WEYERHAEUSER CO

Previous wording

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; our capital structure and the sufficiency of our liquidity position to meet future cash requirements; compliance with covenants in our debt agreements; our expectations concerning our contingent liabilities and the sufficiency of related reserves and accruals including, but not limited to, cost estimates of future litigation and environmental remediation; our provision for income taxes; expected capital expenditures; expected returns on pension plan assets; market and general economic conditions, including related influencing factors such as the trajectory of U.S. housing activity, repair and remodel activity, inflation trends and interest rates; our expectations about our future opportunities in emerging carbon credit and carbon capture and storage markets; and assumptions used in valuing incentive compensation and related expense.

Current wording

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; our capital structure and the sufficiency of our liquidity position to meet future cash requirements; our cash dividend framework, including our target percentage return to shareholders of Adjusted Funds Available for Distribution, including expected supplemental cash dividends and future share repurchases; compliance with covenants in our debt agreements; our expectations concerning our contingent liabilities and the sufficiency of related reserves and accruals including, but not limited to, cost estimates of future litigation and environmental remediation; our provision for income taxes; expected capital expenditures; expected returns on pension plan assets; market and general economic conditions, including related influencing factors such as the trajectory of U.S. housing activity, repair and remodel activity, inflation trends and interest rates; expected adjustments to our lumber production in third quarter 2024; our expectations about our future opportunities in emerging carbon credit and carbon capture and storage markets; assumptions used in valuing incentive compensation and related expense and pending timberland acquisition transactions.

Previous wording

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

Current wording

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

Previous wording

Over the past year, particularly in the first half of 2023, home sales and building activity slowed due in part to higher mortgage interest rates, reduced affordability and general macroeconomic conditions. In the second half of 2023 and into first quarter 2024, new home sales and single-family construction activity strengthened, supported by near record-low levels of existing inventory and resilient levels of demand. On a seasonally adjusted annual basis, as reported by the U.S. Census Bureau, housing starts for first quarter 2024 averaged 1.4 million units, a 4.7 percent decrease from fourth quarter 2023. Single-family starts averaged 1.1 million units in first quarter 2024, a 1.4 percent increase from fourth quarter 2023. Multi-family starts averaged 346 thousand units in first quarter 2024, which was a 19.5 percent decrease from fourth quarter 2023. Single-family construction is the primary driver for our business as compared to multi-family due to the amount of wood products used. Sales of newly built, single-family homes averaged a seasonally adjusted annual rate of 667 thousand units for first quarter 2024, an increase of 3.5 percent from fourth quarter 2023. Over the medium to long-term, we expect a favorable U.S. housing construction market supported by strong demographics in the key home buying age cohorts, a decade of under building and historically low housing inventory.

Current wording

Over the first half of the year, home sales and building activity moderated in part due to continued elevated mortgage interest rates, reduced affordability and general macroeconomic conditions. Specifically, multi-family construction has been hampered by a large supply of recently completed projects as well as higher interest rates and other factors constraining the underwriting of proposed projects. In contrast, new single-family home construction has remained resilient, as existing homeowners continued to be constrained by the lock-in effect of lower mortgage rates. On a seasonally adjusted annual basis, as reported by the U.S. Census Bureau, housing starts for second quarter 2024 averaged 1.35 million units, a 4.2 percent decrease from first quarter 2024. Single-family starts averaged 1.0 million units in second quarter 2024, a 5.2 percent decrease from first quarter 2024. Multi-family starts averaged 342 thousand units in second quarter 2024, which was a 1.0 percent decrease from first quarter 2024. Single-family construction is the primary driver for our business as compared to multi-family due to the amount of wood products used. Sales of newly built, single-family homes averaged a seasonally adjusted annual rate of 656 thousand units for second quarter 2024, a decrease of 1.1 percent from first quarter 2024, with slower activity primarily due to high mortgage rates. Over the medium to long-term, we expect a favorable U.S. housing construction market supported by strong demographics in the key home buying age cohorts, a decade of under building and historically low housing inventory.

Previous wording

Repair and remodeling expenditures decreased by 2.8 percent from fourth quarter 2023 to first quarter 2024 according to the Census Bureau Advance Retail Spending report. Near-term, activity has been supported by existing homeowners staying in place and investing in their current homes due to the lock-in effect of having lower rate mortgages compared to current rates. Over the longer term, we expect this sector to resume pre-pandemic growth trends with healthy household balance sheets, elevated home equity and an aging U.S. housing stock, with a median age of 43 years.

Current wording

Repair and remodeling expenditures increased by 1.1 percent from first quarter 2024 to second quarter 2024 according to the Census Bureau Advance Retail Spending report. While there continues to be steady demand due to growing home equity and the lock-in effect of having lower mortgage rates compared to current rates, many homeowners have become more cautious in discretionary spending on large projects. Additionally, some repair and remodeling activity was accelerated during the pandemic which has had an impact on the level of spending. This softness has been reflected in both the do-it-yourself (DIY) and professionally built segments. Over the longer term, we expect this sector to resume pre-pandemic growth trends with healthy household balance sheets, elevated home equity and an aging U.S. housing stock, with a median age of 43 years.

Previous wording

In U.S. wood product markets, demand for lumber and OSB was influenced by cautious buyer sentiment at the outset of first quarter 2024. As the quarter progressed, demand was steady in response to strong single-family housing starts. The Random Lengths Framing Lumber Composite price averaged $403/MBF and the OSB Composite averaged $460/MSF in first quarter 2024. Over the course of the first quarter, composite prices for lumber increased from $395/MBF to $422/MBF and composite prices for OSB increased from $430/MSF to $603/MSF. Constrained capacity for OSB led to the sharp price increases, while lumber supply moderately outpaced demand.

Current wording

In U.S. wood product markets, demand for lumber and OSB was influenced by cautious buyer sentiment during the second quarter of 2024. As the quarter progressed, demand was mixed as continued strength in single-family housing starts was offset by weaker multi-family construction and repair and remodel activity. The Random Lengths Framing Lumber Composite price averaged $384/MBF and the OSB Composite averaged $487/MSF in second quarter 2024. Over the course of the second quarter, composite prices for lumber decreased from $422/MBF to $366/MBF and composite prices for OSB decreased from $603/MSF to $352/MSF. Lumber markets have been particularly challenged due to an imbalance of supply and demand, which has resulted in a sustained, weak pricing environment. In light of these conditions, Weyerhaeuser expects to reduce its lumber production by 5 to 10 percent in third quarter 2024. This reduction is inclusive of the company's decision to indefinitely curtail its lumber mill in New Bern, North Carolina. The company will continue to assess its operating rates in light of current market conditions on a go-forward basis.

Previous wording

In Western log markets, Douglas fir sawlog prices decreased 2.9 percent in first quarter 2024 compared with fourth quarter 2023, as reported by Fastmarkets RISI Log Lines based on Weyerhaeuser’s sales mix. Overall, domestic log demand and prices faced downward pressure through the quarter, as mills continued to adjust to a soft lumber market and worked through elevated log inventories. In the South, delivered sawlog prices were stable in first quarter 2024 compared to fourth quarter 2023 and declined 0.6 percent from first quarter 2023 as reported by TimberMart-South. While there continued to be demand for logs across the region and markets generally had ample log supply, a number of mills faced elevated inventories and were adjusting operations due to lower lumber prices.

Current wording

In Western log markets, Douglas fir sawlog prices decreased 4.9 percent in second quarter 2024 compared with first quarter 2024, as reported by Fastmarkets RISI Log Lines based on Weyerhaeuser’s sales mix. Overall, domestic log demand and prices faced downward pressure through the quarter, as mills continued to adjust to a soft lumber market and worked through elevated log inventories. In the South, delivered sawlog prices decreased 1.0 percent in second quarter 2024 compared to first quarter 2024 and declined 1.7 percent from second quarter 2023 as reported by TimberMart-South. While there continued to be demand for logs across the region and markets generally had ample log supply, a number of mills faced elevated inventories and were adjusting operations due to lower lumber prices.

Previous wording

Currency exchange rates, available supply from other countries and trade policy affect our export businesses. During first quarter 2024, end use demand in export markets moderated. In Japan, total housing starts decreased 7.8 percent year to date through February compared to the same period in 2023, while the key Post and Beam segment saw a 5.9 percent decrease. Lumber imports to Japan from Europe were reduced due to supply chain costs, which provided some support for log sales. China’s weaker end use demand for logs and lumber was offset by lower competitive supply, leading to an increase in pricing for logs from the West.

Current wording

Currency exchange rates, available supply from other countries and trade policy affect our export businesses. During second quarter 2024, end use demand in export markets moderated. In Japan, total housing starts decreased 4.0 percent year to date through May compared to the same period in 2023, while the key Post and Beam segment saw a 4.4 percent decrease. Lumber imports to Japan from Europe were reduced due to supply chain costs, which provided some support for log sales. China’s weaker end use demand for logs and lumber led to a decrease in pricing for logs from the West.

Previous wording

Interest rates affect our business primarily through their impact on mortgage rates and housing affordability, their general impact on the economy and their influence on our capital management activities. Actions by the U.S. Federal Reserve, the overall condition of the economy and fluctuations in financial markets are all factors that influence long-term interest rates. 30-year mortgage rates, which are correlated with long-term interest rates, increased from 6.6 percent at the end of fourth quarter 2023 to 6.8 percent at the end of first quarter 2024, according to economic data from Freddie Mac. Many builders have been able to offset higher mortgage rates through discounts, mortgage rate buydowns and modifying product offerings such as home sizes and finishes. Higher rates have also locked-in many existing homeowners from selling, reducing inventories of existing homes for sale which has led to increased demand for available new homes.

Current wording

Interest rates affect our business primarily through their impact on mortgage rates and housing affordability, their general impact on the economy and their influence on our capital management activities. Actions by the U.S. Federal Reserve, the overall condition of the economy and fluctuations in financial markets are all factors that influence long-term interest rates. 30-year mortgage rates, which are correlated with long-term interest rates, increased from 6.8 percent at the end of first quarter 2024 to 6.9 percent at the end of second quarter 2024, according to economic data from Freddie Mac. Many builders have been able to offset higher mortgage rates through discounts, mortgage rate buydowns and modifying product offerings such as home sizes and finishes. Higher rates have also locked-in many existing homeowners from selling, reducing inventories of existing homes for sale which has led to increased demand for available new homes.

Previous wording

Increased inflation affects the cost of our operations across each of our business segments, including costs for raw materials, transportation, energy and labor. The Consumer Price Index increased at an annual rate of 3.5 percent as of March 2024, which is markedly down from its peak of over 9.0 percent in June 2022. While we can offset some of the impacts of inflation through our sales activities, operational excellence initiatives and procurement practices, not all of the costs associated with inflation can be fully mitigated or passed on to the consumer.

Current wording

Increased inflation affects the cost of our operations across each of our business segments, including costs for raw materials, transportation, energy and labor. The Consumer Price Index increased at an annual rate of 3.0 percent as of June 2024, which is markedly down from its peak of over 9.0 percent in June 2022. While we can offset some of the impacts of inflation through our sales activities, operational excellence initiatives and procurement practices, not all of the costs associated with inflation can be fully mitigated or passed on to the consumer.

Previous wording

The condition of the labor market affects all of our businesses as it relates to our ability to attract and retain employees and contractors. The unemployment rate of 3.8 percent in March 2024 remained near historically low levels and increased 0.1 percent from the end of fourth quarter 2023.

Current wording

The condition of the labor market affects all of our businesses as it relates to our ability to attract and retain employees and contractors. The unemployment rate of 4.1 percent in June 2024 has increased moderately above historically low levels and increased 0.3 percent from the end of first quarter 2024.

Previous wording

Net earnings decreased $37 million – 25 percent – primarily due to the $40 million decrease in operating income, as discussed above, partially offset by a $2 million decrease in income tax expense (refer to Income Taxes).

Current wording

Net earnings decreased $57 million – 25 percent – primarily due to the $49 million decrease in operating income, as discussed above, as well as an $8 million increase in income tax expense (refer to Income Taxes).

Previous wording

Net sales decreased $85 million – 5 percent – primarily due to a $75 million decrease in Timberlands sales to unaffiliated customers, attributable to decreased log sales volumes and sales realizations.

Current wording

Net sales decreased $143 million – 4 percent – primarily due to a $95 million decrease in Wood Products net sales to unaffiliated customers attributable to decreased sales realizations across most product lines, as well as an $83 million decrease in Timberlands net sales to unaffiliated customers attributable to decreased sales volumes and sales realizations.

Previous wording

Net sales to unaffiliated customers decreased $75 million – 16 percent – primarily due to a $53 million decrease in Western log sales attributable to a 13 percent decrease in sales volumes and a 12 percent decrease in sales realizations, as well as a $17 million decrease in Southern log sales attributable to a 7 percent decrease in sales volumes and a 3 percent decrease in sales realizations.

Current wording

Net sales to unaffiliated customers decreased $83 million – 9 percent – primarily due to a $54 million decrease in Western log sales attributable to a 6 percent decrease in sales volumes and sales realizations, as well as a $26 million decrease in Southern log sales attributable to a 6 percent decrease in sales volumes and a 3 percent decrease in sales realizations.

Previous wording

Costs of sales decreased $46 million – 10 percent – primarily due to decreased Western third-party log purchases and freight costs, as well as decreased sales volumes across all regions.

Current wording

Costs of sales decreased $35 million – 4 percent – primarily due to decreased Western third-party log purchases and decreased Southern sales volumes, partially offset by increased Western logging and hauling costs.

Previous wording

Net sales increased $6 million – 6 percent – primarily due to increases in average price per acre sold and mitigation credit sales, partially offset by a decrease in royalty income from our Energy and Natural Resources business.

Current wording

Net sales increased $35 million – 19 percent – primarily due to an increase in acres sold, partially offset by a decrease in average price per acre sold and a decrease in royalty income from our Energy and Natural Resources business.

Previous wording

a $22 million decrease in complementary building products sales primarily attributable to decreased sales volumes and realizations across most products and

Current wording

a $28 million decrease in complementary building products sales attributable to decreased sales realizations and sales volumes across most products;

Previous wording

These decreases were partially offset by:

Current wording

These decreases were partially offset by a $73 million increase in oriented strand board sales attributable to a 36 percent increase in sales realizations.

Previous wording

a $51 million decrease in structural lumber sales attributable to a 6 percent decrease in sales volumes, as well as a 5 percent decrease in sales realizations;

Current wording

a $125 million decrease in structural lumber sales attributable to a 9 percent decrease in sales realizations, as well as a 3 percent decrease in sales volumes;

Previous wording

an $8 million increase in engineered solid section sales attributable to a 15 percent increase in sales volumes, partially offset by a 12 percent decrease in sales realizations.

Current wording

a $16 million decrease in engineered solid section sales attributable to a 10 percent decrease in sales realizations, partially offset by a 7 percent increase in sales volumes and

Previous wording

an $11 million decrease in other products produced primarily attributable to decreased sales realizations for wood chips.

Current wording

a $16 million decrease in other products produced primarily attributable to decreased sales realizations for wood chips.

Previous wording

a $47 million increase in oriented strand board sales attributable to a 33 percent increase in sales realizations, partially offset by an 8 percent decrease in sales volumes;

Current wording

These decreases were partially offset by a $120 million increase in oriented strand board sales attributable to a 35 percent increase in sales realizations, partially offset by a 5 percent decrease in sales volumes.

Previous wording

Costs of sales decreased $52 million – 4 percent – primarily due to decreased sales volumes for oriented strand board and structural lumber, as discussed above, as well as decreased raw material costs across most product lines.

Current wording

Costs of sales decreased $85 million – 4 percent – primarily due to decreased sales volumes for oriented strand board and structural lumber, as discussed above, as well as decreased raw material costs across most product lines.

Previous wording

Net charge to earnings increased $38 million – 131 percent – primarily due to a $15 million increase in elimination of intersegment profit in inventory and LIFO and an $11 million increase in unallocated corporate function and variable compensation expense.

Current wording

Net charge to earnings increased $52 million – 67 percent – primarily due to a $16 million increase in unallocated corporate function and variable compensation expense and a $12 million increase in elimination of intersegment profit in inventory and LIFO.

Previous wording

Interest expense increased by $1 million compared to first quarter 2023 primarily due to a series of debt issuances and retirements during 2023 that slightly increased our average outstanding debt.

Current wording

Interest expense decreased by $3 million compared to second quarter 2023 and decreased by $2 million compared to year-to-date 2023 primarily due to a series of debt issuances and retirements during 2023 that decreased our average outstanding debt.

Previous wording

Our provision for income taxes is primarily driven by earnings generated by our TRSs. Income tax expense decreased by $2 million compared to first quarter 2023 primarily due to a slight decrease in our overall earnings in first quarter 2024.

Current wording

Our provision for income taxes is primarily driven by earnings generated by our TRSs. Income tax expense increased by $6 million compared to year-to-date 2023 primarily due to a $25 million product remediation recovery received during second quarter 2024.

Previous wording

Refer to Note 14: Income Taxes for further information.

Current wording

Refer to Note 13: Other Operating (Income) Costs, Net and Note 14: Income Taxes for further information.

Previous wording

We are committed to maintaining an appropriate capital structure that provides financial flexibility and enables us to protect the interests of our shareholders and meet our obligations to our lenders, while also maintaining access to all major financial markets. As of March 31, 2024, we had $871 million in cash and cash equivalents and $1.5 billion of availability on our line of credit, which expires in March 2028. We believe we have sufficient liquidity to meet our cash requirements for the foreseeable future.

Current wording

We are committed to maintaining an appropriate capital structure that provides financial 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, 2024, we had $997 million in cash and cash equivalents and $1.5 billion of availability on our line of credit, which expires in March 2028. We believe we have sufficient liquidity to meet our cash requirements for the foreseeable future.

Previous wording

Net cash from operations decreased $2 million primarily due to a $17 million increase in cash paid for income taxes, partially offset by increased cash inflows from our business operations.

Current wording

Net cash from operations decreased $66 million primarily due to decreased cash flows from our business operations, as well as a $20 million increase in cash paid for income taxes.

Previous wording

Net cash from financing activities increased $533 million primarily due to a $551 million decrease in cash used for payments of dividends, partially offset by a $16 million increase in cash used for repurchases of common stock.

Current wording

Net cash from financing activities decreased $213 million primarily due to a $743 million decrease in net proceeds from issuance of long-term debt, partially offset by a $544 million decrease in cash used for payments of dividends.

Previous wording

In March 2023, we entered into a new $1.5 billion five-year senior unsecured revolving credit facility, which expires in March 2028 and replaced the existing facility which was set to expire in January 2025. Borrowings will bear interest at a floating rate based on either the adjusted term SOFR plus a spread or a mutually agreed upon base rate plus a spread. We had no outstanding borrowings on our $1.5 billion five-year senior unsecured revolving credit facility as of March 31, 2024 or December 31, 2023.

Current wording

We had no outstanding borrowings on our $1.5 billion five-year senior unsecured revolving credit facility as of June 30, 2024 or December 31, 2023. This credit facility expires in March 2028.

Previous wording

We have $210 million of long-term debt scheduled to mature during first quarter 2025.

Current wording

We have $210 million of long-term debt, with a weighted average interest rate of 8.314 percent, scheduled to mature during first quarter 2025.

Previous wording

We repurchased 1,472,369 common shares for approximately $49 million (including transaction fees) during first quarter 2024 and we repurchased 1,115,560 common shares for approximately $35 million (including transaction fees) during first quarter 2023 under the 2021 Repurchase Program. There were no unsettled shares as of March 31, 2024 and 13,866 unsettled shares (approximately $1 million) as of December 31, 2023. Refer to Note 4: Net Earnings Per Share and Share Repurchases for further information.

Current wording

We repurchased 1,669,145 common shares for approximately $50 million (including transaction fees) during second quarter 2024 and 3,141,514 common shares for approximately $99 million (including transaction fees) during year-to-date 2024 under the 2021 Repurchase Program. During second quarter 2023, we repurchased 1,689,874 common shares for approximately $50 million (including transaction fees) and 2,805,434 common shares for approximately $85 million (including transaction fees) during year-to-date 2023 under the 2021 Repurchase Program. There were 15,765 unsettled shares (approximately $1 million) as of June 30, 2024 and 13,866 unsettled shares (approximately $1 million) as of December 31, 2023. Refer to Note 4: Net Earnings Per Share and Share Repurchases for further information.

Previous wording

There have been no significant changes during first quarter 2024 to the critical accounting policies presented in our 2023 Annual Report on Form 10-K.

Current wording

There have been no significant changes during year-to-date 2024 to the critical accounting estimates presented in our 2023 Annual Report on Form 10-K.