Weyerhaeuser Company (WY) Q3 2015 Earnings Report, Transcript and Summary

Good morning. My name is Brent, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Weyerhaeuser Third 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. Thank you. I'd now like to turn the call over to Denise Merle, Senior Vice President of Human Resources and Investor Relations. Please go ahead. Denise M. Merle - Senior Vice President-Human Resources & Investor Relations: Thank you, Brent. Good morning, everyone, and thank you for joining us today to discuss Weyerhaeuser's third 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. Doyle R. Simons - President, Chief Executive Officer & Director: Thank you, Denise, and welcome, everyone. This morning, Weyerhaeuser reported third quarter net earnings of $180 million, or $0.35 per diluted share on net sales of $1.8 billion. I'm very pleased with our third quarter performance as each of our businesses capitalized on operational excellence improvements to deliver strong results despite some market and global macroeconomic headwinds. In addition, we continued to deliver on our commitment to return cash to shareholders. We have completed the $700 million share repurchase program authorized in 2014. In August, our board supplemented this program with an additional $500 million share repurchase authorization and also increased our quarterly dividend by 7% to $0.31 per share. This illustrates our confidence in our ability to continue to execute our operational excellence initiatives and capitalize on market improvements going forward. I'll begin the discussion of our business results with some brief comments about the housing market. The U.S. housing market continued to advance in the third quarter following choppy activity in the first half of the year. Total housing starts as of September, has improved 18% compared with 2014, and single-family starts are up 12%. We continue to anticipate just over 1.1 million starts for 2015. Our customers tell us they expect strong year-in activity for as long as weather conditions remain favorable. With rising employment, strong consumer confidence, historically low mortgage rates and builder sentiment reaching all-time highs, we continue to anticipate steady improvement in the U.S. housing market. Let me now turn to our business segments, starting with Timberlands, charts two to four. Timberlands contributed $126 million to third quarter earnings, comparable to the second quarter. Strong cost controls and operational excellence initiatives offset the effect of reduced Western fee harvest volumes and lower average sales realizations for Western logs. As expected, Western fee harvest volumes declined by 5% compared with the second quarter due to buyer season logging constraints. This year's buyer season was exceptionally severe due to record breaking temperatures and unusually low rainfall. Our employees did an exceptional job of protecting our Timberlands and flexing harvest settings to adjust the changing logging constraints and market conditions. Our tree farms experienced virtually no fire damage with only about 150 of our 7 million acres affected, less than 100 of 1%. Average realizations for Western domestic logs improved slightly in the third quarter as fire season restrictions resulted in tighter log supplies, especially in Southern Oregon and we benefited from an improved mix. Turning to the export markets, Japanese demand remained strong and pricing for our Japanese logs was up slightly in the quarter. After peaking in August, log inventories at Chinese ports have declined as supply has fallen in response to lower pricing. However, Chinese demand in pricing remained challenging due to continued slow construction activity and we flexed volume into more profitable domestic markets. Overall, average realizations for our Western logs declined compared with the second quarter, primarily due to the higher proportion of domestic log sales. In the South, fee harvest volume increased and average log sales realizations improved slightly. Third quarter included earnings of $13 million from disposition of non-strategic timberlands, an increase of $8 million compared with the second quarter. Operational excellence initiatives contributed to Timberlands' third quarter results as efforts to optimize harvest settings and road and silviculture expenditures resulted in continued cost improvements. The business remained on track to meet or exceed its OpEx target for 2015. Wood Products, charts five and six. Wood Products contributed $85 million to third quarter earnings, an improvement of $14 million compared with the second quarter. EBITDA increased to $111 million as improved sales volumes and lower operating costs enabled the business to overcome the drag of lower average lumber realization. In Lumber, EBITDA declined $4 million compared with the second quarter. A 3% decrease in average sales realizations was mostly offset by seasonally higher sales volumes and improvements in logs and other costs. In OSB, EBITDA improved by $12 million, due to a 2% increase in average sales realizations and reduced manufacturing and log cost. Engineered Wood Products reported third quarter EBITDA of $36 million, compared with $38 million in the second quarter. Slightly improved sales volumes and realizations for several products were offset by higher manufacturing cost due to planned maintenance downtime. EBITDA for the distribution business increased by $7 million compared with the second quarter due to improved sales volumes and lower overhead cost. Our Wood Products business remains relentlessly focused on operational excellence. Lumber and OSB are on track to achieve their 2015 targets. Engineered Wood Products is tracking significantly above its EBITDA improvement target. Year-to-date, the business has generated EBITDA of $100 million, a $35 million improvement compared with a target of $15 million to $20 million. We made significant progress in our distribution toward our OpEx target in the third quarter as EBITDA improved to $9 million and we expect continued progress in the fourth quarter. At this point, however, we're unlikely to reach our full $20 million target for the year. With that said, I'm encouraged by our level of improvement in the third quarter and this business is highly focused on continuing to improve bottom line performance going forward. Cellulose Fibers, charts seven and chart eight. Cellulose Fibers contributed $79 million to third quarter earnings, compared with $27 million in the second quarter. Pulp market softened in the third quarter due to rising global inventories and the continuing challenge of a strong U.S. dollar. Average pulp realizations declined slightly compared with second quarter. Earnings for this segment increased significantly as maintenance expense declined and pulp production improved due to fewer scheduled maintenance outage days. The third quarter included only four days of scheduled maintenance outages, compared with a 46-day extended outage completed in the second quarter. The Cellulose Fibers business continues to make good progress on operational excellence initiatives as well. Third quarter results benefited from initiatives to reduce energy costs, and chemical costs, and usage. Cellulose Fibers business remained on track to achieve its 2015 operational excellence target. I will now turn it over to Patty, to discuss our fourth quarter outlook. Patricia M. Bedient - Chief Financial Officer & Executive Vice President: Thanks, Doyle, and good morning, everyone. The outlook for the fourth quarter is summarized on chart 12, and I'll begin my comments with Timberlands. In the West, export log volumes to Japan is expected to increase during the fourth quarter as a result of an active Japanese housing market, and we anticipate a slight improvement in prices. Although construction activity in China is still slow, inventories at Chinese ports started to decline during Q3 and are expected to decrease further this quarter. As a result, we see fourth quarter prices stabilizing. Average sales realizations and volumes for Western domestic logs are expected to be comparable to Q3. Fee timber harvest in the West is anticipated to increase slightly, as fire-related logging constraints have been lifted. In the South, fee harvest volume is expected to be in line with the third quarter and we anticipate roughly similar average sales realizations. Silviculture and logging costs will likely increase seasonally. Overall, fourth quarter earnings in our Timberlands segment are expected to be comparable to Q3. In our Wood Products segment, the fourth quarter is typically the seasonally weakest quarter of the year. Because of the seasonal slowdown, we expect lower sales volumes. Although we have seen an increase in lumber prices thus far in the fourth quarter, average sales realizations for Q4 are expected to be lower than the average of Q3. We expect higher average sales realizations for oriented strand board in the fourth quarter compared to the third quarter, and we anticipate that Engineered Wood Products' average sales realizations will be relatively flat. Production volumes in the fourth quarter are expected to decline, due to the holiday season and scheduled downtime to complete maintenance and capital projects. This downtime will result in higher per-unit manufacturing costs. Consistent with the normal seasonal patterns, we expect fourth quarter earnings in our Wood Products segment to be lower than the third quarter and slightly lower than the earnings of Q4 of last year, which had much higher pricing. Our Cellulose Fibers business is continuing to experience currency headwinds due to the strong U.S. dollar. Worldwide inventories for softwood pulp stood at 30 days at the end of the third quarter. Typically, industry supply increases during the fourth quarter as there is seasonally not as much maintenance downtime in the colder winter months. As a result, we expect weaker average sales realizations for pulp in the fourth quarter compared to the third quarter. Our final planned maintenance outage for this year was completed earlier this month. The mill is back up and running well. Due to this outage, we will have more planned maintenance phase this quarter, as a result expect that overall maintenance expense will be approximately $10 million higher than Q3. In addition, we expect seasonally higher fiber costs. We anticipate that overall earnings in our Cellulose Fibers segment will be approximately $20 million to $25 million lower in the fourth quarter compared to the third quarter. Chart nine summarizes the results of unallocated items. Unallocated items moved from a positive earnings impact of $20 million in Q2 to a negative $27 million in Q3. The largest change was the result of a non-cash charge for the weakening of the Canadian dollar. As we've said in the past, every $0.01 change in the exchange rate is roughly $3 million to $4 million on a pre-tax basis. The other large variance was a lower positive effect for the elimination of intersegment profit in inventory and LIFO. Now, I'll wrap with some overall financial comments. Income taxes for the quarter resulted in a tax benefit of $16 million. This was due to a true-up of the effective tax rate for the year, which is now estimated to be lower based on the higher mix of REIT income relative to the taxable REIT subsidiary. In addition, there were discrete items booked in the quarter of approximately $9 million; the largest item being a positive resolution of uncertain tax positions. Now, I'll refer you to chart 10. Cash flow from operations for the third quarter was $282 million, or a reduction of $84 million compared to Q2. The change was primarily the result of a large working capital reduction in Q2 and normal timing of interest payments. Capital expenditures for the third quarter were $112 million, bringing our total expenditures for the first three quarters of the year to just over $300 million. We still anticipate total expenditures for the year to approximate $500 million. There was no change to our scheduled debt maturities and, as you can see from the chart, the first maturity isn't until 2017. Chart 11 details our share repurchase activity, and we have now completed our $700 million 2014 share repurchase authorization. And as mentioned earlier, in August, the board authorized an additional share repurchase program for $500 million. Now, I'll turn the call back to Doyle. Doyle R. Simons - President, Chief Executive Officer & Director: Thank you, Patty. We are encouraged by the positive trend in housing and the optimistic tone we are hearing from our customers. Going forward, we remain relentlessly focused on operational excellence and disciplined capital allocation. By relentlessly driving operational excellence in each of our businesses, we are laying a foundation that enables us to take full advantage of market opportunities. Our recently announced dividend increase and share repurchase program illustrate our confidence that we will continue to grow shareholder value by capitalizing on these activities going forward. And with that, we'd like to open the floor for questions.

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

Thank you. Maybe a little bit of a detail question, but on the tax rate, well, maybe the easiest way to ask, what type of tax rate should we be anticipating for the fourth quarter? Kind of looks like you're 5% to 10% even after making all the adjustments for the first three quarters. Is that what we should expect for the fourth quarter? Patricia M. Bedient - Chief Financial Officer & Executive Vice President: Yeah. Mark, that's our outlook for the full year and, of course, the fourth quarter will be the last one. As you mentioned, we had a number of things in the third quarter just to true up the rate for the full year, but we'll be over 5% for the fourth quarter.

Okay, great. And also, maybe a little bit of help, if we look at lumber pricing, which has started to move quite positively of late, one could certainly see scenarios where at least the random length average would be higher in the fourth quarter than it would be in the third quarter. Maybe a little bit more color of – your comments on why you'd expect it to be lower, recognizing maybe you sell more in October and things like that, but if you could give us a little bit of help in understanding how to think through fourth quarter lumber realization, that would be great. Doyle R. Simons - President, Chief Executive Officer & Director: Sure. And Mark, we agree with you. There is a scenario where lumber prices could in fact be higher in the fourth quarter versus the third quarter. But let me kind of give you the facts of where we are currently. If you take fourth quarter-to-date average, it's still about $15 below the third quarter average. Now if you take current prices today for lumber, it's basically in line with the third quarter average. So to your point, it's all dependent on what happens from this point going forward. We may be being conservative in terms of what we're assuming for lumber prices, but we all know that, as Patty mentioned, the fourth quarter is typically a slower seasonal period and we'll just have to see what happens in the month of November and December. So that's the way we see it at this point and we'll just watch together because our – it's nothing but a guess as to what we think's going to happen in the fourth quarter and we'll just have to see how it plays out as we move through the next couple of months.

Understood and totally fair enough. And just any color though in terms of why you think lumber has come back as nicely as it has in the last several weeks? Doyle R. Simons - President, Chief Executive Officer & Director: Sure. I think there's a number of things that have played into that. I think what we understand in talking to our customers and buyers, I think there were very, very low inventories in the system, partially waiting to see what happens when the Softwood Lumber Agreement expired. When that did happen, there was not a lot of lumber that came on. So I think part of it has been a building back of inventories in light of that. I think there have been some slight improvements in the Chinese markets. And our take is, as long as the weather holds, as I said in my comments, we're hearing very positive commentary from our customers in terms of demand in building season. So that's I think what's happened to drive the lumber prices up over the past few weeks.

Thanks so much. Doyle R. Simons - President, Chief Executive Officer & Director: Thank you.

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

Good morning. Doyle R. Simons - President, Chief Executive Officer & Director: Morning, Anthony.

A number of producers seem to have adjusted their production schedules in 3Q given weaker Wood Products prices. I was wondering what your operating rates were in the quarter across lumber, OSB, and Engineered Wood Products? And if you took any kind of market downtime or cut shifts in 3Q or expect anything like that in 4Q? Doyle R. Simons - President, Chief Executive Officer & Director: So, in terms of operating rates, lumber was right at 90%, OSB mid-90%s and ELP in the mid-70%s in terms of operating rates. And I'll let Patty, because she alluded to it in her comments, talk about the fourth quarter and some of the maintenance downtime we have planned for the fourth quarter. Patricia M. Bedient - Chief Financial Officer & Executive Vice President: Sure. As you think about the fourth quarter, the fourth quarter is typically when we do our maintenance as well as install capital projects and most of that will happen in the Wood Products business. And it's really across the board. As you think about OSB, for example, we're installing some – not huge capital but we will take advantage of putting in things across the system. ELP will have some as well, lumber has some capital projects and also we have holiday downtime that happens in the fourth quarter. So if I think – as we think about our operating rates for OSB, in particular, I think as Doyle said we were in the mid-90s for the third quarter, we would expect below 90% for the fourth quarter.

Okay. That's very helpful. And then, just switching to the dividend, I mean, historically, you've targeted 75% of FAD over the cycle. And this year, you raised the dividend while your earnings should be down year-over-year, maybe double digits on a percentage basis. I'm just wondering if you could talk about dividend coverage and prospects for continued dividend growth and maybe the confidence that you have going into 2016 that you're going to see earnings growth next year, given we've got a strong dollar and some of these headwinds in Asia that you called out earlier as well? Doyle R. Simons - President, Chief Executive Officer & Director: Yeah. Anthony, as you alluded to, our guideline, and it is a guideline is 75% of FAD over the cycle. I think the "over the cycle" is an important component. To your point, we feel like we are still early in the housing recovery cycle and as mentioned in my comments, we're optimistic that housing will continue to recover and will be 1% to 1.25% in 2016. As a result of that, we think we have a lot of opportunity to continue to grow earnings and cash flow going forward and are confident that we will continue to do that as housing continues to improve going forward.

Okay. That's helpful. And just in terms of next year, is your view not only that you're going to see a volume recovery with starts going higher, but that will be a accompanied by price recovery as well or price improvement year-over-year in 2016? Doyle R. Simons - President, Chief Executive Officer & Director: Yeah. Pricing, as we all know, is difficult to predict. But following up on the conversation we had earlier on lumber, we are encouraged that lumber prices are improving in a slower seasonal period. And our take is, as we move into the strong building season next year, again, assuming housing's at the 1.2% to 1.25% range, we think that will be very constructive for Wood Products, and frankly Timberland prices moving into 2016.

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

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

Yeah. Good morning. Thanks. Doyle R. Simons - President, Chief Executive Officer & Director: Good morning.

I think just with the domestic West Coast prices, I think, Patty, you mentioned that the fires were a little bit beneficial for prices this quarter. Could you quantify that a little bit? I don't know, is there any risk that with the fire season going away, that prices could slip a little bit this quarter, or do you think they should be sort of pretty stable? Patricia M. Bedient - Chief Financial Officer & Executive Vice President: Tyler, we did talk about the fact that we expected to have a little more fee harvest volume in the West, but it's not a huge amount, and even in the third quarter, we didn't see as much benefit from the fire restriction as probably many expected, because of the fact that many of the mills had already, seeing the fact that the fire season was going to be so severe, had done some additional things as far as their own log supply. So, I don't see a huge risk related to that but the increase that I mentioned in our fee timber harvest in the West is not a huge increase. I don't think it will have that significant of an impact.

Okay. Great, thanks. And then just, switching to Wood Products. Could you quantify, and I think you said the lower earnings in the fourth quarter was coming from sort of lower sale volumes, reduced operating rates and some of the maintenance in OSB. Could you kind of roughly break out how much each of one of those would contribute to the decline? Patricia M. Bedient - Chief Financial Officer & Executive Vice President: In terms of the overall impact, I would say that there, the biggest impact of third Q compared to fourth quarter really does come from sales volumes. As we talked about, seasonally, the fourth quarter is a lower quarter for volume, and that's really a statement across most of our product lines, lumber, OSB and ELP. And certainly in distribution as well, we were very pleased with the improvement in distribution for the third quarter, but they will likely be impacted as well from the seasonal volume fall off. Now, having said all that, as Doyle talked about, we are pleased to see that prices in lumber especially and OSB have been coming up in the quarter. Its pricing can be very volatile, and we'll just have to see how it all plays out. But I would say across the board, the biggest negative compared to the third quarter is in sales volume. And actually, we're very pleased, when you think about quarter-over-quarter, last year in the fourth quarter, we had much better pricing than what we're anticipating for this fourth quarter, and earnings are roughly – maybe a little lower or could be even comparable depending upon where prices are. So I think you start to see the impact of our operational excellence initiative kicking into that.

Okay. Great. And just final question with the distribution, you mentioned a nice increase in earnings. Can you just provide a little bit more detail about sort of what drove that, and sort of how sustainable it is going forward? Doyle R. Simons - President, Chief Executive Officer & Director: Yeah. So, what I would tell you is that it's – what we've been working on is the basic blocking and tackling of running a distribution. It's making sure we have the right warehouse and cost in places, making sure we're growing profitable sales. So, as Patty said, we were very encouraged by the progress we made in the third quarter, but more work to do. But we are pleased that we – on the trajectory that we saw in the third quarter and the changes that we're making in that business to position it for success in the future. So, progress, more work to do, but are confident in the plan that we have in place will get us to where we need to be in that business.

Okay. Great. Thanks so much. Doyle R. Simons - President, Chief Executive Officer & Director: Thank you.

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

Hi. Thank you. Good morning. Doyle R. Simons - President, Chief Executive Officer & Director: Good morning, Gail.

Well, can you just offer some broader perspective on the Softwood Lumber Agreement? I guess, we obviously haven't seen much impact in October but just how you see it playing out, I guess, over the next year while the standstill is in place? Doyle R. Simons - President, Chief Executive Officer & Director: Yeah. So, as we all know, the Softwood Lumber Agreement expired on October 12. Just in terms of what's happening on that, there are ongoing discussions between participants on both sides of the border regarding renewing the agreement. As well as you all know, this is ultimately a government-to-government negotiation, and election season has hampered the ability to have those discussions. But we are looking forward to both governments having an opportunity to engage and it's my take, our take that there is a possibility of reaching an agreement prior to the one year standstill playing out.

Okay. And in terms of flows, do you think recent activity is a pretty good indicator that that probably won't have a major impact in terms of flows in the market? Doyle R. Simons - President, Chief Executive Officer & Director: Yeah. Yeah. I think that's exactly right. I think what's happened over the past two weeks or three weeks was in line with what we anticipated but you never know, but I do think that does show that there wasn't a significant impact in terms of flows when that agreement expired.

All right. And just in terms of the current market, you talked about customers having pretty low inventories and reporting the recent rally. Do you have any view has buying activity over the last couple of weeks been enough or do you think inventories are still light? Doyle R. Simons - President, Chief Executive Officer & Director: Yeah. What we think is inventories continue to be lean especially in lumber and OSB. So, yes, there has been increased buying activity, as you alluded to, and we stated, but it's our stance that inventories continue to be on the lean side.

All right. And you guys have a lot of – I mean, Patty alluded to some smaller stuff going on on the capital side. But you guys do have a few larger capital projects going on at at least a couple of your sawmills. I was just wondering can you give some – just kind of walk through what you're doing and actually there is $190 million going on at one project. Can you just walk through some of your bigger projects whether they're fourth quarter 2016 event? Doyle R. Simons - President, Chief Executive Officer & Director: Fourth quarter 2016, I mean...

Yeah. I am just saying just walk through some of the bigger projects that you have going on... Doyle R. Simons - President, Chief Executive Officer & Director: Yeah. Okay.

And what are the OpEx program? Doyle R. Simons - President, Chief Executive Officer & Director: Yeah. Yeah. You're exactly right. We are, as we have been talking about for a period of time now, spending capital specifically in our lumber operation to support our OpEx initiatives, and to drive down our overall cost structure. So, that's happening at a number of mills, each of our mills has a specific roadmap, that's what's needed to get them to be in lowest cost quartile, and we have specific projects going on. One of the projects, to give you can example, is our Dierks sawmill. Our Dierks sawmill has been a very good sawmill for us for a long time. It's located in a fantastic wood basket. It's close to very good end market, but is a very old mill with an odd configuration. We are basically rebuilding that mill. We are rebuilding that mill on site. As we looked at all the different opportunities to make that mill more cost efficient that was the one that made the most sense. But to your question, Gail, every project that we're doing, the whole focus is to drive down our overall cost structures and that we will have low cost sawmill operation, and we'll be able to deliver on our OpEx initiatives. As we said, we're going to spend roughly total company-wide $500 million in capital, that's inclusive of what we're spending in lumber, and would anticipate the capital spend, as Patty said on the last call, will be in that range for next year as well as we continue on these projects. Patricia M. Bedient - Chief Financial Officer & Executive Vice President: Yeah. Gail, the only other thing that I would add is, as you look at the fourth quarter spend, it will be our highest spend for the year, and as Doyle mentioned, the biggest piece of that will be in the lumber business in addition to the things that he talked about, there are projects that many of the mills really focused on lowering their cost structure. One piece, for example, is in our CDKs that we're putting in the continuous drive kilns at a couple of locations, both to address boiler MACT as well as bringing down drying cost, which is a significant cost. We've got some edger projects, those types of things that really will improve recovery but they really are focused on lowering the overall cost structure.

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

Good morning, Doyle. Good morning, Patty. Patricia M. Bedient - Chief Financial Officer & Executive Vice President: Good morning. Doyle R. Simons - President, Chief Executive Officer & Director: Good morning, Mark.

Doyle, you've really made some impressive progress in all these Wood Products businesses, I wondered just if you looked at the engineered wood business that's had particularly nice gains, will there be kind of two or three key issues you'd point to that have driven that? Doyle R. Simons - President, Chief Executive Officer & Director: Mark, thank you for your commentary and our employees have done a nice job of making improvements and more work to do. In terms of EWP specifically it's really boils down to three things. One is reducing manufacturing cost and specifically controllable manufacturing costs, and that's something we're focused on every day. We've also driven down our overall SG&A cost in EWP business. And then finally we're really focused on growing not only just sales, but growing profitable sales. So those are the three key levers that we've been focused on in EWP, and have been encouraged about the progress that we've made there, and we're focused on continuing to improve that operation going forward.

Okay. And over in the OSB business are there any debottlenecking opportunities there similar to sort of some of the capital that you're putting in the lumber to improve the lumber operations? Doyle R. Simons - President, Chief Executive Officer & Director: Mark I would say in OSB the projects that we're doing, some of it involves debottlenecking, but more than that it's just figuring out a way to continue to improve reliability and drive down cost. As we've talked about, we've got a couple of mills that are world-class and we've got opportunities to improve some of our OSB mills to those same type of levels in terms of reliability and cost structure and that's what our capital expenditures are focused on.

Okay. Fine. Last question, I had Doyle, back in September, we had one of your peers announce kind of an interesting transaction with a group of institutional timber investors. Can you just talk about sort of the applicability or non-applicability of that kind of structure at Weyerhaeuser and maybe tie that in with how you're thinking about sort of growth in your Timberlands business over the next few years? Doyle R. Simons - President, Chief Executive Officer & Director: Sure. So, we thought that it will increase transaction that you're referring to was a very creative transaction and especially did a nice job of highlighting the underlying value of high quality Southern Timberlands. If we were at some point to conclude this type of transaction in the best interest of our shareholders, it's something we would consider. In terms of growth overall markets, we said we are interested in growing our company. Primary opportunity, we think will probably be in Timberlands, but we'll continue to be very disciplined in looking at acquisitions, opportunities as we move forward.

Okay. Good enough. Good luck in the fourth quarter. Doyle, good luck next year. Doyle R. Simons - President, Chief Executive Officer & Director: Thank you.

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

Thanks, everyone. Good morning. I appreciate the details and congratulations again on all the progress on the costs and OE. Maybe, piggybacking off the last two questions from Mark and Gail – Doyle, I think, what you'd have left in terms of projects, and OE benefit s we head into 2016 is something north of $100 million. I know you'll probably want to talk a little bit about this in December at your Analyst Day, but is there a way to at least catch us upon maybe the opportunity for more OE benefit and is there a way to talk to what you achieved in OE in the third quarter across the segments? If you had it, I'd missed it in the deck or in your comments. Doyle R. Simons - President, Chief Executive Officer & Director: Yeah. So, George, to your point, we will be updating exactly our progress in 2015 later this year and giving more specific guidance on the opportunities that are still in front of us, but to your point, we have made good progress. What I'm most encouraged about is, this is now becoming bottom up driven in our organization as people are really understanding what we're doing in OpEx, and finding additional opportunities. So we will be giving further update on that going forward. In terms of quarter-to-quarter, clearly, if you looked at price and volume and what that would result in terms of earnings, that's one number in our earnings and each of the businesses are higher than that. That delta is primarily due to OpEx. Looking at it, I'll just give you an example, if you look at this morning I actually looked at some numbers and I looked year-to-date 2015 versus year-to-date 2014 because I think it's hard and things move around a lot on a quarterly basis but just looking at Timberland, for example, year-to-date 2014 our earnings in 2014 were $470 million. You look at lower price, lower volume that would have – you would have thought just backing in those two things, our earnings would have been $370 million year-to-date 2015 and in fact they're $415 million. So that delta, not all of its OpEx, but a big portion of that is OpEx. Similar type numbers for lumber, OSB, ELP. So that's the way we think about it, just taking out the thing, the volume, the price components of it and that's how we know it's showing up in the bottom-line.

So, could you remind us as you look out and do the buckets for OE change, the deeper we go into this decade or will it be pretty continuous or pretty equal contribution across the various categories for the various businesses? And that's a broad question but if you give us a bit of a feel there. Doyle R. Simons - President, Chief Executive Officer & Director: Yeah. I wouldn't say changes substantially, George. We will identify broader opportunities as we move forward. As I said, the encouraging part about this is it's becoming part of our culture, it is being bottom up-driven. So things that, frankly, I would have never thought of as opportunities, our employees are bringing up as opportunities to continue to drive down our cost structure, improve our profitability. So again, we'll get more clarity on that as we move forward. But it really does boil down, as I mentioned earlier, to the basic blocking and tackling of running these businesses, but we are encouraged by the opportunities that we continue to unearth to drive our OpEx initiatives.

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

Yes. Good morning, Doyle and Patty. Doyle R. Simons - President, Chief Executive Officer & Director: Morning, Chip. Patricia M. Bedient - Chief Financial Officer & Executive Vice President: Morning, Chip.

Yeah. First question, we haven't talked about Cellulose today, and I was just wondering what you're seeing in that marketplace in terms of, there's a very small player that's kind of working hard to fill up their mills because things haven't turned out the way they planned. And then you've got obviously two competitors who are involved in conversion projects next year. And could you just give me a feel for how that may or may not impact you in terms of your contracts and what you see for the marketplace? Patricia M. Bedient - Chief Financial Officer & Executive Vice President: You might imagine, Chip, we're right in the middle of that process. So let me just give you a little bit of color. I would say that we are very pleased with the demand that we're seeing for our products from our customers. We've got, as you know, very long customer relationships. So on the volume side, feeling good about – it's still just the fourth quarter, we're not into 2016 until next year and we'll give you more color as we get a little closer. Having said that, I do expect that there will continue to be some price pressure as we – moving forward into 2016 as you see supply and demand. But I would say, at this point, we are very pleased with where we are on that front, but more to come.

And regardless of the supply side, would you still characterize the market globally as still a low to mid, maybe even a mid single-digit growth, are you seeing that kind of growth rate? And I know it's very early days, but what do you think this change in policy in China can mean for demand, on going from one child to two children? Patricia M. Bedient - Chief Financial Officer & Executive Vice President: Well, more babies mean more diapers, which means more fluff pulp. So hard to factor that into the cash flow stream, but I know what the direction would be. So I think from that perspective, we feel good about that piece, but I don't know how to quite model that at this point.

Okay. And then just on a separate note, I noticed the – and this would be on I guess page eight of the financial package, but the other unallocated expense, which isn't tied to FX or LIFO, was a pretty high number, $23 million. And maybe I missed it, but what was that? And I know it jumps around, but what should we expect that to do from third quarter to fourth quarter? Patricia M. Bedient - Chief Financial Officer & Executive Vice President: Sure. We did true up some of our environmental reserves, which is probably the biggest piece of that, it's not all of that by any matter of means, we have a number of things that you saw in the second quarter. The number was I think about $13 million, went to $23 million. The biggest difference really was for a true-up of some environmental reserves that are old reserves and it's just a function of – this is kind of the time that we go through that process. There are probably some other small reserve true-ups, but that's the biggest number. Going forward into the fourth quarter, I wouldn't expect that that number would be as large as you see it.

Your next question comes from the line of Steve Chercover with D.A. Davidson. Please go ahead. Steven Pierre Chercover - D. A. Davidson & Co.: Thank you. Good morning, everyone. I had a couple of questions on EWP, first of all. Have you seen any significant pressure from the decline in solid wood, because it seems like your prices were holding in pretty well? Doyle R. Simons - President, Chief Executive Officer & Director: Yeah. Steve. And good morning, Steve. As you would expect, we have seen a little bit of pricing pressure as the saw log prices have come off. We anticipate, as we mentioned earlier, as saw log prices go up, some of that pressure will abate. So to answer your question, I would say, yes, we've seen a little bit of pressure, nothing significant and not something we're concerned about in the long term. Steven Pierre Chercover - D. A. Davidson & Co.: Okay. And do any of the Trus Joist facilities have the ability to participate in this cross-laminated timber market that seems to be emerging? Doyle R. Simons - President, Chief Executive Officer & Director: Yeah. We are really encouraged by the cross-laminated timber emerging market. And more and more buildings, as we all know, are using wood. And yes, we are positioned to participate in that as we move forward and there are some big initiatives, as you know, to continue to encourage those efforts going forward. Steven Pierre Chercover - D. A. Davidson & Co.: Yeah, I think it's a great opportunity. And then I have one question on Cellulose. A couple of years ago, when viscose was really, really strong, you introduced your Pearl product that I believe was marketed as an extender, but I don't think you've spoken about it recently. So I was just wondering, is it growing, is it lucrative and are prices moving one way or another? Patricia M. Bedient - Chief Financial Officer & Executive Vice President: Yeah, Steve, it's Patty. It is a smaller part of the overall portfolio, but we are producing the Pearl product, primarily in our Port Wentworth facility, and that does help the overall supply that comes into the fluff market. So it is still a meaningful part for Port Wentworth, still a small part as it relates to the overall pulp manufacturing and supply. Steven Pierre Chercover - D. A. Davidson & Co.: But your expertise in any future growth would be more in fluff than in the extenders, is that correct? Patricia M. Bedient - Chief Financial Officer & Executive Vice President: Well, the biggest impact for sure would be in fluff just based upon the size of both that market and our capacity, but I wouldn't discount the importance of the Pearl product, especially as a result, as I said, to both the price as well as additional capacity for Port Wentworth.

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

Hey, everyone. This is Scott Lehmann (47:01) in for Mark Connelly. Good morning. Just two quick questions. The first one is, if you guys see these FX conditions persist for the next year, how would you expect that that would affect the mix of wood that you guys are shipping? Doyle R. Simons - President, Chief Executive Officer & Director: Let's talk just a minute about what we're seeing in the export market. As we mentioned, we are very encouraged by what we're seeing in Japan. Housing continues to improve there. And as a result, we expect improved shipments into Japan in the fourth quarter and would expect that trend to continue next year. In terms of Chinese markets, as we referred to earlier, inventories are returning, trending back toward normalized levels. And we think, as a result, prices are stabilizing and getting inventories back toward more normalized levels by the end of this year we think positions China to be a improving market as we move into next year, 2016.

Okay. And then just the second and last question. It looks like your price realizations for Engineered Wood Products were both up in the quarter. Do you think that those markets are tight enough to allow you to pass along higher OSB prices, if OSB prices do continue to move higher over the next six months? Patricia M. Bedient - Chief Financial Officer & Executive Vice President: We'll have to see how that all figures out. As we said, for the fourth quarter, which is really on a pricing guidance what we give, think that realization will be basically flat into the third quarter.

Okay. Thank you.

Your next question comes from the line of Alex Ovshey with Goldman Sachs. Please go ahead. Alex Ovshey - Goldman Sachs & Co.: Thank you. Good morning, Doyle and Patty. Doyle R. Simons - President, Chief Executive Officer & Director: Good morning, Alex. Alex Ovshey - Goldman Sachs & Co.: A couple of ones for you. So, you and others or U.S. based pulp producers have talked about the potential impact of a strong dollar on pulp pricing, assuming the dollar does stay strong. How do you sort of handicap the potential impact to margins in pulp from that? Patricia M. Bedient - Chief Financial Officer & Executive Vice President: Well, I think as Doyle talked about in his comments on the FX, a strong dollar is not a positive business. But I think as we look at the euro right now, if you look year-over-year, it has weakened considerably compared to the U.S. dollar. So, I wouldn't necessarily see that it will be significantly weaker from where it is today. Alex Ovshey - Goldman Sachs & Co.: Okay. Thanks a lot, Patty. And then just thinking about the manufacturing portfolio. So a few years back we were talking about engineered wood distribution is businesses that you would potentially exit unless there was material improvement in the profitability which we've absolutely seen. So is there any interest in growing those segments through M&A now that we have seen a very nice improvement in the profitability there? Doyle R. Simons - President, Chief Executive Officer & Director: Thank you for your comment regarding the improved profitability and as I mentioned earlier, a lot of good work from our employees. With that said, in both of those businesses we still got more work to do. In terms of growth generally, we said we would like to grow our company. We'll be very disciplined about how we do that. We think our largest opportunities will be in Timberlands. But if we can find bolt-on type acquisitions and our other businesses that makes sense and drive value for shareholders, that's something we would consider. But our primary focus especially in the two businesses that you just highlighted continue to improve our existing operations. Alex Ovshey - Goldman Sachs & Co.: Thanks, Doyle. Doyle R. Simons - President, Chief Executive Officer & Director: Thank you.

Your final question comes from the line of Collin Mings with Raymond James & Associates. Please go ahead. Collin P. Mings - Raymond James & Associates, Inc.: Hey. Good morning, Doyle. Good morning, Patty. Doyle R. Simons - President, Chief Executive Officer & Director: Good morning, Collin. Patricia M. Bedient - Chief Financial Officer & Executive Vice President: Good morning, Collin. Collin P. Mings - Raymond James & Associates, Inc.: Just first on the capital allocation front. Going back to – when you announced your $700 million buyback, I think you guys made it pretty clear that you fully intend to utilize that in context of the TRI Pointe deal. How should we be thinking about really this latest share repurchase announcement? Just given where your cash balance is now, should we view that as you're going to fully execute that or is it just kind of a tool you want at your disposal? Doyle R. Simons - President, Chief Executive Officer & Director: I think when we announced the share repurchase our intent when we announced it is to fully execute it. So, we'll continue to update everybody on exactly where we are on a quarter-to-quarter basis, but our intention would be to execute the share repurchase over time. Collin P. Mings - Raymond James & Associates, Inc.: Okay. Yeah, no, it just looked like you had – there was a little bit of a pause if you completed the full $90 million in the third quarter, and there wasn't really anything incremental for the remainder of the quarter. So that was kind of the – where the question was coming from... Doyle R. Simons - President, Chief Executive Officer & Director: Yeah, there was nothing to be read into that Collin. Collin P. Mings - Raymond James & Associates, Inc.: Okay. And then just I'm curious if you can talk a little bit more about – there have been a few lumber production curtailments announced in the U.S. South recently and obviously in response to where lumber pricing was in the third quarter. And just maybe what have you seen in terms of your Timberlands business as it relates to that? Have you had to get back at pricing at all, have you lost a little bit of volume to a couple mills, just maybe update us in context of some of the announcements in the third quarter? Doyle R. Simons - President, Chief Executive Officer & Director: Yeah. In terms of our Southern Timberlands, I would say are – whether all these – are these one off. Our demand has been continued to be fairly consistent and pricing in the third quarter was up slightly versus the second quarter. And for 2015 versus 2014, our best guess is prices will be up somewhere in the 2% to 3% range as we had indicated earlier this year. So, yeah, was there some impact from those announcements? Yes. But, it had any significant impact on our Timberlands, either volume or pricing? No. Collin P. Mings - Raymond James & Associates, Inc.: Okay. And then just bigger picture, I know you've mentioned a couple of times on this call again, Doyle, just the focus on looking at growing potentially that Timberland platform, maybe more opportunities in the U.S. South. But can you just talk about given that we've now seen two of the larger deals that were out there this year either cleared or are in the process of clearing the market, just what you're even seeing in terms of opportunities right now? Doyle R. Simons - President, Chief Executive Officer & Director: There's not a lot out there right now, Collin. I would tell you, especially for higher quality Timberlands when something does come, become available, there's a lot of interest, a lot of competition and still a lot of money out there interested in investing in this asset class. But, in terms of specific opportunities other than the two that you just mentioned, not seeing a lot of activity in terms of availability. Collin P. Mings - Raymond James & Associates, Inc.: Okay. And then just one last one and then just kind of piggybacking off of couple of the other questions. Just – again, congratulations on all the progress, particularly on the Engineered Wood Products business. Should we think about just given that, there still sounds like some other opportunities you want to explore there on cost savings over time. Do you think about this as now being kind of a minimum of $140 million to $150 million a year in terms of EBITDA business? I mean just maybe speak to the sustainability of the improvement that we've seen here, particularly over the last couple of quarters? Doyle R. Simons - President, Chief Executive Officer & Director: We do think the improvements that we've seen are sustainable. I do believe that we have, as I alluded to earlier, additional opportunities to improve that business going forward. So, to your point very encouraged about the progress, very encouraged about the work of our employees in that business. And there is no reason to the things that we've done aren't sustainable and that there aren't additional opportunities to improve that business going forward. Collin P. Mings - Raymond James & Associates, Inc.: All right. Thank you very much. Doyle R. Simons - President, Chief Executive Officer & Director: Thank you, Collin.

Thank you. I'd like to turn the call back over to Doyle for any closing remarks. Doyle R. Simons - President, Chief Executive Officer & Director: Let me just close by saying thanks everybody for joining in this morning. And more importantly, thank you for your interest in Weyerhaeuser. And everybody have a good day.

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