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 SEPTEMBER 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 October 21, 2024, 726,582 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
28
ITEM 4.
CONTROLS AND PROCEDURES
PART II
OTHER INFORMATION
LEGAL PROCEEDINGS
ITEM 1A.
RISK FACTORS
29
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
DEFAULTS UPON SENIOR SECURITIES – NOT APPLICABLE
MINE SAFETY DISCLOSURES – NOT APPLICABLE
ITEM 5.
ITEM 6.
EXHIBITS
30
SIGNATURES
31
PART I – FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
(UNAUDITED)
QUARTER ENDED
YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES
SEPTEMBER 2024
SEPTEMBER 2023
Net sales (Note 3)
$
1,681
2,022
5,416
5,900
Costs of sales
1,431
1,520
4,407
4,560
Gross margin
250
502
1,009
1,340
Selling expenses
22
66
General and administrative expenses
122
107
358
316
Other operating costs, net (Note 13)
20
41
50
Operating income
78
353
544
908
Non-operating pension and other post-employment benefit costs (Note 6)
(10
)
(12
(31
(33
Interest income and other
24
43
54
Interest expense, net of capitalized interest
(69
(72
(203
(208
Earnings before income taxes
13
293
721
Income taxes (Note 14)
15
(54
(38
(101
Net earnings
239
315
620
Earnings per share, basic and diluted (Note 4)
0.04
0.33
0.43
0.85
Weighted average shares outstanding (in thousands) (Note 4):
Basic
727,621
731,046
728,892
732,069
Diluted
728,180
731,742
729,355
732,542
See accompanying Notes to Consolidated Financial Statements.
DOLLAR AMOUNTS IN MILLIONS
Other comprehensive income:
Foreign currency translation adjustments
(7
(8
—
Changes in unamortized actuarial loss, net of tax expense of $3, $3, $9 and $7
9
21
23
Changes in unamortized net prior service credit, net of tax benefit of $0, $0, $0 and $1
Total other comprehensive income
Total comprehensive income
241
329
644
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PAR VALUE
SEPTEMBER 30,2024
DECEMBER 31,2023
ASSETS
Current assets:
Cash and cash equivalents
877
1,164
Receivables, net
373
354
Receivables for taxes
10
Inventories (Note 5)
592
566
Prepaid expenses and other current assets
142
219
Total current assets
1,994
2,313
Property and equipment, less accumulated depreciation of $3,935 and $3,901
2,247
2,269
Construction in progress
270
Timber and timberlands at cost, less depletion
11,502
11,528
Minerals and mineral rights, less depletion
192
200
Deferred tax assets
Other assets
404
388
Total assets
16,668
16,983
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt (Note 8)
210
Accounts payable
275
287
Accrued liabilities (Note 7)
507
501
Total current liabilities
992
788
Long-term debt, net (Note 8)
4,864
5,069
Deferred tax liabilities
81
Deferred pension and other post-employment benefits (Note 6)
462
461
Other liabilities
345
348
Total liabilities
6,741
6,747
Commitments and contingencies (Note 10)
Equity:
Common shares: $1.25 par value; authorized 1,360 million shares; issued and outstanding: 726,758 thousand shares at September 30, 2024 and 729,753 thousand shares at December 31, 2023
909
912
Other capital
7,517
7,608
Retained earnings
1,780
2,009
Accumulated other comprehensive loss (Note 11)
(279
(293
Total equity
9,927
10,236
Total liabilities and equity
Cash flows from operations:
Noncash charges (credits) to earnings:
Depreciation, depletion and amortization
376
374
Basis of real estate sold
93
80
Pension and other post-employment benefits (Note 6)
46
Share-based compensation expense (Note 12)
32
26
Other
(3
(4
Change in:
(21
(77
Receivables and payables for taxes
51
Inventories
(5
Accounts payable and accrued liabilities
(1
Pension and post-employment benefit contributions and payments
(16
(20
Net cash from operations
790
1,145
Cash flows from investing activities:
Capital expenditures for property and equipment
(228
(209
Capital expenditures for timberlands reforestation
(39
(42
Acquisitions of timberlands (Note 15)
(135
(70
Purchase of short-term investments
(664
Net cash from investing activities
(381
(982
Cash flows from financing activities:
Cash dividends on common shares
(539
(1,076
Net proceeds from issuance of long-term debt (Note 8)
743
Payments on long-term debt (Note 8)
(118
Repurchases of common shares (Note 4)
(126
(109
(9
(11
Net cash from financing activities
(674
(571
Net change in cash, cash equivalents and restricted cash
(265
(408
Cash, cash equivalents and restricted cash at beginning of period
1,581
Cash, cash equivalents and restricted cash at end of period
899
1,173
Cash paid during the period for:
Interest, net of amount capitalized of $7 and $5
189
190
Income taxes, net of refunds
40
Common shares:
Balance at beginning of period
910
914
916
Issued for exercise of stock options and vested units
Balance at end of period
913
Other capital:
7,530
7,624
7,691
Issued for exercise of stock options
(25
(24
(120
(105
Share-based compensation
Other transactions, net
(6
7,609
Retained earnings:
1,897
1,828
2,389
Dividends on common shares
(145
(138
(544
(1,080
1,929
Accumulated other comprehensive loss:
(292
(225
(247
Other comprehensive income
Balance at end of period (Note 11)
(223
Total equity:
10,228
Dividends paid per common share
0.20
0.19
0.74
1.47
NOTE 1:
BASIS OF PRESENTATION
NOTE 2:
BUSINESS SEGMENTS
NOTE 3:
REVENUE RECOGNITION
8
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
12
NOTE 12:
SHARE-BASED COMPENSATION
NOTE 13:
OTHER OPERATING COSTS, NET
NOTE 14:
INCOME TAXES
NOTE 15:
TIMBERLAND ACQUISITONS
NOTE 16:
RESTRICTED CASH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE QUARTERS AND YEAR-TO-DATE PERIODS ENDED SEPTEMBER 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
357
380
1,153
1,259
Real Estate & ENR
89
105
305
286
Wood Products
1,235
1,537
3,958
4,355
Intersegment sales:
136
141
416
433
Total sales
1,817
2,163
5,832
6,333
Intersegment eliminations
(136
(141
(416
(433
Total
Net contribution (charge) to earnings:
57
218
302
56
170
161
27
277
351
590
135
411
739
1,053
Unallocated items(1)
(53
(46
(183
(124
Net contribution to earnings
82
365
556
929
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
96
269
290
Export grade sales
321
Subtotal West
158
176
539
611
South
149
155
453
485
North
33
35
Subtotal delivered logs sales
318
342
1,025
1,131
Stumpage and pay-as-cut timber
38
Recreational and other lease revenue
19
Other(1)
Net sales attributable to Timberlands segment
Real Estate & ENR segment
Real estate
59
79
220
198
Energy and natural resources
85
88
Net sales attributable to Real Estate & ENR segment
Wood Products segment
Structural lumber
451
570
1,414
1,658
Oriented strand board
206
284
749
707
Engineered solid section
175
216
543
600
Engineered I-joists
95
301
335
Softwood plywood
42
121
127
Medium density fiberboard
123
120
Complementary building products
184
475
551
Other(2)
70
232
257
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
154
115
134
Restricted stock units
304
203
117
Performance share units
238
145
222
Total effect of outstanding dilutive potential common shares
559
696
463
473
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
609
892
612
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 820,706 common shares for approximately $26 million (including transaction fees) under the 2021 Repurchase Program during third quarter 2024 and 3,962,220 common shares for approximately $125 million (including transaction fees) under the 2021 Share Repurchase Program during year-to-date 2024. During third quarter 2023, we repurchased 757,510 common shares for approximately $25 million (including transaction fees) and 3,562,944 common shares for approximately $110 million (including transaction fees) during year-to-date 2023 under the 2021 Repurchase Program. As of September 30, 2024, we had remaining authorization of $127 million for future share repurchases.
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 11,564 unsettled shares (less than $1 million) as of September 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
Lumber, plywood, oriented strand board and fiberboard
74
77
Other products
Moving average cost or FIFO inventories:
49
Lumber, plywood, oriented strand board, fiberboard and engineered wood products
124
178
Materials and supplies
150
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
17
Interest cost
87
Expected return on plan assets
(30
(92
(90
Amortization of actuarial loss
Amortization of prior service cost
Total net periodic benefit cost – pension
16
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 the 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
171
173
Current portion of lease liabilities
Customer rebates, volume discounts and deferred income
130
Interest
63
Taxes payable
47
71
91
NOTE 8: LONG-TERM DEBT AND LINE OF CREDIT
In July 2023, we repaid $118 million of our 7.125 percent notes at maturity.
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 September 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
4,825
4,897
4,820
4,853
Variable rate
249
Total debt
5,074
5,147
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 September 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 $80 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)
(498
(444
(515
(458
Other comprehensive loss before reclassifications
Amounts reclassified from accumulated other comprehensive loss to earnings(2)
25
(490
(435
Other post-employment benefits(1)
Total other comprehensive (loss) income
Translation adjustments and other
191
Translation adjustments
Total other comprehensive income (loss)
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
688
Performance share units (PSUs)
412
317
A total of 749 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 COSTS, NET
Other operating costs, net were comprised of the following:
Environmental remediation charges
Litigation expense, net
Product remediation recovery
Research and development expenses
Restructuring, impairments and other charges
Other, net
Total other operating costs, net
Asset Impairment
During third quarter 2024, we recorded a $10 million noncash impairment charge related to the indefinite curtailment of our New Bern lumber mill. The loss was attributable to our Wood Products segment and was recorded within “Other operating costs, net” in our Consolidated Statement of Operations.
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 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 $244 million. The first transaction was completed on May 30, 2024 and was comprised of 13 thousand acres for $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 second transaction was completed on August 28, 2024 and was comprised of 32 thousand acres for $82 million. We recorded $81 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 third transaction was completed on October 9, 2024 and was comprised of 39 thousand acres for $114 million.
On July 19, 2023, we completed the purchase of 22 thousand acres of Mississippi timberlands for $60 million. We recorded $59 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.
NOTE 16: RESTRICTED CASH
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on our Consolidated Balance Sheet that sum to the total of the amounts shown in the Consolidated Statement of Cash Flows:
SEPTEMBER 30,2023
Restricted cash included in other assets(1)
Total cash, cash equivalents and restricted cash
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/or 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; expected market and general economic conditions, including related influencing factors such as the trajectory of U.S. housing construction activity, repair and remodel activity, inflation trends and interest rates; our expected lumber production operating rates in fourth quarter 2024; our expectations about our future opportunities in emerging carbon credit and carbon capture and storage markets and assumptions used in valuing incentive compensation and related expense.
Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often involve use of words such as “anticipate,” “believe,” “committed,” "continue,” “estimate,” “expect,” “foreseeable,” “maintain,” “may,” "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 past 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 third quarter 2024 averaged 1.3 million units, a 1.1 percent decrease from second quarter 2024. Single-family starts averaged 1.0 million units in third quarter 2024, a 4.1 percent decrease from second quarter 2024. Multi-family starts averaged 363 thousand units in third quarter 2024, which was a 7.9 percent increase from second 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 724 thousand units for third quarter 2024, an increase of 4.5 percent from second quarter 2024, supported by builder mortgage rate buydowns and other incentives. 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 1.8 percent from second quarter 2024 to third 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 some 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 42 years.
In U.S. wood product markets, demand for lumber and OSB was influenced by continued cautious buyer sentiment at the outset of third quarter 2024. As the quarter progressed, demand was mixed as continued strength in single-family housing starts was offset by weaker multi-family construction and restrained repair and remodel activity. The Random Lengths Framing Lumber Composite price averaged $383/MBF and the OSB Composite averaged $346/MSF in third quarter 2024. Over the course of the third quarter, composite prices for lumber increased from $366/MBF to $396/MBF and composite prices for OSB decreased from $352/MSF to $344/MSF. Increased curtailments, in addition to an increase in duties on Canadian lumber imports, contributed to the moderate recovery in lumber prices. In light of these conditions, we reduced our operating rates in third quarter 2024, resulting in a 10.1 percent decrease in lumber production from second quarter 2024 to third quarter 2024, which includes the previously announced indefinite curtailment of our lumber mill in New Bern, North Carolina. We expect to return to more normalized operating rates in fourth quarter 2024.
In Western log markets, Douglas fir sawlog prices decreased 3.7 percent in third quarter 2024 compared with second 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 increased 1.0 percent in third quarter 2024 compared to second quarter 2024 and declined 0.4 percent from third quarter 2023, as reported by TimberMart-South. While there continued to be demand for logs across the region, sawlog markets were generally soft given ample supply and in response to mills carrying elevated log inventories and adjusting operations in a soft lumber market. Mill adjustments during the quarter included a series of curtailments and permanent closures.
Currency exchange rates, available supply from other countries and trade policy affect our export businesses. During third quarter 2024, end use demand in export markets moderated. In Japan, total housing starts decreased 4.0 percent year to date through August compared to the same period in 2023, while the key Post and Beam segment saw a 5.0 percent decrease. Lumber imports to Japan from Europe increased, which placed some pressure on 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, decreased from 6.9 percent in second quarter 2024 to 6.1 percent in third 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 2.4 percent as of September 2024 compared to 3.0 percent in June 2024. This rate 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 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 remained flat at 4.1 percent from second quarter 2024 to third quarter 2024.
Governments and businesses across the globe are taking action on climate change and are making significant commitments toward 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 Third Quarter 2024 and Year-to-Date 2024
AMOUNT OFCHANGE
2024 VS. 2023
Net sales
(341
(484
(89
(153
(275
(364
(211
(305
Earnings per share, basic and diluted
(0.29
(0.42
Comparing Third Quarter 2024 with Third Quarter 2023
Net sales decreased $341 million – 17 percent – primarily due to:
Costs of sales decreased $89 million – 6 percent – primarily due to decreased sales volumes across most product lines in our Wood Products segment, as well as a decrease in acres sold in our Real Estate, Energy and Natural Resources segment.
Operating income decreased $275 million – 78 percent – primarily due to a $252 million decrease in consolidated gross margin (see discussion of components above), as well as a $10 million noncash impairment charge related to the indefinite curtailment of our New Bern lumber mill recorded in third quarter 2024 (refer to Note 13: Other Operating Costs, Net).
Net earnings decreased $211 million – 88 percent – primarily due to the $275 million decrease in operating income, as discussed above, partially offset by a $69 million decrease in income tax expense (refer to Income Taxes).
Comparing Year-to-Date 2024 with Year-to-Date 2023
Net sales decreased $484 million – 8 percent – primarily due to a $397 million decrease in Wood Products net sales to unaffiliated customers attributable to decreased sales realizations and sales volumes across most product lines, as well as a $106 million decrease in Timberlands net sales to unaffiliated customers attributable to decreased sales volumes and sales realizations. These decreases were partially offset by a $19 million increase in Real Estate, Energy and Natural Resources net sales to unaffiliated customers attributable to an increase in acres sold, partially offset by a decrease in average price per acre sold.
Costs of sales decreased $153 million – 3 percent – primarily due to decreased sales volumes across most product lines in Wood Products, as well as decreased sales volumes in our Timberlands segment, partially offset by an increase in acres sold in Real Estate, Energy and Natural Resources.
Operating income decreased $364 million – 40 percent – primarily due to a $331 million decrease in consolidated gross margin (see discussion of components above), as well as a $10 million noncash impairment charge related to the indefinite curtailment of our New Bern lumber mill recorded in third quarter 2024. These decreases were partially offset by a $25 million product remediation recovery recorded in second quarter 2024 (refer to Note 13: Other Operating Costs, Net).
Net earnings decreased $305 million – 49 percent – primarily due to the $364 million decrease in operating income, as discussed above, partially offset by a $63 million decrease in income tax expense (refer to Income Taxes).
TIMBERLANDS
(18
(32
(2
(106
Subtotal net sales to unaffiliated customers
(23
Intersegment sales
(17
493
521
(28
1,569
1,692
(123
410
417
1,275
1,317
217
(85
(84
Net sales to unaffiliated customers
Net sales to unaffiliated customers decreased $23 million – 6 percent – primarily due to an $18 million decrease in Western log sales attributable to a 7 percent decrease in sales volumes and a 4 percent decrease in sales realizations, as well as a $6 million decrease in Southern log sales attributable to a 3 percent decrease in sales volumes.
Intersegment sales decreased $5 million – 4 percent – primarily due to a 6 percent decrease in sales realizations, partially offset by a 3 percent increase in sales volumes.
Costs of sales decreased $7 million – 2 percent – primarily due to decreased sales volumes.
Operating income and Net contribution to earnings
Operating income and net contribution to earnings decreased $21 million – 27 percent – primarily due to the change in the components of gross margin, as discussed above.
Net sales to unaffiliated customers decreased $106 million – 8 percent – primarily due to a $72 million decrease in Western log sales attributable to a 7 percent decrease in sales volumes and a 6 percent decrease in sales realizations, as well as a $32 million decrease in Southern log sales attributable to a 5 percent decrease in sales volumes and a 2 percent decrease in sales realizations.
Intersegment sales decreased $17 million – 4 percent – primarily due to a 5 percent decrease in sales realizations.
Costs of sales decreased $42 million – 3 percent – primarily due to decreased sales volumes.
Net contribution to earnings decreased $84 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)
1,379
1,479
(100
4,499
4,814
(315
4,062
4,180
12,305
12,907
(602
160
148
450
5,601
5,807
(206
17,257
18,171
(914
Fee harvest volumes – tons:
2,184
2,137
6,753
6,674
6,070
6,146
(76
18,353
19,008
(655
247
223
676
683
8,501
8,506
25,782
26,365
(583
18
REAL ESTATE, ENERGY AND NATURAL RESOURCES
Net sales:
118
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 decreased $16 million – 15 percent – primarily due to a decrease in acres sold, as well as a decrease in average price per acre sold.
Costs of sales decreased $12 million – 28 percent – primarily due to a decrease in acres sold.
Operating income and net contribution to earnings decreased $5 million – 9 percent – primarily due to the change in the components of gross margin, as discussed above.
Net sales increased $19 million – 7 percent – primarily due to an increase in acres sold, partially offset by a decrease in average price per acre sold.
Costs of sales increased $13 million – 12 percent – primarily due to an increase in acres sold.
Operating income and net contribution to earnings increased $9 million – 6 percent – primarily due to the change in the components of gross margin, as discussed above.
REAL ESTATE SALES STATISTICS
Acres sold
17,441
25,721
(8,280
74,880
55,755
19,125
Average price per acre
2,808
3,033
2,650
3,403
(753
WOOD PRODUCTS
(119
(244
(78
(41
(57
(27
(34
(26
Other products produced(1)
(302
(397
1,132
1,195
(63
3,424
3,572
(148
(250
(239
Net sales decreased $302 million – 20 percent – primarily due to:
Costs of sales decreased $63 million – 5 percent – primarily due to decreased sales volumes across most product lines.
Operating income and net contribution to earnings decreased $250 million – 90 percent – primarily due to the change in the components of gross margin, as discussed above, as well as a $10 million noncash impairment charge related to the indefinite curtailment of our New Bern lumber mill recorded in third quarter 2024 (refer to Note: 13: Other Operating Costs, Net).
Net sales decreased $397 million – 9 percent – primarily due to:
These decreases were partially offset by a $42 million increase in oriented strand board sales attributable to a 10 percent increase in sales realizations, partially offset by a 4 percent decrease in sales volumes.
Costs of sales decreased $148 million – 4 percent – primarily due to decreased sales volumes across most product lines.
Operating income and net contribution to earnings decreased $239 million – 41 percent – primarily due to the change in the components of gross margin, as discussed above, as well as a $10 million noncash impairment charge related to the indefinite curtailment of our New Bern lumber mill recorded in third quarter 2024, partially offset by a $25 million product remediation recovery recorded in second quarter 2024 (refer to Note: 13: Other Operating Costs, Net).
Third-Party Sales Volumes
VOLUMES IN MILLIONS(1)
Structural lumber – board feet
1,116
1,184
(68
3,386
3,524
Oriented strand board – square feet (3/8”)
675
2,093
2,176
(83
Engineered solid section – cubic feet
5.4
6.2
(0.8
16.8
16.9
(0.1
Engineered I-joists – lineal feet
36
114
113
Softwood plywood – square feet (3/8”)
86
259
263
Medium density fiberboard – square feet (3/4”)
104
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
1,046
1,174
(128
3,294
3,481
(187
Outside purchase
(13
97
1,071
1,212
3,391
3,594
Oriented strand board – square feet (3/8”):
724
2,162
2,212
(50
55
700
(43
2,217
2,267
Engineered solid section – cubic feet:
5.0
5.6
(0.6
16.1
0.7
2.6
3.7
(1.1
8.9
9.7
7.6
9.3
(1.7
25.7
25.8
Engineered I-joists – lineal feet:
44
Softwood plywood – square feet (3/8”):
235
268
Medium density fiberboard – square feet (3/4"):
37
34
101
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
(107
(15
Liability classified share-based compensation
Foreign exchange gain
Elimination of intersegment profit in inventory and LIFO
(29
(62
Operating loss
(58
(194
(49
Non-operating pension and other post-employment benefit costs
Net charge to earnings
(59
Net charge to earnings increased $7 million – 15 percent – primarily due to a $10 million decrease in interest income and other, attributable to a decrease in our cash and short-term investment accounts, and a $4 million increase in liability classified share-based compensation. These changes were partially offset by a $9 million decrease in elimination of intersegment profit in inventory and LIFO.
Net charge to earnings increased $59 million – 48 percent – primarily due to a $15 million increase in unallocated corporate function and variable compensation expense and a $12 million decrease in interest income and other, primarily attributable to a decrease in our cash and short-term investment accounts.
INTEREST EXPENSE
Our interest expense, net of capitalized interest, was:
Interest expense decreased by $3 million compared to third quarter 2023 and decreased by $5 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 decreased by $63 million compared to year-to-date 2023 primarily due to a decrease in our TRS earnings in 2024, as well as a decrease in our estimated annual effective tax rate.
Refer to Note 14: Income Taxes for further information.
LIQUIDITY AND CAPITAL RESOURCES
We are committed to maintaining an appropriate capital structure that provides financial flexibility and enables us to protect the interests of our shareholders and meet our obligations to our lenders, while also maintaining access to all major financial markets. As of September 30, 2024, we had $877 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 $355 million primarily due to decreased cash flows from our business operations, as well as an $11 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 $601 million primarily due to a $664 million decrease in cash paid for short-term investments, partially offset by a $65 million increase in cash paid for acquisitions of timberlands.
Summary of Capital Spending by Business Segment
177
168
Unallocated Items
267
251
We anticipate our capital expenditures for 2024 to be approximately $420 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 $103 million primarily due to a $743 million decrease in net proceeds from issuance of long-term debt, partially offset by a $537 million decrease in cash used for payments of dividends, as well as a $118 million decrease in cash used for payments of long-term debt.
Line of Credit
We had no outstanding borrowings on our $1.5 billion five-year senior unsecured revolving credit facility as of September 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 September 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.
Under our cash return framework, we plan to supplement our base dividend with an additional return of variable cash, as appropriate, in the form of a supplemental cash dividend and/or share repurchase to achieve a targeted total return to shareholders of 75 to 80 percent of annual Adjusted Funds Available for Distribution (Adjusted FAD). For further information on Adjusted FAD see Performance and Liquidity Measures.
Share Repurchases
We repurchased 820,706 common shares for approximately $26 million (including transaction fees) during third quarter 2024 and 3,962,220 common shares for approximately $125 million (including transaction fees) during year-to-date 2024 under the 2021 Repurchase Program. During third quarter 2023, we repurchased 757,510 common shares for approximately $25 million (including transaction fees) and 3,562,944 common shares for approximately $110 million (including transaction fees) during year-to-date 2023 under the 2021 Repurchase Program. There were 11,564 unsettled shares (less than $1 million) as of September 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:
143
413
503
94
273
253
328
(237
500
746
(246
565
1,186
1,502
(316
(56
(188
(129
Adjusted EBITDA
236
509
(273
998
1,373
(375
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 September 30, 2024:
Real Estate &ENR
WoodProducts
UnallocatedItems
69
Net contribution (charge) to earnings
(14
Operating income (loss)
65
125
Special items included in operating income (loss)(1)
The table below reconciles Adjusted EBITDA for the quarter ended September 30, 2023:
72
The table below reconciles Adjusted EBITDA for the year-to-date period ended September 30, 2024:
196
164
The table below reconciles Adjusted EBITDA for the year-to-date period ended September 30, 2023:
Real Estate& ENR
208
201
156
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:
234
523
Capital expenditures
(97
(99
(267
(251
FAD
137
424
894
Cash from product remediation recovery
498
(161
(164
(171
(281
Net Earnings and Net Earnings per Diluted Share Before Special Items (Income Tax Affected)
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
(19
Net earnings before special items
303
628
Net Earnings per Diluted Share Before Special Items
Net earnings per diluted share
0.01
(0.02
Net earnings per diluted share before special items
0.05
0.42
0.86
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 September 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 September 30, 2024, based on an evaluation of the company’s disclosure controls and procedures as of that date.
CHANGES IN INTERNAL CONTROLS
During third quarter 2024, we completed the implementation of a new enterprise resource planning (ERP) system, which we expect to improve the efficiency of certain financial and transactional processes. As a result of the ERP system implementation, certain internal controls over financial reporting have been modified or implemented to address the new control environment and processes associated with the new ERP system. There were no other changes in our internal control over financial reporting during the quarter ended September 30, 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 third quarter 2024:
COMMON SHARE REPURCHASES DURING THIRD QUARTER 2024
TOTAL NUMBEROF SHARESPURCHASED
AVERAGE PRICEPAID PER SHARE
TOTAL NUMBEROF SHARESPURCHASED ASPART OF PUBLICLYANNOUNCEDPROGRAMS
APPROXIMATEDOLLAR VALUEOF SHARES THATMAY YET BEPURCHASEDUNDER THEPROGRAMS
July 1 – July 31
293,051
29.33
143,852,342
August 1 – August 31
279,733
30.72
135,258,589
September 1 – September 30
247,922
32.12
127,296,096
820,706
30.64
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 third quarter 2024, we repurchased 820,706 shares for approximately $26 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 September 30, 2024, we had remaining authorization of $127 million for future stock repurchases.
Item 5. OTHER INFORMATION
Insider Trading Arrangements
During third quarter 2024, no director or "officer" (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of the company adopted, modified or terminated trading plans intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or non-Rule 10b5-1 trading arrangements.
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).
101.INS
XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
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 September 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: October 25, 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)