What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-10-28 compared with 2022-07-29 · 174 added, 101 removed, 358 unchanged (43% of the section changed)

12 unchanged sentences

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;

housing activity, repair and remodel activity, impacts from any future restrictions related to COVID or other viral or similar outbreak, inflation trends and interest rates;

our expectations about our future opportunities in emerging carbon offset and carbon capture and storage markets;

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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 rate levels, inflation, housing starts, general availability of financing for home mortgages and the relative strength of the U.S.

the effect of general economic conditions, including employment rates, interest rate levels, inflation, housing starts, general availability and cost of financing for home mortgages and the relative strength of the U.S.

the effect of COVID-19 and other viral or disease outbreaks, including but not limited to any related regulatory restrictions or requirements, and their potential effects on our business, results of operations, cash flows, financial condition and future prospects;

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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.

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

housing and repair and remodel segments, impacts from any future restrictions related to COVID or other viral or similar outbreak, inflation trends and interest rates.

The demand for sawlogs within our Timberlands segment is directly affected by domestic production of wood-based building 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 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.

In general, Western log markets are highly tensioned while Southern log markets have more available supply.

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.

While underlying longer-term fundamentals remain favorable for construction of new housing in the U.S., home sales and building activity have slowed due in part to higher mortgage interest rates, reduced affordability, and general macroeconomic conditions.

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

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 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 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.

Census Bureau, housing starts for third quarter 2022 averaged 1.46 million units, an 11 percent decrease from second quarter 2022.

Single family starts averaged 0.9 million units, a 16 percent decrease from second quarter 2022.

Multi-family starts averaged 551 thousand units in third quarter 2022, which was a 2 percent decrease from second quarter 2022.

Sales of newly built, single family homes averaged a seasonally adjusted annual rate of 608 thousand units for third quarter 2022, a decrease of 0.2 percent from the prior quarter.

Over the medium to long-term, we expect continued strength in the U.S.

housing construction market, supported by strong demographics in the key homebuying age cohorts, a decade of underbuilding and an aging housing stock.

Repair and remodeling expenditures increased by 1.8 percent from second quarter 2022 to third 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 have benefitted from larger projects and increases in home equity levels.

Over the longer term, we expect this sector to return to pre-pandemic growth trends with healthy household balance sheets, elevated home equity, and a housing stock median age of 43 years old.

wood product markets, demand was measured most of third quarter 2022 as buyers adjusted to a more uncertain economic environment.

The Random Lengths Framing Lumber Composite price averaged $591/MBF and the OSB Composite averaged $449/MSF in third quarter 2022.

Over the course of the third quarter, prices declined from $604/MBF to $512/MBF for lumber and from $425/MSF to $402/MSF for OSB, reflecting a softening housing construction market.

Pricing for both lumber and OSB remain well above 10-year averages.

In Western log markets, Douglas fir sawlog prices fell by 2.9 percent in third quarter 2022 compared with second quarter 2022 as reported by RISI Log Lines based on Weyerhaeuser’s portfolio mix.

Overall, domestic prices in the West were supported by steady demand and constrained log supplies associated with log and haul capacity in the region.

In the South, delivered sawlog prices increased by 0.2 percent from second quarter 2022 and 5.5 percent from third quarter 2021 as reported by TimberMart-South, as mills are carrying higher inventories to mitigate log and haul capacity constraints.

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

During third quarter 2022, end use demand softened which was partly offset by disruptions of other global sources of log supply.

In Japan, total housing starts increased 1.4 percent year to date through August compared to the same period in 2021, while the key Post and Beam segment saw a 2.8 percent decrease.

An increase in lumber imports from Europe to Japan placed downward pressure on market conditions.

China demand was held back by their general economic conditions, but constraints of supply sources from other countries supported demand from U.S.

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 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.

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 5.7 percent at the end of second quarter 2022 to 6.7 percent at the end of the third quarter.

This represents an increase of 3.6 percentage points from the end of 2021, which has had a negative impact on home affordability and has reduced demand for homebuying.

Monetary policy set by the U.S.

Federal Reserve affects changes in the rate of inflation 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, including costs for raw materials, transportation, energy and labor.

The Consumer Price Index increased 8.2 percent year over year in September 2022.

While we can offset some of the impacts of inflation through our sales activities, our operational excellence initiatives, and our procurement practices, not all of the costs associated with inflation can be fully mitigated or passed on to the consumer.

The relative strength 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 was 3.5 percent in September 2022, compared to 3.6 percent at the end of the second quarter.

Labor force participation has increased to 62.3 percent in September 2022, from 61.7 percent in September 2021, but this remains below pre-pandemic levels of over 63 percent.

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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We believe we are uniquely positioned to help entities achieve these commitments through natural climate solutions, including forest carbon sequestration and carbon capture and storage activities.

In mid-September 2022, Weyerhaeuser employee members of the International Association of Machinists and Aerospace Workers union commenced a work stoppage affecting the company’s operations in Washington and Oregon.

The stoppage involves approximately 1,200 employees and affects four lumber mills in our Wood Products segment and a portion of our Western Timberlands operations.

This event has had a negative impact on our results of operations for the third quarter, including reductions in fee harvest volumes and sale volumes for Western Timberlands, as well as reductions in production volumes and sales volumes for our lumber business.

The stoppage has had a similar impact on our fourth quarter results to date.

On October 28, 2022, the company announced the successful resolution of the work stoppage and will resume normal operations as soon as possible.

CONSOLIDATED RESULTS

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

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

QUARTER ENDED

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DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES

SEPTEMBER 2022

SEPTEMBER 2021

SEPTEMBER 2022

SEPTEMBER 2021

Costs of sales

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Earnings per share, basic and diluted

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.

Comparing Third Quarter 2022 with Third Quarter 2021

Net sales decreased $69 million – 3 percent – primarily due to an $86 million decrease in Wood Products sales to unaffiliated customers attributable to decreased sales realizations for oriented strand board, as well as decreased sales volumes for structural lumber.

This decrease was partially offset by an $18 million increase in Timberlands net sales to unaffiliated customers primarily due to increased sales realizations for Southern logs.

Costs of sales

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.

Costs of sales increased $105 million – 7 percent – primarily due to increased freight and raw material costs within our Wood Products segment, as well as increased logging and hauling costs within our Timberlands segment.

Operating income

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Net earnings decreased $172 million – 36 percent – primarily due to the $192 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 ).

This decrease was partially offset by a $12 million decrease in interest expense, as well as a $7 million decrease in income tax expense (refer to Interest Expense and 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.

Net sales increased $366 million – 5 percent – primarily due to a $214 million increase in Timberlands sales to unaffiliated customers attributable to increased sales realizations and sales volumes in the Western and Southern regions, as well as a $124 million increase in Wood Products sales to unaffiliated customers attributable to increased sales realizations across most product lines.

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.

Costs of sales increased $528 million – 11 percent – primarily due to increased freight and raw material costs within our Wood Products segment, as well as increased third-party log purchases and logging and hauling costs 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).

Operating income decreased $186 million – 6 percent – primarily due to a $162 million decrease in consolidated gross margin (see discussion of components above).

Net earnings decreased $322 million – 15 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

Long-Term Debt and Line of Credit ), as well as the $186 million decrease in operating income discussed above.

These decreases were partially offset by a $127 million decrease in income tax expense, as well as a $32 million decrease in interest expense (refer to Income Taxes and Interest Expense ).

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

QUARTER ENDED

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DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2022

SEPTEMBER 2021

SEPTEMBER 2022

SEPTEMBER 2021

Net sales to unaffiliated customers:

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

Comparing Second Quarter 2022 with Second Quarter 2021

Comparing Third Quarter 2022 with Third Quarter 2021

Net sales to unaffiliated customers

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.

Net sales to unaffiliated customers increased $18 million – 4 percent – primarily due to a $13 million increase in Southern log sales attributable to a 9 percent increase in sales realizations.

Western log sales decreased $2 million due to a 9 percent decrease in sales volumes, primarily attributable to the work stoppage in Washington and Oregon, partially offset by a 9 percent increase in sales realizations.

Intersegment sales

Intersegment sales increased $20 million – 15 percent – primarily due to a 19 percent increase in sales realizations.

Intersegment sales increased $4 million – 3 percent – primarily due to a 9 percent increase in sales realizations, partially offset by a 5 percent decrease in sales volumes, primarily attributable to the work stoppage in Washington and Oregon.

Costs of sales

Costs of sales increased $88 million – 22 percent – primarily due to increased freight costs and third-party log purchases, as well as increased sales volumes, as discussed above.

Costs of sales increased $14 million – 3 percent – primarily due to increased logging and hauling costs, partially offset by a 3 percent decrease in sales volumes, primarily attributable to the work stoppage in Washington and Oregon.

Operating income and Net contribution to earnings

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.

Operating income and net contribution to earnings decreased $26 million – 20 percent – primarily due to a $32 million gain on sale of timberlands recorded in third quarter 2021, partially offset by the change in the components of gross margin, as discussed above.

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

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Intersegment sales

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

Intersegment sales increased $51 million – 13 percent – primarily due to a 16 percent increase in sales realizations, partially offset by a 3 percent decrease in sales volumes.

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.

Costs of sales increased $142 million – 12 percent – primarily due to increased third-party log purchases and logging and hauling costs.

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.

Operating income and net contribution to earnings increased $88 million – 25 percent – primarily due to the change in the components of gross margin, as discussed above, partially offset by a $32 million gain on sale of timberlands recorded in third quarter 2021.

Third-Party Log Sales Volumes and Fee Harvest Volumes

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VOLUMES IN THOUSANDS

SEPTEMBER 2022

SEPTEMBER 2021

SEPTEMBER 2022

SEPTEMBER 2021

Third-party log sales – tons:

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REAL ESTATE, ENERGY AND NATURAL RESOURCES

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

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

QUARTER ENDED

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DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2022

SEPTEMBER 2021

SEPTEMBER 2022

SEPTEMBER 2021

Energy and natural resources

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Operating income and Net contribution to earnings

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 (particularly in the northern states), 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.

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 sales price per acre will vary based on the location and physical characteristics of parcels sold.

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.

Comparing Third Quarter 2022 with Third Quarter 2021

Net sales decreased $1 million – 1 percent – primarily due to a decrease in acres sold, partially offset by an increase in royalty income from our Energy and Natural Resources business.

Costs of sales

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

Costs of sales decreased $4 million – 22 percent – primarily due to a decrease in acres sold.

Operating income and Net contribution to earnings

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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.

Net sales increased $28 million – 10 percent – primarily due to increases in acres sold and royalty income from our Energy and Natural Resources business, partially offset by a decrease in 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.

Costs of sales increased $7 million – 8 percent – primarily due to an increase in acres sold, partially offset by a decrease in mitigation bank credit sales.

Operating income and Net contribution to earnings

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YEAR-TO-DATE ENDED

SEPTEMBER 2022

SEPTEMBER 2021

SEPTEMBER 2022

SEPTEMBER 2021

Average price per acre

WOOD PRODUCTS

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

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

QUARTER ENDED

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DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2022

SEPTEMBER 2021

SEPTEMBER 2022

SEPTEMBER 2021

Structural lumber

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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 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.

Comparing Third Quarter 2022 with Third Quarter 2021

Net sales decreased $86 million – 5 percent – due to a $183 million decrease in oriented strand board sales attributable to a 42 percent decrease in sales realizations, partially offset by a 5 percent increase in sales volumes, as well as a $5 million decrease in structural lumber sales attributable to an 8 percent decrease in sales volumes, partially offset by an 8 percent increase in sales realizations.

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.

a $50 million increase in engineered solid section sales due to a 28 percent increase in sales realizations;

a $38 million increase in engineered I-joists sales due to a 36 percent increase in sales realizations and

an $11 million increase in complementary building products sales due to increased sales volumes and sales realizations for siding and trim.

Costs of sales

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a $156 million increase in engineered I-joists sales attributable to a 56 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.

an $81 million increase in complementary building products sales attributable to increased sales realizations;

an $11 million increase in other products produced sales attributable to increased sales volumes for wood chips and

an $8 million increase in medium density fiberboard sales attributable to a 33 percent increase in sales realizations, partially offset by a 20 percent decrease in sales volumes.

These increases were partially offset by a $165 million decrease in oriented strand board sales due to a 15 percent decrease in sales realizations, partially offset by a 5 percent increase in sales volumes, as well as a $140 million decrease in structural lumber sales due to a 3 percent decrease in sales realizations and a 1 percent decrease in sales volumes.

Costs of sales

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VOLUMES IN MILLIONS ( 1)

SEPTEMBER 2022

SEPTEMBER 2021

SEPTEMBER 2022

SEPTEMBER 2021

Structural lumber – board feet

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VOLUMES IN MILLIONS

SEPTEMBER 2022

SEPTEMBER 2021

SEPTEMBER 2022

SEPTEMBER 2021

Structural lumber – board feet:

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DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2022

SEPTEMBER 2021

SEPTEMBER 2022

SEPTEMBER 2021

Unallocated corporate function and variable compensation expense

Liability classified share-based compensation

Foreign exchange gain (loss)

Foreign exchange gain

Elimination of intersegment profit in inventory and LIFO

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Net charge to earnings

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 Third Quarter 2022 with Third Quarter 2021

Net charge to earnings decreased $5 million – 10 percent – primarily due to:

an $8 million increase in interest income and other due to an increase in the interest rate on our cash and investment accounts;

a $4 million increase in foreign exchange gain due to strengthening of the U.S.

a $3 million decrease in liability classified share-based compensation driven by the change in our stock price.

These changes were partially offset by a $10 million increase in elimination of intersegment profit in inventory and LIFO.

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

Net charge to earnings increased $7 million – 4 percent – primarily due to a $24 million increase in non-operating pension and other post-employment benefit costs.

This increase was partially offset by a $10 million increase in foreign exchange gain due to strengthening of the U.S.

dollar, as well as a $7 million decrease in liability classified share-based compensation driven by the change in our stock price.

INTEREST EXPENSE

Our interest expense, net of capitalized interest, was:

$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.

$67 million for third quarter 2022 and $204 million year-to-date 2022;

$79 million for third quarter 2021 and $236 million year-to-date 2021.

Interest expense decreased by $12 million compared to third quarter 2021 and decreased by $32 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 $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.

a $77 million expense for third quarter 2022 and a $470 million expense year-to-date 2022;

an $84 million expense for third quarter 2021 and a $597 million expense year-to-date 2021.

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

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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 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.

As of September 30, 2022, we had over $1.9 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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$2,665 million for year-to-date 2021.

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

This change was partially offset by a $91 million increase in cash paid for income taxes.

Net cash from operations remained consistent as decreased cash inflows from our business operations were offset by a $48 million decrease in cash paid for income taxes, a $37 million decrease in pension and post-employment benefit contributions and payments, and a $26 million decrease in cash paid for interest.

CASH FROM INVESTING ACTIVITIES

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Net cash from investing activities decreased $422 million, primarily due to:

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

a $261 million decrease in proceeds from the sale of timberlands;

a $137 million increase in cash paid for the acquisition of timberlands and

a $22 million increase in cash paid for capital expenditures.

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DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2022

SEPTEMBER 2021

Wood Products

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Line of Credit

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.

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

This credit facility expires in January 2025.

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We paid holders an aggregate $1.2 billion in cash reflecting principal, premium to par and tender premium.

In May 2021, we repaid our $225 million variable-rate term loan that was scheduled to mature in July 2026.

Refer to Note 8:

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Debt Covenants

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

As of September 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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Share Repurchases

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.

We repurchased 4,234,838 common shares for approximately $145 million (including transaction fees) during third quarter 2022 and 11,217,300 common shares for approximately $404 million (including transaction fees) during year-to-date 2022 under the 2021 Repurchase Program.

During third quarter and year-to-date 2021, we repurchased 780,228 common shares for approximately $26 million (including transaction fees) under the 2019 Repurchase Program.

There were 64,135 unsettled shares (approximately $2 million) as of September 30, 2022 and no unsettled shares as of December 31, 2021.

Refer to Note 4:

2 unchanged sentences

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.

QUARTER ENDED

1 unchanged sentence

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2022

SEPTEMBER 2021

SEPTEMBER 2022

SEPTEMBER 2021

Adjusted EBITDA by Segment:

3 unchanged sentences

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 June 30, 2022:

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

DOLLAR AMOUNTS IN MILLIONS

9 unchanged sentences

Adjusted EBITDA

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

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

DOLLAR AMOUNTS IN MILLIONS

8 unchanged sentences

Basis of real estate sold

Special items included in operating income (loss) (1)

Adjusted EBITDA

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

Operating income (loss) includes a pretax special item consisting of a $32 million gain on the sale of timberlands.

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

DOLLAR AMOUNTS IN MILLIONS

11 unchanged sentences

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 year-to-date period ended June 30, 2021:

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

DOLLAR AMOUNTS IN MILLIONS

7 unchanged sentences

Basis of real estate sold

Special items included in operating income (loss) (1)

Adjusted EBITDA

Operating income (loss) includes a pretax special item consisting of a $32 million gain on the sale of timberlands.

Net Earnings and Net Earnings per Diluted Share Before Special Items

6 unchanged sentences

DOLLAR AMOUNTS IN MILLIONS

SEPTEMBER 2022

SEPTEMBER 2021

SEPTEMBER 2022

SEPTEMBER 2021

Loss on debt extinguishment

Gain on sale of timberlands

Net earnings before special items

2 unchanged sentences

YEAR-TO-DATE ENDED

SEPTEMBER 2022

SEPTEMBER 2021

SEPTEMBER 2022

SEPTEMBER 2021

Net earnings per diluted share

Loss on debt extinguishment

Gain on sale of timberlands

Net earnings per diluted share before special items

2 unchanged sentences

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