What changed in this filing

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Item 1. Financial Statements

2020-10-30 compared with 2020-07-31 · 121 added, 25 removed, 415 unchanged (26% of the section changed)

5 unchanged sentences

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES

SEPTEMBER 2020

SEPTEMBER 2019

SEPTEMBER 2020

SEPTEMBER 2019

Net sales ( Note 3 )

2 unchanged sentences

General and administrative expenses

Product remediation recoveries ( Note 14 )

Other operating costs, net ( Note 16 )

14 unchanged sentences

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2020

SEPTEMBER 2019

SEPTEMBER 2020

SEPTEMBER 2019

Net earnings (loss)

9 unchanged sentences

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PAR VALUE

SEPTEMBER 30,

Current assets:

3 unchanged sentences

Inventories ( Note 5 )

Assets held for sale

Assets held for sale ( Note 15 )

Prepaid expenses and other current assets

22 unchanged sentences

issued and outstanding:

746,251 thousand shares at June 30, 2020 and 745,300 thousand shares at

746,398 thousand shares at September 30, 2020 and 745,300 thousand shares at

December 31, 2019

Other capital

Accumulated deficit

Retained earnings (accumulated deficit)

Accumulated other comprehensive loss ( Note 12 )

5 unchanged sentences

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2020

SEPTEMBER 2019

Cash flows from operations:

6 unchanged sentences

Share-based compensation expense ( Note 13 )

Timber casualty loss ( Note 16 )

Receivables, net

16 unchanged sentences

Payments on line of credit ( Note 9 )

Payments on debt held by variable interest entities ( Note 6 )

Proceeds from exercise of stock options

1 unchanged sentence

Net cash from financing activities

Net change in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Net change in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

Cash paid (received) during the period for:

7 unchanged sentences

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES

SEPTEMBER 2020

SEPTEMBER 2019

SEPTEMBER 2020

SEPTEMBER 2019

Common shares:

37 unchanged sentences

SHARE-BASED COMPENSATION

PRODUCT REMEDIATION RECOVERIES

TIMBERLAND ACQUISITIONS AND DIVESTITURES

OTHER OPERATING COSTS, NET

RESTRICTED CASH

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTERS AND YEAR-TO-DATE PERIODS ENDED JUNE 30, 2020 AND 2019

FOR THE QUARTERS AND YEAR-TO-DATE PERIODS ENDED SEPTEMBER 30, 2020 AND 2019

BASIS OF PRESENTATION

22 unchanged sentences

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2020

SEPTEMBER 2019

SEPTEMBER 2020

SEPTEMBER 2019

Sales to unaffiliated customers:

7 unchanged sentences

Unallocated items (1)

Net contribution (charge) to earnings

Net contribution to earnings

Interest expense, net of capitalized interest

8 unchanged sentences

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2020

SEPTEMBER 2019

SEPTEMBER 2020

SEPTEMBER 2019

Net sales to unaffiliated customers:

26 unchanged sentences

Our basic and diluted earnings (loss) per share were:

$ 0.10 during second quarter 2020 and $ 0.30 during year-to-date 2020;

$ 0.17 during second quarter 2019 and $( 0.22 ) during year-to-date 2019.

$ 0.38 during third quarter 2020 and $ 0.68 during year-to-date 2020;

$ 0.13 during third quarter 2019 and $( 0.08 ) during year-to-date 2019.

Basic earnings (loss) per share is net earnings (loss) 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.

3 unchanged sentences

SHARES IN THOUSANDS

SEPTEMBER 2020

SEPTEMBER 2019

SEPTEMBER 2020

SEPTEMBER 2019

Weighted average common shares outstanding – basic

12 unchanged sentences

SHARES IN THOUSANDS

SEPTEMBER 2020

SEPTEMBER 2019

SEPTEMBER 2020

SEPTEMBER 2019

Stock options

6 unchanged sentences

During year-to-date 2019, we repurchased over 2.3 million common shares for approximately $ 60 million under the 2019 Repurchase Program.

As of June 30, 2020, we had remaining authorization of approximately $ 440 million for future share repurchases.

As of September 30, 2020, we had remaining authorization of approximately $ 440 million for future share repurchases.

All common stock repurchases under the 2019 Repurchase Program were made in open-market transactions.

1 unchanged sentence

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 30,

LIFO inventories:

24 unchanged sentences

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2020

SEPTEMBER 2019

SEPTEMBER 2020

SEPTEMBER 2019

Interest cost

8 unchanged sentences

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2020

SEPTEMBER 2019

SEPTEMBER 2020

SEPTEMBER 2019

Interest cost

2 unchanged sentences

Total net periodic benefit cost - other postretirement benefits

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 postretirement benefit costs” in our Consolidated Statement of Operations .

Actions to Reduce Pension Plan Obligations

10 unchanged sentences

The net effect of these updates was a $ 14 million improvement in funded status as of December 31, 2019.

This change in funded status was reflected in our second quarter 2020 Consolidated Balance Sheet .

This change in funded status was reflected on our second quarter 2020 Consolidated Balance Sheet .

ACCRUED LIABILITIES

1 unchanged sentence

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 30,

Compensation and employee benefit costs

3 unchanged sentences

LONG-TERM DEBT AND LINE OF CREDIT

In October 2020, we notified holders of our outstanding 4.625 percent notes due in September 2023 that we will redeem the entire aggregate principal amount outstanding in December 2020 .

The amount of principal outstanding and the book value of the debt were approximately $ 500 million and $ 498 million, respectively, as of September 30, 2020.

The total redemption price of the notes is expected to be approximately $ 560 million which reflects the make-whole premium due on early redemption.

In September 2020, we redeemed our $ 325 million 3.25 percent notes due in March 2023 .

A pretax charge of $ 23 million was included in “Interest expense, net of capitalized interest” in the Consolidated Statement of Operations in third quarter 2020 for the make-whole premium in connection with the early extinguishment of the $325 million notes.

In March 2020, we issued $ 750 million of 4.00 percent notes due in April 2030 .

1 unchanged sentence

In May 2020, a portion of the net proceeds was used to redeem our $ 569 million 4.70 percent notes due in March 2021 .

A net pretax charge of $ 11 million was included in “Interest expense, net of capitalized interest” in the Consolidated Statement of Operations in second quarter 2020 for make-whole premiums in connection with the early extinguishment of the $ 569 million notes, partially offset by the write-off of an unamortized fair value step-up adjustment.

A net pretax charge of $ 11 million was included in “Interest expense, net of capitalized interest” in the Consolidated Statement of Operations in second quarter 2020 for the make-whole premium in connection with the early extinguishment of the $569 million notes, partially offset by the write-off of an unamortized fair value step-up adjustment.

In February 2019, we issued $ 750 million of 4.00 percent notes due in November 2029 .

1 unchanged sentence

In March 2019, a portion of the net proceeds was used to redeem our $ 500 million 7.38 percent notes due in October 2019 .

A pretax charge of $ 12 million was included in "Interest expense, net of capitalized interest" in the Consolidated Statement of Operations in first quarter 2019 for make-whole premiums, unamortized debt issuance costs and unamortized debt discounts in connection with the early extinguishment of the $ 500 million notes.

A pretax charge of $ 12 million was included in "Interest expense, net of capitalized interest" in the Consolidated Statement of Operations in first quarter 2019 for the make-whole premium, unamortized debt issuance costs and unamortized debt discounts in connection with the early extinguishment of the $500 million notes.

In January 2020, we refinanced and extended our $ 1.5 billion five-year senior unsecured revolving credit facility, which now expires in January 2025 .

Borrowings are at LIBOR plus a spread or at other interest rates mutually agreed upon between the borrower and the lending banks.

We had no outstanding borrowings on our credit facility as of June 30, 2020.

We had no outstanding borrowings on our credit facility as of September 30, 2020.

As of December 31, 2019, we had $ 230 million of outstanding borrowings on our credit facility.

1 unchanged sentence

The estimated fair values and carrying values of our long-term debt and line of credit consisted of the following:

SEPTEMBER 30,

DOLLAR AMOUNTS IN MILLIONS

14 unchanged sentences

Site Remediation

Under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) – commonly known as the Superfund – and similar state laws, we:

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 June 30, 2020, our total accrual for future estimated remediation costs on active Superfund sites and other sites for which we are potentially responsible was approximately $ 61 million.

As of September 30, 2020, our total accrual for future estimated remediation costs on active Superfund sites and other sites for which we are potentially responsible was approximately $ 58 million.

These amounts are recorded in "Accrued liabilities" and "Other liabilities" on our Consolidated Balance Sheet .

4 unchanged sentences

In situations where we cannot reasonably determine when asbestos containing materials might be removed from the sites, we have not recorded an accrual because the fair value of the obligation cannot be reasonably estimated.

As of June 30, 2020, we had an asset retirement obligation reserve of $ 32 million.

As of September 30, 2020, we had an asset retirement obligation reserve of $ 30 million.

These obligations are recorded in "Accrued liabilities" and "Other liabilities" on our Consolidated Balance Sheet .

4 unchanged sentences

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2020

SEPTEMBER 2019

SEPTEMBER 2020

SEPTEMBER 2019

Balance at beginning of period

5 unchanged sentences

Balance at beginning of period

Other comprehensive income before reclassifications

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

15 unchanged sentences

Performance share units (PSUs)

A total of 951 thousand shares of common stock were issued as a result of RSU vestings, PSU vestings and stock option exercises.

A total of 1.1 million shares of common stock were issued as a result of RSU vestings, PSU vestings and stock option exercises.

Restricted Stock Units

17 unchanged sentences

Calculated as an average of the high and low prices on grant date.

PRODUCT REMEDIATION RECOVERIES

In July 2017, we announced we were implementing a solution to address concerns regarding our TJI® Joists coated with our former Flak Jacket® Protection product.

This issue was isolated to Flak Jacket product manufactured after December 1, 2016 and did not affect any of our other products.

In third quarter 2019 and second quarter 2020, we received and recorded insurance recoveries of $ 68 million and $ 8 million, respectively, related to prior remediation efforts.

These recoveries are attributable to our Wood Products segment and were recorded in "Product remediation recoveries" in the Consolidated Statement of Operations .

TIMBERLAND ACQUISITIONS AND DIVESTITURES

Oregon Acquisition and Divestiture

On September 1, 2020, we announced an agreement to sell 149,000 acres of southern Oregon timberlands for $ 385 million and a separate agreement to purchase 85,000 acres of mid-coastal Oregon timberlands for $ 426 million.

These transactions within our Timberlands business segment will be structured as a like-kind exchange for tax purposes.

The two agreements are subject to customary closing conditions and are both expected to close in fourth quarter 2020.

The sale of southern Oregon timberlands is not considered a strategic shift that has, or will have, a major effect on our operations or financial results and therefore does not meet the requirements for presentation as discontinued operations.

However, the related assets have met the relevant criteria to be classified as held for sale in the current period Consolidated Balance Sheet .

This classification does not affect the presentation in the Consolidated Statement of Operations .

The held for sale classification did change the presentation of the related assets from long-term to current on our Consolidated Balance Sheet .

As of September 30, 2020, “Assets held for sale” had a balance of $ 199 million, which consisted primarily of timberlands and other related assets.

Montana Divestiture

On December 17, 2019, we announced an agreement to sell 630,000 acres of Montana timberlands, which was part of our Timberlands business segment.

On March 26, 2020, we completed the sale to Southern Pine Plantations for $ 145 million in cash proceeds, which is net of purchase price adjustments and closing costs.

On March 26, 2020, we completed the sale for $ 145 million in cash proceeds, which is net of purchase price adjustments and closing costs.

Due to the impairment recorded during fourth quarter 2019, no material gain or loss was recorded as a result of this sale.

5 unchanged sentences

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2020

SEPTEMBER 2019

SEPTEMBER 2020

SEPTEMBER 2019

Foreign exchange losses (gains), net

Litigation expense, net

Product remediation recovery

Research and development expenses

Timber casualty loss

Total other operating costs, net

Timber Casualty Loss

In September 2020, forest fires in the state of Oregon, commonly referred to as the Holiday Farm, Beachie Creek, Riverside, and Archie Creek fires, spread from adjacent lands onto portions of our Oregon timberland properties.

Based on interpretation of satellite imagery and aerial photography, we estimate that the fires have had some impact on approximately 125,000 acres of our Oregon timberlands.

Our initial assessments indicate that the extent of damage varies from tract to tract based on topographical conditions, rate of fire spread, age of the timber and other circumstances.

Based on these initial assessments, we expect that the majority of merchantable timber, even if affected by the fires, is likely salvageable if we are able to harvest it within a reasonable period of time.

We anticipate that the majority of pre-merchantable timber affected by the fires will not be able to be salvaged.

For the quarter ended September 30, 2020, we have recorded a timber casualty loss of $ 80 million which represents the estimated book value of timber and related assets that cannot be salvaged based on the information available at this time.

The loss is attributable to our Timberlands segment and is recorded within “Other operating costs, net” in the Consolidated Statement of Operations .

As salvage efforts continue and as we are able to complete on-site assessments of timber within the fire perimeter, it is reasonably possible that this estimate could increase by as much as $ 30 million to $ 40 million.

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 includes our Wood Products segment earnings and portions of our Timberlands and Real Estate & ENR segments' earnings.

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 may occur during the quarter.

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 2020 estimated annual effective tax rate, excluding discrete items, differs from the U.S.

federal statutory tax rate of 21 percent primarily due to tax benefits associated with our nontaxable REIT earnings and the projected mix of earnings between our REIT and our TRSs.

In July 2020, the Internal Revenue Service released final regulations which resolved uncertainties related to our interest expense calculation under the Tax Cuts and Jobs Act of 2017.

Previously unrecognized tax benefits associated with this position will be recognized in third quarter 2020, which favorably impacts our receivables for taxes and does not impact our effective tax rate.

In July 2020, the Internal Revenue Service released final regulations which resolved uncertainties related to the deductible portion of our interest expense under the Tax Cuts and Jobs Act of 2017.

Previously unrecognized tax benefits associated with this position were recognized in third quarter 2020, which favorably impacted our receivables for taxes and did not impact our effective tax rate.

RESTRICTED CASH

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on our Consolidated Balance Sheet that sum to the total of the amounts shown in the Consolidated Statement of Cash Flows :

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 30,

Cash and cash equivalents

Restricted cash included in other assets (1)

Total cash, cash equivalents and restricted cash

Amounts included in restricted cash are primarily comprised of proceeds held by a qualified intermediary that are intended to be reinvested in timber and timberlands through a like-kind exchange transaction, as well as additional funds held in escrow related to this transaction.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements