Joining me this morning are Dan Fulton, President and Chief Executive Officer; and Patty Bedient, Executive Vice President and Chief Financial Officer.As summarized on Chart 1, Weyerhaeuser reported second quarter 2012 net earnings of $84 million or $0.16 per diluted share on net sales of $1.8 billion. Earnings for the second quarter include after-tax gain of $37 million from special items. These items are detailed in Chart 2, a GAAP reconciliation of earnings before special items. A gain of $33 million or $0.06 per share for postretirement plan amendments, no further gains are anticipated from these benefit changes which were effective June 30; and a gain of $4 million or $0.01 per share for the sale of properties. Excluding special items, the company reported net earnings of $47 million or $0.09 per diluted share. To provide a better understanding of business operating results, during the second quarter, we began reporting the elimination of intersegment profit on inventory and the LIFO reserve as part of unallocated items. Previously, these amounts were reported in the business segments. For consistency, segment contributions to pretax earnings for first quarter 2012 as well as prior periods have been adjusted to reclassify these as part of unallocated items. These adjustments are detailed on Chart 14. There is no change to Weyerhaeuser's consolidated net earnings for first quarter 2012 or prior years. Next, turning to our business segments, my comments reviewing the second quarter of 2012 refer to changes from the first quarter of 2012 for all segments, beginning with Timberlands, Charts 3 and 4. Timberlands contributed $77 million to pretax earnings, $7 million more than in Q1. Fee harvest volume seasonally increased in the West and South. In the West, log prices declined nearly $5 per cubic meter as the domestic -- as domestic volumes comprised a higher proportion of sales. Domestic log demand was strong. Third-party volumes increased 19% and domestic log prices was 2%. Japanese log volumes increased. Japanese log prices were slightly lower. The log export mix shifted towards China where volumes were higher and price is lower. Southern sales volumes increased and log prices rose 2%. Logging costs were higher in the West due to more cable logging on steep terrain and silviculture costs were lower in the South.
Wood Products, Charts 5 and 6. Wood Products contributed $36 million to pretax earnings, $49 million more than in Q1. The second quarter included a pretax gain of $6 million on a property sale. Lumber price realizations increased $39 per thousand board feet or 13%. Lumber volumes also increased 13%. OSB price realizations rose $17 per thousand square feet or 9%. OSB volumes were 14% higher in Q2. Engineered wood products declined 6% for TJIs and 2% for solid sections. TJI volumes rose 25% from very low level and solid section increased 9% also from a low level. Log costs slightly increased from Q1 and other manufacturing costs were flat.Cellulose Fibers, Charts 7 and 8. The pretax contribution from Cellulose Fibers was $36 million, $12 million less than in Q1. Average pulp price realizations were flat in the quarter due to mix. There were 27 days of maintenance downtime in Q2. Manufacturing issues and the timing of shipments reduced pulp sales volumes 5%. Downtime increased costs and reduced productivity. Real Estate, Charts 9 and 10. The pretax contribution to earnings from Real Estate before special items was $15 million, $23 million more than in Q1. Single-family home closings seasonally increased 46% to 508 homes in Q2 from 349 homes in Q1. Home closings increased 11% from the same quarter last year. Gross margins increased to nearly 20% in Q2 from 17% in Q1. The average home closing price was $374,000, nearly flat with Q1. The closing price declined 4% from the same quarter last year due to mix. Unallocated items, Chart 11. The foreign exchange loss was $8 million in Q2 due to a weaker Canadian dollar. This was a $14 million swing from Q1. As discussed earlier, the elimination of intersegment profit in inventory and LIFO, formerly reported at the segment level, is now recorded in unallocated items. Read the rest of this transcript for free on seekingalpha.com