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WY Weyerhaeuser

Filed: 30 Jul 21, 4:38pm

 

 

 

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, 2021

or

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

FOR THE TRANSITION PERIOD FROM             TO             

COMMISSION FILE NUMBER: 1-4825

 

WEYERHAEUSER COMPANY

(Exact name of registrant as specified in its charter)

 

 

Washington

 

91-0470860

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

 

 

220 Occidental Avenue South

Seattle, Washington

 

98104-7800

(Address of principal executive offices)

 

(Zip Code)

 

(206) 539-3000

(Registrant’s telephone number, including area code)

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $1.25 per share

 

WY

 

New York Stock Exchange

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

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

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

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

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

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

As of July 26, 2021, 749,784 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

27

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

 

 

 


 

 

PART I – FINANCIAL INFORMATION

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 2021

 

 

JUNE 2020

 

 

JUNE 2021

 

 

JUNE 2020

 

Net sales (Note 3)

 

$

3,144

 

 

$

1,631

 

 

$

5,650

 

 

$

3,359

 

Costs of sales

 

 

1,583

 

 

 

1,283

 

 

 

3,013

 

 

 

2,665

 

Gross margin

 

 

1,561

 

 

 

348

 

 

 

2,637

 

 

 

694

 

Selling expenses

 

 

24

 

 

 

18

 

 

 

44

 

 

 

40

 

General and administrative expenses

 

 

95

 

 

 

84

 

 

 

185

 

 

 

158

 

Other operating costs, net (Note 15)

 

 

13

 

 

 

3

 

 

 

23

 

 

 

13

 

Operating income

 

 

1,429

 

 

 

243

 

 

 

2,385

 

 

 

483

 

Non-operating pension and other post-employment benefit costs (Note 7)

 

 

(1

)

 

 

(10

)

 

 

(9

)

 

 

(19

)

Interest income and other

 

 

2

 

 

 

2

 

 

 

3

 

 

 

3

 

Interest expense, net of capitalized interest

 

 

(78

)

 

 

(103

)

 

 

(157

)

 

 

(188

)

Earnings before income taxes

 

 

1,352

 

 

 

132

 

 

 

2,222

 

 

 

279

 

Income taxes (Note 16)

 

 

(324

)

 

 

(60

)

 

 

(513

)

 

 

(57

)

Net earnings

 

$

1,028

 

 

$

72

 

 

$

1,709

 

 

$

222

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share, basic and diluted (Note 4)

 

$

1.37

 

 

$

0.10

 

 

$

2.28

 

 

$

0.30

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

750,127

 

 

 

746,896

 

 

 

749,429

 

 

 

746,715

 

Diluted

 

 

751,508

 

 

 

746,984

 

 

 

750,773

 

 

 

747,070

 

 

See accompanying Notes to Consolidated Financial Statements.

1


 

 

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(UNAUDITED)

 

 

 

QUARTER ENDED

 

 

YEAR-TO-DATE ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

JUNE 2021

 

 

JUNE 2020

 

 

JUNE 2021

 

 

JUNE 2020

 

Net earnings

 

$

1,028

 

 

$

72

 

 

$

1,709

 

 

$

222

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

15

 

 

 

17

 

 

 

24

 

 

 

(25

)

Changes in unamortized actuarial loss, net of tax expense of $38, $8, $45 and $24

 

 

121

 

 

 

23

 

 

 

141

 

 

 

67

 

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

 

 

0

 

 

 

1

 

 

 

1

 

 

 

2

 

Total other comprehensive income

 

 

136

 

 

 

41

 

 

 

166

 

 

 

44

 

Total comprehensive income

 

$

1,164

 

 

$

113

 

 

$

1,875

 

 

$

266

 

 

See accompanying Notes to Consolidated Financial Statements.

2


 

 

WEYERHAEUSER COMPANY

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

 

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PAR VALUE

 

JUNE 30,

2021

 

 

DECEMBER 31,

2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,777

 

 

$

495

 

Receivables, net

 

 

702

 

 

 

450

 

Receivables for taxes

 

 

7

 

 

 

82

 

Inventories (Note 5)

 

 

499

 

 

 

443

 

Assets held for sale (Note 14)

 

 

229

 

 

 

0

 

Prepaid expenses and other current assets

 

 

141

 

 

 

139

 

Total current assets

 

 

3,355

 

 

 

1,609

 

Property and equipment, less accumulated depreciation of $3,550 and $3,432

 

 

1,965

 

 

 

2,013

 

Construction in progress

 

 

102

 

 

 

73

 

Timber and timberlands at cost, less depletion

 

 

11,643

 

 

 

11,827

 

Minerals and mineral rights, less depletion

 

 

262

 

 

 

268

 

Deferred tax assets

 

 

71

 

 

 

120

 

Other assets

 

 

432

 

 

 

401

 

Total assets

 

$

17,830

 

 

$

16,311

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current maturities of long-term debt (Note 9)

 

$

150

 

 

$

150

 

Accounts payable

 

 

253

 

 

 

204

 

Accrued liabilities (Note 8)

 

 

775

 

 

 

596

 

Total current liabilities

 

 

1,178

 

 

 

950

 

Long-term debt, net (Note 9)

 

 

5,100

 

 

 

5,325

 

Deferred tax liabilities

 

 

42

 

 

 

24

 

Deferred pension and other post-employment benefits (Note 7)

 

 

747

 

 

 

911

 

Other liabilities

 

 

363

 

 

 

370

 

Total liabilities

 

 

7,430

 

 

 

7,580

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

Common shares: $1.25 par value; authorized 1,360 million shares; issued and outstanding: 749,782 thousand shares at June 30, 2021 and 747,385 thousand shares at

December 31, 2020

 

 

937

 

 

 

934

 

Other capital

 

 

8,258

 

 

 

8,208

 

Retained earnings

 

 

1,861

 

 

 

411

 

Accumulated other comprehensive loss (Note 12)

 

 

(656

)

 

 

(822

)

Total equity

 

 

10,400

 

 

 

8,731

 

Total liabilities and equity

 

$

17,830

 

 

$

16,311

 

 

See accompanying Notes to Consolidated Financial Statements.

3


 

 

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

 

 

 

YEAR-TO-DATE ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

JUNE 2021

 

 

JUNE 2020

 

Cash flows from operations:

 

 

 

 

 

 

 

 

Net earnings

 

$

1,709

 

 

$

222

 

Noncash charges (credits) to earnings:

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

238

 

 

 

240

 

Basis of real estate sold

 

 

51

 

 

 

96

 

Deferred income taxes, net

 

 

19

 

 

 

(2

)

Pension and other post-employment benefits (Note 7)

 

 

30

 

 

 

37

 

Share-based compensation expense (Note 13)

 

 

15

 

 

 

15

 

Change in:

 

 

 

 

 

 

 

 

Receivables, net

 

 

(252

)

 

 

(112

)

Receivables and payables for taxes

 

 

236

 

 

 

61

 

Inventories

 

 

(51

)

 

 

2

 

Prepaid expenses and other current assets

 

 

(1

)

 

 

5

 

Accounts payable and accrued liabilities

 

 

65

 

 

 

(61

)

Pension and post-employment benefit contributions and payments

 

 

(33

)

 

 

(16

)

Other

 

 

(20

)

 

 

(10

)

Net cash from operations

 

 

2,006

 

 

 

477

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures for property and equipment

 

 

(93

)

 

 

(102

)

Capital expenditures for timberlands reforestation

 

 

(32

)

 

 

(32

)

Acquisition of Alabama timberlands (Note 14)

 

 

(149

)

 

 

0

 

Proceeds from note receivable held by variable interest entities (Note 6)

 

 

0

 

 

 

362

 

Proceeds from sale of Montana timberlands (Note 14)

 

 

0

 

 

 

145

 

Other

 

 

1

 

 

 

3

 

Net cash from investing activities

 

 

(273

)

 

 

376

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Cash dividends on common shares

 

 

(255

)

 

 

(254

)

Net proceeds from issuance of long-term debt (Note 9)

 

 

0

 

 

 

732

 

Payments on long-term debt (Note 9)

 

 

(225

)

 

 

(588

)

Proceeds from borrowings on line of credit (Note 9)

 

 

0

 

 

 

550

 

Payments on line of credit (Note 9)

 

 

0

 

 

 

(780

)

Proceeds from exercise of stock options

 

 

45

 

 

 

6

 

Other

 

 

(16

)

 

 

(15

)

Net cash from financing activities

 

 

(451

)

 

 

(349

)

Net change in cash and cash equivalents

 

 

1,282

 

 

 

504

 

Cash and cash equivalents at beginning of period

 

 

495

 

 

 

139

 

Cash and cash equivalents at end of period

 

$

1,777

 

 

$

643

 

Cash paid (received) during the period for:

 

 

 

 

 

 

 

 

Interest, net of amount capitalized of $2 and $3

 

$

154

 

 

$

178

 

Income taxes, net of refunds

 

$

263

 

 

$

1

 

 

See accompanying Notes to Consolidated Financial Statements.

4


 

 

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(UNAUDITED)

 

 

 

QUARTER ENDED

 

 

YEAR-TO-DATE ENDED

 

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES

 

JUNE 2021

 

 

JUNE 2020

 

 

JUNE 2021

 

 

JUNE 2020

 

Common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

936

 

 

$

933

 

 

$

934

 

 

$

932

 

Issued for exercise of stock options and vested units

 

 

1

 

 

 

0

 

 

 

3

 

 

 

1

 

Balance at end of period

 

 

937

 

 

 

933

 

 

 

937

 

 

 

933

 

Other capital:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

 

8,222

 

 

 

8,159

 

 

 

8,208

 

 

 

8,152

 

Issued for exercise of stock options

 

 

27

 

 

 

0

 

 

 

43

 

 

 

6

 

Share-based compensation

 

 

8

 

 

 

8

 

 

 

15

 

 

 

15

 

Other transactions, net

 

 

1

 

 

 

(1

)

 

 

(8

)

 

 

(7

)

Balance at end of period

 

 

8,258

 

 

 

8,166

 

 

 

8,258

 

 

 

8,166

 

Retained earnings (accumulated deficit):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

 

962

 

 

 

(109

)

 

 

411

 

 

 

(3

)

Net earnings

 

 

1,028

 

 

 

72

 

 

 

1,709

 

 

 

222

 

Dividends on common shares

 

 

(129

)

 

 

0

 

 

 

(259

)

 

 

(256

)

Balance at end of period

 

 

1,861

 

 

 

(37

)

 

 

1,861

 

 

 

(37

)

Accumulated other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

 

(792

)

 

 

(901

)

 

 

(822

)

 

 

(904

)

Other comprehensive income

 

 

136

 

 

 

41

 

 

 

166

 

 

 

44

 

Balance at end of period (Note 12)

 

 

(656

)

 

 

(860

)

 

 

(656

)

 

 

(860

)

Total equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at end of period

 

$

10,400

 

 

$

8,202

 

 

$

10,400

 

 

$

8,202

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid per common share

 

$

0.17

 

 

$

0

 

 

$

0.34

 

 

$

0.34

 

 

See accompanying Notes to Consolidated Financial Statements.

5


 

 

INDEX FOR NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

6


 

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTERS AND YEAR-TO-DATE PERIODS ENDED JUNE 30, 2021 AND 2020

 

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, 2020. 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 2021

 

 

JUNE 2020

 

 

JUNE 2021

 

 

JUNE 2020

 

Sales to unaffiliated customers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timberlands

 

$

405

 

 

$

359

 

 

$

784

 

 

$

740

 

Real Estate & ENR

 

 

110

 

 

 

65

 

 

 

216

 

 

 

177

 

Wood Products

 

 

2,629

 

 

 

1,207

 

 

 

4,650

 

 

 

2,442

 

 

 

 

3,144

 

 

 

1,631

 

 

 

5,650

 

 

 

3,359

 

Intersegment sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timberlands

 

 

136

 

 

 

121

 

 

 

270

 

 

 

243

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sales

 

 

3,280

 

 

 

1,752

 

 

 

5,920

 

 

 

3,602

 

Intersegment eliminations

 

 

(136

)

 

 

(121

)

 

 

(270

)

 

 

(243

)

Total

 

$

3,144

 

 

$

1,631

 

 

$

5,650

 

 

$

3,359

 

Net contribution (charge) to earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timberlands

 

$

113

 

 

$

75

 

 

$

221

 

 

$

180

 

Real Estate & ENR

 

 

63

 

 

 

19

 

 

 

129

 

 

 

55

 

Wood Products

 

 

1,338

 

 

 

159

 

 

 

2,178

 

 

 

293

 

 

 

 

1,514

 

 

 

253

 

 

 

2,528

 

 

 

528

 

Unallocated items(1)

 

 

(84

)

 

 

(18

)

 

 

(149

)

 

 

(61

)

Net contribution to earnings

 

 

1,430

 

 

 

235

 

 

 

2,379

 

 

 

467

 

Interest expense, net of capitalized interest

 

 

(78

)

 

 

(103

)

 

 

(157

)

 

 

(188

)

Earnings before income taxes

 

 

1,352

 

 

 

132

 

 

 

2,222

 

 

 

279

 

Income taxes

 

 

(324

)

 

 

(60

)

 

 

(513

)

 

 

(57

)

Net earnings

 

$

1,028

 

 

$

72

 

 

$

1,709

 

 

$

222

 

(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.

7


 

NOTE 3: REVENUE RECOGNITION

A reconciliation of revenue recognized by our major products:

 

 

 

QUARTER ENDED

 

 

YEAR-TO-DATE ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

JUNE 2021

 

 

JUNE 2020

 

 

JUNE 2021

 

 

JUNE 2020

 

Net sales to unaffiliated customers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timberlands segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Delivered logs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic sales

 

$

80

 

 

$

71

 

 

$

159

 

 

$

158

 

Export grade sales

 

 

142

 

 

 

108

 

 

 

264

 

 

 

198

 

Subtotal West

 

 

222

 

 

 

179

 

 

 

423

 

 

 

356

 

South

 

 

145

 

 

 

145

 

 

 

276

 

 

 

295

 

North

 

 

9

 

 

 

7

 

 

 

25

 

 

 

24

 

Subtotal delivered logs sales

 

 

376

 

 

 

331

 

 

 

724

 

 

 

675

 

Stumpage and pay-as-cut timber

 

 

7

 

 

 

5

 

 

 

13

 

 

 

10

 

Recreational and other lease revenue

 

 

16

 

 

 

16

 

 

 

32

 

 

 

31

 

Other(1)

 

 

6

 

 

 

7

 

 

 

15

 

 

 

24

 

Net sales attributable to Timberlands segment

 

 

405

 

 

 

359

 

 

 

784

 

 

 

740

 

Real Estate & ENR segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate

 

 

83

 

 

 

48

 

 

 

167

 

 

 

143

 

Energy and natural resources

 

 

27

 

 

 

17

 

 

 

49

 

 

 

34

 

Net sales attributable to Real Estate & ENR segment

 

 

110

 

 

 

65

 

 

 

216

 

 

 

177

 

Wood Products segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Structural lumber

 

 

1,349

 

 

 

538

 

 

 

2,339

 

 

 

1,046

 

Oriented strand board

 

 

605

 

 

 

179

 

 

 

1,043

 

 

 

369

 

Engineered solid section

 

 

166

 

 

 

111

 

 

 

308

 

 

 

238

 

Engineered I-joists

 

 

104

 

 

 

70

 

 

 

187

 

 

 

148

 

Softwood plywood

 

 

69

 

 

 

34

 

 

 

125

 

 

 

73

 

Medium density fiberboard

 

 

43

 

 

 

33

 

 

 

91

 

 

 

77

 

Complementary building products

 

 

213

 

 

 

169

 

 

 

384

 

 

 

322

 

Other(2)

 

 

80

 

 

 

73

 

 

 

173

 

 

 

169

 

Net sales attributable to Wood Products segment

 

 

2,629

 

 

 

1,207

 

 

 

4,650

 

 

 

2,442

 

Total net sales

 

$

3,144

 

 

$

1,631

 

 

$

5,650

 

 

$

3,359

 

 

(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

 

Our basic and diluted earnings per share were:

$1.37 during second quarter 2021 and $2.28 during year-to-date 2021;

$0.10 during second quarter 2020 and $0.30 during year-to-date 2020.

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.

8


 

 

 

QUARTER ENDED

 

 

YEAR-TO-DATE ENDED

 

SHARES IN THOUSANDS

 

JUNE 2021

 

 

JUNE 2020

 

 

JUNE 2021

 

 

JUNE 2020

 

Weighted average common shares outstanding – basic

 

 

750,127

 

 

 

746,896

 

 

 

749,429

 

 

 

746,715

 

Dilutive potential common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

443

 

 

 

0

 

 

 

330

 

 

 

169

 

Restricted stock units

 

 

659

 

 

 

38

 

 

 

699

 

 

 

161

 

Performance share units

 

 

279

 

 

 

50

 

 

 

315

 

 

 

25

 

Total effect of outstanding dilutive potential common shares

 

 

1,381

 

 

 

88

 

 

 

1,344

 

 

 

355

 

Weighted average common shares outstanding – dilutive

 

 

751,508

 

 

 

746,984

 

 

 

750,773

 

 

 

747,070

 

 

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 2021

 

 

JUNE 2020

 

 

JUNE 2021

 

 

JUNE 2020

 

Stock options

 

 

0

 

 

 

4,676

 

 

 

0

 

 

 

4,676

 

Performance share units

 

 

1,142

 

 

 

1,139

 

 

 

1,142

 

 

 

1,139

 

 

 

NOTE 5: INVENTORIES

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

 

DOLLAR AMOUNTS IN MILLIONS

 

JUNE 30,

2021

 

 

DECEMBER 31,

2020

 

LIFO inventories:

 

 

 

 

 

 

 

 

Logs

 

$

17

 

 

$

24

 

Lumber, plywood, panels and fiberboard

 

 

80

 

 

 

59

 

Other products

 

 

10

 

 

 

9

 

Moving average cost or FIFO inventories:

 

 

 

 

 

 

 

 

Logs

 

 

67

 

 

 

64

 

Lumber, plywood, panels, fiberboard and engineered wood products

 

 

104

 

 

 

84

 

Other products

 

 

109

 

 

 

100

 

Materials and supplies

 

 

112

 

 

 

103

 

Total

 

$

499

 

 

$

443

 

 

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: VARIABLE INTEREST ENTITIES

From 2002 through 2004, we sold certain nonstrategic timberlands. As a result of these sales, buyer-sponsored and monetization variable interest entities, or special purpose entities (SPEs), were formed. We were the primary beneficiary and consolidated the assets and liabilities of the SPEs involved in these transactions.

The assets of the buyer-sponsored SPEs were financial investments which consisted of bank guarantees. These bank guarantees were in turn backed by bank notes, which were the liabilities of the monetization SPEs. Interest earned from the financial investments within the buyer-sponsored SPEs was used to pay interest accrued on the corresponding monetization SPE’s note.

During first quarter 2020, we received $362 million in proceeds from our final buyer-sponsored SPE at maturity. The corresponding $302 million in liabilities of this SPE was paid in third quarter 2019.

 

 

9


 

 

NOTE 7: 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 2021

 

 

JUNE 2020

 

 

JUNE 2021

 

 

JUNE 2020

 

Service cost

 

$

10

 

 

$

8

 

 

$

21

 

 

$

18

 

Interest cost

 

 

25

 

 

 

34

 

 

 

49

 

 

 

69

 

Expected return on plan assets

 

 

(53

)

 

 

(57

)

 

 

(102

)

 

 

(116

)

Amortization of actuarial loss

 

 

27

 

 

 

31

 

 

 

57

 

 

 

61

 

Amortization of prior service cost

 

 

0

 

 

 

1

 

 

 

1

 

 

 

2

 

Total net periodic benefit cost – pension

 

$

9

 

 

$

17

 

 

$

26

 

 

$

34

 

 

 

 

OTHER POST-EMPLOYMENT BENEFITS

 

 

 

QUARTER ENDED

 

 

YEAR-TO-DATE ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

JUNE 2021

 

 

JUNE 2020

 

 

JUNE 2021

 

 

JUNE 2020

 

Interest cost

 

$

1

 

 

$

1

 

 

$

2

 

 

$

2

 

Amortization of actuarial loss

 

 

0

 

 

 

0

 

 

 

2

 

 

 

1

 

Amortization of prior service credit

 

 

1

 

 

 

0

 

 

 

0

 

 

 

0

 

Total net periodic benefit cost – other post-employment benefits

 

$

2

 

 

$

1

 

 

$

4

 

 

$

3

 

 

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 2021, we recorded an increase to the beginning of the year fair value of the pension assets of $155 million, or 5 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 increase of $17 million, or less than 1 percent. The net effect of these updates was a $138 million improvement in funded status. This change in funded status was reflected on our Consolidated Balance Sheet as of June 30, 2021.

 

 

NOTE 8: ACCRUED LIABILITIES

Accrued liabilities were comprised of the following:

 

DOLLAR AMOUNTS IN MILLIONS

 

JUNE 30,

2021

 

 

DECEMBER 31,

2020

 

Compensation and employee benefit costs

 

$

185

 

 

$

204

 

Current portion of lease liabilities

 

 

23

 

 

 

26

 

Customer rebates, volume discounts and deferred income

 

 

160

 

 

 

111

 

Interest

 

 

86

 

 

 

87

 

Taxes payable

 

 

235

 

 

 

75

 

Other

 

 

86

 

 

 

93

 

Total

 

$

775

 

 

$

596

 

 

 

10


 

 

NOTE 9: LONG-TERM DEBT AND LINE OF CREDIT

In May 2021, we repaid our $225 million variable-rate term loan that was scheduled to mature in July 2026.  

In March 2020, we issued $750 million of 4.00 percent notes due in April 2030. The net proceeds after deducting the discount, underwriting fees and issuance costs were $732 million. In May 2020, a portion of the net proceeds was used to redeem our $569 million 4.70 percent notes due in March 2021. A net pretax charge of $11 million was included in “Interest expense, net of capitalized interest” in the Consolidated Statement of Operations in second quarter 2020 for the make-whole premium in connection with the early extinguishment of the $569 million notes, partially offset by the write-off of an unamortized fair value step-up adjustment.

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 0 outstanding borrowings on our credit facility as of June 30, 2021 and December 31, 2020.

 

 

NOTE 10: FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values and carrying values of our long-term debt and line of credit consisted of the following:

 

 

 

JUNE 30,

2021

 

 

DECEMBER 31,

2020

 

DOLLAR AMOUNTS IN MILLIONS

 

CARRYING

VALUE

 

 

FAIR VALUE

(LEVEL 2)

 

 

CARRYING

VALUE

 

 

FAIR VALUE

(LEVEL 2)

 

Long-term debt (including current maturities) and line of credit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed rate

 

$

5,250

 

 

$

6,529

 

 

$

5,250

 

 

$

6,718

 

Variable rate

 

 

0

 

 

 

0

 

 

 

225

 

 

 

225

 

Total debt

 

$

5,250

 

 

$

6,529

 

 

$

5,475

 

 

$

6,943

 

 

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 variable rate long-term debt and line of credit instruments have net carrying values that approximate their fair values with only insignificant differences. The inputs to these valuations 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, and 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.

 

 

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, 2021, our total accrual for future estimated remediation costs on active Superfund sites and other sites for which we are potentially responsible was approximately $58 million. These amounts are recorded in "Accrued liabilities" and "Other liabilities" on our Consolidated Balance Sheet.

 

 

11


 

 

NOTE 12: 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 2021

 

 

JUNE 2020

 

 

JUNE 2021

 

 

JUNE 2020

 

Pension(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

(1,044

)

 

$

(1,084

)

 

$

(1,064

)

 

$

(1,128

)

Other comprehensive income before reclassifications

 

 

100

 

 

 

0

 

 

 

96

 

 

 

20

 

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

 

 

20

 

 

 

24

 

 

 

44

 

 

 

48

 

Total other comprehensive income

 

 

120

 

 

 

24

 

 

 

140

 

 

 

68

 

Balance at end of period

 

 

(924

)

 

 

(1,060

)

 

 

(924

)

 

 

(1,060

)

Other Post-Employment Benefits(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

(11

)

 

$

(11

)

 

$

(12

)

 

$

(12

)

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

 

 

1

 

 

 

0

 

 

 

2

 

 

 

1

 

Total other comprehensive income

 

 

1

 

 

 

0

 

 

 

2

 

 

 

1

 

Balance at end of period

 

 

(10

)

 

 

(11

)

 

 

(10

)

 

 

(11

)

Translation Adjustments and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

263

 

 

$

194

 

 

$

254

 

 

$

236

 

Translation adjustments

 

 

15

 

 

 

17

 

 

 

24

 

 

 

(25

)

Total other comprehensive income (loss)

 

 

15

 

 

 

17

 

 

 

24

 

 

 

(25

)

Balance at end of period

 

 

278

 

 

 

211

 

 

 

278

 

 

 

211

 

Accumulated other comprehensive loss, end of period

 

$

(656

)

 

$

(860

)

 

$

(656

)

 

$

(860

)

(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 7: Pension and Other Post-Employment Benefit Plans.

 

 

NOTE 13: SHARE-BASED COMPENSATION

Share-based compensation activity during year-to-date 2021 included the following:

 

SHARES IN THOUSANDS

 

GRANTED

 

 

VESTED

 

Restricted stock units (RSUs)

 

 

769

 

 

 

781

 

Performance share units (PSUs)

 

 

354

 

 

 

229

 

 

A total of 2.4 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 2021 was $34.38. The vesting provisions for RSUs granted in 2021 were consistent with prior year grants.

Performance Share Units

The weighted average grant date fair value of PSUs granted in 2021 was $38.50. The final number of shares granted in 2021 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 2021 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 2021

 

 

 

PERFORMANCE SHARE UNITS

 

Performance period

 

2/11/2021 – 12/31/2023

 

Valuation date average stock price(1)

 

$34.14

 

Expected dividends

 

1.99%

 

Risk-free rate

 

0.02% – 0.20%

 

Expected volatility

 

32.87% – 52.82%

 

(1)

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

 

12


 

 

 

NOTE 14: TIMBERLAND ACQUISITIONS AND DIVESTITURES

Washington Divestiture

On April 30, 2021, we announced an agreement to sell 145,000 acres of timberlands in the North Cascades region of Washington. On July 7, 2021, we completed the sale for $261 million in cash proceeds, which is net of purchase price adjustments and closing costs. This transaction was structured as a like-kind exchange along with the Alabama acquisition discussed below. As a result of the sale, a gain of approximately $30 million will be recorded in the Timberlands segment in our third quarter 2021 Consolidated Statement of Operations.

This divestiture is not considered a strategic shift that has, or will have, a major effect on our operations or financial results and therefore does not meet the requirements for presentation as discontinued operations. However, the related assets have met the relevant criteria to be classified as held for sale in the current period Consolidated Balance Sheet. The designation as held for sale requires us to record the related net assets at the lower of their current cost basis or fair value, less an amount of estimated selling costs. This classification does not affect the presentation in the Consolidated Statement of Operations. The held for sale classification did change the presentation of the related assets from long-term to current on our Consolidated Balance Sheet.

As of June 30, 2021, “Assets held for sale” had a balance of $229 million, which consisted primarily of timberlands and other related assets.

Alabama Acquisition

On February 25, 2021, we announced an agreement to purchase 69,200 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. As discussed above, this transaction was structured as a like-kind exchange, and therefore, the southwest Alabama timberlands were held on our behalf by an intermediary as of June 30, 2021.

Montana Divestiture

On December 17, 2019, we announced an agreement to sell 630,000 acres of Montana timberlands, which was part of our Timberlands business segment. On March 26, 2020, we completed the sale for $145 million in cash proceeds, which is net of purchase price adjustments and closing costs. Due to the impairment recorded during fourth quarter 2019, no material gain or loss was recorded as a result of this sale.

The divestiture was not considered a strategic shift that had or will have a major effect on our operations or financial results and therefore did not meet the requirements for presentation as discontinued operations.

 

 

NOTE 15: OTHER OPERATING COSTS, NET

Other operating costs, net were comprised of the following:

 

 

 

QUARTER ENDED

 

 

YEAR-TO-DATE ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

JUNE 2021

 

 

JUNE 2020

 

 

JUNE 2021

 

 

JUNE 2020

 

Foreign exchange losses (gains), net

 

$

1

 

 

$

(3

)

 

$

3

 

 

$

5

 

Litigation expense, net

 

 

3

 

 

 

6

 

 

 

6

 

 

 

2

 

Product remediation recovery

 

 

0

 

 

 

(8

)

 

 

0

 

 

 

(8

)

Research and development expenses

 

 

1

 

 

 

2

 

 

 

2

 

 

 

3

 

Other, net

 

 

8

 

 

 

6

 

 

 

12

 

 

 

11

 

Total other operating costs, net

 

$

13

 

 

$

3

 

 

$

23

 

 

$

13

 

 

 

NOTE 16: 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 2021 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.

 

13


 

 

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

NOTE ABOUT FORWARD-LOOKING STATEMENTS

This report contains statements concerning our future results and performance that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include, without limitation, statements relating to: our expected future financial and operating performance; our plans, strategies, intentions and expectations; estimated taxes and tax provision; our capital structure and the sufficiency of our liquidity position to meet future cash requirements; future debt maturities, compliance with our debt agreements and the effect on our financial position of the expected discontinuation of LIBOR; expected results of litigation and other legal proceedings and contingent liabilities, and the sufficiency of litigation and other contingent liability reserves and related accruals; expected uses of cash, including future dividends and expected capital expenditures; expected effects of certain acquisitions and divestitures on our operations and financial results; expected economic conditions, including markets, pricing and demand for our products; laws and regulations relevant to our businesses; assumptions used in valuing incentive compensation and related expense; and our expectations relating to returns on invested pension plan assets and expected benefit payments.

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," "intend," "maintain," "may," "plan," "potential," "project," "should," "targeted," "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. These risks and uncertainties include, but are not limited to:

the effect of general economic conditions, including employment rates, interest rate levels, 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 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;

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 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 2020 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.

14


 

 

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 or income taxes.

 

ECONOMIC AND MARKET CONDITIONS AFFECTING OUR OPERATIONS

 

Overview

In March 2020, COVID-19 was officially declared a global pandemic by the World Health Organization, and a national emergency was declared by the United States. The immediate economic effects of the pandemic were severe, as U.S. gross domestic product (GDP) declined 31 percent in the second quarter of 2020 and the national unemployment rate soared to a record-high of nearly 15 percent in April 2020 driven by the restrictions imposed in response to the pandemic. Since that time the unemployment rate has fallen steadily, and U.S. GDP has rebounded significantly as states have continued to reopen their economies and loosen restrictions. Although market conditions across our businesses deteriorated rapidly in late first quarter and early second quarter 2020, they quickly rebounded as demand for housing and wood products proved resilient. Growth in repair and remodel demand and new residential construction activity resulted in demand for wood products that significantly outpaced available supply, and benchmark pricing for our commodity wood products reached record levels. After declining briefly in the final months of 2020, benchmark prices for our commodity wood products rose sharply through May 2021 beyond the record levels established in the prior year. At the end of the second quarter, lumber prices had begun a substantial correction as demand and supply came into balance. Looking ahead to the remainder of 2021, our market conditions and the strength of the broader U.S. economy will continue to be influenced by the trajectory of U.S. housing activity, the ongoing pace of reopening economic activities due to COVID-related restrictions, inflation trends, interest rates, and the nature and extent of future government stimulus including the proposed infrastructure bill.

We have taken proactive steps to safeguard the health of our employees and preserve business continuity from the beginning of the pandemic. These actions included detailed cleaning and disinfecting procedures, strict processes around masking, social distancing and personal hygiene, clear communication with our employees, contractors, vendors and visitors about our safety protocols, comprehensive guidance for response to any COVID-19 diagnoses or exposures in our operations, suspension of all air travel and non-essential meetings, and a directive that employees work from home if feasible. In light of the recent adjustments to federal, state and local health and safety restrictions, we have begun a phased-in approach to return those employees who have been working from home back to their work locations. We remain vigilant about employee safety and will continue to monitor developments, including but not limited to the spread of disease variants and their impact on local health systems.

Business Outlook

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, especially 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. In second quarter 2021, wet weather constrained harvest operations for producers in the U.S. South. 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 is contributing to some tightening in the South.

On a seasonally adjusted annual basis, as reported by the U.S. Census Bureau, housing starts for second quarter 2021 averaged 1.57 million units, which was 2 percent below first quarter 2021. Single family starts averaged 1.1 million units, a 4 percent decline from first quarter 2021 but a 43 percent improvement over second quarter 2020. Multi-family starts averaged 464 thousand units in second quarter 2021, which was 5 percent higher than first quarter 2021 and 49 percent higher than second quarter 2020. Sales of newly built, single family homes averaged a seasonally adjusted annual rate of 728 thousand units for second quarter 2021, a 19 percent decrease from the prior quarter average of 896 thousand units and a 4 percent increase from the second quarter 2020 average of 703 thousand units.

Repair and remodeling expenditures declined by 10 percent from March to June 2021 according to the Census Bureau Advance Retail Spending report. A decrease in do-it-yourself activity contributed to lower sales at home improvement centers offset in part by a transition to larger projects undertaken by professional contractors.

In U.S. wood product markets, demand for commodity products was strong during the first half of the second quarter, and benchmark pricing for lumber and OSB reached record highs as demand continued to outpace production capacity. As repair and remodeling demand fell, lumber prices declined. OSB, which is much more focused on new residential construction activity than repair and remodeling, had not seen similar price declines as lumber at the end of the quarter. The Random Lengths Framing Lumber Composite price averaged $1,260/MBF and the OSB Composite averaged $1,373/MSF in second quarter 2021. At the end of the second quarter, prices were $770/MBF for the Lumber Composite and $1,501/MSF for the OSB composite. Through the end of July, lumber prices continued to fall, and OSB prices began to decline in the second half of July.   

In Western log markets, Douglas fir sawlog prices decreased 3 percent in second quarter 2021 compared with first quarter 2021 as reported by RISI Log Lines, in part a response to the recent decline in lumber prices. In the South, sawlog prices increased by 3 percent from first quarter 2021 as reported by TimberMart-South.

15


 

Exchange rates, available supply from other countries and trade policy affect our export businesses. During second quarter 2021, continued disruptions in shipping, diversion of European log and lumber supply to other markets, and curtailments on Australian log imports to China generally had a positive impact on China’s demand for logs imported from the U.S. In Japan, total housing starts increased 2.5 percent year to date through May compared to the same period in 2020, while the key Post and Beam segment saw a 6 percent increase. Decreased lumber imports from Europe to Japan were favorable to our Japanese log export business.

 

CONSOLIDATED RESULTS

 

How We Did Second Quarter 2021 and Year-to-Date 2021

 

 

 

QUARTER ENDED

 

 

AMOUNT OF

CHANGE

 

 

YEAR-TO-DATE ENDED

 

 

AMOUNT OF

CHANGE

 

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES

 

JUNE 2021

 

 

JUNE 2020

 

 

2021 VS.

2020

 

 

JUNE 2021

 

 

JUNE 2020

 

 

2021 VS.

2020

 

Net sales

 

$

3,144

 

 

$

1,631

 

 

$

1,513

 

 

$

5,650

 

 

$

3,359

 

 

$

2,291

 

Costs of sales

 

 

1,583

 

 

 

1,283

 

 

 

300

 

 

 

3,013

 

 

 

2,665

 

 

 

348

 

Operating income

 

 

1,429

 

 

 

243

 

 

 

1,186

 

 

 

2,385

 

 

 

483

 

 

 

1,902

 

Net earnings

 

 

1,028

 

 

 

72

 

 

 

956

 

 

 

1,709

 

 

 

222

 

 

 

1,487

 

Earnings per share, basic and diluted

 

 

1.37

 

 

 

0.10

 

 

 

1.27

 

 

 

2.28

 

 

 

0.30

 

 

 

1.98

 

 

Comparing Second Quarter 2021 with Second Quarter 2020

 

Net sales

 

Net sales increased $1,513 million – 93 percent – primarily due to a $1,422 million increase in Wood Products sales to unaffiliated customers attributable to increased sales realizations across all product lines.

 

Costs of sales

 

Costs of sales increased $300 million – 23 percent – primarily due to increased sales volumes within our Wood Products segment and increased freight costs and third-party log purchases within our Timberlands segment.

 

Operating income

 

Operating income increased $1,186 million – 488 percent – primarily due to a $1,213 million increase in consolidated gross margin (see discussion of components above).

 

Net earnings

 

Net earnings increased $956 million – 1,328 percent – primarily due to the $1,186 million increase in operating income discussed above.

 

This increase was partially offset by a $264 million increase in income tax expense (refer to Income Taxes).

 

Comparing Year-to-Date 2021 with Year-to-Date 2020

 

Net sales

 

Net sales increased $2,291 million – 68 percent – primarily due to a $2,208 million increase in Wood Products sales to unaffiliated customers attributable to increased sales realizations across all product lines.

 

Costs of sales

 

Costs of sales increased $348 million – 13 percent – primarily due to increased sales volumes within our Wood Products segment and increased freight costs and third-party log purchases within our Timberlands segment.

 

These increases were partially offset by decreased real estate acres sold within our Real Estate & ENR segment.

 

Operating income

 

Operating income increased $1,902 million – 394 percent – primarily due to a $1,943 million increase in consolidated gross margin (see discussion of components above).

 

Net earnings

 

Net earnings increased $1,487 million – 670 percent – primarily due to the $1,902 million increase in operating income discussed above.

 

This increase was partially offset by a $456 million increase in income tax expense (refer to Income Taxes).

 

16


 

 

 

TIMBERLANDS

 

How We Did Second Quarter 2021 and Year-to-Date 2021

 

 

 

QUARTER ENDED

 

 

AMOUNT OF

CHANGE

 

 

YEAR-TO-DATE ENDED

 

 

AMOUNT OF

CHANGE

 

DOLLAR AMOUNTS IN MILLIONS

 

JUNE 2021

 

 

JUNE 2020

 

 

2021 VS.

2020

 

 

JUNE 2021

 

 

JUNE 2020

 

 

2021 VS.

2020

 

Net sales to unaffiliated customers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Delivered logs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

222

 

 

$

179

 

 

$

43

 

 

$

423

 

 

$

356

 

 

$

67

 

South

 

 

145

 

 

 

145

 

 

 

 

 

 

276

 

 

 

295

 

 

 

(19

)

North(1)

 

 

9

 

 

 

7

 

 

 

2

 

 

 

25

 

 

 

24

 

 

 

1

 

Subtotal delivered logs sales

 

 

376

 

 

 

331

 

 

 

45

 

 

 

724

 

 

 

675

 

 

 

49

 

Stumpage and pay-as-cut timber

 

 

7

 

 

 

5

 

 

 

2

 

 

 

13

 

 

 

10

 

 

 

3

 

Recreational and other lease revenue

 

 

16

 

 

 

16

 

 

 

 

 

 

32

 

 

 

31

 

 

 

1

 

Other(2)

 

 

6

 

 

 

7

 

 

 

(1

)

 

 

15

 

 

 

24

 

 

 

(9

)

Subtotal net sales to unaffiliated customers

 

 

405

 

 

 

359

 

 

 

46

 

 

 

784

 

 

 

740

 

 

 

44

 

Intersegment sales

 

 

136

 

 

 

121

 

 

 

15

 

 

 

270

 

 

 

243

 

 

 

27

 

Total sales

 

$

541

 

 

$

480

 

 

$

61

 

 

$

1,054

 

 

$

983

 

 

$

71

 

Costs of sales

 

$

407

 

 

$

383

 

 

$

24

 

 

$

790

 

 

$

758

 

 

$

32

 

Operating income and Net contribution to earnings

 

$

113

 

 

$

75

 

 

$

38

 

 

$

221

 

 

$

180

 

 

$

41

 

(1)

In March 2020, we sold our Montana timberlands.

(2)

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

 

Comparing Second Quarter 2021 with Second Quarter 2020

 

Net sales to unaffiliated customers

 

Net sales to unaffiliated customers increased $46 million – 13 percent – primarily due to a $43 million increase in Western log sales attributable to a 31 percent increase in sales realizations, partially offset by a 6 percent decrease in sales volumes.

Intersegment sales

 

Intersegment sales increased $15 million – 12 percent – primarily due to a 15 percent increase in sales realizations, partially offset by a 2 percent decrease in sales volumes.

 

Costs of sales

 

Costs of sales increased $24 million – 6 percent – primarily due to increased freight costs and third-party log purchases, partially offset by decreased fee harvest volumes.

 

Operating income and Net contribution to earnings

 

Operating income and net contribution to earnings increased $38 million – 51 percent – primarily due to the change in the components of gross margin, as discussed above.

 

Comparing Year-to-Date 2021 with Year-to-Date 2020

 

Net sales to unaffiliated customers

 

Net sales to unaffiliated customers increased $44 million – 6 percent – primarily due to a $67 million increase in Western log sales attributable to a 28 percent increase in sales realizations, partially offset by a 7 percent decrease in sales volumes. The increase was partially offset by a $19 million decrease in Southern log sales attributable to a 9 percent decrease in sales volumes.

 

Intersegment sales

 

Intersegment sales increased $27 million – 11 percent – primarily due to a 15 percent increase in sales realizations, partially offset by a 3 percent decrease in sales volumes.

 

Costs of sales

 

Costs of sales increased $32 million – 4 percent – primarily due to increases in freight costs and third-party log purchases, partially offset by decreased fee harvest volumes.

 

17


 

 

Operating income and Net contribution to earnings

 

Operating income and net contribution to earnings increased $41 million – 23 percent – primarily due to the change in the components of gross margin, as discussed above.

 

 

Third-Party Log Sales Volumes and Fee Harvest Volumes

 

 

 

QUARTER ENDED

 

 

AMOUNT OF

CHANGE

 

 

YEAR-TO-DATE ENDED

 

 

AMOUNT OF

CHANGE

 

VOLUMES IN THOUSANDS

 

JUNE 2021

 

 

JUNE 2020

 

 

2021 VS.

2020

 

 

JUNE 2021

 

 

JUNE 2020

 

 

2021 VS.

2020

 

Third-party log sales – tons:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West(1)

 

 

1,608

 

 

 

1,714

 

 

 

(106

)

 

 

3,147

 

 

 

3,398

 

 

 

(251

)

South

 

 

4,150

 

 

 

4,307

 

 

 

(157

)

 

 

7,932

 

 

 

8,672

 

 

 

(740

)

North(2)

 

 

115

 

 

 

113

 

 

 

2

 

 

 

376

 

 

 

397

 

 

 

(21

)

Total

 

 

5,873

 

 

 

6,134

 

 

 

(261

)

 

 

11,455

 

 

 

12,467

 

 

 

(1,012

)

Fee harvest volumes – tons:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West(1)

 

 

2,099

 

 

 

2,236

 

 

 

(137

)

 

 

4,200

 

 

 

4,546

 

 

 

(346

)

South

 

 

5,856

 

 

 

5,914

 

 

 

(58

)

 

 

11,232

 

 

 

12,044

 

 

 

(812

)

North(2)

 

 

199

 

 

 

194

 

 

 

5

 

 

 

536

 

 

 

580

 

 

 

(44

)

Total

 

 

8,154

 

 

 

8,344

 

 

 

(190

)

 

 

15,968

 

 

 

17,170

 

 

 

(1,202

)

(1)

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

(2)

In March 2020, we sold our Montana timberlands.

 

 

REAL ESTATE, ENERGY AND NATURAL RESOURCES

 

How We Did Second Quarter 2021 and Year-to-Date 2021

 

 

 

QUARTER ENDED

 

 

AMOUNT OF

CHANGE

 

 

YEAR-TO-DATE ENDED

 

 

AMOUNT OF

CHANGE

 

DOLLAR AMOUNTS IN MILLIONS

 

JUNE 2021

 

 

JUNE 2020

 

 

2021 VS.

2020

 

 

JUNE 2021

 

 

JUNE 2020

 

 

2021 VS.

2020

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate

 

$

83

 

 

$

48

 

 

$

35

 

 

$

167

 

 

$

143

 

 

$

24

 

Energy and natural resources

 

 

27

 

 

 

17

 

 

 

10

 

 

 

49

 

 

 

34

 

 

 

15

 

Total

 

$

110

 

 

$

65

 

 

$

45

 

 

$

216

 

 

$

177

 

 

$

39

 

Costs of sales

 

$

41

 

 

$

40

 

 

$

1

 

 

$

75

 

 

$

110

 

 

$

(35

)

Operating income and Net contribution to earnings

 

$

63

 

 

$

19

 

 

$

44

 

 

$

129

 

 

$

55

 

 

$

74

 

 

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 2021 with Second Quarter 2020

 

Net sales

 

Net sales increased $45 million – 69 percent – primarily due to an increase in the average price per real estate acre sold.

 

Costs of sales

 

Costs of sales increased $1 million – 3 percent – primarily due to increased basis per real estate acre sold, partially offset by decreased real estate acres sold.

 

Operating income and Net contribution to earnings

 

Operating income and net contribution to earnings increased $44 million – 232 percent – primarily due to the change in the components of gross margin, as discussed above.

 

18


 

 

Comparing Year-to-Date 2021 with Year-to-Date 2020

 

Net sales

 

Net sales increased $39 million – 22 percent – primarily due to an increase in the average price per real estate acre sold.

Costs of sales

 

Costs of sales decreased $35 million – 32 percent – primarily due to decreased real estate acres sold.

 

Operating income and Net contribution to earnings

 

Operating income and net contribution to earnings increased $74 million – 135 percent – primarily due to the change in the components of gross margin, as discussed above.

 

REAL ESTATE SALES STATISTICS

 

 

 

QUARTER ENDED

 

 

AMOUNT OF

CHANGE

 

 

YEAR-TO-DATE ENDED

 

 

AMOUNT OF

CHANGE

 

 

 

JUNE 2021

 

 

JUNE 2020

 

 

2021 VS.

2020

 

 

JUNE 2021

 

 

JUNE 2020

 

 

2021 VS.

2020

 

Acres sold

 

 

18,415

 

 

 

31,337

 

 

 

(12,922

)

 

 

37,870

 

 

 

76,310

 

 

 

(38,440

)

Average price per acre

 

$

3,227

 

 

$

1,501

 

 

$

1,726

 

 

$

3,523

 

 

$

1,790

 

 

$

1,733

 

 

 

WOOD PRODUCTS

 

How We Did Second Quarter 2021 and Year-to-Date 2021

 

 

 

QUARTER ENDED

 

 

AMOUNT OF

CHANGE

 

 

YEAR-TO-DATE ENDED

 

 

AMOUNT OF

CHANGE

 

DOLLAR AMOUNTS IN MILLIONS

 

JUNE 2021

 

 

JUNE 2020

 

 

2021 VS.

2020

 

 

JUNE 2021

 

 

JUNE 2020

 

 

2021 VS.

2020

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Structural lumber

 

$

1,349

 

 

$

538

 

 

$

811

 

 

$

2,339

 

 

$

1,046

 

 

$

1,293

 

Oriented strand board

 

 

605

 

 

 

179

 

 

 

426

 

 

 

1,043

 

 

 

369

 

 

 

674

 

Engineered solid section

 

 

166

 

 

 

111

 

 

 

55

 

 

 

308

 

 

 

238

 

 

 

70

 

Engineered I-joists

 

 

104

 

 

 

70

 

 

 

34

 

 

 

187

 

 

 

148

 

 

 

39

 

Softwood plywood

 

 

69

 

 

 

34

 

 

 

35

 

 

 

125

 

 

 

73

 

 

 

52

 

Medium density fiberboard

 

 

43

 

 

 

33

 

 

 

10

 

 

 

91

 

 

 

77

 

 

 

14

 

Complementary building products

 

 

213

 

 

 

169

 

 

 

44

 

 

 

384

 

 

 

322

 

 

 

62

 

Other products produced(1)

 

 

80

 

 

 

73

 

 

 

7

 

 

 

173

 

 

 

169

 

 

 

4

 

Total

 

$

2,629

 

 

$

1,207

 

 

$

1,422

 

 

$

4,650

 

 

$

2,442

 

 

$

2,208

 

Costs of sales

 

$

1,229

 

 

$

997

 

 

$

232

 

 

$

2,353

 

 

$

2,037

 

 

$

316

 

Operating income and Net contribution to earnings

 

$

1,338

 

 

$

159

 

 

$

1,179

 

 

$

2,178

 

 

$

293

 

 

$

1,885

 

(1)

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

 

Comparing Second Quarter 2021 with Second Quarter 2020

 

Net sales

Net sales increased $1,422 million – 118 percent – due to:

an $811 million increase in structural lumber sales attributable to a 146 percent increase in sales realizations, as well as a 2 percent increase in sales volumes;

a $426 million increase in oriented strand board sales attributable to a 280 percent increase in sales realizations, partially offset by an 11 percent decrease in sales volumes primarily due to planned maintenance outages;

a $55 million increase in engineered solid section sales attributable to a 27 percent increase in sales volumes, as well as an 18 percent increase in sales realizations;

a $44 million increase in complementary building product sales attributable to increased sales volumes and sales realizations;

a $35 million increase in softwood plywood sales attributable to a 153 percent increase in sales realizations, partially offset by a 19 percent decrease in sales volumes primarily due to the ongoing effects of weather-related disruptions that occurred in first quarter 2021;

a $34 million increase in engineered I-joists sales attributable to a 26 percent increase in sales volumes, as well as a 20 percent increase in sales realizations;

19


 

a $10 million increase in medium density fiberboard sales attributable to a 25 percent increase in sales volumes, as well as a 5 percent increase in sales realizations and

a $7 million increase in other products produced sales attributable to increased sales volumes and sales realizations.

 

Costs of sales

Costs of sales increased $232 million – 23 percent – primarily due to an increase in sales volumes across most product lines.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings increased $1,179 million – 742 percent – primarily due to the change in the components of gross margin, as discussed above.

 

Comparing Year-to-Date 2021 with Year-to-Date 2020

 

Net sales

 

Net sales increased $2,208 million – 90 percent – primarily due to:

a $1,293 million increase in structural lumber sales attributable to a 128 percent increase in sales realizations, partially offset by a 2 percent decrease in sales volumes;

a $674 million increase in oriented strand board sales attributable to a 211 percent increase in sales realizations, partially offset by a 9 percent decrease in sales volumes primarily due to planned maintenance outages;

a $70 million increase in engineered solid section sales attributable to a 15 percent increase in sales volumes, as well as a 12 percent increase in sales realizations;

a $62 million increase in complementary building product sales attributable to increased sales volumes and sales realizations;

a $52 million increase in softwood plywood sales attributable to a 108 percent increase in sales realizations, partially offset by an 18 percent decrease in sales volumes primarily due to the effects of weather-related disruptions that occurred in first quarter 2021;

a $39 million increase in engineered I-joists sales attributable to a 14 percent increase in sales realizations, as well as a 12 percent increase in sales volumes and

a $14 million increase in medium density fiberboard sales attributable to a 16 percent increase in sales volumes, as well as a 2 percent increase in sales realizations.

 

Costs of sales

 

Costs of sales increased $316 million – 16 percent – primarily due to an increase in sales volumes for engineered wood products and complementary building products, as discussed above.

 

Operating income and Net contribution to earnings

 

Operating income and net contribution to earnings increased $1,885 million – 643 percent – primarily due to the change in the components of gross margin, as discussed above.

 

Third-Party Sales Volumes

 

 

 

QUARTER ENDED

 

 

AMOUNT OF

CHANGE

 

 

YEAR-TO-DATE ENDED

 

 

AMOUNT OF

CHANGE

 

VOLUMES IN MILLIONS(1)

 

JUNE 2021

 

 

JUNE 2020

 

 

2021 VS.

2020

 

 

JUNE 2021

 

 

JUNE 2020

 

 

2021 VS.

2020

 

Structural lumber – board feet

 

 

1,252

 

 

 

1,225

 

 

 

27

 

 

 

2,397

 

 

 

2,447

 

 

 

(50

)

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

 

 

663

 

 

 

747

 

 

 

(84

)

 

 

1,377

 

 

 

1,517

 

 

 

(140

)

Engineered solid section – cubic feet

 

 

6.6

 

 

 

5.2

 

 

 

1.4

 

 

 

12.8

 

 

 

11.1

 

 

 

1.7

 

Engineered I-joists – lineal feet

 

 

53

 

 

 

42

 

 

 

11

 

 

 

100

 

 

 

89

 

 

 

11

 

Softwood plywood – square feet (3/8”)

 

 

77

 

 

 

95

 

 

 

(18

)

 

 

171

 

 

 

208

 

 

 

(37

)

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

 

 

50

 

 

 

40

 

 

 

10

 

 

 

107

 

 

 

92

 

 

 

15

 

(1)

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

20


 

 

 

PRODUCTION AND OUTSIDE PURCHASE VOLUMES

 

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

 

 

 

QUARTER ENDED

 

 

AMOUNT OF

CHANGE

 

 

YEAR-TO-DATE ENDED

 

 

AMOUNT OF

CHANGE

 

VOLUMES IN MILLIONS

 

JUNE 2021

 

 

JUNE 2020

 

 

2021 VS.

2020

 

 

JUNE 2021

 

 

JUNE 2020

 

 

2021 VS.

2020

 

Structural lumber – board feet:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production

 

 

1,234

 

 

 

1,108

 

 

 

126

 

 

 

2,445

 

 

 

2,317

 

 

 

128

 

Outside purchase

 

 

49

 

 

 

51

 

 

 

(2

)

 

 

104

 

 

 

110

 

 

 

(6

)

Total

 

 

1,283

 

 

 

1,159

 

 

 

124

 

 

 

2,549

 

 

 

2,427

 

 

 

122

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production

 

 

683

 

 

 

742

 

 

 

(59

)

 

 

1,425

 

 

 

1,519

 

 

 

(94

)

Outside purchase

 

 

71

 

 

 

64

 

 

 

7

 

 

 

139

 

 

 

151

 

 

 

(12

)

Total

 

 

754

 

 

 

806

 

 

 

(52

)

 

 

1,564

 

 

 

1,670

 

 

 

(106

)

Engineered solid section – cubic feet:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production

 

 

6.2

 

 

 

5.3

 

 

 

0.9

 

 

 

12.2

 

 

 

11.4

 

 

 

0.8

 

Outside purchase

 

 

0.2

 

 

 

0.1

 

 

 

0.1

 

 

 

0.5

 

 

 

0.3

 

 

 

0.2

 

Total

 

 

6.4

 

 

 

5.4

 

 

 

1.0

 

 

 

12.7

 

 

 

11.7

 

 

 

1.0

 

Engineered I-joists – lineal feet:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production

 

 

51

 

 

 

38

 

 

 

13

 

 

 

95

 

 

 

85

 

 

 

10

 

Outside purchase

 

 

2

 

 

 

3

 

 

 

(1

)

 

 

5

 

 

 

5

 

 

 

 

Total

 

 

53

 

 

 

41

 

 

 

12

 

 

 

100

 

 

 

90

 

 

 

10

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production

 

 

62

 

 

 

76

 

 

 

(14

)

 

 

142

 

 

 

173

 

 

 

(31

)

Outside purchase

 

 

12

 

 

 

14

 

 

 

(2

)

 

 

26

 

 

 

30

 

 

 

(4

)

Total

 

 

74

 

 

 

90

 

 

 

(16

)

 

 

168

 

 

 

203

 

 

 

(35

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production

 

 

52

 

 

 

35

 

 

 

17

 

 

 

108

 

 

 

91

 

 

 

17

 

Total

 

 

52

 

 

 

35

 

 

 

17

 

 

 

108

 

 

 

91

 

 

 

17

 

 

21


 

 

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

CHANGE

 

 

YEAR-TO-DATE ENDED

 

 

AMOUNT OF

CHANGE

 

DOLLAR AMOUNTS IN MILLIONS

 

JUNE 2021

 

 

JUNE 2020

 

 

2021 VS.

2020

 

 

JUNE 2021

 

 

JUNE 2020

 

 

2021 VS.

2020

 

Unallocated corporate function and variable compensation expense

 

$

(36

)

 

$

(23

)

 

$

(13

)

 

$

(61

)

 

$

(42

)

 

$

(19

)

Liability classified share-based compensation

 

 

 

 

 

(4

)

 

 

4

 

 

 

(1

)

 

 

6

 

 

 

(7

)

Foreign exchange gain (loss)

 

 

(1

)

 

 

3

 

 

 

(4

)

 

 

(3

)

 

 

(5

)

 

 

2

 

Elimination of intersegment profit in inventory and LIFO

 

 

(28

)

 

 

18

 

 

 

(46

)

 

 

(45

)

 

 

5

 

 

 

(50

)

Other

 

 

(20

)

 

 

(4

)

 

 

(16

)

 

 

(33

)

 

 

(9

)

 

 

(24

)

Operating loss

 

 

(85

)

 

 

(10

)

 

 

(75

)

 

 

(143

)

 

 

(45

)

 

 

(98

)

Non-operating pension and other post-employment benefit costs

 

 

(1

)

 

 

(10

)

 

 

9

 

 

 

(9

)

 

 

(19

)

 

 

10

 

Interest income and other

 

 

2

 

 

 

2

 

 

 

 

 

 

3

 

 

 

3

 

 

 

 

Net charge to earnings

 

$

(84

)

 

$

(18

)

 

$

(66

)

 

$

(149

)

 

$

(61

)

 

$

(88

)

 

Comparing Second Quarter 2021 with Second Quarter 2020

 

Net charge to earnings increased $66 million  – 367 percent – primarily due to:

a $46 million increase in elimination of intersegment profit in inventory and LIFO and

a $13 million increase in unallocated corporate function and variable compensation expense.

 

 

Comparing Year-to-Date 2021 with Year-to-Date 2020

 

Net charge to earnings increased $88 million – 144 percent – primarily due to:

a $50 million increase in elimination of intersegment profit in inventory and LIFO;

a $19 million increase in unallocated corporate function and variable compensation expense;

a $12 million legal benefit recognized in first quarter 2020 and

a $7 million increase in liability classified share-based compensation due to an increase in our stock price for the year-to-date period ended June 30, 2021 compared to a decrease for the same period in 2020.

 

 

INTEREST EXPENSE

 

Our interest expense, net of capitalized interest, was:

$78 million for second quarter 2021 and $157 million year-to-date 2021;

$103 million for second quarter 2020 and $188 million year-to-date 2020.

 

Interest expense decreased by $25 million compared to second quarter 2020 and by $31 million compared to year-to-date 2020. The decreases were primarily due to an $11 million charge related to the early extinguishment of debt recorded in second quarter 2020, with no similar activity in second quarter and year-to-date 2021, as well as a decrease in the average outstanding debt in second quarter and year-to-date 2021.

 

Refer to Note 9: Long-Term Debt and Line of Credit for further information.

 

 

INCOME TAXES

 

Our provision for income taxes was:

a $324 million expense for second quarter 2021 and a $513 million expense year-to-date 2021;

a $60 million expense for second quarter 2020 and a $57 million expense year-to-date 2020.

Our provision for income taxes is primarily driven by earnings generated by our TRSs. Income tax expense increased by $456 million compared to year-to-date 2020 primarily due to an increase in our TRS earnings in 2021.

 

Refer to Note 16: Income Taxes for further information.

 

22


 

 

 

LIQUIDITY AND CAPITAL RESOURCES

 

We are committed to maintaining an appropriate capital structure that provides flexibility and enables us to protect the interests of our shareholders and meet our obligations to our lenders, while also maintaining access to all major financial markets. As of June 30, 2021, 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:

$2,006 million for year-to-date 2021 and

$477 million for year-to-date 2020.

 

Net cash from operations increased $1,529 million, primarily due to:

increased cash inflows from our business segments and

decreased cash used for interest payments.

These changes were partially offset by a $262 million increase in cash paid for income taxes.

 

CASH FROM INVESTING ACTIVITIES

 

Consolidated net cash from investing activities was:

$(273) million for year-to-date 2021 and

$376 million for year-to-date 2020.

 

Net cash from investing activities decreased $649 million, primarily due to:

a $362 million decrease in proceeds received from variable interest entities;

a $149 million increase in cash paid for timberlands acquisitions and

a $145 million decrease in proceeds from the sale of timberlands.

 

Summary of Capital Spending by Business Segment

 

 

 

YEAR-TO-DATE ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

JUNE 2021

 

 

JUNE 2020

 

Timberlands

 

$

49

 

 

$

51

 

Wood Products

 

 

76

 

 

 

83

 

Total

 

$

125

 

 

$

134

 

 

We expect our capital expenditures for 2021 will be approximately $460 million. The amount we spend on capital expenditures could change.

 

CASH FROM FINANCING ACTIVITIES

 

Consolidated net cash from financing activities was:

$(451) million for year-to-date 2021 and

$(349) million for year-to-date 2020.

 

Net cash from financing activities decreased $102 million, primarily due to a $369 million increase in net cash used for payments on long-term debt.

This change was partially offset by:

a $230 million decrease in net cash paid related to borrowings on our line of credit and

a $39 million increase in cash received from exercise of stock options.

 

Line of Credit

 

We had no outstanding borrowings on our $1.5 billion five-year senior unsecured revolving credit facility as of June 30, 2021 or December 31, 2020. This credit facility expires in January 2025.

 

Refer to Note 9: Long-Term Debt and Line of Credit for further information.

 

Long-Term Debt

 

In May 2021, we repaid our $225 million variable-rate term loan that was scheduled to mature in July 2026.

 

In March 2020, we issued $750 million of 4.00 percent notes due in April 2030. The net proceeds after deducting the discount, underwriting fees and issuance costs were $732 million. In May 2020, a portion of the net proceeds was used to redeem our $569 million 4.70 percent notes due in March 2021.

 

23


 

 

Refer to Note 9: Long-Term Debt and Line of Credit for further information.

 

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. Publication of USD LIBOR is expected to cease between January 1, 2022 and July 1, 2023, and we are closely monitoring ongoing market developments in the identification or creation of a widely accepted replacement rate. We have included provisions in our revolving credit agreement that specifically contemplate the transition from LIBOR to a replacement benchmark rate.

 

Debt Covenants

 

As of June 30, 2021, Weyerhaeuser Company was in compliance with its debt covenants. There have been no significant changes to the debt covenants presented in our 2020 Annual Report on Form 10-K for our existing 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:

$45 million for year-to-date 2021 and

$6 million for year-to-date 2020.

 

Our average stock price was $35.60 and $23.24 for year-to-date 2021 and 2020, respectively.

 

Dividend Payments

 

We paid cash dividends on common shares of $255 million and $254 million for year-to-date 2021 and 2020, respectively.

 

Share Repurchases

 

We did not repurchase shares during year-to-date 2021 or 2020. There were no unsettled repurchases as of June 30, 2021 or December 31, 2020.

 

 

 

PERFORMANCE MEASURES

 

Adjusted EBITDA by Segment

 

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

 

 

 

QUARTER ENDED

 

 

AMOUNT OF

CHANGE

 

 

YEAR-TO-DATE ENDED

 

 

AMOUNT OF

CHANGE

 

DOLLAR AMOUNTS IN MILLIONS

 

JUNE 2021

 

 

JUNE 2020

 

 

2021 VS.

2020

 

 

JUNE 2021

 

 

JUNE 2020

 

 

2021 VS.

2020

 

Adjusted EBITDA by Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timberlands

 

$

180

 

 

$

140

 

 

$

40

 

 

$

352

 

 

$

313

 

 

$

39

 

Real Estate & ENR

 

 

91

 

 

 

57

 

 

 

34

 

 

 

187

 

 

 

158

 

 

 

29

 

Wood Products

 

 

1,386

 

 

 

198

 

 

 

1,188

 

 

 

2,275

 

 

 

382

 

 

 

1,893

 

 

 

 

1,657

 

 

 

395

 

 

 

1,262

 

 

 

2,814

 

 

 

853

 

 

 

1,961

 

Unallocated Items

 

 

(84

)

 

 

(9

)

 

 

(75

)

 

 

(140

)

 

 

(54

)

 

 

(86

)

Adjusted EBITDA

 

$

1,573

 

 

$

386

 

 

$

1,187

 

 

$

2,674

 

 

$

799

 

 

$

1,875

 

24


 

 

 

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, 2021:

 

DOLLAR AMOUNTS IN MILLIONS

 

Timberlands

 

 

Real Estate &

ENR

 

 

Wood

Products

 

 

Unallocated

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 quarter ended June 30, 2020:

 

DOLLAR AMOUNTS IN MILLIONS

 

Timberlands

 

 

Real Estate &

ENR

 

 

Wood

Products

 

 

Unallocated

Items

 

 

Total

 

Adjusted EBITDA by Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

72

 

Interest expense, net of capitalized interest(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

103

 

Income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

60

 

Net contribution (charge) to earnings

 

$

75

 

 

$

19

 

 

$

159

 

 

$

(18

)

 

$

235

 

Non-operating pension and other post-employment benefit costs

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

10

 

Interest income and other

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

(2

)

Operating income (loss)

 

 

75

 

 

 

19

 

 

 

159

 

 

 

(10

)

 

 

243

 

Depreciation, depletion and amortization

 

 

65

 

 

 

4

 

 

 

47

 

 

 

1

 

 

 

117

 

Basis of real estate sold

 

 

 

 

 

34

 

 

 

 

 

 

 

 

 

34

 

Special items included in operating income (loss)(2)

 

 

 

 

 

 

 

 

(8

)

 

 

 

 

 

(8

)

Adjusted EBITDA

 

$

140

 

 

$

57

 

 

$

198

 

 

$

(9

)

 

$

386

 

(1)

Interest expense, net of capitalized interest includes a pretax special item of $11 million related to a net charge for the early extinguishment of debt.

(2)

Operating income (loss) includes a pretax special item consisting of an $8 million product remediation insurance recovery.

25


 

 

 

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

 

DOLLAR AMOUNTS IN MILLIONS

 

Timberlands

 

 

Real Estate &

ENR

 

 

Wood

Products

 

 

Unallocated

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

 

 

The table below reconciles Adjusted EBITDA for the year-to-date period ended June 30, 2020:

 

DOLLAR AMOUNTS IN MILLIONS

 

Timberlands

 

 

Real Estate

& ENR

 

 

Wood

Products

 

 

Unallocated

Items

 

 

Total

 

Adjusted EBITDA by Segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

222

 

Interest expense, net of capitalized interest(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

188

 

Income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

57

 

Net contribution (charge) to earnings

 

$

180

 

 

$

55

 

 

$

293

 

 

$

(61

)

 

$

467

 

Non-operating pension and other post-employment benefit costs

 

 

 

 

 

 

 

 

 

 

 

19

 

 

 

19

 

Interest income and other

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

(3

)

Operating income (loss)

 

 

180

 

 

 

55

 

 

 

293

 

 

 

(45

)

 

 

483

 

Depreciation, depletion and amortization

 

 

133

 

 

 

7

 

 

 

97

 

 

 

3

 

 

 

240

 

Basis of real estate sold

 

 

 

 

 

96

 

 

 

 

 

 

 

 

 

96

 

Special items included in operating income (loss)(2)

 

 

 

 

 

 

 

 

(8

)

 

 

(12

)

 

 

(20

)

Adjusted EBITDA

 

$

313

 

 

$

158

 

 

$

382

 

 

$

(54

)

 

$

799

 

(1)

Interest expense, net of capitalized interest includes a pretax special item of $11 million related to a net charge for the early extinguishment of debt.

(2)

Operating income (loss) includes pretax special items consisting of a $12 million noncash legal benefit within Unallocated Items and an $8 million product remediation insurance recovery within Wood Products.

 

 

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 2021

 

 

JUNE 2020

 

 

JUNE 2021

 

 

JUNE 2020

 

Net earnings

 

$

1,028

 

 

$

72

 

 

$

1,709

 

 

$

222

 

Early extinguishment of debt charge

 

 

 

 

 

11

 

 

 

 

 

 

11

 

Legal benefit

 

 

 

 

 

 

 

 

 

 

 

(12

)

Product remediation recovery

 

 

 

 

 

(6

)

 

 

 

 

 

(6

)

Net earnings before special items

 

$

1,028

 

 

$

77

 

 

$

1,709

 

 

$

215

 

26


 

 

 

Net Earnings per Diluted Share Before Special Items

 

 

 

QUARTER ENDED

 

 

YEAR-TO-DATE ENDED

 

 

 

JUNE 2021

 

 

JUNE 2020

 

 

JUNE 2021

 

 

JUNE 2020

 

Net earnings per diluted share

 

$

1.37

 

 

$

0.10

 

 

$

2.28

 

 

$

0.30

 

Early extinguishment of debt charge

 

 

 

 

 

0.02

 

 

 

 

 

 

0.02

 

Legal benefit

 

 

 

 

 

 

 

 

 

 

 

(0.02

)

Product remediation recovery

 

 

 

 

 

(0.01

)

 

 

 

 

 

(0.01

)

Net earnings per diluted share before special items

 

$

1.37

 

 

$

0.11

 

 

$

2.28

 

 

$

0.29

 

 

 

CRITICAL ACCOUNTING POLICIES

 

There have been no significant changes during year-to-date 2021 to the critical accounting policies presented in our 2020 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, 2021

 

DOLLAR AMOUNTS IN MILLIONS

 

2021

 

 

2022

 

 

2023

 

 

2024

 

 

2025

 

 

THEREAFTER

 

 

TOTAL(1)

 

 

FAIR VALUE

 

Fixed-rate debt

 

$

150

 

 

$

 

 

$

1,051

 

 

$

 

 

$

436

 

 

$

3,638

 

 

$

5,275

 

 

$

6,529

 

Average interest rate

 

 

9.00

%

 

 

%

 

 

5.56

%

 

 

%

 

 

8.33

%

 

 

5.94

%

 

 

6.15

%

 

N/A

 

(1)

Excludes $25 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, 2021, 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 2021 that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Refer to Note 11: 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 2020 Annual Report on Form 10-K.

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

Issuer Purchases of Equity Securities

 

There were no share repurchases during second quarter 2021.

 

27


 

 

 

Item 6. EXHIBITS

 

4.1

Second Amendment to Installment Loan Agreement (including as Annex A the Amended Installment Note) dated as of June 30, 2021 between Weyerhaeuser Company, as borrower, and MeadWestvaco Timber Note Holding Company II, LLC as Holder (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on July 7, 2021 – 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, 2021, has been formatted in Inline XBRL.

 

28


 

 

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 30, 2021

By:

/s/ David M. Wold

 

 

David M. Wold

 

 

Vice President and Chief Accounting Officer

 

 

(Principal Accounting Officer and Duly Authorized Officer)

 

29