Equibles

10-Q

WEYERHAEUSER CO (WY)

10-Q 2022-07-29 For: 2022-06-30
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Added on April 11, 2026

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 JUNE 30, 2022

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<br><br><br>incorporation or organization) (I.R.S. Employer<br><br><br>Identification Number)
220 Occidental Avenue South<br><br><br>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<br><br><br>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 July 25, 2022, 740,315 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 26
ITEM 4. CONTROLS AND PROCEDURES 27
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 27
ITEM 1A. RISK FACTORS 27
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 27
ITEM 3. DEFAULTS UPON SENIOR SECURITIES – NOT APPLICABLE
ITEM 4. MINE SAFETY DISCLOSURES – NOT APPLICABLE
ITEM 5. OTHER INFORMATION – NOT APPLICABLE
ITEM 6. EXHIBITS 28
SIGNATURES 29

Item 1. FINANCIAL STATEMENTS

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

QUARTER ENDED YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES JUNE 2022 JUNE 2021 JUNE 2022 JUNE 2021
Net sales (Note 3) $ 2,973 $ 3,144 $ 6,085 $ 5,650
Costs of sales 1,789 1,583 3,436 3,013
Gross margin 1,184 1,561 2,649 2,637
Selling expenses 23 24 46 44
General and administrative expenses 102 95 194 185
Other operating costs, net (Note 13) 12 13 18 23
Operating income 1,047 1,429 2,391 2,385
Non-operating pension and other post-employment benefit costs (Note 6) (11 ) (1 ) (26 ) (9 )
Interest income and other 1 2 — 3
Interest expense, net of capitalized interest (65 ) (78 ) (137 ) (157 )
Loss on debt extinguishment (Note 8) — — (276 ) —
Earnings before income taxes 972 1,352 1,952 2,222
Income taxes (Note 14) (184 ) (324 ) (393 ) (513 )
Net earnings $ 788 $ 1,028 $ 1,559 $ 1,709
Earnings per share, basic and diluted (Note 4) $ 1.06 $ 1.37 $ 2.09 $ 2.28
Weighted average shares outstanding (in thousands) (Note 4):
Basic 744,542 750,127 746,017 749,429
Diluted 745,582 751,508 747,194 750,773

See accompanying Notes to Consolidated Financial Statements.

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(UNAUDITED)

YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS JUNE 2021 JUNE 2022 JUNE 2021
Net earnings 788 $ 1,028 $ 1,559 $ 1,709
Other comprehensive income (loss):
Foreign currency translation adjustments (25 ) 15 (9 ) 24
Changes in unamortized actuarial loss, net of tax expense of 24, 38, 29 and 45 77 121 90 141
Changes in unamortized net prior service credit, net of tax expense of 0, 1, 1 and 0 — — — 1
Total other comprehensive income 52 136 81 166
Total comprehensive income 840 $ 1,164 $ 1,640 $ 1,875

All values are in US Dollars.

See accompanying Notes to Consolidated Financial Statements.

WEYERHAEUSER COMPANY

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PAR VALUE DECEMBER 31,<br><br><br>2021
ASSETS
Current assets:
Cash and cash equivalents 1,723 $ 1,879
Receivables, net 547 507
Receivables for taxes 6 24
Inventories (Note 5) 571 520
Prepaid expenses and other current assets 165 205
Total current assets 3,012 3,135
Property and equipment, less accumulated depreciation of 3,673 and 3,592 2,000 2,057
Construction in progress 233 175
Timber and timberlands at cost, less depletion 11,706 11,510
Minerals and mineral rights, less depletion 248 255
Deferred tax assets 11 17
Other assets 370 503
Total assets 17,580 $ 17,652
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable 283 $ 281
Accrued liabilities (Note 7) 658 673
Total current liabilities 941 954
Long-term debt, net (Note 8) 5,053 5,099
Deferred tax liabilities 83 46
Deferred pension and other post-employment benefits (Note 6) 347 440
Other liabilities 340 346
Total liabilities 6,764 6,885
Commitments and contingencies (Note 10)
Equity:
Common shares: 1.25 par value; authorized 1,360 million shares; issued and outstanding: 741,738 thousand shares at June 30, 2022 and 747,301 thousand shares at December 31, 2021 927 934
Other capital 7,954 8,181
Retained earnings 2,333 2,131
Accumulated other comprehensive loss (Note 11) (398 ) (479 )
Total equity 10,816 10,767
Total liabilities and equity 17,580 $ 17,652

All values are in US Dollars.

See accompanying Notes to Consolidated Financial Statements.

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS JUNE 2022 JUNE 2021
Cash flows from operations:
Net earnings $ 1,559 $ 1,709
Noncash charges (credits) to earnings:
Depreciation, depletion and amortization 241 238
Basis of real estate sold 70 51
Deferred income taxes, net 14 19
Pension and other post-employment benefits (Note 6) 44 30
Share-based compensation expense (Note 12) 17 15
Loss on debt extinguishment (Note 8) 276 —
Change in:
Receivables, net (40 ) (252 )
Receivables and payables for taxes 27 236
Inventories (58 ) (51 )
Prepaid expenses and other current assets (3 ) (1 )
Accounts payable and accrued liabilities (15 ) 65
Pension and post-employment benefit contributions and payments (14 ) (33 )
Other (15 ) (20 )
Net cash from operations 2,103 2,006
Cash flows from investing activities:
Capital expenditures for property and equipment (121 ) (93 )
Capital expenditures for timberlands reforestation (30 ) (32 )
Acquisition of timberlands (Note 16) (283 ) (149 )
Other 1 1
Net cash from investing activities (433 ) (273 )
Cash flows from financing activities:
Cash dividends on common shares (1,352 ) (255 )
Net proceeds from issuance of long-term debt (Note 8) 881 —
Payments on long-term debt (Note 8) (1,203 ) (225 )
Proceeds from exercise of stock options 14 45
Repurchases of common shares (Note 4) (259 ) —
Other (19 ) (16 )
Net cash from financing activities (1,938 ) (451 )
Net change in cash, cash equivalents and restricted cash (268 ) 1,282
Cash, cash equivalents and restricted cash at beginning of period 1,999 495
Cash, cash equivalents and restricted cash at end of period $ 1,731 $ 1,777
Cash paid (received) during the period for:
Interest, net of amount capitalized of $3 and $2 $ 149 $ 154
Income taxes, net of refunds $ 354 $ 263

See accompanying Notes to Consolidated Financial Statements.

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(UNAUDITED)

QUARTER ENDED YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES JUNE 2022 JUNE 2021 JUNE 2022 JUNE 2021
Common shares:
Balance at beginning of period $ 932 $ 936 $ 934 $ 934
Issued for exercise of stock options and vested units — 1 2 3
Repurchases of common shares (Note 4) (5 ) — (9 ) —
Balance at end of period 927 937 927 937
Other capital:
Balance at beginning of period 8,076 8,222 8,181 8,208
Issued for exercise of stock options 2 27 13 43
Repurchases of common shares (Note 4) (133 ) — (250 ) —
Share-based compensation 9 8 17 15
Other transactions, net — 1 (7 ) (8 )
Balance at end of period 7,954 8,258 7,954 8,258
Retained earnings:
Balance at beginning of period 1,679 962 2,131 411
Net earnings 788 1,028 1,559 1,709
Dividends on common shares (134 ) (129 ) (1,357 ) (259 )
Balance at end of period 2,333 1,861 2,333 1,861
Accumulated other comprehensive loss:
Balance at beginning of period (450 ) (792 ) (479 ) (822 )
Other comprehensive income 52 136 81 166
Balance at end of period (Note 11) (398 ) (656 ) (398 ) (656 )
Total equity:
Balance at end of period $ 10,816 $ 10,400 $ 10,816 $ 10,400
Dividends paid per common share $ 0.18 $ 0.17 $ 1.81 $ 0.34

See accompanying Notes to Consolidated Financial Statements.

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: RESTRICTED CASH 13
NOTE 16: TIMBERLAND ACQUISITIONS 13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTERS AND YEAR-TO-DATE PERIODS ENDED JUNE 30, 2022 AND 2021

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, 2021. 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 every acre we own 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 categorized 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, and wind and solar resources) 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 YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS JUNE 2022 JUNE 2021 JUNE 2022 JUNE 2021
Sales to unaffiliated customers:
Timberlands $ 515 $ 405 $ 980 $ 784
Real Estate & ENR 117 110 245 216
Wood Products 2,341 2,629 4,860 4,650
2,973 3,144 6,085 5,650
Intersegment sales:
Timberlands 156 136 317 270
Total sales 3,129 3,280 6,402 5,920
Intersegment eliminations (156 ) (136 ) (317 ) (270 )
Total $ 2,973 $ 3,144 $ 6,085 $ 5,650
Net contribution (charge) to earnings:
Timberlands $ 153 $ 113 $ 335 $ 221
Real Estate & ENR 65 63 146 129
Wood Products 863 1,338 2,045 2,178
1,081 1,514 2,526 2,528
Unallocated items^(^^1)^ (44 ) (84 ) (161 ) (149 )
Net contribution to earnings 1,037 1,430 2,365 2,379
Interest expense, net of capitalized interest (65 ) (78 ) (137 ) (157 )
Loss on debt extinguishment — — (276 ) —
Earnings before income taxes 972 1,352 1,952 2,222
Income taxes (184 ) (324 ) (393 ) (513 )
Net earnings $ 788 $ 1,028 $ 1,559 $ 1,709
(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.
--- ---

NOTE 3: REVENUE RECOGNITION

A reconciliation of revenue recognized by our major products:

QUARTER ENDED YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS JUNE 2022 JUNE 2021 JUNE 2022 JUNE 2021
Net sales to unaffiliated customers:
Timberlands segment
Delivered logs:
West
Domestic sales $ 103 $ 80 $ 216 $ 159
Export grade sales 205 142 351 264
Subtotal West 308 222 567 423
South 160 145 314 276
North 10 9 25 25
Subtotal delivered logs sales 478 376 906 724
Stumpage and pay-as-cut timber 11 7 20 13
Recreational and other lease revenue 16 16 33 32
Other^(^^1)^ 10 6 21 15
Net sales attributable to Timberlands segment 515 405 980 784
Real Estate & ENR segment
Real estate 90 83 187 167
Energy and natural resources 27 27 58 49
Net sales attributable to Real Estate & ENR segment 117 110 245 216
Wood Products segment
Structural lumber 998 1,349 2,204 2,339
Oriented strand board 497 605 1,061 1,043
Engineered solid section 247 166 443 308
Engineered I-joists 168 104 305 187
Softwood plywood 53 69 111 125
Medium density fiberboard 53 43 101 91
Complementary building products 239 213 454 384
Other^(^^2)^ 86 80 181 173
Net sales attributable to Wood Products segment 2,341 2,629 4,860 4,650
Total net sales $ 2,973 $ 3,144 $ 6,085 $ 5,650
(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:

● $1.06 during second quarter 2022 and $2.09 during year-to-date 2022;
● $1.37 during second quarter 2021 and $2.28 during year-to date 2021.
--- ---

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 YEAR-TO-DATE ENDED
SHARES IN THOUSANDS JUNE 2022 JUNE 2021 JUNE 2022 JUNE 2021
Weighted average common shares outstanding – basic 744,542 750,127 746,017 749,429
Dilutive potential common shares:
Stock options 308 443 346 330
Restricted stock units 410 659 415 699
Performance share units 322 279 416 315
Total effect of outstanding dilutive potential common shares 1,040 1,381 1,177 1,344
Weighted average common shares outstanding – dilutive 745,582 751,508 747,194 750,773

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 YEAR-TO-DATE ENDED
SHARES IN THOUSANDS JUNE 2022 JUNE 2021 JUNE 2022 JUNE 2021
Performance share units 573 1,142 573 1,142

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 3,784,787 common shares for approximately $138 million under the 2021 Repurchase Program during second quarter 2022 and 6,982,462 common shares for approximately $259 million under the 2021 Repurchase Program during year-to-date 2022. As of June 30, 2022, we had remaining authorization of $668 million for future share repurchases. We did not repurchase shares during year-to-date 2021.

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 no unsettled repurchases as of June 30, 2022, or December 31, 2021.

NOTE 5: INVENTORIES

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

DOLLAR AMOUNTS IN MILLIONS JUNE 30,<br><br><br>2022 DECEMBER 31,<br><br><br>2021
LIFO inventories:
Logs $ 17 $ 26
Lumber, plywood, panels and fiberboard 75 61
Other products 25 17
Moving average cost or FIFO inventories:
Logs 53 65
Lumber, plywood, panels, fiberboard and engineered wood products 127 106
Other products 151 131
Materials and supplies 123 114
Total $ 571 $ 520

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.

NOTE 6: PENSION AND OTHER POST-EMPLOYMENT BENEFIT PLANS

The components of net periodic benefit cost are:

PENSION
QUARTER ENDED YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS JUNE 2022 JUNE 2021 JUNE 2022 JUNE 2021
Service cost $ 8 $ 10 $ 18 $ 21
Interest cost 26 25 53 49
Expected return on plan assets (41 ) (53 ) (80 ) (102 )
Amortization of actuarial loss 23 27 47 57
Amortization of prior service cost — — 1 1
Total net periodic benefit cost – pension $ 16 $ 9 $ 39 $ 26
OTHER POST-EMPLOYMENT BENEFITS
--- --- --- --- --- --- --- --- ---
QUARTER ENDED YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS JUNE 2022 JUNE 2021 JUNE 2022 JUNE 2021
Interest cost $ 1 $ 1 $ 2 $ 2
Amortization of actuarial loss 2 — 3 2
Amortization of prior service credit — 1 — —
Total net periodic benefit cost – other post-employment benefits $ 3 $ 2 $ 5 $ 4

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.

During second quarter 2022, we recorded an increase to the beginning of the year fair value of the pension assets of $54 million, or 2 percent. We also updated our census data that is used to estimate our beginning of the year projected benefit obligation for our pension plans, which resulted in a projected benefit obligation decrease of $13 million, or less than 1 percent. The net effect of these updates was a $67 million improvement in funded status. This change in funded status was reflected on our

Consolidated Balance Sheet

as of June 30, 2022.

NOTE 7: ACCRUED LIABILITIES

Accrued liabilities were comprised of the following:

DOLLAR AMOUNTS IN MILLIONS JUNE 30,<br><br><br>2022 DECEMBER 31,<br><br><br>2021
Compensation and employee benefit costs $ 197 $ 225
Current portion of lease liabilities 22 24
Customer rebates, volume discounts and deferred income 190 164
Interest 68 83
Taxes payable 119 106
Other 62 71
Total $ 658 $ 673

NOTE 8: LONG-TERM DEBT AND LINE OF CREDIT

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 January 2020, we refinanced and extended our $1.5 billion five-year senior unsecured revolving credit facility, which expires in January 2025. Borrowings are at LIBOR plus a spread or at other interest rates mutually agreed upon between the borrower and the lending banks. We had no outstanding borrowings on our credit facility as of June 30, 2022 and December 31, 2021.

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 JUNE 30,<br><br><br>2022 DECEMBER 31, 2021
Long-term fixed rate debt (including current maturities):
Carrying value $ 5,053 $ 5,099
Fair value (level 2) $ 5,118 $ 6,221

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.

NOTE 10: LEGAL PROCEEDINGS, COMMITMENTS AND CONTINGENCIES

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 June 30, 2022, our total accrual for future estimated remediation costs on active Superfund sites and other sites for which we are potentially responsible was approximately $62 million. These amounts are recorded in "Accrued liabilities" and "Other liabilities" on our

Consolidated Balance Sheet

.

NOTE 11: ACCUMULATED OTHER COMPREHENSIVE LOSS

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

QUARTER ENDED YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS JUNE 2022 JUNE 2021 JUNE 2022 JUNE 2021
Pension^(^^1)^
Balance at beginning of period $ (709 ) $ (1,044 ) $ (720 ) $ (1,064 )
Other comprehensive income before reclassifications 59 100 51 96
Amounts reclassified from accumulated other comprehensive loss to earnings^(^^2)^ 18 20 37 44
Total other comprehensive income 77 120 88 140
Balance at end of period $ (632 ) $ (924 ) $ (632 ) $ (924 )
Other post-employment benefits^(^^1)^
Balance at beginning of period $ — $ (11 ) $ (2 ) $ (12 )
Other comprehensive loss before reclassifications (1 ) — — —
Amounts reclassified from accumulated other comprehensive loss to earnings^(^^2)^ 1 1 2 2
Total other comprehensive income — 1 2 2
Balance at end of period $ — $ (10 ) $ — $ (10 )
Translation adjustments and other
Balance at beginning of period $ 259 $ 263 $ 243 $ 254
Translation adjustments (25 ) 15 (9 ) 24
Total other comprehensive income (loss) (25 ) 15 (9 ) 24
Balance at end of period 234 278 234 278
Accumulated other comprehensive loss, end of period $ (398 ) $ (656 ) $ (398 ) $ (656 )
(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). See Note 6: Pension and Other Post-Employment Benefit Plans.
--- ---

NOTE 12: SHARE-BASED COMPENSATION

Share-based compensation activity during year-to-date 2022 included the following:

SHARES IN THOUSANDS GRANTED VESTED
Restricted stock units (RSUs) 626 853
Performance share units (PSUs) 306 419

A total of 1.4 million 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 2022 was $41.94. The vesting provisions for RSUs granted in 2022 were consistent with prior year grants.

Performance Share Units

The weighted average grant date fair value of PSUs granted in 2022 was $49.77. The final number of shares granted in 2022 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 2022 will vest at a maximum of 100 percent of target value in the event of negative absolute company total shareholder return.

Weighted Average Assumptions Used in Estimating the Value of Performance Share Units Granted in 2022

PERFORMANCE SHARE UNITS
Performance period 2/10/2022 – 12/31/2024
Valuation date average stock price^(^^1)^ $42.16
Expected dividends 1.72%
Risk-free rate 0.34% – 1.84%
Expected volatility 26.27% – 41.01%
(1) Calculated as an average of the high and low prices on grant date.
--- ---

NOTE 13: OTHER OPERATING COSTS, NET

Other operating costs, net were comprised of the following:

QUARTER ENDED YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS JUNE 2022 JUNE 2021 JUNE 2022 JUNE 2021
Foreign exchange losses (gains), net $ (3 ) $ 1 $ (4 ) $ 3
Litigation expense, net 4 3 8 6
Research and development expenses 2 1 3 2
Other, net 9 8 11 12
Total other operating costs, net $ 12 $ 13 $ 18 $ 23

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 2022 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: RESTRICTED CASH

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on our

Consolidated Balance Sheet

that sum to the total of the amounts shown in the

Consolidated Statement of Cash Flows

:

DOLLAR AMOUNTS IN MILLIONS JUNE 30,<br><br><br>2022 DECEMBER 31,<br><br><br>2021
Cash and cash equivalents $ 1,723 $ 1,879
Restricted cash included in other assets^(^^1)^ — 120
Restricted cash included in prepaid expenses and other current assets 8 —
Total cash, cash equivalents and restricted cash $ 1,731 $ 1,999
(1) Amounts included in restricted cash as of December 31, 2021 were comprised of proceeds held by a qualified intermediary that were intended to be reinvested in timber and timberlands through a like-kind exchange transaction. In first quarter 2022, the proceeds were released as a like-kind property was not identified.
--- ---

NOTE 16: TIMBERLAND ACQUISITIONS

On April 14, 2022, we announced an agreement to purchase 81 thousand acres of North and South Carolina timberlands for approximately $265 million. We completed the purchase on May 18, 2022 and 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

.

On February 25, 2021, we announced an agreement to purchase 69 thousand acres of southwest Alabama timberlands for approximately $149 million. We completed the purchase on April 27, 2021 and recorded $148 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

. This transaction was structured as a like-kind exchange.

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; estimated taxes and tax provision; our expectations relating to returns on invested pension plan assets and expected benefit payments; 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; expected capital expenditures; market and general economic conditions, including related influencing factors such as the trajectory of U.S. housing activity, repair and remodel activity, impacts from COVID-related restrictions, 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,” 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 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 2021 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.

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.
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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 U.S. housing activity, repair and remodel activity, impacts from COVID-related restrictions, 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 pellets made from pulpwood. The Timberlands segment is also influenced by the availability of harvestable timber. In general, Western log markets are highly tensioned 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.

On a seasonally adjusted annual basis, as reported by the U.S. Census Bureau, housing starts for second quarter 2022 averaged 1.65 million units, a 4 percent decrease from first quarter 2022. Single family starts averaged 1.1 million units, a 9.5 percent decrease from first quarter 2022. Multi-family starts averaged 577 thousand units in second quarter 2022, which was an 8.4 percent increase from first quarter 2022. Sales of newly built, single family homes averaged a seasonally adjusted annual rate of 612 thousand units for second quarter 2022, a decrease of 21.1 percent from the prior quarter.

Repair and remodeling expenditures fell by 1 percent from first quarter 2022 to second quarter 2022 according to the Census Bureau Advance Retail Spending report. Do-it-yourself activity has been returning to more normalized levels while professionally contracted activities continue to increase.

In U.S. wood product markets, demand was steady most of second quarter 2022 as dealer inventories adjusted to a more uncertain economic environment. The Random Lengths Framing Lumber Composite price averaged $850/MBF and the OSB Composite averaged $798/MSF in second quarter 2022. Over the course of the second quarter, prices declined from $1,134/MBF to $604/MBF for lumber and from $1,372/MSF to $425/MSF for OSB, reflecting a more volatile pricing environment.

In Western log markets, Douglas fir sawlog prices fell by 3 percent in second quarter 2022 compared with first quarter 2022 as reported by RISI Log Lines. Continued strength in Western log prices was supported by tight log supplies. In the South, delivered sawlog prices increased by 0.7 percent from first quarter 2022 and 7 percent from second quarter 2021 as reported by TimberMart-South, as new mill capacity has increased demand in certain markets.

Exchange rates, available supply from other countries and trade policy affect our export businesses. During second quarter 2022, continued strength in end use demand and disruptions of other global sources of supply supported demand for export logs. China export activity and pricing were supported by constrained log and lumber imports from other geographies. In Japan, total housing starts increased 2.5 percent year to date through May compared to the same period in 2021, while the key Post and Beam segment saw a 2.1 percent decrease. Decreased lumber imports from Europe to Japan have been favorable to our Japanese log export business through the first half of 2022.

Interest rates affect our business primarily through their impact on mortgage rates, 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 longer-term interest rates. Mortgage rates, which are correlated to longer-term interest rates, impact home affordability and therefore significant increases can reduce demand for homebuying.

Changes in inflation also reflect monetary policy set by the U.S. Federal Reserve, as well as changes in demand and supply for goods and services and fluctuations in labor markets. Increased inflation affects the cost of our operations across each of our business segments. The Consumer Price Index increased 9.1 percent year over year in June 2022. While we can offset some of the impacts of inflation through our sales activities, not all of the costs associated with inflation can be fully mitigated.

Governments and businesses across the globe are taking action on climate change and are making significant commitments towards 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 and carbon capture and storage activities.

CONSOLIDATED RESULTS

How We Did Second Quarter 2022 and Year-to-Date 2022

QUARTER ENDED AMOUNT OF<br><br><br>CHANGE YEAR-TO-DATE ENDED AMOUNT OF<br><br><br>CHANGE
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES JUNE 2022 JUNE 2021 2022 VS.<br><br><br>2021 JUNE 2022 JUNE 2021 2022 VS.<br><br><br>2021
Net sales $ 2,973 $ 3,144 $ (171 ) $ 6,085 $ 5,650 $ 435
Costs of sales $ 1,789 $ 1,583 $ 206 $ 3,436 $ 3,013 $ 423
Operating income $ 1,047 $ 1,429 $ (382 ) $ 2,391 $ 2,385 $ 6
Net earnings $ 788 $ 1,028 $ (240 ) $ 1,559 $ 1,709 $ (150 )
Earnings per share, basic and diluted $ 1.06 $ 1.37 $ (0.31 ) $ 2.09 $ 2.28 $ (0.19 )

Comparing Second Quarter 2022 with Second Quarter 2021

Net sales

Net sales decreased $171 million – 5 percent – primarily due to a $288 million decrease in Wood Products sales to unaffiliated customers attributable to decreased sales realizations for structural lumber, oriented strand board and softwood plywood.

This decrease was partially offset by a $110 million increase in Timberlands net sales to unaffiliated customers primarily due to increased sales realizations.

Costs of sales

Costs of sales increased $206 million – 13 percent – primarily due to increased freight and raw material costs within our Wood Products segment as well as increased freight costs, third-party log purchases and sales volumes within our Timberlands segment.

Operating income

Operating income decreased $382 million – 27 percent – primarily due to a $377 million decrease in consolidated gross margin (see discussion of components above).

Net earnings

Net earnings decreased $240 million – 23 percent – primarily due to the $382 million decrease in operating income discussed above.

This decrease was partially offset by a $140 million decrease in income tax expense (refer to

Income Taxes

).

Comparing Year-to-Date 2022 with Year-to-Date 2021

Net sales

Net sales increased $435 million – 8 percent – primarily due to a $210 million increase in Wood Products sales to unaffiliated customers attributable to increased sales realizations across most product lines, as well as a $196 million increase in Timberlands sales to unaffiliated customers attributable to increased sales realizations and sales volumes in the Western and Southern regions.

Costs of sales

Costs of sales increased $423 million –14 percent – primarily due to increased freight and raw material costs within our Wood Products segment as well as increased freight costs, third-party log purchases and sales volumes within our Timberlands segment.

Operating income

Operating income increased $6 million – less than 1 percent – primarily due to a $12 million increase in consolidated gross margin (see discussion of components above).

Net earnings

Net earnings decreased $150 million – 9 percent – primarily due to a $276 million pretax charge ($207 million after-tax) related to the early extinguishment of debt (refer to

Note 8: Long-Term Debt and Line of Credit

).

This decrease was partially offset by a $120 million decrease in income tax expense (refer to

Income Taxes

).

TIMBERLANDS

How We Did Second Quarter 2022 and Year-to-Date 2022

QUARTER ENDED AMOUNT OF<br><br><br>CHANGE YEAR-TO-DATE ENDED AMOUNT OF<br><br><br>CHANGE
DOLLAR AMOUNTS IN MILLIONS JUNE 2022 JUNE 2021 2022 VS.<br><br><br>2021 JUNE 2022 JUNE 2021 2022 VS.<br><br><br>2021
Net sales to unaffiliated customers:
Delivered logs:
West $ 308 $ 222 $ 86 $ 567 $ 423 $ 144
South 160 145 15 314 276 38
North 10 9 1 25 25 —
Subtotal delivered logs sales 478 376 102 906 724 182
Stumpage and pay-as-cut timber 11 7 4 20 13 7
Recreational and other lease revenue 16 16 — 33 32 1
Other^(^^1)^ 10 6 4 21 15 6
Subtotal net sales to unaffiliated customers 515 405 110 980 784 196
Intersegment sales 156 136 20 317 270 47
Total sales $ 671 $ 541 $ 130 $ 1,297 $ 1,054 $ 243
Costs of sales $ 495 $ 407 $ 88 $ 918 $ 790 $ 128
Operating income and Net contribution to earnings $ 153 $ 113 $ 40 $ 335 $ 221 $ 114
(1) Other Timberlands sales include sales of seeds and seedlings from our nursery operations as well as wood chips.
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Comparing Second Quarter 2022 with Second Quarter 2021

Net sales to unaffiliated customers

Net sales to unaffiliated customers increased $110 million – 27 percent – primarily due to an $86 million increase in Western log sales attributable to a 26 percent increase in sales realizations and an 11 percent increase in sales volumes, as well as a $15 million increase in Southern log sales attributable to a 10 percent increase in sales realizations.

Intersegment sales

Intersegment sales increased $20 million – 15 percent – primarily due to a 19 percent increase in sales realizations.

Costs of sales

Costs of sales increased $88 million – 22 percent – primarily due to increased freight costs and third-party log purchases, as well as increased sales volumes, as discussed above.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings increased $40 million – 35 percent – primarily due to the change in the components of gross margin, as discussed above.

Comparing Year-to-Date 2022 with Year-to-Date 2021

Net sales to unaffiliated customers

Net sales to unaffiliated customers increased $196 million – 25 percent – primarily due to a $144 million increase in Western log sales attributable to a 25 percent increase in sales realizations and a 7 percent increase in sales volumes, as well as a $38 million increase in Southern log sales attributable to a 9 percent increase in sales realizations and a 5 percent increase in sales volumes.

Intersegment sales

Intersegment sales increased $47 million – 17 percent – primarily due to a 19 percent increase in sales realizations.

Costs of sales

Costs of sales increased $128 million – 16 percent – primarily due to increased freight costs and third-party log purchases, as well as increased sales volumes, as discussed above.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings increased $114 million – 52 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<br><br><br>CHANGE YEAR-TO-DATE ENDED AMOUNT OF<br><br><br>CHANGE
VOLUMES IN THOUSANDS JUNE 2022 JUNE 2021 2022 VS.<br><br><br>2021 JUNE 2022 JUNE 2021 2022 VS.<br><br><br>2021
Third-party log sales – tons:
West^(^^1)^ 1,778 1,608 170 3,382 3,147 235
South 4,167 4,150 17 8,302 7,932 370
North 118 115 3 328 376 (48 )
Total 6,063 5,873 190 12,012 11,455 557
Fee harvest volumes – tons:
West^(^^1)^ 2,085 2,099 (14 ) 4,325 4,200 125
South 6,159 5,856 303 12,001 11,232 769
North 180 199 (19 ) 458 536 (78 )
Total 8,424 8,154 270 16,784 15,968 816
(1) Western logs are primarily transacted in thousand board feet (MBF) but are converted to ton equivalents for external reporting purposes.
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REAL ESTATE, ENERGY AND NATURAL RESOURCES

How We Did Second Quarter 2022 and Year-to-Date 2022

QUARTER ENDED AMOUNT OF<br><br><br>CHANGE YEAR-TO-DATE ENDED AMOUNT OF<br><br><br>CHANGE
DOLLAR AMOUNTS IN MILLIONS JUNE 2022 JUNE 2021 2022 VS.<br><br><br>2021 JUNE 2022 JUNE 2021 2022 VS.<br><br><br>2021
Net sales:
Real estate $ 90 $ 83 $ 7 $ 187 $ 167 $ 20
Energy and natural resources 27 27 — 58 49 9
Total $ 117 $ 110 $ 7 $ 245 $ 216 $ 29
Costs of sales $ 45 $ 41 $ 4 $ 86 $ 75 $ 11
Operating income and Net contribution to earnings $ 65 $ 63 $ 2 $ 146 $ 129 $ 17

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 (particularly in the northern states), 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 Second Quarter 2022 with Second Quarter 2021

Net sales

Net sales increased $7 million – 6 percent – primarily due to an increase in the amount of acres sold, partially offset by decreased mitigation bank credit sales.

Costs of sales

Costs of sales increased $4 million – 10 percent – primarily due to increases in the amount of acres sold and basis per acre sold.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings increased $2 million – 3 percent – primarily due to the change in the components of gross margin, as discussed above.

Comparing Year-to-Date 2022 with Year-to-Date 2021

Net sales

Net sales increased $29 million – 13 percent – primarily due to an increase in the amount of acres sold, partially offset by decreased mitigation bank credit sales.

Costs of sales

Costs of sales increased $11 million – 15 percent – primarily due to increases in the amount of acres sold and basis per acre sold.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings increased $17 million – 13 percent – primarily due to the change in the components of gross margin, as discussed above.

REAL ESTATE SALES STATISTICS

QUARTER ENDED AMOUNT OF<br><br><br>CHANGE YEAR-TO-DATE ENDED AMOUNT OF<br><br><br>CHANGE
JUNE 2022 JUNE 2021 2022 VS.<br><br><br>2021 JUNE 2022 JUNE 2021 2022 VS.<br><br><br>2021
Acres sold 26,906 18,415 8,491 51,032 37,870 13,162
Average price per acre $ 3,215 $ 3,227 $ (12 ) $ 3,484 $ 3,523 $ (39 )

WOOD PRODUCTS

How We Did Second Quarter 2022 and Year-to-Date 2022

QUARTER ENDED AMOUNT OF<br><br><br>CHANGE YEAR-TO-DATE ENDED AMOUNT OF<br><br><br>CHANGE
DOLLAR AMOUNTS IN MILLIONS JUNE 2022 JUNE 2021 2022 VS.<br><br><br>2021 JUNE 2022 JUNE 2021 2022 VS.<br><br><br>2021
Net sales:
Structural lumber $ 998 $ 1,349 $ (351 ) $ 2,204 $ 2,339 $ (135 )
Oriented strand board 497 605 (108 ) 1,061 1,043 18
Engineered solid section 247 166 81 443 308 135
Engineered I-joists 168 104 64 305 187 118
Softwood plywood 53 69 (16 ) 111 125 (14 )
Medium density fiberboard 53 43 10 101 91 10
Complementary building products 239 213 26 454 384 70
Other products produced^(^^1)^ 86 80 6 181 173 8
Total $ 2,341 $ 2,629 $ (288 ) $ 4,860 $ 4,650 $ 210
Costs of sales $ 1,414 $ 1,229 $ 185 $ 2,690 $ 2,353 $ 337
Operating income and Net contribution to earnings $ 863 $ 1,338 $ (475 ) $ 2,045 $ 2,178 $ (133 )
(1) Other products produced sales include wood chips, other byproducts and third-party residual log sales from our Canadian Forestlands operations.
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Comparing Second Quarter 2022 with Second Quarter 2021

Net sales

Net sales decreased $288 million – 11 percent – due to:

● a $351 million decrease in structural lumber sales attributable to a 28 percent decrease in sales realizations, partially offset by a 3 percent increase in sales volumes;
● a $108 million decrease in oriented strand board sales attributable to a 26 percent decrease in sales realizations, partially offset by an 11 percent increase in sales volumes and
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● a $16 million decrease in softwood plywood sales attributable to a 17 percent decrease in sales realizations, as well as a 9 percent decrease in sales volumes.
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These decreases were partially offset by:

● an $81 million increase in engineered solid section sales due to a 53 percent increase in sales realizations, partially offset by a 3 percent decrease in sales volumes;
● a $64 million increase in engineered I-joists sales due to a 73 percent increase in sales realizations, partially offset by an 8 percent decrease in sales volumes;
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● a $26 million increase in complementary building products sales attributable to increased sales realizations;
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● a $10 million increase in medium density fiberboard sales attributable to a 35 percent increase in sales realizations, partially offset by a 10 percent decrease in sales volumes and
--- ---
● a $6 million increase in other products produced sales attributable to increased sales volumes.
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Costs of sales

Costs of sales increased $185 million – 15 percent – primarily due to increased freight and raw material costs.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings decreased $475 million – 36 percent – primarily due to the change in the components of gross margin, as discussed above.

Comparing Year-to-Date 2022 with Year-to-Date 2021

Net sales

Net sales increased $210 million – 5 percent – due to:

● a $135 million increase in engineered solid section sales attributable to a 52 percent increase in sales realizations, partially offset by a 5 percent decrease in sales volumes;
● a $118 million increase in engineered I-joists sales attributable to a 70 percent increase in sales realizations, partially offset by a 5 percent decrease in sales volumes;
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● a $70 million increase in complementary building products sales attributable to increased sales realizations;
--- ---
● an $18 million increase in oriented strand board sales attributable to 5 percent increase in sales volumes, partially offset by a 3 percent decrease in sales realizations;
--- ---
● a $10 million increase in medium density fiberboard sales attributable to a 32 percent increase in sales realizations, partially offset by a 17 percent decrease in sales volumes and
--- ---
● an $8 million increase in other products produced sales attributable to increased sales volumes.
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These increases were partially offset by a $135 million decrease in structural lumber sales attributable to an 8 percent decrease in sales realizations, partially offset by a 2 percent increase in sales volumes, as well as a $14 million decrease in softwood plywood sales attributable to a 15 percent decrease in sales volumes, partially offset by a 4 percent increase in sales realizations.

Costs of sales

Costs of sales increased $337 million – 14 percent – primarily due to increased freight and raw material costs.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings decreased $133 million – 6 percent – primarily due to the change in the components of gross margin, as discussed above.

Third-Party Sales Volumes

QUARTER ENDED AMOUNT OF<br><br><br>CHANGE YEAR-TO-DATE ENDED AMOUNT OF<br><br><br>CHANGE
VOLUMES IN MILLIONS^(^^1)^ JUNE 2022 JUNE 2021 2022 VS.<br><br><br>2021 JUNE 2022 JUNE 2021 2022 VS.<br><br><br>2021
Structural lumber – board feet 1,289 1,252 37 2,446 2,397 49
Oriented strand board – square feet (3/8”) 735 663 72 1,452 1,377 75
Engineered solid section – cubic feet 6.4 6.6 (0.2 ) 12.1 12.8 (0.7 )
Engineered I-joists – lineal feet 49 53 (4 ) 95 100 (5 )
Softwood plywood – square feet (3/8”) 70 77 (7 ) 145 171 (26 )
Medium density fiberboard – square feet (3/4”) 45 50 (5 ) 89 107 (18 )
(1) Sales volumes include sales of internally produced products and products purchased for resale primarily through our distribution business.
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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<br><br><br>CHANGE YEAR-TO-DATE ENDED AMOUNT OF<br><br><br>CHANGE
VOLUMES IN MILLIONS JUNE 2022 JUNE 2021 2022 VS.<br><br><br>2021 JUNE 2022 JUNE 2021 2022 VS.<br><br><br>2021
Structural lumber – board feet:
Production 1,232 1,234 (2 ) 2,435 2,445 (10 )
Outside purchase 43 49 (6 ) 85 104 (19 )
Total 1,275 1,283 (8 ) 2,520 2,549 (29 )
Oriented strand board – square feet (3/8”):
Production 758 683 75 1,497 1,425 72
Outside purchase 66 71 (5 ) 136 139 (3 )
Total 824 754 70 1,633 1,564 69
Engineered solid section – cubic feet:
Production 6.4 6.2 0.2 12.1 12.2 (0.1 )
Outside purchase 0.3 0.2 0.1 0.5 0.5 —
Total 6.7 6.4 0.3 12.6 12.7 (0.1 )
Engineered I-joists – lineal feet:
Production 50 51 (1 ) 94 95 (1 )
Outside purchase 3 2 1 5 5 —
Total 53 53 — 99 100 (1 )
Softwood plywood – square feet (3/8”):
Production 67 62 5 133 142 (9 )
Outside purchase 8 12 (4 ) 18 26 (8 )
Total 75 74 1 151 168 (17 )
Medium density fiberboard – square feet (3/4"):
Production 48 52 (4 ) 92 108 (16 )
Total 48 52 (4 ) 92 108 (16 )

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.

Net Charge to Earnings – Unallocated Items

QUARTER ENDED AMOUNT OF<br><br><br>CHANGE YEAR-TO-DATE ENDED AMOUNT OF<br><br><br>CHANGE
DOLLAR AMOUNTS IN MILLIONS JUNE 2022 JUNE 2021 2022 VS.<br><br><br>2021 JUNE 2022 JUNE 2021 2022 VS.<br><br><br>2021
Unallocated corporate function and variable compensation expense $ (36 ) $ (36 ) $ — $ (67 ) $ (61 ) $ (6 )
Liability classified share-based compensation 2 — 2 3 (1 ) 4
Foreign exchange gain (loss) 3 (1 ) 4 3 (3 ) 6
Elimination of intersegment profit in inventory and LIFO 18 (28 ) 46 (41 ) (45 ) 4
Other (21 ) (20 ) (1 ) (33 ) (33 ) —
Operating loss (34 ) (85 ) 51 (135 ) (143 ) 8
Non-operating pension and other post-employment benefit costs (11 ) (1 ) (10 ) (26 ) (9 ) (17 )
Interest income and other 1 2 (1 ) — 3 (3 )
Net charge to earnings $ (44 ) $ (84 ) $ 40 $ (161 ) $ (149 ) $ (12 )

Comparing Second Quarter 2022 with Second Quarter 2021

Net charge to earnings decreased $40 million – 48 percent – primarily due to a $46 million decrease in elimination of intersegment profit in inventory and LIFO.

Comparing Year-to-Date 2022 with Year-to-Date 2021

Net charge to earnings increased $12 million – 8 percent – primarily due to a $17 million increase in non-operating pension and other post-employment benefit costs.

INTEREST EXPENSE

Our interest expense, net of capitalized interest, was:

● $65 million for second quarter 2022 and $137 million year-to-date 2022;
● $78 million for second quarter 2021 and $157 million year-to-date 2021.
--- ---

Interest expense decreased by $13 million compared to second quarter 2021 and decreased by $20 million compared to year-to-date 2021 primarily due to decreases in the average outstanding debt and weighted average interest rate.

Refer to

Note 8: Long-Term Debt and Line of Credit

for further information.

INCOME TAXES

Our provision for income taxes was:

● a $184 million expense for second quarter 2022 and a $393 million expense year-to-date 2022;
● a $324 million expense for second quarter 2021 and a $513 million expense year-to-date 2021.
--- ---

Our provision for income taxes is primarily driven by earnings generated by our TRSs. Income tax expense decreased by $120 million compared to year-to-date 2021 primarily due to a tax benefit of approximately $69 million resulting from the $276 million pretax loss on debt extinguishment recorded in first quarter 2022, as well as a decrease in our estimated annual effective tax rate.

Refer to

Note 14: Income Taxes

and

Note 8: Long-Term Debt and Line of Credit

for further information.

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 June 30, 2022, we had over $1.7 billion in cash and cash equivalents and $1.5 billion of availability on our line of credit, which expires in January 2025. We believe we have sufficient liquidity to meet our cash requirements for the foreseeable future.

CASH FROM OPERATIONS

Consolidated net cash from operations was:

● $2,103 million for year-to-date 2022 and
● $2,006 million for year-to-date 2021.
--- ---

Net cash from operations increased $97 million, primarily due to increased cash inflows from our business operations. This change was partially offset by a $91 million increase in cash paid for income taxes.

CASH FROM INVESTING ACTIVITIES

Consolidated net cash from investing activities was:

● $(433) million for year-to-date 2022 and
● $(273) million for year-to-date 2021.
--- ---

Net cash from investing activities decreased $160 million, primarily due to:

● a $134 million increase in cash paid for acquisition of timberlands and
● a $26 million increase in cash paid for capital expenditures.
--- ---

Summary of Capital Spending by Business Segment

YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS JUNE 2022 JUNE 2021
Timberlands $ 53 $ 49
Wood Products 95 76
Unallocated Items 3 —
Total $ 151 $ 125

We anticipate our capital expenditures for 2022 to be approximately $460 million. The amount we spend on capital expenditures could change.

CASH FROM FINANCING ACTIVITIES

Consolidated net cash from financing activities was:

● $(1,938) million for year-to-date 2022 and
● $(451) million for year-to-date 2021.
--- ---

Net cash from financing activities decreased $1,487 million, primarily due to:

● a $1,097 million increase in cash paid for dividends;
● a $259 million increase in cash used for repurchases of common stock and
--- ---
● a $97 million increase in net cash used for payments on long term debt.
--- ---

Line of Credit

We had no outstanding borrowings on our $1.5 billion five-year senior unsecured revolving credit facility as of June 30, 2022 or December 31, 2021. This credit facility expires in January 2025.

Our revolving credit agreement utilizes the London Inter-bank Offered Rate (LIBOR) as a basis for one of the interest rate options available to the company to apply to outstanding borrowings. We plan to transition our revolving credit facility to an alternate reference rate prior to the cessation of LIBOR. We have included provisions in our revolving credit agreement that specifically contemplate the transition from LIBOR to a replacement benchmark rate.

Refer to

Note 8: Long-Term Debt and Line of Credit

for further information.

Long-Term Debt

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.

Refer to

Note 8: Long-Term Debt and Line of Credit

for further information.

Debt Covenants

As of June 30, 2022, Weyerhaeuser Company was in compliance with its debt covenants. There have been no significant changes to the debt covenants presented in our 2021 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:

● $14 million for year-to-date 2022 and
● $45 million for year-to-date 2021.
--- ---

Our average stock price was $38.89 and $35.60 for year-to-date 2022 and 2021, respectively.

Dividend Payments

We paid cash dividends on common shares of:

● $1,352 million for year-to-date 2022 and
● $255 million for year-to-date 2021.
--- ---

The increase in dividends paid is primarily due to a supplemental dividend of $1.45 per share ($1,084 million in total) paid in the first quarter of 2022 based on 2021 financial results.

Share Repurchases

We repurchased 3,197,675 shares for approximately $121 million (including transaction fees) during first quarter 2022 and 3,784,787 shares for approximately $138 million (including transaction fees) during second quarter 2022 under the 2021 Repurchase Program. We did not repurchase shares during year-to-date 2021. There were no unsettled repurchases as of June 30, 2022 or December 31, 2021. Refer to

Note 4: Net Earnings Per Share and Share Repurchases

for further information.

PERFORMANCE MEASURES

Adjusted EBITDA by Segment

QUARTER ENDED AMOUNT OF<br><br><br>CHANGE YEAR-TO-DATE ENDED AMOUNT OF<br><br><br>CHANGE
DOLLAR AMOUNTS IN MILLIONS JUNE 2022 JUNE 2021 2022 VS.<br><br><br>2021 JUNE 2022 JUNE 2021 2022 VS.<br><br><br>2021
Adjusted EBITDA by Segment:
Timberlands $ 219 $ 180 $ 39 $ 466 $ 352 $ 114
Real Estate & ENR 107 91 16 223 187 36
Wood Products 912 1,386 (474 ) 2,145 2,275 (130 )
1,238 1,657 (419 ) 2,834 2,814 20
Unallocated Items (33 ) (84 ) 51 (132 ) (140 ) 8
Adjusted EBITDA $ 1,205 $ 1,573 $ (368 ) $ 2,702 $ 2,674 $ 28

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.

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 June 30, 2022:

DOLLAR AMOUNTS IN MILLIONS Timberlands Real Estate &<br><br><br>ENR Wood<br><br><br>Products Unallocated<br><br><br>Items Total
Adjusted EBITDA by Segment:
Net earnings $ 788
Interest expense, net of capitalized interest 65
Income taxes 184
Net contribution (charge) to earnings $ 153 $ 65 $ 863 $ (44 ) $ 1,037
Non-operating pension and other post-employment benefit costs — — — 11 11
Interest income and other — — — (1 ) (1 )
Operating income (loss) 153 65 863 (34 ) 1,047
Depreciation, depletion and amortization 66 3 49 1 119
Basis of real estate sold — 39 — — 39
Adjusted EBITDA $ 219 $ 107 $ 912 $ (33 ) $ 1,205

The table below reconciles Adjusted EBITDA for the quarter ended June 30, 2021:

DOLLAR AMOUNTS IN MILLIONS Timberlands Real Estate &<br><br><br>ENR Wood<br><br><br>Products Unallocated<br><br><br>Items Total
Adjusted EBITDA by Segment:
Net earnings $ 1,028
Interest expense, net of capitalized interest 78
Income taxes 324
Net contribution (charge) to earnings $ 113 $ 63 $ 1,338 $ (84 ) $ 1,430
Non-operating pension and other post-employment benefit costs — — — 1 1
Interest income and other — — — (2 ) (2 )
Operating income (loss) 113 63 1,338 (85 ) 1,429
Depreciation, depletion and amortization 67 4 48 1 120
Basis of real estate sold — 24 — — 24
Adjusted EBITDA $ 180 $ 91 $ 1,386 $ (84 ) $ 1,573

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

DOLLAR AMOUNTS IN MILLIONS Timberlands Real Estate &<br><br><br>ENR Wood<br><br><br>Products Unallocated<br><br><br>Items Total
Adjusted EBITDA by Segment:
Net earnings $ 1,559
Interest expense, net of capitalized interest 137
Loss on debt extinguishment^(^^1)^ 276
Income taxes 393
Net contribution (charge) to earnings $ 335 $ 146 $ 2,045 $ (161 ) $ 2,365
Non-operating pension and other post-employment benefit costs — — — 26 26
Interest income and other — — — — —
Operating income (loss) 335 146 2,045 (135 ) 2,391
Depreciation, depletion and amortization 131 7 100 3 241
Basis of real estate sold — 70 — — 70
Adjusted EBITDA $ 466 $ 223 $ 2,145 $ (132 ) $ 2,702
(1) Loss on debt extinguishment is a special item consisting of a pretax charge of $276 million related to early debt retirement.
--- ---

The table below reconciles Adjusted EBITDA for the year-to-date period ended June 30, 2021:

DOLLAR AMOUNTS IN MILLIONS Timberlands Real Estate<br><br><br>& ENR Wood<br><br><br>Products Unallocated<br><br><br>Items Total
Adjusted EBITDA by Segment:
Net earnings $ 1,709
Interest expense, net of capitalized interest 157
Income taxes 513
Net contribution (charge) to earnings $ 221 $ 129 $ 2,178 $ (149 ) $ 2,379
Non-operating pension and other post-employment benefit costs — — — 9 9
Interest income and other — — — (3 ) (3 )
Operating income (loss) 221 129 2,178 (143 ) 2,385
Depreciation, depletion and amortization 131 7 97 3 238
Basis of real estate sold — 51 — — 51
Adjusted EBITDA $ 352 $ 187 $ 2,275 $ (140 ) $ 2,674

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 YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS JUNE 2022 JUNE 2021 JUNE 2022 JUNE 2021
Net earnings $ 788 $ 1,028 $ 1,559 $ 1,709
Loss on debt extinguishment — — 207 —
Net earnings before special items $ 788 $ 1,028 $ 1,766 $ 1,709

Net Earnings per Diluted Share Before Special Items

QUARTER ENDED YEAR-TO-DATE ENDED
JUNE 2022 JUNE 2021 JUNE 2022 JUNE 2021
Net earnings per diluted share $ 1.06 $ 1.37 $ 2.09 $ 2.28
Loss on debt extinguishment — — 0.28 —
Net earnings per diluted share before special items $ 1.06 $ 1.37 $ 2.37 $ 2.28

CRITICAL ACCOUNTING POLICIES

There have been no significant changes during year-to-date 2022 to the critical accounting policies presented in our 2021 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.
--- ---

We estimate the fair value of our debt instruments using 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.

Summary of Long-Term Indebtedness Principal Obligations as of June 30, 2022

DOLLAR AMOUNTS IN MILLIONS 2022 2023 2024 2025 2026 THEREAFTER TOTAL^(^^1)^ FAIR VALUE
Fixed-rate debt $ — $ 978 $ — $ 210 $ 272 $ 3,633 $ 5,093 $ 5,118
Average interest rate — % 5.44 % — % 8.31 % 7.65 % 5.00 % 5.36 % N/A
(1) Excludes $40 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 June 30, 2022, 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 year-to-date 2022 that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

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 2021 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 second quarter 2022:

COMMON SHARE REPURCHASES DURING SECOND QUARTER 2022 TOTAL NUMBER<br><br><br>OF SHARES<br><br><br>PURCHASED AVERAGE PRICE<br><br><br>PAID PER SHARE TOTAL NUMBER<br><br><br>OF SHARES<br><br><br>PURCHASED AS<br><br><br>PART OF PUBLICLY<br><br><br>ANNOUNCED<br><br><br>PROGRAMS APPROXIMATE<br><br><br>DOLLAR VALUE<br><br><br>OF SHARES THAT<br><br><br>MAY YET BE<br><br><br>PURCHASED<br><br><br>UNDER THE<br><br><br>PROGRAMS
April 1 – April 30 981,596 $ 37.88 981,596 $ 768,422,544
May 1 – May 31 — — — 768,422,544
June 1 – June 30 2,803,191 35.66 2,803,191 668,467,616
Total 3,784,787 $ 36.23 3,784,787 $ 668,467,616

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 first quarter 2022, we repurchased 3,197,675 common shares for approximately $121 million (including transaction fees) and during second quarter 2022, we repurchased 3,784,787 common shares for approximately $138 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 June 30, 2022, we had remaining authorization of $668 million for future stock repurchases.

Item 6. EXHIBITS

10.1 Weyerhaeuser Company 2022 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on May 13, 2022 – Commission File Number 1-4825)
10.2 Form of 2022 Long-Term Incentive Plan Performance Share Unit Award Terms and Conditions (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed May 13, 2022 – Commission File Number 1-4825)
10.3 Form of 2022 Long-Term Incentive Plan Restricted Stock Unit Award Terms and Conditions (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed May 13, 2022 – 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 June 30, 2022, has been formatted in Inline XBRL.

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: July 29, 2022 By: /s/ David M. Wold
David M. Wold
Senior Vice President and Chief Financial Officer
(Principal Accounting Officer and Duly Authorized Officer)

29

wy-ex311_6.htm

EXHIBIT 31.1

Certification Pursuant to Rule 13a-14(a)

Under the Securities Exchange Act of 1934

I, Devin W. Stockfish, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Weyerhaeuser Company.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
--- ---
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
--- ---
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
--- ---
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
--- ---
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
--- ---
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
--- ---
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
--- ---
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
--- ---
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
--- ---
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
--- ---
Date: July 29, 2022
--- ---
/s/ DEVIN W. STOCKFISH
Devin W. Stockfish<br><br><br>President and Chief Executive Officer

wy-ex312_7.htm

EXHIBIT 31.2

Certification Pursuant to Rule 13a-14(a)

Under the Securities Exchange Act of 1934

I, David M. Wold, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Weyerhaeuser Company.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
--- ---
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
--- ---
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
--- ---
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
--- ---
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
--- ---
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
--- ---
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
--- ---
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
--- ---
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
--- ---
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
--- ---
Date: July 29, 2022
--- ---
/s/ DAVID M. WOLD
David M. Wold<br><br><br>Senior Vice President and Chief Financial Officer

wy-ex32_8.htm

EXHIBIT 32

Certification Pursuant to Rule 13a-14(b)

Under the Securities Exchange Act of 1934 and

Section 1350, Chapter 63 of Title 18, United States Code

Pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and Section 1350, Chapter 63 of Title 18, United States Code, each of the undersigned officers of Weyerhaeuser Company, a Washington corporation (the “Company”), hereby certifies that:

The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 and dated July 29, 2022 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ DEVIN W. STOCKFISH
Devin W. Stockfish<br><br><br>President and Chief Executive Officer
Dated: July 29, 2022
/s/ DAVID M. WOLD
David M. Wold<br><br><br>Senior Vice President and Chief Financial Officer
Dated: July 29, 2022

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