Weyerhaeuser Company (WY) Q4 2015 Earnings Report, Transcript and Summary

Good morning. My name is Brent and I will be your conference operator today. At this time, I would like to welcome everyone to the Weyerhaeuser Fourth 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, Vice President of Human Resources and Investor Relations. Please go ahead. Denise M. Merle - Senior VP-Human Resources & Investor Relations: Thank you, Brent. Good morning, everyone, and thank you for joining us today to discuss Weyerhaeuser's fourth 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 the 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. For the past two years, we've been relentlessly focused on making Weyerhaeuser a truly great company by pulling three key levers to drive value for shareholders: portfolio, performance and capital allocation. In 2015, we've made significant progress in each of these areas. We announced two transformational portfolio changes, a merger with Plum Creek that will create the world's premier timberland and forest products company and the exploration of strategic alternatives for our Cellulose Fibers business. We maintained a relentless focus on improving our relative performance and delivered on our second set of annual operational excellence targets. And importantly, we delivered on our commitment to return cash to shareholders. We increased our dividend by 7%, and we repurchased nearly $520 million of common shares in 2015. Despite ongoing headwinds related to the strengthening of the U.S. dollar and global macroeconomic uncertainty, we remain focused on what we could control. And for the fourth quarter, our business has once again delivered solid operating results. Weyerhaeuser reported fourth quarter net earnings of $59 million or $0.11 per diluted share on net sales of $1.7 billion. Excluding special items, we earned $121 million or $0.24 per share. Our primary special item for the fourth quarter was a non-cash asset impairment in our newsprint equity affiliate. Additional items included costs for the Plum Creek merger and the closure of several distribution centers, and a tax benefit from the expiration of our built-in gains period. I will begin the discussion of our fourth quarter business results with some brief comments about the housing market. The housing market maintained positive momentum in the fourth quarter as favorable weather conditions enabled building activity to continue through December in many areas of the country. Single-family housing starts improved in the quarter and ended the year up 10% compared with 2014. Total U.S. housing starts ended 2015 at just over 1.1 million, an improvement of 11% compared with last year. For 2016, we expect steady moderate growth in the U.S. housing market. We are planning for just over 1.2 million housing starts in an increasing single-family share. With improving job growth and historically low interest rate, U.S. economic fundamentals support a continuing recovery. Despite some headwinds from labor constraint and falling oil prices, builder sentiment remains extremely strong. Most of our customers tell us they are planning for 2016 growth rate in the low-double digits. Let me now turn to our business segment results, starting with Timberlands, charts 3 to 5. Timberlands contributed $134 million to fourth quarter earnings, an improvement of $8 million compared with the third quarter. In the West, fee harvest volumes rose seasonally as we exited the third quarter fire season, and average log realizations increased due to a greater percentage of export sales. Each of our export markets improved during the quarter. Log sales volumes to Japan increased and prices rose modestly as a solid Japanese housing market continues to drive demand. So the full-year 2015, Japanese win housing starts grew by 3%. In China, log inventories at the ports declined throughout the fourth quarter as many suppliers curtailed shipments in response to weak third quarter pricing. Although overall Chinese market demand remained relatively flat compared with the third quarter, average realizations for our China export logs increased and sales volumes rose as we flexed volume to take advantage of opportunities created by the tighter Chinese inventory situation. In Western domestic markets, log supply and demand remained balanced during the quarter. Realizations for our Western domestic logs declined slightly to a greater mix of hemlock and other whitewood. The flooding experienced in some regions of Washington and in Oregon during December had no significant effect on our operations or infrastructure. In the South, heavy rainfall did affect harvest operations in select wood baskets, but fee harvest declined only 3% compared with third quarter as our Southern Timberlands teams did an outstanding job of flexing harvest settings in response to weather conditions. Although overall market conditions were stable, realizations for our Southern logs declined slightly, due to a shift in geographic mix. Silviculture and forestry expenses declined due to cost control initiatives and weather-related constraints. Fourth quarter included earnings of $19 million from disposition of non-strategic timberlands, an increase of $6 million compared with the third quarter. Wood Products, chart six and seven. Wood Products contributed $48 million to fourth quarter earnings before special items compared with $85 million in the third quarter. Special items for the fourth quarter included a pre-tax charge of $8 million for the closure of four distribution centers, as we continue to improve the cost structure of that business. Adjusted EBITDA before special items for the Wood Products segment declined to $75 million in the fourth quarter, as seasonally lower sales volumes and lower operating rates more than offset improved realizations for oriented strand board. In lumber, EBITDA was $22 million lower compared with the third quarter. Average realizations declined 3% and sales volumes fell 9%. Operating rates declined and unit manufacturing cost rose due to increased downtime, primarily for installation of capital projects that will continue to reduce cost within our Southern lumber system. In OSB, EBITDA improved by $13 million, primarily due to a 14% increase in average sales realizations. This improvement was partially offset by a 7% reduction in sales volumes and higher unit manufacturing costs due to planned maintenance downtime. Engineered Wood Products reported fourth quarter EBITDA of $14 million compared with $36 million in the third quarter. Operating rates declined due to downtime for major maintenance, capital projects, and seasonal holiday shutdowns. Sales volumes declined seasonally, and average realizations were lower due to mix. EBITDA for the distribution business declined compared with third quarter due to seasonally lower sales volumes. Cellulose Fibers, charts eight and nine. Cellulose Fibers contributed $64 million to fourth quarter earnings before special items compared with $79 million in the third quarter. Fourth quarter results included a non-cash pre-tax charge of $84 million for the asset impairment in our newsprint equity affiliate. Pulp prices remained under pressure during the fourth quarter due to continued strengthening of the U.S. dollar. Average pulp realizations declined compared with the third quarter, and maintenance expense increased due to additional scheduled maintenance outage dates. Fourth quarter included eight days of scheduled maintenance outages compared with four days in the third quarter. These factors were partially offset by improved sales volumes and strong operating performance. Pulp production rose compared with the third quarter despite the increase in scheduled maintenance outage days and several of our mills set operating records. For example, our Columbus, Mississippi mill operated at nearly 100% reliability in the quarter. I will now turn it over to Patty to discuss our first quarter outlook, and then I'll follow up with some specific comments on operational excellence. Patricia M. Bedient - Chief Financial Officer & Executive Vice President: Thanks, Doyle, and good morning, everyone. The outlook for the first quarter is summarized on chart 12. Now, this outlook does not incorporate the merger with Plum Creek. We'll include Plum Creek results after the transaction closes. I'll begin my comments with Timberlands. In the West, export demand from Japan is expected to remain strong, and we anticipate a slight improvement in pricing. The strength of the U.S. dollar continues to dampen significant price increases. Sales volumes to Japan are expected to increase more than 5% in the quarter. Our volumes and realizations for log sales to China are anticipated to increase modestly. We anticipate a slight increase in Western domestic sales realizations as lumber prices are expected to improve later in the quarter. Fee harvest in the West is expected to be comparable to the fourth quarter. In the South, sales realizations are expected to decrease slightly due to mix. Sales volumes will be lower as wet weather contributes to the typical seasonal decline in fee harvest. Earnings from non-strategic land sales are anticipated to be roughly $10 million lower than the fourth quarter. Overall, we expect earnings in our Timberlands segment to be comparable to the fourth quarter. In Wood Products, lumber average sales realizations are anticipated to increase in the first quarter compared to the fourth, although prices have not improved thus far. Realizations for our other product lines as well as overall sales volumes are expected to be roughly comparable to last quarter. We expect less downtime from planned maintenance and capital projects compared to the fourth quarter. And as a result, average unit manufacturing cost should decrease. Channel inventories remain low, with customers generally purchasing for immediate needs. As we enter the spring building season, we do expect to see business improve. We anticipate that overall earnings on our Wood Products segment will be higher in the first quarter compared to the fourth and slightly higher than the first quarter of 2015. In Cellulose Fibers, global softwood pulp inventories as of the end of the fourth quarter were at 29 days, down slightly from the 30 days at the end of the third quarter. This is at the high end of balanced inventory levels. We expect that average sales realizations and volumes for our pulp products will weaken during the first quarter due to continued currency headwinds and the normal effect of the Chinese New Year. Our liquid packaging operation will begin its planned maintenance outage this quarter, and as a result, we expect maintenance expense for this segment will increase significantly compared to the fourth quarter, which had fewer overall maintenance days. We anticipate that earnings in our Cellulose Fibers segment will be significantly lower than the fourth quarter of 2015 and roughly comparable to the first quarter of last year. Now, I'll wrap up with some overall financial comments, and I'll refer to chart 11 for these discussions. Cash from operations totaled $339 million in the fourth quarter, an increase of $57 million from the third quarter. Capital expenditures for the fourth quarter were $174 million, bringing our total expenditures for the full year to $483 million, well within our earlier guidance of $500 million. Looking ahead to 2016, we expect total expenditures for the full year to be down slightly from 2015, subject to the outcome of the strategic review for Cellulose Fibers and the transaction with Plum Creek. At the end of the quarter, we had cash of just over $1 billion and we do not have any scheduled debt maturities in 2016. Now, I'd like to update you on the status of our retirement benefit plans. The year-end 2015 funded status of our defined benefit pension plans and post-employment retirement plans improved by approximately $400 million compared to year-end 2014. This improvement was primarily the result of the increase in discount rates. We did not make any cash contributions to the U.S. qualified pension plan in 2015 and we don't anticipate any cash contributions for that plan this year. Cash paid for all other pension and other post-employment retirement plans in 2015 was approximately $80 million. We expect spending in 2016 to be approximately $60 million. Chart 14 in the appendix details the pension expense by business for 2015. Total expense in 2015 was approximately $42 million, and in 2016, we expect the total amount will be income of approximately $5 million. So with that, I'll turn the call back to Doyle. Doyle R. Simons - President, Chief Executive Officer & Director: Thank you, Patty. I'd now like to switch gears and provide an update on our operational excellence efforts. Throughout the year, each of our businesses remained relentlessly focused on achieving their respective operational excellence targets. Achieving these targets is not easy. They're designed to stretch a business to deliver a step change and relative performance, and that's exactly what is happening through a lot of really good work by our employees. Chart 13 highlights our OpEx accomplishments for 2015 and our annual target for 2016. The Timberlands business delivered $39 million of operational excellence improvement in 2015, exceeding its target of $20 million to $30 million. These results were primarily driven by cost efficiency in three key areas. First, harvest and haul cost. We're continuing the implementation of centralized dispatch systems to improve the efficiency of logging and trucking contractors and replacing costly cable logging with steep slope technologies. Second, spending on forest roads. We're adjusting the volume of rock relay during road construction and the level of road maintenance to match expected vehicle travel patterns and local weather conditions. Finally, silvicultural cost. Data we have collected on tree stand growth patterns enable us to custom-tailors silviculture prescriptions to apply pruning and hardwood control only to acres where those activities generate an optimal financial return. With total OpEx improvements of $64 million since 2013, the Timberlands business has achieved the $50 million to $70 million improvement goal we established two years ago. However, we are not done. For 2016, we are targeting an additional $20 million to $30 million of OpEx improvements from our existing Timberlands holdings. This does not include the benefit we will get from applying our OpEx efforts to over 6 million acres of Plum Creek lands. The Lumber business achieved $21 million of improvements in 2015, meeting its target of $20 million to $25 million. Primary drivers include improvements in reliability and process efficiency and rigorous cost management as we continue to drive down our cost net of logs. Each mill is focused on maintaining consistent throughput and improving uptime by resolving process and equipment issues that create bottlenecks or stop production. Capital expenditures for the Lumber business increased in 2015 as we invested in low-risk, high-return projects to further improve the cost structure of our mills. These projects include auto graders and continuous dry kilns. We will capture the full benefits from several of these investments in 2016. With cumulative improvements of over $40 million since 2013, the Lumber business is nearing halfway on its journey to $100 million of controllable manufacturing cost reductions. For 2016, the business is targeting OpEx improvement of $15 million to $20 million. Oriented strand board delivered $24 million of OpEx improvement in 2015, exceeding its target of $10 million to $15 million. Results were driven by improving reliability as our mills focused on eliminating sources of downtime and recovering efficiently from outage events; lowering wax and resin costs as we optimize recipes for multiple products; and increasing our mix of higher-margin products such as flooring. With cumulative improvements of $34 million, the OSB business is more than halfway to its $60 million goal. The business is targeting another $15 million to $20 million of OpEx improvements in 2016. For Engineered Wood Products and Distribution, we set specific bottom-line EBITDA improvement target for 2015 as those businesses remain focused on turnaround performance. Engineered Wood Products improved full-year EBITDA by $35 million compared with 2014, significantly exceeding its $15 million to $20 million target. Each mill maintained a rigorous focus on reducing unit manufacturing cost for all products. For example, maintenance team shared best practices across the mill system, increasing reliability and reducing cost. Engineered Wood Products has made a substantial improvement since 2013. Over the past two years, this business has increased annual EBITDA by almost $70 million, proving that it has the ability to perform. Our focus now is continuing to improve relative performance versus the competition. The 2016 goal for this business will not be a bottom line EBITDA target, but an OpEx improvement target of $10 million to $15 million. Distribution improved full-year EBITDA by $8 million in 2015. The business fell short of its $20 million to $30 million improvement target as it was unable to overcome between effect of severe winter weather early in the year and lower than expected demand in the first half of 2015. 2015 OpEx improvements were largely attributable to improved product margins and reductions in head count, warehouse and delivery expenses. Improvements made to the Distribution cost structure during 2015 have created a stronger foundation for better operating performance next year. In 2016, the distribution business is targeting bottom line EBITDA improvement of $15 million to $20 million. Cellulose Fibers. Cellulose Fibers delivered operational excellence improvements of $47 million, significantly exceeding its $30 million to $35 million target. Improvements were primarily attributable to lower energy costs, driven by our new turbine generator at our Flint River mill and a boiler conversion at Columbus and reduced usage of key chemicals as several mills-adjusted processes are tied to their digesters and bleach plants. During 2016, Cellulose Fibers is targeting improvements of $40 million to $50 million. With OpEx improvements of $75 million to-date, this would enable the business to exceed the $100 million goal established in 2013. I'll also mention the reduction in our SG&A. Part of our commitment to operational excellence is having the right cost structure across our company. Two years ago, we committed to reduce SG&A about $75 million and achieve that run rate by the end of 2014. Last year, we told you we had delivered on that commitment, and you can see our performance in this year's results. Compared with 2013, we have reduced our SG&A by over $100 million. Success in achieving our OpEx target was a critical component of Weyerhaeuser's 2015 financial performance, enabling us to offset pricing headwinds in many of our markets. In Timberlands, weaker year-over-year pricing for Western logs created a headwind of over $100 million. By exceeding its operational excellence target, the Timberlands business was able to overcome nearly half of that deficit. Lower year-over-year realizations of 11% for lumber and 9% for OSB created a headwind of over $250 million for Wood Products earnings. However, the segment captured nearly $100 million of operational excellence improvement, significantly mitigating the effect of these lower prices and earnings for Wood Products declined less than $70 million on a year-over-year basis. Cellulose Fibers made the headwind of over $100 million from declining pulp prices, higher fiber cost, and the effects of the West Coast port slowdown. The business offset nearly half of this amount through its OpEx efforts. Looking forward to 2016, our relentless focus on operational excellence remains a key component of our commitment to improve our relative performance and drive value for shareholders. I will close this morning with some brief comments on our merger with Plum Creek and the strategic review of our Cellulose Fibers business. The joint proxy and registration statement associated with our announced merger with Plum Creek was declared effective by the SEC on December 28. Both ISS and Glass Lewis have recommended that shareholders vote in favor of the proposals. The shareholder vote will be held on February 12 and we anticipate closing the merger in the first quarter. Our joint integration team is making excellent progress as we define staffing needs, establish plan for cost synergy, and position the merged company for a smooth and successful day one. The review of Cellulose Fibers is proceeding well and we look forward to sharing more information with you when that review is complete. As we enter 2016, I'm excited about the opportunities in front of us. Although the first few weeks of the year have been characterized by market turbulence and global macroeconomic concerns, I am encouraged by the positive trend in U.S. housing and the optimistic tone we are hearing from our customers. Our portfolio changes and operational improvements are positioning Weyerhaeuser to drive long-term value for shareholders. We will remain relentlessly focused on operational excellence and disciplined capital allocation, and I look forward to sharing our continued progress with you. And now, I'd like to open up the phone for questions.

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

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

In Cellulose Fibers, your average prices were down, I think, around 10% year-over-year, which is maybe a little bit sharper than the list price decline. Can you remind us, was there any mix issues there or kind of what was driving the price decline? It seemed a little bit sharper than what we might have expected? And then, just related to Cellulose Fibers, you're targeting an acceleration of OpEx improvements in 2016, and I'm just wondering if you could give a little color on what's driving that kind of year-over-year. Doyle R. Simons - President, Chief Executive Officer & Director: Let me start. I'll address your second question with OpEx and then, I'll ask Patty to address your first question. And what I would tell you on OpEx is we're gaining a lot of traction across our businesses and specifically in Cellulose Fibers. What we found there through Cathy Slater's leadership is an abundance of ideas that are percolating up from a bottoms-up approach in terms of continuing to drive down our overall cost structure. The encouraging thing about OpEx overall, Anthony, that we've seen is, it started off as a top-down effort. But as we defined winning, defined exactly what we mean by OpEx and people are incented to drive OpEx, we are having just more and more ideas bubble up in terms of the opportunities, and Cathy has a full slate of those outlined and proved in 2015 the ability to execute on those, and more to come in 2016. So, it's across the board, lower energy, lower chemicals, better reliability, all the safety blocking and tackling of running a Cellulose Fibers business. Patricia M. Bedient - Chief Financial Officer & Executive Vice President: Yeah, Anthony. This is Patty. Your question on Cellulose Fibers, was it fourth quarter of 2014 to fourth quarter of 2015 in terms of...

Yeah. Yeah. Year-over-year. Patricia M. Bedient - Chief Financial Officer & Executive Vice President: Yeah. It really isn't anything significant as it relates to anything out of the ordinary. As you know, we do have a different mix in terms of both our product within our fluff mill, as well as our NBSK mill in Grande Prairie. But I wouldn't say there's anything out of the ordinary or strange about the pricing itself. It's just that the mix can change.

Okay. Okay. That's helpful. And then just shifting to Wood Products, can you share your operating rates across the three businesses? And I'm sorry if I missed this, but with OSB, can you just repeat kind of the trajectory of pricing that you're expecting into the first quarter? Doyle R. Simons - President, Chief Executive Officer & Director: Sure, Anthony. So in terms of operating rates, in the fourth quarter, Lumber was in the high-80s, OSB was in the low-90s, and ELP was in the low-70s. In terms of pricing for OSB, if you look at its current or first quarter to-date, average to-date is down about $7 versus the fourth quarter in terms of the OSB pricing.

Okay. That's helpful. I'll turn it over. Doyle R. Simons - President, Chief Executive Officer & Director: All right. Thanks.

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

Hi, everyone. Good morning. Thanks for all the details. Congratulations on the year. Doyle, if we can talk about operational excellence first. So you're two years into the program, you're more than achieving your goals. I'd have to imagine that you're getting to the proverbial fruit that's maybe hanging higher on the tree. So do you need to have a larger funnel to get to the goals in a year like 2015 relative to what would have been the case in – excuse me, 2016 relative to 2015 or 2014? And then the related question, ultimately, running a business is a lot easier than running numbers on a spreadsheet if you're an analyst. But what's been so difficult about getting the OE benefits to the bottom line and distribution? Doyle R. Simons - President, Chief Executive Officer & Director: Okay. Yeah, thanks for the question, George. On OpEx, I think you said it exactly right. It does get more difficult as you move forward. But as I said in response to the earlier question, what I'm really encouraged about and why we're confident we're going to – be able to continue to deliver on OpEx targets is because it has become part of who we are. It is being done much more from a bottoms-up approach, George. So whereas previously, you would think that we're identified at the top and kind of driven down and now more and more of these ideas. To your point, it's a larger funnel. More and more of our ideas are coming from our employee base, which they are the ones out there doing the hard work every day. When they understand what the opportunities are, recognize that they are empowered to go do something at those, and then send them (31:33) to do that, it's amazing what can happen. So, you're right, it is a different approach, but very encouraged by the progress. And most importantly, it's becoming part of our culture and that's why we're year-after-year, we believe, we're going to be able to continue to drive operational excellence as we move forward. In terms of distribution, George, it's been – while we have made – and I think it's important to highlight, we have made an improvements there. And if you look at it, we've made $40 million plus improvements over the last two years in bottom line distribution EBITDA, but we're still not where we need to be to your point. This year, I hate using weather, but weather did have an impact in the first half of the year, slower than the expected demand, and then the fact that we had kind of eroding commodity prices throughout the year limited the ability to leverage the margin improvements. As we said, we made some significant changes to the cost structure by closing four sites to reduce the footprint, the cost structure and really focus on our growth markets going forward. And I'll tell you, with those changes, we are confident that we're going to be able to continue to improve our distribution business. But still a lot of work to do there and still have work to do, frankly, to prove that we deserve to be in this business long term. With good progress and again with the structural changes we made in the fourth quarter, optimistic about that business going forward.

Okay. And my last question and I'll turn it over, two-part, unrelated, I guess that's two questions. First of all, what kind of pricing are you expecting on average for wood sequentially versus fourth quarter to hit your guidance? And then in SG&A, you've more than achieved your target. Should we assume that SG&A is now flat on a going-forward basis? Thanks, guys. Good luck in the quarter. Doyle R. Simons - President, Chief Executive Officer & Director: Thank you, George. In terms of pricing, as Patty outlined, we anticipate prices will in fact be higher in Lumber in the first quarter versus the fourth quarter. However, that's still in front of us. If you look at it currently, quarter-to-date, prices for Lumber are down approximately $7 versus the fourth quarter average. Encouraging, prices were up $4 or $5 this week. So, we'll see where it plays out. But normally, you start to see an inflection point in Lumber prices mid to late-February as the spring – as building season kicks in. And we would hope to see the same type of price inflection or improvement in OSB as we move through the quarter as well. And that's what's baked into – generally baked into our guidance for the first quarter. Patricia M. Bedient - Chief Financial Officer & Executive Vice President: Yeah, George. As you think about Wood Products, the primary price increase quarter-over-quarter that we have baked into our guidance is in Lumber and I would say we're looking for something low-single digits in Lumber. And OSB and Engineered Wood, combinations of those two, probably the results would – in our guidance would be roughly flat from a pricing perspective. But as Doyle has said, thus far for January, one month does not a quarter make, but we are down from the guidance that we have baked into the quarter. Doyle R. Simons - President, Chief Executive Officer & Director: And in terms of SG&A, George, we're always looking to drive down our SG&A costs and as we complete the merger with Plum Creek, as we already identified, there will be at least $100 million of hard dollar cost synergies. Most of that will be SG&A they did and then of course operational synergies on top of that. So like I said, we're never done on SG&A and the focus after the closure of the merger will quickly turn to the – to hard dollar cost synergies that we outlined when we announced that merger.

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

Your next question comes from the line of Collin Mings with Raymond James. 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 P. Mings - Raymond James & Associates, Inc.: First question. I just wanted to follow up on George's question. Just as it relates to closing the four distribution centers, can you quantify how much of a lift and run rate as far as EBITDA within the distribution business? How much that specifically will provide a lift in 2016? Doyle R. Simons - President, Chief Executive Officer & Director: Well, as we said, we did close four sites. These were markets with limited growth potential and high cost. And we think, as a result of that, we've laid out our OpEx target for 2016, and we are confident with these changes, Collin, that we will meet these specific targets that we laid out for 2016 in terms of bottom line EBITDA improvement of $15 million to $20 million in that business. Collin P. Mings - Raymond James & Associates, Inc.: Okay. I'll just – is there any way to think about how much of a drag maybe those facilities were in 2015 or you don't really break it out that way? Doyle R. Simons - President, Chief Executive Officer & Director: We don't really break it out that way, Collin. I'll just tell you, it does significantly improve our cost structure. It gets us focused on the markets that we need to be focused on. And I think it's going to be a big benefit as we move in to 2016. Collin P. Mings - Raymond James & Associates, Inc.: Okay. Then, moving to Timberlands, just maybe as we enter the year here, just update us on your latest thinking as it relates to the potential improvement in sawlog prices in the U.S. South this year? What are you thinking about for 2016 and then, just more broadly (37:09) continue to extend, just how you're thinking about the price recovery in the South? Doyle R. Simons - President, Chief Executive Officer & Director: Yes. So, if you think about Southern log prices, Collin, our prices were up a couple of percent in 2015 versus 2014, and we would anticipate a similar increase in 2016 versus 2015. From a broader picture, if U.S. housing starts continue to improve, demand for lumber will rise. And we expect the tension and rising prices across the Southern log markets, we are confident that's going to continue to pay out. And frankly, the additional mills, whether it be the Canadians coming down and investing in mills and increasing the productivity of those mills or Klausner adding the three mills that they're adding, that's all positive from a demand standpoint for Southern sawlogs as well. So we are – we remain confident that we're going to reach that inflection point and see Southern sawlog prices begin to rise on a more aggressive basis than the 2% that we've seen over the last couple of years. Collin P. Mings - Raymond James & Associates, Inc.: Okay. And then switching gears and recognizing there are some limitations, I recognize what you can say is related to disclosure. But I do want to touch on the financial projections in the proxies internally within Weyerhaeuser. I was curious if you could provide any color on the kind of a drop in expected EBITDA and expected FAD reference between 2016 and 2017 on really Weyerhaeuser on a standalone basis. Any additional color you can provide on that? Patricia M. Bedient - Chief Financial Officer & Executive Vice President: No, I don't think there's anything additional that we can say about that at this point. Collin P. Mings - Raymond James & Associates, Inc.: Okay. All right. I'll turn it over. Thanks, guys. Doyle R. Simons - President, Chief Executive Officer & Director: Thank you.

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

Yes. Hi. Good morning, Patty and Doyle. First question is on the – thanks. As you think about the analysis with the Cellulose division, I understand since most of its legacy proctor (39:22) properties bought 25 years ago, the basis is low. And I guess the way we need – would help me to think about this, obviously, if you do a spin, you would avoid some capital gain tax, I believe. But on the other hand, if you do the spin, there's a lot of cost, I guess, in terms of setting up a public company that you would not have to incur if you're just doing a direct sale of the assets. And I guess can you give me some feel for the trade-off of that? I mean, can you actually put a rough dollar cost of pursuing a spin versus just a sale? Patricia M. Bedient - Chief Financial Officer & Executive Vice President: Yeah. Chip, this is Patty. I think as we think about Cellulose Fibers strategic review, we're looking at all of those alternatives and evaluating them. I couldn't put any dollars on them at this point. You are correct in that the tax basis for Cellulose Fibers is low. And so, we would have on a cash sale a tax, a gain, but we would have to compare that to what we would get in terms of a spin and both in terms of time as well as cost of setting up a separate company. But as we have done with all of our other strategic reviews over the course of time, we are looking at a broad range of options at this point.

Okay. And when you look at the distribution business, I know that it's really nice to see how every business has hit their targets, obviously, Doyle, the last couple of three years except for that one. And I didn't know if you were – just sort of give us an update on your thinking in terms of sort of how much more of time do they have before you might consider strategic review of that business. And then maybe just more broadly, is your thinking toward all the Wood Products segment, all the manufacturing, has that changed at all in light of the Plum Creek deal in terms of would this be an area that you – in other words, do you want to be a pure Timber play and maybe it's not as strategic? Doyle R. Simons - President, Chief Executive Officer & Director: So, Chip, let me – since it's Super Bowl weekend, let me use a football analogy on distribution.

Yeah. But you guys aren't in it? Doyle R. Simons - President, Chief Executive Officer & Director: No, I guess (41:45)... Patricia M. Bedient - Chief Financial Officer & Executive Vice President: Yeah.

Sorry. Doyle R. Simons - President, Chief Executive Officer & Director: ... rough around the air (41:45). Patricia M. Bedient - Chief Financial Officer & Executive Vice President: Don't remind us, Chip. Doyle R. Simons - President, Chief Executive Officer & Director: Everybody's walking around with a frown on their face. But in terms of distribution, Chip, I would tell you, as I mentioned earlier, we have made improvements in that business. I think the business has earned the right to continue to be on the field at this point, but has not earned a spot on the roster. So, like I said earlier, still more to do, encouraged by the progress. Like I said, we made some significant changes in the fourth quarter of 2015 and we're confident that that's going to help us accelerate progress in distribution going forward, so more work to do. In terms of Wood Products overall, Chip, as you've heard us say and me say historically, we believe that this can be a very good business and create a lot of value for shareholders over a cycle, assuming that you run it effectively and get the cost structure to where it needs to be, where you're back at the bottom and that you're fully capitalizing on the upturn in housing that we still have in front of us. We're encouraged by the progress we've made on the overall cost structure and our OpEx improvements and still more to come, and like I said, very well positioned to continue to capitalize on the improvement in housing as we move forward.

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

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

Thank you. Two things. The rating agencies have said that given the terms of the deal, they'd probably downgrade Weyerhaeuser. Since you've said you want to remain acquisitive, would it make sense to scale back or slow down the buybacks to keep the agencies happy? And the second question is maybe a little more theoretical, WestRock has said publicly, it wants to get out of its land deals faster. Would that be something that might fit with your priorities? You've talked about wanting to expand, but is cleaning up those JVs something that might be attractive to you? Doyle R. Simons - President, Chief Executive Officer & Director: So, let me talk about the acquisitive part and I'll turn it over to Patty to talk about the rating agency. Mark, we have said that we would like to grow the company. We said that our primary opportunities were in Timberlands and thus, the Plum Creek transaction. I'll tell you, in the near term, our focus and maybe our singular focus is going to be on fully integrating Plum Creek and making sure we fully realize the synergy and the value of that transaction. So, in the near term, that's going to be our primary focus and our plate's full on that. Longer term as we integrate that and get the full benefit, continuing to grow the company assuming we can find the right opportunities is something we would consider, but right now, our focus is on Plum Creek and the integration thereof. Patricia M. Bedient - Chief Financial Officer & Executive Vice President: And Mark, as to your question about the rating agencies, S&P did write that based upon their understanding of what the leverage would look like after we close the transaction in order to repurchase the shares, as we've talked about that, the leverage will be certainly higher than where we have historically been. And so, based upon their understanding, at this point, they would expect that they would downgrade us from BBB to BBB minus, so still investment grade. We are focused on bringing that leverage down as we go forward. We are still committed to the $2.5 billion of share repurchase, but certainly mindful that we'll need to bring the leverage down going forward and we think we'll have good opportunities to do that, both with respect to the broader portfolio of 13 million acres of timberland as well as depending upon the outcome of the strategic review of Cellulose Fibers.

Super. Thank you. Doyle R. Simons - President, Chief Executive Officer & Director: Thank you.

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

Good morning, Doyle. Good morning, Patty. Doyle R. Simons - President, Chief Executive Officer & Director: Good morning, Mark.

The whole Weyerhaeuser team has done an impressive job over the last couple of years. I had a few questions. One, Doyle, can you just clarify for us on the review of Cellulose, especially, does that include things like the NORPAC joint venture and the bleached board mill at Longview? Doyle R. Simons - President, Chief Executive Officer & Director: Yes. So first, let me say thank you for those comments, Mark. And then secondly, yes, the strategic review of Cellulose Fibers includes all of the businesses in Cellulose Fibers.

Okay. And then to kind of follow on, on Mark's question about the rating agency, I mean there are some other things that you could look at divesting like the business down in Uruguay, which is still not generating a lot of cash. Any thoughts on that, Doyle? Doyle R. Simons - President, Chief Executive Officer & Director: As we've said, as part of the integration process, we'll do a thorough analysis of all 13-plus million acres with 13-plus million acres and the fact, Mark, and I think this is an important one to highlight, with the recent tax extender package, reducing the build-in gains period permanently to five years, we no longer have that constraint. So, 13 million acres with – plus no longer being under the built-in gains tax. We have lots of flexibility in terms of what we could do going forward.

Okay. Now, last question I had is to kind of come back to something Collin Mings raised and that is you've got a lot of capital tied up in Southern timberland and you're going to commit a lot more capital here pretty quickly to Southern timberland. But if we look at the cash returns on Southern Timber, they've been pretty anemic for about a decade now. What gives you the confidence that these returns are going to improve significantly over the next few years, and what do you think that trajectory looks like? Doyle R. Simons - President, Chief Executive Officer & Director: Yeah. Mark, what gives me confidence and gives us confidence is basically supply and demand. And as you know, ultimately that works. And if you just look at it from a housing continuing to improve and housing has improved, it's been slow but steady. So, I think that's going to be what's going to happen on the demand front. And on the supply front, if housing continues to improve, the supply is not going to come from the Pacific Northwest, the supply is not going to come from Canada. Yeah, we see a little influx now because of exchange rates in China, but ultimately, they, being Canada are limited because of the pine beetle situation as to what they're going to be able to provide. So, supply and demand works. We're going to reach that inflection point. And when we do, that's when we're going to see a significant change in Southern sawlog prices. So, yeah, it comes slower than any of us would have expected or hoped, but if you just look at the basic supply and demand, we remain confident that we will in fact see improved prices for Southern sawlog just like we have historically.

And, Doyle, just to follow on this, we all, I think, buy into supply and demand. But on the supply side, it seems like for many years here because of the weakness in housing, we've really been under-harvesting the growth rates down in the South. So we've got some accumulated inventory, and I just wonder how that accumulated inventory affects the rebound in pricing. Doyle R. Simons - President, Chief Executive Officer & Director: Yeah, Mark, that's a really good point and there's no doubt that there is some accumulated inventory as housing has improved over the last couple of years, we have started to work through some of that accumulated inventory, but there's still some out there. So that's why I'll say there's still a little bit of time, if housing continues, to improve to work through accumulated inventory. But once we do that, you can hit that inflection point of supply and demand, and that's where you start to see the significant increase in pricing.

Okay. I'll turn it over. Good luck in 2016, Doyle. Doyle R. Simons - President, Chief Executive Officer & Director: Thank you, Mark.

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

Thank you. First, a numbers-oriented question. Just on the Cellulose Fibers business, can you provide us with at least preliminary estimates on the maintenance expense and scheduled maintenance outage days for the – for 2016 by quarter if possible? Is that something you have handy? Patricia M. Bedient - Chief Financial Officer & Executive Vice President: No, we can't give it to you by quarter, Mark. I can tell you that as you think about fourth quarter to first quarter and the guidance that there's about roughly $10 million of additional maintenance expense in the first quarter compared to the fourth quarter.

Okay. And then maybe just as a follow-on to that, the $40 million to $50 million of OpEx improvement in Cellulose Fibers, does much or any of that come from being able to effectively reduce maintenance outage expenses? So will we see it in not variable year-to-year? Doyle R. Simons - President, Chief Executive Officer & Director: That is not a key driver of the OpEx improvement that we laid out, Mark. There is, of course, some benefit as we go into the 18-month schedule, but that's not the big driver of what we saw in 2015 versus 2014 nor we'll see in 2016 versus 2015.

Okay. And then, maybe lastly, kind of following on Mark Wilde's question a little bit. One of the components of the bullish lumber, as well as log story has been the expected reduction in supply coming from British Columbia related to the beetle, et cetera. It doesn't seem to have happened yet and lots of reasons maybe that (51:48). Are you still of that view that we will see a reduction and any color you can provide on how that might play into the market? Doyle R. Simons - President, Chief Executive Officer & Director: Yes, Mark. We are absolutely confident that that's going to happen and all you have to do is spend some time in that area and see the devastation that the pine beetle has, in fact, caused. You're starting to see some announcement as you know of some lumber mill closures because of that. I think what's happened is, part of that has just been distorted by the fact that there's been less demand from China. So, some of the impact from lumber that would normally would get on to China has come to the U.S. and that has temporarily offset the pine beetle situation. But if you just look at what the allowable cuts are, if you look at just the overall fiber situation in Canada, we are confident that the pine beetle scenario is going to play out.

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

And we have time for one more question. Your final question comes from the line of Paul Quinn with RBC Capital Markets. Please go ahead.

Yes. Thanks very much. Just looking at your overall volumes in both Timber, well I guess, Timber, Lumber and OSB. What are you planning for 2016? I noticed 2015 Timber volumes were down but you had gains in Lumber and OSB. Just wondering at a higher level what the plan is. Doyle R. Simons - President, Chief Executive Officer & Director: Yeah. So, we would say unit for 2016 in terms of sawlogs overall, we would then anticipate volumes from being flat to maybe down just very slightly. In terms of Lumber and OSB, part of that of course will be dependent on markets. But as we continue to improve our reliability, we would think Lumber and OSB volumes will be up slightly in 2016 versus 2015.

Okay. And just a follow-up, just a flat to down on the log side, is that related to not so robust markets or is that because you're logging at a sustainable level? Doyle R. Simons - President, Chief Executive Officer & Director: I think it's more related to the fact that we're logging at sustainable levels. As we said, we have the ability in any given year to flex 5% or maybe a little more depending on markets. So we'll see how that plays out and that will ultimately determine what the harvest levels are. But basically, we are harvesting at sustainable levels.

Great. That's where I'll put the vote. Doyle R. Simons - President, Chief Executive Officer & Director: All right. Thank you very much.

Thank you. I'd like to turn the call back over to Doyle for any final remarks. Doyle R. Simons - President, Chief Executive Officer & Director: Thank you and thank you for everybody's interest today. Before I – or in closing today, I want to say some words about Patty as this will be her last earnings call on behalf of Weyerhaeuser as she will retire later this year. Specifically, I want to acknowledge her outstanding work as the CFO since 2007 and personally thank her for partnering with me over the last couple of years as we've taken significant steps to make Weyerhaeuser a truly great company. Thank you, Patty, for all you've done for Weyerhaeuser. Patricia M. Bedient - Chief Financial Officer & Executive Vice President: Well, Doyle, let me, just before you close the call, interject one additional thank you to the analyst community on the call. We are very fortunate as a company to have a whole host of very knowledgeable people, and I've enjoyed the dialogue over the years. And as I do retire from Weyerhaeuser now, I feel very confident in the management team going forward, really pleased with the progress that we've made on portfolio performance and capital allocation, and couldn't be more pleased with my successor, once we close this transaction, Russell Hagan. I think that as we go forward, since I will continue to be a significant shareholder, I think that we have a lot of additional capabilities and levers to pull to create ongoing value for shareholders. So, Doyle, thanks to you and thanks to the whole senior management team and employees of Weyerhaeuser. Doyle R. Simons - President, Chief Executive Officer & Director: Thank you, Patty, and thanks, everyone, for joining us this morning, and thank you for your interest in Weyerhaeuser.

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