Good morning and welcome to our annual analyst meeting.
This morning you’re going to hear about the new Weyerhaeuser —
the changes we’re making and the progress we’ve made. You’re going to hear
about what we’re doing to position our company for future growth, growth
we’ll undertake only when the time is right. You’re going to hear directly
from the leaders of our businesses and learn more about them and their teams.
But before we do that, I want to turn back the clock and take us
to a place far from New York City.
Let’s travel to the
frozen, forbidding slopes of Mt. Everest. There, 50 years ago today, a young
beekeeper from Auckland pauses in his quest to become the first person to
reach the summit.
In nine days, on May 29, he will achieve
his goal. In nine days, Ed Hillary, as he is known on this day, will stand
on the highest point on Earth and become a household name.
But
on this day, 50 years ago, Hillary pauses in his pursuit. He is higher on
the mountain than he has ever been. His goal is within sight.
He knows that much work remains and that the going will be difficult,
but he is confident and eager to move forward.
But this
day, he pauses.
Hillary pauses so that he doesn’t out-climb
his physical capabilities. He is letting his body adjust to his new heights.
He is studying his route ahead and adjusting the plans he made at base camp.
Like Hillary, Weyerhaeuser today is closer to our ultimate
goal than ever before. We’ve mapped the path we must take to become the
best forest products company in the world and a global leader among all
industries. Like Hillary, we know how much work lies ahead, but we are confident
and eager to move forward.
But, like Hillary, we pause
in our pursuit.
We pause to do what is necessary to gain
strength before taking our next steps toward our goal, toward growth. We
pause to:
- Pay down our debt
- Fully
capture the synergies from our last acquisition
- Revise
our approach to our work, with a greater focus on speed, simplicity, decisiveness,
accountability and frugality.
And, although
perhaps not entirely visible, we’re making progress in each of these areas.
In 1953, when Hillary climbed Everest, climbers didn’t use radios
to report their progress to the leader at base camp. Instead, observers
would scan the slopes above with a telescope to see how the climbing team
was doing.
Unfortunately, clouds often obscured the upper
mountain, making it impossible for observers to track the progress of the
team. All they could do is wait for a climber to return from the high camps
with a progress report.
Today, our industry is plagued
with clouds that can obscure our progress. Clouds like worldwide economic
uncertainty, unsettled wood product markets, international trade disputes,
and rapidly increasing energy and health care costs.
We’re
taking steps to reduce the impact of these “clouds,” but they make it difficult
for others to see how far we’ve advanced on our climb to the top.
So, today, you’re going to hear reports from our “high camps.”
You’ll hear directly from members of our Senior Management Team. They’ll
talk about our progress in the areas I mentioned. You’ll hear about the
changes that we’re making to position us for future growth. I believe you’ll
leave here today with a better understanding of the significant progress
we’ve made since we were here last year.
You’ll also
get a chance to hear from some of our new leaders – or perhaps I should
say familiar names with new titles.
Dick Taggart, for
example, recently became our new chief financial officer. Dick has some
big shoes to fill in succeeding Bill Stivers who retires later this year.
Bill is one of the primary reasons Weyerhaeuser enjoys
such a strong financial reputation and it will be Dick’s job to continue
that legacy. Dick’s well prepared, however, having worked in our operations
as well as heading our investor relations, treasury and finance functions
over the past several years. Dick will talk about our financial philosophy
and update you on our financial progress.
But we’re not
going to let Bill Stivers get out of here without one last “performance”
from the curmudgeon. Bill will end today’s formal presentations with a wrap-up
of what you’ve heard from our other senior managers.
Rich
Hanson is another familiar face with a new title. Rich was recently appointed
our first chief operating officer. Many of you know Rich from his days as
our Timberlands leader and for his work in the Willamette integration. Rich
still plays a significant role in those areas, but he now oversees all of
our operations. This frees me to pursue more strategic work such as working
on the Canadian softwood lumber issue, strengthening relationships with
our customers and developing future leaders at Weyerhaeuser.
Rich
will spend some time talking about his new role before briefing you on our
capital spending efficiency and the importance of Timberlands in our portfolio.
He’ll also talk about how our new structure is bringing additional discipline
to our capital spending.
A new face to many of you is
Dan Fulton, president of our Real Estate company, WRECO. Real Estate is
an important element of our portfolio, but one that isn’t fully understood.
Dan will provide you with an overview of his very impressive business and
outline our unique approach to serving varied real-estate markets.
WRECO’s approach drives decision-making down to the local markets
and enables us to tailor our strategies to maximize our strength in each
market. Our real-estate business also has an extremely well seasoned management
team – a team that has seen the best and the worst of market conditions.
But before Dan discusses WRECO, you’ll hear from three other operating
seniors that are here today – Bill Corbin, Mick Onustock and Jim Keller.
Bill’s a veteran of our Wood Products and Timberlands businesses.
In the past, he’s taken the steps necessary to improve the competitiveness
of our Timberlands business. Now, he’s faced with the task of rationalizing
our Wood Products business, to position our company for the future as we
adapt to over-supplied markets. Wood Products is a very important business
to Weyerhaeuser and one we’re confident will play a significant role in
our future success.
But it’s going to take some concentrated
effort to get us to that point. Bill’s going to outline some of the steps
we’re taking – or about to take – as part of that process.
I
guess you could say that Mick’s also a veteran now that he’s just celebrated
his one-year anniversary at Weyerhaeuser. Mick, of course, spent 13 years
running the pulp and paper operations at Willamette before joining us last
year. When we acquired Willamette, we significantly improved our paper-production
capabilities.
Mick will talk about our expanded paper
portfolio and explain the contribution our enhanced position is making to
our bottom line.
And finally, there’s Jim Keller who
heads up our Containerboard Packaging and Recycling business. It’s been
a busy year for Jim and his team as they’ve closed 10 inefficient, under
performing or duplicate facilities since we last met. Jim also has some
excellent examples of how the Willamette acquisition enables us to serve
customers more efficiently, just some of the synergies we’re achieving.
Before I turn the meeting over to our management team, I want to
set the stage for them by talking about two important areas: synergies and
the changes we’re making within Weyerhaeuser.
When we
acquired Willamette, we committed to delivering 300 million dollars in synergies
by the end of the first quarter in 2005. At the end of the first quarter
this year, we announced we had achieved an annualized run rate of 261 million
dollars in pre-tax synergies. This means we’re well on our way to meeting
our goal.
But I know many of you are questioning where
these synergies are. To borrow a line from the movie Jerry McGuire, you’re
saying “show me the money.”
That’s Dick Taggart’s job
today and he’ll do that in a few minutes. But I want to emphasize that each
day we see the benefits of synergies. We just need to do a better job of
making sure you see the benefits as well. Hopefully, today’s session is
the first step in that process.
Another commitment we
made at the time of the acquisition was to fully integrate Willamette facilities
and people, and get their help to increase our frugality. Again, we’re making
significant progress.
We said it would take us 90 days
to complete the integration. We did it in 60 days. You’ve heard us talk
about how smoothly it went, but you don’t have to take our word for it.
Our customers are saying the same thing.
Recently, I
was at a meeting where several groups of our fine paper customers approached
me to compliment us on the integration. As one customer noted, pulling two
large sales forces together is a challenge that often affects customer service
– something he’d seen first hand. So, when we announced our acquisition,
this customer braced for the worst.
However, he was pleasantly
surprised by his experience with our acquisition. Not only has he continued
to receive outstanding customer service, he complimented us on how quickly
we began operating as “one team” with a wider range of services.
The other area of change involves how we operate. We’re creating
a workplace where we’re focused on speed, simplicity and decisiveness. This
is driving accountability and frugality, leading to a leaner, less cumbersome,
more streamlined, more customer-focused organization and simpler ways of
doing things.
We’re holding people accountable for results,
not activity. Our people are being given the responsibility and authority
to deliver results. And, we’re continuing our intense focus on safety.
I should note that most of these changes were underway prior to
our acquisition of Willamette. However, since the acquisition, we’ve accelerated
our pace with the help of 15,000 adherents to these disciplines from Willamette.
What are some signs of progress?
- We’ve
eliminated redundant, unnecessary and time-consuming processes, as well
as layers of management. Two examples are how we’ve simplified our annual
planning process and how we’ve flattened our Pulp, Paper, Containerboard
Manufacturing and Engineering organization.
- We’re less
patient with underperforming assets. It’s painful to have to close a line
or mill, but a company periodically has to prune to keep the overall enterprise
healthy and in balance. Since last March, we’ve sold or closed 23 facilities.
In addition, we’ve sold three large blocks of non strategic timberlands
and, just yesterday, announced plans to sell an additional 344,000 acres.
- We’re more focused on the bottom line. Frugality isn’t only finding
the least-cost solutions; it’s asking whether something needs to be done
at all. For example, an analysis of our Sales, General and Administrative
costs led us to identify 750 positions for elimination at our headquarters
operation. Across the company, we’ve eliminated 1,550 positions in the first
quarter alone. You might say these changes are to our “base camp.”
Now I think it’s time you hear from our “high camps”
so you get a closer look at our climb to our ultimate goal.
I
would just like to say in closing that we feel strong and confident. Our
climbing equipment is good and our enthusiasm is high. Our pause is momentary.
There may be some clouds in the sky, but our eyes are on the prize — being
the best.
Like Sir Edmund Hillary, we’re confident we’ll
reach our goal.
At this time, I’d like to turn the meeting
over to Dick Taggart.
