Weyerhaeuser Company · NYSE:WY
Weyerhaeuser — Investor Day (December 2013)
42 slides from Weyerhaeuser's investor day presentation, Dec 17, 2013
Slide 1: Weyerhaeuser Growing a Truly Great Company: Investor Meeting
WEYERHAEUSER Growing a Truly Great Company INVESTOR MEETING Dec. 17, 2013 | New York, NY Filed by Weyerhaeuser Company pursuant to Rule 425 under the Securities Act of 1933, as amended, and deemed filed pursuant to Rule 14a-12 under the Securities Exchange Act of 1934, as amended Subject Company: We
Slide 2: Forward-Looking Statements and Non-GAAP Financial Measures
FORWARD-LOOKING STATEMENTS AND NON-GAAP FINANCIAL MEASURES This presentation contains statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, with respect to future prospects, developments, business str
Slide 3: Additional Information
ADDITIONAL INFORMATION Additional Information and Where to Find It : In connection with the proposed “Reverse Morris Trust” transaction between TRI Pointe Homes, Inc. and Weyerhaeuser Company, pursuant to which the homebuilding subsidiary of Weyerhaeuser, WRECO (with certain exclusions), will be com
Slide 4: Our vision: a truly great company
Workiz< iugeine: ¢9 grow a truly great company UR VISION for our shareholder: istomers and employees WEYERHAEUSER A TRULY GREAT COMPANY Great Financial Results Great Gon ) CHASE PERFECTION... CATCH EXCELLENCE
Slide 5: Path Forward
PATH FORWARD TEAM GOAL – Grow Shareholder Value LEVERS – Portfolio – Performance: Operational Excellence – Capital Allocation KEY MEASURES – Relative EBITDA margin – Total Shareholder Return (TSR) Relative to peers & S&P
Slide 6: TSR Drivers
TSR TSR DRIVERS Change in market cap WY GOAL: Total Shareholder Return Profit growth Dividends & Share Repurchases Multiple Capital Allocation Operational Excellence Operational Excellence Capital Allocation Portfolio / Market Factors
Slide 7: Portfolio
PORTFOLIO
Slide 8: Portfolio changes: before and after
Timberlands Cellulose Fibers Wood Products Timberlands Cellulose Fibers Wood Products WRECO** PORTFOLIO Total Assets $11.1 B Pro-forma 2013 Q3* Total Assets $10.4 B YE 2012* BEFORE AFTER PORTFOLIO CHANGES: *Excludes Unallocated Items. 2013 Q3 pro-forma excludes assets related to announced combinatio
Slide 9: Weyerhaeuser segment EBITDA overview
WEYERHAEUSER TIMBERLANDS 7 MM acres $579 MM EBITDA * WOOD PRODUCTS Lumber: $285 MM OSB ** : $284 MM ELP ** : $31 MM Distribution: $(39) MM CELLULOSE FIBERS *EBITDA Excluding Special Items, LTM as of Q3 2013. Unallocated items not included. See appendix for reconciliation to GAAP amounts. **ELP = Eng
Slide 10: Near Term Focus: Drive Operational Excellence
Near Term FOCUS: Drive Operational Excellence NEAR TERM PRIORITY MIDTERM PRIORITY BUSINESS PORTFOLIO Exit TIMBERLANDS Operational Excellence: drive cash & earnings Longview acquisition Disciplined growth WOOD PRODUCTS Lumber OSB ELP Distribution Operational Excellence: drive cash & earnings Fix Oppo
Slide 11: Performance
PERFORMANCE
Slide 12: Performance: Timberlands
BASE BASE PERFORMANCE: Timberlands STRATEGIC INITIATIVES Maximize cash flow through Operational Excellence Capture full value of the Longview Timber acquisition See appendix for detail on calculations. *See appendix for reconciliation to GAAP amounts. EBITDA* / ACRE OWNED Longview Timber Operational
Slide 13: Performance: Wood Products - Lumber
PERFORMANCE: Wood Products - Lumber STRATEGIC INITIATIVES Reduce cost – achieve industry-leading cost structure Maintain value added product mix OPERATIONAL EXCELLENCE** Controllable Manufacturing Cost EBITDA MARGIN* Closing the Gap = $100 MM Source for competitor data: public SEC filings *See appen
Slide 14: Performance: Wood Products - OSB
-10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 2013 YTD Q3 Ainsworth OSB LPX OSB Norbord OSB WY OSB PERFORMANCE: Wood Products – OSB STRATEGIC INITIATIVES Drive down controllable costs by improving reliability Grow higher margin products EBITDA MARGIN* $50 MM **Note: Reliability benchmark is mill Best in Class
Slide 15: Performance: Wood Products - ELP & Distribution
PERFORMANCE: Wood Products – ELP & Distribution TURNAROUND INITIATIVES ELP DISTRIBUTION Close the gap on manufacturing cost Simplify & focus supply chain Leverage our brand Reduce cost: Warehouse, delivery, sales Disciplined, profitable growth at market rate Source for competitor data: public SEC fi
Slide 16: Performance: Cellulose Fibers
PERFORMANCE: Cellulose Fibers STRATEGIC INITIATIVES Reduce cost Grow with global customers Innovate high-margin products EBITDA MARGIN* OPERATIONAL EXCELLENCE** Reduce Controllable Cost $100 MM **Cost of Goods Sold, excluding inflation. Current is based on Q3 2013 YTD data. *See appendix for reconci
Slide 17: Performance: SG&A
PERFORMANCE: SG&A Note: SG&A includes R&D STRATEGIC INITIATIVE: Reduce Overhead Cost by $75 MM REDUCTION GOAL $75 MM 2013 Pro-forma* 2014 Run Rate Lowering cost essential to our success *Pro-forma is total company 3Q YTD 2013 annualized, less WRECO direct SG&A of $141 MM
Slide 18: Capital Allocation
CAPITAL ALLOCATION
Slide 19: Capital Allocation Priorities
CAPITAL ALLOCATION PRIORITIES Return cash to shareholders Invest in our businesses Maintain appropriate capital structure
Slide 20: Increasing Dividend Payout Ratio
INCREASING DIVIDEND PAYOUT RATIO Sustainable and Growing Dividend RETURNING CASH TO SHAREHOLDERS DIVIDEND PAYOUT POLICY Target payout of 75% of Funds Available for Distribution (FAD) over cycle (1) (1) Funds Available for Distribution: Cash Flow before major acquisitions and dispositions and financi
Slide 21: Disciplined Capital Investment
DISCIPLINED CAPITAL INVESTMENT *Depreciation, Depletion & Amortization $476 $456 $470 $500 Estimated Estimated % of DD&A* 50% 63% 64% 78% Other Wood Products Timberlands Cellulose Fibers $238 $285 $300 $390 DD&A* CapEx:
Slide 22: Capital Structure and Liquidity
Current (Est.) Target Over Cycle $ Millions 2013 Q4 CAPITAL STRUCTURE AND LIQUIDITY Cash balance as of September 30, 2013: $900 million (1) $1 Billion revolving credit facility: Expires in June 2018 Long term debt: Improving financial metrics support investment grade rating: (1) Excludes $494 millio
Slide 23: WRECO/TRI Pointe Combination
WRECO/TRI POINTE COMBINATION WRECO to combine with TRI Pointe (TPH) in a tax-free transaction: – 129.7 million shares TPH stock Using Dec 13, 2013 TPH stock price of $18.42 per share, the estimated value is ~$2.4 billion – Approximately $700 million in cash Total estimated transaction value of ~$3.1
Slide 24: WRECO/TRI Pointe Combination: Use of Proceeds
WRECO/TRI POINTE COMBINATION: Use of Proceeds Stock: distributed to shareholders in either a spin-off or split-off – Spin: Similar to a dividend – Split: Similar to a share repurchase/exchange offer – Spin / Split decision to be determined by WY Board shortly before closing Cash – Adjust capital str
Slide 25: Market Outlook
MARKET OUTLOOK
Slide 26: Market Outlook: Positive Trends for Our Products
MARKET OUTLOOK: Positive Trends for Our Products Higher demand and prices for US timber and wood products: – Rebound in US housing – Growing off-shore demand – Canadian timber supply shortage Growing markets for fluff products driven by emerging country demand and global growth
Slide 27: Housing Recovers to Trend
HOUSING RECOVERS TO TREND ~1.5 MM STARTS 0.0 0.5 1.0 1.5 2.0 2.5 Million Units *RISI *John Burns *Global Insight TOTAL U.S. HOUSING STARTS (Seasonally Adjusted Annual Rate) *Forecast Harvard Joint Center for Housing Studies forecast: Trend (2015 and beyond) 1.6 - 1.9 MM units Source: Census Quarterl
Slide 28: Growing Export Volumes: Logs & Lumber
Japan Korea China Japan China GROWING EXPORT VOLUMES: Logs & Lumber DEMAND DRIVERS Japan & Korea: Long term demand for wood-based housing China: rising wealth and urbanization drives demand for industrial and interior wood uses WEST COAST SOFTWOOD LOG EXPORTS TO ASIA MMBF Scribner Annual Source: Ran
Slide 29: Log Prices: Positive Outlook
LOG PRICES: Positive Outlook West has strengthened, with more upside expected South recovery still ahead DELIVERED LOG PRICE DOUGLAS FIR #2 $/MBF Annual Forecast Source: Log Lines, FEA, RISI YTD DELIVERED LOG PRICE SOUTHERN AVERAGE PINE SAWLOG $/MBF Annual Forecast Source: Log Lines, FEA, RISI YTD
Slide 30: Supply from Canada Constrained
SUPPLY FROM CANADA CONSTRAINED: Benefits Southern Lumber & Logs Canadian production expected to drop to 25% of U.S. market by 2015, 5-7BBF below peak Southern pine lumber expanding; limited growth in Canadian imports Source: WWPA, COFI Forecast CANADIAN LUMBER SHARE OF U.S. MARKET U.S. LUMBER SUPPLY
Slide 31: Wood Products: Strong Growth for OSB & Engineered Wood
WOOD PRODUCTS: Strong Growth for OSB & Engineered Wood DEMAND DRIVERS New residential construction Repair & remodel, industrial & export Billion Square Feet Forecast* NORTH AMERICAN I-JOIST DEMAND Million Linear Feet Annual Source: FEA Forecast* * Annual Source: *FEA NORTH AMERICAN OSB DEMAND
Slide 32: Fluff Demand Growth: Emerging Economies
Rest of World Rest of Asia Japan Europe N.A. Expect growing fluff pulp demand of 3.5% / year Supply position: Southern Pine ideal for fluff; globally competitive cost FLUFF DEMAND GROWTH: Emerging Economies FLUFF MARKET PULP CONSUMPTION BY REGION Million Tons Source: Starr, Weyerhaeuser CF Business
Slide 33: Market Outlook Recap
Overall Positive Trends for Weyerhaeuser Products MARKET OUTLOOK RECAP Higher demand and prices for US timber and wood products: – Rebound in US housing – Growing off-shore demand – Canadian timber supply shortage Growing markets for fluff products driven by emerging country demand and global growth
Slide 34: Weyerhaeuser Growing a Truly Great Company
WEYERHAEUSER Growing a Truly Great Company
Slide 35: Appendix
APPENDIX
Slide 36: 2011 EBITDA Reconciliation by Segment
$ Millions 2011 Timberlands Lumber OSB EWP Distribution WP Other Wood Products Cellulose Fibers Real Estate Unallocated Items Total 2011 EBITDA RECONCILIATION BY SEGMENT Adjusted EBITDA Excluding Special Items $472 ($7) ($4) $6 ($37) ($1) ($43) $597 $89 ($90) $1,025 Depletion, Depreciation & Amortiz
Slide 37: 2012 EBITDA Reconciliation by Segment
$ Millions 2012 Timberlands Lumber OSB EWP Distribution WP Other Wood Products Cellulose Fibers Real Estate Unallocated Items Total 2012 EBITDA RECONCILIATION BY SEGMENT Adjusted EBITDA Excluding Special Items $460 $130 $143 $17 ($29) ($15) $246 $368 $142 ($54) $1,162 Depletion, Depreciation & Amort
Slide 38: 2013 YTD EBITDA Reconciliation by Segment
$ Millions 2013 Q3 YTD Timberlands Lumber OSB EWP Distribution WP Other Wood Products Cellulose Fibers Real Estate Unallocated Items Total 2013 YTD EBITDA RECONCILIATION BY SEGMENT Adjusted EBITDA Excluding Special Items $448 $258 $223 $34 ($27) ($2) $486 $252 $82 ($18) $1,250 Depletion, Depreciatio
Slide 39: 2013 Q3 LTM EBITDA Reconciliation by Segment
$ Millions 2013 Q3 LTM Timberlands Lumber OSB EWP Distribution WP Other Wood Products Cellulose Fibers Real Estate Unallocated Items Total 2013 Q3 LTM EBITDA RECONCILIATION BY SEGMENT 1. Adjusted EBITDA excluding special items is a non-GAAP measure that management uses to evaluate the performance of
Slide 40: EBITDA Reconciliation: Timberlands
$ Millions 2011 2012 2013 Q3 YTD EBITDA RECONCILIATION: TIMBERLANDS West (excluding Longview Timber) $273 $250 $265 South Other (15) (8) Adjusted EBITDA Excluding Special Items $472 $460 $448 Depletion, Depreciation & Amortization (137) (142) (115) Special Items -- -- Operating Income (GAAP) $487 $3
Slide 41: Reconciliation to GAAP: Pro Forma Total Assets
Pro Forma Total Assets $ millions 2013 Q3 1 RECONCILIATION TO GAAP: 2013 Pro Forma Total Assets Pro Forma total assets $11,143 Real Estate assets 2,193 Unallocated assets 2,273 Total Assets (GAAP) $15,609 1. Pro forma total assets is a non-GAAP measure that management uses to evaluate the performanc
Slide 42: Timberlands Benchmarking: EBITDA/Acre
TIMBERLANDS BENCHMARKING: EBITDA/Acre Based on publicly reported financials, plus National Council of Real Estate Investment Fiduciaries (NCREIF) data – WY does not include Longview Timber – Pope Resources = Fee Timber Income from operations external + Fee Timber Depletion – NCREIF = Northwest NOI –