Denise Merle – SVP, Human Resources and IR Doyle Simons – President and CEO Patty Bedient – EVP and CFO.

Anthony Pettinari – Citi Mark Weintraub – Buckingham Research Chip Dillon – Vertical Research Partners Gail Glazerman – UBS Alex Ovshey – Goldman Sachs Mark Wilde – BMO Capital Markets Mark Connelly – CLSA George Staphos – Bank of America Steve Chercover – DA Davidson Paul Quinn – RBC Capital Markets Collin Mings – Raymond James.

Good morning. My name is Brad, and I will be your conference operator today. At this time, I would like to welcome everyone to the Weyerhaeuser’s Second Quarter 2014 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session.

(Operator Instructions). Thank you. I now like to turn the call over to Denise Merle, Senior VP of Human Resources and Investor Relations. Please go ahead ma’am..

Thank you, Brad. Good morning, everyone. And thank you for joining us today to discuss Weyerhaeuser’s second quarter 2014 earnings. This call is being webcast at www.weyerhaeuser.com, our earnings release and presentation materials can also be found on our website.

Please review the warning statements in our press release and on the presentation slides concerning the risks associated with forward-looking statements, as forward-looking statements will be made during this conference call. We will discuss non-GAAP financial measures and a reconciliation of GAAP can be found in earnings materials on our website.

On the call with me this morning are Doyle Simons, Chief Executive Officer; Patty Bedient, Chief Financial Officer and Beth Baum, Director of Investor Relations. I will now turn the call over to Doyle Simons..

Thank you, Denise and good morning everyone. Weyerhaeuser delivered a solid earnings performance in the second quarter driven by very strong results in each of our businesses and reflecting our employees’ relentless focus on operational excellence.

This morning we reported second quarter net earnings of $280 million or $0.47 per diluted share on net sales from continuing operations of $2 billion. Excluding discontinued operations and special items, we earned $234 million or $0.40 per diluted share.

This is an increase of nearly 65% compared with the first quarter and almost 30% compared with one year ago. Special items in the quarter included an ongoing gain from a change to the post retirement health plan and restructuring charges associated with our SG&A cost reductions.

Earnings associated with Weyerhaeuser real-estate company RICO are being reported as discontinued operations as a result of the divestiture of that business on July 7. I would like to thank the Weyerhaeuser and RICO employees for their hard work in completing this transaction.

As part of the RICO transaction, we retired nearly 59 million common shares worth over $1.9 billion. These retirements which will be reflected in our third quarter share count more than offset the common shares issued in conjunction with last year’s Longview Timber acquisition.

I will begin the discussion of our business results with some brief comments about market conditions. Severe winter weather earlier this year dampened the start of the spring building season and the U.S. housing market recovery remained sluggish with total housing start up only 6% in the first half of 2014 compared with 2013.

Rising employment and strong consumer confidence support our expectation of further housing market improvements. However, we have lowered our 2014 housing outlook as a result of the weaker market during the first half of the year and are now planning for between 1 million and 1.1 million starts.

The bottom line is we believe that residential housing markets will continue to improve but at a slower rate than it had been previously anticipated. Let me now turn to our business segments starting with Timberlands, charts 3 to 5. Timberlands posted another outstanding quarter contributing $170 million to earnings.

In the West, we experienced steady demand in our domestic markets, our realizations from Western domestic logs declined. Although overall Chinese demand softened somewhat during the quarter as a result of elevated inventory to support our sales volumes to our customers increased compared with the first quarter and our pricing remained comparable.

As anticipated, Japanese demand weakened in the second quarter due to the effect of the increased consumption tax. Western logging and road cost increased seasonally as we log our higher elevations in the summer months when snow is not present.

We remain extremely pleased with the performance of our Longview Timber acquisition which contributed $51 of EBITDA in the quarter. In the South, sea harvest volumes declined due to wet weather and log prices rose by approximately 1% compared with the first quarter.

Second quarter also included $24 million from dispositions of non-strategic Timberlands an increase of $20 million compared with the first quarter. The Timberlands segment continues to benefit from operational excellence initiatives including reduction and stomp to customer logging cost and increased extraction of export quality logs.

Wood products charts 6 and 7, wood products earned $102 million in the second quarter, an improvement of nearly 60% compared with the first quarter. Adjusted EBITDA increased to $132 million compared with $93 million in the first quarter and sales volumes increased seasonally across all our product lines.

In lumber, EBITDA improved by $9 million as high sales volumes due to improved weather and seasonality were partially offset by lower average price realizations. Lumber manufacturing costs continued to decline as a result of our operational excellence initiative which are focused on lowering our costs net of logs.

In OSB, EBITDA was flat as lower realizations were offset by growth and enhanced products and improved productivity. Results for engineered wood products improved significantly compared with first quarter as EBITDA increased nearly fourfold to $30 million.

Sales volumes increased more than 25% for solid section products and nearly 40% for TGI Joists, and average realizations for both products rose slightly. The business also benefited from lower manufacturing costs compared with the prior quarter as a result of operational excellence initiatives and the successful ramp-up of the evergreen Alabama mill.

Our distribution business reported EBITDA of $3 million in the second quarter, an improvement of $8 million. The business remains focused on lowering cost and improving sales and margins.

We’re extremely pleased with the progress that our engineered wood products and distribution businesses made against their operational excellence targets in the quarter. Cellulose fibers, chart 8 and 9, cellulose fibers earned $91 million, a substantial increased compared with $54 million in the first quarter.

Fluff realizations were strong and maintenance cost declined due to fewer schedule maintenance outage dates. The business had another excellent quarter operationally and set a year-to-date record for productivity. Discontinued operations, chart 11.

As I indicated in my opening remarks, results from our real-estate business are now reported as discontinued operations. Second quarter results include after-tax earnings of $22 million from discontinued operations compared with $10 million in the first quarter. The improvement was primarily due to a seasonal increase in home closings.

At the end of the second quarter, we clearly identified all planned cost reductions associated with our SG&A initiative. Implementation is ongoing and we incurred an additional $6 million of restructuring charges in the quarter relating to this initiative.

I’m highly confident we will reach our $75 million run rate reduction target by the end of the year. I will now turn it over to Patty to discuss our third quarter outlook..

Thanks Doyle, and good morning everybody. The housing recovery thus far in 2014 has been slower than anticipated. However, this week’s better than expected forecast on GDP growth for the remainder of the year was welcome news. The outlook for the third quarter earnings is summarized on chart 12, and I’ll begin my comments with Timberlands.

In the west, export log realizations and volumes are expected to decline as a result of normal seasonal softening. The Japan market is normally weaker during the summer months as a result of rainy weather.

In addition to the normal seasonality, the Japanese lumber market has been adversely affected by the implementation of the consumption tax increase. High log inventories at Chinese courts will also likely result in lower demand and prices. Domestic log markets are anticipated to be weaker as well during the third quarter.

Softer export markets combined with the increased supply of logs that typically come to market during the third quarter from the smaller non-industrial private land owners who do not have adequate road systems to harvest on year round basis are expected to exert downward pressure on prices.

As a result in anticipation of the softer markets in the third quarter, we intentionally accelerated harvest into the first half of this year. For these reasons, we anticipate a lower fee harvest in the west in the third quarter compared to the second.

Supply constraints as a result of fire related logging restrictions could result in some upward price pressure in certain markets especially in Oregon. In the third quarter we also expect seasonal increases in western road costs.

In the south, we expect that fee harvest will increase as some harvest in the second quarter was delayed due to wet weather. In addition, we typically perform more of our spending activity on the third quarter, which increases volumes and lowers the average realizations due to mix.

We are also anticipating higher cost due to seasonal increase in silvicultural activities. Earnings from non-strategic land sales should also decrease compared to the higher levels of the second quarter.

We expect that overall earnings in our Timberland segment will be significantly lower in the third quarter compared to the second but comparable to the third quarter of last year. In wood products, we expect that sales realizations will be down slightly for both lumber and OSB with relatively consistent volumes.

Sales realizations for engineered lumber will be up as a result of price increases that were effective as of the beginning of this quarter. Engineered lumber volumes could be somewhat lower due to orders that may have been called forward into the second quarter as a result of the announced price increase.

Log cost in the west should decrease in the quarter and also in Canada to a larger extent. Housing demand has been more muted than expected, however our inventories continue to be in great shape across our system. And our continued focus on cost reduction and operating efficiencies continues to benefit all businesses.

We expect that earnings in the third quarter in the wood product segment will be comparable to the second quarter. In Cellulose Fibers, global softwood inventories as beginning of this quarter were in good shape at a couple of days below normal.

We do see some softening in paper grade especially into China and we expect that inventory levels will return to normal during the quarter. Fluff demand globally remains healthy and our order books are full.

The most significant change in our Cellulose Fibers business in the third quarter will be an extended planned outage at our Longview liquid packaging operation. We will be completing a number of capital improvements that have been planned for some time. These include upgrades to the press section, evaporators, digester and head-box.

The improvements will lower energy and fiber costs and increase the quality of the board and product mix. Although the outage will result in increased maintenance cost, our sales volumes will be only somewhat lower as we have been building inventory in anticipation of this outage and we have had excellent year-to-date operating reliability.

In addition to the liquid packaging outage, we will also have increased plan maintenance in our port mill system compared to the second quarter. Overall, we expect that earnings in our sale of fiber segment will be significantly lower in the third quarter compared to the second quarter and more comparable to the first quarter of this year.

Our real-estate results have been restated for all periods to show RICO operations has discontinued. At the end of the second quarter, our balance sheet was grossed up for funds RICO borrowed in anticipation of the transaction.

Both the cash and the debt are included in discontinued operations as of June 30 and were eliminated after the end of the quarter when the divestiture was completed. As previously announced, we closed the divestiture on July 7.

As a result, our share count was reduced by approximately 59 million shares bringing our current share count to just under 530 million. In addition, we received over $700 million in cash. Our third quarter results will show a gain on the divestiture of approximately $1 billion. Chart 10 summarizes the unallocated items for the second quarter.

In the third quarter we expect that we will once again have a special item for the pretax gain of approximately $45 million related to an earlier post retirement health plan amendment which we are amortizing ratably over the year.

Other ongoing unallocated items are difficult to forecast, as they are driven by changes in foreign exchange, share price and inventory levels. Chart 13 summarizes certain financial items. We ended the quarter with a cash balance of $845 million, an increase of almost $70 million.

There was no change to our long-term debt of just under $4.9 billion and we have no maturities until 2017. As of the end of the second quarter, we had year-to-date capital expenditures including reforestation of $159 million and we still expect the total for the year to approximate $400 million.

Now I’ll turn the call back to Doyle, and I look forward to your questions..

Thank you, Patty. Through the RICO divestiture and Longview Timber acquisition we have positioned Weyerhaeuser as a focused force products company with a productive asset base and significant runway for earnings growth and cash generation. Our strong second quarter results reflect our employee’s commitment to operational excellence.

And we remain focused on driving superior returns from our assets to generate value for our shareholders. Thank you. And now I would like to open the call to questions..

(Operator Instructions). Your first question comes from the line of Anthony Pettinari with Citi. Please go ahead with your question..

Good morning..

Good morning, Anthony..

Good morning..

I had a couple of questions in Wood Products. In engineered wood products it looks like you’ve got $20 million of EBITDA improvement year-to-date. And I believe that you had the $30 million to $40 million target for the year.

And given the progress thus far, do you feel like maybe you’ll be at the top end of that range? Is there maybe potential upside to that target? And then, also for the three main businesses within wood products, I was wondering if you could share what your operating rates were in the quarter?.

So, let’s start with your first question and in our ELP business, Anthony, we were very encouraged by the progress we made in the quarter. As you referenced, we went from $8 million of EBITDA to $30 million, from $8 million of EBITDA in the first quarter to $30 million of EBITDA in the second quarter.

Also as you referenced, our commitment was to improve EBITDA in that business by $30 million to $40 million in 2014 versus 2013. And we think we’re well on the way to doing that, that’s the commitment we’re going to work to get as much earnings out of that business as we can get in 2014.

And like I said, we’re encouraged about the progress we made to date. In terms of operating rates, if you will start with lumber, lumber operating rates were in the low 90%. OSB, was approximately 90% and then ELP overall and as you know that the mixture of products was in mid-70s in terms of operating rates for that business..

Okay, that’s very helpful. And then just a follow-up maybe on Cellulose Fibers.

The project in liquid packaging board, is that going to result in any material increase in capacity or is it just a cost measure?.

Anthony, the most important part of that project is cost reduction and quality improvement. We will get some increased capacity maybe in the around 10% range but that project really was done to lower our energy and our fiber cost and as I said improved the product quality..

Okay, that’s helpful. I’ll turn it over..

Your next question comes from the line of Mark Weintraub with Buckingham Research. Please go ahead with your question..

Thank you.

Just following up a little bit on the liquid packaging and the Cellulose Fibers, can you give us a sense as to roughly how much the outages, are going to impact the third quarter relative to the second quarter?.

Sure Mark. As we indicated in the comments, we anticipate earnings will be lower in the third quarter versus the second quarter in Cellulose Fiber. And that is primarily if not wholly driven by the outages. Just to quantify it a little bit, we think the Longview liquid packaging outage will result in roughly $30 million of the impact.

And as we also said we have additional outages compared to the prior quarter in our port mills. And that would be another $5 million to $10 million impact on the third quarter versus the second quarter..

Great. And then, is it fair to say that when you come out of it the other end, you not only get that back but presumably from the project, picking the liquid packaging, you hopefully have even higher earnings power assuming pricing and markets are similar.

And any way to give us a feel for the type of returns or earning enhancement that you might get from the project?.

Well, as Patty alluded to Mark, the project will do three things, improve quality, lower cost and then have roughly 10%, over time it will take a little bit time to get there but 10% improvement in production. So, all those things will factor in.

We won’t provide a specific number but clearly the reason for doing that project is to drive additional earnings in cash out of our liquid packaging board operation..

Okay. Thank you and congratulations for the evidence of continued operational improvement..

Thank you, Mark..

Your next question comes from the line of Chip Dillon with Vertical Research Partners. Please go ahead with your question..

Yes, good morning Doyle and congratulations on a great quarter..

Thanks Chip..

I wanted to ask you about distribution, I know that it seemed like in the first quarter hadn’t really turned much of a quarter but on the numbers I see here, it looks like you went from something like $16 million EBITDA loss from the first half of ‘13 to $2 million loss in the first half of ‘14.

So, it may not be – it may not have arrived yet, but it looks like if the needle is moving in the right direction, do you still think you’ll get to your goals for the year or have your feelings about the business changed any in the last three to six months?.

So, we’re very encouraged about the progress we’ve made in distribution Chip. And as you will recall, the objective there is to improve earnings about $30 million to $40 million. In that business versus 2013, we think we’re absolutely on track to do that.

I can tell you there is a real focus on continuing to grow profitable share, making sure our cost are at the target levels. And I’ll just tell you we’re encouraged as now more than half of our sites are in fact profitable and we see more and more of those becoming profitable as we move forward.

So again very – lots of work to do as you mentioned but very encouraged by the progress that’s been made over the past couple of quarters..

Okay.

And then on the $1 billion gain on RICO, is the early tax impact on that that we should anticipate in the third quarter?.

No Chip, that transaction as we talked about was done in a reverse more structure. And that is one of the benefits of that structure is there is a tax on that gain..

I see, and then lastly, just on the dividend at this point, I would imagine with $700 million plus coming in from RICO and with the strong results and I know the third quarter is not going to be quite a repeat.

But with the lower share count, is that something that you guys are thinking about in the near-term in terms of bringing?.

So, Chip, as we previously disclosed, we’re going to be visiting with our board in mid-August regarding the dividend, potentially use of cash proceeds and those types of things.

Just to remind you and everybody else, as we think about capital allocation and what our financial priorities are, as you know, first and foremost is returning cash to shareholders primarily through a growing dividend but also about share repurchase where appropriate. Second, is investing our business to high return projects.

And then, just as you heard on sale this morning, then improved cost structure and our margin and of course we’ll also look for opportunities to grow our business through value creating acquisitions. Again, an example there would be Longview. And then, finally, making sure we maintain the appropriate capital structure.

And as you know we’re in good shape on that front. So that’s the way we think about it and again we’ll read back to you in mid-August..

Thank you..

Thank you..

Your next question comes from the line of Gail Glazerman with UBS. Please go ahead with your question..

Hi, good morning..

Good morning, Gail..

Good morning, Gail..

Maybe going back to engineered wood for a little bit, the volume growth that you had relative to the comments about housing maybe not picking up as quickly as you thought and given how much engineered wood is driven by housing.

I mean, what do you think of your volumes, were you picking up share, was there an inventory build or do you think that volume has actually been used?.

I think there are a couple of things that were happening. Or I’m guessing there were a couple of things that were happening there. I think first as we mentioned Gail, there is a price increase going into effect, and first is third quarter.

So, I think there might have been some pull forward in terms of buying in the second quarter versus the third quarter. So I think that’s part of the equation. I will also tell you as I mentioned earlier, we had a very focused sales effort in that business and I’m encouraged by the progress we’re making there.

So, I think our sales folks did a really good job of growing profitable share in that business in the second quarter as well..

And Gail, as Doyle referenced in his remarks, we did bring up the ever green Alabama facility so all of our engineered wood products facilities now are operating. And so that came up starting shipping product in May so we’ll have it for the full quarter in the third quarter..

Okay. And going, and looking at Cellulose Fiber, was there anything in the second quarter result that you wouldn’t view as sustainable, I mean, I was wondering, it is your best quarter since 2011, pricing reported didn’t move dramatically.

I’m just wondering, kind of what you think of that upside?.

Well, probably the thing that drove the upside the most was just outstanding operational performance across the Cellulose Fibers system. And I think that all of the hard work that they’ve been doing is paying off and I would look to that being sustainable and repeatable as we go forward..

Okay.

And looking at the Japanese market, I guess what trends did you see moving through the quarter obviously the tax went up at the start of the quarter? Were things still getting worse or they’re stable, just how do you see that market?.

Are you talking primarily on logs?.

The logs market, yes..

So, we had thought that it would be impacted we started to see some impact in the second quarter and that continued into the third quarter. It’s a little difficult to tell for sure because as I mentioned, the third quarter is normally seasonally weaker.

But I think the latest news that we’ve heard just earlier this week was that the Japanese government is thinking that the impact of the consumption task, now this is broadly was not as significant as many once thought. And that it is starting to come up and they see more activity towards the second half of the year. But we’ll have to see.

But certainly it is softer in the third quarter..

Okay.

And just one last question, your Timberlands guidance for the quarter, can you give the sense of what type of land sale activity might be incorporated in that?.

So, share it..

It’s about – it will be lower than the second quarter as we mentioned, it will probably be somewhere around $8 million to $10 million lower than the second quarter..

Okay, thank you..

Your next question comes from the line of Alex Ovshey with Goldman Sachs. Please go ahead with your question..

Thank you. Good morning everyone..

Good morning Alex..

Good morning..

Couple of questions, starting off, engineered wood products. Can you put a little bit more meat around how much you think pre-buy may have contributed to the volume number in the second quarter? I guess we’re now through July kind of looking at how the divine trends were in EWP in July.

Does that sort of give you any incremental insight into how much pre-buy there was in the second quarter?.

Well, it is always difficult to assess pre-buy, I would tell you our activity in the month of July continued to be good. So, I would tell you there are some – there clearly was some pre-buy in the month, in the second quarter.

But we didn’t see just a dramatic fall-off in July so we continue to be encouraged by those markets and our sales efforts in those markets..

Okay, that’s very helpful Doyle.

And then, when you talk about share, so taking share in the EWP, is that again just traditional lumber or would that be against other players in the EWP market?.

And again, it’s hard to know exactly what happens on shares because we don’t see all the different information. But really what we’re talking about when we talk about profitable growth is just growing the ELP business overall.

And there are some coming out of saw logs maybe but that’s not specifically what we’re talking – when I say I didn’t mean all of it, some of it coming out of lumber, possibly but that’s not really what we’re referring to..

Okay, understood.

And then, just one last one, Patty, on the corporate line, just from a modeling perspective, so, is it really just zero to minus 5 an then everything else is kind of noise around like you said currency and inventories and some of the other things as well on that line?.

Yes, Alex, as I mentioned, it is difficult to forecast. And that’s one of the reasons why when we put this information together we’ve started putting that chart 10 together for you just so you can see what it looks like in the number of things that move around. So, if for us, the foreign exchange really is a function of the Canadian exchange rate.

So as that moves, our share based comp certainly you can track that with the stock price. And then, there are just a whole lot of other stuff that goes in there.

This quarter, and as we go forward, the other thing that we are focused on is lowering our G&A but we will have some costs on a go forward basis that were historically allocated to the RICO business. And we are focused on making those costs lower as well. But you may see some choppiness as a result of that as we work through the G&A cost..

Okay, got you. All right, thank you very much. I appreciate it..

You bet..

Your next question comes from the line of Mark Wilde with BMO Capital. Please go ahead with your question..

Good morning, Doyle, good morning, Patty..

Good morning, Mark..

Good morning Mark. Good to hear you..

Good to be here.

I wondered if you guys could talk a little bit about just this shift that we’ve seen over the last year and where your log exports are going because it’s been a pretty marked drop off in the proportion of the volume that goes to Japan and about a 20% to 40% in terms of the growth in what’s going to China?.

Sure Mark. It really is a function of not Japan getting smaller but the China market growing. And so, as you think about the percentage of the pie to those markets, it moves around. What we’re really focused on is growing the pie, and Japan continues to be an extremely good market and important market to us.

But what’s moving that really is more growth in the China market in terms of incremental growth..

And Patty, does that, should that change sort of your average just realization in your export log prices, because my understanding is always that China doesn’t buy as high priced of log as what goes into the Japanese market?.

Yes, that’s fair Mark. From a mixed perspective, you will see the average realization come down. But you will still see a spread between the specific China log compared to the Japanese log..

Yes.

And how would you think about that spread right now?.

It’s closing a little bit but they’re both – both of them have come down in the quarter as we talked about. So I don’t know that the spread is changing all that much..

Okay. In terms of the way we look at acquisition opportunities in wood products, Mark. We will, as we’ve said, we would be interested in potentially growing our wood products business but we’re going to be very disciplined. We’re not going to grow those businesses just for the sake of growing.

And if we find one-off opportunities that something we would consider, but our primary focus in our wood products business is we’ve said, it’s just running on what we have better. And that’s what we’re focused on doing every day..

Mark, I think you’re referencing the licensing that we did on some of our technology IP international intellectual property. And I think it’s an important recognition of the importance and the strength of our intellectual property. But I will tell you that it’s not a meaningful increase in terms of our quarterly results..

Okay. Very good. That’s helpful. Good luck in the second half of the year..

Thank you..

Thanks Mark..

Your next question comes from the line of Mark Connelly with CLSA. Please go ahead with your question..

Thank you. To follow on Mark’s question, so the market in Asia for logs is moving in the direction that you said last quarter you thought it would.

Does that change the way you think about your Timberland mix? Over the years, obviously Weyerhaeuser bulked up on higher value species and got rid of a lot of the lower value, Hemlock and other lower value stuff.

So, are we likely to see Weyerhaeuser maybe attempt to move that shift back to owning or being more willing to own lower value species in the Pacific Northwest?.

Well, Mark, we are focused primarily on Douglas Fir, that is what our most of our lands are best suited to grow. We do have some Whitewoods as well. And so, as you know, not every acre grows best the same species. So I would say we will continue to have a focus on Douglas Fir but our Whitewoods inventory will be important as well.

Although it does come at a lower price point based on the quality..

Okay. And then a second question, you’ve said that you have catch up investing to do, particularly in Wood Products.

When do you think you will have caught up? Will that happen this year or next? And what do you think of as normal spending in manufacturing and maintenance, once that catch up is done?.

So, Mark, we’re spending a lot of time working on capital issues currently. We will, as always once we make some decisions for next year, either late this year or early next year we will be passing those on to you.

It will take more than one year period to get our – to make the investments in some of our wood product operations that we need to, to get our cost structure to where we want it to be.

And as you know, that’s the real focus of the investment we’re going to make going forward is to continue to drive down our cost structure in order to fully accomplish the OpEx initiatives that we laid out. So, that’s how we’re thinking about it. And as we develop more detail, we will be sharing that with you..

Thank you. That’s very helpful..

Thank you..

Your next question comes from the line of George Staphos with Bank of America. Please go ahead with your question..

Thanks, hi, everyone. Good morning. Thanks for all the details. I guess my first question I wanted to go back to distribution. And Doyle recognizing there were a number of factors that you had mentioned in past, that you were focused on in terms of improving the profitability.

Were there one or two key things that you did this quarter better as a business than you did first quarter or second quarter last year that drove the swing in profitability? And could you comment to those things?.

Sure, sure George. And it really is, when you step back and look at it, it’s getting the focus where it needs to be and just doing the blocking and tackling better.

But just a couple of things that I would highlight is, we set very specific targeted cost levels that we needed to accomplish in our distribution business to get – start to get earnings to where they needed to be. And we made significant progress towards those target levels in the second quarter.

And then the other thing I would say is, while we’ve been successful in driving the top-line in that business as I referred, we haven’t always had a focus on driving what I call a profitable share. And I think our folks did a really nice job of growing business that added profit to the bottom line in the quarter.

So, those are the two specific things that I would highlight occurred in the quarter. Again more work to do but really encouraged about the progress that we’re making in distribution and our folks have done a lot of really good work in that business..

In terms of the runway, is it going to be more on the cost side or is it going to be more on what you’ve got on the racks and can sell? I mean where do you get the further uplift from here, if you had to pick between those two?.

Normally I’m not ambiguous as you know George. But I would tell you, it’s absolutely both. We have to pull both those levers to get to where we need to get to. So I think there is, opportunities both on the cost side and making sure we get the turns right, making sure we have the right products that our customers need.

So lots of levers to pull in that business and we’re going to need to pull everyone (inaudible) we are..

Okay. Thanks for that. Doyle, in terms of the Longview board machine, I seem to remember that machine’s maybe had some operating difficulties in the last couple of years. Now clearly you’re going to improve productivity, you’re going to improve cost and you need a little bit of throughput out of this as well.

But how much of this was driven by the fact that maybe the machine had been a little bit less reliable in terms of quality over the last few years? And can you explain a little more in terms of what was behind that?.

So, let me give my view point of probably little more short time and I’ll let Patty expand on it. But again, I’m just telling you, this facility has run really well, and Patty mentioned in her comments, it’s run really run over the past few quarters, both from a quality perspective.

You’re right, historically we’ve had some quality issues but quality, we made significant improvements in quality over the past few quarters. And just to be real straight forward about it, the operating rates and reliability of liquid packaging had been kind of up the charts the last few quarters.

Now again, we’re excited about this, the outage and the capital that we’re getting because we think that’s going to allow us to take it to the next level.

But this is not one where we go we’re having big, big problems so we got to go spend this money, this is the one that’s really going to just further enhance what we’ve been able to do at this facility at least over the past year..

That’s where I was going with that question. Go ahead, Patty, I’m sorry..

No, I was going to say George that as we look at the spending that’s being done at Longview there is some spending for cleaners that will improve the quality. But as a percentage of the total dollars, it’s a small amount of that. The big piece as well in this project is that it will allow us to upgrade the product mix coming out of that operation.

Today, the excess fluff pulp goes into wet lap. And so there is not a great market for that. So we’ll be able to change the product mix a little bit. And then again, the big piece will be just lowering the fiber cost and lowering the energy cost.

So, it’s not a place where as we look across our system that we would spend capital in any operation that we didn’t think had the ability to run well and run reliably. And Longview has proven that. And I think they have a really good package going forward as it relates to the return that we’ll get from these projects..

Okay. Last question and I’ll turn it over.

Would it be fair to say that in recognizing it is the Board’s decision, that at this juncture, from your vantage point of the key metrics, either from a balance sheet standpoint or the operating fundamentals of the Company and the sectors that you’re in, that you’ve checked the box, so to speak, in terms of being able to raise the dividend in the next several quarters? Thanks guys and good luck in the quarter..

Yes, I think George, going back to the comments that I made in December at the Investor Meeting. We said that we would be looking forward to increasing the dividend in the future but that would likely be after we closed the RICO transaction.

And that is now closed and as Doyle said, we’ll be visiting on that with the board at the next board meeting in mid-August..

Thank you, Patty..

Your next question comes from the line of Steve Chercover with DA Davidson. Please go ahead with your question..

Thanks, good morning, everyone..

Good morning..

A couple that pertained to I guess the Wood Products segment. Starting with engineered wood products, I think you indicated that all of you facilities are now running and you’re at around a 75% operating rate. Let’s, if we call housing at $1 million, and potential $1.5 million, that’s a 66% operating rate.

Will you guys have sufficient engineered wood product when the housing actually hits mid cycle, particularly if EWP gains share versus solids on lumber?.

So, as I have said, we’re running at 75% kind of on a blended average across the system. Some of our mills are running more than that, some of our facilities are running less than that. So, clearly, in some products if housing continues to improve, we may not have enough production to always meet our customer’s demand.

In others we clearly do have as Patty mentioned, we’re in the process of ramping up evergreen. So we’ve clearly gotten more capacity there. So, we feel pretty good about where we’re positioned overall in engineered lumber, in order to continue to service our customers as we move forward..

But the capacity you have is the limit, right? Everything that has been de-commissioned has been demolished or is there any kind of temporarily or indefinitely idled capacity that still exists?.

You’re exactly right. The capacities that we have, is what we have. And so there is nothing sitting out there to go start back up, we’re running what we have..

Okay. Thanks for that clarification. And then, just on distribution, great to see it, turn the corner a little bit.

Again looking towards mid cycle, can you give us a sense of the revenues and I guess EBITDA or margins are, please?.

Yes. It’s hard to project exactly what revenues or earnings are going to be. But I’ll just tell you as mentioned our commitment this year is to improve by $30 million to $40 million in our distribution. But let’s be clear about it, that doesn’t get us to where we absolutely need to be.

We think as we do benchmarking versus our competition, we understand we are clearly not the leader. Our goal will be to be the leader in that business. And I’ll just put it this way Steve, I think there is still a lot of run way.

Once we accomplish the $30 million to $40 million this year, there is still a lot of run way in front of us to continue to improve earnings and cash flow out of that business going forward..

Yes, I should think so.

And so, therefore, would it be safe to say that your aspiration is to see 3%, perhaps 4% EBITDA margin once you’re back at mid cycle potential?.

Yes, I mean, our goal is to be like I said the leader in that business. And those types of numbers are absolutely what we would be able to accomplish..

Great. Thanks, Doyle..

Thank you..

Your next question comes from the line of Paul Quinn with RBC Capital Markets. Please go ahead with your question..

Yes, thanks very much. Morning, Doyle and Patty. Just a couple of easy questions here. Just trying to put in context on Cellulose Fibers, you mentioned the year to date record productivity. I know you’ve moved to 18 months maintenance schedules on some of your mills.

Just if you could give us an update on where you are in that program? And then how the year-to-date productivity record balances with that?.

Sure, Paul. As it relates to the 18-month cycle, now all mills will be on an 18-month cycle. The last one really is Longview which was on 18-month and we took it down, it went down in ‘13, it’s coming down this quarter or this year in order for us to be able to flip those capital improvements. But now they are all on an 18-month cycle going forward.

So, I don’t have the specific, how many mills and which year will be in ‘15 versus ‘14 in front of me. But they are all on that cycle. In terms of the productivity, that really is as we look at it, how are we doing in terms of our uptime and how are we doing in terms of our production per day. And all of our mills are really operating very strongly.

And they are competing with each other as well as one gets better they benchmark each other and share best practices. And we’re really pleased with the work that’s being done by the folks in Cellulose Fibers.

As I mentioned, the third quarter earnings will be significantly lower but that’s because of the maintenance that we’re doing because the mills aren’t running well..

Okay, great to hear. And Doyle, you mentioned that you’d be interested in growing the Wood Products business.

Just curious as to which area within Wood Products is more highly sought after than other areas?.

Yes, and what I’ve said on the wood products business is, our primary focus is continuing to run what we have better and again making progress there. In terms of specific businesses, there is not a specific business we feel compelled to grow at all. We like our position.

And all of those – in those businesses, again we think our biggest opportunity is to run when we have better. With that said, if we find growth opportunities then we think can add additional value for our shareholders in that business that’s something we would consider..

Great thanks very much. Best of luck..

Thank you..

Thanks, Paul..

Your next question comes from the line of Collin Mings with Raymond James. Please go ahead with your question..

Good morning, Patty and Doyle..

Good morning..

Congrats on the quarter. A couple of questions here. Can you guys discuss a little more about the trends you’re seeing in the different wood baskets you operate in the US south? I know we’ve heard kind of just generally out there that Arkansas and Mississippi is heavily lagged. Maybe as it relates to you guys the Carolinas.

But put a little bit more color on what you’re seeing, kind of your expectations there for the back half of the year?.

Sure, so in terms of further on saw logs, we should step back and look at overall in the south, we saw log prices go up about 4% in ‘13 versus ‘12. As we mentioned earlier, we had seen saw log prices up modestly in the first half of ‘14 versus ‘13. And we think that trend will continue into the second half of ‘14.

Yes, there are always some regional differences based on capacity, based on weather, based on a lot of different things. So yes, you do see some different things in mid south versus Gulf versus Atlantic, whatever the case may be. But overall, we continue to anticipate but continued improvement in saw log prices going forward..

Okay.

And then, I don’t know if maybe you guys could break out roughly how much of the EBIT during the quarter came from the south versus say the west?.

I don’t have that exact number in front of me.

I would tell you that in terms of looking forward in the third quarter, most of the decrease in EBIT will come in the west versus the south because of the export markets both in terms of what the export markets are doing in export and then obviously that has an impact back to the domestic market as well..

Okay. And then, just to like following up on earlier question and I know it’s early. But as you think about the – really the step-up in the run rate as far as the CapEx this year is.

The $400 million kind of – is that even appropriate if we think about 2015 or could there be another, I guess, I’m asking, could be there another leg up in terms of CapEx dollars, do you feel like this was kind of the high water mark?.

Colin, as we look at our capital expenditure what will drive that is our ability to continue to have high quality projects which we would focus on as driving our cost down. So as Doyle said, we’re still looking at those numbers.

I hope actually that that number will go up a little bit because that means we do have good projects but we’re still working through that as we are speaking. And I think the other thing that we have really had a focus on is making sure that before we spend capital, all of our operations are really operating well.

So, we’re not looking at growing capacity necessarily from additional capital spend, it really is focused on improving the cost position of our operations. But we’ll be giving you more clarity on that as we get closer to the end of the year..

Okay. And then, again, going back to just the capital allocation and still recognizing you’re in the middle of that process right now.

Can you maybe just put a little more detail on how much time are you really actively spending right now looking at Timberland acquisition and growing that part of the book currently or has it really just been trying to again determine where you want to put capital to work and still kind of integrating Longview?.

We’re always looking for opportunities to grow our Timberland base. So, there is as you probably are assuming – I’m sure you know there is some activity out there. There has been a pretty consistent flow. We look at every opportunity that comes along. We take a disciplined approach to it. And we will continue to do that.

So, no, we didn’t – Longview has been a fantastic acquisition for us. We’re well ahead of our synergy targets. We’re on track to deliver the EBITDA that we indicated out of that acquisition. But we didn’t put other things on hold as we went through that process. We’ve continued to look.

Again, we’ll be very disciplined but we think there will be opportunities to grow our Timberland base going forward and we’re focused on doing just that..

Okay, thanks. I’ll turn it over..

Thank you. We’ve now reached the allotted time for questions. I would like to turn the call back over to Doyle for closing remarks..

Thank you. And thanks everybody for joining this morning. Before we sign-off, one thing I would like to do as, I would like to acknowledge Kathy McAuley who actually retired effective today. It’s hard to express just how much Kathy has contributed to Weyerhaeuser during her 14 years with us. Patty and I would like to offer our sincere thanks.

And more importantly wish her all the best in her retirement. As we have previously announced Denise Merle has taken on responsibility as Senior Vice President of HR and Investor Relations. And Beth Baum is the Director of Investor Relations. They will both be available to answer any follow-up questions that you may have.

And again, I’d like to thank everybody for joining us this morning. And we appreciate your interest in Weyerhaeuser..

Thank you. This concludes today’s conference call. You may now disconnect..