Weyerhaeuser(WY) - 2023 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements The company's quarterly and nine-month financial statements show a decline in net sales and earnings year-over-year Consolidated Statement of Operations Third quarter and year-to-date results show decreased net sales and net earnings compared to the prior year Consolidated Statement of Operations Highlights (in millions, except per-share figures) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $2,022 | $2,276 | $5,900 | $8,361 | | Operating income | $353 | $457 | $908 | $2,848 | | Net earnings | $239 | $310 | $620 | $1,869 | | Earnings per share, diluted | $0.33 | $0.42 | $0.85 | $2.51 | Consolidated Balance Sheet Total assets slightly increased while total equity decreased, with a notable rise in long-term debt Balance Sheet Summary (in millions) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $3,016 | $2,746 | | Total Assets | $17,550 | $17,340 | | Total Current Liabilities | $1,686 | $1,740 | | Long-term debt, net | $4,818 | $4,071 | | Total Liabilities | $7,322 | $6,591 | | Total Equity | $10,228 | $10,749 | Consolidated Statement of Cash Flows Net cash from operations significantly decreased year-over-year, driven by lower net earnings Year-to-Date Cash Flow Summary (in millions) | Cash Flow Activity | YTD Sep 2023 | YTD Sep 2022 | | :--- | :--- | :--- | | Net cash from operations | $1,145 | $2,665 | | Net cash from investing activities | $(982) | $(530) | | Net cash from financing activities | $(571) | $(2,214) | | Net change in cash | $(408) | $(79) | Notes to Consolidated Financial Statements Notes detail segment performance, share repurchases, debt issuance, and a recent timberland acquisition - The company's business is organized into three segments: Timberlands, Real Estate & ENR, and Wood Products, with Wood Products being the largest segment by sales at $4.36 billion YTD 2023[21] - Year-to-date 2023, the company repurchased 3.56 million common shares for approximately $110 million, with $267 million remaining authorized for future repurchases[30] - In May 2023, the company issued $750 million of 4.750% notes due in 2026 and repaid $118 million of 7.125% notes at maturity in July 2023[38] - On July 19, 2023, the company acquired 22,000 acres of Mississippi timberlands for approximately $60 million[55] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses declining performance due to the Wood Products segment and maintains a strong liquidity position Economic and Market Conditions Performance is tied to U.S. housing, which is affected by higher mortgage rates and volatile wood product prices - U.S. housing starts for Q3 2023 averaged 1.36 million units, a 6.2% decrease from Q2 2023, though single-family starts increased 3.4%[62] - The Random Lengths Framing Lumber Composite price averaged $438/MBF in Q3 2023, while the OSB Composite averaged $540/MSF[64] - 30-year mortgage rates increased from 6.7% at the end of Q2 2023 to 7.3% at the end of Q3 2023, impacting housing affordability[67] Consolidated Results Consolidated net sales and earnings declined in Q3 and year-to-date, driven by the Wood Products segment Consolidated Results Summary (in millions) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $2,022 | $2,276 | $5,900 | $8,361 | | Operating income | $353 | $457 | $908 | $2,848 | | Net earnings | $239 | $310 | $620 | $1,869 | - The Q3 2023 net sales decrease of $254 million was primarily due to a $230 million decrease in Wood Products sales[73] - The YTD 2023 net sales decrease of $2,461 million was mainly driven by a $2,272 million decrease in Wood Products sales and a $162 million decrease in Timberlands sales[77] Business Segment Results The Wood Products and Timberlands segments saw earnings decline, while the Real Estate & ENR segment improved Net Contribution to Earnings by Segment (in millions) | Segment | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Timberlands | $78 | $107 | $302 | $442 | | Real Estate & ENR | $56 | $48 | $161 | $194 | | Wood Products | $277 | $344 | $590 | $2,389 | - Timberlands: Q3 net sales to unaffiliated customers decreased 14% YoY, primarily due to a 25% decrease in Western log sales realizations[82] - Real Estate & ENR: Q3 net sales increased 54% YoY, driven by a significant increase in acres sold, though the average price per acre was lower[91][97] - Wood Products: Q3 net sales decreased 13% YoY, led by a $106 million drop in structural lumber sales due to lower prices and volumes[99] Liquidity and Capital Resources The company maintains strong liquidity with significant cash, investments, and credit availability - As of September 30, 2023, the company had $1.2 billion in cash, $668 million in short-term investments, and $1.5 billion of availability on its credit line[113] - Net cash from operations decreased by $1,520 million year-over-year for the nine-month period, primarily due to lower cash inflows from business operations[114] - Anticipated capital expenditures for the full year 2023 are approximately $440 million[116] Performance Measures Adjusted EBITDA and net earnings per share before special items both declined significantly year-over-year Adjusted EBITDA by Segment (in millions) | Segment | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Timberlands | $143 | $168 | $503 | $634 | | Real Estate & ENR | $94 | $60 | $253 | $283 | | Wood Products | $328 | $395 | $746 | $2,540 | | Total Adjusted EBITDA | $509 | $583 | $1,373 | $3,285 | Net Earnings per Diluted Share Before Special Items | Period | 2023 | 2022 | | :--- | :--- | :--- | | Quarter Ended September 30 | $0.33 | $0.42 | | Year-to-Date Ended September 30 | $0.86 | $2.79 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company details its long-term fixed-rate debt obligations, totaling $5.725 billion in principal Summary of Long-Term Debt (as of Sep 30, 2023) | Metric | Value (in millions) | | :--- | :--- | | Total Principal | $5,725 | | Fair Value | $5,434 | | Weighted Avg. Interest Rate | 5.24% | Item 4. Controls and Procedures Management concluded that disclosure controls and internal controls over financial reporting were effective - The company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of September 30, 2023[138] - No material changes occurred in the company's internal control over financial reporting during the year-to-date period[139] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is not involved in any legal proceedings expected to have a material adverse effect - Management does not believe any current legal proceeding could have a material adverse effect on the company's financial statements[44] Item 1A. Risk Factors No material changes to risk factors have been reported since the 2022 Annual Report on Form 10-K - No material changes to risk factors were reported since the 2022 Annual Report on Form 10-K[141] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased approximately $25 million of its common stock during the third quarter of 2023 Q3 2023 Share Repurchases | Metric | Value | | :--- | :--- | | Total Shares Purchased | 757,510 | | Average Price Paid per Share | $32.67 | | Total Cost (approx.) | $25 million | | Remaining Authorization | $267 million | Item 5. Other Information Two company officers, including the CEO, adopted Rule 10b5-1 trading plans during the third quarter - Two company officers, including the CEO, adopted Rule 10b5-1 trading plans during Q3 2023[144][145] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including certifications and XBRL data Signatures The report is duly signed by the Senior Vice President and Chief Financial Officer on October 27, 2023