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; 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.

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/or 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; expected market and general economic conditions, including related influencing factors such as the trajectory of U.S. housing construction activity, repair and remodel activity, inflation trends and interest rates; our expected lumber production operating rates in fourth quarter 2024; 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.

Previous 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.

Current wording

Over the past 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 third quarter 2024 averaged 1.3 million units, a 1.1 percent decrease from second quarter 2024. Single-family starts averaged 1.0 million units in third quarter 2024, a 4.1 percent decrease from second quarter 2024. Multi-family starts averaged 363 thousand units in third quarter 2024, which was a 7.9 percent increase from second 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 724 thousand units for third quarter 2024, an increase of 4.5 percent from second quarter 2024, supported by builder mortgage rate buydowns and other incentives. 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 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.

Current wording

Repair and remodeling expenditures increased by 1.8 percent from second quarter 2024 to third 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 some 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 42 years.

Previous 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.

Current wording

In U.S. wood product markets, demand for lumber and OSB was influenced by continued cautious buyer sentiment at the outset of third quarter 2024. As the quarter progressed, demand was mixed as continued strength in single-family housing starts was offset by weaker multi-family construction and restrained repair and remodel activity. The Random Lengths Framing Lumber Composite price averaged $383/MBF and the OSB Composite averaged $346/MSF in third quarter 2024. Over the course of the third quarter, composite prices for lumber increased from $366/MBF to $396/MBF and composite prices for OSB decreased from $352/MSF to $344/MSF. Increased curtailments, in addition to an increase in duties on Canadian lumber imports, contributed to the moderate recovery in lumber prices. In light of these conditions, we reduced our operating rates in third quarter 2024, resulting in a 10.1 percent decrease in lumber production from second quarter 2024 to third quarter 2024, which includes the previously announced indefinite curtailment of our lumber mill in New Bern, North Carolina. We expect to return to more normalized operating rates in fourth quarter 2024.

Previous 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.

Current wording

In Western log markets, Douglas fir sawlog prices decreased 3.7 percent in third quarter 2024 compared with second 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 increased 1.0 percent in third quarter 2024 compared to second quarter 2024 and declined 0.4 percent from third quarter 2023, as reported by TimberMart-South. While there continued to be demand for logs across the region, sawlog markets were generally soft given ample supply and in response to mills carrying elevated log inventories and adjusting operations in a soft lumber market. Mill adjustments during the quarter included a series of curtailments and permanent closures.

Previous 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.

Current wording

Currency exchange rates, available supply from other countries and trade policy affect our export businesses. During third quarter 2024, end use demand in export markets moderated. In Japan, total housing starts decreased 4.0 percent year to date through August compared to the same period in 2023, while the key Post and Beam segment saw a 5.0 percent decrease. Lumber imports to Japan from Europe increased, which placed some pressure on 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 6.8 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.

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, decreased from 6.9 percent in second quarter 2024 to 6.1 percent in third 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 3.0 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.

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 2.4 percent as of September 2024 compared to 3.0 percent in June 2024. This rate 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 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 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.

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 remained flat at 4.1 percent from second quarter 2024 to third quarter 2024.

Previous wording

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

Current wording

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

Previous 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.

Current wording

a $23 million decrease in Timberlands net sales to unaffiliated customers attributable to decreased sales volumes and sales realizations and

Previous 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).

Current wording

Net earnings decreased $211 million – 88 percent – primarily due to the $275 million decrease in operating income, as discussed above, partially offset by a $69 million decrease in income tax expense (refer to Income Taxes).

Previous wording

Net sales decreased $58 million – 3 percent – primarily due to a $79 million decrease in Wood Products net sales to unaffiliated customers attributable to decreased sales realizations and sales volumes across most product lines, partially offset by a $29 million increase in Real Estate, Energy and Natural Resources net sales attributable to an increase in acres sold.

Current wording

Net sales decreased $484 million – 8 percent – primarily due to a $397 million decrease in Wood Products net sales to unaffiliated customers attributable to decreased sales realizations and sales volumes across most product lines, as well as a $106 million decrease in Timberlands net sales to unaffiliated customers attributable to decreased sales volumes and sales realizations. These decreases were partially offset by a $19 million increase in Real Estate, Energy and Natural Resources net sales to unaffiliated customers attributable to an increase in acres sold, partially offset by a decrease in average price per acre sold.

Previous wording

Costs of sales increased $7 million – less than 1 percent – primarily due to an increase in acres sold in our Real Estate, Energy and Natural Resources segment, partially offset by decreased sales volumes across most product lines in our Wood Products segment.

Current wording

Costs of sales decreased $153 million – 3 percent – primarily due to decreased sales volumes across most product lines in Wood Products, as well as decreased sales volumes in our Timberlands segment, partially offset by an increase in acres sold in Real Estate, Energy and Natural Resources.

Previous wording

Operating income decreased $49 million – 15 percent – primarily due to a $65 million decrease in consolidated gross margin (see discussion of components above), partially offset by a $25 million product remediation recovery recorded in second quarter 2024 (refer to Note 13: Other Operating (Income) Costs, Net).

Current wording

Operating income decreased $364 million – 40 percent – primarily due to a $331 million decrease in consolidated gross margin (see discussion of components above), as well as a $10 million noncash impairment charge related to the indefinite curtailment of our New Bern lumber mill recorded in third quarter 2024. These decreases were partially offset by a $25 million product remediation recovery recorded in second quarter 2024 (refer to Note 13: Other Operating Costs, Net).

Previous wording

Net earnings decreased $94 million – 25 percent – primarily due to the $89 million decrease in operating income, as discussed above.

Current wording

Net earnings decreased $305 million – 49 percent – primarily due to the $364 million decrease in operating income, as discussed above, partially offset by a $63 million decrease in income tax expense (refer to Income Taxes).

Previous 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.

Current wording

Net sales to unaffiliated customers decreased $23 million – 6 percent – primarily due to an $18 million decrease in Western log sales attributable to a 7 percent decrease in sales volumes and a 4 percent decrease in sales realizations, as well as a $6 million decrease in Southern log sales attributable to a 3 percent decrease in sales volumes.

Previous wording

Costs of sales decreased $64 million – 2 percent – primarily due to decreased sales volumes for oriented strand board and structural lumber in our Wood Products segment.

Current wording

Costs of sales decreased $7 million – 2 percent – primarily due to decreased sales volumes.

Previous wording

Net sales to unaffiliated customers decreased $8 million – 2 percent – primarily due to a $9 million decrease in Southern log sales attributable to a 4 percent decrease in sales volumes and a 2 percent decrease in sales realizations.

Current wording

Net sales to unaffiliated customers decreased $106 million – 8 percent – primarily due to a $72 million decrease in Western log sales attributable to a 7 percent decrease in sales volumes and a 6 percent decrease in sales realizations, as well as a $32 million decrease in Southern log sales attributable to a 5 percent decrease in sales volumes and a 2 percent decrease in sales realizations.

Previous wording

Intersegment sales decreased $4 million – 3 percent – primarily due to a 5 percent decrease in sales realizations, partially offset by a 2 percent increase in sales volumes.

Current wording

Intersegment sales decreased $17 million – 4 percent – primarily due to a 5 percent decrease in sales realizations.

Previous wording

Net contribution to earnings decreased $63 million – 28 percent – primarily due to the change in the components of gross margin, as discussed above.

Current wording

Net contribution to earnings decreased $84 million – 28 percent – primarily due to the change in the components of gross margin, as discussed above.

Previous wording

Intersegment sales decreased $12 million – 4 percent – primarily due to a 4 percent decrease in sales realizations.

Current wording

Costs of sales decreased $12 million – 28 percent – primarily due to a decrease in acres sold.

Previous wording

Net sales increased $29 million – 36 percent – primarily due to an increase in acres sold, partially offset by a decrease in average price per acre sold.

Current wording

Net sales increased $19 million – 7 percent – primarily due to an increase in acres sold, partially offset by a decrease in average price per acre sold.

Previous 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;

Current wording

a $119 million decrease in structural lumber sales attributable to a 16 percent decrease in sales realizations, as well as a 6 percent decrease in sales volumes;

Previous 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.

Current wording

a $78 million decrease in oriented strand board sales attributable to a 27 percent decrease in sales realizations;

Previous 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

Current wording

a $41 million decrease in engineered solid section sales attributable to a 13 percent decrease in sales volumes, as well as a 6 percent decrease in sales realizations;

Previous wording

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

Current wording

a $26 million decrease in complementary building products sales attributable to decreased sales volumes across most products and

Previous wording

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

Current wording

a $9 million decrease in other products produced primarily attributable to decreased sales realizations for wood chips.

Previous wording

Net sales decreased $79 million – 5 percent – primarily due to:

Current wording

Costs of sales decreased $63 million – 5 percent – primarily due to decreased sales volumes across most product lines.

Previous wording

a $74 million decrease in structural lumber sales attributable to a 13 percent decrease in sales realizations;

Current wording

a $244 million decrease in structural lumber sales attributable to an 11 percent decrease in sales realizations, as well as a 4 percent decrease in sales volumes;

Previous wording

a $50 million decrease in complementary building products sales attributable to decreased sales realizations and sales volumes across most products;

Current wording

a $76 million decrease in complementary building products sales attributable to decreased sales volumes across most products;

Previous wording

a $24 million decrease in engineered solid section sales attributable to a 9 percent decrease in sales realizations and

Current wording

a $57 million decrease in engineered solid section sales attributable to a 9 percent decrease in sales realizations;

Previous 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.

Current wording

These decreases were partially offset by a $42 million increase in oriented strand board sales attributable to a 10 percent increase in sales realizations, partially offset by a 4 percent decrease in sales volumes.

Previous wording

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

Current wording

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

Previous wording

Operating income and net contribution to earnings increased $7 million – 13 percent – primarily due to the change in the components of gross margin, as discussed above.

Current wording

Net charge to earnings increased $7 million – 15 percent – primarily due to a $10 million decrease in interest income and other, attributable to a decrease in our cash and short-term investment accounts, and a $4 million increase in liability classified share-based compensation. These changes were partially offset by a $9 million decrease in elimination of intersegment profit in inventory and LIFO.

Previous 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.

Current wording

Net charge to earnings increased $59 million – 48 percent – primarily due to a $15 million increase in unallocated corporate function and variable compensation expense and a $12 million decrease in interest income and other, primarily attributable to a decrease in our cash and short-term investment accounts.

Previous 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.

Current wording

Interest expense decreased by $3 million compared to third quarter 2023 and decreased by $5 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 increased by $6 million compared to year-to-date 2023 primarily due to a $25 million product remediation recovery received during second quarter 2024.

Current wording

Our provision for income taxes is primarily driven by earnings generated by our TRSs. Income tax expense decreased by $63 million compared to year-to-date 2023 primarily due to a decrease in our TRS earnings in 2024, as well as a decrease in our estimated annual effective tax rate.

Previous wording

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

Current wording

Refer to 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 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.

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 September 30, 2024, we had $877 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.