To measure the financial success of each of our businesses and our company as a whole, we set financial targets
and monitor our progress monthly, quarterly and annually. These targets are wide-ranging and include measures
such as cash flow, net earnings, and selling and administrative costs.
For our sustainability report, we’ve chosen to discuss five target areas that together indicate our ability to
sustain long-term financial success.
TOTAL SHAREHOLDER RETURN
Our goal is to achieve top-quartile performance in total shareholder return against a target set of competitors
over a multi-year period. TSR is calculated based on the value of our stock over time plus the value of dividends
we pay to shareholders. In 2012, we delivered a total shareholder return of 52.7 percent. For the year, we rated
ourselves “high achieves” in this category.
COMPANY EBIT RONA
Another of our goals is to achieve a companywide return on net assets that is top quartile in our industry over
the business cycle. We determine RONA by dividing our earnings (before interest and taxes) by our average net
assets. Put simply, EBIT RONA measures the amount of money we earn compared with the book value of the assets
used to produce our earnings.
In 2012, our companywide RONA was 7.4 percent. As the graph shows, we’ve made significant progress in the last
several years to improve our absolute RONA performance, even as the housing market continued to falter in a depressed
economy. However, there is still much work to be done. We fell just short of our relative target in 2012 and therefore
rated ourselves “below” for this category.
TOP-QUARTILE BUSINESS PERFORMANCE
For our company to achieve top-quartile results as a whole, each of our businesses must also be working to achieve
and retain top-quartile performance. Our Timberlands, Wood Products, Cellulose Fibers and Real Estate businesses
each benchmark their financial results against a target set of competitors in their industry, and then take action
as needed to improve or maintain their relative position. In 2012, all of our businesses made progress against
competitors. We do not disclose our benchmarking data. We rated ourselves an overall “low achieves” in this category.
EARNING THE COST OF CAPITAL
We expect each of our businesses, and Weyerhaeuser as a whole, to earn cost-of-capital returns over a business
cycle. That means we need to earn enough, after all costs of doing business, to pay our debt and equity holders
the returns they expect. In 2012, we improved our financial performance and return compared with our performance
in 2011. This was due in part to a recovering U.S. housing market, but it was also a results of the improvements
we made in our operations across the company. For that reason, we rated ourselves an ‘achieves’ on this measure.
BUSINESS VALUE DELIVERY
If our customers are not satisfied with the products and services we offer, we will not be able to sustain the
profitability of our company. Each year, all our businesses identify strategic initiatives that will improve their
performance. They set distinct value delivery goals that will maintain the strong relationships we have with existing
customers and attract new customers to our company. We do not disclose our value delivery targets. We rated ourselves
an “achieves” in this category for 2012.
ECONOMIC VALUE: DISTRIBUTION VERSUS RETENTION
|Direct Economic Value Generated
||2012 (in millions)
|Net sales and revenue - cash basis
|Interest income and other
|Net proceeds of investments held by special purpose entities
|Proceeds from the sale of assets and operations
|Economic value distributed
|Costs and expenses - cash basis
|Payments to providers of funds
|Cash paid for taxes
|Economic Value Retained