
Kathryn F. McAuley - Vice President of Investor Relations
Doyle R. Simons - Chief Executive Officer, President, Director, Member of Compensation Committee and Member of Finance Committee
Patricia M. Bedient - Chief Financial Officer and Executive Vice President
Alex Ovshey - Goldman Sachs Group Inc., Research Division
Mark A. Weintraub - The Buckingham Research Group Incorporated
George L. Staphos - BofA Merrill Lynch, Research Division
Gail S. Glazerman - UBS Investment Bank, Research Division
Mark W. Connelly - Credit Agricole Securities (USA) Inc., Research Division
Ketan Mamtora - Deutsche Bank AG, Research Division
Chip A. Dillon - Vertical Research Partners, LLC
Paul C. Quinn - RBC Capital Markets, LLC, Research Division
Joshua L. Zaret - Longbow Research LLC
Previous Statements by WY
» Weyerhaeuser's CEO Hosts Investor Meeting (Transcript)
» Weyerhaeuser's CEO Presents at Merger of TRI Pointe Homes, Inc. Conference (Transcript)
» Weyerhaeuser Management Discusses Q3 2013 Results - Earnings Call Transcript
Kathryn F. McAuley
Thank you, Carmen. Good morning. Thank you for joining us today to discuss Weyerhaeuser's 2013 results. This call is being webcast at www.weyerhaeuser.com, and materials can be found at our website.
Please review the warning statements in our press release and on the presentation slides concerning the risks associated with forward-looking statements, as forward-looking statements will be made during this conference call. We will be discussing non-GAAP financial measures. A reconciliation of GAAP can be found in the earnings materials on our website.
On the call this morning are Doyle Simons, Chief Executive Officer; and Patty Bedient, Chief Financial Officer. I will now turn the call over to Doyle. Doyle?
Doyle R. Simons
Thank you, Kathy, and good morning, everyone. Our vision here at Weyerhaeuser is to grow a truly great company for our shareholders, customers and employees. 2013 was a very good year, as we made initial progress toward achieving this goal by doubling net earnings, excluding special items from $316 million or $0.58 per diluted share in 2012 to $654 million or $1.14 per diluted share in 2013; increasing our dividend by nearly 30%; announcing an agreement to combine our Real Estate operation with TRI Pointe Homes and a tax-efficient Reverse Morris Trust transaction; and acquiring approximately 645,000 acres of some of the finest timberland in the country through the purchase of Longview Timber. As a result of our actions in 2013 and our relentless focus on operational excellence going forward, we are well positioned to fully capitalize on improving markets and drive value for our shareholders in 2014 and beyond.
Speaking of improving markets, let me just comment on economic conditions that affect our company before I discuss our fourth quarter performance. First, the housing market. The housing market continued to improve in 2013, with total starts rising to 923,000, an 18% gain from 2012. The housing recovery showed resilience as construction activity increased in the fourth quarter, having adjusted to higher interest rates and market uncertainty caused by fiscal infighting, which impacted the second and third quarters. Housing fundamentals remain positive with low inventories and affordability still well above historic norms. In addition, prices for existing homes have increased 14% on a year-ago basis and the additional homeowner wealth is a boost to the economy. The economy has been adding jobs, and as people find employment, they are forming households and adding to the demand for housing. These trends are expected to continue in 2014, and we are planning for over 1.1 million starts, including 780,000 single-family.
I'll comment briefly on global economic conditions since approximately 1/3 of our revenues come from exported products from our Cellulose Fibers, Timberlands and Wood Products segments. As the Eurozone continues to manage its debt crisis and emerges from recession, the currency has stabilized and strengthened. A stronger euro should improve the relative competitiveness of our Cellulose Fiber business, as well as our Asian log exports. In Japan, fiscal and monetary reforms have stimulated the economy and increased housing starts, which has improved demand for our products. In China, our export activity picked up in 2013, and while many forecasts of overall economic growth in China have been lowered, the government continues with its objective of moving people from rural to urban settings. This is the driver of construction activity and the source of China's growing demand for imported wood.
Now I will comment on our fourth quarter performance. For the fourth quarter 2013, we reported net earnings of $43 million or $0.07 per diluted share on net sales of $2.3 billion. We have several special items in the quarter, the largest of which was the previously announced noncash impairment of a community excluded from the combination of WRECO and TRI Pointe Homes. Charges for special items were partially offset by some unrelated tax adjustments, which Patty will discuss in more detail. Excluding these special items, we reported solid fourth quarter net earnings of $157 million or $0.27 per diluted share compared with net earnings of $143 million or $0.26 per diluted share for the fourth quarter of 2012.
Let me now turn to our business segments, starting with Timberlands, Charts 4 to 6. Timberlands contributed $134 million to earnings in the quarter, up 14% compared with the third quarter 2013 as construction markets in China drove increased demand for Western logs. Our Western fee harvest volumes were up by 17% due to the stronger demand and a full quarter of harvest from the Longview land. I'm pleased to report that the Longview integration continues to go smoothly and that we are on track to achieve or exceed our EBITDA and synergy goals.