DYNAMICS IN TIMBERLAND OWNERSHIP - WHAT THEY MEAN TO WEYERHAEUSER RHONDA HUNTER SENIOR VICE PRESIDENT WEYERHAEUSER

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1 DYNAMICS IN TIMBERLAND OWNERSHIP - WHAT THEY MEAN TO WEYERHAEUSER RHONDA HUNTER SENIOR VICE PRESIDENT WEYERHAEUSER

2 FORWARD-LOOKING STATEMENTS AND NON-GAAP FINANCIAL MEASURES This presentation contains statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, including, without limitation, with respect to future prospects, business strategies, revenues, earnings, cash flow, taxes, funds available for distribution, pricing, production, supply, dividend levels, share repurchases, business priorities, performance, cost reductions, operational excellence initiatives, costs and operational synergies, demand drivers and levels, margins, growth, housing markets, capital structure, credit ratings, capital expenditures, cash position, debt levels, and harvests and export markets. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements may be identified by our use of certain words in such statements, including without limitation words such as anticipate, believe, continue, continued, could, forecast, estimate, outlook, goal, will, plan, expect, target, would and similar words and terms and phrases using such terms and words. We may refer to assumptions, goals or targets, or we may reference expected performance through, or events to occur by or at, a future date, and such references may also constitute forward-looking statements. Forward-looking statements are based on management s current expectations and assumptions concerning future events and are inherently subject to uncertainties and factors relating to our operations and business environment that are difficult to predict and often beyond the company s control. Many factors could cause, among other things, one or more of our expectations to be unmet, one or more of our assumptions to be materially inaccurate or actual results to differ materially from those expressed or implied in these forward-looking statements. Such factors include, without limitation: our ability to successfully integrate the Plum Creek merger; our ability to successfully execute our performance plans, including cost reductions and other operational excellence initiatives; the effect of general economic conditions, including employment rates, housing starts, interest rate levels, availability of financing for home mortgages and the strength of the U.S. dollar; market demand for our products, including demand for our timberland properties with higher and better uses, which in turn is related to the strength of various U.S. business segments and U.S. and international economic conditions; domestic and foreign competition; raw material prices; energy prices; the effect of weather; the risk of loss from fires, floods, windstorms, hurricanes, pest infestation and other natural disasters; transportation availability and costs; federal tax policies; the effect of forestry, land use, environmental and other governmental regulations; legal proceedings; performance of pension fund investments and related derivatives; the effect of timing of retirements and changes in market price of our common stock on charges for share-based compensation; changes in accounting principles; and the other risk factors described in filings we make from time to time with the Securities and Exchange Commission, including without limitation risk factors described in our annual report on Form 10-K for the year ended December 31, There is no guarantee that any of the anticipated events or results articulated in this presentation will occur or, if they occur, what effect they will have on the company s results of operations or financial condition. The forward-looking statements contained herein apply only as of the date of this presentation and we do not undertake any obligation to update these forward-looking statements. Nothing on our website is intended to be included or incorporated by reference into, or made a part of, this presentation. Also included in this presentation are certain non-gaap financial measures, which management believes complement the financial information presented in accordance with U.S. generally accepted accounting principles. Management believes such non-gaap measures may be useful to investors. Our non-gaap financial measures may not be comparable to similarly named or captioned non-gaap financial measures of other companies due to potential inconsistencies in how such measures are calculated. A reconciliation of each presented non-gaap measure to its most directly comparable GAAP measure is provided in the appendices to this presentation. 2

3 INDUSTRY OWNERSHIP TRANSFORMATION 1979 US Timberland Ownership 2016 US Timberland Ownership Million of Acres International Paper Weyerhaeuser Georgia-Pacific St Regis Paper Champion International Great Northern Nekoosa Boise Cascade Scott Paper Crown Zellerbach Union Camp Time Inc. Burlington Northern Continental Group Potlatch IT&T Rayonier Corp. REIT Millions of Acres Weyerhaeuser AFM Hancock TIMO/Financial The Forestland Group Rayonier Campbell Global FIA RMS Sierra Pacific Potlatch JD Irving Wagner Forest Man. Green Diamond BTG Pactual Major timberland owners were vertically integrated corporations Vertically integrateds largely replaced by REITs, TIMOs and financial owners Source: Morgan Stanley Source: RISI 3

4 BUSINESS MODELS HAVE CHANGED REITS TIMOs LONG TERM DIRECT INVESTORS CONSERVATION Deliver most value from every acre Forest standlevel optimization Leaders in silvicultural practices and R&D Typically hold years Maximize shorter-term value Optimize silvicultural and management spend Capital preservation focus Lower return and hurdle rate requirements Patient capital Conservation value focus Not market driven Newer classes of timberland owners have different objectives Timber investors use different business models Investment in silviculture and management regimes align with investor priorities 4

5 TIMBERLAND MANAGEMENT REGIMES HAVE CHANGED TO MEET OWNER OBJECTIVES 100% 80% 60% 40% 20% 0% Industrial Timberland Ownership Sources: USFS, Forisk, WY Internal TIMO/Financial Integrated REIT Time 1970s-1980s 1990s-Early 2000s Late 2000s-present Ownership Integrated Transition to TIMOs and REITs TIMOs and REITs Management Objectives Pricing Forest Management and Technology Supply security for manufacturing ops Narrow delta between pulp and sawlog prices Earn competitive return on planted forests Timber supply shortages boost sawlog prices Volume emphasis Shift to sawlog production Maximize value per acre Sawlog premium persists Sawlog production focus Remote sensing for inventory and management Sawmill recovery improvements Models Yield tables Simple growth and yield models Decision support systems 5

6 CATALYSTS FOR TIMBERLAND INVESTMENT Global timber demand increasing WORLD POPULATION TO INCREASE 30% BY 2050 New markets for timber are emerging INNOVATION CREATES NEW DEMAND Universe of investable timberland is limited GLOBAL INVESTMENTS HAVE DIFFERENT RISK PROFILES 6

7 THE WORLD IS GOING TO NEED MORE WOOD Expected Population Growth by 2050 (in millions) , Global Fiber Flows 17 Source: United Nations, FAO As population grows, timber consumption will grow as developing markets use more timber Demand/supply imbalance in many regions due to shortage of productive timberlands Log markets can be both local and global 7

8 NEW MARKETS FOR TIMBER CREATE INCREMENTAL GROWTH OPPORTUNITIES Mass Timber uses wood panels or cross laminated beams and columns as structural components Location: Brock Commons Project, Vancouver, BC 8

9 GLOBAL INVESTABLE TIMBERLANDS LARGELY IN NORTH AMERICA AND EUROPE 140 Canada Millions of Acres USA North America Europe Africa Asia Latin America Oceania Source: FIA, RISI, CAFO 9

10 WEYERHAEUSER S TRANSFORMATION IS ONGOING CELLULOSE FIBERS CELLULOSE WOOD FIBERS PRODUCTS WOOD PRODUCTS 2012 ASSETS $10.4 BILLION* WRECO TIMBERLANDS WOOD PRODUCTS WOOD PRODUCTS TODAY TIMBERLANDS ASSETS $17.5 BILLION* TIMBERLANDS WRECO Acquired Longview Timber 6 MILLION Divested WRECO ACRES Merged with Plum Creek 13 Divesting Cellulose Fibers MILLION ACRES *Book value of assets by business segment. Excludes Unallocated items. Timberlands includes Real Estate and Energy & Natural Resources assets. Today excludes assets of discontinued operations. Source: WY K and K. 10

11 WHAT WEYERHAEUSER LOOKS LIKE TODAY WEST 3.0 MILLION ACRES 100% CERTIFIED TO SUSTAINABLE STANDARDS CANADA Manage 13.9 MILLION ACRES NORTH 2.5 MILLION ACRES SOUTH 7.4 MILLION ACRES QUALITY, DIVERSITY & SCALE ARE UNMATCHED 11

12 WEYERHAEUSER TIMBERLANDS - OUR STRATEGY FOR SUCCESS BEST TIMBERLANDS BEST EXECUTION WINNING Superior quality and productivity Unmatched diversity Unparalleled scale Sustainably certified Operational synergies from merger Ongoing operational excellence initiatives Targeted capital investments INDUSTRY- LEADING EBITDA PER ACRE RIGHT PEOPLE IN THE RIGHT ROLES DRIVE RESULTS 12

13 INNOVATION WITH SCALE AT EVERY STEP OF THE VALUE CHAIN SEEDLINGS PLANTING SILVICULTURE HARVEST TRANSPORT MARKETING WE PRODUCE LOGS AND WE HAVE OPPORTUNITIES FOR INNOVATION AT EVERY STAGE OF THE PROCESS 13

14 INNOVATION IN HARVEST TECHNOLOGIES OPPORTUNITY Utilize new cable-assist technology to mechanize harvest on steep slopes Reduce reliance on manual labor and high cost equipment to improve safety and productivity ACTION Expand use of steep slope technologies across Western footprint Previously inoperable acres in Maine Will take multiple years to fully implement RESULT LOOKING AHEAD Expand across our western footprint and some previously inoperable acres in Maine Will take multiple years to fully implement Reduced harvest costs $4 MILLION Annual Savings in 2016 Growing to $12-15 MILLION Annual Savings 14

15 INNOVATION IN SILVICULTURAL PRACTICES OPPORTUNITY Benchmark silviculture costs Grow long-term value by adopting best practices and retaining best genetics ACTION Adopt regional silviculture regimes that: Target product mix best suited for current and long-term view of local markets Maintain flexibility to adapt to changing market conditions Optimize cash flows and maximize NPV Activity Cost Difference $/acre Stand Establishment $10 Competition Control $10 Fertilization $20 RESULT Reduced silviculture costs $1 MILLION Annual Savings 15

16 TIMBERLAND MARKETS TODAY TIMBERLAND MARKETS ARE STRONG Investment in industrial timberlands is competitive Deal flow remains steady Continued interest from institutional investors and REITs Smaller offerings attracting strong interest from private wealth funds and international buyers Recent transactions support solid timberland valuations for quality timberlands 16

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