<PAGE>
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential for Use of the
[_] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[X] Soliciting Material Under Rule 14a-12
Willamette Industries, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
<PAGE>
News Release
[Willamette Industries, Inc. logo]
FOR IMMEDIATE RELEASE
January 17, 2001
<TABLE>
<S> <C> <C> <C>
CONTACT: Greg Hawley Cathy Dunn Paul Verbinnen/David Reno/
EVP & CFO VP Communications Jim Barron
Willamette Industries Willamette Industries Citigate Sard Verbinnen
503-273-5640 503-273-5642 212-687-8080
</TABLE>
WILLAMETTE REPORTS STRONG FOURTH QUARTER EARNINGS
PORTLAND, ORE. - (NYSE:WLL) - Willamette Industries (NYSE:WLL) today reported
financial results for the fourth quarter and year ended December 31, 2000.
Net earnings for the 2000 fourth quarter were $86.0 million, or $0.78 per
diluted share, an increase over net earnings of $83.6 million, or $0.75 per
diluted share, in the fourth quarter of 1999. Sales for the 2000 fourth quarter
were $1.1 billion, up slightly over the same period last year. Fourth quarter
net earnings include a year-to-date tax rate decrease from 34.5% to 33%, which
improved earnings by $0.05 per share, offset by a $0.05 per share charge
associated with the defense of the unsolicited hostile takeover initiated by
Weyerhaeuser during the fourth quarter of 2000. Total pretax cost associated
with this defense could approximate $50 million.
Net earnings for the full year 2000 were $344.9 million, or $3.12 per diluted
share, up 33.9% from 1999 net earnings of $260.5 million, or $2.33 per diluted
share. Sales for 2000 were $4.7 billion, up 8.9% from the $4.3 billion recorded
in 1999.
Duane McDougall, President and Chief Executive Officer, said, "Willamette
produced strong earnings results for the quarter despite weakening conditions in
the general economy, sharply rising energy costs and a hostile takeover attempt
by Weyerhaeuser. Our strong performance under these difficult circumstances is
the result of our efficient
<PAGE>
high quality asset base, our leading customer service, and the exceptional
dedication and efforts of our employees.
"Earnings were driven by improved pricing for white paper, and lower raw
material costs for our brown paper operations. Volumes were down slightly due
to normal seasonal softening," McDougall continued. "While the building
materials market remains at the bottom of the cycle in terms of pricing across
product lines, our plants continued to run efficiently and we began to see the
benefits of increased timber availability on raw material costs."
Commenting on the Company's outlook, McDougall said: "Prospects look mixed for
the first quarter of 2001. However, even in the face of economic and market
pressures, rising energy costs, and a hostile takeover attempt, we believe we
will remain the performance leader in the forest products industry. This
leadership will only be enhanced over time by recent capital projects which will
further enhance our competitive position and profitability. We are confident
that continued pursuit of our long-term strategic plan will yield significant
growth opportunities for shareholders, customers and our other constituencies."
Conference Call Information:
WHAT: Willamette Industries Earnings Conference Call
WHEN: Wednesday, January 17, 2001
11:00 a.m. Eastern time
NUMBER: 1-800-521-5431
Dial in by 10:45 a.m. Eastern time
Conference name/reservation number: 906528
WEBCAST: www.streetfusion.com "Earnings Events"
--------------------
REBROADCAST January 17 3:30 p.m. Eastern time through
DATES: January 24 5:00 p.m. Eastern time
REBROADCAST 1-800-625-5288 or 303-804-1855
NUMBER: Reservation number 906528
<PAGE>
Willamette Industries is an integrated forest products company with 105 plants,
located in the U.S., France, Ireland and Mexico. The company owns 1.7 million
acres of forestland in the U.S. and manages it sustainably to produce building
materials, composite wood panels, fine paper, office paper products, corrugated
packaging and grocery bags.
Forward-looking statements in this release are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are subject to risks and uncertainties and actual
results could differ materially from those projected. Such risks and
uncertainties include, but are not limited to, the effect of general economic
conditions; the level of new housing starts and remodeling activity; the
availability and terms of financing for construction; competitive factors,
including pricing pressures; the cost and availability of wood fiber; the effect
of natural disasters on the Company's timberlands; construction delays; risk of
nonperformance by third parties; and the impact of environmental regulations and
other costs associated with complying with such regulations. Please refer to
Willamette Industries' Securities and Exchange Commission filings for further
information.
Investors are urged to read the proxy statement that will be filed by Willamette
in connection with the 2001 annual meeting of shareholders when it becomes
available, as well as any solicitation/recommendation statement that has been or
may be filed by Willamette, because they contain important information. Each of
these documents has been or will be filed with the SEC and investors may obtain
a free copy of them at the SEC's Internet web site at www.sec.gov. These
documents may also be obtained for free (when available) from Willamette by
directing such request to: Willamette Industries, Inc., Attention: Investor
Relations, 1300 S.W. Fifth Avenue, Suite 3800, Portland, Oregon 97201,
telephone: (503) 227-5581, or MacKenzie Partners, Inc. at (800) 322-2885 (toll-
free) or at (212) 929-5500 (collect) or by e-mail at
[email protected]. Detailed information regarding the names,
affiliations and interests of individuals who may be deemed participants in the
solicitation of proxies of Willamette's shareholders is available in the
Soliciting Materials on Schedule 14A filed by Willamette with the SEC on January
3, 2001.
-Tables Follow-
<PAGE>
WILLAMETTE INDUSTRIES, INC.
FINANCIAL HIGHLIGHTS
2000 1999
---- ----
Quarter Ended December 31:
--------------------------
Basic Earnings Per Share $ 0.79 $ 0.75
Diluted Earnings Per Share $ 0.78 $ 0.75
Sales * $1,126,990,000 $1,108,540,000
Earnings Before Taxes $ 119,071,000 $ 130,289,000
Net Earnings $ 85,955,000 $ 83,609,000
Average Shares Outstanding:
Basic 109,286,000 111,574,000
Diluted 109,745,000 112,149,000
Twelve Months Ended December 31:
--------------------------------
Basic Earnings Per Share $ 3.14 $ 2.34
Diluted Earnings Per Share $ 3.12 $ 2.33
Sales * $4,651,761,000 $4,272,957,000
Earnings Before Taxes $ 514,387,000 $ 413,275,000
Net Earnings $ 344,887,000 $ 260,475,000
Average Shares Outstanding:
Basic 109,982,000 111,375,000
Diluted 110,717,000 112,001,000
* Sales for all periods presented have been reclassified to conform with EITF
00-10 "Accounting for Shipping and Handling Costs."
<PAGE>
<TABLE>
<CAPTION>
WILLAMETTE INDUSTRIES, INC. January 17, 2001
Quarterly Statistical Data
Fourth Quarter 2000
Fourth Quarter Year-to-Date
-------------------------- ----------------------------
2000 1999 2000 1999
----- ----- ----- -----
<S> <C> <C> <C> <C>
PRODUCT SHIPMENTS
-----------------
Lumber 1" - MBF 219,543 198,675 862,756 819,800
Plywood - 3/8" MSF 312,481 373,293 1,432,448 1,579,715
Oriented Strand Board - 3/8" MSF 64,314 79,108 295,718 320,746
Domestic Particleboard - 3/4" MSF 142,464 149,462 630,020 620,384
International Particleboard - 3/4" MSF 38,076 39,402 140,627 69,069
Domestic MDF - 3/4" MSF 77,119 77,493 321,123 321,132
International MDF - 3/4" MSF 66,603 64,969 256,300 251,945
Domestic Corrugated - MSF 6,253,144 6,204,439 25,475,221 25,125,344
International Corrugated - MSF 399,167 89,512 1,093,024 342,903
Grocery Bags - Tons 27,165 29,960 108,567 113,958
Business Forms - Tons 90,189 97,966 369,200 374,438
Cut-sheets - Tons 172,168 162,739 731,967 650,567
Brown Mills - Tons 471,109 473,456 1,885,166 1,839,322
Market Pulp - Tons 71,171 46,020 211,838 144,276
White Mills - Tons 364,740 382,206 1,494,672 1,456,523
SEGMENT INFORMATION ($ in Thousands)
------------------------------------
Sales: (1)
Building Materials Group $ 324,370 $ 368,295 $1,436,580 $1,552,739
Brown Paper 447,716 400,978 1,763,892 1,522,195
White Paper 354,904 339,267 1,451,289 1,198,023
Operating Earnings:
Building Materials Group 23,207 38,790 137,259 253,910
Brown Paper 103,967 73,326 355,011 225,283
White Paper 43,402 60,897 207,702 118,955
Corporate (11,480) (11,353) (46,715) (47,879)
SUPPLEMENTAL FINANCIAL ($ in Thousands)
----------------------
Cost of Sales (1) 895,487 882,056 3,729,685 3,468,994
Selling & Administrative Expense (1) 72,407 64,824 268,819 253,694
Non-Recurring and Other Income (Expense) - Net (2), (4) (11,437) (1,524) (19,737) (11,710)
Interest Expense - Net 28,588 29,847 119,133 125,284
Capitalized Interest 1,798 1,708 5,163 3,998
Income Taxes (3) 33,116 46,680 169,500 152,800
Tax Rate (3) 27.8% 35.8% 33.0% 37.0%
Depreciation & Amortization 69,868 65,046 270,225 257,522
Cost of Fee Timber Harvested 11,737 10,665 44,774 46,197
Deferred Taxes 9,151 26,644 70,011 86,938
Plant, Property & Equipment 133,602 86,522 379,667 267,856
Timber, Roads & Reforestation 4,296 4,073 19,221 22,390
Acquisitions 3,480 - 169,334 -
AVERAGE SHARES OUTSTANDING (in Thousands)
Basic 109,286 111,574 109,982 111,375
Diluted 109,745 112,149 110,717 112,001
</TABLE>
(1) Sales, cost of sales, and selling and administrative expenses for all
periods presented have been reclassified to conform with EITF 00-10
"Accounting for Shipping and Handling Costs."
(2) Non-recurring expense for the fourth quarter of 2000 includes charges of
$8.0 million for hostile takeover defense costs and $4.0 million for the
closure of the Ruston, Louisiana, plywood plant. In addition,
non-recurring expense for the year ended December 31, 2000, also includes
charges totaling $5.1 million related to estimated costs for the closure
of the Dallas, Oregon, plywood plant and settlement costs for alleged
violations of the Clean Air Act involving the company's building
materials operations.
(3) The fourth quarter of 2000 includes an adjustment of $.05 per share
related to a change in the effective tax rate from 34.5% to 33.0%.
(4) Non-recurring expense for the year ended December 31, 1999 includes a
$10.0 million charge related to an estimate of environmental penalties
resulting from allegations of Clean Air Act issues at the company's
building materials operations.
<PAGE>
Willamette Industries, Inc.
Consolidated Balance Sheets
(000s omitted, except per share amounts)
<TABLE>
<CAPTION>
12/31/00 12/31/99
------------- -------------
<S> <C> <C>
Assets
Current Assets:
Cash............................................................................... $ 24,284 $ 25,557
Accounts receivable - net.......................................................... 459,591 382,763
Inventories........................................................................ 473,788 445,110
Prepaid expenses................................................................... 35,154 36,160
------------- -------------
Total current assets............................................................ 992,817 889,590
Other assets.......................................................................... 92,975 99,532
Timber, timberlands and related facilities - net...................................... 1,014,285 1,057,529
Property, plant and equipment - net................................................... 3,017,593 2,751,210
------------- -------------
$ 5,117,670 $ 4,797,861
============= =============
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable - current............................................................ $ 127,499 $ 16,873
Accounts payable and accrued expenses.............................................. 450,040 393,046
Federal and state income taxes..................................................... 19,184 22,200
------------- -------------
Total current liabilities....................................................... 596,723 432,119
Long-term debt........................................................................ 1,542,926 1,628,843
Deferred income taxes and other liabilities........................................... 596,978 533,187
Stockholders' Equity:
Common stock, $.50 par value; authorized 150,000
shares; issued and outstanding 109,417 and 111,587 shares....................... 54,709 55,794
Capital surplus.................................................................... 229,598 303,626
Retained earnings.................................................................. 2,096,736 1,844,292
------------- -------------
Total stockholders' equity...................................................... 2,381,043 2,203,712
------------- -------------
$ 5,117,670 $ 4,797,861
============= =============
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statements of Earnings
(000s omitted, except per share amounts)
Three Months Ended Twelve Months Ended
----------------------------- -----------------------------
12/31/00 12/31/99 12/31/00 12/31/99
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales................................................. $ 1,126,990 $ 1,108,540 $ 4,651,761 $ 4,272,957
Cost of sales............................................. 895,487 882,056 3,729,685 3,468,994
------------- ------------- ------------- -------------
Gross profit.......................................... 231,503 226,484 922,076 803,963
Selling and administrative expense........................ 72,407 64,824 268,819 253,694
Non-recurring and other income (expense) - net............ (11,437) (1,524) (19,737) (11,710)
------------- ------------- ------------- -------------
Operating earnings.................................... 147,659 160,136 633,520 538,559
Interest expense.......................................... 28,588 29,847 119,133 125,284
------------- ------------- ------------- -------------
Earnings before income taxes.......................... 119,071 130,289 514,387 413,275
Income taxes.............................................. 33,116 46,680 169,500 152,800
------------- ------------- ------------- -------------
Net earnings.......................................... $ 85,955 $ 83,609 $ 344,887 $ 260,475
============= ============= ============= =============
Basic earnings per share.................................. $ 0.79 $ 0.75 $ 3.14 $ 2.34
============= ============= ============= =============
Diluted earnings per share................................ $ 0.78 $ 0.75 $ 3.12 $ 2.33
============= ============= ============= =============
Average shares outstanding - basic........................ 109,286 111,574 109,982 111,375
============= ============= ============= =============
Average shares outstanding - diluted...................... 109,745 112,149 110,717 112,001
============= ============= ============= =============
</TABLE>
<PAGE>
Willamette Industries, Inc.
Summary of Cash Flows
(000s omitted)
<TABLE>
<CAPTION>
Twelve Months Ended
------------------------------
12/31/00 12/31/99
------------ --------------
<S> <C> <C>
Operating Activities:
Net earnings $ 344,887 $ 260,475
Depreciation, amortization and cost of
fee timber harvested 314,999 303,719
Deferred income taxes 70,011 86,938
Change in working capital items (39,424) (48,266)
------------ --------------
690,473 602,866
------------ --------------
Investing Activities:
Proceeds from sale of assets 5,704 5,965
Expenditures for property purchases (379,667) (267,856)
Expenditures for timber, timberlands,
roads, and reforestation (19,221) (22,390)
Acquisitions (169,334) -
Other 13,646 (33,329)
------------ --------------
(548,872) (317,610)
------------ --------------
Financing Activities:
Net change in operating lines of credit 108,383 (33,635)
Debt borrowing 115,038 27,770
Proceeds from sale of common stock 8,931 18,725
Repurchased common stock (84,071) -
Cash dividends (92,443) (77,984)
Payment on debt (198,712) (225,934)
------------ --------------
(142,874) (291,058)
------------ --------------
Change in cash $ (1,273) $ (5,802)
============ ==============
</TABLE>
Notes:
(A) Non-recurring expense for the fourth quarter of 2000 includes charges of
$8.0 million for hostile takeover defense costs and $4.0 million for the
closure of the Ruston, Louisiana, plywood plant. In addition, non-recurring
expense for the year ended December 31, 2000, also includes charges
totaling $5.1 million related to estimated costs for the closure of the
Dallas, Oregon, plywood plant and settlement costs for alleged violations
of the Clean Air Act involving the company's building materials operations.
(B) In the second quarter of 2000, the company completed its acquisition of
Corrugados Tehuacan S.A. de C.V. This company operates a state-of-the-art
corrugated container plant, a solid fiber box plant and a small recycled
linerboard and medium mill, all located in Mexico. Also in the second
quarter of 2000, the company purchased a hardwood pulp mill in Port
Wentworth, Georgia.
(C) Sales, cost of sales, and selling and administrative expense for all
periods presented have been reclassified to conform with EITF 00-10
"Accounting for Shipping and Handling Costs."
(D) The fourth quarter of 2000 includes an adjustment of $.05 per share related
to a change in the effective tax rate from 34.5% to 33.0%.
(E) Non-recurring expense for the year ended December 31, 1999 includes a $10.0
million charge related to an estimate of environmental penalties resulting
from allegations of Clean Air Act issues at the company's building
materials operations.
<PAGE>
WILLAMETTE INDUSTRIES, INC.
SUPPLEMENTAL INFORMATION
<TABLE>
<CAPTION>
(000s Omitted)
-----------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001
--------- ---------- ---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Non-Cash Charges: Estimate
Depreciation & Amortization $ 224,104 259,556 286,300 316,765 257,522 270,225 286,000
Cost of Fee Timber Harvested $ 25,061 43,381 52,649 54,376 46,197 44,774 47,000
--------- ---------- ---------- ---------- ---------- --------- ----------
Subtotal $ 249,165 302,937 338,949 371,141 303,719 314,999 333,000
Deferred Taxes $ 98,425 40,717 28,650 7,683 86,938 70,011 75,000
--------- ---------- ---------- ---------- ---------- --------- ----------
Total $ 347,590 343,654 367,599 378,824 390,657 385,010 408,000
========= ========== ========== ========== ========== ========= ==========
Capital Expenditures:
Timber, Roads & Reforest. $ 41,538 31,025 21,560 24,067 22,390 19,221 25,000
Plant, Property & Equip. (1) $ 411,985 454,744 506,348 417,772 267,856 379,667 475,000
Acquisitions $ - 1,019,274 - - - 169,334 -
Capitalized Interest $ 6,187 10,534 19,939 13,589 3,998 5,163 11,700
Interest Expense $ 71,050 92,804 116,990 131,990 125,284 119,133 110,000
Tax Rate 37.5% 37.2% 34.4% 33.0% 37.0% 33.0% 33.0%
</TABLE>
(1) Includes capitalized interest
<PAGE>
WILLAMETTE INDUSTRIES, INC.
PRODUCTION SUMMARY
<TABLE>
<CAPTION>
Projected
1996 1997 1998 1999 2000 2001
------------ ------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BUILDING MATERIALS GROUP
Western Plywood - 3/8" msf 352,000 291,000 362,000 405,000 335,000 255,000
Southern Plywood - 3/8" msf 1,083,000 936,000 731,000 824,000 792,000 604,000
Atlantic Plywood - 3/8" msf 304,000 310,000 325,000 351,000 305,000 355,000
------------ ------------ ------------- ------------- ------------ ------------
Total 1,739,000 1,537,000 1,418,000 1,580,000 1,432,000 1,214,000
============ ============ ============= ============= ============ ============
Oriented Strand Board - 143,000 310,000 299,000 321,000 296,000 330,000
3/8" msf ============ ============ ============= ============= ============ ============
Western Lumber - 1" mbf 421,000 484,000 580,000 640,000 659,000 694,000
Southern Lumber - 1" mbf 117,000 140,000 175,000 180,000 188,000 186,000
Atlantic Lumber - 1" mbf - - - - 16,000 39,000
------------ ------------ ------------- ------------- ------------ ------------
Total 538,000 624,000 755,000 820,000 863,000 919,000
============ ============ ============= ============= ============ ============
Particleboard - 3/4" msf 546,000 593,000 616,000 689,000 (1) 771,000 (1) 914,000 (1)
============ ============ ============= ============= ============ ============
MDF -3/4" msf 284,000 466,000 (2) 540,000 (2) 573,000 (2) 577,000 (2) 611,000 (2)
============ ============ ============= ============= ============ ============
Lam Beams - 1" mbf 99,000 93,000 75,000 83,000 84,000 95,000
============ ============ ============= ============= ============ ============
Structural I-Beams - 24,000 36,000 45,000 55,000 68,000 79,000
M. Lin. Ft. ============ ============ ============= ============= ============ ============
LVL - ccf 16,000 27,000 34,000 46,000 52,000 57,000
============ ============ ============= ============= ============ ============
PAPER GROUP
Brown Paper (3) - Tons 1,629,000 1,730,000 1,792,000 1,839,000 1,888,000 (3) 1,915,000 (3)
============ ============ ============= ============= ============ ============
White Paper - Tons 1,040,000 1,117,000 1,274,000 1,456,000 1,483,000 1,471,000
============ ============ ============= ============= ============ ============
Hardwood Market Pulp - Tons 134,000 134,000 125,000 137,000 203,000 406,000
============ ============ ============= ============= ============ ============
Corrugated Containers - msf 21,528,000 22,976,000 24,491,000 (4) 25,709,000 (4) 26,925,000 (4) 29,480,000 (4)
============ ============ ============= ============= ============ ============
Grocery Bags - Tons 118,000 113,000 105,000 111,000 104,000 109,000
============ ============ ============= ============= ============ ============
Business Forms - Tons 326,000 345,000 316,000 334,000 307,000 298,000
============ ============ ============= ============= ============ ============
Cut-Sheets - Tons 423,000 500,000 586,000 697,000 799,000 946,000
============ ============ ============= ============= ============ ============
</TABLE>
(1) Includes International - 69,000 msf 1999, 141,000 msf 2000 and 233,000
msf 2001.
(2) Includes International - 161,000 msf 1997, 227,000 msf 1998, 251,000
msf 1999, 256,000 msf 2000 and 272,000 msf 2001.
(3) Linerboard, bag and medium. Includes International - 14,000 tons 2000
and 28,000 tons 2001.
(4) Includes International - 357,000 msf 1998, 350,000 msf 1999, 1,204,000
msf 2000 and 1,725,000 msf 2001.
<PAGE>
ANALYST CONFERENCE CALL SCRIPT
------------------------------
Conference Call Operator
Good morning. I'd like to welcome you to the Willamette Industries fourth
quarter 2000 conference call.
[Before we begin, I have been asked to remind you that during the course of this
conference call the company may make forward-looking statements within the
meaning of the federal securities laws. The company believes that its
expectations are reasonable and are based on reasonable assumptions. However,
risks and uncertainties relating to future events could cause actual results to
differ materially from expectations. For a full discussion of the risks and
uncertainties, please refer to our recent SEC filings. The company does not
intend and assumes no obligation to update any forward-looking statements.
Following our discussion, we will have a question and answer period.]
I'd like now to introduce Duane C. McDougall, chief executive officer of
Willamette Industries.
Mr. McDougall ...
***
<PAGE>
Good morning and thank you for joining us today. I have with me Greg Hawley,
executive vice president and chief financial officer.
Earlier this morning, we released our earnings for the 2000 fourth quarter and
full year. You should all have either received a copy of the press release, or
if not, accessed it on our web site.
Before I begin, let me clarify that this call is to review our fourth quarter
and full year financial results. Obviously, there are a few other things going
on, and I know most of you remain interested in the hostile takeover attempt by
Weyerhaeuser. Our position on that has been clear from the start and we've been
taking your calls and answering your questions on that matter all along. This
call is to discuss our financial results. So please, lets keep the discussion
on this call to Willamette's earnings. Thank you all in advance for your
courtesy.
The fourth quarter was an outstanding one for Willamette, particularly in light
of the significant challenges we faced. The overall economy has experienced a
slowdown and with it our industry as a whole faces weakening conditions
especially in the building materials and pulp markets, as well as sharply rising
energy costs. In addition, we are dealing with the significant distraction of
defending the hostile takeover attempt.
<PAGE>
Yet again, Willamette's industry leadership shows in our strong financial
performance. We believe our efficient high quality asset base, our leading
customer service, and the exceptional dedication and efforts of our employees
will allow us to continue to provide our shareholders with our historically
proven returns which outperform the industry.
I'm very proud of the determination shown by our thousands of employees during
this difficult time. They believe in this company and they will all continue to
work hard to show you just how great Willamette can be.
Fourth quarter net earnings per diluted share of $0.78 were $.05 above consensus
analyst estimates. We were quite surprised at the magnitude of the earnings
warnings released earlier by others in the industry. There is no question that
there have been many challenges this quarter. However, I would argue we have
met those challenges better than others. While white and brown volumes were
seasonably slower, our order files are still solid and our inventories are at
normal year-end levels. I think everyone is pretty familiar with what is going
on with the building materials markets for the year 2000 - between increased
capacity, decreased demand, higher imports and lower exports - pricing is at the
bottom and we don't see a lot changing in the short run.
<PAGE>
An unanticipated drain on the Company is the cost of the defense of
Weyerhauser's unsolicited hostile takeover attempt. What a waste - and before
it is all over we believe Weyerhaeuser will have cost our shareholders as much
as $50 million in pretax expense, not to mention countless hours of internal
time. As you read in our release, $8 million of these costs were charged
against earnings in the fourth quarter. Offsetting this charge was the
reduction of our estimated annual tax rate from 34.5% to 33%.
Much has been made this quarter about the spike in energy costs. Before I turn
it over to Greg, I thought I would remind you that we self-generate 61% of our
energy and, with our cogen facilities, have some flexibility as to how this
energy is used. This is certainly less true at our converting facilities, but
overall we have not yet been significantly impacted by the rise in energy costs.
As our suppliers continue to push these increased costs through to us however,
we believe there will be added cost pressures in the first quarter of 2001.
Greg, do you want to run through some of the specifics?
Greg - sure Duane.
At the Corporate level I thought I would start with some basic return measures.
Our return on average assets for the
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year 2000 is at 7% - a figure we believe will more than double the industry
average for 2000.
Our return on average equity for 2000 was 15%, again a return that as others
report 2000 earnings, we believe you will find is significantly above our
competition.
Our 2000 EBITDA of $949 million was 20.4% of sales. This EBITDA margin
continues to significantly outpace the industry.
Finally, our return on capital for 2000 was 12.0%, once again exceeding our cost
of capital. We believe we are the only company in our industry whose return has
exceeded its cost of capital for the past decade and beyond.
We also believe you will find that the gap between these return measures and the
industry composite is widening over the last couple years - a trend we believe
will continue as our cost reduction capital projects are brought into the
production cycle.
At the Corporate level I'd also mention that our SG&A as a percentage of sales
for 2000 ended up at 5.8%, below the 5.9% of the previous year - a figure we
believe continues to be one of the lowest in the industry.
White Paper
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Specific to the various business segments, our white paper
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order file has been steady with some seasonal slowing in December while market
pulp mills experienced market-related slowdowns. White paper price increases
implemented in October resulted in increased realizations of about $24 per ton
over the third quarter. Operating earnings for the fourth quarter were about on
par with the third quarter as slightly higher energy costs and seasonally
reduced volume offset the positive price impact. With the softening in the pulp
markets, our crew at Port Wentworth has been very flexible, occasionally running
softwood pulp to help balance our internal needs, even though the plant is
intended to run hardwood. Our inventory is at normal levels, and we continue to
believe that Willamette's average white paper production per machine is the
highest in the industry.
Brown Paper
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Willamette's domestic corrugated shipments were up 1.4% compared with last year,
with operating earnings up 57.6%. This is in direct contrast to lower volume
experienced by the remainder of the industry. Our box plants have been
outperforming the industry at a very profitable level, partly because of our
focus on customer service and our modern facilities. Let me remind you that
Willamette exceeds the industry average by over $3 per MSF sold in terms of
operating income. Fourth quarter pricing held up very well, falling off only
about $5 per ton offset by OCC costs falling an average of $16 per ton. Energy
costs had little effect on the brown side of our business due to our self
generation efficiencies.
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Building Materials
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Building materials prices generally remain at the bottom of the cycle with
fourth quarter volumes down due to normal seasonal slowing. High energy costs
also contributed to weakness in the building materials business during the
quarter, with particleboard and medium density fiberboard plants suffering the
most. Operating earnings for the fourth quarter remain consistent with third
quarter as volume and price reductions were offset by increases in export log
sales and decreases in overall log costs due to lower purchased log costs and
higher fee cut. Recent investments will benefit Willamette as we move through
the cycle, and our diversified product line will help us to mitigate the cycle's
impact on earnings. We are hopeful that there will be improvement in this
market in late 2001.
Duane -
2000 Highlights
---------------
Duane - I might add that because of our year 2000 performance, the best in the
Company's history next only to the peak in 1995, our cash generation has been
equally outstanding. Cash flow from operating activities before working capital
items exceeded $730 million and our debt-to-capital ratio declined to 41.2%. We
accomplished many initiatives with this performance in 2000 including:
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- The acquisition and start-up of our Port Wentworth market pulp mill
- Our Mexico expansion with the acquisition of three facilities
- The new Phoenix corrugated plant
- $380 million of total capital expenditures for further cost reduction
projects including:
French particleboard line expansion
Modernization projects at Albany, Johnsonburg, and Kingsport paper mills
Cogeneration at Albany and Kentucky
- Increasing the cash dividend 16.7% from $.18 to $.21 - and we've never
reduced our dividend in our 34 years as a public company.
- In early 2000 repurchasing 2.5 million shares of Company stock
Projects in process include:
- Further cogeneration capability at Kentucky and Albany
- Elk Grove, Illinois corrugated plant relocation
- A new preprint press and plant relocation in Oregon
- New Oklahoma City corrugated box plant
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- Modernization of the Albany paper mill pulping line
- New Carolina particleboard plant
- And, of course, the Kingsport modernization
We also reduced capacity at a number of our less efficient facilities, and have
closed our Ruston, Louisiana and Dallas, Oregon plywood plants along with the
No. 2 paper machine at Johnsonburg. Willamette has consistently eliminated -
and will continue to eliminate - inefficient or unprofitable capacity.
Outlook
-------
As you know, many of our competitors are having a very difficult time right now.
Rising energy costs and softening demand are challenges facing the entire
industry. But as you can see, we have met, and, in some cases, even taken
advantage of, these market and industry challenges. Overcoming these issues
requires Strong Focus - 1) on being the lowest cost producer, 2) on efficient
management of a high quality asset base, 3) on excellent customer service, and
4) on exceptional employees - the very qualities which have made us the
performance leader in the industry.
Our leadership will only be enhanced over time by recent capital projects which
will further enhance our competitive position and profitability. In sum, we
remain confident that continued pursuit of our long-term strategic plan will
yield
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significant growth opportunities for shareholders, employees, customers and our
other constituencies.
Again, thank you. We'd now be happy to take any questions you have on the
earnings.
Operator...
