WEYERHAEUSER CO

NOTE 18: OTHER OPERATING COSTS, NET

Other operating costs, net:

Income and Expense Items Included in Other Operating Costs, Net

(1)

Foreign exchange gains and losses result from changes in exchange rates primarily related to our U.S. dollar denominated cash and debt balances that are held by our Canadian subsidiary.

ENVIRONMENTAL REMEDIATION

During second quarter 2023, we recorded an $11 million noncash environmental remediation charge. This charge was attributable to our Unallocated segment and recorded within "Other operating costs, net" in our Consolidated Statement of Operations.

ASSET IMPAIRMENT

During fourth quarter 2022, we recorded a $10 million noncash impairment charge related to the planned divestiture of legacy coal assets. The loss was attributable to our Real Estate & ENR segment and was recorded within "Other operating costs, net” in our Consolidated Statement of Operations.

INSURANCE RECOVERIES

During fourth quarter 2023 and fourth quarter 2021, we received $14 million and $13 million in insurance recoveries, respectively, related to property damage and business interruption for certain of our mills in the southern U.S. as a result of severe winter storm damage in first quarter 2021. These recoveries are attributable to our Wood Products segment and are recorded within “Other operating costs, net” in our Consolidated Statement of Operations.

NOTE 19: INCOME TAXES

This note provides details about income taxes applicable to our operations, including the following:

The “Income Taxes” section of Note 1: Summary of Significant Accounting Policies provides details about how we account for our income taxes.

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EARNINGS BEFORE INCOME TAXES

Domestic and Foreign Earnings Before Income Taxes

PROVISION FOR INCOME TAXES

EFFECTIVE INCOME TAX RATE

DEFERRED TAX ASSETS AND LIABILITIES

Deferred tax assets and liabilities reflect the future tax effect created by differences between the timing of when income or deductions are recognized for pretax financial book reporting purposes versus income tax purposes. Deferred tax assets represent a future tax benefit (or reduction to income taxes in a future period), while deferred tax liabilities represent a future tax obligation (or increase to income taxes in a future period).

Balance Sheet Classification of Deferred Income Tax Assets (Liabilities)

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Items Included in Our Deferred Income Tax Assets (Liabilities)

Net Operating Loss and Credit Carryforwards

Our gross federal, state and foreign net operating loss carryforwards as of December 31, 2023 totaled $716 million as follows:

Our gross state credit carryforwards as of December 31, 2023 totaled$54 million, which includes$5 million that expire from 2026 through 2036. Our U.S. TRSs have $8 million in foreign tax credit carryforwards that expire from 2027 through 2031.

Valuation Allowances

With the exception of the valuation allowance discussed below, we believe it is more likely than not that we will have sufficient future taxable income to realize our deferred tax assets.

Our valuation allowance on our deferred tax assets was$57 million as of December 31, 2023, which related to state credits, state net operating losses and foreign tax credits.

UNRECOGNIZED TAX BENEFITS

Unrecognized tax benefits represent potential future obligations to taxing authorities if uncertain tax positions we have taken on previously filed tax returns are not sustained. In accordance with our accounting policy, we accrue interest and penalties related to unrecognized tax benefits as a component of income tax expense (see Note 1: Summary of Significant Accounting Policies). The total gross amount of unrecognized tax benefits as of December 31, 2023 and 2022, as well as the activity during those years, were immaterial.

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As of December 31, 2023, none of our U.S. federal income tax returns or foreign jurisdiction income tax returns are under examination. Our U.S. federal income tax returns are open to examination for years 2020 forward and foreign jurisdiction income tax returns are open to examination for years 2016 forward. We are undergoing examinations in state jurisdictions for tax years 2018 through 2021, with tax years 2009 forward open to examination. We do not expect that the outcome of any examination will have a material effect on our consolidated financial statements; however, audit outcomes and the timing of audit settlements are subject to significant uncertainty.

NOTE 20: GEOGRAPHIC AREAS

This note provides selected key financial data according to the geographical locations of our customers.

SALES

Our sales to unaffiliated customers outside the U.S. are primarily to customers in Canada, Japan, China and Korea. Our export sales from the U.S. are comprised primarily of logs, lumber and wood chips to customers in those same countries.

Sales by Geographic Area

LONG-LIVED ASSETS

Our long-lived assets used in the generation of revenues in different geographical areas are nearly all in the U.S. and Canada. Our long-lived assets primarily include:

Long-Lived Assets by Geographic Area

(1)

Includes legacy coal assets related to planned divestiture.

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