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Weyerhaeuser reports third quarter results

-- Net earnings of $255 million, or $0.34 per diluted share

-- Increased quarterly dividend by 6.3 percent to $0.34 per share

-- Repurchased $290 million of common shares during the third quarter

SEATTLE, Oct. 26, 2018 /PRNewswire/ -- Weyerhaeuser Company (WY) today reported third quarter net earnings of $255 million, or 34 cents per diluted share, on net sales of $1.9 billion. This compares with earnings of $130 million, or 17 cents per diluted share, on net sales of $1.9 billion for the same period last year.

Weyerhaeuser Company logo. (PRNewsFoto/Weyerhaeuser Company)

View our earnings release and financial statements in a printer-friendly PDF.

Excluding a special tax benefit of $41 million, the company reported net earnings of $214 million, or 28 cents per diluted share for the third quarter. This compares with net earnings before special items of $259 million for the same period last year and $332 million for the second quarter of 2018. Adjusted EBITDA for the third quarter was $505 million compared with $569 million for the third quarter of last year and $637 million for the second quarter of 2018.

"In the third quarter, our business delivered solid operating performance despite significant headwinds from severe weather, trade policy and unusually volatile wood products markets," said Doyle R. Simons, president and chief executive officer. "During the quarter we demonstrated our ongoing commitment to disciplined capital allocation by increasing our quarterly dividend six percent, repurchasing $290 million of common shares, and announcing actions to reduce our pension liabilities. Going forward, we remain relentlessly focused on driving value for shareholders through industry-leading performance and disciplined capital allocation."

WEYERHAEUSER FINANCIAL HIGHLIGHTS

2018


2018


2017

(millions, except per share data)

Q2


Q3


Q3

Net sales

$2,065


$1,910


$1,872

Net earnings

$317


$255


$130

Net earnings per diluted share

$0.42


$0.34


$0.17

Weighted average shares outstanding, diluted

761


757


757

Net earnings before special items(1)

$332


$214


$259

Net earnings per diluted share before special items

$0.44


$0.28


$0.34

Adjusted EBITDA(2)

$637


$505


$569








(1)

Second quarter 2018 special items include $15 million of net after-tax charges for product remediation. Third quarter 2018 after-tax special items include a $41 million tax benefit related to the previously announced $300 million contribution to our U.S. qualified pension plan. Third quarter 2017 after-tax special items include a $118 million charge for product remediation, $4 million for countervailing and antidumping duties on Canadian softwood lumber the company sold into the United States, $4 million for restructuring, impairments, and other charges, and $3 million for Plum Creek merger-related costs. Beginning first quarter 2018, countervailing and antidumping duties are no longer reported as a special item.



(2)

Adjusted EBITDA is a non-GAAP measure that management uses to evaluate the performance of the company. Adjusted EBITDA, as we define it, is operating income, adjusted for depreciation, depletion, amortization, basis of real estate sold, unallocated pension service costs and special items. Adjusted EBITDA excludes results from joint ventures. Adjusted EBITDA should not be considered in isolation from and is not intended to represent an alternative to our GAAP results. A reconciliation of Adjusted EBITDA to GAAP earnings is included within this release.





TIMBERLANDS









FINANCIAL HIGHLIGHTS

2018


2018



(millions)

Q2


Q3


Change

Net sales

$667


$653


($14)

Contribution to pre-tax earnings

$161


$126


($35)

Adjusted EBITDA

$240


$206


($34)

3Q 2018 Performance - In the West, average sales realizations for domestic and Chinese export logs declined, domestic and export log sales volumes decreased, and road and unit logging costs increased seasonally. In the South, slightly higher average sales realizations were more than offset by moderately lower sales volumes due to weather, increased unit logging costs and seasonally higher forestry spending.

4Q 2018 Outlook - Weyerhaeuser expects fourth quarter earnings and Adjusted EBITDA will be lower than the third quarter. In the West, the company anticipates lower average sales realizations, partially offset by moderately higher export log sales volumes. In the South, the company anticipates slightly higher fee harvest volumes and comparable average log sales realizations.

REAL ESTATE, ENERGY & NATURAL RESOURCES







FINANCIAL HIGHLIGHTS

2018


2018



(millions)

Q2


Q3


Change

Net sales

$58


$96


$38

Contribution to pre-tax earnings

$22


$36


$14

Adjusted EBITDA

$47


$86


$39

3Q 2018 Performance - Earnings and Adjusted EBITDA increased compared to the second quarter due to seasonally higher real estate sales and a large acre transaction in Montana which accounted for approximately half of the acres sold in the third quarter. Average land basis increased modestly due to the mix of properties sold.

4Q 2018 Outlook - Weyerhaeuser anticipates fourth quarter earnings and Adjusted EBITDA will be comparable to the third quarter. The company expects full year 2018 Adjusted EBITDA for the segment will be approximately $260 million.

WOOD PRODUCTS








FINANCIAL HIGHLIGHTS

2018


2018



(millions)

Q2


Q3


Change

Net sales

$1,525


$1,346


($179)

Contribution to pre-tax earnings

$329


$213


($116)

Pre-tax charge (benefit) for special items

$20



($20)

Contribution to pre-tax earnings before special items

$349


$213


($136)

Adjusted EBITDA

$385


$250


($135)








3Q 2018 Performance - Average sales realizations for lumber declined nine percent and average sales realizations for oriented strand board were 13 percent lower compared to the second quarter. Operating rates and sales volumes declined and unit manufacturing costs increased, primarily due to mill downtime related to severe weather in the U.S. South and a scheduled press replacement at our Grayling, Michigan oriented strand board mill. Canadian log costs also increased.

4Q 2018 Outlook - Weyerhaeuser anticipates fourth quarter earnings and Adjusted EBITDA will be significantly lower than the third quarter. Based on current pricing, the company anticipates average sales realizations for lumber and oriented strand board will be substantially lower than third quarter averages. This will be partially offset by lower Western and Canadian log costs, improved unit manufacturing costs for lumber, and higher sales volumes for oriented strand board due to completion of the Grayling press replacement.

ABOUT WEYERHAEUSER

Weyerhaeuser Company, one of the world's largest private owners of timberlands, began operations in 1900. We own or control 12.4 million acres of timberlands in the U.S. and manage additional timberlands under long-term licenses in Canada. We manage these timberlands on a sustainable basis in compliance with internationally recognized forestry standards. We are also one of the largest manufacturers of wood products. Our company is a real estate investment trust. In February 2016, we merged with Plum Creek Timber Company, Inc. In 2017, we generated $7.2 billion in net sales and employed approximately 9,300 people who serve customers worldwide. We are listed on the North American and World Dow Jones Sustainability Indices. Our common stock trades on the New York Stock Exchange under the symbol WY. Learn more at https://www.weyerhaeuser.com/.

EARNINGS CALL INFORMATION

Weyerhaeuser will hold a live conference call at 7 a.m. Pacific (10 a.m. Eastern) on October 26, 2018, to discuss third quarter results.

To access the live webcast and presentation online, go to the Investor Relations section on https://www.weyerhaeuser.com/ on October 26, 2018.

To join the conference call from within North America, dial 855-223-0757 (access code: 6699896) at least 15 minutes prior to the call. Those calling from outside North America should dial 574-990-1206 (access code: 6699896). Replays will be available for two weeks at 855-859-2056 (access code: 6699896) from within North America and at 404-537-3406 (access code: 6699896) from outside North America.

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, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may appear throughout this report. These forward-looking statements generally are identified by words such as "believe," "project," "expect," "anticipate," "estimate," "intend," "strategy," "future," "opportunity," "plan," "may," "should," "will," "would," and expressions such as "going forward", "will be," "will continue," "will likely result," and similar words and expressions. Forward-looking statements are based on our current expectations and assumptions and are not guarantees of future performance. The realization of our expectations and the accuracy of our assumptions are subject to a number of risks and uncertainties that could cause actual results to differ materially from the content of these forward-looking statements. These risks and uncertainties include, but are not limited to:

  • the effect of general economic conditions, including employment rates, interest rate levels, housing starts, general availability of financing for home mortgages and the relative strength of the U.S. dollar;
  • market demand for the company's products, including market demand for our timberland properties with higher and better uses, which is related to, among other factors, the strength of the various U.S. business segments and U.S. and international economic conditions;
  • changes in currency exchange rates, particularly the relative value of the U.S. dollar to the yen and the Canadian dollar, and the relative value of the euro to the yen;
  • restrictions on international trade, tariffs imposed on imports of our products and the availability and cost of shipping and transportation; economic activity in Asia, especially Japan and China;
  • performance of our manufacturing operations, including maintenance and capital requirements;
  • potential disruptions in our manufacturing operations;
  • the level of competition from domestic and foreign producers;
  • the successful execution of our internal plans and strategic initiatives, and cost reduction initiatives;
  • raw material availability and prices;
  • the effect of weather;
  • the risk of loss from fires, floods, windstorms, hurricanes, pest infestation and other natural disasters;
  • energy prices;
  • transportation and labor availability and 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 employee retirements and changes in the market price of our common stock on charges for share-based compensation;
  • the accuracy of our estimates of costs and expenses related to contingent liabilities;
  • changes in accounting principles; and
  • other risks and uncertainties identified in our 2017 Annual Report on Form 10-K, which are incorporated herein by reference, as well as those set forth from time to time in our other public statements and other reports and filings with the SEC.

Forward-looking statements speak only as of the date they are made, and we undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise.

For more information contact:
Analysts - Beth Baum, 206-539-3907
Media - Nancy Thompson, 919-861-0342



RECONCILIATION OF ADJUSTED EBITDA TO NET EARNINGS


We reconcile Adjusted EBITDA to net earnings for the consolidated company and to operating income for the business segments, as those are the most directly comparable U.S. GAAP measures for each.


The table below reconciles Adjusted EBITDA for the quarter ended June 30, 2018:


DOLLAR AMOUNTS IN MILLIONS

Timberlands


Real Estate
& ENR


Wood
Products


Unallocated
Items


Total

Adjusted EBITDA by Segment:










Net earnings









$

317


Interest expense, net of capitalized interest









92


Income taxes









65


Net contribution to earnings

$

161



$

22



$

329



$

(38)



$

474


Non-operating pension and other postretirement benefit costs







13



13


Interest income and other







(11)



(11)


Operating income (loss)

161



22



329



(36)



476


Depreciation, depletion and amortization

79



3



36



1



119


Basis of real estate sold



22







22


Special items(1)





20





20


Adjusted EBITDA

$

240



$

47



$

385



$

(35)



$

637



(1) Pre-tax special items included in Wood Products consist of net charges of $20 million for finalization of product remediation costs.



The table below reconciles Adjusted EBITDA for the quarter ended September 30, 2018:


DOLLAR AMOUNTS IN MILLIONS

Timberlands


Real Estate
& ENR


Wood
Products


Unallocated
Items


Total

Adjusted EBITDA by Segment:










Net earnings









$

255


Interest expense, net of capitalized interest









93


Income taxes(1)









(15)


Net contribution to earnings

$

126



$

36



$

213



$

(42)



$

333


Non-operating pension and other postretirement benefit costs







17



17


Interest income and other







(13)



(13)


Operating income (loss)

126



36



213



(38)



337


Depreciation, depletion and amortization

80



4



37



1



122


Basis of real estate sold



46







46


Adjusted EBITDA

$

206



$

86



$

250



$

(37)



$

505



(1)   After tax special items included a $41 million tax benefit related to our $300 million pension contribution. There were no pre-tax special items in third quarter 2018.



The table below reconciles Adjusted EBITDA for the quarter ended September 30, 2017:


DOLLAR AMOUNTS IN MILLIONS

Timberlands


Real Estate
& ENR


Wood
Products


Unallocated
Items


Total

Adjusted EBITDA by Segment:










Net earnings









$

130


Interest expense, net of capitalized interest









98


Income taxes









(27)


Net contribution to earnings

$

131



$

47



$

40



$

(17)



$

201


Non-operating pension and other postretirement benefit costs







16



16


Interest income and other



(1)





(11)



(12)


Operating income (loss)

131



46



40



(12)



205


Depreciation, depletion and amortization

89



4



37



2



132


Basis of real estate sold



24







24


Unallocated pension service costs







1



1


Special items(1)





201



6



207


Adjusted EBITDA

$

220



$

74



$

278



$

(3)



$

569




(1)

Special items attributable to Wood Products includes: $190 million of product remediation charges, $6 million of restructuring, impairments and other charges and $5 million of retroactive and prospective countervailing and antidumping duties. Special items attributable to Unallocated Items include $6 million of Plum Creek merger-related costs.







Weyerhaeuser Company

Exhibit 99.2


Q3.2018 Analyst Package


Preliminary results (unaudited)













Consolidated Statement of Operations













in millions

Q1


Q2


Q3


Year-to-Date


March 31,
2018


June 30,
2018


September 30,
2018


September 30,
2017


September 30,
2018


September 30,
2017

Net sales

$

1,865



$

2,065



$

1,910



$

1,872



$

5,840



$

5,373


Cost of products sold

1,348



1,447



1,452



1,374



4,247



3,982


Gross margin

517



618



458



498



1,593



1,391


Selling expenses

23



23



20



22



66



66


General and administrative expenses

78



80



78



75



236



238


Research and development expenses

2



2



2



4



6



12


Charges for integration and restructuring, closures and asset impairments

2







14



2



178


Charges (recoveries) for product remediation, net

(20)



20





190





240


Other operating costs (income), net

28



17



21



(12)



66



2


Operating income

404



476



337



205



1,217



655


Non-operating pension and other postretirement benefit costs

(24)



(13)



(17)



(16)



(54)



(46)


Interest income and other

12



11



13



12



36



30


Interest expense, net of capitalized interest

(93)



(92)



(93)



(98)



(278)



(297)


Earnings before income taxes

299



382



240



103



921



342


Income taxes

(30)



(65)



15



27



(80)



(31)


Net earnings

$

269



$

317



$

255



$

130



$

841



$

311




Per Share Information



Q1


Q2


Q3


Year-to-Date


March 31,
2018


June 30,
2018


September 30,
2018


September 30,
2017


September 30,
2018


September 30,
2017

Earnings per share, basic and diluted

$

0.35



$

0.42



$

0.34



$

0.17



$

1.11



$

0.41


Dividends paid per common share

$

0.32



$

0.32



$

0.34



$

0.31



$

0.98



$

0.93


Weighted average shares outstanding (in thousands):












Basic

756,815



757,829



754,986



753,535



756,531



752,301


Diluted

759,462



760,533



757,389



756,903



759,116



756,058


Common shares outstanding at end of period (in thousands)

756,700



757,646



749,199



753,051



749,199



753,051




Adjusted Earnings before Interest, Tax, Depreciation, Depletion and Amortization (Adjusted EBITDA)*


in millions

Q1


Q2


Q3


Year-to-Date


March 31,
2018


June 30,
2018


September 30,
2018


September 30,
2017


September 30,
2018


September 30,
2017

Net earnings

$

269



$

317



$

255



$

130



$

841



$

311


Non-operating pension and other postretirement benefit costs

24



13



17



16



54



46


Interest income and other

(12)



(11)



(13)



(12)



(36)



(30)


Interest expense, net of capitalized interest

93



92



93



98



278



297


Income taxes

30



65



(15)



(27)



80



31


Operating income

404



476



337



205



1,217



655


Depreciation, depletion and amortization

120



119



122



132



361



394


Basis of real estate sold

12



22



46



24



80



48


Unallocated pension service costs







1





3


Special items

8



20





207



28



429


Adjusted EBITDA*

$

544



$

637



$

505



$

569



$

1,686



$

1,529














*Adjusted EBITDA is a non-GAAP measure that management uses to evaluate the performance of the company. Adjusted EBITDA, as we define it, is operating income adjusted for depreciation, depletion, amortization, basis of real estate sold, unallocated pension service costs, and special items. Adjusted EBITDA excludes results from joint ventures. Our definition of Adjusted EBITDA may be different from similarly titled measures reported by other companies. Adjusted EBITDA should not be considered in isolation from and is not intended to represent an alternative to our GAAP results.




Weyerhaeuser Company

Total Company Statistics


Q3.2018 Analyst Package



Preliminary results (unaudited)














Special Items Included in Net Earnings (Income Tax Affected)













in millions

Q1


Q2


Q3


Year-to-Date


March 31,
2018


June 30,
2018


September 30,
2018


September 30,
2017


September 30,
2018


September 30,
2017

Net earnings

$

269



$

317



$

255



$

130



$

841



$

311


Plum Creek merger and integration-related costs







3





15


Restructuring, impairment and other charges







4





151


Environmental remediation charges (recoveries)

21









21




Countervailing and antidumping duties charges (credits)(1)







4





12


Product remediation charges (recoveries), net

(15)



15





118





149


Tax adjustments(2)





(41)





(41)




Net earnings before special items

$

275



$

332



$

214



$

259



$

821



$

638



























Q1


Q2


Q3


Year-to-Date


March 31,
2018


June 30,
2018


September 30,
2018


September 30,
2017


September 30,
2018


September 30,
2017

Net earnings per diluted share

$

0.35



$

0.42



$

0.34



$

0.17



$

1.11



$

0.41


Plum Creek merger and integration-related costs











0.02


Restructuring, impairment and other charges







0.01





0.20


Environmental remediation charges (recoveries)

0.03









0.03




Countervailing and antidumping duties charges (credits)(1)







0.01





0.01


Product remediation charges (recoveries), net

(0.02)



0.02





0.15





0.20


Tax adjustments(2)





(0.06)





(0.06)




Net earnings per diluted share before special items

$

0.36



$

0.44



$

0.28



$

0.34



$

1.08



$

0.84



(1) As of first quarter 2018, countervailing and antidumping duties are no longer reported as a special item.


(2) During third quarter 2018, we recorded a tax benefit related to our $300 million contribution to our U.S. qualified pension plan.














Selected Total Company Items


in millions

Q1


Q2


Q3


Year-to-Date


March 31,
2018


June 30,
2018


September 30,
2018


September 30,
2017


September 30,
2018


September 30,
2017

Pension and postretirement costs:












Pension and postretirement service costs

$

10



$

8



$

10



$

9



$

28



$

26


Non-operating pension and other postretirement benefit costs

24



13



17



16



54



46


Total company pension and postretirement costs

$

34



$

21



$

27



$

25



$

82



$

72




















Weyerhaeuser Company

Q3.2018 Analyst Package

Preliminary results (unaudited)


Consolidated Balance Sheet









in millions

March 31,
2018


June 30,
2018


September 30,
2018


December 31,
2017


ASSETS








Current assets:








Cash and cash equivalents

$

598



$

901



$

348



$

824


Receivables, less discounts and allowances

481



491



444



396


Receivables for taxes

24



23



140



14


Inventories

445



414



389



383


Prepaid expenses and other current assets

118



146



140



98


Current restricted financial investments held by variable interest entities

253



253



253




Total current assets

1,919



2,228



1,714



1,715


Property and equipment, net

1,573



1,597



1,672



1,618


Construction in progress

275



282



255



225


Timber and timberlands at cost, less depletion

12,888



12,790



12,727



12,954


Minerals and mineral rights, less depletion

306



302



297



308


Goodwill

40



40



40



40


Deferred tax assets

244



168



71



268


Other assets

278



279



289



316


Restricted financial investments held by variable interest entities

362



362



362



615


Total assets

$

17,885



$

18,048



$

17,427



$

18,059










LIABILITIES AND EQUITY








Current liabilities:








Current maturities of long-term debt

$



$



$



$

62


Current debt (nonrecourse to the company) held by variable interest entities

209



209



511



209


Accounts payable

245



270



271



249


Accrued liabilities

457



543



491



645


Total current liabilities

911



1,022



1,273



1,165


Long-term debt

5,928



5,924



5,921



5,930


Long-term debt (nonrecourse to the company) held by variable interest entities

302



302





302


Deferred pension and other postretirement benefits

1,454



1,224



885



1,487


Other liabilities

299



295



291



276


Total liabilities

8,894



8,767



8,370



9,160


Total equity

8,991



9,281



9,057



8,899


Total liabilities and equity

$

17,885



$

18,048



$

17,427



$

18,059




















Weyerhaeuser Company



Q3.2018 Analyst Package


Preliminary results (unaudited)







Consolidated Statements of Cash Flows













in millions

Q1


Q2


Q3


Year-to-Date


March 31,
2018


June 30,
2018


September 30,
2018


September 30,
2017


September 30,
2018


September 30,
2017

Cash flows from operations:












Net earnings

$

269



$

317



$

255



$

130



$

841



$

311


Noncash charges earnings:












Depreciation, depletion and amortization

120



119



122



132



361



394


Basis of real estate sold

12



22



46



24



80



48


Deferred income taxes, net

10



15



86



3



111



9


Pension and other postretirement benefits

34



21



27



25



82



72


Share-based compensation expense

9



9



13



10



31



29


Charges for impairments of assets

1







6



1



153


Change in:












Receivables, less allowances

(83)



(18)



46



(35)



(55)



(113)


Receivables and payables for taxes

5



10



(124)



(63)



(109)



(116)


Inventories

(66)



30



27



11



(9)



4


Prepaid expenses

(5)



4



(6)



4



(7)



(9)


Accounts payable and accrued liabilities

(173)



103



(63)



129



(133)



184


Pension and postretirement benefit contributions and payments

(16)



(16)



(323)



(22)



(355)



(59)


Other

19



(19)



(19)



(31)



(19)



(60)


Net cash from operations

$

136



$

597



$

87



$

323



$

820



$

847


Cash flows from investing activities:












Capital expenditures for property and equipment

$

(61)



$

(83)



$

(94)



$

(87)



$

(238)



$

(213)


Capital expenditures for timberlands reforestation

(20)



(14)



(11)



(10)



(45)



(46)


Proceeds from sale of assets and operations

2







411



2



423


Other

3



24



(10)



(16)



17



28


Cash from (used in) investing activities

$

(76)



$

(73)



$

(115)



$

298



$

(264)



$

192


Cash flows from financing activities:












Cash dividends on common shares

$

(242)



$

(243)



$

(256)



$

(233)



$

(741)



$

(699)


Proceeds from issuance of long-term debt







225





225


Payments of long-term debt

(62)







(831)



(62)



(831)


Proceeds from borrowing on line of credit







100





100


Payments on line of credit







(100)





(100)


Proceeds from exercise of stock options

25



23



4



8



52



89


Repurchases of common shares





(273)





(273)




Other

(7)



(1)





6



(8)



(2)


null