A statement by Steven R. Rogel, Chairman and Chief Executive Officer of the board of Weyerhaeuser is given below. The statement has been taken from the company’s 2007 annual report.
Photosynthesis is indeed at the heart of all we do here at Weyerhaeuser.Yet because it takes decades For this remarkable process to create mature trees, There exists a perception that our business also moves Slowly. Nothing could be farther from the truth.This is a time of unprecedented and dynamic change, And at weyerhaeuser, innovation continues to propel us forward.
LOOKING BACK: A YEAR OF TOUGH MARKETS, DECISIVE ACTION
Our 2007 performance reflects difficult market conditions but also reveals our ability to create shareholder value.
The most significant event of the year occurred in the first quarter, when we closed the groundbreaking spin-split merger that combined our fine paper assets with Domtar to create the largest fine paper producer in North America. This innovative transaction produced $1.35 billion in cash for Weyerhaeuser, which we used to pay down debt.
It also enabled us to reduce our outstanding shares by more than 25 million. Our remaining Cellulose Fibers business is now better positioned to leverage research and development expertise, boost mill efficiencies and margins, and capitalize on a strong worldwide market for absorbent pulp.
We followed this value-creating deal with the announcement that we are conducting a strategic review of our Containerboard, Packaging and Recycling business. We are pleased with the range of options that our board is able to consider and look forward to concluding the process.
Plummeting housing starts posed a significant challenge to our homebuilding and wood products businesses last year—and we don’t expect conditions to significantly improve in 2008. Despite this, our Real Estate business sustained leading financial performance among large homebuilders by relying on targeted strategies in each of its select markets and by taking swift action to prepare for weaker business conditions.
Meanwhile, our iLevel organization took aggressive action to balance production with customer demand throughout the year and will continue to do so as needed in the coming months. This business is streamlined, focused and well positioned to take full advantage of a housing rebound, which we anticipate based on favorable demographic trends over the long term.
To maximize value from our timberlands, we continue to consider a range of options, including ongoing support of the industry in its effort to pass the TREE Act of 2007-tax-reform legislation that would provide immediate value to investors. Significant progress was made in 2007, with a one-year provision of the TREE Act passed in both the House Energy and the Senate Farm bills. With this progress, along with the TREE Act’s strong bipartisan and broad regional support, we are well positioned for enactment in 2008. We continue to position our timber portfolio for growth in South
America and remain intensely focused on realizing all potential revenue from owning timberlands, beyond planting and harvesting trees.
Finally, a number of leadership changes made last year reflects the deep pool of talent we’ve cultivated to propel our company toward continued success. In the first quarter, Tom Gideon was appointed senior vice president, Containerboard, Packaging and Recycling, succeeding Jim Keller, who retired after 32 years with the company.
Mike Branson stepped in to fill Tom’s previous position as senior vice president of Timberlands. In the second quarter, Patty Bedient was appointed executive vice president and chief financial officer, succeeding Dick Taggart, who retired after 33 years with the company. And in the fourth quarter, we announced Dan Fulton would take over my duties as president, Weyerhaeuser Company, at the beginning of 2008.
He now oversees all our operations and a number of staff functions and is working closely with Rich Hanson to prepare for his planned retirement later this year. In addition, Debra Cafaro was elected to our board and adds a wealth of real estate and broad business knowledge to the breadth of skills on our board.
LOOKING AHEAD: CAPITALIZING ON INVENTIVE SOLUTIONS, UNIQUE EXPERTISE
The world continues to demand different and better products. People want safe, reliable shelter and products that make life easier. Businesses want innovative solutions that help them become more efficient and profitable. And we all seek sustainable, visionary products that anticipate what people—and our planet— will need in the future.
Our response to this challenge can be summed up with two words: trees and innovation. We have a strong track record of taking deliberate action to create shareholder value in the best possible way, wherever opportunity is present. Sometimes this means applying our industry-leading expertise to find new ways to use every part of the tree and the land it grows on.You’ve seen some outstanding examples in the first few pages of this report. Sometimes it means having the market knowledge and foresight to restructure a business, discover a more efficient or profitable way to operate it or, if necessary, sell, close or scale it back.
Sometimes it means creating a brand new approach to maximizing value from divestiture.
The recent announcement of our intention to partner with Chevron is a perfect example of our innovative thinking.
Our expertise in large-scale forest management and cellulose conversion matches well with Chevron’s expertise in energy production and markets.We expect this partnership to hasten the development of cellulosic ethanol as a renewable nonfood-based fuel for cars and trucks—an endeavor that represents not only innovative leadership in the face of one of the world’s most pressing needs but also an extraordinary opportunity to unlock additional value from our core timberlands.
Our ability to find creative solutions also applies to the way we report our sustainability performance. We’ve taken steps to become more transparent and timely by launching a comprehensive website, where stakeholders will have easy access to current information about our practices, policies and results.
Last year, we set a number of sustainability goals, including drafting a policy that confirms our commitment to human rights, which is now complete. We also analyzed our water consumption at primary mills and are identifying opportunities for improvement. Product certification remains a top priority, with 94 percent of our North American forest products currently certified to sustainable forestry standards. And we continue to support wide adoption of green building practices by taking a leadership role in the development of a National Green Building Standard by the National Association of Home Builders.
Our progress on these fronts and in other critical sustainability areas will be reported throughout the year at www.weyerhaeuser.com/sustainability.
As a leader in our industry, we have a responsibility to continually set stretch goals in all these areas and then exceed them. In doing so, our shareholders will benefit from the value we create, and customers, partners, communities and employees can be confident in the sustainability of our company and the forests from which we derive value.
This brings us back, as always, to the trees.They remain our core resource, our chief expertise and our greatest competitive advantage. By focusing on innovation, we will continue to unlock a whole new world of potential in our forests and ensure that shareholders receive the full benefits of these holdings. We have the formula for success, and with it we will not only weather change but also turn it into opportunity.