UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31,SEPTEMBER 30, 2023

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO ______

COMMISSION FILE NUMBER: 1-4825

 

WEYERHAEUSER COMPANY

(Exact name of registrant as specified in its charter)

 

 

Washington

 

91-0470860

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

 

 

220 Occidental Avenue South

Seattle, Washington

 

98104-7800

(Address of principal executive offices)

 

(Zip Code)

 

(206) 539-3000

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $1.25 per share

 

WY

 

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of April 24,October 23, 2023, 732,296730,001 thousand shares of the registrant’s common stock ($1.25 par value) were outstanding.

 

 

 


 

TABLE OF CONTENTS

 

PART I

FINANCIAL INFORMATION

 

ITEM 1.

FINANCIAL STATEMENTS:

 

 

CONSOLIDATED STATEMENT OF OPERATIONS

1

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

2

 

CONSOLIDATED BALANCE SHEET

3

 

CONSOLIDATED STATEMENT OF CASH FLOWS

4

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

5

 

INDEX FOR NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

14

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

2426

ITEM 4.

CONTROLS AND PROCEDURES

2527

 

 

 

PART II

OTHER INFORMATION

 

ITEM 1.

LEGAL PROCEEDINGS

2527

ITEM 1A.

RISK FACTORS

2527

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

2527

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES – NOT APPLICABLE

 

ITEM 4.

MINE SAFETY DISCLOSURES – NOT APPLICABLE

 

ITEM 5.

OTHER INFORMATION – NOT APPLICABLE

28

ITEM 6.

EXHIBITS

2629

 

SIGNATURES

2730

 


 

PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

 

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

 

 

QUARTER ENDED

 

 

QUARTER ENDED

 

 

YEAR-TO-DATE ENDED

 

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES

 

MARCH 2023

 

 

MARCH 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

Net sales (Note 3)

 

$

1,881

 

 

$

3,112

 

 

$

2,022

 

 

$

2,276

 

 

$

5,900

 

 

$

8,361

 

Costs of sales

 

 

1,512

 

 

 

1,647

 

 

 

1,520

 

 

 

1,694

 

 

 

4,560

 

 

 

5,130

 

Gross margin

 

 

369

 

 

 

1,465

 

 

 

502

 

 

 

582

 

 

 

1,340

 

 

 

3,231

 

Selling expenses

 

 

22

 

 

 

23

 

 

 

22

 

 

 

24

 

 

 

66

 

 

 

70

 

General and administrative expenses

 

 

101

 

 

 

92

 

 

 

107

 

 

 

100

 

 

 

316

 

 

 

294

 

Other operating costs, net (Note 13)

 

 

10

 

 

 

6

 

 

 

20

 

 

 

1

 

 

 

50

 

 

 

19

 

Operating income

 

 

236

 

 

 

1,344

 

 

 

353

 

 

 

457

 

 

 

908

 

 

 

2,848

 

Non-operating pension and other post-employment benefit costs (Note 6)

 

 

(9

)

 

 

(15

)

 

 

(12

)

 

 

(12

)

 

 

(33

)

 

 

(38

)

Interest income and other

 

 

12

 

 

 

(1

)

 

 

24

 

 

 

9

 

 

 

54

 

 

 

9

 

Interest expense, net of capitalized interest

 

 

(66

)

 

 

(72

)

 

 

(72

)

 

 

(67

)

 

 

(208

)

 

 

(204

)

Loss on debt extinguishment (Note 8)

 

 

 

 

 

(276

)

 

 

 

 

 

 

 

 

 

 

 

(276

)

Earnings before income taxes

 

 

173

 

 

 

980

 

 

 

293

 

 

 

387

 

 

 

721

 

 

 

2,339

 

Income taxes (Note 14)

 

 

(22

)

 

 

(209

)

 

 

(54

)

 

 

(77

)

 

 

(101

)

 

 

(470

)

Net earnings

 

$

151

 

 

$

771

 

 

$

239

 

 

$

310

 

 

$

620

 

 

$

1,869

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share, basic and diluted (Note 4)

 

$

0.21

 

 

$

1.03

 

 

$

0.33

 

 

$

0.42

 

 

$

0.85

 

 

$

2.51

 

Weighted average shares outstanding (in thousands) (Note 4):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

733,163

 

 

 

747,507

 

 

 

731,046

 

 

 

740,058

 

 

 

732,069

 

 

 

743,990

 

Diluted

 

 

733,546

 

 

 

748,823

 

 

 

731,742

 

 

 

740,975

 

 

 

732,542

 

 

 

745,081

 

 

See accompanying Notes to Consolidated Financial Statements.

1


 

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(UNAUDITED)

 

 

QUARTER ENDED

 

 

QUARTER ENDED

 

 

YEAR-TO-DATE ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2023

 

 

MARCH 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

Net earnings

 

$

151

 

 

$

771

 

 

$

239

 

 

$

310

 

 

$

620

 

 

$

1,869

 

Other comprehensive income:

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

 

 

 

16

 

 

 

(7

)

 

 

(53

)

 

 

 

 

 

(62

)

Changes in unamortized actuarial loss, net of tax expense of $2 and $5

 

 

7

 

 

 

13

 

Changes in unamortized net prior service credit, net of tax expense of $0 and $1

 

 

 

 

 

 

Total other comprehensive income

 

 

7

 

 

 

29

 

Changes in unamortized actuarial loss, net of tax expense of $3, $11, $7 and $40

 

 

9

 

 

 

32

 

 

 

23

 

 

 

122

 

Changes in unamortized net prior service credit, net of tax benefit (expense) of $0, $0, $1 and ($1)

 

 

 

 

 

1

 

 

 

1

 

 

 

1

 

Total other comprehensive income (loss)

 

 

2

 

 

 

(20

)

 

 

24

 

 

 

61

 

Total comprehensive income

 

$

158

 

 

$

800

 

 

$

241

 

 

$

290

 

 

$

644

 

 

$

1,930

 

 

See accompanying Notes to Consolidated Financial Statements.

2


 

WEYERHAEUSER COMPANY

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

 

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PAR VALUE

 

MARCH 31,
 2023

 

 

DECEMBER 31,
2022

 

 

SEPTEMBER 30,
2023

 

 

DECEMBER 31,
2022

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

797

 

 

$

1,581

 

 

$

1,173

 

 

$

1,581

 

Short-term investments (Note 9)

 

 

668

 

 

 

 

Receivables, net

 

 

440

 

 

 

357

 

 

 

443

 

 

 

357

 

Receivables for taxes

 

 

28

 

 

 

42

 

 

 

18

 

 

 

42

 

Inventories (Note 5)

 

 

586

 

 

 

550

 

 

 

528

 

 

 

550

 

Prepaid expenses and other current assets

 

 

202

 

 

 

216

 

 

 

186

 

 

 

216

 

Total current assets

 

 

2,053

 

 

 

2,746

 

 

 

3,016

 

 

 

2,746

 

Property and equipment, less accumulated depreciation of $3,759 and $3,710

 

 

2,157

 

 

 

2,171

 

Property and equipment, less accumulated depreciation of $3,854 and $3,710

 

 

2,106

 

 

 

2,171

 

Construction in progress

 

 

222

 

 

 

222

 

 

 

311

 

 

 

222

 

Timber and timberlands at cost, less depletion

 

 

11,564

 

 

 

11,604

 

 

 

11,521

 

 

 

11,604

 

Minerals and mineral rights, less depletion

 

 

211

 

 

 

214

 

 

 

203

 

 

 

214

 

Deferred tax assets

 

 

8

 

 

 

8

 

 

 

8

 

 

 

8

 

Other assets

 

 

365

 

 

 

375

 

 

 

385

 

 

 

375

 

Total assets

 

$

16,580

 

 

$

17,340

 

 

$

17,550

 

 

$

17,340

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt (Note 8)

 

$

981

 

 

$

982

 

 

$

861

 

 

$

982

 

Accounts payable

 

 

266

 

 

 

247

 

 

 

288

 

 

 

247

 

Accrued liabilities (Note 7)

 

 

403

 

 

 

511

 

 

 

537

 

 

 

511

 

Total current liabilities

 

 

1,650

 

 

 

1,740

 

 

 

1,686

 

 

 

1,740

 

Long-term debt, net (Note 8)

 

 

4,072

 

 

 

4,071

 

 

 

4,818

 

 

 

4,071

 

Deferred tax liabilities

 

 

101

 

 

 

96

 

 

 

113

 

 

 

96

 

Deferred pension and other post-employment benefits (Note 6)

 

 

346

 

 

 

344

 

 

 

349

 

 

 

344

 

Other liabilities

 

 

335

 

 

 

340

 

 

 

356

 

 

 

340

 

Total liabilities

 

 

6,504

 

 

 

6,591

 

 

 

7,322

 

 

 

6,591

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

 

 

 

Common shares: $1.25 par value; authorized 1,360 million shares; issued and outstanding: 732,507 thousand shares at March 31, 2023 and 732,794 thousand shares at December 31, 2022

 

 

916

 

 

 

916

 

Common shares: $1.25 par value; authorized 1,360 million shares; issued and outstanding: 730,128 thousand shares at September 30, 2023 and 732,794 thousand shares at December 31, 2022

 

 

913

 

 

 

916

 

Other capital

 

 

7,662

 

 

 

7,691

 

 

 

7,609

 

 

 

7,691

 

Retained earnings

 

 

1,738

 

 

 

2,389

 

 

 

1,929

 

 

 

2,389

 

Accumulated other comprehensive loss (Note 11)

 

 

(240

)

 

 

(247

)

 

 

(223

)

 

 

(247

)

Total equity

 

 

10,076

 

 

 

10,749

 

 

 

10,228

 

 

 

10,749

 

Total liabilities and equity

 

$

16,580

 

 

$

17,340

 

 

$

17,550

 

 

$

17,340

 

 

See accompanying Notes to Consolidated Financial Statements.

3


 

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

 

 

QUARTER ENDED

 

 

YEAR-TO-DATE ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2023

 

 

MARCH 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

Cash flows from operations:

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

151

 

 

$

771

 

 

$

620

 

 

$

1,869

 

Noncash charges (credits) to earnings:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

126

 

 

 

122

 

 

 

374

 

 

 

360

 

Basis of real estate sold

 

 

33

 

 

 

31

 

 

 

80

 

 

 

77

 

Deferred income taxes, net

 

 

3

 

 

 

14

 

Pension and other post-employment benefits (Note 6)

 

 

15

 

 

 

25

 

 

 

50

 

 

 

65

 

Share-based compensation expense (Note 12)

 

 

8

 

 

 

8

 

 

 

26

 

 

 

25

 

Loss on debt extinguishment (Note 8)

 

 

 

 

 

276

 

 

 

 

 

 

276

 

Other

 

 

(4

)

 

 

17

 

Change in:

 

 

 

 

 

 

 

 

 

 

 

 

Receivables, net

 

 

(83

)

 

 

(238

)

 

 

(77

)

 

 

81

 

Receivables and payables for taxes

 

 

14

 

 

 

110

 

 

 

51

 

 

 

15

 

Inventories

 

 

(36

)

 

 

(87

)

 

 

23

 

 

 

(30

)

Prepaid expenses and other current assets

 

 

(9

)

 

 

(1

)

 

 

(5

)

 

 

(7

)

Accounts payable and accrued liabilities

 

 

(87

)

 

 

(62

)

 

 

43

 

 

 

(23

)

Pension and post-employment benefit contributions and payments

 

 

(6

)

 

 

(4

)

 

 

(16

)

 

 

(19

)

Other

 

 

(3

)

 

 

(8

)

 

 

(20

)

 

 

(41

)

Net cash from operations

 

 

126

 

 

 

957

 

 

 

1,145

 

 

 

2,665

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures for property and equipment

 

 

(50

)

 

 

(50

)

 

 

(209

)

 

 

(207

)

Capital expenditures for timberlands reforestation

 

 

(21

)

 

 

(20

)

 

 

(42

)

 

 

(38

)

Acquisition of timberlands

 

 

 

 

 

(18

)

Acquisition of timberlands (Note 15)

 

 

(70

)

 

 

(286

)

Purchase of short-term investments

 

 

(664

)

 

 

 

Other

 

 

2

 

 

 

1

 

 

 

3

 

 

 

1

 

Net cash from investing activities

 

 

(69

)

 

 

(87

)

 

 

(982

)

 

 

(530

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends on common shares

 

 

(799

)

 

 

(1,218

)

 

 

(1,076

)

 

 

(1,485

)

Net proceeds from issuance of long-term debt (Note 8)

 

 

 

 

 

881

 

 

 

743

 

 

 

881

 

Payments on long-term debt (Note 8)

 

 

 

 

 

(1,203

)

 

 

(118

)

 

 

(1,203

)

Proceeds from exercise of stock options

 

 

2

 

 

 

12

 

Repurchases of common shares (Note 4)

 

 

(34

)

 

 

(118

)

 

 

(109

)

 

 

(402

)

Other

 

 

(10

)

 

 

(18

)

 

 

(11

)

 

 

(5

)

Net cash from financing activities

 

 

(841

)

 

 

(1,664

)

 

 

(571

)

 

 

(2,214

)

Net change in cash, cash equivalents and restricted cash

 

 

(784

)

 

 

(794

)

 

 

(408

)

 

 

(79

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

1,581

 

 

 

1,999

 

 

 

1,581

 

 

 

1,999

 

Cash, cash equivalents and restricted cash at end of period

 

$

797

 

 

$

1,205

 

 

$

1,173

 

 

$

1,920

 

Cash paid (received) during the period for:

 

 

 

 

 

 

Interest, net of amount capitalized of $1 and $1

 

$

57

 

 

$

78

 

Cash paid during the period for:

 

 

 

 

 

 

Interest, net of amount capitalized of $5 and $5

 

$

190

 

 

$

211

 

Income taxes, net of refunds

 

$

6

 

 

$

85

 

 

$

40

 

 

$

446

 

 

See accompanying Notes to Consolidated Financial Statements.

4


 

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(UNAUDITED)

 

 

QUARTER ENDED

 

 

QUARTER ENDED

 

 

YEAR-TO-DATE ENDED

 

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES

 

MARCH 2023

 

 

MARCH 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

Common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

916

 

 

$

934

 

 

$

914

 

 

$

927

 

 

$

916

 

 

$

934

 

Issued for exercise of stock options and vested units

 

 

1

 

 

 

2

 

 

 

 

 

 

 

 

 

2

 

 

 

2

 

Repurchases of common shares (Note 4)

 

 

(1

)

 

 

(4

)

 

 

(1

)

 

 

(5

)

 

 

(5

)

 

 

(14

)

Balance at end of period

 

 

916

 

 

 

932

 

 

 

913

 

 

 

922

 

 

 

913

 

 

 

922

 

Other capital:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

 

7,691

 

 

 

8,181

 

 

 

7,624

 

 

 

7,954

 

 

 

7,691

 

 

 

8,181

 

Issued for exercise of stock options

 

 

2

 

 

 

11

 

 

 

1

 

 

 

1

 

 

 

3

 

 

 

14

 

Repurchases of common shares (Note 4)

 

 

(34

)

 

 

(117

)

 

 

(24

)

 

 

(140

)

 

 

(105

)

 

 

(390

)

Share-based compensation

 

 

8

 

 

 

8

 

 

 

9

 

 

 

8

 

 

 

26

 

 

 

25

 

Other transactions, net

 

 

(5

)

 

 

(7

)

 

 

(1

)

 

 

1

 

 

 

(6

)

 

 

(6

)

Balance at end of period

 

 

7,662

 

 

 

8,076

 

 

 

7,609

 

 

 

7,824

 

 

 

7,609

 

 

 

7,824

 

Retained earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

 

2,389

 

 

 

2,131

 

 

 

1,828

 

 

 

2,333

 

 

 

2,389

 

 

 

2,131

 

Net earnings

 

 

151

 

 

 

771

 

 

 

239

 

 

 

310

 

 

 

620

 

 

 

1,869

 

Dividends on common shares

 

 

(802

)

 

 

(1,223

)

 

 

(138

)

 

 

(133

)

 

 

(1,080

)

 

 

(1,490

)

Balance at end of period

 

 

1,738

 

 

 

1,679

 

 

 

1,929

 

 

 

2,510

 

 

 

1,929

 

 

 

2,510

 

Accumulated other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

 

(247

)

 

 

(479

)

 

 

(225

)

 

 

(398

)

 

 

(247

)

 

 

(479

)

Other comprehensive income

 

 

7

 

 

 

29

 

Other comprehensive income (loss)

 

 

2

 

 

 

(20

)

 

 

24

 

 

 

61

 

Balance at end of period (Note 11)

 

 

(240

)

 

 

(450

)

 

 

(223

)

 

 

(418

)

 

 

(223

)

 

 

(418

)

Total equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at end of period

 

$

10,076

 

 

$

10,237

 

 

$

10,228

 

 

$

10,838

 

 

$

10,228

 

 

$

10,838

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid per common share

 

$

1.09

 

 

$

1.63

 

 

$

0.19

 

 

$

0.18

 

 

$

1.47

 

 

$

1.99

 

 

See accompanying Notes to Consolidated Financial Statements.

5


 

INDEX FOR NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1:

BASIS OF PRESENTATION

7

 

 

 

NOTE 2:

BUSINESS SEGMENTS

7

 

 

 

NOTE 3:

REVENUE RECOGNITION

8

 

 

 

NOTE 4:

NET EARNINGS PER SHARE AND SHARE REPURCHASES

8

 

 

 

NOTE 5:

INVENTORIES

9

 

 

 

NOTE 6:

PENSION AND OTHER POST-EMPLOYMENT BENEFIT PLANS

10

 

 

 

NOTE 7:

ACCRUED LIABILITIES

10

 

 

 

NOTE 8:

LONG-TERM DEBT AND LINE OF CREDIT

10

 

 

 

NOTE 9:

FAIR VALUE OF FINANCIAL INSTRUMENTS

11

 

 

 

NOTE 10:

LEGAL PROCEEDINGS, COMMITMENTS AND CONTINGENCIES

11

 

 

 

NOTE 11:

ACCUMULATED OTHER COMPREHENSIVE LOSS

12

 

 

 

NOTE 12:

SHARE-BASED COMPENSATION

12

 

 

 

NOTE 13:

OTHER OPERATING COSTS, NET

13

 

 

 

NOTE 14:

INCOME TAXES

13

 

 

 

NOTE 15:

TIMBERLAND ACQUISITIONS

13

 

6


 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTERS AND YEAR-TO-DATE PERIODS ENDED MARCH 31,SEPTEMBER 30, 2023 AND 2022

NOTE 1: BASIS OF PRESENTATION

Our consolidated financial statements provide an overall view of our results of operations, financial condition and cash flows. They include our accounts and the accounts of entities we control, including majority-owned domestic and foreign subsidiaries. They do not include our intercompany transactions and accounts, which are eliminated. Throughout these Notes to Consolidated Financial Statements, unless specified otherwise, references to “Weyerhaeuser,” “we,” “the company” and “our” refer to the consolidated company.

The accompanying unaudited Consolidated Financial Statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented. Except as otherwise disclosed in these Notes to Consolidated Financial Statements, such adjustments are of a normal, recurring nature. The Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission pertaining to interim financial statements. Certain information and footnote disclosures normally included in our annual Consolidated Financial Statements have been condensed or omitted. These quarterly Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2022. Results of operations for interim periods should not necessarily be regarded as indicative of the results that may be expected for the full year.

NOTE 2: BUSINESS SEGMENTS

We are principally engaged in growing and harvesting timber; manufacturing, distributing and selling products made from trees; maximizing the value of our acreage through the sale of higher and better use (HBU) properties; and monetizing the value of surface and subsurface assets through leases and royalties. Our business segments are organized based primarily on products and services which include:

Timberlands – Logs, timber, recreational leases and other products;
Real Estate, Energy and Natural Resources (Real Estate & ENR) – Real Estate (sales of timberlands) and ENR (rights to explore for and extract hard minerals, construction materials, natural gas production, and wind and solar resources)solar); and
Wood Products – Structural lumber, oriented strand board, engineered wood products and building materials distribution.

A reconciliation of our business segment information to the respective information in the Consolidated Statement of Operations is as follows:

 

 

QUARTER ENDED

 

 

QUARTER ENDED

 

 

YEAR-TO-DATE ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2023

 

 

MARCH 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

Sales to unaffiliated customers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timberlands

 

$

462

 

 

$

465

 

 

$

380

 

 

$

441

 

 

$

1,259

 

 

$

1,421

 

Real Estate & ENR

 

 

101

 

 

 

128

 

 

 

105

 

 

 

68

 

 

 

286

 

 

 

313

 

Wood Products

 

 

1,318

 

 

 

2,519

 

 

 

1,537

 

 

 

1,767

 

 

 

4,355

 

 

 

6,627

 

 

 

1,881

 

 

 

3,112

 

 

 

2,022

 

 

 

2,276

 

 

 

5,900

 

 

 

8,361

 

Intersegment sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timberlands

 

 

142

 

 

 

161

 

 

 

141

 

 

 

133

 

 

 

433

 

 

 

450

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

 

 

2,023

 

 

 

3,273

 

 

 

2,163

 

 

 

2,409

 

 

 

6,333

 

 

 

8,811

 

Intersegment eliminations

 

 

(142

)

 

 

(161

)

 

 

(141

)

 

 

(133

)

 

 

(433

)

 

 

(450

)

Total

 

$

1,881

 

 

$

3,112

 

 

$

2,022

 

 

$

2,276

 

 

$

5,900

 

 

$

8,361

 

Net contribution (charge) to earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timberlands

 

$

120

 

 

$

182

 

 

$

78

 

 

$

107

 

 

$

302

 

 

$

442

 

Real Estate & ENR

 

 

53

 

 

 

81

 

 

 

56

 

 

 

48

 

 

 

161

 

 

 

194

 

Wood Products

 

 

95

 

 

 

1,182

 

 

 

277

 

 

 

344

 

 

 

590

 

 

 

2,389

 

 

 

268

 

 

 

1,445

 

 

 

411

 

 

 

499

 

 

 

1,053

 

 

 

3,025

 

Unallocated items(1)

 

 

(29

)

 

 

(117

)

 

 

(46

)

 

 

(45

)

 

 

(124

)

 

 

(206

)

Net contribution to earnings

 

 

239

 

 

 

1,328

 

 

 

365

 

 

 

454

 

 

 

929

 

 

 

2,819

 

Interest expense, net of capitalized interest

 

 

(66

)

 

 

(72

)

 

 

(72

)

 

 

(67

)

 

 

(208

)

 

 

(204

)

Loss on debt extinguishment

 

 

 

 

 

(276

)

 

 

 

 

 

 

 

 

 

 

 

(276

)

Earnings before income taxes

 

 

173

 

 

 

980

 

 

 

293

 

 

 

387

 

 

 

721

 

 

 

2,339

 

Income taxes

 

 

(22

)

 

 

(209

)

 

 

(54

)

 

 

(77

)

 

 

(101

)

 

 

(470

)

Net earnings

 

$

151

 

 

$

771

 

 

$

239

 

 

$

310

 

 

$

620

 

 

$

1,869

 

(1)
Unallocated items are gains or charges not related to, or allocated to, an individual operating segment. They include all or a portion of items such as share-based compensation, pension and post-employment costs, elimination of intersegment profit in inventory and LIFO, foreign exchange transaction gains and losses, interest income and other as well as legacy obligations.other.

7


 

NOTE 3: REVENUE RECOGNITION

A reconciliation of revenue recognized by our major products:

 

 

QUARTER ENDED

 

 

QUARTER ENDED

 

 

YEAR-TO-DATE ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2023

 

 

MARCH 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

Net sales to unaffiliated customers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timberlands segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Delivered logs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic sales

 

$

93

 

 

$

113

 

 

$

96

 

 

$

97

 

 

$

290

 

 

$

313

 

Export grade sales

 

 

136

 

 

 

146

 

 

 

80

 

 

 

127

 

 

 

321

 

 

 

478

 

Subtotal West

 

 

229

 

 

 

259

 

 

 

176

 

 

 

224

 

 

 

611

 

 

 

791

 

South

 

 

168

 

 

 

154

 

 

 

155

 

 

 

166

 

 

 

485

 

 

 

480

 

North

 

 

17

 

 

 

15

 

 

 

11

 

 

 

15

 

 

 

35

 

 

 

40

 

Subtotal delivered logs sales

 

 

414

 

 

 

428

 

 

 

342

 

 

 

405

 

 

 

1,131

 

 

 

1,311

 

Stumpage and pay-as-cut timber

 

 

16

 

 

 

9

 

 

 

12

 

 

 

10

 

 

 

43

 

 

 

30

 

Recreational and other lease revenue

 

 

18

 

 

 

17

 

 

 

19

 

 

 

18

 

 

 

54

 

 

 

51

 

Other(1)

 

 

14

 

 

 

11

 

 

 

7

 

 

 

8

 

 

 

31

 

 

 

29

 

Net sales attributable to Timberlands segment

 

 

462

 

 

 

465

 

 

 

380

 

 

 

441

 

 

 

1,259

 

 

 

1,421

 

Real Estate & ENR segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate

 

 

72

 

 

 

97

 

 

 

79

 

 

 

30

 

 

 

198

 

 

 

217

 

Energy and natural resources

 

 

29

 

 

 

31

 

 

 

26

 

 

 

38

 

 

 

88

 

 

 

96

 

Net sales attributable to Real Estate & ENR segment

 

 

101

 

 

 

128

 

 

 

105

 

 

 

68

 

 

 

286

 

 

 

313

 

Wood Products segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Structural lumber

 

 

515

 

 

 

1,206

 

 

 

570

 

 

 

676

 

 

 

1,658

 

 

 

2,880

 

Oriented strand board

 

 

208

 

 

 

564

 

 

 

284

 

 

 

287

 

 

 

707

 

 

 

1,348

 

Engineered solid section

 

 

169

 

 

 

196

 

 

 

216

 

 

 

233

 

 

 

600

 

 

 

676

 

Engineered I-joists

 

 

87

 

 

 

137

 

 

 

122

 

 

 

166

 

 

 

335

 

 

 

471

 

Softwood plywood

 

 

41

 

 

 

58

 

 

 

42

 

 

 

47

 

 

 

127

 

 

 

158

 

Medium density fiberboard

 

 

38

 

 

 

48

 

 

 

40

 

 

 

50

 

 

 

120

 

 

 

151

 

Complementary building products

 

 

163

 

 

 

215

 

 

 

184

 

 

 

222

 

 

 

551

 

 

 

676

 

Other(2)

 

 

97

 

 

 

95

 

 

 

79

 

 

 

86

 

 

 

257

 

 

 

267

 

Net sales attributable to Wood Products segment

 

 

1,318

 

 

 

2,519

 

 

 

1,537

 

 

 

1,767

 

 

 

4,355

 

 

 

6,627

 

Total net sales

 

$

1,881

 

 

$

3,112

 

 

$

2,022

 

 

$

2,276

 

 

$

5,900

 

 

$

8,361

 

 

(1)
Other Timberlands sales include sales of seeds and seedlings from our nursery operations as well as wood chips.
(2)
Other Wood Products sales include wood chips, other byproducts and third-party residual log sales from our Canadian Forestlands operations.

NOTE 4: NET EARNINGS PER SHARE AND SHARE REPURCHASES

Our basic and diluted earnings per share were:

$0.210.33 during firstthird quarter 2023 and $0.85 during year-to-date 2023;
$1.030.42 during firstthird quarter 2022 and $2.51 during year-to-date 2022.

8


 

Basic earnings per share is net earnings divided by the weighted average number of our outstanding common shares, including stock equivalent units where there is no circumstance under which those shares would not be issued. Diluted earnings per share is net earnings divided by the sum of the weighted average number of our outstanding common shares and the effect of our outstanding dilutive potential common shares.

 

 

QUARTER ENDED

 

 

QUARTER ENDED

 

 

YEAR-TO-DATE ENDED

 

SHARES IN THOUSANDS

 

MARCH 2023

 

 

MARCH 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

Weighted average common shares outstanding – basic

 

 

733,163

 

 

 

747,507

 

 

 

731,046

 

 

 

740,058

 

 

 

732,069

 

 

 

743,990

 

Dilutive potential common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

137

 

 

 

384

 

 

 

154

 

 

 

192

 

 

 

134

 

 

 

294

 

Restricted stock units

 

 

27

 

 

 

420

 

 

 

304

 

 

 

420

 

 

 

117

 

 

 

417

 

Performance share units

 

 

219

 

 

 

512

 

 

 

238

 

 

 

305

 

 

 

222

 

 

 

380

 

Total effect of outstanding dilutive potential common shares

 

 

383

 

 

 

1,316

 

 

 

696

 

 

 

917

 

 

 

473

 

 

 

1,091

 

Weighted average common shares outstanding – dilutive

 

 

733,546

 

 

 

748,823

 

 

 

731,742

 

 

 

740,975

 

 

 

732,542

 

 

 

745,081

 

We use the treasury stock method to calculate the dilutive effect of our outstanding stock options, restricted stock units and performance share units.

Potential Shares Not Included in the Computation of Diluted Earnings per Share

The following shares were not included in the computation of diluted earnings per share because they were either antidilutive or the required performance or market conditions were not met. Some or all of these shares may be dilutive potential common shares in future periods.

 

 

QUARTER ENDED

 

 

QUARTER ENDED

 

 

YEAR-TO-DATE ENDED

 

SHARES IN THOUSANDS

 

MARCH 2023

 

 

MARCH 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

Stock options

 

 

610

 

 

 

 

 

 

609

 

 

 

620

 

 

 

609

 

 

 

620

 

Performance share units

 

 

860

 

 

 

693

 

 

 

612

 

 

 

623

 

 

 

612

 

 

 

623

 

 

Share Repurchase Program

On September 22, 2021, we announced that our board of directors approved a new share repurchase program (the 2021 Repurchase Program) under which we are authorized to repurchase up to $1 billion of outstanding shares. Concurrently, the board terminated the remaining repurchase authorization under the share repurchase program approved by the board in February 2019 (the 2019 Repurchase Program).

We repurchased 1,115,560757,510 common shares for approximately $3525 million (including transaction fees) under the 2021 Repurchase Program during firstthird quarter 2023 and 3,562,944 common shares for approximately $110 million under the 2021 Repurchase Program during year-to-date 2023. As of March 31,September 30, 2023, we had remaining authorization of $342267 million for future share repurchases. During first quarteryear-to-date 2022, we repurchased 3,197,67511,217,300 common shares for approximately $121404 million (including transaction fees) under the 2021 Repurchase Program.

All common stock repurchases under the 2021 Repurchase Program were made in open-market transactions. We record share repurchases upon trade date as opposed to the settlement date when cash is disbursed. We record a liability for repurchases that have not yet been settled as of period end. There were 27,13932,757 unsettled shares (approximately $1 million) as of March 31,September 30, 2023, and 223,548 unsettled shares (approximately $7 million) as of December 31, 2022.

NOTE 5: INVENTORIES

Inventories include raw materials, work-in-process and finished goods, as well as materials and supplies.

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 31,
 2023

 

 

DECEMBER 31,
2022

 

LIFO inventories:

 

 

 

 

 

 

Logs

 

$

32

 

 

$

32

 

Lumber, plywood, panels and fiberboard

 

 

71

 

 

 

61

 

Other products

 

 

9

 

 

 

9

 

Moving average cost or FIFO inventories:

 

 

 

 

 

 

Logs

 

 

78

 

 

 

56

 

Lumber, plywood, panels, fiberboard and engineered wood products

 

 

119

 

 

 

122

 

Other products

 

 

140

 

 

 

140

 

Materials and supplies

 

 

137

 

 

 

130

 

Total

 

$

586

 

 

$

550

 

DOLLAR AMOUNTS IN MILLIONS

 

SEPTEMBER 30,
2023

 

 

DECEMBER 31,
2022

 

LIFO inventories:

 

 

 

 

 

 

Logs

 

$

28

 

 

$

32

 

Lumber, plywood, panels and fiberboard

 

 

80

 

 

 

61

 

Other products

 

 

16

 

 

 

9

 

Moving average cost or FIFO inventories:

 

 

 

 

 

 

Logs

 

 

31

 

 

 

56

 

Lumber, plywood, panels, fiberboard and engineered wood products

 

 

98

 

 

 

122

 

Other products

 

 

129

 

 

 

140

 

Materials and supplies

 

 

146

 

 

 

130

 

Total

 

$

528

 

 

$

550

 

 

9


LIFO – the last-in, first-out method – applies to major inventory products held at our U.S. locations. The moving average cost method or FIFO – the first-in, first-out method – applies to the balance of our U.S. raw material and product inventories, all material and supply inventories and all foreign inventories.

9


NOTE 6: PENSION AND OTHER POST-EMPLOYMENT BENEFIT PLANS

The components of net periodic benefit cost are:

 

 

PENSION

 

 

PENSION

 

 

QUARTER ENDED

 

 

QUARTER ENDED

 

 

YEAR-TO-DATE ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2023

 

 

MARCH 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

Service cost

 

$

6

 

 

$

10

 

 

$

6

 

 

$

9

 

 

$

17

 

 

$

27

 

Interest cost

 

 

30

 

 

 

27

 

 

 

30

 

 

 

27

 

 

 

89

 

 

 

80

 

Expected return on plan assets

 

 

(30

)

 

 

(39

)

 

 

(30

)

 

 

(40

)

 

 

(90

)

 

 

(120

)

Amortization of actuarial loss

 

 

8

 

 

 

24

 

 

 

10

 

 

 

23

 

 

 

29

 

 

 

70

 

Amortization of prior service cost

 

 

 

 

 

1

 

 

 

 

 

 

1

 

 

 

1

 

 

 

2

 

Total net periodic benefit cost – pension

 

$

14

 

 

$

23

 

 

$

16

 

 

$

20

 

 

$

46

 

 

$

59

 

 

 

OTHER POST-EMPLOYMENT BENEFITS

 

 

OTHER POST-EMPLOYMENT BENEFITS

 

 

QUARTER ENDED

 

 

QUARTER ENDED

 

 

YEAR-TO-DATE ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2023

 

 

MARCH 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

Interest cost

 

$

1

 

 

$

1

 

 

$

2

 

 

$

 

 

$

4

 

 

$

2

 

Amortization of actuarial loss

 

 

 

 

 

1

 

 

 

 

 

 

1

 

 

 

1

 

 

 

4

 

Amortization of prior service credit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

Total net periodic benefit cost – other post-employment benefits

 

$

1

 

 

$

2

 

 

$

2

 

 

$

1

 

 

$

4

 

 

$

6

 

For the periods presented, service cost is included in “Costs of sales,” “Selling expenses,” and “General and administrative expenses” with the remaining components included in “Non-operating pension and other post-employment benefit costs” in the Consolidated Statement of Operations.

Fair Value of Pension Plan Assets and Obligations

In our year-end reporting process, we estimate the fair value of pension plan assets based upon the information available at that time. For certain assets, primarily private equity funds, the information available consists of net asset values as of an interim date, cash flows between the interim date and the end of the year and market events. We update the year-end estimated fair value of pension plan assets in the second quarter of each year to incorporate final net asset values reflected in financial statements received after we have filed our Annual Report on Form 10-K.No adjustments to the fair value of assets or projected benefit obligations were necessary during second quarter 2023.

NOTE 7: ACCRUED LIABILITIES

Accrued liabilities were comprised of the following:

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 31,
 2023

 

 

DECEMBER 31,
2022

 

 

SEPTEMBER 30,
2023

 

 

DECEMBER 31,
2022

 

Compensation and employee benefit costs

 

$

147

 

 

$

201

 

 

$

173

 

 

$

201

 

Current portion of lease liabilities

 

 

21

 

 

 

22

 

 

 

21

 

 

 

22

 

Customer rebates, volume discounts and deferred income

 

 

83

 

 

 

132

 

 

 

135

 

 

 

132

 

Interest

 

 

72

 

 

 

69

 

 

 

84

 

 

 

69

 

Taxes payable

 

 

24

 

 

 

23

 

 

 

66

 

 

 

23

 

Other

 

 

56

 

 

 

64

 

 

 

58

 

 

 

64

 

Total

 

$

403

 

 

$

511

 

 

$

537

 

 

$

511

 

 

NOTE 8: LONG-TERM DEBT AND LINE OF CREDIT

In July 2023, we repaid $118 million of our 7.125 percent notes at maturity.

In May 2023, we completed an offering of debt securities by issuing $750 million of 4.750 percent notes due in May 2026. The net proceeds after deducting the discount, underwriting fees and issuance costs were $743 million. Of these total net proceeds, $664 million was invested in short-term investments classified as held-to-maturity securities.

10


In March 2022, we completed a series of transactions that lowered our weighted average interest rate and extended our weighted average maturity by issuing $900 million in notes and using the net proceeds plus cash on hand to close cash tender offers for $931 million of principal in higher interest rate notes. We issued $450 million of 3.375 percent notes due in March 2033 and $450 million of 4.000 percent notes due in March 2052. The net proceeds after deducting the discount, underwriting fees and issuance costs were $444 million and $437 million, respectively. The net proceeds were used to retire $592 million of our 7.375 percent notes due in March 2032, $161 million of our 8.500 percent notes due in January 2025, $73 million of our 7.125 percent notes due in July 2023, $65 million of our 7.950 percent notes due in March 2025, and $40 million of our 7.850 percent notes due in July 2026. We paid holders an aggregate $1.2 billion in cash reflecting principal, premium to par and tender premium. A net pretax charge of $276 million ($207 million after-tax) was included in the Consolidated Statement of Operations in first quarter 2022 for premiums to retire $931 million of principal plus unamortized debt issuance costs and unamortized debt discounts in connection with the early debt retirement.

In March 2023, we entered into a new $1.5 billion five-year senior unsecured revolving credit facility, which expires in March 2028 and replaced the existing facility which was set to expire in January 2025. Borrowings will bear interest at a floating rate based on either the adjusted term Secured Overnight Financing Rate (SOFR) plus a spread or a mutually agreed upon base rate plus a spread. We had no outstanding borrowings on our credit facility as of March 31,September 30, 2023 and December 31, 2022.

10


NOTE 9: FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value and carrying value of our long-term debt consisted of the following:

 

 

 

 

 

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 31,
 2023

 

 

DECEMBER 31,
2022

 

 

SEPTEMBER 30,
2023

 

 

DECEMBER 31,
2022

 

Long-term fixed rate debt (including current maturities):

 

 

 

 

 

 

 

 

 

 

 

 

Carrying value

 

$

5,053

 

 

$

5,053

 

 

$

5,679

 

 

$

5,053

 

Fair value (level 2)

 

$

5,048

 

 

$

4,918

 

 

$

5,434

 

 

$

4,918

 

 

To estimate the fair value of fixed rate long-term debt, we used the market approach, which is based on quoted market prices we received for the same types and issues of our debt. We believe that our line of credit has a net carrying value that approximates its fair value within an insignificant difference. The inputs to the valuations of our long-term debt are based on market data obtained from independent sources or information derived principally from observable market data. The difference between the fair value and the carrying value represents the theoretical net premium or discount we would pay or receive to retire all debt at the measurement date.

Fair Value of Other Financial Instruments

We believe that our other financial instruments, including cash and cash equivalents, short-term investments, receivables and payables, have net carrying values that approximate their fair values with only insignificant differences. This is primarily due to the short-term nature of these instruments and the allowance for doubtful accounts.

As of September 30, 2023, we had $668 million in short-term investments classified as held-to-maturity debt securities, which consist of a mixture of term deposits and Treasury bills. We did not have any short-term investments classified as held-to-maturity debt securities as of December 31, 2022. These short-term investments mature within one year and are recorded in "Short-term investments" on our Consolidated Balance Sheet. We record held-to-maturity debt securities at amortized cost, which approximates fair value.

Legal Proceedings

We are party to various legal proceedings arising in the ordinary course of business. We are not currently a party to any legal proceeding that management believes could have a material adverse effect on our Consolidated Statement of Operations, Consolidated Balance Sheet or Consolidated Statement of Cash Flows.

Environmental Matters

Site Remediation

Under the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) – commonly known as the “Superfund” – and similar state laws, we:

are a party to various proceedings related to the cleanup of hazardous waste sites and
have been notified that we may be a potentially responsible party related to the cleanup of other hazardous waste sites for which proceedings have not yet been initiated.

As of March 31,September 30, 2023, our total accrual for future estimated remediation costs on active Superfund sites and other sites for which we are potentially responsible was approximately $6575 million. These amounts are recorded in "Accrued liabilities" and "Other liabilities" on our Consolidated Balance Sheet.

11


 

NOTE 11: ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in amounts included in our accumulated other comprehensive loss by component are:

 

 

QUARTER ENDED

 

 

QUARTER ENDED

 

 

YEAR-TO-DATE ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2023

 

 

MARCH 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

Pension(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

(458

)

 

$

(720

)

 

$

(444

)

 

$

(632

)

 

$

(458

)

 

$

(720

)

Other comprehensive income (loss) before reclassifications

 

 

1

 

 

 

(8

)

 

 

 

 

 

14

 

 

 

(1

)

 

 

65

 

Amounts reclassified from accumulated other comprehensive loss to earnings(2)

 

 

6

 

 

 

19

 

 

 

9

 

 

 

19

 

 

 

24

 

 

 

56

 

Total other comprehensive income

 

 

7

 

 

 

11

 

 

 

9

 

 

 

33

 

 

 

23

 

 

 

121

 

Balance at end of period

 

$

(451

)

 

$

(709

)

 

$

(435

)

 

$

(599

)

 

$

(435

)

 

$

(599

)

Other post-employment benefits(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

20

 

 

$

(2

)

 

$

21

 

 

$

 

 

$

20

 

 

$

(2

)

Other comprehensive income before reclassifications

 

 

 

 

 

1

 

Other comprehensive loss before reclassifications

 

 

(1

)

 

 

(1

)

 

 

 

 

 

(1

)

Amounts reclassified from accumulated other comprehensive loss to earnings(2)

 

 

 

 

 

1

 

 

 

1

 

 

 

1

 

 

 

1

 

 

 

3

 

Total other comprehensive income

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

1

 

 

 

2

 

Balance at end of period

 

$

20

 

 

$

 

 

$

21

 

 

$

 

 

$

21

 

 

$

 

Translation adjustments and other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

191

 

 

$

243

 

 

$

198

 

 

$

234

 

 

$

191

 

 

$

243

 

Translation adjustments

 

 

 

 

 

16

 

 

 

(7

)

 

 

(53

)

 

 

 

 

 

(62

)

Total other comprehensive income

 

 

 

 

 

16

 

Total other comprehensive loss

 

 

(7

)

 

 

(53

)

 

 

 

 

 

(62

)

Balance at end of period

 

 

191

 

 

 

259

 

 

 

191

 

 

 

181

 

 

 

191

 

 

 

181

 

Accumulated other comprehensive loss, end of period

 

$

(240

)

 

$

(450

)

 

$

(223

)

 

$

(418

)

 

$

(223

)

 

$

(418

)

(1)
Amounts presented are net of tax.
(2)
Amounts of actuarial loss and prior service (cost) credit are components of net periodic benefit cost (credit).cost. See Note 6: Pension and Other Post-Employment Benefit Plans.

 

NOTE 12: SHARE-BASED COMPENSATION

Share-based compensation activity during first quarteryear-to-date 2023 included the following:

 

SHARES IN THOUSANDS

 

GRANTED

 

 

VESTED

 

 

GRANTED

 

 

VESTED

 

Restricted stock units (RSUs)

 

 

835

 

 

 

746

 

 

 

844

 

 

 

771

 

Performance share units (PSUs)

 

 

392

 

 

 

228

 

 

 

392

 

 

 

228

 

 

A total of 829897 thousand shares of common stock were issued as a result of RSU vestings, PSU vestings and stock option exercises.

Restricted Stock Units

The weighted average fair value of the RSUs granted in 2023 was $33.9133.76. The vesting provisions for RSUs granted in 2023 were consistent with prior year grants.

Performance Share Units

The weighted average grant date fair value of PSUs granted in 2023 was $37.58. The final number of shares granted in 2023 will vest between a range of 0 percent to 150 percent of each grant's target, depending upon actual company performance compared against an industry peer group. PSUs granted in 2023 will vest at a maximum of 100 percent of target value in the event of negative absolute company total shareholder return.

12


Weighted Average Assumptions Used in Estimating the Value of Performance Share Units Granted in 2023

 

 

 

PERFORMANCE SHARE UNITS

Performance period

 

2/09/2023 – 12/31/2025

Valuation date average stock price(1)

 

$33.96

Expected dividends

 

2.25%

Risk-free rate

 

4.21% – 4.66%

Expected volatility

 

29.26% – 40.19%

(1)
Calculated as an average of the high and low prices on grant date.

12


NOTE 13: OTHER OPERATING COSTS, NET

Other operating costs, net were comprised of the following:

 

 

QUARTER ENDED

 

 

QUARTER ENDED

 

 

YEAR-TO-DATE ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2023

 

 

MARCH 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

Environmental remediation charges

 

$

1

 

 

$

 

 

$

14

 

 

$

1

 

Foreign exchange losses (gains), net

 

$

1

 

 

$

(1

)

 

 

1

 

 

 

(8

)

 

 

(1

)

 

 

(12

)

Litigation expense, net

 

 

1

 

 

 

4

 

 

 

9

 

 

 

2

 

 

 

11

 

 

 

10

 

Research and development expenses

 

 

2

 

 

 

1

 

 

 

2

 

 

 

1

 

 

 

5

 

 

 

4

 

Other, net

 

 

6

 

 

 

2

 

 

 

7

 

 

 

6

 

 

 

21

 

 

 

16

 

Total other operating costs, net

 

$

10

 

 

$

6

 

 

$

20

 

 

$

1

 

 

$

50

 

 

$

19

 

 

NOTE 14: INCOME TAXES

As a real estate investment trust (REIT), we generally are not subject to federal corporate income taxes on REIT taxable income that is distributed to shareholders. We are required to pay corporate income taxes on earnings of our wholly-owned Taxable REIT Subsidiaries (TRSs), which includes our Wood Products segment earnings and portions of our Timberlands and Real Estate & ENR segments' earnings.

The quarterly provision for income taxes is based on our current estimate of the annual effective tax rate and is adjusted for discrete taxable events that have occurred during the year. Our 2023 estimated annual effective tax rate, excluding discrete items, differs from the U.S. federal statutory tax rate of 21 percent primarily due to state and foreign income taxes and tax benefits associated with our nontaxable REIT earnings.

NOTE 15: TIMBERLAND ACQUISITIONS

On July 19, 2023, we completed the purchase of 22 thousand acres of Mississippi timberlands for approximately $60 million. We recorded $59 million of timberland assets in "Timber and timberlands at cost, less depletion" and $1 million of related assets in "Property and equipment, net" on our Consolidated Balance Sheet.

On May 18, 2022, we completed the purchase of 81 thousand acres of North and South Carolina timberlands for approximately $265 million. We recorded $263 million of timberland assets in “Timber and timberlands at cost, less depletion” and $2 million of related assets in “Property and equipment, net” on our Consolidated Balance Sheet.

13


 

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

NOTE ABOUT FORWARD-LOOKING STATEMENTS

This report contains statements concerning our future results and performance that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include, without limitation, statements relating to: our expected future financial and operating performance; our plans, strategies, intentions and expectations; estimates of invested pension plan assets; our capital structure and the sufficiency of our liquidity position to meet future cash requirements; compliance with covenants in our debt agreements; our expectations concerning our contingent liabilities and the sufficiency of related reserves and accruals including, but not limited to, cost estimates of future litigation and environmental remediation; our provision for income taxes; expected capital expenditures; expected returns on pension plan assets; market and general economic conditions, including related influencing factors such as the trajectory of U.S. housing activity, repair and remodel activity, inflation trends and interest rates; our expectations about our future opportunities in emerging carbon offset and carbon capture and storage markets; and assumptions used in valuing incentive compensation and related expense.

Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often involve use of words such as “anticipate,” “believe,” “committed,” "continue,” “estimate,” “expect,” “foreseeable,” “future,” “maintain,” “may,” “plan,” “potential,” “will,” and “would,“will,” or similar words or terminology. They may use the positive, negative or another variation of those and similar words. These forward-looking statements are based on our current expectations and assumptions and are not guarantees of future events or performance. The realization of our expectations and the accuracy of our assumptions are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. There is no guarantee that any of the events anticipated by our forward-looking statements will occur. If any of the events occur, there is no guarantee what effect it will have on our operations, cash flows, or financial condition. We undertake no obligation to update our forward-looking statements after the date of this report. The factors listed below, as well as other factors not described herein because they are not currently known to us or we currently judge them to be immaterial, may cause our actual results to differ significantly from our forward-looking statements:

the effect of general economic conditions, including employment rates, interest rate levels, inflation, housing starts, general availability and cost of financing for home mortgages and the relative strength of the U.S. dollar;
the effect of COVID-19 and other viral or disease outbreaks, including but not limited to any related regulatory restrictions or requirements, and their potential effects on our business, results of operations, cash flows, financial condition and future prospects;
market demand for the company's products, including market demand for our timberland properties with higher and better uses, which is related to, among other factors, the strength of the various U.S. business segments and U.S. and international economic conditions;
changes in currency exchange rates, particularly the relative value of the U.S. dollar to the Japanese yen, the Chinese yuan, and the Canadian dollar, and the relative value of the euro to the yen;
restrictions on international trade and tariffs imposed on imports or exports;
the availability and cost of shipping and transportation;
economic activity in Asia, especially Japan and China;
performance of our manufacturing operations, including maintenance and capital requirements;
potential disruptions in our manufacturing operations;
the level of competition from domestic and foreign producers;
the successful execution of our internal plans and strategic initiatives, including restructuring and cost reduction initiatives;
our ability to hire and retain capable employees;
the successful and timely execution and integration of our strategic acquisitions, including our ability to realize expected benefits and synergies, and the successful and timely execution of our strategic divestitures, each of which is subject to a number of risks and conditions beyond our control including, but not limited to, timing and required regulatory approvals or the occurrence of any event, change or other circumstances that could give rise to a termination of any acquisition or divestiture transaction under the terms of the governing transaction agreements;
raw material availability and prices;
the effect of weather;
changes in global or regional climate conditions and governmental response to such changes;
the risk of loss from fires, floods, windstorms, hurricanes, pest infestation and other natural disasters;
energy prices;
transportation and labor availability and costs;
federal tax policies;
the effect of forestry, land use, environmental and other governmental regulations;
legal proceedings;
performance of pension fund investments and related derivatives;
the effect of timing of employee retirements as it relates to the cost of pension benefits and changes in the market price of our common stock on charges for share-based compensation;
the accuracy of our estimates of costs and expenses related to contingent liabilities and the accuracy of our estimates of charges related to casualty losses;
changes in accounting principles; and
other risks and uncertainties described in this report under Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) and in our 2022 Annual Report on Form 10-K, as well as those set forth from time to time in our other public statements, reports, registration statements, prospectuses, information statements and other filings with the SEC.

 

It is not possible to predict or identify all risks and uncertainties that might affect the accuracy of our forward-looking statements and, consequently, our descriptions of such risks and uncertainties should not be considered exhaustive. There is no guarantee that any of the events anticipated by these forward-looking statements will occur, and if any of the events do occur, there is no guarantee what effect they will have on the company's business, results of operations, cash flows, financial condition and future prospects.

14


 

14


 

Forward-looking statements speak only as of the date they are made, and we undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise.

 

RESULTS OF OPERATIONS

 

In reviewing our results of operations, it is important to understand these terms:

 

Sales realizations for Timberlands and Wood Products refer to net selling prices. This includes selling price plus freight, minus normal sales deductions. Real Estate transactions are presented at the contract sales price before commissions and closing costs, net of any credits.
Net contribution (charge) to earnings does not include interest expense, loss on debt extinguishment or income taxes.

 

 

ECONOMIC AND MARKET CONDITIONS AFFECTING OUR OPERATIONS

Our market conditions and the strength of the broader U.S. economy are, and will continue to be, influenced by the trajectory of activity in the U.S. housing and repair and remodel segments, inflation trends and interest rates. The demand for sawlogs within our Timberlands segment is directly affected by domestic production of wood-based building products. The strength of the U.S. housing market, particularly new residential construction, strongly affects demand in our Wood Products segment, as does repair and remodeling activity. Seasonal weather patterns impact the level of construction activity in the U.S., which in turn affects demand for our logs and wood products. Our Timberlands segment, specifically the Western region, is also affected by export demand and trade policy. Japanese housing starts are a key driver of export log demand in Japan. The demand for pulpwood from our Timberlands segment is directly affected by the production of pulp, paper and oriented strand board (OSB) as well as the demand for biofuels, such as wood-burning pellets made from pulpwood. Our Timberlands segment is also influenced by the availability of harvestable timber. In general, Western log markets are highly tensioned by available supply, while Southern log markets have more available supply. However, additional mill capacity being added in the U.S. South has led to tightening of markets in certain geographies. Our Real Estate, Energy and Natural Resources segment is affected by a variety of factors, including the general state of the economy, local real estate market conditions, the level of construction activity in the U.S. and evolution of emerging renewable energy and carbon-related markets.

While underlying longer-term fundamentals remain favorable for construction of new housing inOver the U.S.,past year, home sales and building activity have slowed due in part to higher mortgage interest rates, reduced affordability and general macroeconomic conditions. During third quarter 2023, market conditions continued to shift towards sales of new homes as existing inventory remained near record-low levels. On a seasonally adjusted annual basis, as reported by the U.S. Census Bureau, housing starts for firstthird quarter 2023 averaged 1.41.36 million units, a 0.26.2 percent decrease from fourthsecond quarter 2022.2023. Single-family starts averaged 841961 thousand units in third quarter 2023, a 1.03.4 percent decreaseincrease from fourthsecond quarter 2022.2023. Multi-family starts averaged 555398 thousand units in firstthird quarter 2023, which was a 1.123.5 percent increasedecrease from fourthsecond quarter 2022.2023. Single-family construction is the primary driver for our business as compared to multi-family due to the amount of wood products used. Sales of newly built, single-family homes averaged a seasonally adjusted annual rate of 651724 thousand units for firstthird quarter 2023, an increase of 9.04.8 percent from the prior quarter. Over the medium to long-term, we expect a favorable U.S. housing construction market supported by strong demographics in the key homebuying age cohorts, a decade of underbuilding and a historically low housing inventory.

Repair and remodeling expenditures decreased by 1.3 percentwere steady from fourthsecond quarter 20222023 to firstthird quarter 2023 according to the Census Bureau Advance Retail Spending report. Do-it-yourself activity has been returning to more normalized levels while professionally contracted activities have benefited from larger projects and increases in home equity levels. Over the longer term, we expect this sector to return to pre-pandemic growth trends with healthy household balance sheets, elevated home equity and an aging U.S. housing stock, with a median age of 43 years.

In U.S. wood product markets, demand continued to be affectedin third quarter 2023 helped lift prices in mid-summer. By the end of the third quarter, this had been offset by softening in themacroeconomic and housing market uncertainty, including an increase in interest and a more uncertain economic environment during firstmortgage rates. Temporary and permanent curtailments provided some balance to the market. OSB demand was strong for most of the quarter, 2023.as customer inventories were not sufficient to meet current building activity. The Random Lengths Framing Lumber Composite price averaged $412/$438/MBF and the OSB Composite averaged $297/$540/MSF in firstthird quarter 2023. Over the course of the firstthird quarter, prices for lumber decreased from $438/MBF to $422/MBF and prices for OSB increased from $380/MBF to $417/MBF for lumber and from $288/$432/MSF to $297/MSF for OSB.$454/MSF.

In Western log markets, Douglas fir sawlog pricesfell decreased by 6.30.2 percent in firstthird quarter 2023 compared with fourthsecond quarter 20222023, as reported by RISI Log Lines based on Weyerhaeuser’s sales mix. Overall, domestic prices in the West fell moderately as a result of lower lumber prices,declined due to compressed mill margins, but this was partially offset by continued constraints in log supply. In the South, delivered sawlog prices decreased by 2.90.3 percent in firstthird quarter 2023 compared to fourthsecond quarter 20222023 and declined 0.82.0 percent from firstthird quarter 2022 as reported by Timber Mart-South, as log and haul capacity constraints eased somewhat.TimberMart-South. Favorable harvest conditions later in the quarter provided sufficient supply to meet mills' needs.

Currency exchange rates, available supply from other countries and trade policy affect our export businesses. During firstthird quarter 2023, end use demand softened in export markets, partially offset by continued disruptions in global log and lumber supply. In Japan, total housing starts increased 3.0decreased 3.7 percent year to date through FebruaryAugust compared to the same period in 2022, while the key Post and Beam segment saw a 5.85.7 percent decrease. An increase in lumberLumber imports to Japan from Europe placed downward pressure on market conditions. China demand has improved from low levels late in 2022 but remains subdued due to general economic conditions. However, constrainedconditions and steady supply of logs from other countries, particularly Russia, supported demandNew Zealand and rough lumber from U.S. producers.Russia.

Interest rates affect our business primarily through their impact on mortgage rates and housing affordability, their general impact on the economy and their influence on our capital management activities. Actions by the U.S. Federal Reserve, the overall condition of the economy and fluctuations in financial markets are all factors that influence long-term interest rates. 30-year mortgage rates, which are correlated with long-term interest rates, decreasedincreased from 6.46.7 percent at the end of fourthsecond quarter 20222023 to 6.37.3 percent at the end of firstthird quarter 2023. While2023, according to economic data from the St. Louis Federal Reserve. Many builders have been able to offset higher mortgage rates fell over the quarterthrough discounts, mortgage rate buydowns and modifying product offerings such as home sizes and finishes. Higher rates have also locked-in many existing homeowners from a highselling, reducing inventories of over 7 percent in November 2022, the rapid increase in mortgage rates since the end of 2021existing homes for sale which has had a negative impact on home affordability and reducedled to increased demand for homebuying. A modest reduction in rates in January and February resulted in a moderate increase in buyer interest and sales for bothavailable new and existing homes.

Increased inflation affects the cost of our operations across each of our business segments, including costs for raw materials, transportation, energy and labor. The Consumer Price Index increased 5.03.7 percent year over year in MarchSeptember 2023, primarily due to demand and supply for goods and services, fluctuationswhich is markedly down from its peak of over 9.0 percent in labor markets, and monetary policy set by the U.S. Federal Reserve.June 2022. While we can offset some of the impacts of inflation through our sales activities, our operational excellence initiatives and our procurement practices, not all of the costs associated with inflation can be fully mitigated or passed on to the consumer.

The condition of the labor market affects all of our businesses as it relates to our ability to attract and retain employees and contractors. The unemployment rate of 3.53.8 percent in MarchSeptember 2023 remained near historically low levels and was unchangedincreased 0.2 percent from the end of fourthsecond quarter 2022. Labor force participation hasincreased to 62.6 percent in March 2023, from 62.4 percent in March 2022, but this remains below pre-pandemic levels of over 63 percent.

15


 

2023. Labor force participation has increased to 62.8 percent in September 2023, from 62.3 percent in September 2022, approaching pre-pandemic levels.

Governments and businesses across the globe are taking action on climate change and are making significant commitments towards decarbonizing operations and reducing greenhouse gas emissions to net zero. Achieving these commitments will require governments and companies to take major steps to modify operations, invest in low-carbon activities and purchase offsets to reduce environmental impacts. We believe we are uniquely positioned to help entities achieve these commitments through natural climate solutions, including forest carbon sequestration, carbon capture and storage and renewable energy activities.

 

CONSOLIDATED RESULTS

 

How We Did FirstThird Quarter 2023 and Year-to-Date 2023

 

 

QUARTER ENDED

 

 

AMOUNT OF
CHANGE

 

 

QUARTER ENDED

 

 

AMOUNT OF
CHANGE

 

 

YEAR-TO-DATE ENDED

 

 

AMOUNT OF
CHANGE

 

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES

 

MARCH 2023

 

 

MARCH 2022

 

 

2023 VS.
2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

2023 VS.
2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

2023 VS.
2022

 

Net sales

 

$

1,881

 

 

$

3,112

 

 

$

(1,231

)

 

$

2,022

 

 

$

2,276

 

 

$

(254

)

 

$

5,900

 

 

$

8,361

 

 

$

(2,461

)

Costs of sales

 

$

1,512

 

 

$

1,647

 

 

$

(135

)

 

$

1,520

 

 

$

1,694

 

 

$

(174

)

 

$

4,560

 

 

$

5,130

 

 

$

(570

)

Operating income

 

$

236

 

 

$

1,344

 

 

$

(1,108

)

 

$

353

 

 

$

457

 

 

$

(104

)

 

$

908

 

 

$

2,848

 

 

$

(1,940

)

Net earnings

 

$

151

 

 

$

771

 

 

$

(620

)

 

$

239

 

 

$

310

 

 

$

(71

)

 

$

620

 

 

$

1,869

 

 

$

(1,249

)

Earnings per share, basic and diluted

 

$

0.21

 

 

$

1.03

 

 

$

(0.82

)

 

$

0.33

 

 

$

0.42

 

 

$

(0.09

)

 

$

0.85

 

 

$

2.51

 

 

$

(1.66

)

 

Comparing FirstThird Quarter 2023 with FirstThird Quarter 2022

 

Net sales

 

Net sales decreased $1,231$254 million – 4011 percent – primarily due to a $1,201$230 million decrease in Wood Products sales to unaffiliated customers attributable to decreased sales volumes and sales realizations for structural lumber, oriented strand board and softwood plywood, as well as decreased sales volumes for complementary building products, engineered I-joists, engineered solid section and medium density fiberboard.across most product lines.

 

Costs of sales

 

Costs of sales decreased $135$174 million – 810 percent – primarily due to a $117 million decrease in Wood Products attributable to decreased sales volumes for complementary building products, engineered I-joists, engineered solid section and medium density fiberboard.across most product lines within our Wood Products segment, as well as decreased freight costs.

 

Operating income

 

Operating income decreased $1,108$104 million – 8223 percent – primarily due to a $1,096an $80 million decrease in consolidated gross margin, (see discussion of components above).as discussed above.

 

Net earnings

 

Net earnings decreased $620$71 million – 8023 percent – primarily due to the $1,108$104 million decrease in operating income, as discussed above.

 

This decrease in operating income was partially offset by a $23 million decrease in income tax expense (refer toIncome Taxes).

Comparing Year-to-Date 2023 with Year-to-Date 2022

Net sales

Net sales decreased $2,461 million – 29 percent – primarily due to a $2,272 million decrease in Wood Products sales to unaffiliated customers attributable to decreased sales realizations and sales volumes across most product lines, as well as a $162 million decrease in Timberlands sales to unaffiliated customers attributable to decreased sales realizations in the Western region.

Costs of sales

Costs of sales decreased $570 million – 11 percent – primarily due to decreased sales volumes across most product lines within our Wood Products segment, as well as decreased freight costs and Western third-party log purchases.

Operating income

Operating income decreased $1,940 million – 68 percent – primarily due to a $1,891 million decrease in consolidated gross margin, as discussed above.

Net earnings

Net earnings decreased $1,249 million – 67 percent – primarily due to the $1,940 million decrease in operating income, as discussed above.

This decrease was partially offset by a $369 million decrease in income tax expense (refer to Income Taxes), as well as a $276 million pretax charge ($207 million after-tax) related to the early extinguishment of debt in first quarter 2022 (refer to Note 8: Long-Term Debt and Line of Credit), as well as a $187 million decrease in income tax expense (refer to Income Taxes).

16


 

TIMBERLANDS

 

How We Did FirstThird Quarter 2023 and Year-to-Date 2023

 

 

QUARTER ENDED

 

 

AMOUNT OF
CHANGE

 

 

QUARTER ENDED

 

 

AMOUNT OF
CHANGE

 

 

YEAR-TO-DATE ENDED

 

 

AMOUNT OF
CHANGE

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2023

 

 

MARCH 2022

 

 

2023 VS.
2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

2023 VS.
2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

2023 VS.
2022

 

Net sales to unaffiliated customers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Delivered logs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

229

 

 

$

259

 

 

$

(30

)

 

$

176

 

 

$

224

 

 

$

(48

)

 

$

611

 

 

$

791

 

 

$

(180

)

South

 

 

168

 

 

 

154

 

 

 

14

 

 

 

155

 

 

 

166

 

 

 

(11

)

 

 

485

 

 

 

480

 

 

 

5

 

North

 

 

17

 

 

 

15

 

 

 

2

 

 

 

11

 

 

 

15

 

 

 

(4

)

 

 

35

 

 

 

40

 

 

 

(5

)

Subtotal delivered logs sales

 

 

414

 

 

 

428

 

 

 

(14

)

 

 

342

 

 

 

405

 

 

 

(63

)

 

 

1,131

 

 

 

1,311

 

 

 

(180

)

Stumpage and pay-as-cut timber

 

 

16

 

 

 

9

 

 

 

7

 

 

 

12

 

 

 

10

 

 

 

2

 

 

 

43

 

 

 

30

 

 

 

13

 

Recreational and other lease revenue

 

 

18

 

 

 

17

 

 

 

1

 

 

 

19

 

 

 

18

 

 

 

1

 

 

 

54

 

 

 

51

 

 

 

3

 

Other(1)

 

 

14

 

 

 

11

 

 

 

3

 

 

 

7

 

 

 

8

 

 

 

(1

)

 

 

31

 

 

 

29

 

 

 

2

 

Subtotal net sales to unaffiliated customers

 

 

462

 

 

 

465

 

 

 

(3

)

 

 

380

 

 

 

441

 

 

 

(61

)

 

 

1,259

 

 

 

1,421

 

 

 

(162

)

Intersegment sales

 

 

142

 

 

 

161

 

 

 

(19

)

 

 

141

 

 

 

133

 

 

 

8

 

 

 

433

 

 

 

450

 

 

 

(17

)

Total sales

 

$

604

 

 

$

626

 

 

$

(22

)

 

$

521

 

 

$

574

 

 

$

(53

)

 

$

1,692

 

 

$

1,871

 

 

$

(179

)

Costs of sales

 

$

461

 

 

$

423

 

 

$

38

 

 

$

417

 

 

$

442

 

 

$

(25

)

 

$

1,317

 

 

$

1,360

 

 

$

(43

)

Operating income and Net contribution to earnings

 

$

120

 

 

$

182

 

 

$

(62

)

 

$

78

 

 

$

107

 

 

$

(29

)

 

$

302

 

 

$

442

 

 

$

(140

)

(1)
Other Timberlands sales include sales of seeds and seedlings from our nursery operations as well as wood chips.

 

Comparing FirstThird Quarter 2023 with FirstThird Quarter 2022

 

Net sales to unaffiliated customers

 

Net sales to unaffiliated customers decreased $3$61 million – 114 percent – primarily due to a $30$48 million decrease in Western log sales, attributable to a 1525 percent decrease in sales realizations, partially offset by a 4 percent increase in sales volumes. Thisas well as an $11 million decrease was partially offset by a $14 million increase in Southern log sales, attributable to a 64 percent increasedecrease in sales volumesrealizations and a 3 percent increasedecrease in sales realizations, as well as a $7 million increase in stumpage and pay-as-cut timber sales attributable to increased log volumes.

 

Intersegment sales

 

Intersegment sales decreased $19increased $8 million – 126 percent – primarily due to a 914 percent increase in sales volumes, partially offset by a 7 percent decrease in sales realizations, as well as a 3 percent decrease in sales volumes.realizations.

 

Costs of sales

 

Costs of sales increased $38decreased $25 million – 96 percent – primarily due to decreased Western third-party log purchases and decreased Southern log sales volumes, partially offset by increased logging and hauling costs as well asand increased Western log sales volumes, as discussed above.volumes.

 

Operating income and Net contribution to earnings

 

Operating income and net contribution to earnings decreased $62$29 million – 3427 percent – primarily due to the change in the components of gross margin, as discussed above.

 

Comparing Year-to-Date 2023 with Year-to-Date 2022

Net sales to unaffiliated customers

Net sales to unaffiliated customers decreased $162 million – 11 percent – primarily due to a $180 million decrease in Western log sales, primarily attributable to a 23 percent decrease in sales realizations, partially offset by a $13 million increase in stumpage and pay-as-cut timber sales.

Intersegment sales

Intersegment sales decreased $17 million – 4 percent – primarily due to a 9 percent decrease in sales realizations, partially offset by a 5 percent increase in sales volumes.

17


Costs of sales

Costs of sales decreased $43 million – 3 percent – primarily due to decreased Western third-party log purchases, partially offset by increased logging and hauling costs and increased log sales volumes.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings decreased $140 million – 32 percent – primarily due to the change in the components of gross margin, as discussed above.

 

Third-Party Log Sales Volumes and Fee Harvest Volumes

 

 

QUARTER ENDED

 

 

AMOUNT OF
CHANGE

 

 

QUARTER ENDED

 

 

AMOUNT OF
CHANGE

 

 

YEAR-TO-DATE ENDED

 

 

AMOUNT OF
CHANGE

 

VOLUMES IN THOUSANDS

 

MARCH 2023

 

 

MARCH 2022

 

 

2023 VS.
2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

2023 VS.
2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

2023 VS.
2022

 

Third-party log sales – tons:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West(1)

 

 

1,674

 

 

 

1,604

 

 

 

70

 

 

 

1,479

 

 

 

1,411

 

 

 

68

 

 

 

4,814

 

 

 

4,793

 

 

 

21

 

South

 

 

4,386

 

 

 

4,135

 

 

 

251

 

 

 

4,180

 

 

 

4,310

 

 

 

(130

)

 

 

12,907

 

 

 

12,612

 

 

 

295

 

North

 

 

204

 

 

 

210

 

 

 

(6

)

 

 

148

 

 

 

177

 

 

 

(29

)

 

 

450

 

 

 

505

 

 

 

(55

)

Total

 

 

6,264

 

 

 

5,949

 

 

 

315

 

 

 

5,807

 

 

 

5,898

 

 

 

(91

)

 

 

18,171

 

 

 

17,910

 

 

 

261

 

Fee harvest volumes – tons:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West(1)

 

 

2,245

 

 

 

2,240

 

 

 

5

 

 

 

2,137

 

 

 

1,760

 

 

 

377

 

 

 

6,674

 

 

 

6,085

 

 

 

589

 

South

 

 

6,432

 

 

 

5,842

 

 

 

590

 

 

 

6,146

 

 

 

6,112

 

 

 

34

 

 

 

19,008

 

 

 

18,113

 

 

 

895

 

North

 

 

285

 

 

 

278

 

 

 

7

 

 

 

223

 

 

 

245

 

 

 

(22

)

 

 

683

 

 

 

703

 

 

 

(20

)

Total

 

 

8,962

 

 

 

8,360

 

 

 

602

 

 

 

8,506

 

 

 

8,117

 

 

 

389

 

 

 

26,365

 

 

 

24,901

 

 

 

1,464

 

(1)
Western logs are primarily transacted in thousand board feet (MBF) but are converted to ton equivalents for external reporting purposes.

 

REAL ESTATE, ENERGY AND NATURAL RESOURCES

 

How We Did FirstThird Quarter 2023 and Year-to-Date 2023

 

 

QUARTER ENDED

 

 

AMOUNT OF
CHANGE

 

 

QUARTER ENDED

 

 

AMOUNT OF
CHANGE

 

 

YEAR-TO-DATE ENDED

 

 

AMOUNT OF
CHANGE

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2023

 

 

MARCH 2022

 

 

2023 VS.
2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

2023 VS.
2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

2023 VS.
2022

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate

 

$

72

 

 

$

97

 

 

$

(25

)

 

$

79

 

 

$

30

 

 

$

49

 

 

$

198

 

 

$

217

 

 

$

(19

)

Energy and natural resources

 

 

29

 

 

 

31

 

 

 

(2

)

 

 

26

 

 

 

38

 

 

 

(12

)

 

 

88

 

 

 

96

 

 

 

(8

)

Total

 

$

101

 

 

$

128

 

 

$

(27

)

 

$

105

 

 

$

68

 

 

$

37

 

 

$

286

 

 

$

313

 

 

$

(27

)

Costs of sales

 

$

41

 

 

$

41

 

 

$

 

 

$

43

 

 

$

14

 

 

$

29

 

 

$

105

 

 

$

100

 

 

$

5

 

Operating income and Net contribution to earnings

 

$

53

 

 

$

81

 

 

$

(28

)

 

$

56

 

 

$

48

 

 

$

8

 

 

$

161

 

 

$

194

 

 

$

(33

)

 

The volume of real estate sales is a function of many factors, including the general state of the economy, demand in local real estate markets, the ability of buyers to obtain financing, the number of competing properties listed for sale, the seasonal nature of sales, the plans of adjacent landowners, our expectation of future price appreciation, the timing of harvesting activities, and the availability of government and not-for-profit funding. In any period, the average sales price per acre will vary based on the location and physical characteristics of parcels sold.

 

Comparing FirstThird Quarter 2023 with FirstThird Quarter 2022

 

Net sales

 

Net sales decreased $27increased $37 million – 2154 percent – primarily due to a decreasean increase in acres sold, as well aspartially offset by a decrease in the average price per acre sold.

 

Costs of sales

 

Costs of sales remained consistentincreased $29 million – 207 percent – primarily due to an increase in acres sold.

18


Operating income and Net contribution to earnings

Operating income and net contribution to earnings increased $8 million – 17 percent – primarily due to the mixchange in the components of acresgross margin, as discussed above.

Comparing Year-to-Date 2023 with Year-to-Date 2022

Net sales

Net sales decreased $27 million – 9 percent – primarily due to decreases in average price per acre sold and royalty income from our Energy and Natural Resources business.

Costs of sales

Costs of sales increased $5 million – 5 percent – primarily due to an increase in basis per acre sold.

 

Operating income and Net contribution to earnings

 

Operating income and net contribution to earnings decreased $28$33 million – 3517 percent – primarily due to the change in the components of gross margin, as discussed above.

 

REAL ESTATE SALES STATISTICS

 

 

 

QUARTER ENDED

 

 

AMOUNT OF
CHANGE

 

 

 

MARCH 2023

 

 

MARCH 2022

 

 

2023 VS.
2022

 

Acres sold

 

 

20,753

 

 

 

24,126

 

 

 

(3,373

)

Average price per acre

 

$

3,241

 

 

$

3,785

 

 

$

(544

)

18


 

 

QUARTER ENDED

 

 

AMOUNT OF
CHANGE

 

 

YEAR-TO-DATE ENDED

 

 

AMOUNT OF
CHANGE

 

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

2023 VS.
2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

2023 VS.
2022

 

Acres sold

 

 

25,721

 

 

 

5,014

 

 

 

20,707

 

 

 

55,755

 

 

 

56,046

 

 

 

(291

)

Average price per acre

 

$

3,033

 

 

$

5,046

 

 

$

(2,013

)

 

$

3,403

 

 

$

3,624

 

 

$

(221

)

 

WOOD PRODUCTS

 

How We Did FirstThird Quarter 2023 and Year-to-Date 2023

 

 

QUARTER ENDED

 

 

AMOUNT OF
CHANGE

 

 

QUARTER ENDED

 

 

AMOUNT OF
CHANGE

 

 

YEAR-TO-DATE ENDED

 

 

AMOUNT OF
CHANGE

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2023

 

 

MARCH 2022

 

 

2023 VS.
2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

2023 VS.
2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

2023 VS.
2022

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Structural lumber

 

$

515

 

 

$

1,206

 

 

$

(691

)

 

$

570

 

 

$

676

 

 

$

(106

)

 

$

1,658

 

 

$

2,880

 

 

$

(1,222

)

Oriented strand board

 

 

208

 

 

 

564

 

 

 

(356

)

 

 

284

 

 

 

287

 

 

 

(3

)

 

 

707

 

 

 

1,348

 

 

 

(641

)

Engineered solid section

 

 

169

 

 

 

196

 

 

 

(27

)

 

 

216

 

 

 

233

 

 

 

(17

)

 

 

600

 

 

 

676

 

 

 

(76

)

Engineered I-joists

 

 

87

 

 

 

137

 

 

 

(50

)

 

 

122

 

 

 

166

 

 

 

(44

)

 

 

335

 

 

 

471

 

 

 

(136

)

Softwood plywood

 

 

41

 

 

 

58

 

 

 

(17

)

 

 

42

 

 

 

47

 

 

 

(5

)

 

 

127

 

 

 

158

 

 

 

(31

)

Medium density fiberboard

 

 

38

 

 

 

48

 

 

 

(10

)

 

 

40

 

 

 

50

 

 

 

(10

)

 

 

120

 

 

 

151

 

 

 

(31

)

Complementary building products

 

 

163

 

 

 

215

 

 

 

(52

)

 

 

184

 

 

 

222

 

 

 

(38

)

 

 

551

 

 

 

676

 

 

 

(125

)

Other products produced(1)

 

 

97

 

 

 

95

 

 

 

2

 

 

 

79

 

 

 

86

 

 

 

(7

)

 

 

257

 

 

 

267

 

 

 

(10

)

Total

 

$

1,318

 

 

$

2,519

 

 

$

(1,201

)

 

$

1,537

 

 

$

1,767

 

 

$

(230

)

 

$

4,355

 

 

$

6,627

 

 

$

(2,272

)

Costs of sales

 

$

1,159

 

 

$

1,276

 

 

$

(117

)

 

$

1,195

 

 

$

1,360

 

 

$

(165

)

 

$

3,572

 

 

$

4,050

 

 

$

(478

)

Operating income and Net contribution to earnings

 

$

95

 

 

$

1,182

 

 

$

(1,087

)

 

$

277

 

 

$

344

 

 

$

(67

)

 

$

590

 

 

$

2,389

 

 

$

(1,799

)

(1)
Other products produced sales include wood chips, other byproducts and third-party residual log sales from our Canadian Forestlands operations.

 

Comparing FirstThird Quarter 2023 with FirstThird Quarter 2022

 

Net sales

Net sales decreased $1,201$230 million – 4813 percent – due to:

a $691$106 million decrease in structural lumber sales attributable to a 5713 percent decrease in sales realizations, as well as a 13 percent decrease in sales volumes;
a $356$44 million decrease in oriented strand boardengineered I-joists sales attributable to a 6619 percent decrease in sales realizations, partially offset byas well as an 811 percent increasedecrease in sales volumes;
a $52$38 million decrease in complementary building products sales attributable to decreased sales volumes;volumes across most products;

19


a $50 million decrease in engineered I-joists sales attributable to a 41 percent decrease in sales volumes, partially offset by a 7 percent increase in sales realizations;
a $27$17 million decrease in engineered solid section sales attributable to an 18 percent decrease in sales volumes, partially offset by a 6 percent increase in sales realizations;
a $17 million decrease in softwood plywood sales attributable to a 3712 percent decrease in sales realizations, partially offset by an 11a 5 percent increase in sales volumes andvolumes;
a $10 million decrease in medium density fiberboard sales attributable to an 18 percent decrease in sales volumes, as well as a 343 percent decrease in sales realizations;
a $7 million decrease in other products produced sales attributable to decreased sales volumes for wood chips;
a $5 million decrease in softwood plywood sales attributable to a 23 percent decrease in sales realizations, partially offset by a 16 percent increase in sales volumes and
a $3 million decrease in oriented strand board sales attributable to a 4 percent decrease in sales volumes, partially offset by a 214 percent increase in sales realizations.

 

Costs of sales

Costs of sales decreased $117$165 million – 912 percent – primarily due to decreased sales volumes for complementary building products, engineered I-joists, engineered solid section and medium density fiberboard,across most product lines, as discussed above.well as decreased freight costs.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings decreased $1,087$67 million – 9219 percent – primarily due to the change in the components of gross margin, as discussed above.

 

19Comparing Year-to-Date 2023 with Year-to-Date 2022


Net sales

Net sales decreased $2,272 million – 34 percent – due to:

a $1,222 million decrease in structural lumber sales attributable to a 40 percent decrease in sales realizations, as well as a 4 percent decrease in sales volumes;
a $641 million decrease in oriented strand board sales attributable to a 48 percent decrease in sales realizations;
a $136 million decrease in engineered I-joist sales attributable to a 20 percent decrease in sales volumes, as well as an 11 percent decrease in sales realizations;
a $125 million decrease in complementary building products sales attributable to decreased sales volumes and sales realizations across most products;
a $76 million decrease in engineered solid section sales attributable to a 6 percent decrease in sales volumes, as well as a 5 percent decrease in sales realizations;
a $31 million decrease in medium density fiberboard sales attributable to a 28 percent decrease in sales volumes, partially offset by an 11 percent increase in sales realizations;
a $31 million decrease in softwood plywood sales attributable to a 33 percent decrease in sales realizations, partially offset by a 20 percent increase in sales volumes and
a $10 million decrease in other products produced attributable to decreased sales volumes.

Costs of sales

Costs of sales decreased $478 million – 12 percent – primarily due to decreased sales volumes across most product lines, as well as decreased freight costs.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings decreased $1,799 million – 75 percent – primarily due to the change in the components of gross margin, as discussed above.

 

Third-Party Sales Volumes

 

 

QUARTER ENDED

 

 

AMOUNT OF
CHANGE

 

 

QUARTER ENDED

 

 

AMOUNT OF
CHANGE

 

 

YEAR-TO-DATE ENDED

 

 

AMOUNT OF
CHANGE

 

VOLUMES IN MILLIONS(1)

 

MARCH 2023

 

 

MARCH 2022

 

 

2023 VS.
2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

2023 VS.
2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

2023 VS.
2022

 

Structural lumber – board feet

 

 

1,144

 

 

 

1,157

 

 

 

(13

)

 

 

1,184

 

 

 

1,216

 

 

 

(32

)

 

 

3,524

 

 

 

3,662

 

 

 

(138

)

Oriented strand board – square feet (3/8”)

 

 

773

 

 

 

717

 

 

 

56

 

 

 

683

 

 

 

715

 

 

 

(32

)

 

 

2,176

 

 

 

2,167

 

 

 

9

 

Engineered solid section – cubic feet

 

 

4.7

 

 

 

5.7

 

 

 

(1.0

)

 

 

6.2

 

 

 

5.9

 

 

 

0.3

 

 

 

16.9

 

 

 

18.0

 

 

 

(1.1

)

Engineered I-joists – lineal feet

 

 

27

 

 

 

46

 

 

 

(19

)

 

 

42

 

 

 

47

 

 

 

(5

)

 

 

113

 

 

 

142

 

 

 

(29

)

Softwood plywood – square feet (3/8”)

 

 

83

 

 

 

75

 

 

 

8

 

 

 

86

 

 

 

74

 

 

 

12

 

 

 

263

 

 

 

219

 

 

 

44

 

Medium density fiberboard – square feet (3/4”)

 

 

29

 

 

 

44

 

 

 

(15

)

 

 

33

 

 

 

40

 

 

 

(7

)

 

 

93

 

 

 

129

 

 

 

(36

)

(1)
Sales volumes include sales of internally produced products and products purchased for resale primarily through our distribution business.

20


 

PRODUCTION AND OUTSIDE PURCHASE VOLUMES

 

Outside purchase volumes are primarily purchased for resale through our distribution business. Production volumes are produced for sale through our own sales organizations and through our distribution business. Production of oriented strand board and engineered solid section are also used to manufacture engineered I-joists.

 

 

QUARTER ENDED

 

 

AMOUNT OF
CHANGE

 

 

QUARTER ENDED

 

 

AMOUNT OF
CHANGE

 

 

YEAR-TO-DATE ENDED

 

 

AMOUNT OF
CHANGE

 

VOLUMES IN MILLIONS

 

MARCH 2023

 

 

MARCH 2022

 

 

2023 VS.
2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

2023 VS.
2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

2023 VS.
2022

 

Structural lumber – board feet:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production

 

 

1,143

 

 

 

1,203

 

 

 

(60

)

 

 

1,174

 

 

 

1,140

 

 

 

34

 

 

 

3,481

 

 

 

3,575

 

 

 

(94

)

Outside purchase

 

 

39

 

 

 

42

 

 

 

(3

)

 

 

38

 

 

 

35

 

 

 

3

 

 

 

113

 

 

 

120

 

 

 

(7

)

Total

 

 

1,182

 

 

 

1,245

 

 

 

(63

)

 

 

1,212

 

 

 

1,175

 

 

 

37

 

 

 

3,594

 

 

 

3,695

 

 

 

(101

)

Oriented strand board – square feet (3/8”):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production

 

 

761

 

 

 

739

 

 

 

22

 

 

 

724

 

 

 

735

 

 

 

(11

)

 

 

2,212

 

 

 

2,232

 

 

 

(20

)

Outside purchase

 

 

17

 

 

 

70

 

 

 

(53

)

 

 

19

 

 

 

18

 

 

 

1

 

 

 

55

 

 

 

154

 

 

 

(99

)

Total

 

 

778

 

 

 

809

 

 

 

(31

)

 

 

743

 

 

 

753

 

 

 

(10

)

 

 

2,267

 

 

 

2,386

 

 

 

(119

)

Engineered solid section – cubic feet:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production

 

 

4.6

 

 

 

5.7

 

 

 

(1.1

)

 

 

5.6

 

 

 

6.0

 

 

 

(0.4

)

 

 

16.1

 

 

 

18.1

 

 

 

(2.0

)

Outside purchase

 

 

2.0

 

 

 

0.2

 

 

 

1.8

 

 

 

3.7

 

 

 

3.6

 

 

 

0.1

 

 

 

9.7

 

 

 

4.1

 

 

 

5.6

 

Total

 

 

6.6

 

 

 

5.9

 

 

 

0.7

 

 

 

9.3

 

 

 

9.6

 

 

 

(0.3

)

 

 

25.8

 

 

 

22.2

 

 

 

3.6

 

Engineered I-joists – lineal feet:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production

 

 

25

 

 

 

44

 

 

 

(19

)

 

 

42

 

 

 

47

 

 

 

(5

)

 

 

105

 

 

 

141

 

 

 

(36

)

Outside purchase

 

 

 

 

 

2

 

 

 

(2

)

 

 

2

 

 

 

1

 

 

 

1

 

 

 

2

 

 

 

6

 

 

 

(4

)

Total

 

 

25

 

 

 

46

 

 

 

(21

)

 

 

44

 

 

 

48

 

 

 

(4

)

 

 

107

 

 

 

147

 

 

 

(40

)

Softwood plywood – square feet (3/8”):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production

 

 

74

 

 

 

66

 

 

 

8

 

 

 

77

 

 

 

64

 

 

 

13

 

 

 

235

 

 

 

197

 

 

 

38

 

Outside purchase

 

 

12

 

 

 

10

 

 

 

2

 

 

 

10

 

 

 

9

 

 

 

1

 

 

 

33

 

 

 

27

 

 

 

6

 

Total

 

 

86

 

 

 

76

 

 

 

10

 

 

 

87

 

 

 

73

 

 

 

14

 

 

 

268

 

 

 

224

 

 

 

44

 

Medium density fiberboard – square feet (3/4"):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production

 

 

34

 

 

 

44

 

 

 

(10

)

 

 

34

 

 

 

38

 

 

 

(4

)

 

 

101

 

 

 

130

 

 

 

(29

)

Total

 

 

34

 

 

 

44

 

 

 

(10

)

 

 

34

 

 

 

38

 

 

 

(4

)

 

 

101

 

 

 

130

 

 

 

(29

)

 

2021


 

UNALLOCATED ITEMS

 

Unallocated items are gains or charges not related to, or allocated to, an individual operating segment. They include all or a portion of items such as share-based compensation, pension and post-employment costs, elimination of intersegment profit in inventory and LIFO, foreign exchange transaction gains and losses, interest income and other as well as legacy obligations.other.

 

Net Charge to Earnings – Unallocated Items

 

 

QUARTER ENDED

 

 

AMOUNT OF
CHANGE

 

 

QUARTER ENDED

 

 

AMOUNT OF
CHANGE

 

 

YEAR-TO-DATE ENDED

 

 

AMOUNT OF
CHANGE

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2023

 

 

MARCH 2022

 

 

2023 VS.
2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

2023 VS.
2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

2023 VS.
2022

 

Unallocated corporate function and variable compensation expense

 

$

(27

)

 

$

(31

)

 

$

4

 

 

$

(33

)

 

$

(36

)

 

$

3

 

 

$

(92

)

 

$

(103

)

 

$

11

 

Liability classified share-based compensation

 

 

 

 

 

1

 

 

 

(1

)

 

 

2

 

 

 

2

 

 

 

 

 

 

 

 

 

5

 

 

 

(5

)

Foreign exchange loss

 

 

(1

)

 

 

 

 

 

(1

)

Foreign exchange gain

 

 

 

 

 

9

 

 

 

(9

)

 

 

1

 

 

 

12

 

 

 

(11

)

Elimination of intersegment profit in inventory and LIFO

 

 

9

 

 

 

(59

)

 

 

68

 

 

 

(4

)

 

 

2

 

 

 

(6

)

 

 

8

 

 

 

(39

)

 

 

47

 

Other

 

 

(13

)

 

 

(12

)

 

 

(1

)

 

 

(23

)

 

 

(19

)

 

 

(4

)

 

 

(62

)

 

 

(52

)

 

 

(10

)

Operating loss

 

 

(32

)

 

 

(101

)

 

 

69

 

 

 

(58

)

 

 

(42

)

 

 

(16

)

 

 

(145

)

 

 

(177

)

 

 

32

 

Non-operating pension and other post-employment benefit costs

 

 

(9

)

 

 

(15

)

 

 

6

 

 

 

(12

)

 

 

(12

)

 

 

 

 

 

(33

)

 

 

(38

)

 

 

5

 

Interest income and other

 

 

12

 

 

 

(1

)

 

 

13

 

 

 

24

 

 

 

9

 

 

 

15

 

 

 

54

 

 

 

9

 

 

 

45

 

Net charge to earnings

 

$

(29

)

 

$

(117

)

 

$

88

 

 

$

(46

)

 

$

(45

)

 

$

(1

)

 

$

(124

)

 

$

(206

)

 

$

82

 

 

Comparing FirstThird Quarter 2023 with FirstThird Quarter 2022

 

Net charge to earnings decreased $88 million – 75 percent –remained consistent primarily due to a $68 million decrease in elimination of intersegment profit in inventory and LIFO and a $13$15 million increase in interest income and other due to an increase in the interest rate on our cash and short-term investment accounts.accounts, offset by a $9 million decrease in foreign exchange gain and a $6 million increase in elimination of intersegment profit in inventory and LIFO.

Comparing Year-to-Date 2023 with Year-to-Date 2022

Net charge to earnings decreased $82 million – 40 percent – primarily due to:

a $47 million decrease in elimination of intersegment profit in inventory and LIFO;
a $45 million increase in interest income and other due to an increase in the interest rate on our cash and short-term investment accounts and
an $11 million decrease in unallocated corporate function and variable compensation expense.

These changes were partially offset by an $11 million decrease in foreign exchange gain, as well as a $10 million increase in other primarily due to an increase in environmental remediation charges.

INTEREST EXPENSE

 

Our interest expense, net of capitalized interest, was:

$6672 million for firstthird quarter 2023 and $208 million year-to-date 2023;
$7267 million for firstthird quarter 2022 and $204 million year-to-date 2022.

 

Interest expense decreasedincreased by $6$5 million compared to firstthird quarter 2022 and increased by $4 million compared to year-to-date 2022 primarily due to a seriesthe May 2023 issuance of transactions in March 2022debt securities that loweredincreased our weighted average interest rate and extended our weighted average maturity.outstanding debt.

 

Refer to Note 8: Long-Term Debt and Line of Credit for further information.

INCOME TAXES

 

Our provision for income taxes was:

a $22$54 million expense for firstthird quarter 2023 and $101 million year-to-date 2023;
a $209$77 million expense for firstthird quarter 2022 and $470 million year-to-date 2022.

Our provision for income taxes is primarily driven by earnings generated by our TRSs. Income tax expense decreased by $187$369 million compared to first quarteryear-to-date 2022 primarily due to a decrease in our TRS earnings in first quarter 2023, as well as a decrease in our estimated annual effective tax rate.

 

Refer to Note 14: Income Taxes for further information.

22


LIQUIDITY AND CAPITAL RESOURCES

 

We are committed to maintaining an appropriate capital structure that provides flexibility and enables us to protect the interests of our shareholders and meet our obligations to our lenders, while also maintaining access to all major financial markets. As of March 31,September 30, 2023, we had approximately $800 million$1.2 billion in cash and cash equivalents, $668 million in short-term investments and $1.5 billion of availability on our line of credit, which expires in March 2028. We believe we have sufficient liquidity to meet our cash requirements for the foreseeable future.

 

CASH FROM OPERATIONS

 

Consolidated net cash from operations was:

$1261,145 million for first quarteryear-to-date 2023 and
$9572,665 million for first quarteryear-to-date 2022.

21


 

Net cash from operations decreased $831$1,520 million primarily due to decreased cash inflows from our business operations. This change was partially offset by a $79$406 million decrease in cash paid for income taxes, as well as a $21 million decrease in cash usedpaid for interest payments.interest.

 

CASH FROM INVESTING ACTIVITIES

 

Consolidated net cash from investing activities was:

$(69)(982) million for first quarteryear-to-date 2023 and
$(87)(530) million for first quarteryear-to-date 2022.

 

Net cash from investing activities increased $18decreased $452 million primarily due to an $18a $664 million increase in cash paid for short-term investments. This change was partially offset by a $216 million decrease in cash paid for acquisition of timberlands.

 

Summary of Capital Spending by Business Segment

 

 

QUARTER ENDED

 

 

YEAR-TO-DATE ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2023

 

 

MARCH 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

Timberlands

 

$

26

 

 

$

30

 

 

$

74

 

 

$

75

 

Wood Products

 

 

43

 

 

 

39

 

 

 

168

 

 

 

163

 

Unallocated Items

 

 

2

 

 

 

1

 

 

 

9

 

 

 

7

 

Total

 

$

71

 

 

$

70

 

 

$

251

 

 

$

245

 

 

We anticipate our capital expenditures for 2023 to be approximately $440 million. The amount we spend on capital expenditures could change.

 

CASH FROM FINANCING ACTIVITIES

 

Consolidated net cash from financing activities was:

$(841)(571) million for first quarteryear-to-date 2023 and
$(1,664)(2,214) million for first quarteryear-to-date 2022.

 

Net cash from financing activities increased $823$1,643 million, primarily due to:

a $419 million decrease in cash used for payments of dividends;
a $322$947 million decrease in net cash used for payments on long-term debtdebt;
a $409 million decrease in cash used for payments of dividends and
an $84a $293 million decrease in cash used for repurchases of common stock.

 

Line of Credit

 

In March 2023, we entered into a new $1.5 billion five-year senior unsecured revolving credit facility, which expires in March 2028 and replaced the existing facility which was set to expire in January 2025. Borrowings will bear interest at a floating rate based on either the adjusted term SOFR plus a spread or a mutually agreed upon base rate plus a spread. We had no outstanding borrowings on our $1.5 billion five-year senior unsecured revolving credit facility as of March 31,September 30, 2023 or December 31, 2022.

 

Refer to Note 8: Long-Term Debt and Line of Credit for further information.

 

Long-Term Debt

In May 2023, we completed an offering of debt securities by issuing $750 million of 4.750 percent notes due in May 2026. The net proceeds after deducting the discount, underwriting fees and issuance costs were $743 million. Of these total net proceeds, $664 million was invested in short-term investments classified as held-to-maturity securities, which consist of a mixture of term deposits and Treasury bills.

In July 2023, we repaid $118 million of our 7.125 percent notes at maturity. We have $860 million of long-term debt scheduled to mature during fourth quarter 2023, and we anticipate the majority will be funded through cash on hand, including the proceeds from our short-term investments which also mature in the fourth quarter.

23


 

In March 2022, we completed a series of transactions that lowered our weighted average interest rate and extended our weighted average maturity by issuing $900 million in notes and using the net proceeds plus cash on hand to close cash tender offers for $931 million of principal in higher interest rate notes. We issued $450 million of 3.375 percent notes due in March 2033 and $450 million of 4.000 percent notes due in March 2052. The net proceeds after deducting the discount, underwriting fees and issuance costs were $444 million and $437 million, respectively. The net proceeds were used to retire $592 million of our 7.375 percent notes due in March 2032, $161 million of our 8.500 percent notes due in January 2025, $73 million of our 7.125 percent notes due in July 2023, $65 million of our 7.950 percent notes due in March 2025, and $40 million of our 7.850 percent notes due in July 2026. We paid holders an aggregate $1.2 billion in cash reflecting principal, premium to par and tender premium.

We have $118 million and $860 million of long-term debt scheduled to mature during third and fourth quarter 2023, respectively.

 

Refer to Note 8: Long-Term Debt and Line of Credit for further information.

 

Debt Covenants

 

As of March 31,September 30, 2023, Weyerhaeuser Company was in compliance with its debt covenants. There have been no significant changes to the debt covenants presented in our 2022 Annual Report on Form 10-K for our long-term debt instruments, and we expect to remain in compliance with our debt covenants for the foreseeable future.

 

Option Exercises

We received cash proceeds from the exercise of stock options of:

$2 million for first quarter 2023 and
$12 million for first quarter 2022.

22


Our average stock price was $31.52 and $39.65 for first quarter 2023 and 2022, respectively.

Dividend Payments

 

We paid cash dividends on common shares of:

$7991,076 million for first quarteryear-to-date 2023 and
$1,2181,485 million for first quarteryear-to-date 2022.

 

The decrease in dividends paid is primarily due to a supplemental dividend of $0.90 per share based on 2022 financial results for a total of $660 million paid in first quarter 2023 in comparison to a supplemental dividend of $1.45 per share based on 2021 financial results for a total of $1,084 million paid in first quarter 2022.

 

Share Repurchases

 

We repurchased 1,115,560757,510 common shares for approximately $35$25 million (including transaction fees) during firstthird quarter 2023 and we repurchased 3,197,6753,562,944 common shares for approximately $121$110 million (including transaction fees) during firstyear-to-date 2023 under the 2021 Repurchase Program. During third quarter 2022, we repurchased 4,234,838 common shares for approximately $145 million (including transaction fees) and we repurchased 11,217,300 common shares for approximately $404 million (including transaction fees) during year-to-date 2022 under the 2021 Repurchase Program. There were 27,13932,757 unsettled shares (approximately $1 million) as of March 31,September 30, 2023 and 223,548 unsettled shares (approximately $7 million) as of December 31, 2022. Refer to Note 4: Net Earnings Per Share and Share Repurchases for further information.

PERFORMANCE MEASURES

 

Adjusted EBITDA by Segment

 

We use Adjusted EBITDA as a key performance measure to evaluate the performance of the consolidated company and our business segments. This measure should not be considered in isolation from, and is not intended to represent an alternative to, our results reported in accordance with U.S. generally accepted accounting principles (U.S. GAAP). However, we believe Adjusted EBITDA provides meaningful supplemental information for investors about our operating performance, better facilitates period to period comparisons and is widely used by analysts, lenders, rating agencies and other interested parties. Our definition of Adjusted EBITDA may be different from similarly titled measures reported by other companies. Adjusted EBITDA, as we define it, is operating income adjusted for depreciation, depletion, amortization, basis of real estate sold and special items.

 

 

QUARTER ENDED

 

 

AMOUNT OF
CHANGE

 

 

QUARTER ENDED

 

 

AMOUNT OF
CHANGE

 

 

YEAR-TO-DATE ENDED

 

 

AMOUNT OF
CHANGE

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2023

 

 

MARCH 2022

 

 

2023 VS.
2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

2023 VS.
2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

2023 VS.
2022

 

Adjusted EBITDA by Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timberlands

 

$

188

 

 

$

247

 

 

$

(59

)

 

$

143

 

 

$

168

 

 

$

(25

)

 

$

503

 

 

$

634

 

 

$

(131

)

Real Estate & ENR

 

 

89

 

 

 

116

 

 

 

(27

)

 

 

94

 

 

 

60

 

 

 

34

 

 

 

253

 

 

 

283

 

 

 

(30

)

Wood Products

 

 

148

 

 

 

1,233

 

 

 

(1,085

)

 

 

328

 

 

 

395

 

 

 

(67

)

 

 

746

 

 

 

2,540

 

 

 

(1,794

)

 

 

425

 

 

 

1,596

 

 

 

(1,171

)

 

 

565

 

 

 

623

 

 

 

(58

)

 

 

1,502

 

 

 

3,457

 

 

 

(1,955

)

Unallocated Items

 

 

(30

)

 

 

(99

)

 

 

69

 

 

 

(56

)

 

 

(40

)

 

 

(16

)

 

 

(129

)

 

 

(172

)

 

 

43

 

Adjusted EBITDA

 

$

395

 

 

$

1,497

 

 

$

(1,102

)

 

$

509

 

 

$

583

 

 

$

(74

)

 

$

1,373

 

 

$

3,285

 

 

$

(1,912

)

 

We reconcile Adjusted EBITDA to net earnings for the consolidated company and to operating income (loss) for the business segments, as those are the most directly comparable U.S. GAAP measures for each.

 

The table below reconciles Adjusted EBITDA for the quarter ended March 31, 2023:24


 

DOLLAR AMOUNTS IN MILLIONS

 

Timberlands

 

 

Real Estate &
ENR

 

 

Wood
Products

 

 

Unallocated
Items

 

 

Total

 

Adjusted EBITDA by Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

$

151

 

Interest expense, net of capitalized interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

66

 

Income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22

 

Net contribution (charge) to earnings

 

$

120

 

 

$

53

 

 

$

95

 

 

$

(29

)

 

$

239

 

Non-operating pension and other post-employment benefit costs

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

9

 

Interest income and other

 

 

 

 

 

 

 

 

 

 

 

(12

)

 

 

(12

)

Operating income (loss)

 

 

120

 

 

 

53

 

 

 

95

 

 

 

(32

)

 

 

236

 

Depreciation, depletion and amortization

 

 

68

 

 

 

3

 

 

 

53

 

 

 

2

 

 

 

126

 

Basis of real estate sold

 

 

 

 

 

33

 

 

 

 

 

 

 

 

 

33

 

Adjusted EBITDA

 

$

188

 

 

$

89

 

 

$

148

 

 

$

(30

)

 

$

395

 

23


 

The table below reconciles Adjusted EBITDA for the quarter ended March 31,September 30, 2023:

DOLLAR AMOUNTS IN MILLIONS

 

Timberlands

 

 

Real Estate &
ENR

 

 

Wood
Products

 

 

Unallocated
Items

 

 

Total

 

Adjusted EBITDA by Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

$

239

 

Interest expense, net of capitalized interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

72

 

Income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

54

 

Net contribution (charge) to earnings

 

$

78

 

 

$

56

 

 

$

277

 

 

$

(46

)

 

$

365

 

Non-operating pension and other post-employment benefit costs

 

 

 

 

 

 

 

 

 

 

 

12

 

 

 

12

 

Interest income and other

 

 

 

 

 

 

 

 

 

 

 

(24

)

 

 

(24

)

Operating income (loss)

 

 

78

 

 

 

56

 

 

 

277

 

 

 

(58

)

 

 

353

 

Depreciation, depletion and amortization

 

 

65

 

 

 

4

 

 

 

51

 

 

 

2

 

 

 

122

 

Basis of real estate sold

 

 

 

 

 

34

 

 

 

 

 

 

 

 

 

34

 

Adjusted EBITDA

 

$

143

 

 

$

94

 

 

$

328

 

 

$

(56

)

 

$

509

 

The table below reconciles Adjusted EBITDA for the quarter ended September 30, 2022:

 

DOLLAR AMOUNTS IN MILLIONS

 

Timberlands

 

 

Real Estate &
ENR

 

 

Wood
Products

 

 

Unallocated
Items

 

 

Total

 

 

Timberlands

 

 

Real Estate &
ENR

 

 

Wood
Products

 

 

Unallocated
Items

 

 

Total

 

Adjusted EBITDA by Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

$

771

 

 

 

 

 

 

 

 

 

 

 

 

 

$

310

 

Interest expense, net of capitalized interest

 

 

 

 

 

 

 

 

 

 

 

 

 

72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

67

 

Loss on debt extinguishment(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

276

 

Income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

209

 

 

 

 

 

 

 

 

 

 

 

 

 

 

77

 

Net contribution (charge) to earnings

 

$

182

 

 

$

81

 

 

$

1,182

 

 

$

(117

)

 

$

1,328

 

 

$

107

 

 

$

48

 

 

$

344

 

 

$

(45

)

 

$

454

 

Non-operating pension and other post-employment benefit costs

 

 

 

 

 

 

 

 

 

 

 

15

 

 

 

15

 

 

 

 

 

 

 

 

 

 

 

 

12

 

 

 

12

 

Interest income and other

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

(9

)

 

 

(9

)

Operating income (loss)

 

 

182

 

 

 

81

 

 

 

1,182

 

 

 

(101

)

 

 

1,344

 

 

 

107

 

 

 

48

 

 

 

344

 

 

 

(42

)

 

 

457

 

Depreciation, depletion and amortization

 

 

65

 

 

 

4

 

 

 

51

 

 

 

2

 

 

 

122

 

 

 

61

 

 

 

5

 

 

 

51

 

 

 

2

 

 

 

119

 

Basis of real estate sold

 

 

 

 

 

31

 

 

 

 

 

 

 

 

 

31

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

7

 

Adjusted EBITDA

 

$

247

 

 

$

116

 

 

$

1,233

 

 

$

(99

)

 

$

1,497

 

 

$

168

 

 

$

60

 

 

$

395

 

 

$

(40

)

 

$

583

 

The table below reconciles Adjusted EBITDA for the year-to-date period ended September 30, 2023:

DOLLAR AMOUNTS IN MILLIONS

 

Timberlands

 

 

Real Estate &
ENR

 

 

Wood
Products

 

 

Unallocated
Items

 

 

Total

 

Adjusted EBITDA by Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

$

620

 

Interest expense, net of capitalized interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

208

 

Income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101

 

Net contribution (charge) to earnings

 

$

302

 

 

$

161

 

 

$

590

 

 

$

(124

)

 

$

929

 

Non-operating pension and other post-employment benefit costs

 

 

 

 

 

 

 

 

 

 

 

33

 

 

 

33

 

Interest income and other

 

 

 

 

 

 

 

 

 

 

 

(54

)

 

 

(54

)

Operating income (loss)

 

 

302

 

 

 

161

 

 

 

590

 

 

 

(145

)

 

 

908

 

Depreciation, depletion and amortization

 

 

201

 

 

 

12

 

 

 

156

 

 

 

5

 

 

 

374

 

Basis of real estate sold

 

 

 

 

 

80

 

 

 

 

 

 

 

 

 

80

 

Special items included in operating income (loss)(1)

 

 

 

 

 

 

 

 

 

 

 

11

 

 

 

11

 

Adjusted EBITDA

 

$

503

 

 

$

253

 

 

$

746

 

 

$

(129

)

 

$

1,373

 

(1)
Operating income (loss) for Unallocated Items includes a pretax special item consisting of an $11 million noncash environmental remediation charge.

25


The table below reconciles Adjusted EBITDA for the year-to-date period ended September 30, 2022:

DOLLAR AMOUNTS IN MILLIONS

 

Timberlands

 

 

Real Estate
& ENR

 

 

Wood
Products

 

 

Unallocated
Items

 

 

Total

 

Adjusted EBITDA by Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1,869

 

Interest expense, net of capitalized interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

204

 

Loss on debt extinguishment(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

276

 

Income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

470

 

Net contribution (charge) to earnings

 

$

442

 

 

$

194

 

 

$

2,389

 

 

$

(206

)

 

$

2,819

 

Non-operating pension and other post-employment benefit costs

 

 

 

 

 

 

 

 

 

 

 

38

 

 

 

38

 

Interest income and other

 

 

 

 

 

 

 

 

 

 

 

(9

)

 

 

(9

)

Operating income (loss)

 

 

442

 

 

 

194

 

 

 

2,389

 

 

 

(177

)

 

 

2,848

 

Depreciation, depletion and amortization

 

 

192

 

 

 

12

 

 

 

151

 

 

 

5

 

 

 

360

 

Basis of real estate sold

 

 

 

 

 

77

 

 

 

 

 

 

 

 

 

77

 

Adjusted EBITDA

 

$

634

 

 

$

283

 

 

$

2,540

 

 

$

(172

)

 

$

3,285

 

(1)
Loss on debt extinguishment is a special item consisting of a pretax charge of $276 million ($207 million after-tax) related to early debt retirement.

 

Net Earnings and Net Earnings per Diluted Share Before Special Items

 

We use net earnings before special items and net earnings per diluted share before special items as key performance measures to evaluate the performance of the consolidated company. These measures should not be considered in isolation from, and are not intended to represent an alternative to, our results reported in accordance with U.S. GAAP. However, we believe the measures provide meaningful supplemental information for investors about our operating performance, better facilitate period to period comparisons and are widely used by analysts, lenders, rating agencies and other interested parties.

 

Net Earnings Before Special Items

 

 

QUARTER ENDED

 

 

QUARTER ENDED

 

 

YEAR-TO-DATE ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2023

 

 

MARCH 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

Net earnings

 

$

151

 

 

$

771

 

 

$

239

 

 

$

310

 

 

$

620

 

 

$

1,869

 

Environmental remediation charge

 

 

 

 

 

 

 

 

8

 

 

 

 

Loss on debt extinguishment

 

 

 

 

 

207

 

 

 

 

 

 

 

 

 

 

 

 

207

 

Net earnings before special items

 

$

151

 

 

$

978

 

 

$

239

 

 

$

310

 

 

$

628

 

 

$

2,076

 

 

Net Earnings per Diluted Share Before Special Items

 

 

QUARTER ENDED

 

 

QUARTER ENDED

 

 

YEAR-TO-DATE ENDED

 

 

MARCH 2023

 

 

MARCH 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

 

SEPTEMBER 2023

 

 

SEPTEMBER 2022

 

Net earnings per diluted share

 

$

0.21

 

 

$

1.03

 

 

$

0.33

 

 

$

0.42

 

 

$

0.85

 

 

$

2.51

 

Environmental remediation charge

 

 

 

 

 

 

 

 

0.01

 

 

 

 

Loss on debt extinguishment

 

 

 

 

 

0.28

 

 

 

 

 

 

 

 

 

 

 

 

0.28

 

Net earnings per diluted share before special items

 

$

0.21

 

 

$

1.31

 

 

$

0.33

 

 

$

0.42

 

 

$

0.86

 

 

$

2.79

 

 

CRITICAL ACCOUNTING POLICIES

 

There have been no significant changes during first quarteryear-to-date 2023 to the critical accounting policies presented in our 2022 Annual Report on Form 10-K.

 

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

LONG-TERM INDEBTEDNESS OBLIGATIONS

 

The following summary of our long-term indebtedness obligations includes:

scheduled principal repayments for the next five years and after;
weighted average interest rates for debt maturing in each of the next five years and after and
estimated fair values of outstanding obligations.

26


We estimate the fair value of ourfixed-rate long-term debt instruments using the market approach, which is based on quoted market prices we received for the same types and issues of our debt or on the discounted value of the future cash flows using market yields for the same type and comparable issues of debt. Changes in market rates of interest affect the fair value of our fixed-rate debt.

 

24


Summary of Long-Term Indebtedness Principal Obligations as of March 31,September 30, 2023

 

DOLLAR AMOUNTS IN MILLIONS

 

2023

 

 

2024

 

 

2025

 

 

2026

 

 

2027

 

 

THEREAFTER

 

 

TOTAL(1)

 

 

FAIR VALUE

 

 

2023

 

 

2024

 

 

2025

 

 

2026

 

 

2027

 

 

THEREAFTER

 

 

TOTAL(1)

 

 

FAIR VALUE

 

Fixed-rate debt

 

$

978

 

 

$

 

 

$

210

 

 

$

272

 

 

$

300

 

 

$

3,333

 

 

$

5,093

 

 

$

5,048

 

 

$

860

 

 

$

 

 

$

210

 

 

$

1,022

 

 

$

300

 

 

$

3,333

 

 

$

5,725

 

 

$

5,434

 

Average interest rate

 

 

5.44

%

 

 

%

 

 

8.31

%

 

 

7.65

%

 

 

6.95

%

 

 

4.82

%

 

 

5.36

%

 

N/A

 

 

 

5.21

%

 

 

%

 

 

8.31

%

 

 

5.52

%

 

 

6.95

%

 

 

4.82

%

 

 

5.24

%

 

N/A

 

(1)
Excludes $40$46 million of unamortized discounts, capitalized debt expense and business combination fair value adjustments.

Item 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Disclosure controls are controls and other procedures that are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosure. The company’s principal executive officer and principal financial officer have concluded that the company’s disclosure controls and procedures were effective as of March 31,September 30, 2023, based on an evaluation of the company’s disclosure controls and procedures as of that date.

CHANGES IN INTERNAL CONTROLS

No changes occurred in the company’s internal control over financial reporting during first quarteryear-to-date 2023 that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Refer to Note 10: Legal Proceedings, Commitments and Contingencies. SEC regulations require us to disclose certain information about proceedings arising under federal, state or local environmental provisions if we reasonably believe that such proceedings may result in monetary sanctions above a stated threshold. In accordance with these regulations, the company uses a threshold of $1 million for purposes of determining whether disclosure of any such proceedings is required pursuant to this item.

Item 1A. RISK FACTORS

There have been no material changes with respect to the risk factors disclosed in our 2022 Annual Report on Form 10-K.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following table provides information with respect to purchases of common stock made by the company during firstthird quarter 2023:

 

COMMON SHARE REPURCHASES DURING FIRST QUARTER 2023

 

TOTAL NUMBER
OF SHARES
PURCHASED

 

 

AVERAGE PRICE
PAID PER SHARE

 

 

TOTAL NUMBER
OF SHARES
PURCHASED AS
PART OF PUBLICLY
ANNOUNCED
PROGRAMS

 

 

APPROXIMATE
DOLLAR VALUE
OF SHARES THAT
MAY YET BE
PURCHASED
UNDER THE
PROGRAMS

 

January 1 – January 31

 

 

478,583

 

 

$

31.84

 

 

 

478,583

 

 

$

361,429,713

 

February 1 – February 28

 

 

239,815

 

 

 

32.37

 

 

 

239,815

 

 

 

353,665,724

 

March 1 – March 31

 

 

397,162

 

 

 

29.86

 

 

 

397,162

 

 

 

341,804,713

 

Total

 

 

1,115,560

 

 

$

31.25

 

 

 

1,115,560

 

 

$

341,804,713

 

COMMON SHARE REPURCHASES DURING THIRD QUARTER 2023

 

TOTAL NUMBER
OF SHARES
PURCHASED

 

 

AVERAGE PRICE
PAID PER SHARE

 

 

TOTAL NUMBER
OF SHARES
PURCHASED AS
PART OF PUBLICLY
ANNOUNCED
PROGRAMS

 

 

APPROXIMATE
DOLLAR VALUE
OF SHARES THAT
MAY YET BE
PURCHASED
UNDER THE
PROGRAMS

 

July 1 – July 31

 

 

171,731

 

 

$

33.63

 

 

 

171,731

 

 

$

286,026,373

 

August 1 – August 31

 

 

353,664

 

 

$

32.88

 

 

 

353,664

 

 

$

274,398,582

 

September 1 – September 30

 

 

232,115

 

 

$

31.63

 

 

 

232,115

 

 

$

267,055,708

 

Total

 

 

757,510

 

 

$

32.67

 

 

 

757,510

 

 

 

 

 

On September 22, 2021, we announced that our board had approved a new share repurchase program (the 2021 Repurchase Program) under which we are authorized to repurchase up to $1 billion of outstanding shares. Concurrently, the board terminated the remaining repurchase authorization under the 2019 Repurchase Program.

During firstthird quarter 2023, we repurchased 1,115,560 common757,510 shares for approximately $35$25 million (including transaction fees) under the 2021 Repurchase Program in open-market transactions. Transaction fees incurred for repurchases are not counted as use of funds authorized for repurchases under the 2021 Repurchase Program. As of March 31,September 30, 2023, we had remaining authorization of $342$267 million for future stock repurchases.

25

27


Item 5. OTHER INFORMATION

Rule 10b5-1 Trading Arrangements

During third quarter 2023, two of the company’s “officers” (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) adopted trading plans intended to satisfy the affirmative defense conditions of Rule 10b5–1(c) of the Exchange Act.

(1)
Devin W. Stockfish, president and chief executive officer, adopted a plan on August 3, 2023 with respect to the exercise of up to 161,500 stock options in the aggregate,14,412 of which expire February 12, 2024, 17,468 of which expire April 9, 2024, 39,458 of which expire February 12, 2025 and 90,162 of which expire February 9, 2026. Specifically, the plan provides for: (i) the exercise of 90,162 stock options at a designated strike price and the sale of all of the underlying shares of common stock in a “cashless” exercise transaction and (ii) the exercise of the remaining stock options at designated strike prices and the sale of an indeterminate number of the underlying shares to cover applicable exercise prices and withholding taxes for such exercises in “cashless” exercise transactions, with the remaining shares to be held by Mr. Stockfish. Mr. Stockfish’s plan expires when all of the shares are sold or on November 12, 2024, whichever occurs first.
(2)
Keith J. O’Rear, senior vice president, Wood Products, adopted a plan on August 3, 2023 to sell an aggregate of 40,876 shares of common stock. Mr. O’Rear’s plan expires when all of the shares are sold or on October 30, 2024, whichever occurs first.

28


 

Item 6. EXHIBITS

 

 

10.1

Revolving Credit Facility Agreement dated as of March 13, 2023, among Weyerhaeuser Company, as Borrower, the lenders party thereto, and Wells Fargo Bank, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Current report on Form 8-K filed on March 15, 2023 – Commission File Number 1-4825)

10.2

Form of Weyerhaeuser Company 2022 Long-Term Incentive Plan Performance Share Unit Award Terms and Conditions for Plan Year 2023 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on January 23, 2023 – Commission File Number 1-4825)

10.3

Form of Weyerhaeuser Company 2022 Long-Term Incentive Plan Restricted Stock Unit Award Terms and Conditions for Plan Year 2023 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on January 23, 2023 – Commission File Number 1-4825)

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

 

 

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

 

 

32

Certification pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).

 

 

101.INS

XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

 

 

101.SCH

Inline XBRL Taxonomy Extension Schema Document

 

 

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

 

 

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

 

 

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

 

 

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

 

 

104

The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31,September 30, 2023, has been formatted in Inline XBRL.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

WEYERHAEUSER COMPANY

 

(Registrant)

 

 

 

Date: April 28,October 27, 2023

By:

/s/ David M. Wold

 

 

David M. Wold

 

 

Senior Vice President and Chief Financial Officer

 

 

(Principal Financial and Accounting Officer and Duly Authorized Officer)

 

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