Elizabeth L. Baum - Director-Investor Relations Doyle R. Simons - President, Chief Executive Officer & Director Russell S. Hagen - Chief Financial Officer & Senior Vice President.

Anthony Pettinari - Citigroup Global Markets, Inc. (Broker) Collin P. Mings - Raymond James & Associates, Inc. John P. Babcock - Merrill Lynch, Pierce, Fenner & Smith, Inc. Mark Connelly - CLSA Americas LLC Mark A. Weintraub - The Buckingham Research Group, Inc. Steven Pierre Chercover - D. A. Davidson & Co.

Clyde Alvin Dillon - Vertical Research Partners LLC Mark William Wilde - BMO Capital Markets (United States).

Good morning. My name is Brent and I will be your conference operator today. At this time, I'd like to welcome everyone to the Weyerhaeuser First Quarter 2016 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. Thank you.

I would now like to turn the call over to Beth Baum, Director of Investor Relations. Please go ahead..

Thank you, Brent. Good morning, everyone, and thank you for joining us today to discuss Weyerhaeuser's first quarter 2016 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 the earnings materials on our website. On the call this morning are Doyle Simons, Chief Executive Officer; and Russell Hagen, Chief Financial Officer. I will now turn the call over to Doyle Simons..

Timberlands; Real Estate, Energy and Natural Resources; Wood Products; and Cellulose Fibers. To make it easier to compare current and historical results, business segment results for prior periods have been adjusted to reflect our new segment definitions.

We've also revised our definition of adjusted EBITDA to add back the non-cash basis of real estate sold. With this change, EBITDA for the Real Estate, Energy and Natural Resources segment will better reflect the cash generated by those activities. Going forward, we will focus on adjusted EBITDA for all our businesses.

I will now begin the discussion, Timberlands, charts 3 to 5. In Timberlands, we're reporting EBITDA by three primary geographies, Western Timberlands includes Washington and Oregon; Southern Timberlands includes all Southern states; and Northern Timberlands includes operations in Montana, the Lake States, New England, and West Virginia.

Results from Canada and Uruguay are reported in other Timberlands. Recreational lease activities continues to be reported within the Timberlands segment and volumes and realizations for our Timberlands business are now reported in tons.

Timberlands contributed $129 million to first quarter earnings, an improvement of $22 million compared with the fourth quarter. These results include a higher non-cash depletion and amortization costs due to the step-up in Timberlands basis associated with acquisition accounting and the alignment of our accounting policies.

Adjusted EBITDA for Timberlands increased by $39 million to $199 million. Approximately, 12% of Timberlands first quarter EBITDA is attributable to the addition of Plum Creek operations. Western Timberlands contributed $118 million to first quarter EBITDA, an improvement of $15 million compared with the fourth quarter.

Western fee harvest volumes increased due to slightly higher harvest for legacy Weyerhaeuser land and a partial quarter of Plum Creek harvest. Average realizations for Western logs declined slightly due to a shift in mix from export to domestic markets.

Average realizations for export logs improved and export sales volumes were comparable to the fourth quarter. Sales volumes to Japan increased and pricing improved modestly due to continued strong demand.

Japanese wooden housing starts have improved slightly compared with 2015 as mortgage rates remained low and we see some pull forward in advance of a scheduled increased in the consumption tax next year. Volumes to China declined seasonally compared with fourth quarter as construction activity paused during the Lunar New Year period.

Average realizations improved slightly. Log inventory to Chinese ports rose during the first quarter, but remained within a normal range for the season and well below the elevated levels experienced during the first quarter of 2015.

With inventories in line and slightly improved construction activity, our customers are optimistic regarding current market conditions. In Western domestic market, log supply and demand remained balanced and realizations improved slightly. Southern Timberland contributed $77 million to first quarter EBITDA, $21 million more than the fourth quarter.

This improvement was attributable to a partial quarter of Plum Creek operations. A partial quarter of harvest from Plum Creek's 3.4 million Southern acres increased Southern harvest by 40% and more than offset a small seasonal decline in harvest from legacy Weyerhaeuser land. Realizations for Southern logs declined slightly primarily due to mix.

Silviculture costs and forestry costs declined as activity was delayed due to wet weather. A partial quarter of results from Plum Creek's Northern Timberlands contributed $3 million to first quarter EBITDA. Operational excellence initiatives continue to contribute to Timberlands' results.

On our fourth quarter earnings call, we set a target of $20 million of $30 million of OpEx improvements from legacy Weyerhaeuser Holdings.

Following the merger, we have now increased the Timberlands' 2016 OpEx target to $30 million to $50 million to incorporate $10 million to $20 million of operational synergies we expect to achieve from the merger this year.

The multi-year OpEx targets for Timberlands has also increased to $200 million, including the $64 million achieved in 2014 and 2015 to incorporate operational synergy opportunity from the merger.

Timberlands has begun an internal benchmarking exercise to identify best practices in silviculture, logging and transportation, and leverage those learnings across the entire Timberlands portfolio. Although this work is still in the early stages, I'm pleased by the level of energy and teamwork in identifying opportunities across the business.

Real Estate, Energy and Natural Resources, chart 6 and 7. The Real Estate & ENR segment includes sales of HBU and non-core Timberland property as well as lease and royalty income from minerals, aggregates, and oil and gas. These activities were formerly reported within Weyerhaeuser's Timberlands segment.

Real Estate & ENR contributed $15 million to first quarter earnings, $12 million lower than the fourth quarter. However, EBITDA increased by $1 million to $34 million as lower EBITDA from legacy Weyerhaeuser operations was more than offset by a partial quarter of Plum Creek results.

Total acreage sold increased in the first quarter compared with the fourth quarter due to a conservation sale of over 8,000 acres of Maine timberlands.

Although a partial quarter of Plum Creek's operations contributed significantly to the segment's EBITDA, the Plum Creek contribution to earnings was minimal because Plum Creek land was marked up to fair value as part of the merger purchase price allocation.

Operational excellence for the Real Estate & ENR business will be based on the premium to Timberland values captured from the sale of HBU properties. The first step in defining the size of this opportunity is applying Plum Creek's asset value optimization, or AVO, process across Weyerhaeuser's 6.9 million acres of legacy Timberlands.

This process is underway and we anticipate it will be substantially complete in about one year. Wood Products, charts 8 and 9. Wood Products contributed $87 million to first quarter earnings compared with earnings before special items of $48 million in the fourth quarter.

Results for Plum Creek lumber mills are reported as part of the lumber business and results for Plum Creek's plywood and medium density fiberboard, or MDF, facilities are reported with Engineered Wood Products.

Adjusted EBITDA for the Wood Products segment increased to $117 million, primarily due to improved unit manufacturing costs and seasonally higher sales volume. Approximately 4% of Wood Products' first quarter EBITDA is attributable to the addition of Plum Creek operations. In lumber, EBITDA improved $18 million compared with fourth quarter.

Average realizations improved 1% and sales volumes increased 3%. Unit manufacturing costs declined due to higher operating rates and strong operating performance. Fourth quarter included downtime for installation of capital projects.

In OSB, EBITDA increased to $31 million, $6 million higher than the fourth quarter and $27 million higher than the first quarter of last year. Unit manufacturing costs improved due to strong operating performance and reduced downtime for planned maintenance. This more than offset a 3% decrease in average sales realizations. Sales volumes increased 5%.

Engineered Wood Products' EBITDA more than doubled to $31 million, compared with $14 million in the fourth quarter. Operating rates and unit manufacturing costs improved due to higher demand, strong operating performance, and reduced downtime for maintenance and capital projects.

Sales volumes increased seasonally and average realizations declined slightly due to mix. EBITDA for the Distribution business improved to $4 million, $2 million more than the fourth quarter and $7 million more than the first quarter of 2015. This business benefited from improved margins and lower operating cost.

Operational excellence continues to contribute to Wood Products results as all four businesses gain leverage from ongoing improvements in controllable cost. The businesses are collectively targeting $55 million to $75 million of operational excellence improvements in 2016.

Each business remains relentlessly focused on its initiatives and is on track to achieve its target. Cellulose Fibers, charts 10 and 11. Cellulose Fibers contributed $28 million to first quarter earnings, compared with earnings before special items of $64 million in the fourth quarter.

Average sales realizations for pulp and liquid packaging declined as prices remained under pressure. Sales volumes declined only slightly as demand for our pulp remained strong despite the seasonally weak Lunar New Year period. Maintenance expense increased due to additional scheduled maintenance outage days.

First quarter included 16 days of scheduled maintenance outages compared with eight days in the fourth quarter. As I noted earlier, we have announced the sale of our pulp mills to International Paper in a $2.2 billion cash transaction.

The transaction is subject to customary closing conditions, including regulatory review, and we expect it to close in the fourth quarter.

This transaction delivers compelling value for our shareholders and we expect to use a substantial portion of the $1.6 billion after-tax proceeds for repayment of the 18-month term loans raised during the first quarter.

I want to thank the employees of our Cellulose Fibers business for their dedication and professionalism as they have continued to operate safely and deliver an exceptional customer experience through the strategic review process.

As noted in Monday's press release, the strategic review of our liquid packaging business and newsprint and publication venture is ongoing, and we look forward to sharing more information with you when that review is complete. I will now turn it over to Russell to discuss some financial items and our second quarter outlook..

Thank you, Doyle, and good morning. The overall outlook for the second quarter is summarized on chart 16 of the earnings slides. Please note that the second quarter will include a full quarter of Plum Creek operations.

Starting with Timberlands, we expect second quarter EBITDA to come in approximately 10% higher than first quarter with second quarter earnings comparable to the first quarter. It is important to note that as part of the purchase price allocation, the Plum Creek Timberlands basis was stepped up to reflect fair value.

As a result, new depletion rates were established for the combined Weyerhaeuser and Plum Creek Timberlands. In addition to changes in the depletion rate, the accounting policies for amortization of road and other related expenses have been aligned.

These changes will result in total amortization and depletion expense of approximately $90 million for the second quarter. In our Western Timberlands operations, log export volume is expected to improve in the second quarter as volumes to China increased following the seasonally low Lunar New Year period.

Japanese export volumes were elevated in the first quarter and are expected to return to more normal seasonal levels in the second quarter. We anticipate stable pricing for our Japanese and Chinese export logs with a slight decline in overall export price realizations due to the higher proportion of Chinese volume.

Domestic log volumes will increase with the addition of the Plum Creek activity with prices remain stable quarter-over-quarter. Costs will be higher due to shifting harvest activity to higher elevation, which is typical during the spring season.

In the South, harvest volumes will increase approximately 40% as we benefit from the full quarter of Plum Creek operations. We expect average log prices will decrease modestly as the harvest mix will include a higher proportion of pulpwood logs. In addition, forestry expenses will be higher due to increased seasonal spending.

In the North, harvest volumes will be above the first quarter levels with the inclusion of a full quarter of Plum Creek operations. The second quarter typically has the lowest harvest levels of the year because of spring weather conditions with the mud season, which limits access to harvest sites in the Northern operating region.

Average sales realizations will be comparable to first quarter levels. Note, that prior to the merger, Plum Creek included their Oregon and Washington activity in their Northern segment. Moving on to our full year Timber harvest outlook. We expect our combined 2016 fee harvest will be 40 million to 42 million tons.

The 2016 fee harvest is comparable to the combined Weyerhaeuser and Plum Creek 2015 harvest levels after adding Plum Creek's harvest for the January 1 to February 19 pre-merger period. Real Estate and Energy and Natural Resources' second quarter EBITDA and earnings are expected to be similar to the first quarter.

Higher and better use markets remain active in the Southern states and we expect similar transaction activity in the second quarter as compared to the first quarter. In the second half of the year, we expect transaction counts to increase as more higher and better use properties are identified through our AVO process and brought to market.

For the remainder of the year, we estimate the sales mix will be evenly split between Weyerhaeuser and Plum Creek lands, with an average basis of 50%. For Wood Products, inventories throughout the supply chain remain relatively low, as buyers continue to meet their purchasing needs on a just-in-time basis.

Prices for lumber have improved in the second half of the first quarter, and that trend continued into the second quarter. Average April sales realizations were $30 higher than the first quarter average. OSB prices have also rallied, with average April sales realizations approximately $15 higher than the first quarter averages.

We anticipate prices will continue to strengthen during the second quarter, as building activity increases. Sales volume for the Engineered Wood Products are expected to be seasonally higher in the second quarter, and we expect continued improvement in this business. Operating rates remain strong across all the Wood Products business lines.

We expect overall second quarter EBITDA and earnings for the Wood Products segment will be significantly higher than the first quarter. In fact, EBITDA for this segment has not been this strong since the second quarter of 2013. This is primarily a result of our improved operational performance and competitive cost structure.

Moving to Cellulose Fibers, EBITDA and earnings in Cellulose Fibers business were expected to increase during the second quarter with higher average sales realizations across our product lines. Volumes are expected to be similar to first quarter levels. We anticipate maintenance spending to be similar to first quarter.

Other cost of sales are expected to decrease slightly due to lower fiber and energy costs. For our key financial items, cash from operations during the first quarter was $47 million. The first quarter is usually our lowest operating cash flow quarter due to seasonally lower earnings, inventory buildup, and semi-annual interest payments.

We ended the quarter with a cash balance of $415 million. Going forward, we anticipate that our normalized cash balance will be in the range of $200 million to $400 million, which we feel is an appropriate level for the capital structure at this time.

We completed our planned post-transaction financing in February and March by entering into two 18-month term loans at a floating rate of LIBOR plus 105 basis points or approximately 1.5%. The loans have a total capacity of $2.5 billion. At the end of the quarter, we had drawn down $1.1 billion.

Long-term debt, not including the term loan balance of $1.1 billion, was $6.7 billion at the end of the quarter. We have no debt maturities in 2016 and we intend to pay down the new term loans primarily with proceeds from asset sales. This will allow us to move toward our target debt to EBITDA ratio of 3.5 times.

Interest expense for the first quarter reflects a partial quarter of interest for both the Plum Creek legacy debt and the new term loans. Looking forward, our 2016 interest expense will be approximately $450 million for the year. Moving on to capital expenditures, first quarter capital expenditures totaled $73 million.

Our capital spending is seasonal and tends to be lowest in the first quarter before ramping up through the rest of the year. We continue to expect 2016 CapEx will be approximately $450 million, excluding Cellulose Fibers.

This includes minimal spending for Real Estate and Energy and Natural resources where the focus is on entitlement and royalty contracts and not capital-intensive development. Our 2016 total company tax rate would be dependent upon the mix of REIT and taxable REIT subsidiary income.

We are currently estimating our full year total company tax rate to be approximately 18% to 20%. Due to prior year overpayment, we do not anticipate making a cash payment in 2016. These first quarter estimates do not take into account the impact of the divestiture of the pulp business, which is expected to close in the fourth quarter of 2016.

Let me direct your attention to chart 12, which details the major components of our unallocated items. Income before special items improved to $19 million in the first quarter compared with $1 million of expense in fourth quarter of 2015. Improvement was driven primarily by foreign exchange as the Canadian dollar strengthened 7% against the U.S.

dollar during the quarter. Now, I'll turn the call back to Doyle and look forward to your questions..

Thank you, Russell. I will close my comments this morning with some brief comments on the merger integration process. Two-and-a-half months after day one, we have made solid progress on merger integration. Our merged corporate area team is operating together out of our building in Federal Way and we have begun the consolidation of regional offices.

Each of our senior management team members has spent several weeks on the road meeting with employees and reinforcing our vision and the core values, relentless focus, and key behaviors that will define our success as a merged company.

I look forward to building on that strong foundation as we work together to be the world's premier timber, land and forest products company. We are relentlessly focused on improving performance through operational excellence and capturing cost and operational synergies to leverage the full benefit of an improving U.S.

housing market and drive long-term value to our shareholders. And now, we like to open up the floor for questions..

Thank you, sir. Your first question comes from the line of Anthony Pettinari with Citi. Please go ahead..

Hi. Good morning..

Good morning, Anthony..

Plum Creek typically gave guidance on annual revenue from the Real Estate business and I was wondering if you would continue that, if you had any thoughts on sales or EBITDA contribution in 2016.

And then from your comments earlier, is it safe to say you'd expect Real Estate sales to step-up in 2017 as you apply that AVO methodology to Weyerhaeuser's portfolio?.

Yeah, Anthony, as we indicated, we are right in the middle of applying the AVO process across the entire legacy Weyerhaeuser Timberland base. And as Russell mentioned, we anticipate that activity will ramp-up in the second half of 2016 and into 2017 as you mentioned.

As we get a better feel for what those numbers are going to look like, we will provide guidance as we have historically on a quarterly basis to let you know what we think those will look like going forward. But we're excited about the process.

We think there's lots of opportunity, and that activity, as I said, will ramp-up in the second half of 2016 and into 2017..

Okay. That's helpful. And then switching to lumber, prices have been much stronger than we expected year-to-date. And I was wondering if you could give us some sense of what's happening on the ground in terms of demand you're seeing at job sites, how tight inventories are. And I think typically we see a little seasonal weakness in the second quarter.

And I think in your comments, you referenced continued strengthening.

So, what's driving your confidence there and maybe what's different from previous years?.

Yeah. So, we're encouraged by what we're seeing in lumber and the price increases that have taken place to-date, Anthony. I think the key drivers are just improvement in demand, and as I highlighted, especially in single-family housing has been a big part of it.

And then the other part, and Russell mentioned this, is just the low inventory levels across the system. So, what we've seen is average prices for April, $30 above first quarter average, and current prices are $10 above the April average, so it has continued to go up.

And as we said based on the low inventories, the strong demand, we are very encouraged by what we've seen on the ground in terms of lumber demand and the opportunity for pricing going forward..

Okay. That's helpful. And then just following up on the outlook for Wood Products, you talked about 2Q EBITDA being significantly higher than 1Q.

Is there any way you can put a finer point on that or quantify that versus previous years?.

Russell mentioned it, you can go back to second quarter of 2013 as kind of a comparable period. The reason – the other thing, Anthony, and the reason we laid out the price and the detail that we did, you, of course, know the leverage. But in terms of, on an annual basis, every $10 increase in lumber is $40 million on an annual basis.

Every $10 increase in OSB is $30 million on an annual basis. I should mention that we talked about lumber, but OSB prices have continued to improve as well, and current prices are up another $7 versus the April average in OSB.

So, we try to provide you the leverage that we have to pricing, and I'll tell you on top of that, as you saw in the first quarter results, our Wood Products business is running, operating really well. And we anticipate that's going to continue as we move through the quarter..

Okay. That's helpful. I'll turn it over..

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

Hey. Good morning, Doyle. Good morning, Russell..

Good morning, Collin..

First question for me. Just as far as acquisition opportunities from here, Doyle, can you maybe just touch on the final terms with the Twin Creeks JV? And, obviously, we've seen a few larger Timberland deals here announced in the last few weeks. Maybe just your take on the current acquisition environment..

Yeah. So, let me comment on the current acquisition environment and then I'll ask Russell to comment on Twin Creeks. So, in terms of the current acquisition environment, there continues to be a lot of interest in this asset class and, frankly, a lot of money chasing deals. As we've seen announced recently, there have been some deals that are happening.

I would highlight on the West some transaction announced at $4,300 an acre and then in the South, of course, our Twin Creeks transaction at $2,150 an acre, and then I think I saw just last night CatchMark announced something at $2,000 an acre. So, I would tell you, as I've said, a lot of increased activity, a lot of interest in the asset class.

And I would say, good values being paid for high-quality property. And, now, let me turn it over to Russell to comment on Twin Creeks..

So, Collin, as we announced, we closed the Twin Creeks transaction on April 1. And that was a deal that was put together prior to the merger, obviously. And we delayed the close so that we could sit down with the investors and make sure that we'd structured it appropriately, given Weyerhaeuser's differences to Plum Creek.

So, the real key items are, the property management agreement under the Plum Creek structure was 15 years. We've shortened that to three years under the Weyerhaeuser, as amended. And then the equity ownership dropped from 25% to 21%. Those are probably the two biggest items that changed in the transaction..

Okay. That's very helpful.

And maybe just, Russell, remind us on what can Weyerhaeuser buy for its balance sheet versus what has to have a first right of refusal to the JV?.

Right. So, the acquisition right of first refusal is anything under $10 million, Weyerhaeuser can buy on its account. And that's primarily because those would probably be properties that are more adjacent to operations. Anything in between $10 million and $200 million first goes to the joint venture for a period of three years.

And so, the remaining $400 million of cash available for acquisitions is completed..

Okay. Very helpful. And then I guess, Russell, just – I wanted – when the dust settles with the Fibers business and use of proceeds for that. I know in the prepared remarks you're referencing kind of a 3.5 times debt to EBITDA.

But are you going to move any of those leverage targets up a little bit given the mix of businesses is going to be a lot more towards timber and less towards manufacturing capacity or what do you stand on that?.

So, was your question in relation to leverage ratios?.

Yes..

Yeah, I would say that right now we're targeting to 3.5 times, we'll continue to move towards that over time. As we've mentioned, we issued short-term debt. We'll use sale of assets to reduce bad debt over time..

Okay. And then just one other follow-up on Anthony's question, just as it relates to the Real Estate business. I think, Doyle, you've suggested in the past may be 15% to 20% of the combined companies could potentially be Real Estate.

Is that still how you're thinking about, again recognizing you're still relatively early in that review process? But would that be fair as we start thinking about 2017 to the comment that it's going to step-up materially?.

That's exactly right, Collin. We are still comfortable with that guidance of 15% to 20%. And as I mentioned, we anticipate real estate activity will ramp-up second half of 2016 and into 2017 to get us to that range.

Every year won't be exactly that, but that's kind of a guideline as to what we anticipate the contribution from Real Estate will be on a go-forward basis after we complete the AVO process..

Perfect. Thanks, guys..

Thank you, Collin..

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

Hey. Good morning, everyone. This is actually John Babcock standing in for George. Just two quick questions for you. First on the EWP markets.

Demand was a little better than we expected, and just wanted to get a little bit of a sense for what you're seeing in the market and ultimately how that might trend for the rest of the year?.

Yes, so we were encouraged by the demand in EWP in the quarter. I think that's primarily driven by the increase in single-family starts. As you very well know, that is by far the biggest driver of demand for EWP and with single-family starts being up 23% in the first quarter, that flowed through to our EWP business.

And again, optimistic that housing is going to continue to improve, including an improvement in single-family starts, so that should bode well for EWP for the balance of the year..

Okay, great. Thank you.

And then secondly, just as the – with regards to the merger as a whole, as that gets under way, ultimately how do you expect that to impact the pace and trajectory of the operating improvements that you're targeting for the business?.

Yeah. So, the key there, of course, is the OpEx targets for Timberland. And as we mentioned, we have raised those targets significantly. In 2016, the original target pre-merger was $20 million to $30 million for Timberlands.

We have now raised that to $30 million to $50 million for 2016 to identify the early opportunities to deliver operational synergies, which are, of course, above the cost synergies. More importantly than that, though, we raised the multi-year target to $200 million.

So that's an incremental $130 million above what we received – what we accomplished in 2014 and 2015. So, an additional $130 million that we think we will be able to accomplish over the next two to three years, as we put these two companies together and deliver bottom-line operational synergies. So, really excited about that opportunity.

A lot of work going on currently to do benchmarking of the best of each company and start to identify opportunities to drive those operational synergies to the bottom line. So, excited about that as we move forward..

Okay. Just a quick follow-up there, though.

I mean with the merger kind of starting obviously in the first half here, do you expect that – the improvements for this year to be kind of back-weighted?.

So, let's talk about the two components just to be clear. So, there's cost synergies and then there's operational synergies. In terms of the cost synergies, as I've said, these are hard dollar cost synergies, as I've said in my remarks, we are highly confident that we'll meet or exceed the $100 million run rate that we laid out as a target.

I'll tell you that will be somewhat lumpy, but it's not going to be all backend loaded, and we will report out on our progress on that on a quarterly basis as we move forward. As with – in terms of operational synergies, again, $10 million to $20 million additional on top of what we had already identified for Timberlands in 2016.

And then I would say kind of as you've seen distributed kind of evenly over the next two or three years to get the balance of the operational synergies that we've identified as part of the merger..

Okay. Thanks a lot, Doyle..

Thank you..

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

Thanks.

Doyle, do you have much visibility into the split of export log business for the year between Japan and China? You talked about seasonality, so I'm kind of hoping you can give some sense of what you think the whole year might look like?.

I would think the whole year, Mark, will be in line with kind of what we've seen historically. But let me give you just a little bit of color on what we're seeing in each of those markets currently. And then if that doesn't answer your question, we'll come back to it.

But in terms of Japan, as we talked about, volume and pricing were both up in the first quarter. We think – and a little bit of that was pull forward for people being ready for an anticipated run up before the consumption tax increase.

In the second quarter we think demand, because it was elevated in the first quarter, will be down a little bit in the second quarter and price will be down, flat to down slightly. China, encouraged about what's happening there.

As you know, the inventories didn't build like they have over the last couple of years in the first quarter, so we anticipate both demand and pricing will be up in the second quarter. And then domestic, as we said, good demand, probably a little bit slightly lower prices in the second quarter.

So, as you know in the slides, we break out the percentage of Japan versus China and Korea, and we wouldn't see any significant changes there as we move forward, although in the second quarter, we will anticipate as I just highlighted, China being a larger component.

And maybe that continues for the balance of the year if China continues to accelerate in terms of demand like we've seen in the first and going into the second quarter..

Super. That's really helpful.

Can I ask just one more question? Can you remind us how much of your OSB is currently going into your EWP business?.

Mark, we're going to get back with you with that exact number. It's a small part of it, but I just don't know that number exactly off the top of my head, but we'll get back with you..

Fair enough. Thank you..

Thank you..

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

Thank you. Just a couple follow-ups first. On the – just want to make sure I understand, so the cost synergy is the $100 million.

Where will that be showing up? Will that be presumably in the various segments as well, primarily in Timberlands? But that is separate from the operational synergies? And I think you talked about being $130 million over a couple years.

Is that correct?.

That is correct, Mark. It will show up in various places, but it'll show up in the segment and then we'll lay out a way for you to track it exactly. But more importantly than that, to your second point, yes, the additional OpEx amount that we've identified for Timberland is above and beyond the hard dollar cost synergies..

Okay..

Completely different bucket..

Okay. And then a second quick follow-up, also you'd mentioned 15% to 20% from real estate sales.

Was that a reference to EBITDA? And are we talking kind of $300 million to $350 million or so expectations coming from real estate from an EBITDA perspective? Is that how we should think about that? Or was that a different reference?.

No. It was an EBITDA reference. And again, once this – we ramp-up, just general guidelines, 15% to 20% of overall EBITDA for the company would come – we would anticipate would come from the real estate business.

Now, like I said, a lot of work to do and identify all of those opportunities, but just to give – we wanted to give some guidance of what we thought that number could be on a go-forward basis..

Okay, and then lastly, just understand kind of the expected pace on the share repurchase. I think you had indicated previously that you anticipated about $2 billion of the $2.5 billion would be done quite quickly – forget the exact terminology.

Now, would you be just continuing to draw down on the term loan to execute on that, and then you pay all of that back when the pulp business gets sold? Is that how to think of it?.

Yeah. So, Mark, you're exactly right. What we said is $2 billion of the $2.5 billion we would do on an accelerated basis. And I think we've shown that that's exactly what we're doing. Once that's completed, we'll kind of pause and reevaluate the timing on the additional $500 million.

You're right, we'll draw down on the term loan and we will use the asset sales and whatever else; but asset sales in Twin Creeks, whatever, to pay down that debt – that short-term debt..

Thank you very much..

Thank you..

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

Thanks. Good morning, everyone.

This might seem kind of silly to just focus on a small part of your portfolio, but with 320,000 acres in Uruguay, you only had $1 million in EBITDA? So is there something about the accounting that keeps the cash or the contribution in South America?.

No, there's nothing that would keep cash in any given place, Steve. So, as we've said, as part of this, we're going to be evaluating our 13.2 million acres of Timberland and making decisions as to what we want the long-term portfolio to look like; with 13.2 million acres and no big tax in place, we have lots of flexibility..

Yeah. I mean, I don't know how much managerial bandwidth it takes, but it's not a big contribution. And then switching gears, I assume that NORPAC and the Longview mill will also be sold.

I'm just wondering, does that have any implications for your export terminal at the Port of Longview?.

No. That has no implications for that..

Okay, thanks. And one other quick clarification – maybe I need a hearing aid.

I think Russell referenced Q2 2013, and you referenced Q2 2014 when you were talking about the Wood Products run rate?.

If I said Q2 2014 that was a mistake. The reference was to Q2 2013..

Great. It was a better quarter. Thank you..

Thank you..

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

Hi. Thank you; and I know you guys have been working hard the last few months. Good morning..

Good morning, Chip..

First question has to do – thank you – is with the pension income.

I know – should that continue to be at the higher level that we saw in the first quarter at roughly, I think, it was $9 million per quarter for the whole year?.

Yeah. I think on the pension income we're expecting a little improvement in 2016..

And so at the same – should it be similar in the second, third, and fourth to the amount you showed on unallocated items in the first quarter?.

Yeah. That would be our expectation..

Okay. Okay, that's helpful. And then on the depletion side, I know you said something about $90 million. When I look at the first quarter of 2016 versus 2015, it was up about $37 million.

Are you saying it should be up year-over-year therefore by – are you saying depletion should be up $90 million or EBITDA should be up $90 million from – which is probably saying the same thing, since EBIT is going to be flat.

But I just want to make sure I had that progression right for Timberlands?.

Yeah. So the depletion and amortization for the second quarter will be $90 million and that's a fair number to use through third and fourth quarter also..

Okay.

And then how about the depletion for the real estate segment in the second quarter?.

You can probably look at what the first quarter was like as a pretty good guide..

Okay.

Even though your real estate sales will pick up a little bit?.

Second quarter they will probably be similar to first quarter, and then pick up in the second half of the year..

Okay, got you. And then next question has to do with the – I think Doyle mentioned the real estate sales would be ramping to eventually around a $350 million EBITDA level sort of a target out there.

Should we see that – is 2018 a realistic year that you think you'll get there, or is that pushing it too soon?.

I think that's pushing it to too fine a point, Chip. Again, we're right in the middle of the AVO process. Again, what we wanted to do is just give some guidance as to the potential magnitude of the real estate business at 15% to 20% of the overall EBITDA for the company. We're going to learn a lot more as we go through this process.

So, we'll be further refining that in terms of the timing as we move forward..

Okay.

And last quick one, the business you just announced you sold to IP, is that going to be reported as a normal segment until it's sold or are you going to split it out as a discontinued operations, or have you figured that out yet?.

The pulp business will be asset held for sale, so it would be a discontinued operation starting in second quarter..

Oh, okay, important.

And so when you give us adjusted EBITDA and adjusted EPS, you will not include the income from that business?.

Correct. You'll be able to see it in our presentation, so you can run your calculations..

Okay. Thank you..

Thank you, Chip..

Ladies and gentlemen, we have time for one additional question. Your final question comes from the line of Mark Wilde with BMO Capital Markets. Please go ahead..

Good morning, Doyle. Good morning, Russ..

Good morning, Mark..

Yeah. Doyle, I have a couple of portfolio questions.

I think one of them you've answered already, and that is just, any potential portfolio repositioning within the Timberlands, maybe concentrating more going forward on plantations in the South and in the Northwest?.

Yes. As I mentioned, Mark, as part of the integration process we're going to – it's going to involve a review of the overall Timberlands portfolio. And again, as I mentioned with 13-plus million acres and no built-in gains tax we've got lots of flexibility as to how we create the most value for our shareholders going forward. So, that work is ongoing..

Okay, and is it fair to say that the focus is going to be kind of plantation forestry, Doyle?.

I don't want to exclude anything at this point, Mark. Let us do the work and figure out exactly what we want the portfolio to look like as we move forward..

Okay. And then the second one I had is just kind of on capital allocation going forward, particularly thinking about what your business investment focus is going to be. You're selling the Cellulose Fibers business. That was clearly a forestry-related business that had a good cash return.

And if I look over at kind of Plum, historically, they had invested in a limited scale in things like gravel pit participations, which looked like they were lower return businesses and not forestry-related.

So, if we think kind of going forward, are there any bounds you would want us to kind of think about in terms of where you'll put capital and where you won't put capital?.

Well, Mark, as you know, we've done a lot of work here at Weyerhaeuser over the past few years to really focus our company. And as we say in where we're headed, we're going to the premier timberland and forest products company going forward.

So, I wouldn't – I think, as you see us, first and foremost, we're going to focus on delivering the value from the Plum Creek merger. As we look to invest going forward, Mark, I would tell you, it's going to be focused on those areas. We do not anticipate moving into other areas – or non-forest-related areas in any significant way..

Okay. That's helpful. Good luck in the second quarter and through the balance of the year..

Thank you, Mark..

Thank you. I'd now like to turn the call....

I'm sorry. Go ahead..

I'm sorry. Please go ahead..

I was just going to say, as I understand it, that was our final question. I want to thank everyone for joining this morning. Thank you for your interest in Weyerhaeuser and we look forward to continuing to report out our progress as we move forward. Everybody, have a good day..

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