Denise Merle - Senior Vice President, Human Resources and Investor Relations Doyle Simons - Chief Executive Officer Patty Bedient - Chief Financial Officer Beth Baum - Director, Investor Relations.

Mark Weintraub - Buckingham Research Tyler Langton - JPMorgan Usha Guntupalli - Goldman Sachs Chip Dillon - Vertical Research Partners Anthony Pettinari - Citi Gail Glazerman - UBS Paul Quinn - RBC Capital Markets Steve Chercover - D.A. Davidson Mark Wilde - BMO Capital George Staphos - Bank of America Collin Mings - Raymond James.

Good morning. My name is Brent and I will be your conference operator today. At this time, I would like to welcome everyone to the Weyerhaeuser First Quarter 2015 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 would now like to turn the call over to Denise Merle, Senior Vice President 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 first quarter 2015 earnings. On the call with me this morning are Doyle Simons, CEO; Patty Bedient, CFO; and Beth Baum, Director of Investor Relations. 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 the conference call.

We will discuss non-GAAP financial measures and a reconciliation of GAAP can be found in earnings material on our website. I will now turn the call over to Doyle Simons..

Thank you, Denise and good morning everyone. This morning, Weyerhaeuser reported net earnings for the first quarter of $90 million, or $0.17 per diluted share on net sales of $1.7 billion. Excluding a $9 million after-tax charge related to a non-strategic asset, we earned $99 million, or $0.19 per diluted share.

We were pleased with our first quarter performance in timberland and wood products as our operational excellence efforts enabled both businesses to improve earnings compared with the fourth quarter despite weaker market conditions.

Our cellulose fiber business faced several challenges in the quarter, including ongoing West Coast port disruptions, a strengthening U.S. dollar and the slower-than-expected restart of our largest fluff mill following a scheduled maintenance outage.

Our earnings before special items also included non-cash foreign exchange losses of approximately $0.04 per diluted share related to debt held by our Canadian entity. We continue to aggressively execute our share repurchase program. During the first quarter, we repurchased over $250 million of common shares. That’s $250 million of common shares.

In total, through the end of the first quarter, we had repurchased over $450 million, or 65% of our $700 million share authorization. I will begin the discussion of our business results with some brief comments about the housing market. U.S.

housing activity paused in the first quarter as severe winter weather delayed the spring selling season and disrupted construction activity throughout much of the country.

Although reported new home sales were lower than anticipated in the first quarter, we are encouraged by the recent positive homebuilder sentiment regarding an improving spring selling season. Employment growth, strong consumer confidence and historically low mortgage rates should support improvement in new home sales this year.

Our outlook for 2015 remains unchanged at approximately 1.1 million starts. Let me now turn to our business segments, starting with timberlands, Charts 3 to 5. Timberlands contributed $162 million to first quarter earnings, an increase of $19 million compared with the fourth quarter.

Operational excellence initiatives related to cost efficiencies and log merchandising more than offset the effect of softening Western markets and unusual winter weather. In the West, average log sales realizations declined.

This decline is primarily due to a shift in mix as we sold fewer logs in the export markets as the continued strengthening of the U.S. dollar pressure demand and pricing for our export logs. Sales volumes to Japan declined due to seasonally weaker demand in a slightly softer housing market following last year’s increase in the consumption tax.

However, average sales realizations for our Japanese logs improved slightly due to favorable mix. Chinese demand remains slowed throughout the extended lunar period and inventories remained at elevated levels.

The combination of lower export log demand and unusually favorable logging conditions generated an oversupply of logs in Western domestic markets and domestic log pricing weakened during the quarter. In the South, unusually wet weather slightly amplified our normal seasonal decline in fee harvest volumes.

Average sales realizations for Southern logs were comparable to the fourth quarter. First quarter included earnings of $17 million from disposition of non-strategic timberlands, an increase of $14 million compared with the fourth quarter.

The timberlands business continues to expect $20 million to $30 million of operational excellence improvement in 2015 from efforts related to log merchandising, harvesting, transportation and silviculture efficiencies and non-timber revenues.

Wood products, Charts 6 and 7, wood products contributed $62 million to first quarter earnings, an improvement of $6 million compared with the fourth quarter. EBITDA increased to $88 million.

Results were comparable to the first quarter of last as benefits from operational excellence initiatives helped the business offset lower year-over-year sales realizations of nearly 15% in OSB and 7% in lumber.

In lumber, EBITDA was unchanged compared to the fourth quarter as the business fully offset a 3% decline in average sales realizations with benefits from operational excellence initiatives to reduce manufacturing costs net of logs and overhead expenses. In OSB, EBITDA decreased by $3 million.

Average sales realizations declined 5% compared with the fourth quarter. This decline was largely offset by reductions in manufacturing cost. Engineered wood products reported first quarter EBITDA of $26 million, an increase of $12 million compared with the fourth quarter and $18 million more than the first quarter of 2014.

Sales volumes rose across all product lines, primarily due to stronger demand in the West and per unit manufacturing costs improved due to higher production volumes and operational excellence initiatives.

EBITDA for the distribution business declined by $2 million compared with the fourth quarter, but improved $2 million compared with the first quarter of 2014. This business remains focused on improving margins and lowering cost.

Our wood products businesses continue to target 2015 operational excellence improvement of $20 million to $25 million from lumber, $10 million to $15 million from OSB, $15 million to $20 million of additional engineered wood products EBITDA and $20 million to $30 million of additional EBITDA from distribution.

Cellulose fibers, Charts 8 and 9, cellulose fibers contributed $33 million to earnings compared with $87 million in the fourth quarter. The West Coast port disputes significantly affected our cellulose fiber business throughout the quarter.

Although a tentative contract agreement was reached in late February, productivity at the ports of Seattle and Tacoma remain well below normal due to continued congestion at the container terminals. Both ports are also absorbing volumes from carriers that have canceled service at the Port of Portland.

As a result of the disruption, we incurred 13 days of downtime at our liquid packaging facility as well as incremental warehousing and transportation costs throughout the segment. In total the port disruption affected segment earnings by approximately $15 million in the quarter. This was significantly more than we had originally anticipated.

Turning to our pulp mill systems, pulp markets weakened during the first quarter as global inventories remained above balanced levels and a strengthening U.S. dollar pressured broader market pricing.

Average pulp sales realizations declined due to slightly softer pricing for pulp, weaker pricing for our premium towel and tissue grades and an unfavorable product mix. First quarter also included higher maintenance expense for a planned outage at our largest fluff mill.

The restart of this mill took longer than anticipated resulting in lower production and higher per unit manufacturing costs. This mill is now running well. The cellulose fiber business remains relentlessly focused on delivering operational excellence improvements of $30 million to $35 million in 2015.

I will now turn it over to Patty to discuss our second quarter outlook..

Thanks, Doyle and good morning everybody. The outlook for the second quarter is summarized on Chart 13 and I will begin the discussion with timberlands. In the West, log export volume is expected to improve from Q1 consistent with higher seasonal construction activity.

Log prices are likely to remain under downward pressure due to the combination of currency headwinds and higher-than-normal inventories in China.

Western domestic log prices and volumes have continued to decrease through the first part of this quarter, but we anticipate they will stabilize as housing activity begins to improve and mill inventories come back into balance. Fee harvest in the West will decrease slightly and road costs are expected to increase seasonally.

In the south, we anticipate pricing consistent with first quarter levels. We expect typical seasonal increases in fee harvest and silviculture costs. In Q1, the gain on non-strategic land sales was $17 million. We anticipate only minimal land sales in Q2.

In total, we expect that earnings in our Timberlands segment will be lower in the second quarter compared to the first. Moving to wood products, thus far in the quarter, prices for lumber and oriented strand board have continued to soften and are currently below the average sales realizations for last quarter.

However, we do expect this trend to reverse as weather improves and building activity picks up. As a result, we anticipate that average realizations in the second quarter for both lumber and OSB will be similar to Q1 on seasonally increased volumes.

Volumes in engineered wood products are expected to increase significantly with little change in pricing. Western log prices should decrease compared to the first quarter and per unit manufacturing costs will likely be lower due to higher operating rates and our operational excellence initiatives.

Overall, second quarter earnings in the wood products segment are expected to be significantly higher than Q1. In cellulose fibers, pulp prices have been negatively affected by foreign currency exchange rates and higher than normal inventory levels. Second quarter average sales realizations are anticipated to be lower than the average for Q1.

The effect of lower realization should be partially offset by increased sales volume. While the disruptions caused by the West Coast port dispute have lessened, we continue to have some negative effects in the second quarter.

We will have an extended outage at one of our southern fluff mills in order to perform scheduled maintenance and to install energy-related capital improvements. These improvements include installation of a turbine generator and upgrades of the boilers and steam and power systems.

Benefits include lower manufacturing costs through improved reliability, improved energy efficiency and increased outside power sales. This second quarter outage is anticipated to result in more than twice the number of outage days compared to the 17 days in Q1.

We expect maintenance expense will be approximately $15 million higher in Q2 compared to Q1. As a result of this extended outage, overall earnings in the cellulose fibers segment are expected to be lower in the second quarter compared to the first.

We have only one mill maintenance outage scheduled for the second half of the year and therefore earnings in the second half of the year should be significantly higher than the first. Chart 10 details the major items of unallocated costs. Q1 expense, before special items, increased to $41 million from the fourth quarter level of $13 million.

As Doyle mentioned, the major item was the non-cash foreign exchange impact of $29 million resulting from the weaker Canadian dollar. In Q2, we expect that the total expense for unallocated items will be closer to the fourth quarter level before considering the effect of foreign exchange rates.

Now, I will wrap up with some overall financial statement comments. I will refer you to Chart 11 for this discussion. Cash for the quarter decreased $422 million. Cash flow from operations was $77 million. As you can see from the chart, the first quarter is typically our lowest quarter due to seasonality.

Major outflows in the first quarter were as follows. Capital expenditures were $89 million. We continue to expect that total capital expenditures for the year will be approximately $500 million. We paid $152 million in dividends and repurchased shares for $253 million. The share repurchase activity is summarized on Chart 12.

As of the end of the first quarter, we had just over $240 million remaining on the $700 million authorization that we announced last August. Now, I will turn the call back over to Doyle and I look forward to your questions..

Thank you, Patty. We are optimistic housing markets will strengthen throughout the remainder of 2015 and look forward to improving demand as the spring selling and summer building season progresses. Going forward, our priorities remained unchanged.

We are relentlessly focused on improving our performance through operational excellence and delivering on our priorities for capital allocation. And now I would like to open the floor for questions..

[Operator Instructions] Your first question comes from the line of Mark Weintraub with Buckingham Research. Please go ahead with your question..

Thank you.

I just wanted to focus a little bit more on the Cellulose Fibers segment just to make sure I understood what was said, I believe you said that the maintenance costs would be as much as $50 million higher second quarter versus first quarter?.

Thanks for asking that question, Mark. It’s $15 million..

Okay, alright. That changes things, all those questions throughout the window.

Shifting gears then, when looking at the first quarter, I think you originally were anticipating that you would see lumber and presumably OSB pricing come back and it didn’t, do you think that was more a function of the demand or supply side issues, maybe if you could delve into that a bit?.

Mark, as you know historically we have experienced price increases in the first quarter and the fourth quarter in lumber. As you highlighted, we thought that would happen again this year, it did not. And to your question, I think there were two drivers. Number one is while January was okay from a weathers perspective, February and March were not.

So clearly from a demand perspective, the lack of construction activity due to the severe weather had an impact on the demand side of the equation. I think there was also some impact from additional supply of lumber coming from Canada due to the currency situation.

So I think it was a combination of both of those things that resulted in pricing not improving to the level that we had anticipated when we had the fourth quarter call..

And so is it fair to say that the demand side should take care of itself assuming housing continues to improve and how do you feel of the supply side, is the stronger dollar – does that change the playing field a bit on a go-forward basis or does – are there reasons why that will come back to normalized and the supply issues disappear?.

Yes, I think it’s the latter, Mark. I think the demand side will clearly take care of itself. And fortunately we are starting to see some real signs of improvements there. On the supply side, I think that takes care of itself over time as well.

As you continue to see improvement in export markets for lumber and as we also know, there is just a natural constraint on how much lumber can come from Canada on an ongoing basis because of the pine beetle situation. So I think both supply and demand work temporary phenomenon in the quarter and will take care of themselves over time..

Okay, I will get back in queue. Thank you..

Your next question comes from the line of Tyler Langton with JPMorgan. Please go ahead with your question..

Yes. Good morning. Thanks. I guess just timberlands, Doyle I mean, I think you mentioned kind of touched on that in your opening remarks, but I guess, in general revenues were down but profits were up, could you just talk a little bit about how much sort of mix may be contributed operational excellence.

And I guess applied on the wood products side, because there is sort of a similar trend there as well..

Yes. So, it’s referred to in the comments. We clearly saw some benefit from operational excellence in both the timberland business and the wood products business in the first quarter.

And timberlands, to your point, basically what happened there is we had lower price and volume as we talked about, but that was more than offset by lower cost in the quarter, the lower costs being both in the west and in the south in the lower price and volume of course being primarily in the west.

In addition, we had some benefit from higher land sales, but that’s what got us to the improvement in the first quarter versus fourth despite the fact that we had weaker market conditions specifically in the west.

On the wood products side, I would say we were pleased with the fact that we clearly saw OpEx improvements in our results in the first quarter. Because as we talked about, we did in fact, have resident higher prices, we had lower prices pretty much across the board.

So, I would tell you our continued effort for example in lumber to reduce our cost net of log. We saw benefit there in OSB, lower manufacturing cost.

And then in ELP where we saw a nice improvement really what – the key driver there was we had lower price kind of offset by higher volume, but the – we had overall lower manufacturing cost due to favorable resins, less maintenance downtime in the quarter, but frankly before I was just running better as a result of our OpEx effort.

So, that’s kind of how what we saw play out in the first quarter versus fourth..

And then I guess do you think you are on track with your operational excellence goals to exceed the targets for this year or are you generally sort of in line?.

Yes, I would say we are on track in both timberlands and in wood products. We got some catching up to do in cellulose fiber..

Got it. Okay, thanks so much..

Thank you..

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

Thanks. It’s actually Usha Guntupalli on for Alex.

How are you?.

Good.

How are you this morning?.

Good, thanks.

Just following up on the operational excellence program as you are working through this program, has execution proved a bit more difficult than original expectations for any of the segments or maybe are you even seeing opportunities for further savings in any segments?.

I would say generally and made this comment before as we get deeper into our operational excellence program it’s harder work to get it done.

But with that said as I just referred to very pleased with the progress that we made in our timberlands business and our lumber business – I mean, timberlands business and our wood products business in the fourth quarter, still some additional work to do in cellulose fiber, but we are very encouraged by the progress we made.

And I can tell you our folks are working really hard everyday to deliver against those targets and we are confident that we will reach those targets in 2015..

The one thing that I would add is on the – Doyle did a nice job of walking through the operational excellence on the businesses. One of the other areas that we had was our G&A targets – SG&A targets.

And as we said at the end of the year that we had identified the things that we needed to execute on to get that and you can see in the results year-over-year the improvement is coming through there. So, we are also equally pleased on that front..

And just a quick one on FX, are you seeing a major impact on trade flows for the log market given all the FX slows around the world?.

I am sorry will you repeat your question please?.

Yes.

Could you talk a little bit about the FX impact on the log market like are you seeing major changes in trade flows around the world?.

Yes. So, as we talked about we did see some impact on the trade flows in terms of our export volumes in the first quarter. As we stated, volumes were down both into Japan and into China. And as a result, there was additional trade flow that came into the domestic market and that was part of the reason for the lower cost – lower priced logs.

Overall, lower price realizations in the first quarter versus the fourth quarter..

Great, thank you..

Thank you..

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 Patty..

Good morning..

Good morning Chip..

First question is on the – just to make sure I heard this right.

I know that timberland, I think sales were top line $25 million in the first quarter, did you say that earnings impact was $18 million?.

Are you talking about the gain on non-strategic land sales in the Timberland segment?.

Yes, that will go away in the second quarter? Yes..

Yes. The gain was in the first quarter was $17 million in total and that was an increase of $14 million over the fourth quarter. And we really don’t expect anything of any significance in the second quarter..

Okay..

So if that’s true that will impact our Timberland earnings without $17 million. And we would expect that that’s probably half of the decrease of Q1 to Q2. The other piece would be primarily Western logs..

I see. Okay, that’s helpful. Now, switching gears, Doyle you had mentioned coming in back in December of ‘13 that the two businesses within wood products that you really wanted to see that needed to improve the most were engineered wood and distribution.

And it looks like at least like in the first quarter and just kind of watching that trends of the engineered business, engineered wood products is doing great compared to what it had done, but it also on the same token looks like distribution is kind of still well, better it’s still bumping along breakeven and how would you sort of look at those businesses strategically over the next year or 2 years.

And has for example, engineered kind of earned its right to grow yet and what has to change in distribution?.

Yes. So to your point Chip, we did make the comment that we needed to significantly improve the performance in both of those businesses. And in 2014, as you will recall we improved earnings in each of those businesses – both of those businesses by $30 million to $40 million, so real progress.

At the end of 2014, as you also recall Chip, we made the comment that that was good progress, but we still have a lot of work to do to get these businesses to where they need to be long-term. Thank you, for your comment on the progress that we made on ELP in the first quarter and we were pleased with that, more work to do.

And on distribution we did made slight improvements there. But what I would tell you is we set goals – OpEx goals for ELP of $15 million to $20 million for 2015. And we are on track and maybe a little bit ahead of schedule to deliver on that and then on distribution, $20 million to $30 million.

And I am still confident that we will accomplish that going forward. So I would say progress in both businesses, still work to do.

And ultimately as I have said, we just got to show that we can in both of those businesses, earn above our cost of capital over the cycle and sustainably and maybe more importantly how to execute our competition, so still more work to be done. But thanks for your comment on the progress..

And then I guess, the last question is just you have certainly executed on the buyback as you said you would back in last August in the wake of the building – homebuilders sale, homebuilding business sale.

As we get out, I would imagine to the next – to this summer or maybe early fall and assuming you have worked through the remaining authorization, what is your sort of your view then, are you going to take another look to see if you should continue a buyback.

I know that obviously, a lot of these – this buyback was funded by the sale of homebuilding business.

And you also – I am sure what would fit your thinking is your view towards opportunities in timberland acquisitions although we keep hearing there is really not much on the market, so what – any early thoughts on those issues?.

Chip, as you know we spend a lot of time focusing on capital allocation around here and we are constantly reviewing our various alternatives. To your point, as we approach the completion of the current repurchase authorization, we will work with our Board regarding the best use of our cash going forward.

As we have previously stated, long-term we believe the appropriate level of cash in our balance sheet is in the $300 million to $500 million range. And even with the completion of the current share authorization we will be well in excess of that.

So something we are spending a lot of time working on thinking about and we will make some decisions as we move forward..

Thank you..

Thank you..

Your next question comes from the line of Anthony Pettinari with Citi. Please go ahead with your question..

Good morning..

Good morning, Anthony..

Regarding the West Coast port strike, I think you indicated it was $15 million in 1Q. And I think Patty said that there was you are still kind of feeling the effects of that this quarter.

Is there any way to size what the impact of West Coast port strike might be this quarter? And then I think you indicated the oversupply of Western logs that you saw in 1Q, you have had some level of confidence that might sort of work itself out domestically as demand improves.

I am just wondering the inventory situation in China and the oversupply in China, do you have any view as to what – when that situation sort of normalizes?.

Okay. So, in terms of the port situation, that has been – as we said in our comments, has taken longer to get resolved than we had originally anticipated. There are still some congestion at the port. We had no situation in Portland in some of the traffic there moving to Seattle and Tacoma.

But to your point, Patty, I did say that it was $15 million impact in the first quarter and we would expect that to be $5 million or less impact in the second quarter..

I think it could be $5 million to $10 million in the second quarter..

Okay. And then the – your question regarding – let’s talk a little bit about kind of how we are viewing the export markets and the overall markets for our timberland for our logs. In Japan, what we have seen there is we talked about reduced log demand by lower housing activity. The strong U.S.

dollar is impacting the pricing as our customer competes with other alternatives from Europe due to the comparative FX rates and Q2 log shipments as we said should be up seasonally compared with Q1, but the price we anticipate will be down and we expect prices to stabilize as we go out of the second quarter into the third quarter.

China, there we are having the strong U.S. dollar is having a negative impact on the U.S. log demand and pricing relative to imports from New Zealand and Russia. Log inventories as everybody know remain elevated at approximately 4.5 million cubic meters.

We expect our shipments to be higher in the second quarter compared with the first quarter due to the Chinese building season. We expect continued downward pressure on pricing in 2Q. And here again, we expect prices to stabilize in the second quarter moving into the third quarter.

I would make the point on China, despite the current situation if you take a little bit longer term look we believe China will continue to be a key market for us due to continued growth in middle class in China and the limitation – the natural limitations on additional wood supply from Russia and New Zealand, but China has been volatile in the past and we think we will continue to be volatile going forward.

And then finally if you look at it at the domestic markets, I think to your specific questions, we think the – the volume and prices that we see there will flatten its housing activity accelerates, especially in California and we are starting to see some of that.

And as log inventories normalize, a part of why the log inventories got to the condition there is because of the very favorable logging conditions that occurred in the first quarter..

Okay, that’s very helpful. I will turn it over..

Thanks..

Your next question comes from the line of Mark Connelly with CLSA. Please go ahead with your question. Mark, please make sure that your line is not on mute..

Mark, are you there?.

Sir, would you like to go to the next question?.

Yes..

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

Hi, good morning..

Good morning, Gail..

Doyle and I guess in one of your responses to your question you referred to seeing some positive signs of improvements, I guess we are in May, it wouldn’t be a surprise, but I was just wondering if you could put a little bit of color behind that, where are you seeing the improvements and how would that compares to this time last year?.

Gail, I am sorry. You cut out a little bit on our end.

So, if you can repeat your question for us please?.

Sure.

In response to your earlier question, you referenced seeing some positive signs of improvement, so and it wouldn’t be a surprise we are into May, but I am just wondering if you could put a little bit of color behind that exactly where you are seeing it and how would it compare to this time last year?.

Yes. So as I said we are seeing signs, it comes partially from discussions that are ongoing with our customer base. We are also encouraged by the commentary that’s coming out of the home builders that we talk to. And their commentary is a lot more people are showing up. Even some commentary that first time homebuyers are starting to show up.

So it just feels like it’s the spring selling season is starting to shape up well. As we have said, it was deferred because of weather. But all in all, with – almost without exception, our customers and others that to are saying the demand is there, folks are interested. And if you really look at it, that makes sense.

I mean you have got full-time employment, its the highest level it’s been in many years. You got consumer confidence, you got gas prices that are down over 30% year-over-year. You still got very low rate mortgages. You got the FHA and heard working together to try to bringing the first-time homebuyers, so a lot of very positive things.

And we are seeing it in the sentiment that we are hearing and from our customer base..

Okay. And can you talk a little bit about what you are seeing on the cost environment, you had put out some targets based on where oil prices are, are things targeting in that level.

And maybe specifically, are you seeing any offset in terms of ocean freight to offset maybe some of the pressure you are seeing in export market?.

Yes. We – as you referred to, Gail we did give some guidance on what we thought the positive impact would be from lower diesel prices. We saw some of that in the quarter. Overall, I would say the benefit was roughly $5 million because of the lower diesel prices in the first quarter versus the fourth quarter.

That has helped on the ocean freight and that has partially offset some of the pressure that’s been on pricing. The other thing I would say, and I think you asked this question last time, we are seeing partially offsetting that, we are seeing some negative impact from our oil and gas revenue from our timberland side.

Our best guess is that will be down somewhere to $5 million maybe $10 million in the – in 2015 versus 2014 if we kind of continue at these oil prices going forward..

Alright.

And just one last question on the fluff pulp market, we have seen another really large supply announcements, you have got a company looking at doing hardword based fluff down in Brazil and another one doing softwood in Brazil in addition to projects here, has any of this changed your outlook, are you hearing anything from your customers that would kind of make you worried as you look at some of that supply coming on next year?.

Gail as we look at that market, the demand for that is growing. And that’s why we do need more supply overall to meet that demand. The unfortunate part is that oftentimes when it comes on, it comes on in chunk. So it takes a while for the market to absorb it.

I think the good news that we are hearing from the folks who are bringing that supply on is they do have the opportunity to produce both paper grade as well as fluffs. And so I suspect that that will come in over the course of time.

But there is no question that as we look at our own demand growing and their customers growing, that there is just more demand for fluff both in the emerging markets and also in the adult and continent here domestically..

Okay, 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.

Lot of questions here have been answered, but just overall guidance, you guys sort of guided after the Q4 call that this quarter would be a little bit better, just wondering how you think about that when you are seeing prices lower than your expectations, do you – was there a thought to revise the guidance at some point in the quarter and is that your – what is you current thinking?.

I want to make sure I answer your questions so restate that Paul just….

Well, if go back to the Q4 guidance for Q1, it seemed a lot more bullish than what you are able to achieve and a lot of things moved in the quarter, I mean it’s the best guess at the time. Just thinking about I am just wondering how you are thinking about that.

When you see prices like say for example lower lumber and lower OSB prices when you guided materially higher pricing, it’s a real improvement in wood products.

Would you look at revising that guidance or is that something that’s a point in time in your way for the quarter?.

Yes, that’s a really good question. And the way we think about it, let me talk specifically about wood products is we did say that we anticipated prices going up in the first quarter versus the fourth quarter. That was based on what we were seeing in January when we did that.

And as I mentioned earlier, January was a good month and we were right on track. Some things happened in February and March. That on the demand side primarily as we talked about that impacted lumber and OSB prices.

We also did make the comment on the first quarter call that those were our best guesses and we would all watch lumber and OSB prices together and see what happens. So, our sense is that, that’s something that not unique to us. It’s being – is able to be tracked by our analysts and investors and can make adjustments accordingly.

So, if it was – what our experience was, was dramatically different than what’s happening in the marketplace.

To your point at that point, we would consider officially revising guidance, but if it’s just something that’s public in what’s happening in the marketplace, we typically would not revise guidance just based on that, because there is a lot of visibility to those prices in the marketplace..

Okay, that’s very helpful. And then just additionally on cellulose fibers, it looks like you had some operational hiccups in Q1 and probably a drag on this West Coast port issue in Q2 and maintenance.

Just wondering how much better the second half of the year is going to look? I mean, it looks quite a bit from my standpoint just trying to get some color from you guys..

Yes. As Patty alluded to in her comments, we anticipate that the second quarter will be significantly higher than the first quarter. To your point, we have got a lot of maintenance in the first half of the year both in the first quarter and then we have doubled the amount of maintenance in the second quarter.

We also had some – to your point some headwinds and small operational issue in the first quarter. All of that should be behind us. So, we would anticipate significant improvement in our cellulose fibers business in the second half versus the first half..

Great, thanks very much. Best of luck..

Thank you..

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

Good morning, everyone. These are kind of cleanups at this point, but could you please expand on your comments on engineered wood.

I think you said flat pricing, maybe you can tell us what the operating rates are and when you expect to see some tension kick in to justify higher prices?.

Yes. So, we do anticipate – or we did have – I am going to start with the operating rate. Operating rates in the first quarter were in the low 70s in terms of ELP. In terms of pricing, you are right we said that was roughly flat currently versus the first quarter.

There has been a price increase announced in Canada and for ELP roughly 5% or a little more and we think that could pass through. We won’t see the full benefit of that until the third quarter..

Okay. And then clearly you think that housing was going to get better and Q1 was just basically seasonal.

Do you think that your pulse on the market is as accurate today as it was when you owned RICO? And what is your full year view for starts?.

Yes. I would say the first quarter was more – first quarter is always slower seasonally, but I would say it was even worse than the normal seasonal, because of the weather impacts again in February and March. As I said earlier, January was a pretty good month and then February and March were difficult due to the weather situation.

In terms of our visibility into housing, our crystal ball is not necessarily any better than anybody else’s, but we have a lot of customers that we talked to on a very regular basis. So, I would say we have got good visibility into housing going forward. I would say in terms of what our forecast is for starts, it is unchanged at $1.1 million.

And actually, we are really encouraged by what we have seen over the past few weeks in terms of again, talking to customers and their overall sentiment for housing.

And if you really step back and look at and it and I have talked about it earlier, there are a lot of really things – positive things happening which should continue to drive household formation.

The employment level, the consumer confidence, the lower gas prices, where mortgage rates are – the availability is improving in terms of mortgage for first time homebuyers. So a lot of encouraging things there that we think will continue to drive housing going forward..

I agree with you actually. So, thank you very much. I appreciate it..

Thank you..

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

Good morning Doyle and good morning Patty..

Good morning Mark..

Good morning Mark..

I got a lumber question and I got a timberland question. My lumber question, Patty is kind of two pieces. One is typically I think of you guys lagging what we would see in terms of random lengths in terms of lumber realizations you report every quarter.

And I just want to kind of confirm that and see how we reconcile that with your assumption that price will be flat kind of quarter-to-quarter.

And also within lumber, it looks like Southern lumber prices are starting to come down now even while we are seeing a little pickup in West Coast lumber prices, so how will that affect you guys sort of Southern prices versus Western.

And then just the lag between reported prices than what you realize?.

Sure. I think as you think about what we report against the random lengths framing composites for lumber, the framing composite has made up a number of different grades and it doesn’t equate exactly to what we are manufacturing. So sometimes we lag, sometimes we are a little ahead. So I don’t know that I would say we always have that same relationship.

As you think about what happens in the South versus West, of course we have operations in both our southern system is larger than our Western system. One other things that I think will help our Western system for lumber in the second quarter is the log prices coming down.

And as you know, log prices are a big or log costs are a big cost of producing lumber. So the West will get a little help on that. And in the South, we would expect that those log prices will be unchanged as well. So little more important to us in the South just based on the size of the system, but both geographies are important to us..

Okay. And then over on to timberlands, I wondered Doyle if you can just talk a little bit about sort of what you see out there in terms of the timberland acquisition markets, how you are kind of seeing values right now.

And just how you think about Weyerhaeuser’s timberland portfolio going forward, you are pretty heavily skewed right now in terms of your earnings to the Pacific Northwest, you want to shift that over time?.

So Mark, in terms of the deal flows overall, it was low in the first quarter in both the South and the West, as we have previously said we expect that to increase as we move through the year. And I will tell you there is still a lot of money chasing deals going forward.

In terms of our specific portfolio, as you know we have got 4 million acres in the South, 2.7 million acres in the Pacific Northwest. We would like to grow both areas. We like the positions where we are. We will look at growing both the South and the Pacific Northwest.

But with that said, we are going to continue to be very disciplined in terms of our approach and make sure that any acquisition opportunity that we look at meets our specific criteria of having appropriate cash flow on returns, both in the near-term and long-term, strong market access and ability for us to add value or synergies and I think the Longview acquisition is a good example of where we were but able to add synergies as a result of that transaction.

So we will look to grow both in the West and in the South we like our position in both of those, but we will be very disciplined in the approach that we take..

And Doyle how do you think about international timberlands, because at one point this was a big growth focus for Weyerhaeuser and I think you have peeled that quite – back quite a bit, how does that sort of fit in the situation now?.

Yes. I think our biggest opportunities for growth going forward, Mark, will be domestic. We will continue to look internationally. As you know, we have Timberland Uruguay. That is a really good timberland. We have got a good team in place there. The growth rates there are really encouraging.

So, we understand international timberland, but I think on a risk-adjusted basis I think our bigger opportunities going forward will be domestic as opposed to international..

Okay, that’s helpful. Thanks very much. Good luck in the coming quarter..

Thank you..

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

Hi, everyone. Good morning..

Good morning, George..

How are you doing? A lot of my questions have been asked already.

So, maybe a couple of bigger picture questions and not necessarily to pick on cellulose fibers, I guess, first of all, Doyle, if we look at the portfolio, my guess is your strategy – your strategic view wouldn’t have changed a whole heck of a lot since December presentation, but certainly cellulose fibers does operate to a different cycle than your classic housing related businesses.

And so can you update us on your thoughts in terms of how C fibers, fits within the whole portfolio and why it fits well? And then separately within cellulose fibers, you mentioned that you are relentlessly focused on operating excellence over the balance of the year, which suggests that you perhaps wanted to improve performance of maybe some things that didn’t go as well as you would have liked in the first quarter.

Obviously, you can’t control the port situation or maybe you could have where there are some things with the port and the situation your reaction to it as a company that you thought you could have done better and the mill outage in coming back from that again lag a little bit.

Is that a reflection at all of the new maintenance schedule or totally not related at all? Thanks and good luck in the quarter..

Thank you, George. And I am going to take your second question first and then I will come back to the bigger question. So, in cellulose fibers in the quarter, we did not see much benefit from operational excellence. In terms of the start up of the mill that was down, that’s something that we could have done better.

In terms of the port situation and the FX situation, those are just were what they were. I was actually really proud of the way our team managed through the very difficult port situation from the fact that it really did – it had a really significant impact on our ability to ship product. We had to move things around.

We had additional transportation costs. We had warehouse costs. A lot of moving parts there in our team was on top of it and did a really nice job of managing through that and has continued to do that as we move forward. So, comment on the $30 million to $35 million of OpEx, I am absolutely convinced we are going to get that for the year.

There was not much that showed up in the first quarter in our cellulose fiber business unlike out other two businesses, where it did show up, but we have got a good team in place, we have got the right strategy and the mill outage. When you take those down, you start them back up, it doesn’t always go as well as you had hoped.

That happened this quarter and we will manage that better as we move forward. In terms of the strategy overall, for cellulose fibers, as you alluded to, we talked about that at our December meeting. And we like having cellulose fiber business as part of our overall portfolio partly because of the reason you said.

It does tend to be countercyclical to some of our other businesses, but much more importantly, we like the cash – the very strong cash flow generation that we have historically received from that business and we are convinced we will continue to generate significant free cash flow going forward.

We like that, because that ties to our number one capital allocation priority of having a growing and sustainable dividend and we believe the cash flow that we generate from that business will continue to allow us to grow our dividend going forward..

And Doyle…..

One of the projects that will significantly improve our operational excellence going forward was, as Doyle said, we didn’t have in the first quarter and we won’t have the full benefit in the second quarter, but is that energy installation and boiler upgrade that we are doing in one of our fluff mills in the second quarter.

So, we are excited about the additional power generation sales that we will have from that upgrade, but also it will significantly improve the reliability of that mill and thereby lower our cost going forward as well.

So that’s just one example of an operational excellence focus that you haven’t seen show up on the bottom line yet, but we will start to see some of that improvement later in the year..

Thanks for that Patty. Doyle, I guess the fact that you didn’t mention it means it wasn’t an issue but you have not seen the new maintenance schedule affect your ability to bring mills back up in a timely way or have you? Again, thanks and good luck in the quarter..

No. George and you are right, I didn’t mention it because it did not have an impact. That was a mill that went down. And as we said when you start mills back up, sometimes they don’t start up as well as they should, that’s what happened on this occasion. And we will work to make sure that doesn’t happen going forward..

It’s tougher than running a spreadsheet I guess. Have a good quarter..

Thanks George..

Thanks George..

Ladies and gentlemen, we now have time for one additional question. Your final question comes from the line of Collin Mings with Raymond James. Please go ahead with your question..

Hi, good morning Doyle, good morning Patty.

Just a couple of questions here, first Patty and I may have missed this but again despite some of the pricing headwinds and given some of the operational improvements you are seeing the lower log cost, could you see wood products earnings bounce all the way back up to year ago levels or is that a bit too optimistic?.

I think that we would certainly see our second quarter significantly higher than the first quarter as I said. To get to the roughly a little over $100 million of a year ago quarter we are going to have to see some really significant turnaround in prices, that we haven’t seen yet.

So I am pulling for it, but it’s unlikely that we ill get there unless as I said pricing just really significantly has an inflection point from here. But it will be somewhere south of that, but still significantly higher than what we saw in Q1..

Okay, that’s helpful.

And then again you talked a little bit about as far as acquisition priority if you guys stop being on the radar, but maybe just provide a little bit more of an update of what you are seeing as far as sawlog price improvement in the region if any I know I think in 2Q you are looking for flat pricing, but just the outlook in that market.

I know some of your peers have kind of suggested that given some of the weakness in Asia that, that tipping point as far as the supply demand in that region may have been pushed out even further, so can you just maybe update us on what you are seeing in that region?.

Yes. So in the South, we continue to anticipate that Southern sawlog prices will be up 3% to 4% in 2015 versus 2014. That’s kind of what we saw in Q4 ‘14 versus ‘13. We think that trend is going to continue. It’s hard to know exactly what the tipping point is going to be to your question. And China, as I mentioned earlier is going to be volatile.

So I don’t get too concerned about that component of it. I think as housing continues to improve, that’s going to help on the demand side and then overall on the supply side, the constraints that Canada has in place because of the pine beetle situation will be a key driver there.

So we are not yet to the tipping point, I think it’s still in front of us and the key driver there is going to be what happens with U.S.

housing and as I mentioned earlier, we continue to be encouraged by the progress there, just had to pause in the first quarter, but the fundamentals are clearly in place for a continued improvement in housing as we move forward..

Okay, that’s helpful.

And then I guess just following up really quick and as far as the Pacific Northwest, is there a good way to think about as far as you are looking at 40% year-over-year decline as far as on log export revenue, I know there are a couple of moving pieces there, but can you maybe give us some sense of how much of that was pricing versus volume?.

Yes. I would say the biggest component and I don’t have that exact breakdown in front of me, but the biggest component of it was the volume as we talked about Japan slows down due to just the general slowdown in housing. And then we all know what happened in China. So clearly, both were components.

But I would tell you, volume was the bigger component of the decrease that was experienced..

Okay. And then just one last one, and Doyle just as you think about that headwinds in the Pacific Northwest.

I mean again I recognized that you think are optimistic that pricing is going to stabilize as you go through 2Q on the domestic front, but is there a point where you really started to ratchet down the harvest activity in the region just with the thinking that may be prices have over corrected here given some of the currency headwinds and the slowing in China and the inventory there?.

Collin, as you know, we do have the ability to flex up and down depending on what’s happened on market conditions. We will see how things play out going forward, do not have any intention to do that at this point, but that is something that we have done historically and we have the ability to do as we move forward. .

Okay, well thanks for all the detail. Good luck during the quarter..

Thank you..

Thanks..

And I would now like to turn the call back over to Doyle for any closing remarks..

Thank you and thanks to everyone for joining us this morning. And most importantly, thank you for your interest in Weyerhaeuser..

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