Weyerhaeuser Company · NYSE:WY
Weyerhaeuser — Investor Day (December 2014)
73 slides from Weyerhaeuser's investor day presentation, Dec 9, 2014
Slide 1: Growing a Truly Great Company - Investor Meeting
0 0 WEYERHAEUSER Growing a Truly Great Company INVESTOR MEETING December 9, 2014 | New York, NY
Slide 2: Forward-Looking Statements and Non-GAAP Financial Measures
1 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, business strategies, ben
Slide 3: Our Vision: A Truly Great Company
OUR VISION w a truly great company for our shareholders istomers and employees HOW WE WIN WEYERHAEUSER A TRULY GREAT COMPANY ) CHASE PERFECTION... CATCH EXCELLENCE
Slide 4: Driving Value for Shareholders
3 DRIVING VALUE FOR SHAREHOLDERS Growing a Truly Great Company LEVERS Portfolio Performance: Operational Excellence Capital Allocation
Slide 5: Focused Portfolio
4 FOCUSED PORTFOLIO *Excludes 13.8 million mandatory convertible preference shares, which convert to common shares on July 1, 2016. Total Assets $11.0B 525 MM common shares* 2014 Q3 Timberlands Cellulose Fibers Wood Products Timberlands Cellulose Fibers Wood Products WRECO (Divested) BEFORE AFTER To
Slide 6: Portfolio Supports a Growing and Sustainable Dividend
5 PORTFOLIO Supports a growing and sustainable dividend TIMBERLANDS Strong, productive asset base COMPLEMENTARY MANUFACTURING OPERATIONS Enhance timberlands cash flow Well-positioned businesses with improving cost structures Wood Products: Strong upside from US housing Cellulose Fibers: St
Slide 7: Performance: Achieved 2014 Targets
6 PERFORMANCE: Achieved 2014 Targets ONE-YEAR TARGETS Longview Timber Synergies Expect $20+ million SG&A Reductions Expect $75 million ELP Turnaround Expect $30-40 million Distribution Turnaround Expect $30-40 million MULTI-YEAR TARGETS Timberlands: $50-70 million Expect $15-20
Slide 8: Capital Allocation: Key Actions
7 CAPITAL ALLOCATION: KEY ACTIONS Returning cash to shareholders 32% GROWTH IN 2014 REPURCHASED AUG-SEPT 2014 $130 MILLION DIVIDEND SHARE REPURCHASE $700 MILLION APPROVED
Slide 9: Performance: Creating Shareholder Value
8 $70 $80 $90 $100 $110 $120 $130 PERFORMANCE: Creating shareholder value Weyerhaeuser S&P Global Timber & Forest Products Potlatch Plum Creek Rayonier TOTAL SHAREHOLDER RETURN
Slide 10: Timberlands
9 TIMBERLANDS Rhonda Hunter Senior Vice President, Timberlands
Slide 11: Timberlands: Ownership
10 TIMBERLANDS: Ownership PACIFIC NORTHWEST Largest timberland holder in region 2.6 million acres west of Cascade mountains Douglas fir domestic and export value U.S. SOUTH More than four million acres Primarily Southern yellow pine URUGUAY More than 300,000 acres Loblolly pine a
Slide 12: Timberlands: OPX Target Set in 2013
11 TIMBERLANDS: OPX Target Set in 2013 Source for competitor data: public SEC filings, National Council of Real Estate Investment Fiduciaries (NCREIF). *See appendix for reconciliation to GAAP amounts. **Data for Rayonier as reported during 2014 Q3. 2011 data unavailable. EBITDA* / ACRE OWNED 0 200
Slide 13: Timberlands: OPX Performance
12 TIMBERLANDS: OPX Performance OPERATIONAL EXCELLENCE 0 25 50 75 Base 2014 2015 Goal 0 75 150 Base 2014 Goal $ m il li o n s Operational Excellence EBITDA $ m il li o n s $175-185MM, incl. $20 MM synergies $50-70MM Longview Timber EBITDA & Synergies $15-20MM $20-30MM 2014 INITIATIVES Merchand
Slide 14: Timberlands: Current Relative Performance
13 TIMBERLANDS: Current Relative Performance EBITDA* / ACRE OWNED U.S. WEST Maintaining Top Position EBITDA* / ACRE OWNED U.S. SOUTH Maintaining Top Position Source for competitor data: public SEC filings, National Council of Real Estate Investment Fiduciaries (NCREIF). *LTM as of 2014 Q3. See appen
Slide 15: Timberlands: Sustainable Harvest
14 2015-2020 2021-2025 2026-2030 TIMBERLANDS: Sustainable Harvest 0 5 10 15 20 25 30 2012 2013 2014 Forecast WEYERHAEUSER FEE HARVEST VOLUME M il li ons o f m 3 Projected Average Annual Harvest U.S. South U.S. West (includes Longview beginning 2013 Q3) Uruguay Annual Harvest Actual Actual 2012 BASEL
Slide 16: Western Log Markets: Prices Have Strengthened
15 0.0 0.3 0.5 0.8 1.0 1.3 1.5 1.8 2.0 2.3 2000 2002 2004 2006 2008 2010 2012 2014 WEST COAST SOFTWOOD LOG EXPORTS TO ASIA BBF Japan Korea China Est. 0 100 200 300 400 500 600 700 800 900 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 $/MBF Forecast* YTD FEA RISI WESTERN LOG MARKETS: Pr
Slide 17: Supply from Canada Constrained: Benefits Southern Lumber & Logs
16 SUPPLY FROM CANADA CONSTRAINED: Benefits Southern Lumber & Logs Canadian production drops to 25% of U.S. market by 2015, expected to be 5-7BBF below peak Southern pine lumber expanding; limited growth in Canadian imports SOUTHERN LOG PRICE DELIVERED SOUTHERN AVERAGE PINE SAWLOG 0 10 20 30 40
Slide 18: Timberlands: Summary
17 World-class timber holdings Scale operations in Pacific Northwest and US South Industry-leading silviculture expertise and sustainability practices Unique export and domestic market access, with strong customer relationships and infrastructure Focused on driving improvement through oper
Slide 19: Lumber
18 Adrian Blocker Senior Vice President, Lumber LUMBER
Slide 20: Lumber Business
19 Lumber mills – 18 Douglas Fir Hem-fir Spruce-Pine-Fir Southern Yellow Pine Production Capacity 4.6 billion board feet LUMBER BUSINESS
Slide 21: Lumber: OPX Target Set in 2013
20 0 50 100 2013 Base Benchmark LUMBER: OPX Target Set in 2013 OPERATIONAL EXCELLENCE** Controllable Manufacturing Cost $ / M B F EBITDA MARGIN* Closing the Gap = $100 MM **Benchmark is mill Best in Class; Mfg cost = Cost Net of Logs, excluding depreciation and inflation. Source for competitor data:
Slide 22: Lumber: OPX Performance
21 LUMBER: OPX Performance 2014 INITIATIVES Labor productivity Process efficiency Operating expense 2015 INITIATIVES Labor productivity Process efficiency Reliability Capital execution OPERATIONAL EXCELLENCE* Controllable Manufacturing Cost *Benchmark is mill Best in Class. Mfg cos
Slide 23: Lumber: Current Relative Performance
22 LUMBER: Current Relative Performance EBITDA MARGIN* Closing the Gap to Take Top Position Source for competitor data: public SEC filings *See appendix for reconciliation to GAAP amounts. -5% 0% 5% 10% 15% 20% 2011 2012 2013 2014 YTD Q3 Canfor Lumber Interfor Lumber West Fraser Lumber WY Lumber
Slide 24: Supply from Canada Constrained
23 SUPPLY FROM CANADA CONSTRAINED: Benefits Southern Lumber & Logs Canadian production drops to 25% of U.S. market by 2015, expected to be 5-7BBF below peak Southern pine lumber expanding; limited growth in Canadian imports 0% 5% 10% 15% 20% 25% 30% 35% 40% 2005 2010 2015 2020 CANADIAN LUMBER SH
Slide 25: Lumber: Summary
24 LUMBER: Summary Scale mills in diverse geographies Diversified products and customers Reducing controllable manufacturing cost through operational excellence Well-positioned to win
Slide 26: OSB, Engineered Lumber & Distribution
25 Cathy Slater Senior Vice President, OSB, ELP & Distribution OSB, ENGINEERED LUMBER & DISTRIBUTION
Slide 27: OSB, Engineered Lumber & Distribution
26 OSB, ENGINEERED LUMBER & DISTRIBUTION Distribution Centers — 21 OSB mills — 6 Production Capacity 3.0 billion square feet ELP Mills — 6 Veneer/Plywood Supply Facilities — 3 Production Capacity Solid Section: 32 million cubic feet I-Joists: 304 million lineal feet Plywood: 460 million square feet
Slide 28: OSB: OPX Target Set in 2013
27 OSB: OPX Target Set in 2013 EBITDA MARGIN* 50 75 100 2013 Base Benchmark $50 MM % Reli a b ilit y **Reliability benchmark is mill Best in Class; 2013 Base = Q3 2013 YTD. Improve Product Mix 0 25 50 75 2013 Base Goal $10 MM % V alue A d d ed P ro d u c t OPERATIONAL EXCELLENCE** Improve Reliabilit
Slide 29: OSB: OPX Performance
28 OSB: OPX Performance 2014 INITIATIVES Maintenance practices Resin usage Energy reduction Automation 2015 INITIATIVES Press reliability Automation Enhanced product mix Transportation reliability OPERATIONAL EXCELLENCE* 0 25 50 75 2013 Base 2014 2015 Goal *Reliability benchmark
Slide 30: OSB: Current Relative Performance
29 OSB: Current Relative Performance EBITDA MARGIN* Highly competitive results Source for competitor data: public SEC filings *See appendix for reconciliation to GAAP amounts. -10% 0% 10% 20% 30% 40% 2011 2012 2013 2014 YTD Q3 Ainsworth OSB LPX OSB Norbord OSB WY OSB
Slide 31: ELP & Distribution: Turnaround Commitment
30 ELP & DISTRIBUTION: Turnaround Commitment Source for competitor data: public SEC filings *See appendix for reconciliation to GAAP amounts. -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 2011 2012 2013 YTD Q3 2014 Outlook Boise ELP LPX ELP WY ELP -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 201
Slide 32: ELP: Turnaround Performance
31 ELP: Turnaround Performance 2014 INITIATIVES • Veneer productivity • Logs selected for veneer • Resin usage • Selling effectiveness 2015 INITIATIVES Reliability Veneer recovery Supply chain performance ELP TURNAROUND 0 50 100 150 2013 2014 2015 Continue EBITDA Improvement* $ m il li o n
Slide 33: ELP: Current Relative Performance
32 ELP: Current Relative Performance EBITDA MARGIN* Significantly Improved Competitive Position Source for competitor data: public SEC filings *See appendix for reconciliation to GAAP amounts. -4% -2% 0% 2% 4% 6% 8% 10% 12% 2011 2012 2013 2014 YTD Q3 Boise ELP LPX ELP WY ELP
Slide 34: Distribution: Turnaround Performance
33 DISTRIBUTION: Turnaround Performance 2014 INITIATIVES Product margin growth Shipping optimization Stocking efficiencies Sales effectiveness 2015 INITIATIVES Warehouse efficiency Delivery cost Growth in excess of market DISTRIBUTION TURNAROUND Continue EBITDA Improvement* (50) 0
Slide 35: Distribution: Current Relative Performance
34 DISTRIBUTION: Current Relative Performance EBITDA MARGIN* Closing the Gap Source for competitor data: public SEC filings *See appendix for reconciliation to GAAP amounts. -10% -8% -6% -4% -2% 0% 2% 4% 2011 2012 2013 2014 YTD Q3 Boise Distribution Blue Linx Distribution WY Distribution
Slide 36: OSB, Engineered Lumber & Distribution: Summary
35 OSB, ENGINEERED LUMBER & DISTRIBUTION: Summary OSB Continuing focus on cost reduction and reliability Leveraging our market-leading position in flooring Engineered Lumber & Distribution: Achieving 2014 turnaround targets Expect significant additional progress to come Well-positioned t
Slide 37: Cellulose Fibers
36 Shaker Chandrasekaran Senior Vice President, Cellulose Fibers CELLULOSE FIBERS
Slide 38: Cellulose Fibers Business
37 CELLULOSE FIBERS BUSINESS Pulp Mills — 5 Capacity: 1.8 million metric tons Converting Facilities — 2 Liquid Packaging Board — 1 Capacity: 315,000 metric tons GDANSK, POLAND
Slide 39: Cellulose Fibers: OPX Target Set in 2013
38 CELLULOSE FIBERS: OPX Target Set in 2013 EBITDA MARGIN* OPERATIONAL EXCELLENCE** Reduce Controllable Cost 625 675 725 2013 Base Goal $ / T o n $100 MM **Cost of Goods Sold, excluding inflation. 2013 Base = Q3 2013 YTD. 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 2011 FY 2012 FY 2013
Slide 40: Cellulose Fibers: OPX Performance
39 CELLULOSE FIBERS: OPX Performance 2014 INITIATIVES Fully implement 18 month maintenance outage cycle Manufacturing reliability Chemical costs Green energy 2015 INITIATIVES Green energy Liquid packaging board cost and quality Reliability: predictive, preventive maintenance OPERAT
Slide 41: Cellulose Fibers: Current Relative Performance
40 CELLULOSE FIBERS: Current Relative Performance EBITDA MARGIN* Narrowing the Gap to Take Top Position Source for competitor data: public SEC filings *See appendix for reconciliation to GAAP amounts. **Rayonier reflects Rayonier Performance Fibers segment for 2011-2013 and Rayonier Advanced Materia
Slide 42: Fluff Demand: Emerging Market Growth
41 - 2.0 4.0 6.0 2003 2008 2013 2017 Expect fluff pulp demand growth of 3.8% per year Supply position: Southern Pine fiber ideal for fluff Strategically located manufacturing sites with globally competitive costs FLUFF DEMAND: Emerging market growth FLUFF MARKET PULP CONSUMPTION BY REGION Fore
Slide 43: Cellulose Fibers: Summary
42 CELLULOSE FIBERS: Summary Strategically located mills with abundant fiber supply Long-term strategic customer relationships Relentless and disciplined execution of operational excellence initiatives Well-positioned to win
Slide 44: Patty Bedient, Chief Financial Officer
43 Patty Bedient Executive Vice President & Chief Financial Officer
Slide 45: SG&A Cost Structure
44 SG&A COST STRUCTURE
Slide 46: Performance: Reducing SG&A Expense
45 PERFORMANCE: Reducing SG&A Expense ACHIEVING REDUCTION GOAL Reduce SG&A Expense Note: SG&A includes R&D *Base = FY 2013 selling, general &administrative and R&D expense of $708 MM, less WRECO direct SG&A of approximately $145 MM 200 250 300 350 400 450 500 550 600 2013 Base* 2014 Year-End Run Rat
Slide 47: Improving Markets
46 IMPROVING MARKETS
Slide 48: Positive Trends for Our Products
47 POSITIVE TRENDS FOR OUR PRODUCTS Continued improvement in US housing market Anticipate 1.1-1.2 million starts in 2015 Accelerating single-family recovery Higher demand and prices for US logs and wood products: Rebound in US housing Steady export demand Canadian timber supply shortag
Slide 49: Significant Leverage from Pricing Improvement
48 SIGNIFICANT LEVERAGE FROM PRICING IMPROVEMENT TIMBERLANDS Western logs: $10/MBF ≈ $15 million Southern sawlogs: $5/ton ≈ $40 million WOOD PRODUCTS OSB: $10/M3/8” ≈ $30 million Lumber: $10/MBF ≈ $40 million CELLULOSE FIBERS $10/ADMT ≈ $20 million
Slide 50: Capital Allocation
49 CAPITAL ALLOCATION
Slide 51: Capital Allocation Priorities
50 CAPITAL ALLOCATION PRIORITIES Return cash to shareholders Invest in our businesses Maintain appropriate capital structure
Slide 52: Returning Cash to Shareholders: Sustainable and Growing Dividend
51 RETURNING CASH TO SHAREHOLDERS: Sustainable and Growing Dividend QUARTERLY DIVIDEND Up 93% since 2011 Increased by 32% to $0.29 per common share effective 2014 Q3 PAYOUT GUIDELINE 75% of Funds Available for Distribution (FAD) over the cycle* *Funds Available for Distribution: cash flow
Slide 53: Returning Cash to Shareholders: Share Repurchase
52 $700 million share repurchase program Authorized in August 2014 Approximates cash proceeds received as part of WRECO divestiture Repurchased 19% of authorization during Q3 $130 million in repurchases Share count reduced by approximately 4 million RETURNING CASH TO SHAREHOLDERS: Share
Slide 54: Investing in Our Businesses
53 INVESTING IN OUR BUSINESSES Disciplined capital investment Focus: reduce cost structure and improve EBITDA 2015 CapEx to approximate DD&A Opportunistic growth through acquisition Targeted, value-creating opportunities Responsible stewards of capital
Slide 55: Maintain Appropriate Capital Structure
54 MAINTAIN APPROPRIATE CAPITAL STRUCTURE Liquidity Long-term debt of approximately $4.9 billion Investment grade rating KEY FINANCIAL RATIOS TARGET CURRENT* Gross Debt / EBITDA (LTM)* < 3.5 3.1 EBITDA / Pro Forma Interest (LTM)* > 5.0 4.7 *Current and LTM as of 2014 Q3. Pro forma interest exc
Slide 56: Our Vision: Grow a Truly Great Company
OUR VISION ‘9 grow a truly great company fo’ our shareholder istomers and employees HOW WE WIN WEYERHAEUSER A TRULY GREAT COMPANY ) CHASE PERFECTION... CATCH EXCELLENCE
Slide 57: Growing a Truly Great Company - Investor Meeting
56 0 WEYERHAEUSER Growing a Truly Great Company INVESTOR MEETING December 9, 2014 | New York, NY
Slide 58: Biographies
57 BIOGRAPHIES
Slide 59: Doyle Simons
58 DOYLE SIMONS Doyle Simons has been president and chief executive officer since August 1, 2013. He has been a director of the company since June 2012 and was appointed as chief executive officer elect and an executive officer of the company June 17, 2013. He served as chairman and chief executive
Slide 60: Patty Bedient
59 PATTY BEDIENT Patty Bedient has been executive vice president and chief financial officer since 2007. She was senior vice president, Finance and Strategic Planning, from February 2006 to 2007. She served as vice president, Strategic Planning, from 2003, when she joined the company, to 2006. Prior
Slide 61: Denise Merle
60 DENISE MERLE Denise M. Merle, has been senior vice president, Human Resources, since February 28, 2014 and senior vice president Investor Relations since August 1, 2014. She was director, Finance and Human Resources for the Lumber business since 2013. Prior to that role, she was director, Complia
Slide 62: Rhonda Hunter
61 RHONDA HUNTER Rhonda Hunter has been senior vice president Timberlands, since January 1, 2014. Prior to her current position, she was vice president, Southern Timberlands, from 2010 to 2014. She held a number of leadership positions in the Southern Timberlands organization with experience in inve
Slide 63: Adrian Blocker
62 ADRIAN BLOCKER Adrian Blocker has been senior vice president, Lumber since August 21, 2013. He joined Weyerhaeuser in May 2013 as vice president, Lumber. Prior to that role, he served as CEO of the Wood Products Council and Chairman. Throughout his career in the industry, Blocker held numerous le
Slide 64: Cathy Slater
63 CATHY SLATER Cathy Slater has been senior vice president, Engineered Products and Distribution since August 21, 2013. She was Weyerhaeuser’s vice president, Oriented Strand Board from 2011 to 2013. Prior to that role, she held a number of other leadership roles in the company’s Wood Products segm
Slide 65: Shaker Chandrasekaran
64 SHAKER CHANDRASEKARAN Shaker Chandrasekaran has been senior vice president, Cellulose Fibers, since 2006. He was vice president, Manufacturing, Cellulose Fibers, from 2005 to 2006; vice president and mill manager at the Kamloops, British Columbia, Cellulose Fibers mill from 2003 to 2005; and vice
Slide 66: Appendix
65 APPENDIX
Slide 67: 2011 EBITDA Reconciliation: By Segment
66 2011 EBITDA RECONCILIATION: By Segment $ Millions 2011 Timberlands Lumber OSB ELP Distribution WP Other Wood Products Cellulose Fibers Unallocated Items Total Adjusted EBITDA1 $472 ($7) ($4) $6 ($37) ($1) ($43) $597 ($108) $918 Depletion, Depreciation & Amortization (137) (47) (34) (61) (6) (3) (
Slide 68: 2012 EBITDA Reconciliation: By Segment
67 2012 EBITDA RECONCILIATION: By Segment 1. 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, pension and postretirement costs not allocated
Slide 69: 2013 Q3 YTD EBITDA Reconciliation: By Segment
68 2013 Q3 YTD EBITDA RECONCILIATION: By Segment $ Millions 2013 Q3 YTD Timberlands Lumber OSB ELP Distribution WP Other Wood Products Cellulose Fibers Unallocated Items Total Adjusted EBITDA1 $448 $258 $223 $34 ($27) ($2) $486 $252 ($33) $1,153 Depletion, Depreciation & Amortization (115) (30) (23)
Slide 70: 2013 EBITDA Reconciliation: By Segment
69 2013 EBITDA RECONCILIATION: By Segment $ Millions 2013 Timberlands Lumber OSB ELP Distribution WP Other Wood Products Cellulose Fibers Unallocated Items Total Adjusted EBITDA1 $632 $317 $247 $45 ($33) ($2) $574 $353 ($61) $1,498 Depletion, Depreciation & Amortization (166) (40) (31) (46) (5) (1)
Slide 71: 2014 Q3 YTD EBITDA Reconciliation: By Segment
70 $ Millions 2014 Q3 YTD Timberlands Lumber OSB ELP Distribution WP Other Wood Products Cellulose Fibers Unallocated Items Total Adjusted EBITDA1 $624 $254 $39 $65 $3 ($1) $360 $321 ($47) $1,258 Depletion, Depreciation & Amortization (154) (31) (23) (31) (4) -- (89) (116) (9) (368) Non-Operating Pe
Slide 72: 2014 Q3 LTM EBITDA Reconciliation: By Segment
71 $ Millions 2014 Q3 LTM1 Timberlands Lumber OSB ELP Distribution WP Other Wood Products Cellulose Fibers Unallocated Items Total Adjusted EBITDA2 $808 $313 $63 $76 ($3) ($1) $448 $422 ($75) $1,603 Depletion, Depreciation & Amortization (205) (41) (31) (42) (5) -- (119) (156) (13) (493) Non-Operati
Slide 73: EBITDA Reconciliation: Timberlands
72 EBITDA RECONCILIATION: Timberlands $ Millions 2011 2012 2013 2014 Q3 (LTM) West1 $273 $250 $361 $556 South 214 218 225 257 Other1 (15) (8) 46 (5) Adjusted EBITDA2 $472 $460 $632 $808 Depletion, Depreciation & Amortization (137) (142) (166) (205) Special Items 152 -- -- -- Operating Income (GAAP)