Annual Analyst Meeting Weyerhaeuser Company New York City May 20, 2004 1
Annual Analyst Meeting
Weyerhaeuser CompanyNew York CityMay 20, 2004
1
2
Forward-Looking StatementSome information inc luded in the following pr esentations contains statements concerning the company’s futur e r esults and per formance that ar e for ward-looking statements within the meaning of the Pr ivate Secur ities Litigation Refor m Act of 1995. Some of these forwar d-looking statements can be identified by the use of forwar d-looking ter minology such as “expects,” “may,” “will,” “believes,” “should,” “approximately,” antic ipates,” “estimates,” “plans,” “continuing”and “maintaining” and the negative or other var iations of those ter ms or compar able ter minology or by discussions of str ategy, plans or intentions. In par ticular , some of these forwar d-looking statements deal with expectations r egarding debt r eduction and debt to capital r atios, cost r eduction, capital spending disc ipline and projected capital spending, non-str ategic asset sales, pr oductivity impr ovements, acquisitions, shar e r epurchases, dividend incr eases, str ength of balance sheet, str ong fr ee cash flow gener ating capability, estimated effects of exchange r ates on manufactur ing costs, estimated effect of exchange r ates on deliver ed softwood pulp costs to Belgium, investment in high r eturn productivity projects, inc luding high-r eturn energy projects, new product development, str ategic gr owth, inc luding inter national expansion improvement in our pulp, paper and containerboard mar kets, incr eased demand and pr ic ing for wood products in 2004, pr ofitability, pr ice incr eases and stable demand for pulp and paper in 2004, gr eater demand for boxes in 2004, incr easing pr ices, shipments and OCC costs in the container boar d mar kets; continuing strong housing demands, the company’s mar kets in 2004 and 2005; and similar matter s. The accur acy of such statements is subject to a number of r isks, uncer tainties and assumptions that may cause actual r esults to differ mater ially fr om those projected, inc luding, but not limited to, the effect of gener al economic conditions, inc luding the level of inter est r ates and housing star ts; mar ket demand for the company’s products, which may be tied to the r elative str ength of var ious U.S. business segments; energy pr ices; r aw mater ial pr ices; tr anspor tation disruptions; per for mance of the company’s manufactur ing oper ations; the successful execution of inter nal per formance plans; the level of competition fr om domestic and for eign pr oducer s; the effect of for estr y, land use, envir onmental and other governmental r egulations; fir es, floods and other natur al disaster s; and legal proceedings. The company is also a large expor ted and is affected by changes in economic activity in Europe and Asia, par ticular ly Japan, and by changes in curr ency exchange r ates, par ticular ly in the r elative value of the U.S. Dollar to the Euro and Canadian Dollar , and r estr ic tions on international tr ade or tar iffs imposed on impor ts, inc luding the counter vailing and dumping duties imposed on the company’s softwood lumber shipments from Canada to the United States. These and other factor s could cause or contr ibute to actual r esults differ ing mater ially fr om such forwar d looking statements and, accordingly, no assur ances can be given that any of the events antic ipated by the forwar d looking statements will occur , and if any of them occur s, what effect they will have on the company’s r esults of oper ations, cash flow or financial condition. Additional infor mation on r isks, assumptions and uncer tainties that could cause actual r esults to var y ar e set for th in the company’s filings with the Secur ities and Exchange Commission.The information in this pr esentation concerning the domestic and global economy, U.S. single-family housing star ts, corpor ate cash flow, gr owth in industr ialpr oduction for China, gr owth in the Wor ld Real GDP, Euro Exchange Rate vs. purchasing power par ity estimate, U.S. Real Impor ts vs. Expor ts, U.S. Curr ent Account Balance as a Shar e of GDP, Gr owth in U.S. Manufacturing Industr ial Pr oduction for Nondur ables, demand on Nor th Amer ican Lumber Mills vs. capacity, spruce-pine-fir 2x4 lumber pr ice, production costs for aver age B.C. inter ior mill, N. C. or iented str and boar d 7/16” pr ice, Nor th Amer ica OSB demand vs. capacity, Wester n expor t IS log vs. Douglas Fir #2 domestic log pr ice, nondur able industr ial production and annual growth of U.S. box shipments, U.S. containerboard capacity and oper ating r ate, kr aft linerboard pr ice, U.S. expor ts of OCC, OCC pulp cost vs. chip pulp cost, China impor ts of Bleached Kr aft Pulp, Wor ld Bleached Mar ket Pulp Consumption Growth, Swedish exchange r ate, nor thern softwood pulp pr ice, growth in domestic consumption for UCFS, Germany UCFS for A-4 cut size vs. U.S. 20lb cut-size, UCFS Expor ts vs. Impor ts, U.S. Non-Canadian Tr ade, growth in N.A. UCFS Consumption vs. Capacity, U.S. UCFS Pr ice vs. NBSKP Pr ice deliver ed in U.S., kr aft linerboard pr ices, per sonal tax cuts vs. cash out r efinancing, and our mar ket position in our geogr aphic mar kets and similar matter s, is der ived pr inc ipally from public ly available information, for est products and building industr y publications and websites, data complied by mar ket r esearch fir ms, and similar sources. Although we believe that this information is r eliable, we have not independently ver ified any of this infor mation and we cannot assur e you that it is accur ate.
3
AgendaSteve Rogel Introduction —
Positioned to SucceedDick Taggart Financial Philosophy
and StrategyLynn Michaelis Industry OutlookRich Hanson The New Weyerhaeuser —
Operating ExcellenceSteve Rogel The Journey AheadQ&A
Weyerhaeuser —Positioned to Succeed
Steven R. RogelChairman, President & CEO
4
5
Positioned to SucceedAchieved the objectives of our three acquisitions
Better positioned than ever to capitalize on favorable industry conditions
Operations are “hitting on all cylinders”Clear vision of our future with a strategy to achieve that vision
Earnings PotentialProforma Earnings by Business
59
262
765
(377)
655
202
699
259
(176)
(83)
777
392
-400
-200
0
200
400
600
800
WRECO &Related
Timberlands Wood Products Pulp & Paper ContainerboardPkg.
Corporate &Other
$ Millions2000 (normal year)2003 (market trough)
6
Earnings per Share Comparison2003 Q4 vs. 2004 Q1
$0.00
$0.20
$0.40
$0.60
$0.80
2003 Q4 Price/Volume Raw Material Mfg. Costs F/X & Other InterestExpense
2004 Q1
.47 .01(.01)
.24
(.10).01 .62
$ per share before special items*
*A reconciliation before Special Items to GAAP can be found on www.weyerhaeuser.com
Before SpecialItems
Before SpecialItems
7
• 11/99
• 11/99 – 1/00
• 2/02
The New Weyerhaeuser
AcquisitionAcquisition
Value Strategic Rationale
$3.0
$0.9
$8.1
• 1st of 2 steps to enhance engineered wood products offering• Synergies: $150 MM target achieved ahead of schedule
• Growth opportunities — new products and systems• Synergies: $50 MM target achieved ahead of schedule
• Created top player in major product lines; timber base• Economies of scale in manufacturing, purchasing and sales• Synergies: $300 MM target achieved ahead of schedule
$ Billions
8
9
The Journey Ahead
Financial Philosophyand Strategy
Richard J. TaggartExecutive Vice President &Chief Financial Officer
10
11
Financial Philosophy
Committed to the maintenance of a sound capital structure
• Protect the underlying interests of shareholders and lenders
• Have access, at all times, to major financial markets
Target debt-to-total capital (excluding WRECO) of 30–40%
12
Deleveraging Strategy
Drive down cost — improve cash flow from operations
Maintain discipline on capital spending
Sell non-strategic assets
One-time equity offering to accelerate progress
13
Why Equity Now
Eliminate downside credit risk
Accelerate restoring financial flexibility to pursue value-creating opportunities
0
3
6
9
12
15
2002Q1 2004Q1 Pro Forma2004Q1
TargetRange
0
3
6
9
12
15
2002Q1 2004Q1 Pro Forma2004Q1
TargetRange
Debt Reduction TargetDebt
(1)
(1) Pro-Forma for equity offering (2) Includes cash generated from exercise of stock options (3) Excludes WRECO
$ Billions
0.9 0.8
Ex-WRECO
11.6
WRECO
EquityFCF(2) Asset Sales
Debt / Cap(3): 57% 52% 47% 30–40%
1.012.614.3
9.07.0
4.6
2.6
14
15
The New Weyerhaeuser —Free Cash Flow Generating Capacity
Old NewWeyerhaeuser Weyerhaeuser
EPS beforeSpecial Item* $4.83 / share $4.83 / share
Cap Ex ($ Mil) $ 996 $ 750
Dividends ($ Mil) $ 306 $ 382
Free Cash Flowafter Dividends $ 254 Million $ 1.3 Billion*EPS in 1995 are shown before charges of $ .90/share for effects of SFAS #121
0
200
400
600
800
1000
1200
1400
Old Weyerhaeuser New Weyerhaeuser
The New Weyerhaeuser —Free Cash Flow Generating Capacity
Free cash flow after dividends @ $4.83 EPSMillions $
254
1,300
16
17
Priorities for Free Cash Flow
Debt reduction
High return productivity projects
Bolt-on acquisitions / share repurchase
Dividend increases
18
The New Weyerhaeuser
Strong balance sheet
Strong free cash flow generating capability
Proven track record of integrating acquisitions
History of returning cash to shareholders
Industry Outlook
Lynn O. MichaelisVice President, Markets & Economic Research& Chief Economist
19
20
Agenda for Industry Outlook
Macroeconomic setting for forest products
Outlook for wood products
Outlook for containerboard, packaging and recycling
Outlook for pulp and uncoated free sheet
21
Macroeconomic Setting for Forest Products
Economic growth remains “healthy”
Strongest Growth in 20 Years
-1
0
1
2
3
4
5
6
1996 1998 2000 2002 2004
Forecast
Source: BEA/Weyerhaeuser
Growth in U.S. Real GDPPercent Change
AnnualMDGA01G 22
Refinancing and Tax Cut Boosted Consumer Spending
Personal Tax Cuts vs. Cash Out Refinance $ Billions
2002 2003
1st Half 2003
2nd Half
Personal Tax Cuts 0 0 125
Cash Out Refinances 135 130 220
Total (Annualized Rate) 135 130 345
23
Source: Fannie Mae
“Surprising” Surge, Helped Fuel Growth
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1998 1999 2000 2001 2002 2003 2004
U.S. Single-family Housing Starts(Seasonally Adjusted Annual Rate)
Million Units
QuarterlyQMDHO05B Source: Census
24
Cash Flow Supports Rebound in Investment
650
750
850
950
1050
1150
1250
1350
1998 1999 2000 2001 2002 2003
Corporate Cash Flow(Seasonally Adjusted Annual Rate)
Billion $
QuarterlyQMDGA42A Source: BEA 25
China Contributes to World Recovery
6
8
10
12
14
16
18
2000 2001 2002 2003 2004
Growth in Industrial Productionfor China% Change Year Ago
3-month Moving
MonthlyMMIAS19B Source: The Economist 26
Back to Mid-1990s Growth Rate
0
1
2
3
4
5
1990 1992 1994 1996 1998 2000 2002 2004
Forecast
Growth in World Real GDPPercent Change
AnnualAMIOT03D Source: Global Insight/Weyerhaeuser 27
28
Macroeconomic Setting for Forest Products
Economic growth remains “healthy”
Dollar decline continues
Dollar Will Fall Further
0.8
1.0
1.2
1.4
1.61994 1996 1998 2000 2002 2004
Actual/Forecast
PPP Estimate
Forecast
Euro Exchange Rate vs. Purchasing Power Parity EstimateU.S.$/Euro
(inverse)
AnnualAMIEU03G Source: Wall Street Journal/
Weyerhaeuser 29
So Far, Deficit is not Declining
0.5
0.7
0.9
1.1
1.3
1.5
1.7
1994 1996 1998 2000 2002 2004
U.S. Real Imports vs. ExportsTrillion 2000$
AnnualAMDGA40B
Forecast
Real Imports
Real Exports
Source: BEA/Weyerhaeuser
Trade Deficit
30
31
Macroeconomic Setting for Forest Products
Economic growth remains “healthy”
Dollar decline continues
U.S. industrial production recovers
Expecting Best Year Since 1998
-4
-2
0
2
4
1995 1997 1999 2001 2003
Forecast
Growth in U.S. ManufacturingIndustrial Production for Nondurables
Percent Change
AnnualAMDIP05D Source: FRB/Weyerhaeuser 32
33
Macroeconomic Setting for Forest Products
Economic growth remains “healthy”
Dollar decline continues
U.S. industrial production recovers
Inflation and interest rates move higher
Interest Rates Move Higher
34
0
2
4
6
8
10
1995 1997 1999 2001 2003
Moody BAA Bonds
3-monthCommercial Paper
Forecast
U.S. Interest RatesPercent
AnnualAMDIR86D Source: FRB
35
Macroeconomic Setting for Forest Products
Economic growth remains “healthy”
Dollar decline continues
U.S. industrial production recovers
Inflation and interest rates move higher
Single-family housing starts at record levels in 2004
Upward Trend due to Demographics and Interest Rates
0.8
1.0
1.2
1.4
1.6
1990 1992 1994 1996 1998 2000 2002 2004
Forecast
U.S. Single-family Housing StartsMillion Units
AnnualAMDHO19C Source: Census/Weyerhaeuser
Average Size 1994 = 20762003 = 2386
36
37
Very Positive Long-term Trends for Single-family Housing Starts
Demographics
Average home size
Housing financing: efficiency and flexibility
38
Agenda for Industry Outlook
Macroeconomic setting for forest products
Outlook for wood products
Outlook for containerboard, packaging and recycling
Outlook for pulp and uncoated free sheet
39
Key Drivers for LumberDemand primarily driven by residential construction — new and remodeling
• Limited substitution
• Net exports improve
Demand Near 70 Billion Board Feet in 2004
50
55
60
65
70
75
80
1988 1990 1992 1994 1996 1998 2000 2002 2004
Demand
Capacity
Demand on North American Lumber Millsvs. Capacity
Billion Board Feet
AnnualAWDNALGD01F
Forecast
Source: RISI, Weyerhaeuser 40
41
Key Drivers for Lumber
Demand primarily driven by residential construction — new and remodeling
Supply is more complex
• Closures
• Canadian costs: manufacturing, trade issue and exchange rate
Reported Price Looks Like This
100
150
200
250
300
350
400
450
1998 1999 2000 2001 2002 2003 2004
Spruce-Pine-Fir 2x4 Lumber Price$/MBF
QuarterlyQWDCLP07B
Reported Random Lengths
TradeCaseBegins
Source: Random Lengths42
Canadian B.C. Mill Net After CVD / AD
100
150
200
250
300
350
400
450
1998 1999 2000 2001 2002 2003 2004
Reported RandomLengthsEstimated Mill Net
TradeCaseBegins
Spruce-Pine-Fir 2x4 Lumber Price$/MBF
QuarterlyQWDCLP07A Source: Random Lengths, Weyerhaeuser 43
Exchange Rates Negated Cost ImprovementsProduction Costs for Average B.C. Interior Mill
RISI Survey Costs 2002 2003 Mfg. Cash Cost (C$) 291 258 Stumpage 58 49 Exchange Rate (C$/USD) 1.57 1.40 Mfg. Cash Cost (USD) 185 184 Duties (USD) 50 51 Cost with Duty (USD) 235 235
Source: RISI44
Exchange Rates Negated Cost ImprovementsProduction Costs for Average B.C. Interior Mill
RISI Survey Costs Estimate for* 2002 2003 2004 Q1 Mfg. Cash Cost (C$) 291 258 275 Stumpage 58 49 62 Exchange Rate (C$/USD) 1.57 1.40 1.33 Mfg. Cash Cost (USD) 185 184 207 Duties (USD) 50 51 64 Cost with Duty (USD) 235 235 271
Source: RISI, *Weyerhaeuser45
46
Key Drivers for Oriented Strand Board (OSB)Demand primarily driven by new residential construction
Substitution
Potential for new capacity
Price Surge Reflects Extreme Shortage
100
200
300
400
500
600
1998 1999 2000 2001 2002 2003 2004
N.C. Oriented Strand Board 7/16" Price$/MSF
QuarterlyQWDPNLP04B Source: Crow's 47
Operating Rates at Record Levels
12
15
18
21
24
27
30
1997 1998 1999 2000 2001 2002 2003 2004
Capacity
Demand
North America OSB Demand vs. CapacityBillion Square Feet
AnnualAWDNAPGD38B
Forecast
Source: RISI, Weyerhaeuser 48
Export Log Premium Holds
400
600
800
1000
1200
1996 1998 2000 2002 2004
Western Export IS Log vs.Douglas Fir #2 Domestic Log Price
$/MBF
AnnualATLP78D
Export IS
#2 Sawlog
YTDSource: Log Lines, Weyerhaeuser 49
50
Agenda for Industry Outlook
Macroeconomic setting for forest products
Outlook for wood products
Outlook for containerboard, packaging and recycling (CBPR)
Outlook for pulp and uncoated free sheet
51
Key Drivers for Containerboard, Packaging and Recycling
Nondurable industrial production
Capacity/operating rate
China’s demand for old corrugated containers (OCC)
Box Shipments Held Up 2003
-3
-2
-1
0
1
2
3
4
1993-1997 1998-2002 2003
Industrial ProductionBox Shipments
Nondurable Industrial Production andAnnual Growth of U.S. Box ShipmentsAverage Annual
Percent Change
ACBBXG82G Source: Fibre Box Association, FRB 52
2004 Similar to Mid-1990s Relationship
-3
-2
-1
0
1
2
3
4
1993-1997 1998-2002 2003 2004
Industrial ProductionBox Shipments
Forecast
Nondurable Industrial Production andAnnual Growth of U.S. Box ShipmentsAverage Annual
Percent Change
ACBBXG82F Source: Fibre Box Association, FRB 53
Capacity Fell Further in 2003
-2
-1
0
1
2
3
4
1990-97 1998-2001 2002 2003
U.S. Containerboard CapacityAverage AnnualPercent Change
ACBOTG10CSource: AFPA
(0%)
54
Significantly Better Situation
80
85
90
95
100
1998 1999 2000 2001 2002 2003 2004
Containerboard Operating RatePercent
QuarterlyQCBOTG09C
Tight Market
Source: AFPA 55
Real Operating Rate Could be Closer to 95%!
80
85
90
95
100
1998 1999 2000 2001 2002 2003 2004
Containerboard Operating RatePercent
QuarterlyQCBOTG09E
Tight Market EffectiveCapacity
Source: AFPA 56
Prices Lag Operating Rates by One Year
57
300
350
400
450
500
1998 1999 2000 2001 2002 2003 2004
Kraft Linerboard Price(Delivered Eastern U.S.)
$/Short Ton
QuarterlyQCBLBP01C Source: RISI
JuneAnnounced
Price
Other Issue: China’s Demand for OCC
58
0
1
2
3
4
5
1998 1999 2000 2001 2002 2003 2004
U.S. Exports of OCCMillion Short Tons
AnnualARCOCCG20C Source: Census
YTDAnnualized
Rate
However, Still the Cheapest Raw Material
60
80
100
120
140
160
180
1996 1998 2000 2002 2004
OCC Pulp Cost vs.Chip Pulp Cost
$/Ton
AnnualAINDP60D
Chip Pulp Cost
OCC Pulp Cost
Source: Weyerhaeuser EstimateYTD
59
60
Agenda for Industry Outlook
Macroeconomic setting for forest products
Outlook for wood products
Outlook for containerboard, packaging and recycling
Outlook for pulp and uncoated free sheet (UCFS)
61
Key Drivers for Pulp
Global Market: demand growth near 3.5%
• China shift to wood pulp
• Economic growth
• Tissue and fluff end-uses
Capacity / operating rate
Exchange rate is critical to outlook
China is Now 12% of World Demand
0
1
2
3
4
5
1998 1999 2000 2001 2002 2003 2004
SoftwoodHardwood
China Imports of Bleached Kraft PulpMillion Metric Tons
AnnualAPLOTG49B
Forecast
Source: Pulp and Paper Products Council,Weyerhaeuser 62
Demand Growth Exceeds Capacity in 2004
0
1
2
3
4
World Bleached Market Pulp Consumption Growth (CAGR,%)
Percent
APLOTG22D
1991-2000 2001-03 2004
Capacity
Forecast
Source: Market Pulp Association/Weyerhaeuser 63
Exchange Rates Help U.S. Producers
0
100
200
300
400
500
600FreightMfg. Cost for U.S.Mfg. Cost for Sweden
Proxy for DeliveredSoftwood Pulp Costs to Belgium
$/Tonne
QuarterlyQPLNBP18B
2002.2Source: Weyerhaeuser Estimate 64
Dollar has Declined 40% Against Kronor
7
8
9
10
11
2000 2001 2002 2003 2004
Swedish Exchange RateKronor/U.S.$
QuarterlyQMISW01A Source: Wall Street Journal 65
Pushing their Costs Up
0
100
200
300
400
500
600FreightMfg. Cost for U.S.Mfg. Cost for Sweden
Proxy for DeliveredSoftwood Pulp Costs to Belgium
$/Tonne
QuarterlyQPLNBP18B
2002.2 2004.1
Source: Weyerhaeuser Estimate 66
Higher Operating Rate and Costs Push Prices Higher
400
500
600
700
800
1998 1999 2000 2001 2002 2003 2004
Source: RISI
Northern Softwood Pulp Price(Delivered Northern Europe)
$/Metric Ton
QuarterlyQPLNBP05B 67
68
Key Drivers for Uncoated Free Sheet (UCFS)
Demand on North America mills
• Domestic (N.A.) consumption
• Net trade position
Exchange rates
Capacity
Strong Growth Helps Boost Demand
-8
-6
-4
-2
0
2
4
6
1997 1998 1999 2000 2001 2002 2003 2004
Forecast
Growth in Domestic (N.A.) Consumptionfor UCFS
Percent Change
AnnualAPAUFG10B Source: AFPA/Weyerhaeuser 69
Market Attractiveness Has Changed
650
750
850
950
1050
1998 1999 2000 2001 2002 2003 2004
Source: Pulp, Paper International and RISI
Germany UCFS Price for A-4 Cut Size(B-Grade) vs. U.S. 20 lb. Cut-Size
$/Ton
AnnualAPAUFP54D
Germany
U.S.
YTD70
Evident in Net Trade Position
0
100
200
300
400
500
600
2001 2002 2003 2004
Imports
Exports
Source: AFPA, Bureau of Census
UCFS Exports vs. Imports, U.S. Non-Canadian Trade,(Seasonally Adjusted Annual Rate)
Thousand Short Tons
QuarterlyQPAUFG07C 71
Capacity Closures Offset Demand Decline
-4
-2
0
2
4
1997-1999 2000-2003
Consumption Capacity
Growth in N.A. UCFSConsumption vs. Capacity
Percent Change
AnnualAPAUFG104A Source: AFPA 72
Cost Squeeze for Non-integrated Producers
400
500
600
700
800
1998 1999 2000 2001 2002 2003 2004
UCFS 50 lb.Offset
NBSKP
U.S. UCFS Price vs.NBSKP Price Delivered in U.S.
$/Ton(ne)
QuarterlyQINDP04H Source: RISI 73
74
Market Conditions Favorable
Economic setting remains very positive
Wood products expected to be strong
Containerboard situation improving
Staging for a sustained recovery in pulp and uncoated free sheet
The New Weyerhaeuser —Operating Excellence
Richard E. HansonExecutive Vice President &Chief Operating Officer
75
76
Role of COO and Operating Committee
Experienced team of solid leaders
Solve problems and replicate best practices
Tackle cross-business issues• Safety• Capital spending• Environmental certification• Portfolio changes
Drive performance improvement
• 11/99
• 11/99 – 1/00
• 2/02
The New Weyerhaeuser
AcquisitionAcquisition
Value Strategic Rationale
$3.0
$0.9
$8.1
• 1st of 2 steps to enhance engineered wood products offering• Synergies: $150 MM target achieved ahead of schedule
• Growth opportunities — new products and systems• Synergies: $50 MM target achieved ahead of schedule
• Created top player in major product lines; timber base• Economies of scale in manufacturing, purchasing and sales• Synergies: $300 MM target achieved ahead of schedule
$ Billions
77
Our Diversification Enhances Earnings PerformanceOur Diversification Enhances Earnings Performance
Diversified Business Portfolio
2003 Sales: $19.9 Billion2003 Sales: $19.9 Billion
Containerboard, Packaging & Recycling—#2 Containerboard and Corrugated Packaging22%22%
11%11%
10%10%
10%10%5%5%
Real Estate— One of the most profitable home builders in U.S.
Market Pulp & Other— #1 Softwood Market Pulp
Timberlands— 6.7 MM acres in North America
Paper— #2 Uncoated Freesheet
18%18%
12%12%
6%6%
Other Wood Products
5%5%
Lumber— #1 Softwood Lumber
Panels— #2 Oriented Strand Board— #2 Plywood
Engineered Wood (TJ)— #1 Engineered Wood Products
78
Earnings per Share Comparison2003 Q4 vs. 2004 Q1
$0.00
$0.20
$0.40
$0.60
$0.80
2003 Q4 Price/Volume Raw Material Mfg. Costs F/X & Other InterestExpense
2004 Q1
.47 .01(.01)
.24
(.10).01 .62
$ per Share Before Special Items*
*A reconciliation before Special Items to GAAP can be found on www.weyerhaeuser.com
Before SpecialItems
Before SpecialItems
79
750626
930
1,2351,228
0
750
1,500
2000 2001 2002 2003 2004E
Capital Spending DisciplineExpenditures for PP&E(1)
Willamette Willamette AcquisitionAcquisition
(1) Proforma for Willamette acquisition
$ Millions
% of Depreciation 110% 108% 76% 48% 60%E
80
81
Capital Spending Plans
How we are investing our capital
2002 2003 2004E
Small Maintenance Capital 200 192 273Optimization and Rationalization 181 166 268Expansion / Additional Capacity 311 59 83 Environmental 190 159 56Information Technology 78 50 70
Total $960 $626 $750
Maintenance expense remains at $1.2 billion annually
$ Millions
885
531685
1,520
2,144
1,806
1,510
1,814
0
500
1,000
1,500
2,000
2000 2001 2002 2003
Free Cash Flow Generation Improved(1)
(1) Proforma for Willamette acquisition(2) Cash from operations minus capital expenditures plus net asset sale proceeds
Willamette Willamette AcquisitionAcquisition
$ Millions
Cash from OperationsFree Cash Flow(2)
82
83
Best in Class Operator
Our strengths
• Scale
• Product breadth
• Integrated operations (forest to market)
• A modern manufacturing fleet
Productivity Improvements in Pulp, Paper and Containerboard Manufacturing
900
1500
2001 2002 2003 2004E
Ton / Year / Employee
25%improvement
84
85
Productivity Improvements in Wood Products
Improvements = 1 scale OSB mill
More lumber production from a smaller asset base
86
Productivity Improvements in Timberlands
Portfolio improvements• Retained core lands• 444,000 acres divested
– Low-performing / non-strategic timberland• 330,000 acres for sale in Georgia• Cash generation growth for future
Improved silviculture and operating practices on acquired lands
87
Fine Paper Business
Competitive advantages
• Lowest cost mill system
• Lowest cost converting operations
• Multiple channels to market
Weyerhaeuser UCFS Market PositionNorth American Capacity
25%25%
15%15%10%10%
7%7%19%19%
24%24%
#1 International Paper
#5 Georgia-Pacific
#4 Boise #2Weyerhaeuser
All Others
#3 Domtar88
Fine Paper Business3.25 Million Tons
45%45%28%28%
Cut Size Business PapersPrinting & Publishing Papers
20%20%
Converting Papers7%7%
Coated Groundwood
89
North American UCFSPaper Machine Width and Age — Dec 2003
100
150
200
250
300
WY Comp A Comp B Comp C Comp D All Others(29)
0
10
20
30
40
50
60Average Width (in) Average Age (yrs)
90
UCFS Paper Machine ProductivityAverage Tons / Inch / Day per Paper Machine
1.5
1.7
1.9
2.1
2.3
2.5
2.7
WY Survey Comp A Comp B Comp C Comp D
2003
Wor
ld Be
nchm
ark*
2003
Wor
ld Be
nchm
ark*
*2003 Metso survey average of 69 best paper machines in the world
Average Tons / Inch / Day per Paper Machine
91
92
Market Pulp Business
Nearly 70% of our market pulp is premium-priced fluff and high-performance value-added pulp
Market Pulp Business
Carrier Fiber Specialty
FluffFluffPapergrade36%36%
13%13%19%19%
32%32%
2.8 Million Metric Tons
93
94
Market Pulp Business
Nearly 70% of our market pulp is premium-priced fluff and high-performance value-added pulp
The majority of our pulp is sold in North America
Provides technical superiority to meet customer needs
95
Containerboard Packaging & Recycling
Low-cost mill system
• Closed inefficient capacity
• All machines in top quartile of industry
Rationalization:Facility Shutdowns 2000–2003
2003North Bend OR
2002Hawesville KY
Sturgeon Falls ON2001
Plymouth NC #3Springfield OR #1
Containerboard988 M Tons (16% of capacity)
2003Guthrie KY
2002Nashville TN, Laredo TX
Richmond VA, Denver COTulsa OK
2001Meriden CT
2000Cleveland OH, Houston TX
Jersey City NJRock Island IL
Packaging7 BSF (9% of capacity)
2002Portland ORSan Jose CA
Oklahoma City OKHaverhill MD
2001Bloomington IN
Recycling
96
97
Containerboard Packaging & Recycling
Low-cost mill system
• Have closed inefficient capacity
• All machines in top quartile of industry
Highly integrated containerboard and box system
Fiber cost management
• Recycled vs. virgin
• Large, efficient recycling system
U.S. Containerboard Market Position
#1 Smurfit-Stone
#2 Weyerhaeuser
#3 International Paper
#5 Inland
#4 Georgia-Pacific
#6 PCA
All Others19.0%19.0%
18.0%18.0%
12.2%12.2%
10.4%10.4%
10.9%10.9%
6.7%6.7%
22.8%22.8%
As of May 2004
98
U.S. Box Market Position
#1 Weyerhaeuser
#2 Smurfit-Stone
#4 Inland #3 Georgia-Pacific
#5 International Paper /Box USA
#6 PCA
All Others18.8%18.8%
18.7%18.7%
12.1%12.1%12.0%12.0%
10.9%10.9%
7.4%7.4%
20.1%20.1%
As of May 2004
99
100
Positioned to Succeed
Low-cost producer with efficient delivery systems
Diversified and balanced portfolio
Focus on value proposition unique to each business
Discipline in capital management and best operating practices
The new Weyerhaeuser is driven to produce bottom-line results
The Journey Ahead
Steven R. RogelChairman, President & CEO
101
Earnings PotentialProforma Earnings by Business
59
262
765
(377)
655
202
699
259
(176)
(83)
777
392
-400
-200
0
200
400
600
800
WRECO &Related
Timberlands Wood Products Pulp & Paper ContainerboardPkg.
Corporate &Other
$ Millions2000 (normal year)2003 (market trough)
102
SG&A is 25% Lower Than Industry Average
8.9%
11.1%
8.0%
10.8%
0%
5%
10%
15%
20012003
103
1 Forest Products Composite based on weighted average SG&A percentage of sales for 9 forest products companies identified as Weyerhaeuser peer comparisons.
Forest Products Composite1 Weyerhaeuser (excluding Real Estate & Related Assets)
% Sales
Total Earnings PotentialTotal Proforma Operating Earnings
2.2
1.2
0
1
2
Total Earnings Upside
$ Billions
2000 (normal year)2003 (market trough)
104
105
The Journey Ahead
Operate safely from the start
1.67
2.19
3.092.39
3.853.904.37
4.965.17
0.0
1.0
2.0
3.0
4.0
5.0
6.0
1996 1997 1998 1999 2000 2001 2002 2003 2004YTD
Total Company Recordable Incident Rate (RIR)1996 — 2004
RIR
106
107
The Journey Ahead
Operate safely from the start
The New Weyerhaeuser• Maintain capital discipline
• Maximizing existing portfolio
• Expand our global footprint
– Focus on Southern Hemisphere– Capitalize on our strengths
108