BUSINESS SEGMENTS

3 Months Ended

Mar. 31, 2016

BUSINESS SEGMENTS

BUSINESS SEGMENTS

Reportable business segments are determined based on the company’s management approach. The management approach, as defined by FASB ASC 280, “Segment Reporting,” is based on the way the chief operating decision maker organizes the segments within a company for making decisions about resources to be allocated and assessing their performance.

During the first quarter of fiscal year 2016, the company’s chief operating decision maker changed the information regularly reviewed for making decisions to allocate resources and assess performance. As a result, beginning in fiscal year 2016, the company will report its financial performance based on four reportable business segments: Timberlands, Real Estate & ENR, Wood Products, and Cellulose Fibers. Prior to revising our segment structure, activities related to the Real Estate & ENR business segment were reported as part of the Timberlands business segment. All prior period amounts have been reclassified throughout the consolidated financial statements and disclosures to conform to the new segment structure.

We are principally engaged in growing and harvesting timber, manufacturing, distributing, and selling products made from trees, as well as maximizing the value of every acre we own through the sale of higher and better use (HBU) properties and monetizing reserves of minerals, oil, gas, coal, and other natural resources on our timberlands. The following is a brief description of each of our reportable business segments and activities:

• Timberlands – which includes logs, timber, and our Uruguay operations;

• Real Estate & ENR – which includes equity interests in our Real Estate Development Ventures (as defined and described in Note 6: Equity Method Investments), sales of HBU and non-core timberlands, minerals, oil, gas, coal and other natural resources;

• Wood Products – which includes softwood lumber, engineered wood products, oriented strand board, plywood, medium density fiberboard and building materials distribution; and

• Cellulose Fibers – which includes pulp, liquid packaging board and an equity interest in our newsprint and publishing papers venture.

On November 8, 2015, Weyerhaeuser announced that the board authorized the exploration of strategic alternatives for its Cellulose Fibers business segment. The Board indicated that it intended to consider a broad range of alternatives including, but not limited to, continuing to hold and operate the business or a sale or spin-off of the business. On May 1, 2016, we entered into a transaction agreement to sell our Cellulose Fibers pulp mills to International Paper for $2.2 billion in cash. The deal includes five pulp mills and two modified fiber mills. The transaction with International Paper does not include our liquid packaging board facility or newsprint and publishing papers venture. The Company’s review of those assets is ongoing.

As of March 31, 2016, the assets and liabilities of the Cellulose Fibers business, including those related to the pulp mills, had not met the criteria to be classified as held for sale under the requirements of ASC Topic 360, primarily because the board of directors was still considering a variety of strategic alternatives at that time. Accordingly, the results from these operations are classified as continuing operations in our Consolidated Statement of Operations for the period ended March 31, 2016.

We expect the transaction with International Paper to close in fourth quarter 2016.

An analysis and reconciliation of our business segment information to the respective information in the Consolidated Statements of Operations is as follows:

	QUARTER ENDED
DOLLAR AMOUNTS IN MILLIONS	MARCH 2016			MARCH 2015
Sales to unaffiliated customers:
Timberlands	$	387		$	323
Real Estate & ENR	39			34
Wood Products	979			923
Cellulose Fibers	430			447
	1,835			1,727
Intersegment sales:
Timberlands	222			228
Wood Products	22			19
	244			247
Total sales	2,079			1,974
Intersegment eliminations	(244		)	(247		)
Total	$	1,835		$	1,727
Net contribution to earnings:
Timberlands	$	129		$	139
Real Estate & ENR(1)	15			23
Wood Products	87			62
Cellulose Fibers(2)	28			33
	259			257
Unallocated items(3)	(61		)	(54		)
Net contribution to earnings	198			203
Interest expense, net of capitalized interest	(97		)	(83		)
Earnings before income taxes	101			120
Income taxes	(20		)	(19		)
Net earnings	81			101
Dividends on preference shares	(11		)	(11		)
Net earnings attributable to Weyerhaeuser common shareholders	$	70		$	90

(1) The Real Estate & ENR segment includes the equity earnings from and investments in and advances to our Real Estate Development Ventures, which are accounted for under the equity method.

(2) The Cellulose Fibers segment includes the equity earnings from and investments in and advances to our newsprint and publishing papers venture, which is accounted for under the equity method.

(3) Unallocated items are gains or charges not related to or allocated to an individual operating segment. They include a portion of items such as: share-based compensation, pension and postretirement costs, foreign exchange transaction gains and losses associated with financing, equity earnings from our Timberland Venture (as defined and described in Note 6: Equity Method Investments), the elimination of intersegment profit in inventory and the LIFO reserve.

A reconciliation of our business segment total assets to total assets in the Consolidated Balance Sheet is as follows:

DOLLAR AMOUNTS IN MILLIONS	MARCH 31, 2016		DECEMBER 31, 2015
Total Assets:
Timberlands and Real Estate & ENR(1)	$	15,447	$	7,260
Wood Products	1,838		1,541
Cellulose Fibers	1,980		1,984
Unallocated items	2,514		1,685
Total	$	21,779	$	12,470

(1) Assets attributable to the Real Estate & ENR business segment are combined with total assets for the Timberlands segment because we do not produce separate balance sheets internally.