Weyerhaeuser cautiously optimistic about coming year

Despite bringing in $15 million less than expected in the fourth quarter of 2001, Weyerhaeuser executives are cautiously optimistic that things will improve — particularly after Portland-based Willamette Industries’ Board of Directors unanimously accepted its offer Monday afternoon.

Weyerhaeuser earnings at the end of last year were dramatically lower than they were in 2000, and things are expected to get worse in some segments before they get better.

Lower-than-expected earnings won’t affect Weyerhaeuser’s recent purchase of Willamette because the company already secured the financing for the acquisition, said Bruce Amundson, Weyerhaeuser’s director of financial and external communications. Because it would be a straight cash transaction, stock prices probably wouldn’t change significantly.

In 2000, Weyerhaeuser brought in $840 million, but that dropped to $354 million last year. Net sales in 2001 were down about $1.5 billion, from $16 billion in 2000 to $14.5 billion.

During the fourth quarter last year, Weyerhaeuser lost about $15 million, or 7 cents a share. By comparison, Weyerhaeuser’s earnings were $194 million during the fourth quarter of 2000. Net sales for the fourth quarter of 2001 were $3.4 billion, compared with $4 billion in 2000.

Each of Weyerhaeuser’s segments — timberlands; wood products; pulp, paper and packaging, and real estate — were soft last quarter.

The timberlands and pulp, paper and packaging segments are expected to dip a little further during first quarter 2002, but the margin of loss is expected to narrow in wood products. Real estate, which remained steady at year’s end, is expected to experience higher earnings during first quarter.

Weyerhaeuser’s future earnings could get a boost by absorbing Willamette’s share of the market — and its profits. Willamette’s 2001 net sales came to $4.6 billion.

Weyerhaeuser is determined to save $300 million once it acquires Willamette, with that savings probably coming from improved efficiency in the company.

Amundson said it’s too early to say whether Weyerhaeuser will lay off some Willamette employees, though he said some operations would be duplicative.

“A lot of people see that number and automatically equate jobs to that and that is not the case,” Amundson said.

Amundson said the two companies could mesh well.

“Willamette is a close fit. They’re in the same product lines ... and there is very little overlap,” he said. “It really won’t be that difficult. We’ve done (several) acquisitions in the past four or five years.”

Spokesman Frank Mendizabal said Weyerhaeuser’s track record illustrates he companies success with mergers and acquisitions. “We know about this type of stuff,” he said. “We want to move forward together.”

If Willamette’s board accepts Weyerhaeuser’s offer, Weyerhaeuser officials expect to follow a three-year process of integrating the companies.

Transition teams will be assembled with members from both companies, with assessment and shared learning sessions taking place over three years.

“We’re trying to take the best from both companies,” Amundson said.

He added that combining the two companies might run smoothly because they have interacted positively in the past.

“When you strip all of this away, the cultures of both companies are the same. We’re Northwest based, we have the same values.,” Amundson said. “It’s really a win-win.”

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