interest rate levels, inflation, housing starts, general availability of
financing for home mortgages and the relative strength of the U.S. dollar;
? the effect of COVID-19 and other viral or disease outbreaks, including but not
limited to any related regulatory restrictions or requirements, and their
? market demand for the company's products, including market demand for our
timberland properties with higher and better uses, which is related to, among
other factors, the strength of the various U.S. business segments and U.S. and
? changes in currency exchange rates, particularly the relative value of the
U.S. dollar to the Japanese yen, the Chinese yuan, and the Canadian dollar,
and the relative value of the euro to the yen;
? restrictions on international trade and tariffs imposed on imports or exports;
? the availability and cost of shipping and transportation;
? economic activity in Asia, especially Japan and China;
? performance of our manufacturing operations, including maintenance and capital
? potential disruptions in our manufacturing operations;
? the level of competition from domestic and foreign producers;
? the successful execution of our internal plans and strategic initiatives,
including restructuring and cost reduction initiatives;
? our ability to hire and retain capable employees;
? the successful and timely execution and integration of our strategic
acquisitions, including our ability to realize expected benefits and
synergies, and the successful and timely execution of our strategic
divestitures, each of which is subject to a number of risks and conditions
beyond our control including, but not limited to, timing and required
regulatory approvals or the occurrence of any event, change or other
circumstances that could give rise to a termination of any acquisition or
divestiture transaction under the terms of the governing transaction
? raw material availability and prices;
? changes in global or regional climate conditions and governmental response to
? the risk of loss from fires, floods, windstorms, hurricanes, pest infestation
? transportation and labor availability and costs;
? the effect of forestry, land use, environmental and other governmental
? performance of pension fund investments and related derivatives;
? the effect of timing of employee retirements as it relates to the cost of
pension benefits and changes in the market price of our common stock on
? the accuracy of our estimates of costs and expenses related to contingent
liabilities and the accuracy of our estimates of charges related to casualty
? changes in accounting principles; and
? other risks and uncertainties described in this report under Management's
Discussion and Analysis of Financial Condition and Results of Operations
(MD&A) and in our 2021 Annual Report on Form 10-K, as well as those set
forth from time to time in our other public statements, reports, registration
statements, prospectuses, information statements and other filings with the
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.
In reviewing our results of operations, it is important to understand these terms:
? Sales realizations for Timberlands and Wood Products refer to net selling
prices. This includes selling price plus freight, minus normal sales
deductions. Real Estate transactions are presented at the contract sales price
before commissions and closing costs, net of any credits.
? Net contribution (charge) to earnings does not include interest expense, loss
ECONOMIC AND MARKET CONDITIONS AFFECTING OUR OPERATIONS
Changes in inflation also reflect monetary policy set by the U.S. Federal Reserve, as well as changes in demand and supply for goods and services and fluctuations in labor markets. Increased inflation affects the cost of our operations across each of our business segments. The Consumer Price Index increased 9.1 percent year over year in June 2022. While we can offset some of the impacts of inflation through our sales activities, not all of the costs associated with inflation can be fully mitigated.
How We Did Second Quarter 2022 and Year-to-Date 2022
Comparing Second Quarter 2022 with Second Quarter 2021
This decrease was partially offset by a $110 million increase in Timberlands net sales to unaffiliated customers primarily due to increased sales realizations.
Operating income decreased $382 million - 27 percent - primarily due to a $377 million decrease in consolidated gross margin (see discussion of components above).
Net earnings decreased $240 million - 23 percent - primarily due to the $382 million decrease in operating income discussed above.
This decrease was partially offset by a $140 million decrease in income tax expense (refer to Income Taxes ).
Net earnings decreased $150 million - 9 percent - primarily due to a $276 million pretax charge ($207 million after-tax) related to the early extinguishment of debt (refer to Note 8: Long-Term Debt and Line of Credit ).
This decrease was partially offset by a $120 million decrease in income tax expense (refer to Income Taxes ).
How We Did Second Quarter 2022 and Year-to-Date 2022
(1) Other Timberlands sales include sales of seeds and seedlings from our nursery
operations as well as wood chips.
Comparing Second Quarter 2022 with Second Quarter 2021
Net sales to unaffiliated customers
Intersegment sales increased $20 million - 15 percent - primarily due to a 19 percent increase in sales realizations.
Operating income and Net contribution to earnings
Operating income and net contribution to earnings increased $40 million - 35 percent - primarily due to the change in the components of gross margin, as discussed above.
Net sales to unaffiliated customers
Intersegment sales increased $47 million - 17 percent - primarily due to a 19 percent increase in sales realizations.
Operating income and Net contribution to earnings
Operating income and net contribution to earnings increased $114 million - 52 percent - primarily due to the change in the components of gross margin, as discussed above.
Third-Party Log Sales Volumes and Fee Harvest Volumes
(1) Western logs are primarily transacted in thousand board feet (MBF) but are
REAL ESTATE, ENERGY AND NATURAL RESOURCES
How We Did Second Quarter 2022 and Year-to-Date 2022
Comparing Second Quarter 2022 with Second Quarter 2021
Net sales increased $7 million - 6 percent - primarily due to an increase in the amount of acres sold, partially offset by decreased mitigation bank credit sales.
Costs of sales increased $4 million - 10 percent - primarily due to increases in the amount of acres sold and basis per acre sold.
Operating income and Net contribution to earnings
Operating income and net contribution to earnings increased $2 million - 3 percent - primarily due to the change in the components of gross margin, as discussed above.
Costs of sales increased $11 million - 15 percent - primarily due to increases in the amount of acres sold and basis per acre sold.
Operating income and Net contribution to earnings
How We Did Second Quarter 2022 and Year-to-Date 2022
(1) Other products produced sales include wood chips, other byproducts and
third-party residual log sales from our Canadian Forestlands operations.
Comparing Second Quarter 2022 with Second Quarter 2021
Net sales decreased $288 million - 11 percent - due to: ? a $351 million decrease in structural lumber sales attributable to a 28
percent decrease in sales realizations, partially offset by a 3 percent
? a $108 million decrease in oriented strand board sales attributable to a 26
percent decrease in sales realizations, partially offset by an 11 percent
increase in sales volumes and
? a $16 million decrease in softwood plywood sales attributable to a 17 percent
decrease in sales realizations, as well as a 9 percent decrease in sales
These decreases were partially offset by: ? an $81 million increase in engineered solid section sales due to a 53 percent
? a $64 million increase in engineered I-joists sales due to a 73 percent
increase in sales realizations, partially offset by an 8 percent decrease in
? a $26 million increase in complementary building products sales attributable
? a $10 million increase in medium density fiberboard sales attributable to a 35
percent increase in sales realizations, partially offset by a 10 percent
decrease in sales volumes and
? a $6 million increase in other products produced sales attributable to
Costs of sales increased $185 million - 15 percent - primarily due to increased freight and raw material costs.
Operating income and Net contribution to earnings
Operating income and net contribution to earnings decreased $475 million - 36 percent - primarily due to the change in the components of gross margin, as discussed above.
Net sales increased $210 million - 5 percent - due to: ? a $135 million increase in engineered solid section sales attributable to a 52
percent increase in sales realizations, partially offset by a 5 percent
? a $118 million increase in engineered I-joists sales attributable to a 70
percent increase in sales realizations, partially offset by a 5 percent
? a $70 million increase in complementary building products sales attributable
percent increase in sales volumes, partially offset by a 3 percent decrease in
? a $10 million increase in medium density fiberboard sales attributable to a 32
percent increase in sales realizations, partially offset by a 17 percent
decrease in sales volumes and
? an $8 million increase in other products produced sales attributable to
Costs of sales increased $337 million - 14 percent - primarily due to increased freight and raw material costs.
Operating income and Net contribution to earnings
(1) Sales volumes include sales of internally produced products and products
PRODUCTION AND OUTSIDE PURCHASE VOLUMES
Net Charge to Earnings - Unallocated Items
Comparing Second Quarter 2022 with Second Quarter 2021
Net charge to earnings decreased $40 million - 48 percent - primarily due to a $46 million decrease in elimination of intersegment profit in inventory and LIFO.
Our interest expense, net of capitalized interest, was:
? $65 million for second quarter 2022 and $137 million year-to-date 2022;
? $78 million for second quarter 2021 and $157 million year-to-date 2021.
Interest expense decreased by $13 million compared to second quarter 2021 and decreased by $20 million compared to year-to-date 2021 primarily due to decreases in the average outstanding debt and weighted average interest rate.
Refer to Note 8: Long-Term Debt and Line of Credit for further information.
Our provision for income taxes was: ? a $184 million expense for second quarter 2022 and a $393 million expense
? a $324 million expense for second quarter 2021 and a $513 million expense
Refer to Note 14: Income Taxes and Note 8: Long-Term Debt and Line of Credit for further information.
Consolidated net cash from investing activities was: ? $(433) million for year-to-date 2022 and
Net cash from investing activities decreased $160 million, primarily due to: ? a $134 million increase in cash paid for acquisition of timberlands and
? a $26 million increase in cash paid for capital expenditures.
Summary of Capital Spending by Business Segment
We anticipate our capital expenditures for 2022 to be approximately $460 million. The amount we spend on capital expenditures could change.
Consolidated net cash from financing activities was: ? $(1,938) million for year-to-date 2022 and
Net cash from financing activities decreased $1,487 million, primarily due to: ? a $1,097 million increase in cash paid for dividends;
? a $259 million increase in cash used for repurchases of common stock and
? a $97 million increase in net cash used for payments on long term debt.
Refer to Note 8: Long-Term Debt and Line of Credit for further information.
Refer to Note 8: Long-Term Debt and Line of Credit for further information.
As of June 30, 2022, Weyerhaeuser Company was in compliance with its debt covenants. There have been no significant changes to the debt covenants presented in our 2021 Annual Report on Form 10-K for our long-term debt instruments, and we expect to remain in compliance with our debt covenants for the foreseeable future.
We received cash proceeds from the exercise of stock options of: ? $14 million for year-to-date 2022 and
Our average stock price was $38.89 and $35.60 for year-to-date 2022 and 2021, respectively.
The increase in dividends paid is primarily due to a supplemental dividend of $1.45 per share ($1,084 million in total) paid in the first quarter of 2022 based on 2021 financial results.
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, 2021:
(1) Loss on debt extinguishment is a special item consisting of a pretax charge
Net Earnings and Net Earnings per Diluted Share Before Special Items
Net Earnings Before Special Items
Net earnings before special items $ 788 $ 1,028 $
Net Earnings per Diluted Share Before Special Items
Net earnings per diluted share $ 1.06 $ 1.37 $
Net earnings per diluted share $ 1.06 $ 1.37 $
There have been no significant changes during year-to-date 2022 to the critical accounting policies presented in our 2021 Annual Report on Form 10-K.
© Edgar Online, source Glimpses