WEYERHAEUSER CO 10-Q

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A) NOTE ABOUT FORWARD-LOOKING STATEMENTS 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; 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; 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. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often involve use of words such as “anticipate,” “believe,” “committed,” "continue,” “estimate,” “expect,” “foreseeable,” “maintain,” “may,” “potential,” and “will,” or similar words or terminology. They may use the positive, negative or another variation of those and similar words. These forward-looking statements are based on our current expectations and assumptions and are not guarantees of future events or performance. The realization of our expectations and the accuracy of our assumptions are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. There is no guarantee that any of the events anticipated by our forward-looking statements will occur. If any of the events occur, there is no guarantee what effect it will have on our operations, cash flows, or financial condition. We undertake no obligation to update our forward-looking statements after the date of this report. The factors listed below, as well as other factors not described herein because they are not currently known to us or we currently judge them to be immaterial, may cause our actual results to differ significantly from our forward-looking statements: ● the effect of general economic conditions, including employment rates, interest rates, inflation rates, housing starts, general availability and cost of financing for home mortgages and the relative strength of the U.S. dollar; ● market demand for the company's products, including market demand for our timberland properties with higher and better uses, which is related to, among other factors, the strength of the various U.S. business segments and U.S. and international economic conditions; ● changes in currency exchange rates, particularly the relative value of the U.S. dollar to the Japanese yen, the Chinese yuan and the Canadian dollar, and the relative value of the euro to the yen; ● restrictions on international trade and tariffs imposed on imports or exports; ● the availability and cost of shipping and transportation; ● economic activity in Asia, especially Japan and China; ● performance of our manufacturing operations, including maintenance and capital requirements; ● potential disruptions in our manufacturing operations; ● the level of competition from domestic and foreign producers; ● the successful execution of our internal plans and strategic initiatives, including restructuring and cost reduction initiatives; ● our ability to hire and retain capable employees; ● the successful and timely execution and integration of our strategic acquisitions, including our ability to realize expected benefits and synergies, and the successful and timely execution of our strategic divestitures, each of which is subject to a number of risks and conditions beyond our control including, but not limited to, timing and required regulatory approvals or the occurrence of any event, change or other circumstances that could give rise to a termination of any acquisition or divestiture transaction under the terms of the governing transaction agreements; ● raw material availability and prices; ● the effect of weather; ● changes in global or regional climate conditions and governmental response to such changes; ● the risk of loss from fires, floods, windstorms, hurricanes, pest infestation and other natural disasters; ● the effects of significant geopolitical conditions or developments such as significant international trade disputes or domestic or foreign terrorist attacks, armed conflict and political unrest; ● the occurrence of regional or global health epidemics and their potential effects on our business, results of operations, cash flows, financial condition and future prospects; ● energy prices; ● transportation and labor availability and costs; ● federal tax policies; ● the effect of forestry, land use, environmental and other governmental regulations; ● legal proceedings; ● performance of pension fund investments and related derivatives; ● the effect of timing of employee retirements as it relates to the cost of pension benefits and changes in the market price of our common stock on charges for share-based compensation; ● the accuracy of our estimates of costs and expenses related to contingent liabilities and the accuracy of our estimates of charges related to casualty losses; 14 ● changes in accounting principles and ● other risks and uncertainties described in this report under Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) and in our 2023 Annual Report on Form 10-K, as well as those set forth from time to time in our other public statements, reports, registration statements, prospectuses, information statements and other filings with the SEC. It is not possible to predict or identify all risks and uncertainties that might affect the accuracy of our forward-looking statements and, consequently, our descriptions of such risks and uncertainties should not be considered exhaustive. There is no guarantee that any of the events anticipated by these forward-looking statements will occur, and if any of the events do occur, there is no guarantee what effect they will have on the company's business, results of operations, cash flows, financial condition and future prospects. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise. RESULTS OF OPERATIONS In reviewing our results of operations, it is important to understand these terms: ● Sales realizations for Timberlands and Wood Products refer to net selling prices. This includes selling price plus freight, minus normal sales deductions. Real Estate transactions are presented at the contract sales price before commissions and closing costs, net of any credits. ● Net contribution (charge) to earnings does not include interest expense or income taxes. ECONOMIC AND MARKET CONDITIONS AFFECTING OUR OPERATIONS Our market conditions and the strength of the broader U.S. economy are, and will continue to be, influenced by the trajectory of activity in the U.S. housing and repair and remodel segments, inflation trends and interest rates. The demand for sawlogs within our Timberlands segment is directly affected by domestic production of wood-based building products. The strength of the U.S. housing market, particularly new residential construction, strongly affects demand in our Wood Products segment, as does repair and remodeling activity. Seasonal weather patterns impact the level of construction activity in the U.S., which in turn affects demand for our logs and wood products. Our Timberlands segment, specifically the Western region, is also affected by export demand and trade policy. Japanese housing starts are a key driver of export log demand in Japan. The demand for pulpwood from our Timberlands segment is directly affected by the production of pulp, paper and oriented strand board (OSB), as well as the demand for biofuels, such as wood-burning pellets made from pulpwood. Our Timberlands segment is also influenced by the availability of harvestable timber. In general, Western log markets are highly tensioned by available supply, while Southern log markets have more available supply. However, additional mill capacity being added in the U.S. South has led to tightening of markets in certain geographies. Our Real Estate, Energy and Natural Resources segment is affected by a variety of factors, including the general state of the economy, local real estate market conditions, the level of construction activity in the U.S. and evolution of emerging renewable energy and carbon-related markets. Over the past year, particularly in the first half of 2023, home sales and building activity slowed due in part to higher mortgage interest rates, reduced affordability and general macroeconomic conditions. In the second half of 2023 and into first quarter 2024, new home sales and single-family construction activity strengthened, supported by near record-low levels of existing inventory and resilient levels of demand. On a seasonally adjusted annual basis, as reported by the U.S. Census Bureau, housing starts for first quarter 2024 averaged 1.4 million units, a 4.7 percent decrease from fourth quarter 2023. Single-family starts averaged 1.1 million units in first quarter 2024, a 1.4 percent increase from fourth quarter 2023. Multi-family starts averaged 346 thousand units in first quarter 2024, which was a 19.5 percent decrease from fourth quarter 2023. 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 667 thousand units for first quarter 2024, an increase of 3.5 percent from fourth quarter 2023. 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. Repair and remodeling expenditures decreased by 2.8 percent from fourth quarter 2023 to first quarter 2024 according to the Census Bureau Advance Retail Spending report. Near-term, activity has been supported by existing homeowners staying in place and investing in their current homes due to the lock-in effect of having lower rate mortgages compared to current rates. 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. In U.S. wood product markets, demand for lumber and OSB was influenced by cautious buyer sentiment at the outset of first quarter 2024. As the quarter progressed, demand was steady in response to strong single-family housing starts. The Random Lengths Framing Lumber Composite price averaged $403/MBF and the OSB Composite averaged $460/MSF in first quarter 2024. Over the course of the first quarter, composite prices for lumber increased from $395/MBF to $422/MBF and composite prices for OSB increased from $430/MSF to $603/MSF. Constrained capacity for OSB led to the sharp price increases, while lumber supply moderately outpaced demand. In Western log markets, Douglas fir sawlog prices decreased 2.9 percent in first quarter 2024 compared with fourth quarter 2023, 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 were stable in first quarter 2024 compared to fourth quarter 2023 and declined 0.6 percent from first 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. Currency exchange rates, available supply from other countries and trade policy affect our export businesses. During first quarter 2024, end use demand in export markets moderated. In Japan, total housing starts decreased 7.8 percent year to date through February compared to the same period in 2023, while the key Post and Beam segment saw a 5.9 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 was offset by lower competitive supply, leading to an increase in pricing for logs from the West. 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 6.6 percent at the end of fourth quarter 2023 to 6.8 percent at the end of first 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 15 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. 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 3.5 percent as of March 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. 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 3.8 percent in March 2024 remained near historically low levels and increased 0.1 percent from the end of fourth quarter 2023. 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. CONSOLIDATED RESULTS How We Did First Quarter 2024 QUARTER ENDED AMOUNT OF CHANGE DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES MARCH 2024 MARCH 2023 2024 VS. 2023 Net sales $ 1,796 $ 1,881 $ (85 ) Costs of sales $ 1,441 $ 1,512 $ (71 ) Operating income $ 196 $ 236 $ (40 ) Net earnings $ 114 $ 151 $ (37 ) Earnings per share, basic and diluted $ 0.16 $ 0.21 $ (0.05 ) Comparing First Quarter 2024 with First Quarter 2023 Net sales Net sales decreased $85 million – 5 percent – primarily due to a $75 million decrease in Timberlands sales to unaffiliated customers, attributable to decreased log sales volumes and sales realizations. Costs of sales Costs of sales decreased $71 million – 5 percent – primarily due to decreased sales volumes in our Wood Products segment, as well as decreased third-party log purchases and sales volumes in our Timberlands segment. Operating income Operating income decreased $40 million – 17 percent – primarily due to a $14 million decrease in consolidated gross margin (see discussion of components above), as well as increased elimination of intersegment profit in inventory and LIFO and unallocated corporate function and variable compensation expense. Net earnings Net earnings decreased $37 million – 25 percent – primarily due to the $40 million decrease in operating income, as discussed above, partially offset by a $2 million decrease in income tax expense (refer to Income Taxes ). 16 TIMBER LANDS How We Did First Quarter 2024 QUARTER ENDED AMOUNT OF CHANGE DOLLAR AMOUNTS IN MILLIONS MARCH 2024 MARCH 2023 2024 VS. 2023 Net sales to unaffiliated customers: Delivered logs: West $ 176 $ 229 $ (53 ) South 151 168 (17 ) North 13 17 (4 ) Subtotal delivered logs sales 340 414 (74 ) Stumpage and pay-as-cut timber 11 16 (5 ) Recreational and other lease revenue 19 18 1 Other (1) 17 14 3 Subtotal net sales to unaffiliated customers 387 462 (75 ) Intersegment sales 134 142 (8 ) Total sales $ 521 $ 604 $ (83 ) Costs of sales $ 415 $ 461 $ (46 ) Operating income and Net contribution to earnings $ 80 $ 120 $ (40 ) (1) Other Timberlands sales include sales of seeds and seedlings from our nursery operations as well as wood chips. Comparing First Quarter 2024 with First Quarter 2023 Net sales to unaffiliated customers Net sales to unaffiliated customers decreased $75 million – 16 percent – primarily due to a $53 million decrease in Western log sales attributable to a 13 percent decrease in sales volumes and a 12 percent decrease in sales realizations, as well as a $17 million decrease in Southern log sales attributable to a 7 percent decrease in sales volumes and a 3 percent decrease in sales realizations. Intersegment sales Intersegment sales decreased $8 million – 6 percent – primarily due to a 3 percent decrease in sales realizations, as well as a 3 percent decrease in sales volumes. Costs of sales Costs of sales decreased $46 million – 10 percent – primarily due to decreased Western third-party log purchases and freight costs, as well as decreased sales volumes across all regions. Operating income and Net contribution to earnings Operating income and net contribution to earnings decreased $40 million – 33 percent – primarily due to the change in the components of gross margin, as discussed above. Third-Party Log Sales Volumes and Fee Harvest Volumes QUARTER ENDED AMOUNT OF CHANGE VOLUMES IN THOUSANDS MARCH 2024 MARCH 2023 2024 VS. 2023 Third-party log sales – tons: West (1) 1,452 1,674 (222 ) South 4,089 4,386 (297 ) North 175 204 (29 ) Total 5,716 6,264 (548 ) Fee harvest volumes – tons: West (1) 2,214 2,245 (31 ) South 5,990 6,432 (442 ) North 239 285 (46 ) Total 8,443 8,962 (519 ) (1) Western logs are primarily transacted in thousand board feet (MBF) but are converted to ton equivalents for external reporting purposes. 17 REAL ESTATE, ENERGY A ND NATURAL RESOURCES How We Did First Quarter 2024 QUARTER ENDED AMOUNT OF CHANGE DOLLAR AMOUNTS IN MILLIONS MARCH 2024 MARCH 2023 2024 VS. 2023 Net sales: Real estate $ 83 $ 72 $ 11 Energy and natural resources 24 29 (5 ) Total $ 107 $ 101 $ 6 Costs of sales $ 41 $ 41 $ — Operating income and Net contribution to earnings $ 60 $ 53 $ 7 The volume of real estate sales is a function of many factors, including the general state of the economy, demand in local real estate markets, the ability of buyers to obtain financing, the number of competing properties listed for sale, the seasonal nature of sales, the plans of adjacent landowners, our expectation of future price appreciation, the timing of harvesting activities and the availability of government and not-for-profit funding. In any period, the average price per acre will vary based on the location and physical characteristics of parcels sold. Comparing First Quarter 2024 with First Quarter 2023 Net sales Net sales increased $6 million – 6 percent – primarily due to increases in average price per acre sold and mitigation credit sales, partially offset by a decrease in royalty income from our Energy and Natural Resources business. Costs of sales Costs of sales remained consistent with an increase in mitigation credit sales offset by a decrease in acres sold. Operating income and Net contribution to earnings 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. REAL ESTATE SALES STATISTICS QUARTER ENDED AMOUNT OF CHANGE MARCH 2024 MARCH 2023 2024 VS. 2023 Acres sold 19,774 20,753 (979 ) Average price per acre $ 3,629 $ 3,241 $ 388 WOOD PRODUCTS How We Did First Quarter 2024 QUARTER ENDED AMOUNT OF CHANGE DOLLAR AMOUNTS IN MILLIONS MARCH 2024 MARCH 2023 2024 VS. 2023 Net sales: Structural lumber $ 464 $ 515 $ (51 ) Oriented strand board 255 208 47 Engineered solid section 177 169 8 Engineered I-joists 99 87 12 Softwood plywood 41 41 — Medium density fiberboard 39 38 1 Complementary building products 141 163 (22 ) Other products produced (1) 86 97 (11 ) Total $ 1,302 $ 1,318 $ (16 ) Costs of sales $ 1,107 $ 1,159 $ (52 ) Operating income and Net contribution to earnings $ 128 $ 95 $ 33 (1) Other products produced sales include wood chips, other byproducts and third-party residual log sales from our Canadian Forestlands operations. 18 Comparing First Quarter 2024 with First Quarter 2023 Net sales Net sales decreased $16 million – 1 percent – due to: ● a $51 million decrease in structural lumber sales attributable to a 6 percent decrease in sales volumes, as well as a 5 percent decrease in sales realizations; ● a $22 million decrease in complementary building products sales primarily attributable to decreased sales volumes and realizations across most products and ● an $11 million decrease in other products produced primarily attributable to decreased sales realizations for wood chips. These decreases were partially offset by: ● a $47 million increase in oriented strand board sales attributable to a 33 percent increase in sales realizations, partially offset by an 8 percent decrease in sales volumes; ● a $12 million increase in engineered I-joists sales attributable to a 37 percent increase in sales volumes, partially offset by a 16 percent decrease in sales realizations and ● an $8 million increase in engineered solid section sales attributable to a 15 percent increase in sales volumes, partially offset by a 12 percent decrease in sales realizations. Costs of sales Costs of sales decreased $52 million – 4 percent – primarily due to decreased sales volumes for oriented strand board and structural lumber, as discussed above, as well as decreased raw material costs across most product lines. Operating income and Net contribution to earnings Operating income and net contribution to earnings increased $33 million – 35 percent – primarily due to the change in the components of gross margin, as discussed above. Third-Party Sales Volumes QUARTER ENDED AMOUNT OF CHANGE VOLUMES IN MILLIONS (1) MARCH 2024 MARCH 2023 2024 VS. 2023 Structural lumber – board feet 1,080 1,144 (64 ) Oriented strand board – square feet (3/8”) 710 773 (63 ) Engineered solid section – cubic feet 5.4 4.7 0.7 Engineered I-joists – lineal feet 37 27 10 Softwood plywood – square feet (3/8”) 81 83 (2 ) Medium density fiberboard – square feet (3/4”) 33 29 4 (1) Sales volumes include sales of internally produced products and products purchased for resale primarily through our distribution business. 19 PRODUCTION AND OUTSIDE PURCHASE VOLUMES Outside purchase volumes are primarily purchased for resale through our distribution business. Production volumes are produced for sale through our own sales organizations and through our distribution business. Production of oriented strand board and engineered solid section are also used to manufacture engineered I-joists. QUARTER ENDED AMOUNT OF CHANGE VOLUMES IN MILLIONS MARCH 2024 MARCH 2023 2024 VS. 2023 Structural lumber – board feet: Production 1,085 1,143 (58 ) Outside purchase 33 39 (6 ) Total 1,118 1,182 (64 ) Oriented strand board – square feet (3/8”): Production 735 761 (26 ) Outside purchase 20 17 3 Total 755 778 (23 ) Engineered solid section – cubic feet: Production 5.7 4.6 1.1 Outside purchase 2.8 2.0 0.8 Total 8.5 6.6 1.9 Engineered I-joists – lineal feet: Production 43 25 18 Outside purchase 1 — 1 Total 44 25 19 Softwood plywood – square feet (3/8”): Production 72 74 (2 ) Outside purchase 9 12 (3 ) Total 81 86 (5 ) Medium density fiberboard – square feet (3/4"): Production 34 34 — Total 34 34 — 20 UNALLOCAT ED ITEMS 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. Net Charge to Earnings – Unallocated Items QUARTER ENDED AMOUNT OF CHANGE DOLLAR AMOUNTS IN MILLIONS MARCH 2024 MARCH 2023 2024 VS. 2023 Unallocated corporate function and variable compensation expense $ (38 ) $ (27 ) $ (11 ) Liability classified share-based compensation (1 ) — (1 ) Foreign exchange loss (1 ) (1 ) — Elimination of intersegment profit in inventory and LIFO (6 ) 9 (15 ) Other (26 ) (13 ) (13 ) Operating loss (72 ) (32 ) (40 ) Non-operating pension and other post-employment benefit costs (11 ) (9 ) (2 ) Interest income and other 16 12 4 Net charge to earnings $ (67 ) $ (29 ) $ (38 ) Comparing First Quarter 2024 with First Quarter 2023 Net charge to earnings increased $38 million – 131 percent – primarily due to a $15 million increase in elimination of intersegment profit in inventory and LIFO and an $11 million increase in unallocated corporate function and variable compensation expense. INTEREST EXPENSE Our interest expense, net of capitalized interest, was: ● $67 million for first quarter 2024 and ● $66 million for first quarter 2023. Interest expense increased by $1 million compared to first quarter 2023 primarily due to a series of debt issuances and retirements during 2023 that slightly increased our average outstanding debt. INCOME TAXES Our provision for income taxes was: ● a $20 million expense for first quarter 2024 and ● a $22 million expense for first quarter 2023. Our provision for income taxes is primarily driven by earnings generated by our TRSs. Income tax expense decreased by $2 million compared to first quarter 2023 primarily due to a slight decrease in our overall earnings in first quarter 2024. Refer to Note 14: Income Taxes for further information. LIQUIDITY AND CAPITAL RESOURCES 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 March 31, 2024, we had $871 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. CASH FROM OPERATIONS Consolidated net cash from operations was: ● $124 million for first quarter 2024 and ● $126 million for first quarter 2023. Net cash from operations decreased $2 million primarily due to a $17 million increase in cash paid for income taxes, partially offset by increased cash inflows from our business operations. 21 CASH FROM INVESTING ACTIVITIES Consolidated net cash from investing activities was: ● $(77) million for first quarter 2024 and ● $(69) million for first quarter 2023. Net cash from investing activities decreased $8 million primarily due to an $8 million increase in cash paid for capital expenditures. Summary of Capital Spending by Business Segment QUARTER ENDED DOLLAR AMOUNTS IN MILLIONS MARCH 2024 MARCH 2023 Timberlands $ 31 $ 26 Wood Products 42 43 Unallocated Items 6 2 Total $ 79 $ 71 We anticipate our capital expenditures for 2024 to be approximately $440 million. The amount we spend on capital expenditures could change. CASH FROM FINANCING ACTIVITIES Consolidated net cash from financing activities was: ● $(308) million for first quarter 2024 and ● $(841) million for first quarter 2023. Net cash from financing activities increased $533 million primarily due to a $551 million decrease in cash used for payments of dividends, partially offset by a $16 million increase in cash used for repurchases of common stock. 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 SOFR plus a spread or a mutually agreed upon base rate plus a spread. We had no outstanding borrowings on our $1.5 billion five-year senior unsecured revolving credit facility as of March 31, 2024 or December 31, 2023. Refer to Note 8: Line of Credit for further information. Long-Term Debt We have $210 million of long-term debt scheduled to mature during first quarter 2025. Refer to Note 9: Fair Value of Financial Instruments for further information. Debt Covenants As of March 31, 2024, Weyerhaeuser Company was in compliance with its debt covenants. There have been no significant changes to the debt covenants presented in our 2023 Annual Report on Form 10-K for our long-term debt instruments, and we expect to remain in compliance with our debt covenants for the foreseeable future. Dividend Payments We paid cash dividends on common shares of: ● $248 million for first quarter 2024 and ● $799 million for first quarter 2023. The decrease in dividends paid is primarily due to a supplemental dividend of $0.14 per share based on 2023 financial results for a total of $102 million paid in first quarter 2024 in comparison to a supplemental dividend of $0.90 per share based on 2022 financial results for a total of $660 million paid in first quarter 2023. We plan to supplement our base dividend each year with an additional return of cash, in the form of a supplemental cash dividend and/or share repurchase, to achieve our targeted annual payout of total cash to shareholders of 75 to 80 percent of Adjusted Funds Available for Distribution (Adjusted FAD). For further information on Adjusted FAD see Performance and Liquidity Measures . 22 Share Repurchases We repurchased 1,472,369 common shares for approximately $49 million (including transaction fees) during first quarter 2024 and we repurchased 1,115,560 common shares for approximately $35 million (including transaction fees) during first quarter 2023 under the 2021 Repurchase Program. There were no unsettled shares as of March 31, 2024 and 13,866 unsettled shares (approximately $1 million) as of December 31, 2023. Refer to Note 4: Net Earnings Per Share and Share Repurchases for further information. PERFORMANCE AND LIQUIDITY MEASURES Adjusted EBITDA by Segment We use Adjusted EBITDA as a key performance measure to evaluate the performance of the consolidated company and our business segments. This measure should not be considered in isolation from, and is not intended to represent an alternative to, our results reported in accordance with U.S. generally accepted accounting principles (U.S. GAAP). However, we believe Adjusted EBITDA provides meaningful supplemental information for investors about our operating performance, better facilitates period to period comparisons and is widely used by analysts, lenders, rating agencies and other interested parties. Our definition of Adjusted EBITDA may be different from similarly titled measures reported by other companies. Adjusted EBITDA, as we define it, is operating income adjusted for depreciation, depletion, amortization, basis of real estate sold and special items. QUARTER ENDED AMOUNT OF CHANGE DOLLAR AMOUNTS IN MILLIONS MARCH 2024 MARCH 2023 2024 VS. 2023 Adjusted EBITDA by Segment: Timberlands $ 144 $ 188 $ (44 ) Real Estate & ENR 94 89 5 Wood Products 184 148 36 422 425 (3 ) Unallocated Items (70 ) (30 ) (40 ) Adjusted EBITDA $ 352 $ 395 $ (43 ) We reconcile Adjusted EBITDA to net earnings for the consolidated company and to operating income (loss) for the business segments, as those are the most directly comparable U.S. GAAP measures for each. The table below reconciles Adjusted EBITDA for the quarter ended March 31, 2024: DOLLAR AMOUNTS IN MILLIONS Timberlands Real Estate & ENR Wood Products Unallocated Items Total Adjusted EBITDA by Segment: Net earnings $ 114 Interest expense, net of capitalized interest 67 Income taxes 20 Net contribution (charge) to earnings $ 80 $ 60 $ 128 $ (67 ) $ 201 Non-operating pension and other post-employment benefit costs — — — 11 11 Interest income and other — — — (16 ) (16 ) Operating income (loss) 80 60 128 (72 ) 196 Depreciation, depletion and amortization 64 3 56 2 125 Basis of real estate sold — 31 — — 31 Adjusted EBITDA $ 144 $ 94 $ 184 $ (70 ) $ 352 23 The table below reconciles Adjusted EBITDA for the quarter ended March 31, 2023: DOLLAR AMOUNTS IN MILLIONS Timberlands Real Estate & ENR Wood Products Unallocated Items Total Adjusted EBITDA by Segment: Net earnings $ 151 Interest expense, net of capitalized interest 66 Income taxes 22 Net contribution (charge) to earnings $ 120 $ 53 $ 95 $ (29 ) $ 239 Non-operating pension and other post-employment benefit costs — — — 9 9 Interest income and other — — — (12 ) (12 ) Operating income (loss) 120 53 95 (32 ) 236 Depreciation, depletion and amortization 68 3 53 2 126 Basis of real estate sold — 33 — — 33 Adjusted EBITDA $ 188 $ 89 $ 148 $ (30 ) $ 395 Adjusted FAD We use Adjusted Funds Available for Distribution (Adjusted FAD) to evaluate the company’s liquidity and measure cash generated during the period (net of capital expenditures and significant non-recurring items) that is available for dividends, repurchases of common shares, debt reduction, acquisitions and other discretionary and nondiscretionary capital allocation activities. Adjusted FAD should not be considered in isolation from, and is not intended to represent an alternative to, our results reported in accordance with U.S. GAAP. However, we believe the measure provides meaningful supplemental information for our investors about our liquidity. Adjusted FAD, as we define it, is net cash from operations adjusted for capital expenditures and significant non-recurring items. Our definition of Adjusted FAD may be different from similarly titled measures reported by other companies, including those in our industry. We reconcile Adjusted FAD to net cash from operations, as that is the most directly comparable U.S. GAAP measure. The table below reconciles Adjusted FAD to net cash from operations: QUARTER ENDED DOLLAR AMOUNTS IN MILLIONS MARCH 2024 MARCH 2023 Net cash from operations $ 124 $ 126 Capital expenditures (79 ) (71 ) Adjusted FAD $ 45 $ 55 Net cash from investing activities $ (77 ) $ (69 ) Net cash from financing activities $ (308 ) $ (841 ) CRITICAL ACCOUNTING POLICIES There have been no significant changes during first quarter 2024 to the critical accounting policies presented in our 2023 Annual Report on Form 10-K. Item 3. QUANTIT ATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK LONG-TERM DEBT OBLIGATIONS The following summary of our long-term debt obligations includes: ● scheduled principal repayments for the next five years and after; ● weighted average interest rates for debt maturing in each of the next five years and after and ● estimated fair values of outstanding obligations. We estimate the fair value of long-term debt based on quoted market prices we receive for the same types and issues of our debt or on the discounted value of the future cash flows using market yields for the same type and comparable issues of debt. Changes in market rates of interest affect the fair value of our fixed-rate debt. 24 Summary of Long-Term Debt Obligations as of March 31, 2024 DOLLAR AMOUNTS IN MILLIONS 2024 2025 2026 2027 2028 THEREAFTER TOTAL (1) FAIR VALUE Fixed-rate debt $ — $ 210 $ 1,022 $ 300 $ — $ 3,333 $ 4,865 $ 4,775 Average interest rate — % 8.31 % 5.52 % 6.95 % — % 4.82 % 5.25 % N/A Variable-rate debt (2) $ — $ — $ — $ — $ 250 $ — $ 250 $ 250 (1) Excludes $44 million of unamortized discounts and capitalized debt expense. (2) As of March 31, 2024, the interest rate for our variable-rate debt was 7.28 percent, excluding estimated patronage refunds.