Weyerhaeuser(WY) - 2021 Q3 - Quarterly Report

Part I Financial Information This section presents the company's comprehensive financial data, including statements, notes, and management's analysis Item 1. Financial Statements The company's financial statements for the period ended September 30, 2021, reflect significant year-over-year growth in net sales and earnings, alongside a strengthened balance sheet and robust cash flow from operations Consolidated Statement of Operations Highlights (in millions, except per-share figures) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $2,345 | $2,110 | $7,995 | $5,469 | | Gross Margin | $756 | $720 | $3,393 | $1,414 | | Operating Income | $649 | $510 | $3,034 | $993 | | Net Earnings | $482 | $283 | $2,191 | $505 | | Earnings Per Share (diluted) | $0.64 | $0.38 | $2.92 | $0.68 | Consolidated Balance Sheet Highlights (in millions) | Metric | Sept 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $2,326 | $495 | | Total current assets | $3,540 | $1,609 | | Total assets | $18,092 | $16,311 | | Long-term debt, net | $5,100 | $5,325 | | Total liabilities | $7,723 | $7,580 | | Total equity | $10,369 | $8,731 | Consolidated Statement of Cash Flows Highlights (YTD, in millions) | Metric | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | | Net cash from operations | $2,665 | $1,085 | | Net cash from investing activities | $(108) | $311 | | Net cash from financing activities | $(606) | $(695) | | Net change in cash | $1,951 | $701 | Notes to Consolidated Financial Statements These notes provide details on the company's business segments, significant timberland transactions, a new $1 billion share repurchase program, and debt management activities - The company's operations are divided into three primary business segments: Timberlands, Real Estate, Energy and Natural Resources (Real Estate & ENR), and Wood Products[15] Sales to Unaffiliated Customers by Segment (YTD, in millions) | Segment | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | | Timberlands | $1,207 | $1,085 | | Real Estate & ENR | $285 | $246 | | Wood Products | $6,503 | $4,138 | | Total | $7,995 | $5,469 | - On September 22, 2021, the board approved a new $1 billion share repurchase program, terminating the previous 2019 program, with $26 million of shares repurchased YTD 2021[24] - In 2021, the company sold 145,000 acres of timberlands in Washington for $261 million, resulting in a $32 million gain, and acquired 69,000 acres in Alabama for approximately $149 million[48][49] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management attributes strong year-to-date performance to robust demand for wood products, leading to significant increases in net earnings and operating income, supported by strong liquidity and a substantial rise in Adjusted EBITDA - Market conditions rebounded strongly after the initial COVID-19 impact, with growth in repair/remodel and new residential construction driving demand for wood products to record price levels through mid-2021[60] - YTD 2021 net sales increased by $2.5 billion (46%) and operating income grew by $2.0 billion (206%) compared to YTD 2020, primarily driven by a $2.37 billion increase in Wood Products sales due to higher price realizations[68][69] Adjusted EBITDA by Segment (YTD, in millions) | Segment | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | | Timberlands | $517 | $443 | | Real Estate & ENR | $247 | $218 | | Wood Products | $2,840 | $997 | | Unallocated Items | $(184) | $(114) | | Total Adjusted EBITDA | $3,420 | $1,544 | Segment Performance Segment performance highlights significant operating income growth across Wood Products, Timberlands, and Real Estate & ENR, primarily driven by higher sales realizations and strategic asset management - Timberlands segment operating income increased by $185 million YTD, primarily due to an $80 million timber casualty loss in 2020 not recurring, a $32 million gain on a timberland sale in 2021, and a 30% increase in Western log sales realizations[79][76] - Real Estate & ENR segment operating income increased by $102 million YTD, mainly due to a higher average price per acre sold ($3,632 in 2021 vs. $1,662 in 2020), which more than offset a decrease in acres sold[85][86] - Wood Products segment operating income surged by $1.84 billion YTD, driven by significantly higher sales realizations, including a 60% increase for structural lumber and a 151% increase for oriented strand board (OSB)[91][92] Liquidity and Capital Resources The company significantly strengthened its liquidity position with increased cash from operations, supporting dividends, debt repayment, and share repurchases, while maintaining substantial credit availability - As of September 30, 2021, the company had over $2.3 billion in cash and cash equivalents and $1.5 billion of availability on its line of credit[102] - YTD net cash from operations increased by $1.58 billion to $2.67 billion, primarily due to increased cash inflows from business operations[103] - Key financing activities YTD included paying $382 million in dividends, making $225 million in payments on long-term debt, and repurchasing $26 million of common shares[106] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure relates to its long-term fixed-rate debt, with its fair value exceeding principal obligations as of September 30, 2021 Summary of Long-Term Indebtedness Principal Obligations as of September 30, 2021 (in millions) | Maturity | 2021 | 2022 | 2023 | 2024 | 2025 | Thereafter | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Fixed-rate debt | $150 | $— | $1,051 | $— | $436 | $3,638 | $5,275 | | Fair Value | | | | | | | $6,467 | Item 4. Controls and Procedures The company's principal executive and financial officers concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal control over financial reporting during the year-to-date period - The company's principal executive and financial officers concluded that disclosure controls and procedures were effective as of September 30, 2021[127] - There were no material changes to the company's internal control over financial reporting during the year-to-date 2021 period[128] Part II Other Information This section covers various other disclosures, including legal proceedings, risk factors, equity security sales, and required exhibits Item 1. Legal Proceedings The company is involved in various legal proceedings that arise in the ordinary course of business, none of which are expected to have a material adverse effect on its financial statements - Management does not believe any current legal proceedings will have a material adverse effect on the company's financial condition or results of operations[38] Item 1A. Risk Factors The company highlights risks from catastrophic events, including natural disasters, geopolitical conditions, and global health pandemics such as COVID-19, which continue to pose significant uncertainties to business operations and financial results - The company is subject to risks from various catastrophic events, including fires, severe weather, geopolitical issues, and health pandemics[130] - The COVID-19 pandemic continues to pose a significant risk, with potential adverse effects on product demand, supply chains, and overall financial condition, and the full extent of the impact remains highly uncertain[130] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q3 2021, the company repurchased shares under its 2019 program and subsequently authorized a new $1 billion share repurchase program Common Share Repurchases During Third Quarter 2021 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | July 1 - July 31 | — | $— | | August 1 - August 31 | 741,132 | $33.81 | | September 1 - September 30 | 39,096 | $33.99 | | Total | 780,228 | $33.82 | - On September 22, 2021, the company's board approved a new share repurchase program authorizing up to $1 billion of outstanding shares and terminated the prior program[133] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from the Chief Executive Officer and Chief Financial Officer as required by the Securities Exchange Act of 1934, and XBRL data files