UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO ______
COMMISSION FILE NUMBER: 1-4825
WEYERHAEUSER COMPANY
(Exact name of registrant as specified in its charter)
Washington
91-0470860
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
220 Occidental Avenue South
Seattle, Washington
98104-7800
(Address of principal executive offices)
(Zip Code)
(206) 539-3000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common Stock, par value $1.25 per share
WY
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As of July 22, 2024, 727,315 thousand shares of the registrant’s common stock ($1.25 par value) were outstanding.
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS:
CONSOLIDATED STATEMENT OF OPERATIONS
1
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2
CONSOLIDATED BALANCE SHEET
3
CONSOLIDATED STATEMENT OF CASH FLOWS
4
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
5
INDEX FOR NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)
14
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
27
ITEM 4.
CONTROLS AND PROCEDURES
PART II
OTHER INFORMATION
LEGAL PROCEEDINGS
ITEM 1A.
RISK FACTORS
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
28
DEFAULTS UPON SENIOR SECURITIES – NOT APPLICABLE
MINE SAFETY DISCLOSURES – NOT APPLICABLE
ITEM 5.
ITEM 6.
EXHIBITS
29
SIGNATURES
30
PART I – FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
(UNAUDITED)
QUARTER ENDED
YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES
JUNE 2024
JUNE 2023
Net sales (Note 3)
$
1,939
1,997
3,735
3,878
Costs of sales
1,535
1,528
2,976
3,040
Gross margin
404
469
759
838
Selling expenses
22
44
General and administrative expenses
116
108
236
209
Other operating (income) costs, net (Note 13)
(4
)
20
13
Operating income
270
319
466
555
Non-operating pension and other post-employment benefit costs (Note 6)
(10
(12
(21
Interest income and other
18
Interest expense, net of capitalized interest
(67
(70
(134
(136
Earnings before income taxes
206
255
340
428
Income taxes (Note 14)
(33
(25
(53
(47
Net earnings
173
230
287
381
Earnings per share, basic and diluted (Note 4)
0.24
0.31
0.39
0.52
Weighted average shares outstanding (in thousands) (Note 4):
Basic
729,026
732,021
729,534
732,599
Diluted
729,341
732,362
729,950
732,961
See accompanying Notes to Consolidated Financial Statements.
DOLLAR AMOUNTS IN MILLIONS
Other comprehensive income:
Foreign currency translation adjustments
(5
(14
Changes in unamortized actuarial loss, net of tax expense of $2, $2, $6 and $4
15
Changes in unamortized net prior service credit, net of tax benefit of $0, $1, $0 and $1
—
Total other comprehensive income
Total comprehensive income
175
245
288
403
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PAR VALUE
JUNE 30,2024
DECEMBER 31,2023
ASSETS
Current assets:
Cash and cash equivalents
997
1,164
Receivables, net
410
354
Receivables for taxes
10
Inventories (Note 5)
614
566
Prepaid expenses and other current assets
152
219
Total current assets
2,183
2,313
Property and equipment, less accumulated depreciation of $3,970 and $3,901
2,240
2,269
Construction in progress
303
Timber and timberlands at cost, less depletion
11,475
11,528
Minerals and mineral rights, less depletion
194
200
Deferred tax assets
Other assets
392
388
Total assets
16,800
16,983
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt (Note 8)
210
Accounts payable
281
Accrued liabilities (Note 7)
504
501
Total current liabilities
995
788
Long-term debt, net (Note 8)
4,862
5,069
Deferred tax liabilities
87
81
Deferred pension and other post-employment benefits (Note 6)
460
461
Other liabilities
351
348
Total liabilities
6,755
6,747
Commitments and contingencies (Note 10)
Equity:
Common shares: $1.25 par value; authorized 1,360 million shares; issued and outstanding: 727,519 thousand shares at June 30, 2024 and 729,753 thousand shares at December 31, 2023
910
912
Other capital
7,530
7,608
Retained earnings
1,897
2,009
Accumulated other comprehensive loss (Note 11)
(292
(293
Total equity
10,045
10,236
Total liabilities and equity
Cash flows from operations:
Noncash charges to earnings:
Depreciation, depletion and amortization
251
252
Basis of real estate sold
70
46
Pension and other post-employment benefits (Note 6)
31
32
Share-based compensation expense (Note 12)
17
Other
Change in:
(57
(105
Receivables and payables for taxes
Inventories
33
8
Accounts payable and accrued liabilities
(30
Pension and post-employment benefit contributions and payments
(9
(11
(22
Net cash from operations
556
622
Cash flows from investing activities:
Capital expenditures for property and equipment
(139
(119
Capital expenditures for timberlands reforestation
(31
Acquisitions of timberlands (Note 15)
(2
Purchase of short-term investments
(664
Net cash from investing activities
(220
(818
Cash flows from financing activities:
Cash dividends on common shares
(394
(938
Net proceeds from issuance of long-term debt (Note 8)
743
Repurchases of common shares (Note 4)
(99
(85
Net cash from financing activities
(503
(290
Net change in cash, cash equivalents and restricted cash
(167
(486
Cash, cash equivalents and restricted cash at beginning of period
1,581
Cash, cash equivalents and restricted cash at end of period
1,095
Cash paid during the period for:
Interest, net of amount capitalized of $5 and $3
126
127
Income taxes, net of refunds
38
Common shares:
Balance at beginning of period
916
Issued for exercise of stock options and vested units
(3
Balance at end of period
914
Other capital:
7,566
7,662
7,691
Issued for exercise of stock options
(48
(95
(81
Share-based compensation
12
9
Other transactions, net
(1
(8
7,624
Retained earnings:
1,870
1,738
2,389
Dividends on common shares
(146
(140
(399
(942
1,828
Accumulated other comprehensive loss:
(294
(240
(247
Other comprehensive income
Balance at end of period (Note 11)
(225
Total equity:
10,141
Dividends paid per common share
0.20
0.19
0.54
1.28
NOTE 1:
BASIS OF PRESENTATION
NOTE 2:
BUSINESS SEGMENTS
NOTE 3:
REVENUE RECOGNITION
NOTE 4:
NET EARNINGS PER SHARE AND SHARE REPURCHASES
NOTE 5:
INVENTORIES
NOTE 6:
PENSION AND OTHER POST-EMPLOYMENT BENEFIT PLANS
NOTE 7:
ACCRUED LIABILITIES
NOTE 8:
LONG-TERM DEBT AND LINE OF CREDIT
NOTE 9:
FAIR VALUE OF FINANCIAL INSTRUMENTS
11
NOTE 10:
LEGAL PROCEEDINGS, COMMITMENTS AND CONTINGENCIES
NOTE 11:
ACCUMULATED OTHER COMPREHENSIVE LOSS
NOTE 12:
SHARE-BASED COMPENSATION
NOTE 13:
OTHER OPERATING (INCOME) COSTS, NET
NOTE 14:
INCOME TAXES
NOTE 15:
TIMBERLAND ACQUISITONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE QUARTERS AND YEAR-TO-DATE PERIODS ENDED JUNE 30, 2024 AND 2023
NOTE 1: BASIS OF PRESENTATION
Our consolidated financial statements provide an overall view of our results of operations, financial condition and cash flows. They include our accounts and the accounts of entities we control, including majority-owned domestic and foreign subsidiaries. They do not include our intercompany transactions and accounts, which are eliminated. Throughout these Notes to Consolidated Financial Statements, unless specified otherwise, references to “Weyerhaeuser,” “the company,” “we” and “our” refer to the consolidated company.
The accompanying unaudited Consolidated Financial Statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented. Except as otherwise disclosed in these Notes to Consolidated Financial Statements, such adjustments are of a normal, recurring nature. The Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission pertaining to interim financial statements. Certain information and footnote disclosures normally included in our annual Consolidated Financial Statements have been condensed or omitted. These quarterly Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2023. Results of operations for interim periods should not necessarily be regarded as indicative of the results that may be expected for the full year.
NOTE 2: BUSINESS SEGMENTS
We are principally engaged in growing and harvesting timber; maximizing the value of our acreage through the sale of higher and better use (HBU) properties; monetizing the value of surface and subsurface assets through leases and royalties; and manufacturing, distributing and selling products made from trees. Our business segments are organized based primarily on products and services which include:
A reconciliation of our business segment information to the respective information in the Consolidated Statement of Operations is as follows:
Sales to unaffiliated customers:
Timberlands
409
417
796
879
Real Estate & ENR
109
80
216
181
Wood Products
1,421
1,500
2,723
2,818
Intersegment sales:
146
150
280
292
Total sales
2,085
2,147
4,015
4,170
Intersegment eliminations
(150
(280
Total
Net contribution (charge) to earnings:
104
161
224
59
52
119
105
196
218
324
313
336
374
604
642
Unallocated items(1)
(63
(49
(130
(78
Net contribution to earnings
273
325
474
564
Income taxes
NOTE 3: REVENUE RECOGNITION
A reconciliation of revenue recognized by our major products:
Net sales to unaffiliated customers:
Timberlands segment
Delivered logs:
West
Domestic sales
97
101
191
Export grade sales
190
241
Subtotal West
205
435
South
153
162
304
330
North
24
Subtotal delivered logs sales
367
375
707
789
Stumpage and pay-as-cut timber
Recreational and other lease revenue
19
35
Other(1)
Net sales attributable to Timberlands segment
Real Estate & ENR segment
Real estate
78
47
Energy and natural resources
55
62
Net sales attributable to Real Estate & ENR segment
Wood Products segment
Structural lumber
499
573
963
1,088
Oriented strand board
215
543
423
Engineered solid section
368
384
Engineered I-joists
107
213
Softwood plywood
42
83
85
Medium density fiberboard
Complementary building products
176
204
317
Other(2)
76
178
Net sales attributable to Wood Products segment
Total net sales
NOTE 4: NET EARNINGS PER SHARE AND SHARE REPURCHASES
Our basic and diluted earnings per share were:
Basic earnings per share is net earnings 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. Diluted earnings per share is net earnings divided by the sum of the weighted average number of our outstanding common shares and the effect of our outstanding dilutive potential common shares.
SHARES IN THOUSANDS
Weighted average common shares outstanding – basic
Dilutive potential common shares:
Stock options
106
111
125
124
Restricted stock units
158
140
23
Performance share units
51
151
Total effect of outstanding dilutive potential common shares
315
341
416
362
Weighted average common shares outstanding – dilutive
We use the treasury stock method to calculate the dilutive effect of our outstanding stock options, restricted stock units and performance share units.
Potential Shares Not Included in the Computation of Diluted Earnings per Share
The following shares were not included in the computation of diluted earnings per share because they were either antidilutive or the required performance or market conditions were not met. Some or all of these shares may be dilutive potential common shares in future periods.
607
787
946
682
Share Repurchase Program
On September 22, 2021, we announced that our board of directors approved a new share repurchase program (the 2021 Repurchase Program) under which we are authorized to repurchase up to $1 billion of outstanding shares. Concurrently, the board terminated the remaining repurchase authorization under the share repurchase program approved by the board in February 2019 (the 2019 Repurchase Program).
We repurchased 1,669,145 common shares for approximately $50 million (including transaction fees) under the 2021 Repurchase Program during second quarter 2024 and 3,141,514 common shares for approximately $99 million (including transaction fees) under the 2021 Share Repurchase Program during year-to-date 2024. As of June 30, 2024, we had remaining authorization of $152 million for future share repurchases. During year-to-date 2023, we repurchased 2,805,434 common shares for approximately $85 million (including transaction fees) under the 2021 Repurchase Program.
All common stock repurchases under the 2021 Repurchase Program were made in open-market transactions. We record share repurchases upon trade date as opposed to the settlement date when cash is disbursed. We record a liability for repurchases that have not yet been settled as of period end. There were 15,765 unsettled shares (approximately $1 million) as of June 30, 2024 and 13,866 unsettled shares (approximately $1 million) as of December 31, 2023.
NOTE 5: INVENTORIES
Inventories include raw materials, work-in-process and finished goods, as well as materials and supplies.
LIFO inventories:
Logs
16
Lumber, plywood, oriented strand board and fiberboard
90
77
Other products
Moving average cost or FIFO inventories:
49
Lumber, plywood, oriented strand board, fiberboard and engineered wood products
143
115
144
134
Materials and supplies
159
LIFO – the last-in, first-out method – applies to major inventory products held at our U.S. locations. The moving average cost method or FIFO – the first-in, first-out method – applies to the balance of our U.S. raw material and product inventories, all material and supply inventories and all foreign inventories.
NOTE 6: PENSION AND OTHER POST-EMPLOYMENT BENEFIT PLANS
The components of net periodic benefit cost are:
PENSION
Service cost
Interest cost
58
Expected return on plan assets
(61
(60
Amortization of actuarial loss
Amortization of prior service cost
Total net periodic benefit cost – pension
OTHER POST-EMPLOYMENT BENEFITS
Amortization of prior service credit
Total net periodic benefit cost – other post-employment 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 post-employment benefit costs” in the Consolidated Statement of Operations.
Fair Value of Pension Plan Assets and Obligations
In our year-end reporting process, we estimate the fair value of pension plan assets based upon the information available at that time. For certain assets, primarily private equity funds, the information available consists of net asset values as of an interim date, cash flows between the interim date and the end of the year and market events. We evaluate the year-end estimated fair value of pension plan assets in second quarter of each year to incorporate final net asset values reflected in financial statements received after we have filed our Annual Report on Form 10-K. No adjustments to the fair value of assets or projected benefit obligations were necessary during second quarter 2024.
NOTE 7: ACCRUED LIABILITIES
Accrued liabilities were comprised of the following:
Compensation and employee benefit costs
Current portion of lease liabilities
21
Customer rebates, volume discounts and deferred income
Interest
63
Taxes payable
53
91
NOTE 8: LONG-TERM DEBT AND LINE OF CREDIT
In May 2023, we completed an offering of debt securities by issuing $750 million of 4.750 percent notes due in May 2026. The net proceeds after deducting the discount, underwriting fees and issuance costs were $743 million.
In March 2023, we refinanced and extended our $1.5 billion five-year senior unsecured revolving credit facility, which expires in March 2028. Borrowings will bear interest at a floating rate based on either the adjusted term Secured Overnight Financing Rate (SOFR) plus a spread or a mutually agreed upon base rate plus a spread. We had no outstanding borrowings on our credit facility as of June 30, 2024 and December 31, 2023.
NOTE 9: FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value and carrying value of our long-term debt consisted of the following:
CARRYINGVALUE
FAIR VALUE(LEVEL 2)
Long-term debt (including current maturities) and line of credit:
Fixed rate
4,823
4,718
4,820
4,853
Variable rate
249
250
Total debt
5,072
4,968
5,103
To estimate the fair value of fixed rate long-term debt, we used the market approach, which is based on quoted market prices we received for the same types and issues of our debt. We believe that our variable-rate long term debt and line of credit instruments have net carrying values that approximate their fair value with only insignificant differences. The inputs to the valuations of our long-term debt are based on market data obtained from independent sources or information derived principally from observable market data. The difference between the fair value and the carrying value represents the theoretical net premium or discount we would pay or receive to retire all debt at the measurement date.
Fair Value of Other Financial Instruments
We believe that our other financial instruments, including cash and cash equivalents, short-term investments, receivables and payables, have net carrying values that approximate their fair values with only insignificant differences. This is primarily due to the short-term nature of these instruments and the allowance for doubtful accounts.
NOTE 10: LEGAL PROCEEDINGS, COMMITMENTS AND CONTINGENCIES
Legal Proceedings
We are party to various legal proceedings arising in the ordinary course of business. We are not currently a party to any legal proceeding that management believes could have a material adverse effect on our Consolidated Statement of Operations, Consolidated Balance Sheet or Consolidated Statement of Cash Flows.
Environmental Matters
Site Remediation
Under the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) – commonly known as the “Superfund” – and similar state laws, we:
As of June 30, 2024, our total accrual for future estimated remediation costs on active Superfund sites and other sites for which we are potentially responsible was approximately $79 million. These amounts are recorded in "Accrued liabilities" and "Other liabilities" on our Consolidated Balance Sheet.
NOTE 11: ACCUMULATED OTHER COMPREHENSIVE LOSS
Changes in amounts included in our accumulated other comprehensive loss by component are:
Pension(1)
(506
(451
(515
(458
Other comprehensive (loss) income before reclassifications
Amounts reclassified from accumulated other comprehensive loss to earnings(2)
(498
(444
Other post-employment benefits(1)
Total other comprehensive (loss) income
Translation adjustments and other
189
198
Translation adjustments
184
Accumulated other comprehensive loss, end of period
NOTE 12: SHARE-BASED COMPENSATION
Share-based compensation activity during year-to-date 2024 included the following:
GRANTED
VESTED
Restricted stock units (RSUs)
915
684
Performance share units (PSUs)
412
A total of 746 thousand shares of common stock were issued as a result of RSU and PSU vestings.
Restricted Stock Units
The weighted average fair value of the RSUs granted in 2024, calculated as an average of the high and low prices on grant date, was $32.92. The vesting provisions for RSUs granted in 2024 were consistent with prior year grants.
Performance Share Units
The weighted average grant date fair value of PSUs granted in 2024 was $37.90. The final number of shares granted in 2024 will vest between a range of 0 percent to 150 percent of each grant's target, depending upon actual company total shareholder return (TSR) compared against the TSR of an industry peer group. TSR assumes full reinvestment of dividends. PSUs granted in 2024 will vest at a maximum of 100 percent of target value in the event of negative absolute company TSR.
Weighted Average Assumptions Used in Estimating the Value of Performance Share Units Granted in 2024
PERFORMANCE SHARE UNITS
Performance period
2/09/2024 – 12/31/2026
Valuation date closing stock price
$33.28
Risk-free rate
4.19% – 4.27%
Expected volatility
21.50% – 27.60%
NOTE 13: OTHER OPERATING (INCOME) COSTS, NET
Other operating (income) costs, net were comprised of the following:
Environmental remediation charges
Foreign exchange losses (gains), net
Litigation expense, net
Product remediation recovery
Research and development expenses
Other, net
Total other operating (income) costs, net
NOTE 14: INCOME TAXES
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 include our Wood Products segment and a portion of our Timberlands and Real Estate & ENR segments.
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 2024 estimated annual effective tax rate, excluding discrete items, differs from the U.S. federal statutory tax rate of 21 percent primarily due to state and foreign income taxes and tax benefits associated with our nontaxable REIT earnings.
NOTE 15: TIMBERLAND ACQUISITIONS
On July 25, 2024, we announced acquisitions totaling 84 thousand acres of Alabama timberlands for approximately $244 million. The first transaction was completed on May 30, 2024 and was comprised of 13 thousand acres for approximately $48 million. We recorded $47 million of timberland assets in "Timber and timberlands at cost, less depletion" and $1 million of related assets in "Property and equipment, net" on our Consolidated Balance Sheet. The remaining transactions are subject to customary closing conditions and are expected to close in second half 2024.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)
NOTE ABOUT FORWARD-LOOKING STATEMENTS
This report contains statements concerning our future results and performance that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include, without limitation, statements relating to: our expected future financial and operating performance; our plans, strategies, intentions and expectations; our capital structure and the sufficiency of our liquidity position to meet future cash requirements; our cash dividend framework, including our target percentage return to shareholders of Adjusted Funds Available for Distribution, including expected supplemental cash dividends and future share repurchases; compliance with covenants in our debt agreements; our expectations concerning our contingent liabilities and the sufficiency of related reserves and accruals including, but not limited to, cost estimates of future litigation and environmental remediation; our provision for income taxes; expected capital expenditures; expected returns on pension plan assets; market and general economic conditions, including related influencing factors such as the trajectory of U.S. housing activity, repair and remodel activity, inflation trends and interest rates; expected adjustments to our lumber production in third quarter 2024; our expectations about our future opportunities in emerging carbon credit and carbon capture and storage markets; assumptions used in valuing incentive compensation and related expense and pending timberland acquisition transactions.
Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often involve use of words such as “anticipate,” “believe,” “committed,” "continue,” “estimate,” “expect,” “foreseeable,” “maintain,” “may,” "plan," “potential,” and “will,” or similar words or terminology. They may use the positive, negative or another variation of those and similar words. These forward-looking statements are based on our current expectations and assumptions and are not guarantees of future events or performance. The realization of our expectations and the accuracy of our assumptions are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. There is no guarantee that any of the events anticipated by our forward-looking statements will occur. If any of the events occur, there is no guarantee what effect it will have on our operations, cash flows, or financial condition. We undertake no obligation to update our forward-looking statements after the date of this report. The factors listed below, as well as other factors not described herein because they are not currently known to us or we currently judge them to be immaterial, may cause our actual results to differ significantly from our forward-looking statements:
It is not possible to predict or identify all risks and uncertainties that might affect the accuracy of our forward-looking statements and, consequently, our descriptions of such risks and uncertainties should not be considered exhaustive. There is no guarantee that any of the events anticipated by these forward-looking statements will occur, and if any of the events do occur, there is no guarantee what effect they will have on the company's business, results of operations, cash flows, financial condition and future prospects.
Forward-looking statements speak only as of the date they are made, and we undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise.
RESULTS OF OPERATIONS
In reviewing our results of operations, it is important to understand these terms:
ECONOMIC AND MARKET CONDITIONS AFFECTING OUR OPERATIONS
Our market conditions and the strength of the broader U.S. economy are, and will continue to be, influenced by the trajectory of activity in the U.S. housing and repair and remodel segments, inflation trends and interest rates. The demand for sawlogs within our Timberlands segment is directly affected by domestic production of wood-based building products. The strength of the U.S. housing market, particularly new residential construction, strongly affects demand in our Wood Products segment, as does repair and remodeling activity. Seasonal weather patterns impact the level of construction activity in the U.S., which in turn affects demand for our logs and wood products. Our Timberlands segment, specifically the Western region, is also affected by export demand and trade policy. Japanese housing starts are a key driver of export log demand in Japan. The demand for pulpwood from our Timberlands segment is directly affected by the production of pulp, paper and oriented strand board (OSB), as well as the demand for biofuels, such as wood-burning pellets made from pulpwood. Our Timberlands segment is also influenced by the availability of harvestable timber. In general, Western log markets are highly tensioned by available supply, while Southern log markets have more available supply. However, additional mill capacity being added in the U.S. South has led to tightening of markets in certain geographies. Our Real Estate, Energy and Natural Resources segment is affected by a variety of factors, including the general state of the economy, local real estate market conditions, the level of construction activity in the U.S. and evolution of emerging renewable energy and carbon-related markets.
Over the first half of the year, home sales and building activity moderated in part due to continued elevated mortgage interest rates, reduced affordability and general macroeconomic conditions. Specifically, multi-family construction has been hampered by a large supply of recently completed projects as well as higher interest rates and other factors constraining the underwriting of proposed projects. In contrast, new single-family home construction has remained resilient, as existing homeowners continued to be constrained by the lock-in effect of lower mortgage rates. On a seasonally adjusted annual basis, as reported by the U.S. Census Bureau, housing starts for second quarter 2024 averaged 1.35 million units, a 4.2 percent decrease from first quarter 2024. Single-family starts averaged 1.0 million units in second quarter 2024, a 5.2 percent decrease from first quarter 2024. Multi-family starts averaged 342 thousand units in second quarter 2024, which was a 1.0 percent decrease from first quarter 2024. Single-family construction is the primary driver for our business as compared to multi-family due to the amount of wood products used. Sales of newly built, single-family homes averaged a seasonally adjusted annual rate of 656 thousand units for second quarter 2024, a decrease of 1.1 percent from first quarter 2024, with slower activity primarily due to high mortgage rates. Over the medium to long-term, we expect a favorable U.S. housing construction market supported by strong demographics in the key home buying age cohorts, a decade of under building and historically low housing inventory.
Repair and remodeling expenditures increased by 1.1 percent from first quarter 2024 to second quarter 2024 according to the Census Bureau Advance Retail Spending report. While there continues to be steady demand due to growing home equity and the lock-in effect of having lower mortgage rates compared to current rates, many homeowners have become more cautious in discretionary spending on large projects. Additionally, some repair and remodeling activity was accelerated during the pandemic which has had an impact on the level of spending. This softness has been reflected in both the do-it-yourself (DIY) and professionally built segments. Over the longer term, we expect this sector to resume pre-pandemic growth trends with healthy household balance sheets, elevated home equity and an aging U.S. housing stock, with a median age of 43 years.
In U.S. wood product markets, demand for lumber and OSB was influenced by cautious buyer sentiment during the second quarter of 2024. As the quarter progressed, demand was mixed as continued strength in single-family housing starts was offset by weaker multi-family construction and repair and remodel activity. The Random Lengths Framing Lumber Composite price averaged $384/MBF and the OSB Composite averaged $487/MSF in second quarter 2024. Over the course of the second quarter, composite prices for lumber decreased from $422/MBF to $366/MBF and composite prices for OSB decreased from $603/MSF to $352/MSF. Lumber markets have been particularly challenged due to an imbalance of supply and demand, which has resulted in a sustained, weak pricing environment. In light of these conditions, Weyerhaeuser expects to reduce its lumber production by 5 to 10 percent in third quarter 2024. This reduction is inclusive of the company's decision to indefinitely curtail its lumber mill in New Bern, North Carolina. The company will continue to assess its operating rates in light of current market conditions on a go-forward basis.
In Western log markets, Douglas fir sawlog prices decreased 4.9 percent in second quarter 2024 compared with first quarter 2024, as reported by Fastmarkets RISI Log Lines based on Weyerhaeuser’s sales mix. Overall, domestic log demand and prices faced downward pressure through the quarter, as mills continued to adjust to a soft lumber market and worked through elevated log inventories. In the South, delivered sawlog prices decreased 1.0 percent in second quarter 2024 compared to first quarter 2024 and declined 1.7 percent from second quarter 2023 as reported by TimberMart-South. While there continued to be demand for logs across the region and markets generally had ample log supply, a number of mills faced elevated inventories and were adjusting operations due to lower lumber prices.
Currency exchange rates, available supply from other countries and trade policy affect our export businesses. During second quarter 2024, end use demand in export markets moderated. In Japan, total housing starts decreased 4.0 percent year to date through May compared to the same period in 2023, while the key Post and Beam segment saw a 4.4 percent decrease. Lumber imports to Japan from Europe were reduced due to supply chain costs, which provided some support for log sales. China’s weaker end use demand for logs and lumber led to a decrease in pricing for logs from the West.
Interest rates affect our business primarily through their impact on mortgage rates and housing affordability, their general impact on the economy and their influence on our capital management activities. Actions by the U.S. Federal Reserve, the overall condition of the economy and fluctuations in financial markets are all factors that influence long-term interest rates. 30-year mortgage rates, which are correlated with long-term interest rates, increased from 6.8 percent at the end of first quarter 2024 to 6.9 percent at the end of second quarter 2024, according to economic data from Freddie Mac. Many builders have been able to offset higher mortgage rates through discounts, mortgage rate buydowns and modifying product offerings such as home sizes and finishes. Higher rates have also locked-in many existing homeowners from selling, reducing inventories of existing homes for sale which has led to increased demand for available new homes.
Increased inflation affects the cost of our operations across each of our business segments, including costs for raw materials, transportation, energy and labor. The Consumer Price Index increased at an annual rate of 3.0 percent as of June 2024, which is markedly down from its peak of over 9.0 percent in June 2022. While we can offset some of the impacts of inflation through our sales activities, operational excellence initiatives and procurement practices, not all of the costs associated with inflation can be fully mitigated or passed on to the consumer.
The condition of the labor market affects all of our businesses as it relates to our ability to attract and retain employees and contractors. The unemployment rate of 4.1 percent in June 2024 has increased moderately above historically low levels and increased 0.3 percent from the end of first quarter 2024.
Governments and businesses across the globe are taking action on climate change and are making significant commitments towards decarbonizing operations and reducing greenhouse gas emissions to net zero. Achieving these commitments will require governments and companies to take major steps to modify operations, invest in low-carbon activities and purchase credits to reduce environmental impacts. We believe we are uniquely positioned to help entities achieve these commitments through natural climate solutions, including forest carbon sequestration, carbon capture and storage and renewable energy activities.
CONSOLIDATED RESULTS
How We Did Second Quarter 2024 and Year-to-Date 2024
AMOUNT OFCHANGE
2024 VS. 2023
Net sales
(58
(143
(64
(89
(94
Earnings per share, basic and diluted
(0.07
(0.13
Comparing Second Quarter 2024 with Second Quarter 2023
Net sales decreased $58 million – 3 percent – primarily due to a $79 million decrease in Wood Products net sales to unaffiliated customers attributable to decreased sales realizations and sales volumes across most product lines, partially offset by a $29 million increase in Real Estate, Energy and Natural Resources net sales attributable to an increase in acres sold.
Costs of sales increased $7 million – less than 1 percent – primarily due to an increase in acres sold in our Real Estate, Energy and Natural Resources segment, partially offset by decreased sales volumes across most product lines in our Wood Products segment.
Operating income decreased $49 million – 15 percent – primarily due to a $65 million decrease in consolidated gross margin (see discussion of components above), partially offset by a $25 million product remediation recovery recorded in second quarter 2024 (refer to Note 13: Other Operating (Income) Costs, Net).
Net earnings decreased $57 million – 25 percent – primarily due to the $49 million decrease in operating income, as discussed above, as well as an $8 million increase in income tax expense (refer to Income Taxes).
Comparing Year-to-Date 2024 with Year-to-Date 2023
Net sales decreased $143 million – 4 percent – primarily due to a $95 million decrease in Wood Products net sales to unaffiliated customers attributable to decreased sales realizations across most product lines, as well as an $83 million decrease in Timberlands net sales to unaffiliated customers attributable to decreased sales volumes and sales realizations.
Costs of sales decreased $64 million – 2 percent – primarily due to decreased sales volumes for oriented strand board and structural lumber in our Wood Products segment.
Operating income decreased $89 million – 16 percent – primarily due to a $79 million decrease in gross margin (see discussion of components above).
Net earnings decreased $94 million – 25 percent – primarily due to the $89 million decrease in operating income, as discussed above.
TIMBERLANDS
(54
(26
(82
(7
Subtotal net sales to unaffiliated customers
(83
Intersegment sales
567
1,076
1,171
450
439
865
900
(35
(24
160
(23
Net sales to unaffiliated customers
Net sales to unaffiliated customers decreased $8 million – 2 percent – primarily due to a $9 million decrease in Southern log sales attributable to a 4 percent decrease in sales volumes and a 2 percent decrease in sales realizations.
Intersegment sales decreased $4 million – 3 percent – primarily due to a 5 percent decrease in sales realizations, partially offset by a 2 percent increase in sales volumes.
Costs of sales increased $11 million – 3 percent – primarily due to increased Western logging, hauling and freight costs.
Net contribution to earnings decreased $23 million – 22 percent – primarily due to the change in the components of gross margin, as discussed above.
Net sales to unaffiliated customers decreased $83 million – 9 percent – primarily due to a $54 million decrease in Western log sales attributable to a 6 percent decrease in sales volumes and sales realizations, as well as a $26 million decrease in Southern log sales attributable to a 6 percent decrease in sales volumes and a 3 percent decrease in sales realizations.
Intersegment sales decreased $12 million – 4 percent – primarily due to a 4 percent decrease in sales realizations.
Costs of sales decreased $35 million – 4 percent – primarily due to decreased Western third-party log purchases and decreased Southern sales volumes, partially offset by increased Western logging and hauling costs.
Net contribution to earnings decreased $63 million – 28 percent – primarily due to the change in the components of gross margin, as discussed above.
Third-Party Log Sales Volumes and Fee Harvest Volumes
VOLUMES IN THOUSANDS
Third-party log sales – tons:
West(1)
1,668
1,661
3,120
3,335
(215
4,154
4,341
(187
8,243
8,727
(484
118
98
293
302
5,940
6,100
(160
11,656
12,364
(708
Fee harvest volumes – tons:
2,355
2,292
4,569
4,537
6,293
6,430
(137
12,283
12,862
(579
429
8,838
8,897
(59
17,281
17,859
(578
REAL ESTATE, ENERGY AND NATURAL RESOURCES
Net sales:
25
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, the plans of adjacent landowners, our expectation of future price appreciation, the timing of harvesting activities and the availability of government and not-for-profit funding. In any period, the average price per acre will vary based on the location and physical characteristics of parcels sold.
Net sales increased $29 million – 36 percent – primarily due to an increase in acres sold, partially offset by a decrease in average price per acre sold.
Costs of sales increased $25 million – 119 percent – primarily due to an increase in acres sold.
Operating income and net contribution to earnings increased $7 million – 13 percent – primarily due to the change in the components of gross margin, as discussed above.
Net sales increased $35 million – 19 percent – primarily due to an increase in acres sold, partially offset by a decrease in average price per acre sold and a decrease in royalty income from our Energy and Natural Resources business.
Costs of sales increased $25 million – 40 percent – primarily due to an increase in acres sold.
Operating income and net contribution to earnings increased $14 million – 13 percent – primarily due to the change in the components of gross margin, as discussed above.
REAL ESTATE SALES STATISTICS
Acres sold
37,665
9,281
28,384
57,439
30,034
27,405
Average price per acre
2,062
4,790
(2,728
2,601
3,720
(1,119
WOOD PRODUCTS
(74
(125
73
120
(16
(19
(28
(50
Other products produced(1)
(79
1,185
1,218
2,377
Net sales decreased $79 million – 5 percent – primarily due to:
These decreases were partially offset by a $73 million increase in oriented strand board sales attributable to a 36 percent increase in sales realizations.
Costs of sales decreased $33 million – 3 percent – primarily due to decreased sales volumes across most product lines.
Operating income and net contribution to earnings decreased $22 million – 10 percent – primarily due to the change in the components of gross margin, as discussed above, partially offset by a $25 million product remediation recovery recorded in second quarter 2024 (refer to Note 13: Other Operating (Income) Costs, Net).
Net sales decreased $95 million – 3 percent – primarily due to:
These decreases were partially offset by a $120 million increase in oriented strand board sales attributable to a 35 percent increase in sales realizations, partially offset by a 5 percent decrease in sales volumes.
Costs of sales decreased $85 million – 4 percent – primarily due to decreased sales volumes for oriented strand board and structural lumber, as discussed above, as well as decreased raw material costs across most product lines.
Operating income and net contribution to earnings increased $11 million – 4 percent – primarily due to a $25 million product remediation recovery recorded in second quarter 2024 (refer to Note 13: Other Operating (Income) Costs, Net), partially offset by the change in the components of gross margin, as discussed above.
Third-Party Sales Volumes
VOLUMES IN MILLIONS(1)
Structural lumber – board feet
1,190
1,196
(6
2,270
2,340
Oriented strand board – square feet (3/8”)
708
720
1,418
1,493
(75
Engineered solid section – cubic feet
6.0
11.4
10.7
0.7
Engineered I-joists – lineal feet
41
71
Softwood plywood – square feet (3/8”)
94
171
177
Medium density fiberboard – square feet (3/4”)
36
69
60
PRODUCTION AND OUTSIDE PURCHASE VOLUMES
Outside purchase volumes are primarily purchased for resale through our distribution business. Production volumes are produced for sale through our own sales organizations and through our distribution business. Production of oriented strand board and engineered solid section are also used to manufacture engineered I-joists.
VOLUMES IN MILLIONS
Structural lumber – board feet:
Production
1,163
2,248
2,307
Outside purchase
39
72
75
1,202
1,200
2,320
2,382
(62
Oriented strand board – square feet (3/8”):
744
727
1,479
1,488
762
746
1,517
1,524
Engineered solid section – cubic feet:
6.1
5.9
0.2
11.8
10.5
1.3
3.5
4.0
(0.5
6.3
0.3
9.6
9.9
(0.3
18.1
16.5
1.6
Engineered I-joists – lineal feet:
84
86
64
Softwood plywood – square feet (3/8”):
82
154
95
Medium density fiberboard – square feet (3/4"):
34
68
67
UNALLOCATED ITEMS
Unallocated items are gains or charges not related to, or allocated to, an individual operating segment. They include all or a portion of items such as share-based compensation, pension and post-employment costs, elimination of intersegment profit in inventory and LIFO, foreign exchange transaction gains and losses, interest income and other.
Net Charge to Earnings – Unallocated Items
Unallocated corporate function and variable compensation expense
(37
(32
Liability classified share-based compensation
Foreign exchange gain (loss)
Elimination of intersegment profit in inventory and LIFO
(39
Operating loss
(65
(55
(87
Non-operating pension and other post-employment benefit costs
Net charge to earnings
(52
Net charge to earnings increased $14 million – 29 percent – primarily due to:
Net charge to earnings increased $52 million – 67 percent – primarily due to a $16 million increase in unallocated corporate function and variable compensation expense and a $12 million increase in elimination of intersegment profit in inventory and LIFO.
INTEREST EXPENSE
Our interest expense, net of capitalized interest, was:
Interest expense decreased by $3 million compared to second quarter 2023 and decreased by $2 million compared to year-to-date 2023 primarily due to a series of debt issuances and retirements during 2023 that decreased our average outstanding debt.
Refer to Note 8: Long-Term Debt and Line of Credit for further information.
Our provision for income taxes was:
Our provision for income taxes is primarily driven by earnings generated by our TRSs. Income tax expense increased by $6 million compared to year-to-date 2023 primarily due to a $25 million product remediation recovery received during second quarter 2024.
Refer to Note 13: Other Operating (Income) Costs, Net and Note 14: Income Taxes for further information.
LIQUIDITY AND CAPITAL RESOURCES
We are committed to maintaining an appropriate capital structure that provides financial flexibility and enables us to protect the interests of our shareholders and meet our obligations to our lenders, while also maintaining access to all major financial markets. As of June 30, 2024, we had $997 million in cash and cash equivalents and $1.5 billion of availability on our line of credit, which expires in March 2028. We believe we have sufficient liquidity to meet our cash requirements for the foreseeable future.
CASH FROM OPERATIONS
Consolidated net cash from operations was:
Net cash from operations decreased $66 million primarily due to decreased cash flows from our business operations, as well as a $20 million increase in cash paid for income taxes.
CASH FROM INVESTING ACTIVITIES
Consolidated net cash from investing activities was:
Net cash from investing activities increased $598 million primarily due to a $664 million decrease in cash paid for short-term investments, partially offset by a $51 million increase in cash paid for acquisitions of timberlands.
Summary of Capital Spending by Business Segment
48
99
Unallocated Items
170
We anticipate our capital expenditures for 2024 to be approximately $440 million. The amount we spend on capital expenditures could change.
CASH FROM FINANCING ACTIVITIES
Consolidated net cash from financing activities was:
Net cash from financing activities decreased $213 million primarily due to a $743 million decrease in net proceeds from issuance of long-term debt, partially offset by a $544 million decrease in cash used for payments of dividends.
Line of Credit
We had no outstanding borrowings on our $1.5 billion five-year senior unsecured revolving credit facility as of June 30, 2024 or December 31, 2023. This credit facility expires in March 2028.
Long-Term Debt
We have $210 million of long-term debt, with a weighted average interest rate of 8.314 percent, scheduled to mature during first quarter 2025.
Debt Covenants
As of June 30, 2024, Weyerhaeuser Company was in compliance with its debt covenants. There have been no significant changes to the debt covenants presented in our 2023 Annual Report on Form 10-K for our long-term debt instruments, and we expect to remain in compliance with our debt covenants for the foreseeable future.
Dividend Payments
We paid cash dividends on common shares of:
The decrease in dividends paid is primarily due to a supplemental dividend of $0.14 per share based on 2023 financial results for a total of $102 million paid in first quarter 2024 in comparison to a supplemental dividend of $0.90 per share based on 2022 financial results for a total of $660 million paid in first quarter 2023.
We plan to supplement our base dividend each year with an additional return of cash, in the form of a supplemental cash dividend and/or share repurchase, to achieve our targeted annual payout of total cash to shareholders of 75 to 80 percent of Adjusted Funds Available for Distribution (Adjusted FAD). For further information on Adjusted FAD see Performance and Liquidity Measures.
Share Repurchases
We repurchased 1,669,145 common shares for approximately $50 million (including transaction fees) during second quarter 2024 and 3,141,514 common shares for approximately $99 million (including transaction fees) during year-to-date 2024 under the 2021 Repurchase Program. During second quarter 2023, we repurchased 1,689,874 common shares for approximately $50 million (including transaction fees) and 2,805,434 common shares for approximately $85 million (including transaction fees) during year-to-date 2023 under the 2021 Repurchase Program. There were 15,765 unsettled shares (approximately $1 million) as of June 30, 2024 and 13,866 unsettled shares (approximately $1 million) as of December 31, 2023. Refer to Note 4: Net Earnings Per Share and Share Repurchases for further information.
PERFORMANCE AND LIQUIDITY MEASURES
Adjusted EBITDA by Segment
We use Adjusted EBITDA as a key performance measure to evaluate the performance of the consolidated company and our business segments. This measure should not be considered in isolation from, and is not intended to represent an alternative to, our results reported in accordance with U.S. generally accepted accounting principles (U.S. GAAP). However, we believe Adjusted EBITDA provides meaningful supplemental information for investors about our operating performance, better facilitates period to period comparisons and is widely used by analysts, lenders, rating agencies and other interested parties. Our definition of Adjusted EBITDA may be different from similarly titled measures reported by other companies. Adjusted EBITDA, as we define it, is operating income adjusted for depreciation, depletion, amortization, basis of real estate sold and special items.
Adjusted EBITDA by Segment:
147
172
291
360
(69
102
37
225
(45
418
512
(38
896
937
(41
(43
(73
Adjusted EBITDA
864
(102
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, 2024:
Real Estate &ENR
WoodProducts
UnallocatedItems
Net contribution (charge) to earnings
(13
Operating income (loss)
54
Special items included in operating income (loss)(1)
The table below reconciles Adjusted EBITDA for the quarter ended June 30, 2023:
(18
The table below reconciles Adjusted EBITDA for the year-to-date period ended June 30, 2024:
(29
131
110
The table below reconciles Adjusted EBITDA for the year-to-date period ended June 30, 2023:
Real Estate& ENR
136
Adjusted FAD
We use Adjusted Funds Available for Distribution (Adjusted FAD) to evaluate the company’s liquidity and measure cash generated during the period (net of capital expenditures and significant non-recurring items) that is available for dividends, repurchases of common shares, debt reduction, acquisitions and other discretionary and nondiscretionary capital allocation activities. Adjusted FAD should not be considered in isolation from, and is not intended to represent an alternative to, our results reported in accordance with U.S. GAAP. However, we believe the measure provides meaningful supplemental information for our investors about our liquidity. Adjusted FAD, as we define it, is net cash from operations adjusted for capital expenditures and significant non-recurring items. Our definition of Adjusted FAD may be different from similarly titled measures reported by other companies, including those in our industry. We reconcile Adjusted FAD to net cash from operations, as that is the most directly comparable U.S. GAAP measure.
The table below reconciles Adjusted FAD to net cash from operations:
432
496
Capital expenditures
(91
(170
(152
FAD
415
386
470
Cash from product remediation recovery
316
361
(749
(195
551
Net Earnings and Net Earnings per Diluted Share Before Special Items
We use net earnings before special items and net earnings per diluted share before special items as key performance measures to evaluate the performance of the consolidated company. These measures should not be considered in isolation from, and are not intended to represent an alternative to, our results reported in accordance with U.S. GAAP. However, we believe the measures provide meaningful supplemental information for investors about our operating performance, better facilitate period to period comparisons and are widely used by analysts, lenders, rating agencies and other interested parties.
Net Earnings Before Special Items
Environmental remediation charge
Net earnings before special items
238
268
389
26
Net Earnings per Diluted Share Before Special Items
Net earnings per diluted share
0.01
(0.03
(0.02
Net earnings per diluted share before special items
0.21
0.32
0.37
0.53
CRITICAL ACCOUNTING ESTIMATES
There have been no significant changes during year-to-date 2024 to the critical accounting estimates presented in our 2023 Annual Report on Form 10-K.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
LONG-TERM DEBT OBLIGATIONS
The following summary of our long-term debt obligations includes:
We estimate the fair value of long-term debt based on quoted market prices we receive for the same types and issues of our debt or on the discounted value of the future cash flows using market yields for the same type and comparable issues of debt. Changes in market rates of interest affect the fair value of our fixed-rate debt.
Summary of Long-Term Debt Obligations as of June 30, 2024
2024
2025
2026
2027
2028
THEREAFTER
TOTAL(1)
FAIR VALUE
Fixed-rate debt
1,022
300
3,333
4,865
Average interest rate
%
8.31
5.52
6.95
4.82
5.25
N/A
Variable-rate debt(2)
Item 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Disclosure controls are controls and other procedures that are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosure. The company’s principal executive officer and principal financial officer have concluded that the company’s disclosure controls and procedures were effective as of June 30, 2024, based on an evaluation of the company’s disclosure controls and procedures as of that date.
CHANGES IN INTERNAL CONTROLS
No changes occurred in the company’s internal control over financial reporting during year-to-date 2024 that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Refer to Note 10: Legal Proceedings, Commitments and Contingencies. SEC regulations require us to disclose certain information about proceedings arising under federal, state or local environmental provisions if we reasonably believe that such proceedings may result in monetary sanctions above a stated threshold. In accordance with these regulations, the company uses a threshold of $1 million for purposes of determining whether disclosure of any such proceedings is required pursuant to this item.
Item 1A. RISK FACTORS
There have been no material changes with respect to the risk factors disclosed in our 2023 Annual Report on Form 10-K.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The following table provides information with respect to purchases of common stock made by the company during second quarter 2024:
COMMON SHARE REPURCHASES DURING SECOND QUARTER 2024
TOTAL NUMBEROF SHARESPURCHASED
AVERAGE PRICEPAID PER SHARE
TOTAL NUMBEROF SHARESPURCHASED ASPART OF PUBLICLYANNOUNCEDPROGRAMS
APPROXIMATEDOLLAR VALUEOF SHARES THATMAY YET BEPURCHASEDUNDER THEPROGRAMS
April 1 – April 30
209,671
31.94
195,749,652
May 1 – May 31
522,048
30.31
179,928,242
June 1 – June 30
937,426
29.32
152,446,072
1,669,145
29.96
On September 22, 2021, we announced that our board had approved a new share repurchase program (the 2021 Repurchase Program) under which we are authorized to repurchase up to $1 billion of outstanding shares. Concurrently, the board terminated the remaining repurchase authorization under the 2019 Repurchase Program.
During second quarter 2024, we repurchased 1,669,145 shares for approximately $50 million (including transaction fees) under the 2021 Repurchase Program in open-market transactions. Transaction fees incurred for repurchases are not counted as use of funds authorized for repurchases under the 2021 Repurchase Program. As of June 30, 2024, we had remaining authorization of $152 million for future stock repurchases.
Item 5. OTHER INFORMATION
Rule 10b5-1 Trading Arrangements
During second quarter 2024, one of the company's "officers" (as that term is defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) adopted a trading plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act.
David M. Wold, senior vice president and chief financial officer, adopted a plan on April 30, 2024 to initiate the cashless exercise of 4,402 stock options which expire on February 12, 2025, and thereby sell on the open market 4,402 shares of common stock underlying the stock options at a designated strike price. Mr. Wold’s plan expires when all of the stock options are exercised and all of the underlying shares are sold or on February 12, 2025, whichever occurs first.
Item 6. EXHIBITS
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
Certification pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).
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Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, has been formatted in Inline XBRL.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
(Registrant)
Date: July 26, 2024
By:
/s/ David M. Wold
David M. Wold
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer and Duly Authorized Officer)