Weyerhaeuser(WY) - 2022 Q1 - Quarterly Report

FORM 10-Q Filing Information Filing Details This document is a Quarterly Report on Form 10-Q for the period ended March 31, 2022, filed by Weyerhaeuser Company, a large accelerated filer that has complied with all SEC filing requirements - The registrant, Weyerhaeuser Company, is a large accelerated filer and has filed all required reports during the preceding 12 months and for the past 90 days[2][113] Common Stock Information (as of April 25, 2022) | Title of Class | Trading Symbol | Exchange Registered On | | :--------------- | :------------- | :--------------------- | | Common Stock, par value $1.25 per share | WY | New York Stock Exchange | Outstanding Shares: 744,498 thousand shares PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited consolidated financial statements for Weyerhaeuser Company, including the statements of operations, comprehensive income, balance sheet, cash flows, and changes in equity, along with their accompanying notes for the quarters ended March 31, 2022, and 2021 CONSOLIDATED STATEMENT OF OPERATIONS The Consolidated Statement of Operations shows a significant increase in net sales, gross margin, operating income, and net earnings for Q1 2022 compared to Q1 2021, despite a substantial loss on debt extinguishment Consolidated Statement of Operations (Q1 2022 vs. Q1 2021) | Metric (Millions USD, except per-share) | March 2022 | March 2021 | Change (YoY) | | :-------------------------------------- | :--------- | :--------- | :----------- | | Net sales | $3,112 | $2,506 | +$606 | | Costs of sales | $1,647 | $1,430 | +$217 | | Gross margin | $1,465 | $1,076 | +$389 | | Operating income | $1,344 | $956 | +$388 | | Loss on debt extinguishment | $(276) | — | $(276) | | Net earnings | $771 | $681 | +$90 | | Earnings per share, basic and diluted | $1.03 | $0.91 | +$0.12 | CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Total comprehensive income increased in Q1 2022 compared to Q1 2021, driven by higher net earnings and positive foreign currency translation adjustments Consolidated Statement of Comprehensive Income (Q1 2022 vs. Q1 2021) | Metric (Millions USD) | March 2022 | March 2021 | | :-------------------- | :--------- | :--------- | | Net earnings | $771 | $681 | | Foreign currency translation adjustments | $16 | $9 | | Total other comprehensive income | $29 | $30 | | Total comprehensive income | $800 | $711 | CONSOLIDATED BALANCE SHEET The balance sheet as of March 31, 2022, shows a decrease in total assets and total equity compared to December 31, 2021, primarily due to a reduction in cash and cash equivalents and retained earnings, while total liabilities remained relatively stable Consolidated Balance Sheet (March 31, 2022 vs. December 31, 2021) | Metric (Millions USD) | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Cash and cash equivalents | $1,205 | $1,879 | | Total current assets | $2,775 | $3,135 | | Total assets | $17,116 | $17,652 | | Total current liabilities | $984 | $954 | | Total liabilities | $6,879 | $6,885 | | Total equity | $10,237 | $10,767 | CONSOLIDATED STATEMENT OF CASH FLOWS Net cash from operations significantly increased in Q1 2022, but this was offset by a substantial net cash outflow from financing activities, primarily due to higher dividend payments and debt repayments, resulting in a net decrease in cash and cash equivalents Consolidated Statement of Cash Flows (Q1 2022 vs. Q1 2021) | Metric (Millions USD) | March 2022 | March 2021 | | :-------------------- | :--------- | :--------- | | Net cash from operations | $957 | $698 | | Net cash from investing activities | $(87) | $(53) | | Net cash from financing activities | $(1,664) | $(124) | | Net change in cash, cash equivalents and restricted cash | $(794) | $521 | | Cash, cash equivalents and restricted cash at end of period | $1,205 | $1,016 | CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Total equity decreased in Q1 2022 compared to Q1 2021, primarily due to significantly higher dividends on common shares and share repurchases, partially offset by net earnings Consolidated Statement of Changes in Equity (Q1 2022 vs. Q1 2021) | Metric (Millions USD, except per-share) | March 2022 | March 2021 | | :-------------------------------------- | :--------- | :--------- | | Balance at beginning of period (Retained earnings) | $2,131 | $411 | | Net earnings | $771 | $681 | | Dividends on common shares | $(1,223) | $(130) | | Balance at end of period (Retained earnings) | $1,679 | $962 | | Total equity at end of period | $10,237 | $9,328 | | Dividends paid per common share | $1.63 | $0.17 | INDEX FOR NOTES TO CONSOLIDATED FINANCIAL STATEMENTS This section provides an index to the detailed notes accompanying the consolidated financial statements, covering various accounting policies, business segments, revenue recognition, debt, and other financial disclosures NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The notes provide detailed explanations and disclosures for the unaudited consolidated financial statements, covering accounting policies, business segment performance, revenue recognition, earnings per share, inventory valuation, pension plans, accrued liabilities, debt, fair value measurements, legal matters, comprehensive loss, share-based compensation, other operating costs, income taxes, restricted cash, and a recent timberland acquisition NOTE 1: BASIS OF PRESENTATION The consolidated financial statements provide an overall view of the company's operations, financial condition, and cash flows, including controlled entities and eliminating intercompany transactions, prepared in accordance with SEC rules for interim financial statements - The financial statements are unaudited and reflect management's necessary adjustments for fair presentation, prepared under SEC rules for interim statements[17][128] - Interim results are not necessarily indicative of full-year expectations[17][128] NOTE 2: BUSINESS SEGMENTS Weyerhaeuser operates in three primary business segments: Timberlands, Real Estate, Energy and Natural Resources (Real Estate & ENR), and Wood Products, all of which showed increased sales and net contribution to earnings in Q1 2022 compared to Q1 2021 - The company's business segments are Timberlands, Real Estate, Energy and Natural Resources (Real Estate & ENR), and Wood Products[18][129] Sales to Unaffiliated Customers by Segment (Millions USD) | Segment | March 2022 | March 2021 | | :---------------- | :--------- | :--------- | | Timberlands | $465 | $379 | | Real Estate & ENR | $128 | $106 | | Wood Products | $2,519 | $2,021 | | Total | $3,112 | $2,506 | Net Contribution to Earnings by Segment (Millions USD) | Segment | March 2022 | March 2021 | | :---------------- | :--------- | :--------- | | Timberlands | $182 | $108 | | Real Estate & ENR | $81 | $66 | | Wood Products | $1,182 | $840 | | Total | $1,445 | $1,014 | NOTE 3: REVENUE RECOGNITION Net sales to unaffiliated customers increased across all segments in Q1 2022, with Wood Products being the largest contributor, followed by Timberlands and Real Estate & ENR Net Sales to Unaffiliated Customers by Major Product (Millions USD) | Product Category | March 2022 | March 2021 | | :----------------------- | :--------- | :--------- | | Timberlands segment | | | | Delivered logs | $428 | $348 | | Stumpage and pay-as-cut timber | $9 | $6 | | Recreational and other lease revenue | $17 | $16 | | Other Timberlands sales | $11 | $9 | | Real Estate & ENR segment | | | | Real estate | $97 | $84 | | Energy and natural resources | $31 | $22 | | Wood Products segment | | | | Structural lumber | $1,206 | $990 | | Oriented strand board | $564 | $438 | | Engineered solid section | $196 | $142 | | Engineered I-joists | $137 | $83 | | Softwood plywood | $58 | $56 | | Medium density fiberboard | $48 | $48 | | Complementary building products | $215 | $171 | | Other Wood Products sales | $95 | $93 | | Total net sales | $3,112 | $2,506 | NOTE 4: NET EARNINGS PER SHARE AND SHARE REPURCHASES Basic and diluted EPS increased in Q1 2022, and the company repurchased 3.2 million common shares for $121 million under its new $1 billion repurchase program, with $806 million remaining authorization Earnings Per Share (Q1 2022 vs. Q1 2021) | Metric | March 2022 | March 2021 | | :---------------------------- | :--------- | :--------- | | Basic and diluted EPS | $1.03 | $0.91 | Weighted Average Shares Outstanding (Thousands) | Metric | March 2022 | March 2021 | | :-------------------------------------- | :--------- | :--------- | | Basic | 747,507 | 748,718 | | Diluted | 748,823 | 750,024 | - The company repurchased 3,197,675 common shares for approximately $121 million during Q1 2022 under the 2021 Repurchase Program, with $806 million remaining authorization[27][138] NOTE 5: INVENTORIES Total inventories increased to $611 million as of March 31, 2022, from $520 million at December 31, 2021, with the company using LIFO for major U.S. inventory products and moving average cost or FIFO for other inventories Inventories (Millions USD) | Metric | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Total Inventories | $611 | $520 | - LIFO method applies to major inventory products at U.S. locations, while moving average cost or FIFO applies to other U.S. raw material, product, and all foreign inventories[28][139] NOTE 6: PENSION AND OTHER POST-EMPLOYMENT BENEFIT PLANS Net periodic benefit cost for pensions increased in Q1 2022, while other post-employment benefit costs remained stable, with the company updating pension plan asset fair values annually in the second quarter Net Periodic Benefit Cost (Millions USD) | Metric | March 2022 | March 2021 | | :-------------------------------------- | :--------- | :--------- | | Total net periodic benefit cost – pension | $23 | $17 | | Total net periodic benefit cost – other post-employment benefits | $2 | $2 | - Service cost is included in 'Costs of sales,' 'Selling expenses,' and 'General and administrative expenses,' while other components are in 'Non-operating pension and other post-employment benefit costs'[30][141] NOTE 7: ACCRUED LIABILITIES Total accrued liabilities remained stable at $674 million as of March 31, 2022, compared to $673 million at December 31, 2021, with notable changes in taxes payable and compensation costs Accrued Liabilities (Millions USD) | Component | March 31, 2022 | December 31, 2021 | | :-------------------------------------- | :------------- | :---------------- | | Compensation and employee benefit costs | $166 | $225 | | Customer rebates, volume discounts and deferred income | $119 | $164 | | Taxes payable | $202 | $106 | | Other | $92 | $71 | | Total | $674 | $673 | NOTE 8: LONG-TERM DEBT AND LINE OF CREDIT In Q1 2022, the company refinanced debt by issuing $900 million in new notes and retiring $931 million of higher interest rate notes, incurring a $276 million pretax charge for early extinguishment, while the $1.5 billion revolving credit facility remains undrawn - In March 2022, the company issued $900 million in new notes (3.375% due 2033 and 4.000% due 2052) and used proceeds plus cash to retire $931 million of higher interest rate notes[34][145] - A pretax charge of $276 million ($207 million after-tax) was recorded for the loss on debt extinguishment[34][145] - The $1.5 billion revolving credit facility, expiring in January 2025, had no outstanding borrowings as of March 31, 2022[34][145] NOTE 9: FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of long-term fixed rate debt decreased to $5,538 million as of March 31, 2022, from $6,221 million at December 31, 2021, while its carrying value also slightly decreased, and other financial instruments' carrying values approximate their fair values Long-Term Fixed Rate Debt (Millions USD) | Metric | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Carrying value | $5,053 | $5,099 | | Fair value (level 2) | $5,538 | $6,221 | - Fair value of fixed rate long-term debt is estimated using the market approach based on quoted market prices[36][147] NOTE 10: LEGAL PROCEEDINGS, COMMITMENTS AND CONTINGENCIES The company is involved in various legal proceedings in the ordinary course of business, none of which are expected to have a material adverse effect, and an accrual of approximately $62 million is maintained for future estimated environmental remediation costs - No current legal proceeding is believed to have a material adverse effect on the company's financial statements[38][149] - An accrual of approximately $62 million is held for future estimated remediation costs on Superfund and other hazardous waste sites[39][150] NOTE 11: ACCUMULATED OTHER COMPREHENSIVE LOSS The accumulated other comprehensive loss decreased to $(450) million as of March 31, 2022, from $(479) million at December 31, 2021, primarily due to positive foreign currency translation adjustments and reclassifications from pension and other post-employment benefits Changes in Accumulated Other Comprehensive Loss (Millions USD) | Component | March 2022 | March 2021 | | :-------------------------------------- | :--------- | :--------- | | Pension (net of tax) - Balance at end of period | $(709) | $(1,044) | | Other post-employment benefits (net of tax) - Balance at end of period | $0 | $(11) | | Translation adjustments and other - Balance at end of period | $259 | $263 | | Accumulated other comprehensive loss, end of period | $(450) | $(792) | NOTE 12: SHARE-BASED COMPENSATION During Q1 2022, the company granted 615 thousand Restricted Stock Units (RSUs) and 295 thousand Performance Share Units (PSUs), with a total of 1.3 million common shares issued from RSU vestings, PSU vestings, and stock option exercises Share-Based Compensation Activity (Thousands of Shares) | Metric | Granted | Vested | | :-------------------- | :------ | :----- | | Restricted stock units (RSUs) | 615 | 830 | | Performance share units (PSUs) | 295 | 419 | - 1.3 million shares of common stock were issued from RSU vestings, PSU vestings, and stock option exercises[43][154] - The weighted average fair value of RSUs granted in 2022 was $42.13, and PSUs was $49.77[44][45][155][156] NOTE 13: OTHER OPERATING COSTS, NET Total other operating costs, net, decreased to $6 million in Q1 2022 from $10 million in Q1 2021, primarily due to foreign exchange gains compared to losses in the prior year Other Operating Costs, Net (Millions USD) | Component | March 2022 | March 2021 | | :-------------------------------------- | :--------- | :--------- | | Foreign exchange losses (gains), net | $(1) | $2 | | Litigation expense, net | $4 | $3 | | Research and development expenses | $1 | $1 | | Other, net | $2 | $4 | | Total other operating costs, net | $6 | $10 | NOTE 14: INCOME TAXES As a REIT, the company is generally not subject to federal corporate income taxes on distributed REIT taxable income but pays corporate income taxes on earnings from its Taxable REIT Subsidiaries (TRSs), with the 2022 estimated annual effective tax rate differing from the U.S. federal statutory rate due to state, foreign taxes, and REIT tax benefits - The company operates as a REIT, generally avoiding federal corporate income taxes on distributed REIT taxable income[49][160] - Corporate income taxes are paid on earnings of wholly-owned Taxable REIT Subsidiaries (TRSs), which include Wood Products segment earnings and portions of Timberlands and Real Estate & ENR segments' earnings[49][160] NOTE 15: RESTRICTED CASH Restricted cash, which was $120 million at December 31, 2021, was released in Q1 2022 as a like-kind property for reinvestment in timberlands was not identified Cash, Cash Equivalents and Restricted Cash (Millions USD) | Metric | March 31, 2022 | December 31, 2021 | | :-------------------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $1,205 | $1,879 | | Restricted cash included in other assets | $0 | $120 | | Total cash, cash equivalents and restricted cash | $1,205 | $1,999 | - Restricted cash from December 31, 2021, intended for timberland reinvestment, was released in Q1 2022 due to the non-identification of a like-kind property[51][162] NOTE 16: TIMBERLAND ACQUISITION The company announced an agreement to acquire 81 thousand acres of North and South Carolina timberlands for approximately $265 million, with closing expected in Q2 2022 - Agreement to purchase 81 thousand acres of timberlands in North and South Carolina for approximately $265 million[52][163] - The transaction is expected to close in the second quarter of 2022[52][163] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A) This section provides management's perspective on the company's financial condition and results of operations for the first quarter of 2022, including an overview of economic and market conditions, detailed segment performance, liquidity, capital resources, and key performance measures NOTE ABOUT FORWARD-LOOKING STATEMENTS This section contains forward-looking statements regarding future results and performance, which are subject to various risks and uncertainties, including economic conditions, market demand, exchange rates, operational disruptions, and regulatory changes, and the company disclaims any obligation to update these statements - Forward-looking statements cover expected financial and operating performance, plans, strategies, estimated taxes, capital structure, liquidity, debt compliance, contingent liabilities, capital expenditures, and market conditions[54][165] - Risks and uncertainties include general economic conditions (employment, interest rates, inflation, housing starts), COVID-19 impacts, market demand, currency exchange rates, trade restrictions, shipping costs, economic activity in Asia, manufacturing performance, competition, strategic execution, raw material prices, weather, climate change, natural disasters, energy prices, labor costs, tax policies, environmental regulations, legal proceedings, and pension fund performance[54][165] RESULTS OF OPERATIONS The company experienced strong consolidated results in Q1 2022, with significant increases in net sales, operating income, and net earnings, driven by robust performance across all business segments, particularly Wood Products, amidst favorable market conditions ECONOMIC AND MARKET CONDITIONS AFFECTING OUR OPERATIONS Market conditions in Q1 2022 were influenced by strong U.S. housing activity, repair and remodel demand, and rising prices for wood products and logs, with housing starts increasing and log prices rising in both Western and Southern markets - U.S. housing starts averaged 1.75 million units (seasonally adjusted annual basis) in Q1 2022, a 5% increase from Q4 2021[167] - Repair and remodeling expenditures increased by 5.2% from Q4 2021 to Q1 2022[167] - Douglas fir sawlog prices in Western markets increased by 18% in Q1 2022 compared to Q4 2021, and Southern sawlog prices increased by 6% QoQ and 13% YoY[167] CONSOLIDATED RESULTS Consolidated net sales increased by 24% to $3,112 million in Q1 2022, driving a 41% increase in operating income and a 13% increase in net earnings, despite a significant charge from debt extinguishment Consolidated Financial Performance (Q1 2022 vs. Q1 2021) | Metric (Millions USD, except per-share) | March 2022 | March 2021 | Change (YoY) | | :-------------------------------------- | :--------- | :--------- | :----------- | | Net sales | $3,112 | $2,506 | +$606 (24%) | | Costs of sales | $1,647 | $1,430 | +$217 (15%) | | Operating income | $1,344 | $956 | +$388 (41%) | | Net earnings | $771 | $681 | +$90 (13%) | | Earnings per share, basic and diluted | $1.03 | $0.91 | +$0.12 | - Net sales increase was primarily driven by a $498 million increase in Wood Products sales and an $86 million increase in Timberlands sales[58][169] - Net earnings increase was partially offset by a $276 million pretax charge for early debt extinguishment and a $20 million increase in income tax expense[61][172] TIMBERLANDS The Timberlands segment saw a 23% increase in net sales to unaffiliated customers and a 69% increase in operating income in Q1 2022, driven by higher sales realizations and volumes in Western and Southern regions Timberlands Segment Performance (Q1 2022 vs. Q1 2021) | Metric (Millions USD) | March 2022 | March 2021 | Change (YoY) | | :-------------------------------------- | :--------- | :--------- | :----------- | | Net sales to unaffiliated customers | $465 | $379 | +$86 (23%) | | Intersegment sales | $161 | $134 | +$27 (20%) | | Total sales | $626 | $513 | +$113 | | Costs of sales | $423 | $383 | +$40 (10%) | | Operating income and Net contribution to earnings | $182 | $108 | +$74 (69%) | - Western log sales increased by $58 million due to a 23% increase in sales realizations and a 4% increase in sales volumes[63][174] - Southern log sales increased by $23 million due to a 9% increase in sales volumes and an 8% increase in sales realizations[63][174] Timberlands Volumes (Thousands of Tons) | Metric | March 2022 | March 2021 | Change (YoY) | | :-------------------- | :--------- | :--------- | :----------- | | Third-party log sales | 5,949 | 5,582 | +367 | | Fee harvest volumes | 8,360 | 7,814 | +546 | REAL ESTATE, ENERGY AND NATURAL RESOURCES The Real Estate, Energy and Natural Resources segment reported a 21% increase in net sales and a 23% increase in operating income in Q1 2022, driven by higher acres sold and increased energy and natural resources sales Real Estate, Energy and Natural Resources Segment Performance (Q1 2022 vs. Q1 2021) | Metric (Millions USD) | March 2022 | March 2021 | Change (YoY) | | :-------------------------------------- | :--------- | :--------- | :----------- | | Net sales | $128 | $106 | +$22 (21%) | | Costs of sales | $41 | $34 | +$7 (21%) | | Operating income and Net contribution to earnings | $81 | $66 | +$15 (23%) | Real Estate Sales Statistics (Q1 2022 vs. Q1 2021) | Metric | March 2022 | March 2021 | Change (YoY) | | :-------------------- | :--------- | :--------- | :----------- | | Acres sold | 24,126 | 19,455 | +4,671 | | Average price per acre | $3,785 | $3,803 | $(18) | WOOD PRODUCTS The Wood Products segment achieved a 25% increase in net sales and a 41% increase in operating income in Q1 2022, primarily due to higher sales realizations across structural lumber, oriented strand board, and engineered wood products Wood Products Segment Performance (Q1 2022 vs. Q1 2021) | Metric (Millions USD) | March 2022 | March 2021 | Change (YoY) | | :-------------------------------------- | :--------- | :--------- | :----------- | | Net sales | $2,519 | $2,021 | +$498 (25%) | | Costs of sales | $1,276 | $1,124 | +$152 (14%) | | Operating income and Net contribution to earnings | $1,182 | $840 | +$342 (41%) | - Structural lumber sales increased by $216 million (21% sales realizations, 1% sales volumes)[70][181] - Oriented strand board sales increased by $126 million (28% sales realizations)[70][181] Wood Products Third-Party Sales Volumes (Millions) | Product | March 2022 | March 2021 | Change (YoY) | | :-------------------- | :--------- | :--------- | :----------- | | Structural lumber (board feet) | 1,157 | 1,145 | +12 | | Oriented strand board (square feet 3/8") | 717 | 714 | +3 | | Engineered solid section (cubic feet) | 5.7 | 6.2 | (0.5) | | Engineered I-joists (lineal feet) | 46 | 47 | (1) | | Softwood plywood (square feet 3/8") | 75 | 94 | (19) | | Medium density fiberboard (square feet 3/4") | 44 | 57 | (13) | UNALLOCATED ITEMS Net charge to earnings from unallocated items increased by $52 million in Q1 2022, primarily due to a $42 million increase in the elimination of intersegment profit in inventory and LIFO adjustments Net Charge to Earnings – Unallocated Items (Millions USD) | Component | March 2022 | March 2021 | Change (YoY) | | :-------------------------------------- | :--------- | :--------- | :----------- | | Unallocated corporate function and variable compensation expense | $(31) | $(25) | $(6) | | Elimination of intersegment profit in inventory and LIFO | $(59) | $(17) | $(42) | | Non-operating pension and other post-employment benefit costs | $(15) | $(8) | $(7) | | Net charge to earnings | $(117) | $(65) | $(52) | INTEREST EXPENSE Interest expense, net of capitalized interest, decreased by $7 million in Q1 2022 compared to Q1 2021, primarily due to a decrease in average outstanding debt and weighted average interest rate Interest Expense, Net (Millions USD) | Metric | March 2022 | March 2021 | Change (YoY) | | :-------------------------------------- | :--------- | :--------- | :----------- | | Interest expense, net of capitalized interest | $72 | $79 | $(7) | INCOME TAXES The provision for income taxes increased by $20 million in Q1 2022, driven by higher earnings from Taxable REIT Subsidiaries (TRSs), partially offset by a tax benefit from the debt extinguishment loss Provision for Income Taxes (Millions USD) | Metric | March 2022 | March 2021 | Change (YoY) | | :-------------------- | :--------- | :--------- | :----------- | | Income taxes expense | $209 | $189 | +$20 | - Increase in income tax expense primarily due to higher TRS earnings, partially offset by a $69 million tax benefit from the $276 million pretax loss on debt extinguishment[79][190] LIQUIDITY AND CAPITAL RESOURCES The company maintains a strong liquidity position with over $1.2 billion in cash and cash equivalents and a $1.5 billion undrawn credit facility, with cash from operations increasing significantly, but cash from financing activities seeing a substantial outflow due to higher dividends and debt repayments - As of March 31, 2022, the company had over $1.2 billion in cash and cash equivalents and $1.5 billion available on its line of credit, expiring in January 2025[80][191] CASH FROM OPERATIONS Net cash from operations increased by $259 million in Q1 2022, primarily due to increased cash inflows from business operations, partially offset by higher income tax payments Net Cash from Operations (Millions USD) | Metric | March 2022 | March 2021 | Change (YoY) | | :-------------------- | :--------- | :--------- | :----------- | | Net cash from operations | $957 | $698 | +$259 | CASH FROM INVESTING ACTIVITIES Net cash used in investing activities increased by $34 million in Q1 2022, mainly due to higher capital expenditures and a timberland acquisition Net Cash from Investing Activities (Millions USD) | Metric | March 2022 | March 2021 | Change (YoY) | | :-------------------------------------- | :--------- | :--------- | :----------- | | Net cash from investing activities | $(87) | $(53) | $(34) | | Capital expenditures for property and equipment | $(50) | $(31) | $(19) | | Acquisition of timberlands | $(18) | — | $(18) | - Anticipated capital expenditures for 2022 are approximately $440 million[84][195] CASH FROM FINANCING ACTIVITIES Net cash used in financing activities significantly increased by $1,540 million in Q1 2022, primarily driven by a substantial increase in dividend payments and common stock repurchases, alongside debt refinancing activities Net Cash from Financing Activities (Millions USD) | Metric | March 2022 | March 2021 | Change (YoY) | | :-------------------------------------- | :--------- | :--------- | :----------- | | Net cash from financing activities | $(1,664) | $(124) | $(1,540) | | Cash dividends on common shares | $(1,218) | $(127) | $(1,091) | | Payments on long-term debt | $(1,203) | — | $(1,203) | | Net proceeds from issuance of long-term debt | $881 | — | +$881 | | Repurchases of common shares | $(118) | — | $(118) | Line of Credit The company's $1.5 billion senior unsecured revolving credit facility, expiring in January 2025, had no outstanding borrowings as of March 31, 2022, and plans to transition from LIBOR to an alternate reference rate in 2022 - No outstanding borrowings on the $1.5 billion revolving credit facility as of March 31, 2022[86][197] - Plans to transition the revolving credit facility from LIBOR to an alternate reference rate in 2022[86][197] Long-Term Debt In March 2022, the company executed a debt refinancing, issuing $900 million in new notes (3.375% due 2033 and 4.000% due 2052) and retiring $931 million of higher interest rate notes, which lowered the weighted average interest rate and extended maturity - Issued $900 million in new notes ($450 million at 3.375% due 2033 and $450 million at 4.000% due 2052)[87][198] - Retired $931 million of principal in higher interest rate notes, including 7.375% notes due 2032, 8.500% notes due 2025, 7.125% notes due 2023, 7.950% notes due 2025, and 7.850% notes due 2026[87][198] Debt Covenants As of March 31, 2022, Weyerhaeuser Company was in compliance with all debt covenants, with no significant changes from the prior annual report, and expects to remain compliant - The company was in compliance with its debt covenants as of March 31, 2022[88][199] - No significant changes to debt covenants from the 2021 Annual Report on Form 10-K, and compliance is expected for the foreseeable future[88][199] Option Exercises Cash proceeds from stock option exercises decreased to $12 million in Q1 2022 from $17 million in Q1 2021, despite an increase in the average stock price Cash Proceeds from Stock Option Exercises (Millions USD) | Metric | March 2022 | March 2021 | | :-------------------------------------- | :--------- | :--------- | | Proceeds from exercise of stock options | $12 | $17 | - Average stock price was $39.65 in Q1 2022, up from $34.05 in Q1 2021[91][202] Dividend Payments Cash dividends on common shares increased significantly to $1,218 million in Q1 2022, primarily due to a $1.45 per share supplemental dividend based on 2021 financial results Cash Dividends on Common Shares (Millions USD) | Metric | March 2022 | March 2021 | Change (YoY) | | :-------------------------------------- | :--------- | :--------- | :----------- | | Cash dividends on common shares | $1,218 | $127 | +$1,091 | - The increase is primarily due to a $1.45 per share supplemental dividend ($1,084 million total) paid in Q1 2022 based on 2021 results[91][202] Share Repurchases The company repurchased 3,197,675 common shares for approximately $121 million in Q1 2022 under the 2021 Repurchase Program, which has $806 million remaining authorization - Repurchased 3,197,675 common shares for approximately $121 million in Q1 2022 under the 2021 Repurchase Program[92][203] - As of March 31, 2022, $806 million remained authorized for future share repurchases[92][203] PERFORMANCE MEASURES This section presents non-GAAP performance measures, including Adjusted EBITDA by segment and Net Earnings before Special Items, which are used to evaluate company and segment performance and provide supplemental information to investors Adjusted EBITDA by Segment Consolidated Adjusted EBITDA increased by 36% to $1,497 million in Q1 2022, with strong contributions from all segments, particularly Wood Products Adjusted EBITDA by Segment (Millions USD) | Segment | March 2022 | March 2021 | Change (YoY) | | :---------------- | :--------- | :--------- | :----------- | | Timberlands | $247 | $172 | +$75 | | Real Estate & ENR | $116 | $96 | +$20 | | Wood Products | $1,233 | $889 | +$344 | | Unallocated Items | $(99) | $(56) | $(43) | | Adjusted EBITDA | $1,497 | $1,101 | +$396 | - Adjusted EBITDA is defined as operating income adjusted for depreciation, depletion, amortization, basis of real estate sold, and special items[93][204] Net Earnings and Net Earnings per Diluted Share Before Special Items Net earnings before special items increased to $978 million in Q1 2022, and diluted EPS before special items rose to $1.31, primarily by excluding the loss on debt extinguishment Net Earnings Before Special Items (Millions USD) | Metric | March 2022 | March 2021 | | :-------------------------------------- | :--------- | :--------- | | Net earnings | $771 | $681 | | Loss on debt extinguishment | $207 | — | | Net earnings before special items | $978 | $681 | Net Earnings per Diluted Share Before Special Items | Metric | March 2022 | March 2021 | | :-------------------------------------- | :--------- | :--------- | | Net earnings per diluted share | $1.03 | $0.91 | | Loss on debt extinguishment | $0.28 | — | | Net earnings per diluted share before special items | $1.31 | $0.91 | CRITICAL ACCOUNTING POLICIES There have been no significant changes to the critical accounting policies disclosed in the company's 2021 Annual Report on Form 10-K during the first quarter of 2022 - No significant changes to critical accounting policies during Q1 2022[101][212] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section provides disclosures on the company's exposure to market risks, specifically focusing on long-term indebtedness obligations, including scheduled principal repayments, weighted average interest rates, and estimated fair values LONG-TERM INDEBTEDNESS OBLIGATIONS The company's long-term fixed-rate debt totaled $5,093 million (carrying value) as of March 31, 2022, with a weighted average interest rate of 5.36%, and significant maturities are scheduled for 2023 and 2025, with the majority due thereafter Summary of Long-Term Indebtedness Principal Obligations (Millions USD) as of March 31, 2022 | Year | Principal Obligations | Average Interest Rate | | :--- | :-------------------- | :-------------------- | | 2022 | $0 | 0% | | 2023 | $978 | 5.44% | | 2024 | $0 | 0% | | 2025 | $210 | 8.31% | | 2026 | $272 | 7.65% | | Thereafter | $3,633 | 5.00% | | Total | $5,093 | 5.36% | | Fair Value | $5,538 | N/A | - Fair value of debt instruments is estimated using quoted market prices or discounted future cash flows based on market yields[102][213] ITEM 4. CONTROLS AND PROCEDURES This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during Q1 2022 EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES The company's principal executive and financial officers concluded that disclosure controls and procedures were effective as of March 31, 2022, ensuring timely and accurate reporting of required information - Disclosure controls and procedures were effective as of March 31, 2022[104][215] CHANGES IN INTERNAL CONTROLS No material changes occurred in the company's internal control over financial reporting during the first quarter of 2022 - No material changes in internal control over financial reporting during Q1 2022[105][216] PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The company is involved in routine legal proceedings, none of which are expected to have a material adverse effect on its financial statements, and environmental proceedings are disclosed if monetary sanctions exceed $1 million - No legal proceeding is currently expected to have a material adverse effect on the company's financial statements[106][217] - Environmental proceedings are disclosed if monetary sanctions are reasonably believed to exceed $1 million[106][217] ITEM 1A. RISK FACTORS There have been no material changes to the risk factors previously disclosed in the company's 2021 Annual Report on Form 10-K - No material changes to risk factors disclosed in the 2021 Annual Report on Form 10-K[107][218] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS During Q1 2022, the company repurchased 3,197,675 common shares for approximately $121 million under the 2021 Repurchase Program, leaving $806 million in remaining authorization Common Share Repurchases During First Quarter 2022 | Period | Total Shares Purchased | Average Price Per Share | Approximate Dollar Value of Shares That May Yet Be Purchased Under The Programs | | :-------------------- | :--------------------- | :---------------------- | :---------------------------------------------------------------------------- | | January 1 – January 31 | 1,320,787 | $37.87 | $876,697,873 | | February 1 – February 28 | 221,913 | $37.31 | $868,422,515 | | March 1 – March 31 | 1,654,975 | $37.97 | $805,603,171 | | Total | 3,197,675 | $37.87 | $805,603,171 | - The 2021 Repurchase Program authorizes repurchases up to $1 billion, with $806 million remaining as of March 31, 2022[108][109][219][220] ITEM 3. DEFAULTS UPON SENIOR SECURITIES – NOT APPLICABLE This item is not applicable to the company for the reporting period ITEM 4. MINE SAFETY DISCLOSURES – NOT APPLICABLE This item is not applicable to the company for the reporting period ITEM 5. OTHER INFORMATION – NOT APPLICABLE This item is not applicable to the company for the reporting period ITEM 6. EXHIBITS This section lists the exhibits filed as part of the Form 10-Q, including forms for long-term incentive plans, certifications from executive officers, and XBRL-related documents - Exhibits include forms for the 2013 Long-Term Incentive Plan (Performance Share Unit and Restricted Stock Unit Award Terms), CEO and CFO certifications, and various Inline XBRL documents[110][221] SIGNATURES The report is signed by David M. Wold, Vice President and Chief Accounting Officer of Weyerhaeuser Company, on April 29, 2022, certifying its submission in accordance with the Securities Exchange Act of 1934 - The report was signed by David M. Wold, Vice President and Chief Accounting Officer, on April 29, 2022[111][222]