Weyerhaeuser Company · NYSE:WY
Weyerhaeuser — Citi 2016 Global Property CEO Conference
48 slides from Weyerhaeuser's conference presentation, Mar 15, 2016
Slide 1: Citi 2016 Global Property CEO Conference
Doyle Simons, President & Chief Executive Officer CITI 2016 GLOBAL PROPERTY CEO CONFERENCE March 15, 2016 | Hollywood, FL 1
Slide 2: Forward-Looking Statements and Non-GAAP Financial Measures
FORWARD-LOOKING STATEMENTS AND NON-GAAP FINANCIAL MEASURES 2 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, rev
Slide 3: Merger with Plum Creek
MERGER WITH PLUM CREEK 3 • Shareholders overwhelmingly approved merger - 99% of Plum Creek voted “for” - 98% of Weyerhaeuser voted “for” • Closed on February 19, 2016 MERGER APPROVAL • New Senior Management Team in place • New Board of Directors in place • $100 million “run rate” cost synergies by e
Slide 4: Cellulose Fibers: Strategic Alternatives
• Board of Directors authorized exploration of strategic alternatives for Cellulose Fibers business in November 2015 • Review is proceeding as planned • Additional information forthcoming as process unfolds CELLULOSE FIBERS: STRATEGIC ALTERNATIVES 4 Creating the World’s Premier Timber, Land & Forest
Slide 5: Weyerhaeuser's Transformation
WEYERHAEUSER’S TRANSFORMATION 5 TIMBERLANDS WOOD PRODUCTS CELLULOSE FIBERS WOOD PRODUCTS WRECO • Acquired Longview Timber • Divested WRECO • Merged with Plum Creek • Cellulose Fibers under strategic review *Book value of assets by business segment. Excludes Unallocated Items. Timberlands includes Re
Slide 6: How We Win / What It Looks Like
HOW WE WIN WHAT IT LOOKS LIKE Vv vW KEY WEYERHAEUSER BEHAVIORS A TRULY GREAT COMPANY + Safety + Develop + Act with urgency our people « Integrity + | + Be accountable = Deliver the most + Citizenship : excellence + Be innovative | | + Sustainability * Drive operational | + Keep it simple | | | * Opt
Slide 7: Weyerhaeuser's Investment Thesis
WEYERHAEUSER’S INVESTMENT THESIS • Most value from every acre • Operational excellence • Return cash to shareholders • Invest in our businesses • Maintain appropriate capital structure • Premier timber, land, and wood products assets Superior relative total shareholder return PORTFOLIO PERFORMANCE C
Slide 8: Portfolio
PORTFOLIO
Slide 9: Three Business Segments
THREE BUSINESS SEGMENTS LEADING WOOD PRODUCTS MANUFACTURER • Lumber, OSB, Engineered Wood, Distribution • Low-cost LEADER IN MAXIMIZING VALUE FROM EVERY ACRE • Premium recreation and conservation lands • Valuable surface and subsurface resources LARGEST PRIVATE TIMBERLAND OWNER IN THE U.S. • 13.2 mi
Slide 10: Unmatched Timberland Portfolio
UNMATCHED TIMBERLAND PORTFOLIO Western Region Southern Region Northern Region Note: 13.2 million acres includes 323,000 acres owned in Uruguay (not shown). Source: WY 2015 10-K, PCL 2015 10-K 10 13.2 MILLION ACRES
Slide 11: Diverse and Productive Timberlands
DIVERSE AND PRODUCTIVE TIMBERLANDS 56% 7.3 million acres Southern Region 22% 3.0 million acres Pacific Northwest 56% 7.3 million acres 22% 3.0 million acres 20% 2.6 million acres 13.2 MILLION ACRES TOTAL Highly productive Southern Yellow Pine forests High-value softwood sawlogs, mostly Douglas fir H
Slide 12: Real Estate: Maximize Value of Each of Our 13.2 Million Acres
Higher and Better Use (HBU) • Capture premium values above timberland value – Recreation – Conservation – Development Energy & Natural Resources • Capture value of all surface and subsurface assets – Oil and natural gas – Construction materials and minerals – Wind resources 12 REAL ESTATE: Maximize
Slide 13: Leading Wood Products Portfolio
• Continued improvement through operational excellence • Well-positioned to benefit from improving housing markets 13 LEADING WOOD PRODUCTS PORTFOLIO * Capacity if mills produce exclusively solid section product. Three engineered wood products facilities also produce engineered I-Joists to meet mark
Slide 14: Performance
PERFORMANCE
Slide 15: Cost and Operational Synergies
Cost synergies of $100 million • Primarily corporate and regional overhead cost savings • Confident we will meet or exceed our target • Run rate at 12 months after close Operational synergies will be part of OpX targets • Apply best practices across the portfolio • Optimize harvest and log merchandi
Slide 16: Gains from Operational Excellence
GAINS FROM OPERATIONAL EXCELLENCE 16 Timberlands Lumber OSB ELP Distribution Cellulose Fibers $39 MM $21 MM $24 MM $35 MM EBITDA $8 MM EBITDA $47 MM $25 MM $25 MM $10 MM $35 MM EBITDA $28 MM $34 MM EBITDA OpX CAPTURED THROUGH 2015 $157 MM $174 MM $330 MILLION 2014 RESULTS 2015 RESULTS
Slide 17: Timberlands: OpX Performance
17 TIMBERLANDS: OpX Performance 2016 OpX INITIATIVES • Logging productivity and costs • Transportation cost • Road maintenance & construction spending • Merchandising and marketing to capture full value of every log segment OPERATIONAL EXCELLENCE SIGNIFICANTLY INCREASING OpX TARGET TO INCLUDE OPERAT
Slide 18: Timberlands: Relative Performance
18 TIMBERLANDS: Relative Performance EBITDA* / ACRE OWNED U.S. WEST EBITDA* / ACRE OWNED U.S. SOUTH 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 restated durin
Slide 19: Lumber: OpX Performance
19 LUMBER: OpX Performance EBITDA MARGIN* RELATIVE PERFORMANCE Source for competitor data: public SEC filings | *See appendix for reconciliation to GAAP amounts Note: WY results do not include any Plum Creek amounts. . 2016 INITIATIVES • Rigorous cost control • Improved recovery • Capture full benef
Slide 20: OSB: OpX Performance
20 OSB: OpX Performance EBITDA MARGIN* RELATIVE PERFORMANCE Source for competitor data: public SEC filings | *See appendix for reconciliation to GAAP amounts. 2016 INITIATIVES • Reliability • Controllable costs • Enhanced product mix OPERATIONAL EXCELLENCE CONTROLLABLE MANUFACTURING COST -10% 0% 10%
Slide 21: Engineered Wood Products: OpX Performance
ENGINEERED WOOD PRODUCTS: OpX Performance EBITDA MARGIN* RELATIVE PERFORMANCE Source for competitor data: public SEC filings | *See appendix for reconciliation to GAAP amounts. Note: WY results do not include any Plum Creek amounts. 2016 INITIATIVES • Controllable manufacturing cost • Improved recov
Slide 22: Distribution: Turnaround Performance
22 DISTRIBUTION: Turnaround Performance EBITDA MARGIN* RELATIVE PERFORMANCE Source for competitor data: public SEC filings | *See appendix for reconciliation to GAAP amounts. ** Blue Linx results through 2015 Q3. 2015 Q4 results not yet available. 2016 INITIATIVES • Improved product margins • Reduce
Slide 23: Real Estate Strategy to Capture Highest Value Per Acre
• Disciplined process to identify higher-value lands • Complete portfolio review using Asset Value Optimization over next 12 months • Best NPV outcome wins REAL ESTATE STRATEGY TO CAPTURE HIGHEST VALUE PER ACRE FOR ALL TIMBERLANDS 23
Slide 24: Asset Valuation Optimization (AVO) Process
ASSET VALUATION OPTIMIZATION (AVO) PROCESS 24 EVERY ACRE ASSIGNED A VALUE PHYSICAL ATTRIBUTES Distance to cities, roads, water, % uplands ECONOMIC ATTRIBUTES Income levels, home values SOCIAL ATTRIBUTES Population growth, distance to amenities, quality of life INPUT: ~13 million acre Timberland port
Slide 25: Capital Allocation
CAPITAL ALLOCATION
Slide 26: Capital Allocation Priorities
26 CAPITAL ALLOCATION PRIORITIES • Sustainable and growing dividend • Opportunistic share repurchases INVEST IN OUR BUSINESSES • Timberlands - Improve productivity • Wood Products - Reduce costs MAINTAIN APPROPRIATE CAPITAL STRUCTURE • Committed to a solid investment grade rating RETURN CASH TO SHAR
Slide 27: Returning Cash to Shareholders
RETURNING CASH TO SHAREHOLDERS 27 • MORE THAN DOUBLED quarterly dividend since 2011 • COMMITTED to a sustainable and growing dividend $0.15 $0.17 $0.20 $0.22 $0.29 $0.31 2011 Q1 2012 Q4 2013 Q2 2013 Q3 2014 Q3 2015 Q3 QUARTERLY DIVIDEND PER SHARE
Slide 28: Returning Cash to Shareholders: Share Repurchase
RETURNING CASH TO SHAREHOLDERS: Share repurchase 28 • $2.5 billion share repurchase authorization - $2.0 billion to be completed on an accelerated basis $2.5 BILLION AUTHORIZED $500 MILLION COMPLETE • Approx. $500 million completed - Over 20 million shares - Average price of approx. $26 per share -
Slide 29: Investing in Our Businesses
• Timberlands – Silviculture – Roads and infrastructure • Wood Products – Projects to reduce costs and improve productivity – Maintenance CAPEX • Real Estate, Energy and Natural Resources – Primarily entitlement activities 29 INVESTING IN OUR BUSINESSES * Excludes Cellulose Fibers. 2015 capital expe
Slide 30: Capital Structure
• Post-transaction financing completed – Raised $2.5 billion of 18-month bank term loans at favorable floating rate (LIBOR +1.05%) – Term loans to be paid down primarily through asset sales • Committed to solid investment grade credit rating – Target net debt / EBITDA < 3.5x 30 CAPITAL STRUCTURE $0
Slide 31: 2016 Outlook
• Continued improvement in US housing – Economic expansion and rising employment boost household formations – Anticipate over 1.2 million housing starts in 2016 – Growth in single-family share • Moderate increase in Western and Southern log prices – Strengthening US housing market – Continued strong
Slide 32: Solid Dividend Coverage
32 SOLID DIVIDEND COVERAGE • Increasing cash flow from synergies and operational excellence • Significant reduction in shares outstanding following $2.5 billion repurchase • Improving markets provide upside *See appendix for reconciliation to GAAP. **Excludes improvements associated with Cellulose F
Slide 33: Summary
• Driving enhanced performance through combination of two best in class industry leaders • More than 13 million acres of diverse and productive timberland • Low-cost manufacturing assets • Well positioned to capitalize on housing recovery • Committed to disciplined capital allocation • Focused on dr
Slide 34: Appendix
APPENDIX
Slide 35: Our Team
35 OUR TEAM DOYLE SIMONS President & Chief Executive Officer TOM LINDQUIST EVP, Real Estate, Energy & Natural Resources RHONDA HUNTER SVP, Timberlands ADRIAN BLOCKER SVP, Wood Products TIM PUNKE SVP, Corporate Affairs DENISE MERLE SVP, Human Resources RUSSELL HAGEN SVP, Chief Financial Officer DEVIN
Slide 36: U.S. Housing Outlook
U.S. HOUSING OUTLOOK Drives lumber and log demand 36 HOUSING DRIVERS POSITIVE • Economic growth and rising employment driving household formations • US housing starts still well below trend levels 0.0 0.5 1.0 1.5 2.0 2.5 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 2
Slide 37: Favorable Price Outlook for Wood Products
FAVORABLE PRICE OUTLOOK FOR WOOD PRODUCTS Reflects strengthening demand 37 OSB NORTH CENTRAL PRICE FRAMING LUMBER COMPOSITE • Domestic housing and remodeling growth drives product demand • Price increases reflect increased capacity utilization 150 200 250 300 350 400 450 500 2005 2006 2007 2008 2009
Slide 38: Favorable Outlook for Southern Log Prices
FAVORABLE OUTLOOK FOR SOUTHERN LOG PRICES 38 • Domestic housing demand growth drives product prices and raw material • Canadian log supply constrained, limiting production growth and share of US market • Capacity expansions fuel growing log demand 20 30 40 50 60 70 1996 1998 2000 2002 2004 2006 2008
Slide 39: Export Log Markets
EXPORT LOG MARKETS 39 SOFTWOOD LOG IMPORTS TO CHINA 0 5 10 15 20 25 30 35 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 M ill io n C ub ic M et er s Source: China Gov't Statistics Customs Code Numbers: 4403-2000 Logs, coniferous • J
Slide 40: Western Log Prices: Positive Outlook
WESTERN LOG PRICES: Positive Outlook 40 • California recovery still to come: single-family starts 60% below normalized level • Positive long-term growth in export markets 0 20 40 60 80 100 120 140 160 180 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 T h o u sa n d s QuarterlySource: Bureau of C
Slide 41: Changes to Business Segment Reporting
CHANGES TO BUSINESS SEGMENT REPORTING REAL ESTATE, ENERGY & NATURAL RESOURCES TIMBERLANDS* WOOD PRODUCTS WOOD PRODUCTS CELLULOSE FIBERS UNALLOCATED 41 WEST • Washington • Oregon SOUTH • All Southern States NORTH • Montana • Lake States • New England • West Virginia OTHER • Includes Canada, Uruguay R
Slide 42: 2015 EBITDA Reconciliation: Legacy WY by Segment
42 2015 EBITDA RECONCILIATION: Legacy WY by Segment $ Millions 2015 Timberlands Lumber OSB ELP Distribution WP Other Wood Products Cellulose Fibers Unallocated Items Total Adjusted EBITDA1 $758 $212 $41 $114 $10 ($5) $372 $378 ($86) $1,422 Depletion, Depreciation & Amortization (209) (44) (30) (27)
Slide 43: EBITDA Reconciliation: Timberlands
EBITDA RECONCILIATION: TIMBERLANDS Legacy WY by Segment $ Millions 2011 2012 2013 2014 2015 West1 $273 $250 $361 $556 $467 South 214 218 225 262 284 Other1 (15) (8) 46 2 7 Adjusted EBITDA2 $472 $460 $632 $820 $758 Depletion, Depreciation & Amortization (137) (142) (166) (207) (209) Special Items 152
Slide 44: 2014 EBITDA Reconciliation: Legacy WY by Segment
$ Millions 2014 Timberlands Lumber OSB ELP Distribution WP Other Wood Products Cellulose Fibers Unallocated Items Total Adjusted EBITDA1 $820 $319 $46 $79 $2 $-- $446 $447 ($79) $1,634 Depletion, Depreciation & Amortization (207) (41) (31) (41) (6) -- (119) (155) (12) (493) Non-Operating Pension & P
Slide 45: 2013 EBITDA Reconciliation: Legacy WY by Segment
2013 EBITDA RECONCILIATION: Legacy WY 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) (
Slide 46: 2012 EBITDA Reconciliation: Legacy WY by Segment
2012 EBITDA RECONCILIATION: Legacy WY by Segment 1. Adjusted EBITDA for legacy WY is a non-GAAP measure that management uses to evaluate the performance of the company. Adjusted EBITDA, as legacy WY has historically defined it, is operating income adjusted for depreciation, depletion, amortization,
Slide 47: 2011 EBITDA Reconciliation: Legacy WY by Segment
2011 EBITDA RECONCILIATION: Legacy WY 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
Slide 48: Reconciliation: 2015 Funds Available for Distribution
RECONCILIATION: 2015 FUNDS AVAILABLE FOR DISTRIBUTION 48 $ Millions 2015 Legacy Weyerhaeuser Legacy Plum Creek Pro Forma Combined Weyerhaeuser Funds Available for Distribution1 $577 $397 $974 Cash for Investing Activities 487 66 553 Cash from Operations (GAAP) $1,064 $463 $1,527 $ Millions 2015 Cell
Weyerhaeuser — Citi 2016 Global Property CEO Conference on 6ix