10-Q 1 wy-20240331.htm 10-Q 10-Q
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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 MARCH 31, 2024

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 April 22, 2024, 729,017 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

24

ITEM 4.

CONTROLS AND PROCEDURES

25

 

 

 

PART II

OTHER INFORMATION

 

ITEM 1.

LEGAL PROCEEDINGS

25

ITEM 1A.

RISK FACTORS

25

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

25

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES – NOT APPLICABLE

 

ITEM 4.

MINE SAFETY DISCLOSURES – NOT APPLICABLE

 

ITEM 5.

OTHER INFORMATION

26

ITEM 6.

EXHIBITS

27

 

SIGNATURES

28

 

 


 

 

PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

 

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

 

 

 

QUARTER ENDED

 

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES

 

MARCH 2024

 

 

MARCH 2023

 

Net sales (Note 3)

 

$

1,796

 

 

$

1,881

 

Costs of sales

 

 

1,441

 

 

 

1,512

 

Gross margin

 

 

355

 

 

 

369

 

Selling expenses

 

 

22

 

 

 

22

 

General and administrative expenses

 

 

120

 

 

 

101

 

Other operating costs, net (Note 13)

 

 

17

 

 

 

10

 

Operating income

 

 

196

 

 

 

236

 

Non-operating pension and other post-employment benefit costs (Note 6)

 

 

(11

)

 

 

(9

)

Interest income and other

 

 

16

 

 

 

12

 

Interest expense, net of capitalized interest

 

 

(67

)

 

 

(66

)

Earnings before income taxes

 

 

134

 

 

 

173

 

Income taxes (Note 14)

 

 

(20

)

 

 

(22

)

Net earnings

 

$

114

 

 

$

151

 

 

 

 

 

 

 

Earnings per share, basic and diluted (Note 4)

 

$

0.16

 

 

$

0.21

 

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

 

 

 

 

 

 

Basic

 

 

730,043

 

 

 

733,163

 

Diluted

 

 

730,558

 

 

 

733,546

 

 

See accompanying Notes to Consolidated Financial Statements.

1


 

 

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(UNAUDITED)

 

 

 

QUARTER ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2024

 

 

MARCH 2023

 

Net earnings

 

$

114

 

 

$

151

 

Other comprehensive (loss) income:

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(9

)

 

 

 

Changes in unamortized actuarial loss, net of tax expense of $4 and $2

 

 

8

 

 

 

7

 

Total other comprehensive (loss) income

 

 

(1

)

 

 

7

 

Total comprehensive income

 

$

113

 

 

$

158

 

 

See accompanying Notes to Consolidated Financial Statements.

2


 

 

WEYERHAEUSER COMPANY

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

 

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PAR VALUE

 

MARCH 31,
2024

 

 

DECEMBER 31,
2023

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

871

 

 

$

1,164

 

Receivables, net

 

 

405

 

 

 

354

 

Receivables for taxes

 

 

13

 

 

 

10

 

Inventories (Note 5)

 

 

630

 

 

 

566

 

Prepaid expenses and other current assets

 

 

192

 

 

 

219

 

Total current assets

 

 

2,111

 

 

 

2,313

 

Property and equipment, less accumulated depreciation of $3,935 and $3,901

 

 

2,283

 

 

 

2,269

 

Construction in progress

 

 

243

 

 

 

270

 

Timber and timberlands at cost, less depletion

 

 

11,481

 

 

 

11,528

 

Minerals and mineral rights, less depletion

 

 

198

 

 

 

200

 

Deferred tax assets

 

 

14

 

 

 

15

 

Other assets

 

 

426

 

 

 

388

 

Total assets

 

$

16,756

 

 

$

16,983

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current maturities of long-term debt

 

$

210

 

 

$

 

Accounts payable

 

 

310

 

 

 

287

 

Accrued liabilities (Note 7)

 

 

424

 

 

 

501

 

Total current liabilities

 

 

944

 

 

 

788

 

Long-term debt, net

 

 

4,861

 

 

 

5,069

 

Deferred tax liabilities

 

 

84

 

 

 

81

 

Deferred pension and other post-employment benefits (Note 6)

 

 

460

 

 

 

461

 

Other liabilities

 

 

353

 

 

 

348

 

Total liabilities

 

 

6,702

 

 

 

6,747

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

Common shares: $1.25 par value; authorized 1,360 million shares; issued and outstanding: 729,141 thousand shares at March 31, 2024 and 729,753 thousand shares at December 31, 2023

 

 

912

 

 

 

912

 

Other capital

 

 

7,566

 

 

 

7,608

 

Retained earnings

 

 

1,870

 

 

 

2,009

 

Accumulated other comprehensive loss (Note 11)

 

 

(294

)

 

 

(293

)

Total equity

 

 

10,054

 

 

 

10,236

 

Total liabilities and equity

 

$

16,756

 

 

$

16,983

 

 

See accompanying Notes to Consolidated Financial Statements.

3


 

 

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

 

 

 

QUARTER ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2024

 

 

MARCH 2023

 

Cash flows from operations:

 

 

 

 

 

 

Net earnings

 

$

114

 

 

$

151

 

Noncash charges (credits) to earnings:

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

125

 

 

 

126

 

Basis of real estate sold

 

 

31

 

 

 

33

 

Pension and other post-employment benefits (Note 6)

 

 

16

 

 

 

15

 

Share-based compensation expense (Note 12)

 

 

10

 

 

 

8

 

Other

 

 

1

 

 

 

3

 

Change in:

 

 

 

 

 

 

Receivables, net

 

 

(53

)

 

 

(83

)

Receivables and payables for taxes

 

 

(3

)

 

 

14

 

Inventories

 

 

(68

)

 

 

(36

)

Prepaid expenses and other current assets

 

 

17

 

 

 

(9

)

Accounts payable and accrued liabilities

 

 

(51

)

 

 

(87

)

Pension and post-employment benefit contributions and payments

 

 

(4

)

 

 

(6

)

Other

 

 

(11

)

 

 

(3

)

Net cash from operations

 

 

124

 

 

 

126

 

Cash flows from investing activities:

 

 

 

 

 

 

Capital expenditures for property and equipment

 

 

(57

)

 

 

(50

)

Capital expenditures for timberlands reforestation

 

 

(22

)

 

 

(21

)

Other

 

 

2

 

 

 

2

 

Net cash from investing activities

 

 

(77

)

 

 

(69

)

Cash flows from financing activities:

 

 

 

 

 

 

Cash dividends on common shares

 

 

(248

)

 

 

(799

)

Repurchases of common shares (Note 4)

 

 

(50

)

 

 

(34

)

Other

 

 

(10

)

 

 

(8

)

Net cash from financing activities

 

 

(308

)

 

 

(841

)

Net change in cash, cash equivalents and restricted cash

 

 

(261

)

 

 

(784

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

1,164

 

 

 

1,581

 

Cash, cash equivalents and restricted cash at end of period

 

$

903

 

 

$

797

 

Cash paid during the period for:

 

 

 

 

 

 

Interest, net of amount capitalized of $2 and $1

 

$

57

 

 

$

57

 

Income taxes, net of refunds

 

$

23

 

 

$

6

 

 

See accompanying Notes to Consolidated Financial Statements.

4


 

 

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(UNAUDITED)

 

 

 

QUARTER ENDED

 

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES

 

MARCH 2024

 

 

MARCH 2023

 

Common shares:

 

 

 

 

 

 

Balance at beginning of period

 

$

912

 

 

$

916

 

Issued for exercise of stock options and vested units

 

 

2

 

 

 

1

 

Repurchases of common shares (Note 4)

 

 

(2

)

 

 

(1

)

Balance at end of period

 

 

912

 

 

 

916

 

Other capital:

 

 

 

 

 

 

Balance at beginning of period

 

 

7,608

 

 

 

7,691

 

Issued for exercise of stock options

 

 

2

 

 

 

2

 

Repurchases of common shares (Note 4)

 

 

(47

)

 

 

(34

)

Share-based compensation

 

 

10

 

 

 

8

 

Other transactions, net

 

 

(7

)

 

 

(5

)

Balance at end of period

 

 

7,566

 

 

 

7,662

 

Retained earnings:

 

 

 

 

 

 

Balance at beginning of period

 

 

2,009

 

 

 

2,389

 

Net earnings

 

 

114

 

 

 

151

 

Dividends on common shares

 

 

(253

)

 

 

(802

)

Balance at end of period

 

 

1,870

 

 

 

1,738

 

Accumulated other comprehensive loss:

 

 

 

 

 

 

Balance at beginning of period

 

 

(293

)

 

 

(247

)

Other comprehensive (loss) income

 

 

(1

)

 

 

7

 

Balance at end of period (Note 11)

 

 

(294

)

 

 

(240

)

Total equity:

 

 

 

 

 

 

Balance at end of period

 

$

10,054

 

 

$

10,076

 

 

 

 

 

 

 

Dividends paid per common share

 

$

0.34

 

 

$

1.09

 

 

See accompanying Notes to Consolidated Financial Statements.

5


 

 

INDEX FOR NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1:

BASIS OF PRESENTATION

7

 

 

 

NOTE 2:

BUSINESS SEGMENTS

7

 

 

 

NOTE 3:

REVENUE RECOGNITION

8

 

 

 

NOTE 4:

NET EARNINGS PER SHARE AND SHARE REPURCHASES

8

 

 

 

NOTE 5:

INVENTORIES

9

 

 

 

NOTE 6:

PENSION AND OTHER POST-EMPLOYMENT BENEFIT PLANS

10

 

 

 

NOTE 7:

ACCRUED LIABILITIES

10

 

 

 

NOTE 8:

LINE OF CREDIT

10

 

 

 

NOTE 9:

FAIR VALUE OF FINANCIAL INSTRUMENTS

11

 

 

 

NOTE 10:

LEGAL PROCEEDINGS, COMMITMENTS AND CONTINGENCIES

11

 

 

 

NOTE 11:

ACCUMULATED OTHER COMPREHENSIVE LOSS

12

 

 

 

NOTE 12:

SHARE-BASED COMPENSATION

12

 

 

 

NOTE 13:

OTHER OPERATING COSTS, NET

13

 

 

 

NOTE 14:

INCOME TAXES

13

 

 

 

NOTE 15:

RESTRICTED CASH

13

 

 

 

 

 

 

 

 

 

 

6


 

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTERS ENDED MARCH 31, 2024 AND 2023

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,” “the company,” “we” 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, 2023. 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; maximizing the value of our acreage through the sale of higher and better use (HBU) properties; monetizing the value of surface and subsurface assets through leases and royalties; and manufacturing, distributing and selling products made from trees. Our business segments are organized 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 production and wind and solar) 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

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2024

 

 

MARCH 2023

 

Sales to unaffiliated customers:

 

 

 

 

 

 

Timberlands

 

$

387

 

 

$

462

 

Real Estate & ENR

 

 

107

 

 

 

101

 

Wood Products

 

 

1,302

 

 

 

1,318

 

 

 

1,796

 

 

 

1,881

 

Intersegment sales:

 

 

 

 

 

 

Timberlands

 

 

134

 

 

 

142

 

 

 

 

 

 

 

Total sales

 

 

1,930

 

 

 

2,023

 

Intersegment eliminations

 

 

(134

)

 

 

(142

)

Total

 

$

1,796

 

 

$

1,881

 

Net contribution (charge) to earnings:

 

 

 

 

 

 

Timberlands

 

$

80

 

 

$

120

 

Real Estate & ENR

 

 

60

 

 

 

53

 

Wood Products

 

 

128

 

 

 

95

 

 

 

268

 

 

 

268

 

Unallocated items(1)

 

 

(67

)

 

 

(29

)

Net contribution to earnings

 

 

201

 

 

 

239

 

Interest expense, net of capitalized interest

 

 

(67

)

 

 

(66

)

Earnings before income taxes

 

 

134

 

 

 

173

 

Income taxes

 

 

(20

)

 

 

(22

)

Net earnings

 

$

114

 

 

$

151

 

(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.

7


 

 

NOTE 3: REVENUE RECOGNITION

A reconciliation of revenue recognized by our major products:

 

 

 

QUARTER ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2024

 

 

MARCH 2023

 

Net sales to unaffiliated customers:

 

 

 

 

 

 

Timberlands segment

 

 

 

 

 

 

Delivered logs:

 

 

 

 

 

 

West

 

 

 

 

 

 

Domestic sales

 

$

94

 

 

$

93

 

Export grade sales

 

 

82

 

 

 

136

 

Subtotal West

 

 

176

 

 

 

229

 

South

 

 

151

 

 

 

168

 

North

 

 

13

 

 

 

17

 

Subtotal delivered logs sales

 

 

340

 

 

 

414

 

Stumpage and pay-as-cut timber

 

 

11

 

 

 

16

 

Recreational and other lease revenue

 

 

19

 

 

 

18

 

Other(1)

 

 

17

 

 

 

14

 

Net sales attributable to Timberlands segment

 

 

387

 

 

 

462

 

Real Estate & ENR segment

 

 

 

 

 

 

Real estate

 

 

83

 

 

 

72

 

Energy and natural resources

 

 

24

 

 

 

29

 

Net sales attributable to Real Estate & ENR segment

 

 

107

 

 

 

101

 

Wood Products segment

 

 

 

 

 

 

Structural lumber

 

 

464

 

 

 

515

 

Oriented strand board

 

 

255

 

 

 

208

 

Engineered solid section

 

 

177

 

 

 

169

 

Engineered I-joists

 

 

99

 

 

 

87

 

Softwood plywood

 

 

41

 

 

 

41

 

Medium density fiberboard

 

 

39

 

 

 

38

 

Complementary building products

 

 

141

 

 

 

163

 

Other(2)

 

 

86

 

 

 

97

 

Net sales attributable to Wood Products segment

 

 

1,302

 

 

 

1,318

 

Total net sales

 

$

1,796

 

 

$

1,881

 

(1)
Other Timberlands sales include sales of seeds and seedlings from our nursery operations as well as wood chips.
(2)
Other Wood Products sales include wood chips, other byproducts and third-party residual log sales from our Canadian Forestlands operations.

NOTE 4: NET EARNINGS PER SHARE AND SHARE REPURCHASES

Our basic and diluted earnings per share were:

$0.16 during first quarter 2024 and
$0.21 during first quarter 2023.

8


 

 

Basic earnings per share is net earnings divided by the weighted average number of our outstanding common shares, including stock equivalent units where there is no circumstance under which those shares would not be issued. Diluted earnings per share is net earnings divided by the sum of the weighted average number of our outstanding common shares and the effect of our outstanding dilutive potential common shares.

 

 

 

QUARTER ENDED

 

SHARES IN THOUSANDS

 

MARCH 2024

 

 

MARCH 2023

 

Weighted average common shares outstanding – basic

 

 

730,043

 

 

 

733,163

 

Dilutive potential common shares:

 

 

 

 

 

 

Stock options

 

 

144

 

 

 

137

 

Restricted stock units

 

 

122

 

 

 

27

 

Performance share units

 

 

249

 

 

 

219

 

Total effect of outstanding dilutive potential common shares

 

 

515

 

 

 

383

 

Weighted average common shares outstanding – dilutive

 

 

730,558

 

 

 

733,546

 

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

 

SHARES IN THOUSANDS

 

MARCH 2024

 

 

MARCH 2023

 

Stock options

 

 

609

 

 

 

610

 

Performance share units

 

 

814

 

 

 

860

 

 

Share Repurchase Program

On September 22, 2021, we announced that our board of directors approved a new share repurchase program (the 2021 Repurchase Program) under which we are authorized to repurchase up to $1 billion of outstanding shares. Concurrently, the board terminated the remaining repurchase authorization under the share repurchase program approved by the board in February 2019 (the 2019 Repurchase Program).

We repurchased 1,472,369 common shares for approximately $49 million (including transaction fees) under the 2021 Repurchase Program during first quarter 2024. As of March 31, 2024, we had remaining authorization of $202 million for future share repurchases. During first quarter 2023, we repurchased 1,115,560 common shares for approximately $35 million (including transaction fees) under the 2021 Repurchase Program.

All common stock repurchases under the 2021 Repurchase Program were made in open-market transactions. We record share repurchases upon trade date as opposed to the settlement date when cash is disbursed. We record a liability for repurchases that have not yet been settled as of period end. There were no unsettled shares as of March 31, 2024 and 13,866 unsettled shares (approximately $1 million) as of December 31, 2023.

NOTE 5: INVENTORIES

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

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 31,
2024

 

 

DECEMBER 31,
2023

 

LIFO inventories:

 

 

 

 

 

 

Logs

 

$

25

 

 

$

29

 

Lumber, plywood, oriented strand board and fiberboard

 

 

89

 

 

 

77

 

Other products

 

 

12

 

 

 

12

 

Moving average cost or FIFO inventories:

 

 

 

 

 

 

Logs

 

 

72

 

 

 

49

 

Lumber, plywood, oriented strand board, fiberboard and engineered wood products

 

 

134

 

 

 

115

 

Other products

 

 

144

 

 

 

134

 

Materials and supplies

 

 

154

 

 

 

150

 

Total

 

$

630

 

 

$

566

 

 

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.

9


 

 

NOTE 6: PENSION AND OTHER POST-EMPLOYMENT BENEFIT PLANS

The components of net periodic benefit cost are:

 

 

 

PENSION

 

 

 

QUARTER ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2024

 

 

MARCH 2023

 

Service cost

 

$

5

 

 

$

6

 

Interest cost

 

 

29

 

 

 

30

 

Expected return on plan assets

 

 

(31

)

 

 

(30

)

Amortization of actuarial loss

 

 

11

 

 

 

8

 

Total net periodic benefit cost – pension

 

$

14

 

 

$

14

 

 

 

 

OTHER POST-EMPLOYMENT BENEFITS

 

 

 

QUARTER ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2024

 

 

MARCH 2023

 

Interest cost

 

$

1

 

 

$

1

 

Amortization of actuarial loss

 

 

1

 

 

 

 

Total net periodic benefit cost – other post-employment benefits

 

$

2

 

 

$

1

 

 

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 evaluate the year-end estimated fair value of pension plan assets in 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.

NOTE 7: ACCRUED LIABILITIES

Accrued liabilities were comprised of the following:

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 31,
2024

 

 

DECEMBER 31,
2023

 

Compensation and employee benefit costs

 

$

155

 

 

$

173

 

Current portion of lease liabilities

 

 

21

 

 

 

19

 

Customer rebates, volume discounts and deferred income

 

 

83

 

 

 

124

 

Interest

 

 

66

 

 

 

63

 

Taxes payable

 

 

35

 

 

 

31

 

Other

 

 

64

 

 

 

91

 

Total

 

$

424

 

 

$

501

 

 

NOTE 8: LINE OF CREDIT

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 Secured Overnight Financing Rate (SOFR) plus a spread or a mutually agreed upon base rate plus a spread. We had no outstanding borrowings on our credit facility as of March 31, 2024 and December 31, 2023.

10


 

 

NOTE 9: FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value and carrying value of our long-term debt consisted of the following:

 

 

 

MARCH 31,
2024

 

 

DECEMBER 31,
2023

 

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

 

$

4,822

 

 

$

4,775

 

 

$

4,820

 

 

$

4,853

 

Variable rate

 

 

249

 

 

 

250

 

 

 

249

 

 

 

250

 

Total debt

 

$

5,071

 

 

$

5,025

 

 

$

5,069

 

 

$

5,103

 

 

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 value with only insignificant differences. The inputs to the valuations of our long-term debt are based on market data obtained from independent sources or information derived principally from observable market data. The difference between the fair value and the carrying value represents the theoretical net premium or discount we would pay or receive to retire all debt at the measurement date.

Fair Value of Other Financial Instruments

We believe that our other financial instruments, including cash and cash equivalents, short-term investments, receivables and payables, have net carrying values that approximate their fair values with only insignificant differences. This is primarily due to the short-term nature of these instruments and the allowance for doubtful accounts.

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 March 31, 2024, our total accrual for future estimated remediation costs on active Superfund sites and other sites for which we are potentially responsible was approximately $76 million. These amounts are recorded in "Accrued liabilities" and "Other liabilities" on our Consolidated Balance Sheet.

11


 

 

NOTE 11: ACCUMULATED OTHER COMPREHENSIVE LOSS

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

 

 

 

QUARTER ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2024

 

 

MARCH 2023

 

Pension(1)

 

 

 

 

 

 

Balance at beginning of period

 

$

(515

)

 

$

(458

)

Other comprehensive income before reclassifications

 

 

1

 

 

 

1

 

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

 

 

8

 

 

 

6

 

Total other comprehensive income

 

 

9

 

 

 

7

 

Balance at end of period

 

$

(506

)

 

$

(451

)

Other post-employment benefits(1)

 

 

 

 

 

 

Balance at beginning of period

 

$

24

 

 

$

20

 

Other comprehensive loss before reclassifications

 

 

(2

)

 

 

 

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

 

 

1

 

 

 

 

Total other comprehensive loss

 

 

(1

)

 

 

 

Balance at end of period

 

$

23

 

 

$

20

 

Translation adjustments and other

 

 

 

 

 

 

Balance at beginning of period

 

$

198

 

 

$

191

 

Translation adjustments

 

 

(9

)

 

 

 

Total other comprehensive loss

 

 

(9

)

 

 

 

Balance at end of period

 

 

189

 

 

 

191

 

Accumulated other comprehensive loss, end of period

 

$

(294

)

 

$

(240

)

(1)
Amounts presented are net of tax.
(2)
Amounts of actuarial loss and prior service cost are components of net periodic benefit cost. See Note 6: Pension and Other Post-Employment Benefit Plans.

 

NOTE 12: SHARE-BASED COMPENSATION

Share-based compensation activity during first quarter 2024 included the following:

 

SHARES IN THOUSANDS

 

GRANTED

 

 

VESTED

 

Restricted stock units (RSUs)

 

 

847

 

 

 

649

 

Performance share units (PSUs)

 

 

412

 

 

 

317

 

 

A total of 714 thousand shares of common stock were issued as a result of RSU and PSU vestings.

Restricted Stock Units

The weighted average fair value of the RSUs granted in 2024, calculated as an average of the high and low prices on grant date, was $33.12. The vesting provisions for RSUs granted in 2024 were consistent with prior year grants.

Performance Share Units

The weighted average grant date fair value of PSUs granted in 2024 was $37.90. The final number of shares granted in 2024 will vest between a range of 0 percent to 150 percent of each grant's target, depending upon actual company total shareholder return (TSR) compared against the TSR of an industry peer group. TSR assumes full reinvestment of dividends. PSUs granted in 2024 will vest at a maximum of 100 percent of target value in the event of negative absolute company TSR.

Weighted Average Assumptions Used in Estimating the Value of Performance Share Units Granted in 2024

 

 

 

PERFORMANCE SHARE UNITS

Performance period

 

2/09/2024 – 12/31/2026

Valuation date closing stock price

 

$33.28

Risk-free rate

 

4.19% – 4.27%

Expected volatility

 

21.50% – 27.60%

 

12


 

 

NOTE 13: OTHER OPERATING COSTS, NET

Other operating costs, net were comprised of the following:

 

 

 

QUARTER ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2024

 

 

MARCH 2023

 

Environmental remediation charges

 

$

2

 

 

$

1

 

Litigation expense, net

 

 

6

 

 

 

1

 

Research and development expenses

 

 

1

 

 

 

2

 

Other, net

 

 

8

 

 

 

6

 

Total other operating costs, net

 

$

17

 

 

$

10

 

 

NOTE 14: INCOME TAXES

As a real estate investment trust (REIT), we generally are not subject to federal corporate income taxes on REIT taxable income that is distributed to shareholders. We are required to pay corporate income taxes on earnings of our wholly-owned Taxable REIT Subsidiaries (TRSs), which include our Wood Products segment and a portion of our Timberlands and Real Estate & ENR segments.

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 2024 estimated annual effective tax rate, excluding discrete items, differs from the U.S. federal statutory tax rate of 21 percent primarily due to state and foreign income taxes and tax benefits associated with our nontaxable REIT earnings.

NOTE 15: RESTRICTED CASH