What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-07-29 compared with 2022-04-29 · 178 added, 91 removed, 281 unchanged (49% of the section changed)

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estimated taxes and tax provision;

our expectations relating to returns on invested pension plan assets and expected benefit payments;

our capital structure and the sufficiency of our liquidity position to meet future cash requirements;

compliance with our debt agreements;

contingent liabilities, and the sufficiency of litigation and other contingent liability reserves and related accruals including, but not limited to, estimates of future environmental remediation costs;

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;

expected capital expenditures;

expected timing of closing of a timberlands acquisition;

market and general economic conditions, including related influencing factors such as the trajectory of U.S.

housing activity, repair and remodel activity, impacts from COVID-related restrictions, inflation trends and interest rates;

assumptions used in valuing incentive compensation and related expense;

and our expectations relating to returns on invested pension plan assets and expected benefit payments.

our expectations about our future opportunities in emerging carbon offset 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.

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ECONOMIC AND MARKET CONDITIONS AFFECTING OUR OPERATIONS

Looking ahead, our market conditions and the strength of the broader U.S.

economy will continue to be influenced by the trajectory of U.S.

Our market conditions and the strength of the broader U.S.

economy are, and will continue to be, influenced by the trajectory of U.S.

housing activity, repair and remodel activity, impacts from COVID-related restrictions, inflation trends and interest rates.

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The strength of the U.S.

housing market, especially new residential construction, strongly affects demand in our Wood Products segment, as does repair and remodeling activity.

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.

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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 OSB as well as the demand for biofuels, such as pellets made from pulpwood.

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 pellets made from pulpwood.

The Timberlands segment is also influenced by the availability of harvestable timber.

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On a seasonally adjusted annual basis, as reported by the U.S.

Census Bureau, housing starts for first quarter 2022 averaged 1.75 million units, a 5 percent increase from fourth quarter 2021.

Single family starts averaged 1.2 million units, a 2.5 percent increase from fourth quarter 2021.

Multi-family starts averaged 557 thousand units in first quarter 2022, which was a 10.7 percent increase from fourth quarter 2021.

Sales of newly built, single family homes averaged a seasonally adjusted annual rate of 814 thousand units for first quarter 2022.

This is an increase of 6.6 percent from the previous quarter.

Repair and remodeling expenditures increased by 5.2 percent from fourth quarter 2021 to first quarter 2022 according to the Census Bureau Advance Retail Spending report.

Do-it-yourself activity remains at or above pre-pandemic historical levels while professionally contracted activities continue to expand.

wood product markets, demand was strong during most of first quarter 2022 as dealer inventories remained lean, which contributed to increased prices for lumber and panels.

The Random Lengths Framing Lumber Composite price averaged $1,248/MBF and the OSB Composite averaged $1,215/MSF in first quarter 2022.

In Western log markets, Douglas fir sawlog prices increased by 18 percent in first quarter 2022 compared with fourth quarter 2021 as reported by RISI Log Lines.

The strength in Western log prices was supported by multiple factors including strong demand as mills capitalized on high lumber pricing.

In the South, sawlog prices increased by 6 percent from fourth quarter 2021 and 13 percent from first quarter 2021 as reported by TimberMart-South mainly attributable to the increase in lumber prices.

Census Bureau, housing starts for second quarter 2022 averaged 1.65 million units, a 4 percent decrease from first quarter 2022.

Single family starts averaged 1.1 million units, a 9.5 percent decrease from first quarter 2022.

Multi-family starts averaged 577 thousand units in second quarter 2022, which was an 8.4 percent increase from first quarter 2022.

Sales of newly built, single family homes averaged a seasonally adjusted annual rate of 612 thousand units for second quarter 2022, a decrease of 21.1 percent from the prior quarter.

Repair and remodeling expenditures fell by 1 percent from first quarter 2022 to second quarter 2022 according to the Census Bureau Advance Retail Spending report.

Do-it-yourself activity has been returning to more normalized levels while professionally contracted activities continue to increase.

wood product markets, demand was steady most of second quarter 2022 as dealer inventories adjusted to a more uncertain economic environment.

The Random Lengths Framing Lumber Composite price averaged $850/MBF and the OSB Composite averaged $798/MSF in second quarter 2022.

Over the course of the second quarter, prices declined from $1,134/MBF to $604/MBF for lumber and from $1,372/MSF to $425/MSF for OSB, reflecting a more volatile pricing environment.

In Western log markets, Douglas fir sawlog prices fell by 3 percent in second quarter 2022 compared with first quarter 2022 as reported by RISI Log Lines.

Continued strength in Western log prices was supported by tight log supplies.

In the South, delivered sawlog prices increased by 0.7 percent from first quarter 2022 and 7 percent from second quarter 2021 as reported by TimberMart-South, as new mill capacity has increased demand in certain markets.

Exchange rates, available supply from other countries and trade policy affect our export businesses.

During first quarter 2022, continued strength in end use demand and disruptions of other global sources of supply supported sustained demand for export logs.

During second quarter 2022, continued strength in end use demand and disruptions of other global sources of supply supported demand for export logs.

China export activity and pricing were supported by constrained log and lumber imports from other geographies.

In Japan, total housing starts increased 4.3 percent year to date through February compared to the same period in 2021, while the key Post and Beam segment saw a 1.5 percent increase.

Decreased lumber imports from Europe to Japan have continued to be favorable to our Japanese log export business.

In Japan, total housing starts increased 2.5 percent year to date through May compared to the same period in 2021, while the key Post and Beam segment saw a 2.1 percent decrease.

Decreased lumber imports from Europe to Japan have been favorable to our Japanese log export business through the first half of 2022.

Interest rates affect our business primarily through their impact on mortgage rates, 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 longer-term interest rates.

Mortgage rates, which are correlated to longer-term interest rates, impact home affordability and therefore significant increases can reduce demand for homebuying.

Changes in inflation also reflect monetary policy set by the U.S.

Federal Reserve, as well as changes in demand and supply for goods and services and fluctuations in labor markets.

Increased inflation affects the cost of our operations across each of our business segments.

The Consumer Price Index increased 9.1 percent year over year in June 2022.

While we can offset some of the impacts of inflation through our sales activities, not all of the costs associated with inflation can be fully mitigated.

Governments and businesses across the globe are taking action on climate change and are making significant commitments towards reducing greenhouse gas emissions to net zero.

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CONSOLIDATED RESULTS

How We Did First Quarter 2022

How We Did Second Quarter 2022 and Year-to-Date 2022

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Earnings per share, basic and diluted

Comparing First Quarter 2022 with First Quarter 2021

Net sales increased $606 million – 24 percent – primarily due to a $498 million increase in Wood Products sales to unaffiliated customers attributable to increased sales realizations across all product lines, as well as an $86 million increase in Timberlands sales to unaffiliated customers attributable to increased sales realizations and sales volumes in the Western and Southern regions.

Comparing Second Quarter 2022 with Second Quarter 2021

Net sales decreased $171 million – 5 percent – primarily due to a $288 million decrease in Wood Products sales to unaffiliated customers attributable to decreased sales realizations for structural lumber, oriented strand board and softwood plywood.

This decrease was partially offset by a $110 million increase in Timberlands net sales to unaffiliated customers primarily due to increased sales realizations.

Costs of sales

Costs of sales increased $217 million – 15 percent – primarily due to increased complementary building product sales, increased cost of commodity products, and higher log and fiber costs within our Wood Products segment and increased freight costs and third-party log purchases within our Timberlands segment.

Costs of sales increased $206 million – 13 percent – primarily due to increased freight and raw material costs within our Wood Products segment as well as increased freight costs, third-party log purchases and sales volumes within our Timberlands segment.

Operating income

Operating income increased $388 million – 41 percent – primarily due to a $389 million increase in consolidated gross margin (see discussion of components above).

Net earnings increased $90 million – 13 percent – primarily due to the $388 million increase in operating income, as discussed above.

This increase was partially offset by a $276 million pretax charge ($207 million after-tax) related to the early extinguishment of debt (refer to Note 8:

Long-Term Debt and Line of Credit ), as well as a $20 million increase in income tax expense (refer to Income Taxes ).

How We Did First Quarter 2022

Operating income decreased $382 million – 27 percent – primarily due to a $377 million decrease in consolidated gross margin (see discussion of components above).

Net earnings decreased $240 million – 23 percent – primarily due to the $382 million decrease in operating income discussed above.

This decrease was partially offset by a $140 million decrease in income tax expense (refer to Income Taxes ).

Comparing Year-to-Date 2022 with Year-to-Date 2021

Net sales increased $435 million – 8 percent – primarily due to a $210 million increase in Wood Products sales to unaffiliated customers attributable to increased sales realizations across most product lines, as well as a $196 million increase in Timberlands sales to unaffiliated customers attributable to increased sales realizations and sales volumes in the Western and Southern regions.

Costs of sales

Costs of sales increased $423 million –14 percent – primarily due to increased freight and raw material costs within our Wood Products segment as well as increased freight costs, third-party log purchases and sales volumes within our Timberlands segment.

Operating income

Operating income increased $6 million – less than 1 percent – primarily due to a $12 million increase in consolidated gross margin (see discussion of components above).

Net earnings decreased $150 million – 9 percent – primarily due to a $276 million pretax charge ($207 million after-tax) related to the early extinguishment of debt (refer to Note 8:

Long-Term Debt and Line of Credit ).

This decrease was partially offset by a $120 million decrease in income tax expense (refer to Income Taxes ).

How We Did Second Quarter 2022 and Year-to-Date 2022

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Other Timberlands sales include sales of seeds and seedlings from our nursery operations as well as wood chips.

Comparing First Quarter 2022 with First Quarter 2021

Comparing Second Quarter 2022 with Second Quarter 2021

Net sales to unaffiliated customers

Net sales to unaffiliated customers increased $86 million – 23 percent – primarily due to a $58 million increase in Western log sales attributable to a 23 percent increase in sales realizations and a 4 percent increase in sales volumes, as well as a $23 million increase in Southern log sales attributable to a 9 percent increase in sales volumes and an 8 percent increase in sales realizations.

Net sales to unaffiliated customers increased $110 million – 27 percent – primarily due to an $86 million increase in Western log sales attributable to a 26 percent increase in sales realizations and an 11 percent increase in sales volumes, as well as a $15 million increase in Southern log sales attributable to a 10 percent increase in sales realizations.

Intersegment sales

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Operating income and net contribution to earnings increased $40 million – 35 percent – primarily due to the change in the components of gross margin, as discussed above.

Comparing Year-to-Date 2022 with Year-to-Date 2021

Net sales to unaffiliated customers

Net sales to unaffiliated customers increased $196 million – 25 percent – primarily due to a $144 million increase in Western log sales attributable to a 25 percent increase in sales realizations and a 7 percent increase in sales volumes, as well as a $38 million increase in Southern log sales attributable to a 9 percent increase in sales realizations and a 5 percent increase in sales volumes.

Intersegment sales

Intersegment sales increased $47 million – 17 percent – primarily due to a 19 percent increase in sales realizations.

Costs of sales

Costs of sales increased $128 million – 16 percent – primarily due to increased freight costs and third-party log purchases, as well as increased sales volumes, as discussed above.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings increased $114 million – 52 percent – primarily due to the change in the components of gross margin, as discussed above.

Third-Party Log Sales Volumes and Fee Harvest Volumes

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VOLUMES IN THOUSANDS

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REAL ESTATE, ENERGY AND NATURAL RESOURCES

How We Did First Quarter 2022

How We Did Second Quarter 2022 and Year-to-Date 2022

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In any period, the average sales price per acre will vary based on the location and physical characteristics of parcels sold.

Comparing First Quarter 2022 with First Quarter 2021

Net sales increased $22 million – 21 percent – primarily due to increases in the amount of acres sold and energy and natural resources sales.

Comparing Second Quarter 2022 with Second Quarter 2021

Net sales increased $7 million – 6 percent – primarily due to an increase in the amount of acres sold, partially offset by decreased mitigation bank credit sales.

Costs of sales

Costs of sales increased $7 million – 21 percent – primarily due to an increase in the amount of acres sold.

Costs of sales increased $4 million – 10 percent – primarily due to increases in the amount of acres sold and basis per acre sold.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings increased $2 million – 3 percent – primarily due to the change in the components of gross margin, as discussed above.

Comparing Year-to-Date 2022 with Year-to-Date 2021

Net sales increased $29 million – 13 percent – primarily due to an increase in the amount of acres sold, partially offset by decreased mitigation bank credit sales.

Costs of sales

Costs of sales increased $11 million – 15 percent – primarily due to increases in the amount of acres sold and basis per acre sold.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings increased $17 million – 13 percent – primarily due to the change in the components of gross margin, as discussed above.

REAL ESTATE SALES STATISTICS

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Average price per acre

WOOD PRODUCTS

How We Did First Quarter 2022

How We Did Second Quarter 2022 and Year-to-Date 2022

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Other products produced sales include wood chips, other byproducts and third-party residual log sales from our Canadian Forestlands operations.

Comparing First Quarter 2022 with First Quarter 2021

Comparing Second Quarter 2022 with Second Quarter 2021

Net sales decreased $288 million – 11 percent – due to:

a $351 million decrease in structural lumber sales attributable to a 28 percent decrease in sales realizations, partially offset by a 3 percent increase in sales volumes;

a $108 million decrease in oriented strand board sales attributable to a 26 percent decrease in sales realizations, partially offset by an 11 percent increase in sales volumes and

a $16 million decrease in softwood plywood sales attributable to a 17 percent decrease in sales realizations, as well as a 9 percent decrease in sales volumes.

These decreases were partially offset by:

an $81 million increase in engineered solid section sales due to a 53 percent increase in sales realizations, partially offset by a 3 percent decrease in sales volumes;

a $64 million increase in engineered I-joists sales due to a 73 percent increase in sales realizations, partially offset by an 8 percent decrease in sales volumes;

a $26 million increase in complementary building products sales attributable to increased sales realizations;

a $10 million increase in medium density fiberboard sales attributable to a 35 percent increase in sales realizations, partially offset by a 10 percent decrease in sales volumes and

a $6 million increase in other products produced sales attributable to increased sales volumes.

Costs of sales

Costs of sales increased $185 million – 15 percent – primarily due to increased freight and raw material costs.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings decreased $475 million – 36 percent – primarily due to the change in the components of gross margin, as discussed above.

Comparing Year-to-Date 2022 with Year-to-Date 2021

Net sales increased $210 million – 5 percent – due to:

a $216 million increase in structural lumber sales attributable to a 21 percent increase in sales realizations, as well as a 1 percent increase in sales volumes;

a $126 million increase in oriented strand board sales attributable to a 28 percent increase in sales realizations;

a $54 million increase in engineered solid section sales attributable to a 50 percent increase in sales realizations, partially offset by an 8 percent decrease in sales volumes;

a $54 million increase in engineered I-joists sales attributable to a 67 percent increase in sales realizations, partially offset by a 2 percent decrease in sales volumes, and

a $135 million increase in engineered solid section sales attributable to a 52 percent increase in sales realizations, partially offset by a 5 percent decrease in sales volumes;

a $118 million increase in engineered I-joists sales attributable to a 70 percent increase in sales realizations, partially offset by a 5 percent decrease in sales volumes;

a $70 million increase in complementary building products sales attributable to increased sales realizations;

an $18 million increase in oriented strand board sales attributable to 5 percent increase in sales volumes, partially offset by a 3 percent decrease in sales realizations;

a $10 million increase in medium density fiberboard sales attributable to a 32 percent increase in sales realizations, partially offset by a 17 percent decrease in sales volumes and

an $8 million increase in other products produced sales attributable to increased sales volumes.

These increases were partially offset by a $135 million decrease in structural lumber sales attributable to an 8 percent decrease in sales realizations, partially offset by a 2 percent increase in sales volumes, as well as a $14 million decrease in softwood plywood sales attributable to a 15 percent decrease in sales volumes, partially offset by a 4 percent increase in sales realizations.

Costs of sales

Costs of sales increased $152 million – 14 percent – primarily due to increased complementary building product sales, increased cost of commodity products, and higher log and fiber costs.

Costs of sales increased $337 million – 14 percent – primarily due to increased freight and raw material costs.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings increased $342 million – 41 percent – primarily due to the change in the components of gross margin, as discussed above.

Operating income and net contribution to earnings decreased $133 million – 6 percent – primarily due to the change in the components of gross margin, as discussed above.

Third-Party Sales Volumes

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VOLUMES IN MILLIONS ( 1)

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Liability classified share-based compensation

Foreign exchange loss

Foreign exchange gain (loss)

Elimination of intersegment profit in inventory and LIFO

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Net charge to earnings

Comparing First Quarter 2022 with First Quarter 2021

Net charge to earnings increased $52 million – 80 percent – primarily due to a $42 million increase in elimination of intersegment profit in inventory and LIFO.

Comparing Second Quarter 2022 with Second Quarter 2021

Net charge to earnings decreased $40 million – 48 percent – primarily due to a $46 million decrease in elimination of intersegment profit in inventory and LIFO.

Comparing Year-to-Date 2022 with Year-to-Date 2021

Net charge to earnings increased $12 million – 8 percent – primarily due to a $17 million increase in non-operating pension and other post-employment benefit costs.

INTEREST EXPENSE

Our interest expense, net of capitalized interest, was:

$72 million for first quarter 2022 and

$79 million for first quarter 2021.

Interest expense decreased by $7 million compared to first quarter 2021 primarily due to a decrease in the average outstanding debt and weighted average interest rate in first quarter 2022.

$65 million for second quarter 2022 and $137 million year-to-date 2022;

$78 million for second quarter 2021 and $157 million year-to-date 2021.

Interest expense decreased by $13 million compared to second quarter 2021 and decreased by $20 million compared to year-to-date 2021 primarily due to decreases in the average outstanding debt and weighted average interest rate.

Refer to Note 8:

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Our provision for income taxes was:

a $209 million expense for first quarter 2022 and

a $189 million expense for first quarter 2021.

a $184 million expense for second quarter 2022 and a $393 million expense year-to-date 2022;

a $324 million expense for second quarter 2021 and a $513 million expense year-to-date 2021.

Our provision for income taxes is primarily driven by earnings generated by our TRSs.

Income tax expense increased by $20 million compared to first quarter 2021 primarily due to an increase in our TRS earnings in first quarter 2022, partially offset by a tax benefit of approximately $69 million resulting from the $276 million pretax loss on debt extinguishment recorded in first quarter 2022.

Income tax expense decreased by $120 million compared to year-to-date 2021 primarily due to a tax benefit of approximately $69 million resulting from the $276 million pretax loss on debt extinguishment recorded in first quarter 2022, as well as a decrease in our estimated annual effective tax rate.

Refer to Note 14:

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We are committed to maintaining an appropriate capital structure that provides 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, 2022, we had over $1.2 billion in cash and cash equivalents and $1.5 billion of availability on our line of credit, which expires in January 2025.

As of June 30, 2022, we had over $1.7 billion in cash and cash equivalents and $1.5 billion of availability on our line of credit, which expires in January 2025.

We believe we have sufficient liquidity to meet our cash requirements for the foreseeable future.

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Consolidated net cash from operations was:

$957 million for first quarter 2022 and

$698 million for first quarter 2021.

$2,103 million for year-to-date 2022 and

$2,006 million for year-to-date 2021.

Net cash from operations increased $97 million, primarily due to increased cash inflows from our business operations.

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Consolidated net cash from investing activities was:

$(87) million for first quarter 2022 and

$(53) million for first quarter 2021.

$(433) million for year-to-date 2022 and

$(273) million for year-to-date 2021.

Net cash from investing activities decreased $160 million, primarily due to:

a $17 million increase in cash paid for capital expenditures and

an $18 million increase in cash paid for acquisition of timberlands.

a $134 million increase in cash paid for acquisition of timberlands and

a $26 million increase in cash paid for capital expenditures.

Summary of Capital Spending by Business Segment

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Consolidated net cash from financing activities was:

$(1,664) million for first quarter 2022 and

$(124) million for first quarter 2021.

$(1,938) million for year-to-date 2022 and

$(451) million for year-to-date 2021.

Net cash from financing activities decreased $1,487 million, primarily due to:

a $1,091 million increase in cash used for payments of dividends;

a $322 million increase in net cash used for payments on long-term debt and

a $118 million increase in cash used for repurchases of common stock.

a $1,097 million increase in cash paid for dividends;

a $259 million increase in cash used for repurchases of common stock and

a $97 million increase in net cash used for payments on long term debt.

Line of Credit

We had no outstanding borrowings on our $1.5 billion five-year senior unsecured revolving credit facility as of March 31, 2022 or December 31, 2021.

We had no outstanding borrowings on our $1.5 billion five-year senior unsecured revolving credit facility as of June 30, 2022 or December 31, 2021.

This credit facility expires in January 2025.

Our revolving credit agreement utilizes the London Inter-bank Offered Rate (LIBOR) as a basis for one of the interest rate options available to the company to apply to outstanding borrowings.

Due to the cessation of USD LIBOR we plan to transition our revolving credit facility to an alternate reference rate in 2022.

We plan to transition our revolving credit facility to an alternate reference rate prior to the cessation of LIBOR.

We have included provisions in our revolving credit agreement that specifically contemplate the transition from LIBOR to a replacement benchmark rate.

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Debt Covenants

As of March 31, 2022, Weyerhaeuser Company was in compliance with its debt covenants.

As of June 30, 2022, Weyerhaeuser Company was in compliance with its debt covenants.

There have been no significant changes to the debt covenants presented in our 2021 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.

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We received cash proceeds from the exercise of stock options of:

$12 million for first quarter 2022 and

$17 million for first quarter 2021.

Our average stock price was $39.65 and $34.05 for first quarter 2022 and 2021, respectively.

$14 million for year-to-date 2022 and

$45 million for year-to-date 2021.

Our average stock price was $38.89 and $35.60 for year-to-date 2022 and 2021, respectively.

Dividend Payments

We paid cash dividends on common shares of:

$1,218 million for first quarter 2022 and

$127 million for first quarter 2021.

The increase in dividends paid is primarily due to a supplemental dividend of $1.45 per share based on 2021 financial results for a total of $1,084 million paid in the first quarter of 2022.

$1,352 million for year-to-date 2022 and

$255 million for year-to-date 2021.

The increase in dividends paid is primarily due to a supplemental dividend of $1.45 per share ($1,084 million in total) paid in the first quarter of 2022 based on 2021 financial results.

Share Repurchases

We repurchased 3,197,675 shares for approximately $121 million (including transaction fees) during first quarter 2022 under the 2021 Repurchase Program.

We did not repurchase shares in first quarter 2021.

There were 78,380 unsettled shares (approximately $3 million) as of March 31, 2022 and no unsettled shares as of December 31, 2021.

We repurchased 3,197,675 shares for approximately $121 million (including transaction fees) during first quarter 2022 and 3,784,787 shares for approximately $138 million (including transaction fees) during second quarter 2022 under the 2021 Repurchase Program.

We did not repurchase shares during year-to-date 2021.

There were no unsettled repurchases as of June 30, 2022 or December 31, 2021.

Refer to Note 4:

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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.

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.

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Adjusted EBITDA

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.

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.

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, 2022:

The table below reconciles Adjusted EBITDA for the quarter ended June 30, 2022:

DOLLAR AMOUNTS IN MILLIONS

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Interest expense, net of capitalized interest

Net contribution (charge) to earnings

Non-operating pension and other post-employment benefit costs

Interest income and other

Operating income (loss)

Depreciation, depletion and amortization

Basis of real estate sold

Adjusted EBITDA

The table below reconciles Adjusted EBITDA for the quarter ended June 30, 2021:

DOLLAR AMOUNTS IN MILLIONS

Real Estate &

Adjusted EBITDA by Segment:

Interest expense, net of capitalized interest

Net contribution (charge) to earnings

Non-operating pension and other post-employment benefit costs

Interest income and other

Operating income (loss)

Depreciation, depletion and amortization

Basis of real estate sold

Adjusted EBITDA

The table below reconciles Adjusted EBITDA for the year-to-date period ended June 30, 2022:

DOLLAR AMOUNTS IN MILLIONS

Real Estate &

Adjusted EBITDA by Segment:

Interest expense, net of capitalized interest

Loss on debt extinguishment ( 1)

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Loss on debt extinguishment is a special item consisting of a pretax charge of $276 million related to early debt retirement.

The table below reconciles Adjusted EBITDA for the quarter ended March 31, 2021:

The table below reconciles Adjusted EBITDA for the year-to-date period ended June 30, 2021:

DOLLAR AMOUNTS IN MILLIONS

Real Estate &

Adjusted EBITDA by Segment:

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Net earnings per diluted share

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CRITICAL ACCOUNTING POLICIES

There have been no significant changes during first quarter 2022 to the critical accounting policies presented in our 2021 Annual Report on Form 10-K.

There have been no significant changes during year-to-date 2022 to the critical accounting policies presented in our 2021 Annual Report on Form 10-K.

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 2. Management’s Discussion and Analysis