Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

	QUARTER ENDED						YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES	SEPTEMBER 2022			SEPTEMBER 2021			SEPTEMBER 2022			SEPTEMBER 2021
Net sales (Note 3)	$	2,276		$	2,345		$	8,361		$	7,995
Costs of sales		1,694			1,589			5,130			4,602
Gross margin		582			756			3,231			3,393
Selling expenses		24			24			70			68
General and administrative expenses		100			98			294			283
Other operating costs (income), net (Note 13)		1			(15	)		19			8
Operating income		457			649			2,848			3,034
Non-operating pension and other post-employment benefit costs (Note 6)		(12	)		(5	)		(38	)		(14	)
Interest income and other		9			1			9			4
Interest expense, net of capitalized interest		(67	)		(79	)		(204	)		(236	)
Loss on debt extinguishment (Note 8)		—			—			(276	)		—
Earnings before income taxes		387			566			2,339			2,788
Income taxes (Note 14)		(77	)		(84	)		(470	)		(597	)
Net earnings	$	310		$	482		$	1,869		$	2,191

Earnings per share, basic and diluted (Note 4)	$	0.42		$	0.64		$	2.51		$	2.92
Weighted average shares outstanding (in thousands) (Note 4):
Basic		740,058			750,105			743,990			749,657
Diluted		740,975			751,443			745,081			750,999

See accompanying Notes to Consolidated Financial Statements.

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(UNAUDITED)

	QUARTER ENDED						YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS	SEPTEMBER 2022			SEPTEMBER 2021			SEPTEMBER 2022			SEPTEMBER 2021
Net earnings	$	310		$	482		$	1,869		$	2,191
Other comprehensive income (loss):
Foreign currency translation adjustments		(53	)		(25	)		(62	)		(1	)
Changes in unamortized actuarial loss, net of tax expense of $11, $10, $40 and $55		32			29			122			170
Changes in unamortized net prior service credit, net of tax expense of $0, $0, $1 and $0		1			1			1			2
Total other comprehensive income (loss)		(20	)		5			61			171
Total comprehensive income	$	290		$	487		$	1,930		$	2,362

See accompanying Notes to Consolidated Financial Statements.

WEYERHAEUSER COMPANY

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PAR VALUE	SEPTEMBER 30, 2022			DECEMBER 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	1,920		$	1,879
Receivables, net		425			507
Receivables for taxes		15			24
Inventories (Note 5)		542			520
Prepaid expenses and other current assets		146			205
Total current assets		3,048			3,135
Property and equipment, less accumulated depreciation of $3,680 and $3,592		1,997			2,057
Construction in progress		245			175
Timber and timberlands at cost, less depletion		11,681			11,510
Minerals and mineral rights, less depletion		245			255
Deferred tax assets		10			17
Other assets		364			503
Total assets	$	17,590		$	17,652
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt (Note 8)	$	118		$	—
Accounts payable		272			281
Accrued liabilities (Note 7)		664			673
Total current liabilities		1,054			954
Long-term debt, net (Note 8)		4,935			5,099
Deferred tax liabilities		89			46
Deferred pension and other post-employment benefits (Note 6)		335			440
Other liabilities		339			346
Total liabilities		6,752			6,885
Commitments and contingencies (Note 10)
Equity:
Common shares: $1.25 par value; authorized 1,360 million shares; issued and outstanding: 737,547 thousand shares at September 30, 2022 and 747,301 thousand shares at December 31, 2021		922			934
Other capital		7,824			8,181
Retained earnings		2,510			2,131
Accumulated other comprehensive loss (Note 11)		(418	)		(479	)
Total equity		10,838			10,767
Total liabilities and equity	$	17,590		$	17,652

See accompanying Notes to Consolidated Financial Statements.

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

	YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS	SEPTEMBER 2022			SEPTEMBER 2021
Cash flows from operations:
Net earnings	$	1,869		$	2,191
Noncash charges (credits) to earnings:
Depreciation, depletion and amortization		360			356
Basis of real estate sold		77			62
Deferred income taxes, net		17			16
Pension and other post-employment benefits (Note 6)		65			46
Share-based compensation expense (Note 12)		25			23
Gain on sale of timberlands (Note 16)		—			(32	)
Loss on debt extinguishment (Note 8)		276			—
Change in:
Receivables, net		81			(47	)
Receivables and payables for taxes		15			93
Inventories		(30	)		(55	)
Prepaid expenses and other current assets		(7	)		(21	)
Accounts payable and accrued liabilities		(23	)		116
Pension and post-employment benefit contributions and payments		(19	)		(56	)
Other		(41	)		(27	)
Net cash from operations		2,665			2,665
Cash flows from investing activities:
Capital expenditures for property and equipment		(207	)		(184	)
Capital expenditures for timberlands reforestation		(38	)		(39	)
Acquisition of timberlands (Note 16)		(286	)		(149	)
Proceeds from sale of timberlands (Note 16)		—			261
Other		1			3
Net cash from investing activities		(530	)		(108	)
Cash flows from financing activities:
Cash dividends on common shares		(1,485	)		(382	)
Net proceeds from issuance of long-term debt (Note 8)		881			—
Payments on long-term debt (Note 8)		(1,203	)		(225	)
Proceeds from exercise of stock options		15			46
Repurchases of common shares (Note 4)		(402	)		(26	)
Other		(20	)		(19	)
Net cash from financing activities		(2,214	)		(606	)
Net change in cash, cash equivalents and restricted cash		(79	)		1,951
Cash, cash equivalents and restricted cash at beginning of period		1,999			495
Cash, cash equivalents and restricted cash at end of period	$	1,920		$	2,446
Cash paid (received) during the period for:
Interest, net of amount capitalized of $5 and $3	$	211		$	237
Income taxes, net of refunds	$	446		$	494

See accompanying Notes to Consolidated Financial Statements.

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(UNAUDITED)

	QUARTER ENDED						YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES	SEPTEMBER 2022			SEPTEMBER 2021			SEPTEMBER 2022			SEPTEMBER 2021
Common shares:
Balance at beginning of period	$	927		$	937		$	934		$	934
Issued for exercise of stock options and vested units		—			—			2			3
Repurchases of common shares (Note 4)		(5	)		(1	)		(14	)		(1	)
Balance at end of period		922			936			922			936
Other capital:
Balance at beginning of period		7,954			8,258			8,181			8,208
Issued for exercise of stock options		1			1			14			44
Repurchases of common shares (Note 4)		(140	)		(25	)		(390	)		(25	)
Share-based compensation		8			8			25			23
Other transactions, net		1			—			(6	)		(8	)
Balance at end of period		7,824			8,242			7,824			8,242
Retained earnings:
Balance at beginning of period		2,333			1,861			2,131			411
Net earnings		310			482			1,869			2,191
Dividends on common shares		(133	)		(501	)		(1,490	)		(760	)
Balance at end of period		2,510			1,842			2,510			1,842
Accumulated other comprehensive loss:
Balance at beginning of period		(398	)		(656	)		(479	)		(822	)
Other comprehensive income (loss)		(20	)		5			61			171
Balance at end of period (Note 11)		(418	)		(651	)		(418	)		(651	)
Total equity:
Balance at end of period	$	10,838		$	10,369		$	10,838		$	10,369

Dividends paid per common share	$	0.18		$	0.17		$	1.99		$	0.51

See accompanying Notes to Consolidated Financial Statements.

INDEX FOR NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1:	BASIS OF PRESENTATION	7

NOTE 2:	BUSINESS SEGMENTS	7

NOTE 3:	REVENUE RECOGNITION	8

NOTE 4:	NET EARNINGS PER SHARE AND SHARE REPURCHASES	8

NOTE 5:	INVENTORIES	9

NOTE 6:	PENSION AND OTHER POST-EMPLOYMENT BENEFIT PLANS	10

NOTE 7:	ACCRUED LIABILITIES	10

NOTE 8:	LONG-TERM DEBT AND LINE OF CREDIT	11

NOTE 9:	FAIR VALUE OF FINANCIAL INSTRUMENTS	11

NOTE 10:	LEGAL PROCEEDINGS, COMMITMENTS AND CONTINGENCIES	11

NOTE 11:	ACCUMULATED OTHER COMPREHENSIVE LOSS	12

NOTE 12:	SHARE-BASED COMPENSATION	12

NOTE 13:	OTHER OPERATING COSTS (INCOME), NET	13

NOTE 14:	INCOME TAXES	13
NOTE 15:	RESTRICTED CASH	13
NOTE 16:	TIMBERLAND ACQUISITIONS AND DIVESTITURES	13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTERS AND YEAR-TO-DATE PERIODS ENDED SEPTEMBER 30, 2022 AND 2021

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,” “we,” “the company” 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, 2021. 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; manufacturing, distributing and selling products made from trees; maximizing the value of every acre we own through the sale of higher and better use (HBU) properties; and monetizing the value of surface and subsurface assets through leases and royalties. Our business segments are categorized based primarily on products and services which include:

●	Timberlands – Logs, timber, recreational leases and other products;

●	Real Estate, Energy and Natural Resources (Real Estate & ENR) – Real Estate (sales of timberlands) and ENR (rights to explore for and extract hard minerals, construction materials, natural gas, and wind and solar resources) and

●	Wood Products – Structural lumber, oriented strand board, engineered wood products and building materials distribution.

A reconciliation of our business segment information to the respective information in the Consolidated Statement of Operations is as follows:

	QUARTER ENDED						YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS	SEPTEMBER 2022			SEPTEMBER 2021			SEPTEMBER 2022			SEPTEMBER 2021
Sales to unaffiliated customers:
Timberlands	$	441		$	423		$	1,421		$	1,207
Real Estate & ENR		68			69			313			285
Wood Products		1,767			1,853			6,627			6,503
		2,276			2,345			8,361			7,995
Intersegment sales:
Timberlands		133			129			450			399

Total sales		2,409			2,474			8,811			8,394
Intersegment eliminations		(133	)		(129	)		(450	)		(399	)
Total	$	2,276		$	2,345		$	8,361		$	7,995
Net contribution (charge) to earnings:
Timberlands	$	107		$	133		$	442		$	354
Real Estate & ENR		48			45			194			174
Wood Products		344			517			2,389			2,695
		499			695			3,025			3,223
Unallocated items(1)		(45	)		(50	)		(206	)		(199	)
Net contribution to earnings		454			645			2,819			3,024
Interest expense, net of capitalized interest		(67	)		(79	)		(204	)		(236	)
Loss on debt extinguishment		—			—			(276	)		—
Earnings before income taxes		387			566			2,339			2,788
Income taxes		(77	)		(84	)		(470	)		(597	)
Net earnings	$	310		$	482		$	1,869		$	2,191

(1)	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 as well as legacy obligations.

NOTE 3: REVENUE RECOGNITION

A reconciliation of revenue recognized by our major products:

	QUARTER ENDED				YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS	SEPTEMBER 2022		SEPTEMBER 2021		SEPTEMBER 2022		SEPTEMBER 2021
Net sales to unaffiliated customers:
Timberlands segment
Delivered logs:
West
Domestic sales	$	97	$	76	$	313	$	235
Export grade sales		127		150		478		414
Subtotal West		224		226		791		649
South		166		153		480		429
North		15		13		40		38
Subtotal delivered logs sales		405		392		1,311		1,116
Stumpage and pay-as-cut timber		10		9		30		22
Recreational and other lease revenue		18		16		51		48
Other(1)		8		6		29		21
Net sales attributable to Timberlands segment		441		423		1,421		1,207
Real Estate & ENR segment
Real estate		30		45		217		212
Energy and natural resources		38		24		96		73
Net sales attributable to Real Estate & ENR segment		68		69		313		285
Wood Products segment
Structural lumber		676		681		2,880		3,020
Oriented strand board		287		470		1,348		1,513
Engineered solid section		233		183		676		491
Engineered I-joists		166		128		471		315
Softwood plywood		47		45		158		170
Medium density fiberboard		50		52		151		143
Complementary building products		222		211		676		595
Other(2)		86		83		267		256
Net sales attributable to Wood Products segment		1,767		1,853		6,627		6,503
Total net sales	$	2,276	$	2,345	$	8,361	$	7,995

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

(2)	Other Wood Products sales include wood chips, other byproducts and third-party residual log sales from our Canadian Forestlands operations.

NOTE 4: NET EARNINGS PER SHARE AND SHARE REPURCHASES

Our basic and diluted earnings per share were:

●	$0.42 during third quarter 2022 and $2.51 during year-to-date 2022;

●	$0.64 during third quarter 2021 and $2.92 during year-to-date 2021.

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.

	QUARTER ENDED				YEAR-TO-DATE ENDED
SHARES IN THOUSANDS	SEPTEMBER 2022		SEPTEMBER 2021		SEPTEMBER 2022		SEPTEMBER 2021
Weighted average common shares outstanding – basic		740,058		750,105		743,990		749,657
Dilutive potential common shares:
Stock options		192		293		294		318
Restricted stock units		420		730		417		709
Performance share units		305		315		380		315
Total effect of outstanding dilutive potential common shares		917		1,338		1,091		1,342
Weighted average common shares outstanding – dilutive		740,975		751,443		745,081		750,999

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.

	QUARTER ENDED				YEAR-TO-DATE ENDED
SHARES IN THOUSANDS	SEPTEMBER 2022		SEPTEMBER 2021		SEPTEMBER 2022		SEPTEMBER 2021
Stock options		620		789		620		789
Performance share units		623		1,067		623		1,067

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 4,234,838 common shares for approximately $145 million (including transaction fees) under the 2021 Repurchase Program during third quarter 2022 and 11,217,300 common shares for approximately $404 million (including transaction fees) under the 2021 Repurchase Program during year-to-date 2022. As of September 30, 2022, we had remaining authorization of $523 million for future share repurchases. During year-to-date 2021, we repurchased 780,228 common shares for approximately $26 million (including transaction fees) under the 2019 Repurchase Program.

All common stock repurchases under the 2019 Repurchase Program and 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 64,135 unsettled shares (approximately $2 million) as of September 30, 2022 and no unsettled shares as of December 31, 2021.

NOTE 5: INVENTORIES

Inventories include raw materials, work-in-process and finished goods, as well as materials and supplies.

DOLLAR AMOUNTS IN MILLIONS	SEPTEMBER 30, 2022		DECEMBER 31, 2021
LIFO inventories:
Logs	$	24	$	26
Lumber, plywood, panels and fiberboard		60		61
Other products		14		17
Moving average cost or FIFO inventories:
Logs		52		65
Lumber, plywood, panels, fiberboard and engineered wood products		116		106
Other products		147		131
Materials and supplies		129		114
Total	$	542	$	520

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
	QUARTER ENDED						YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS	SEPTEMBER 2022			SEPTEMBER 2021			SEPTEMBER 2022			SEPTEMBER 2021
Service cost	$	9		$	11		$	27		$	32
Interest cost		27			24			80			73
Expected return on plan assets		(40	)		(51	)		(120	)		(153	)
Amortization of actuarial loss		23			29			70			86
Amortization of prior service cost		1			1			2			2
Total net periodic benefit cost – pension	$	20		$	14		$	59		$	40

	OTHER POST-EMPLOYMENT BENEFITS
	QUARTER ENDED				YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS	SEPTEMBER 2022		SEPTEMBER 2021		SEPTEMBER 2022		SEPTEMBER 2021
Interest cost	$	—	$	—	$	2	$	2
Amortization of actuarial loss		1		2		4		4
Amortization of prior service credit		—		—		—		—
Total net periodic benefit cost – other post-employment benefits	$	1	$	2	$	6	$	6

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 update 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.

During second quarter 2022, we recorded an increase to the beginning of the year fair value of the pension assets of $54 million, or 2 percent. We also updated our census data that is used to estimate our beginning of the year projected benefit obligation for our pension plans, which resulted in a projected benefit obligation decrease of $13 million, or less than 1 percent. The net effect of these updates was a $67 million improvement in funded status. This change in funded status was reflected on our Consolidated Balance Sheet as of June 30, 2022.

NOTE 7: ACCRUED LIABILITIES

Accrued liabilities were comprised of the following:

DOLLAR AMOUNTS IN MILLIONS	SEPTEMBER 30, 2022		DECEMBER 31, 2021
Compensation and employee benefit costs	$	213	$	225
Current portion of lease liabilities		22		24
Customer rebates, volume discounts and deferred income		165		164
Interest		72		83
Taxes payable		125		106
Other		67		71
Total	$	664	$	673

NOTE 8: LONG-TERM DEBT AND LINE OF CREDIT

In March 2022, we completed a series of transactions that lowered our weighted average interest rate and extended our weighted average maturity by issuing $900 million in notes and using the net proceeds plus cash on hand to close cash tender offers for $931 million of principal in higher interest rate notes. We issued $450 million of 3.375 percent notes due in March 2033 and $450 million of 4.000 percent notes due in March 2052. The net proceeds after deducting the discount, underwriting fees and issuance costs were $444 million and $437 million, respectively. The net proceeds were used to retire $592 million of our 7.375 percent notes due in March 2032, $161 million of our 8.500 percent notes due in January 2025, $73 million of our 7.125 percent notes due in July 2023, $65 million of our 7.950 percent notes due in March 2025, and $40 million of our 7.850 percent notes due in July 2026. We paid holders an aggregate $1.2 billion in cash reflecting principal, premium to par and tender premium. A net pretax charge of $276 million ($207 million after-tax) was included in the Consolidated Statement of Operations in first quarter 2022 for premiums to retire $931 million of principal plus unamortized debt issuance costs and unamortized debt discounts in connection with the early debt retirement.

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

In January 2020, we refinanced and extended our $1.5 billion five-year senior unsecured revolving credit facility, which expires in January 2025. Borrowings are at LIBOR plus a spread or at other interest rates mutually agreed upon between the borrower and the lending banks. We had no outstanding borrowings on our credit facility as of September 30, 2022 and December 31, 2021.

NOTE 9: FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value and carrying value of our long-term debt consisted of the following:


DOLLAR AMOUNTS IN MILLIONS	SEPTEMBER 30, 2022		DECEMBER 31, 2021
Long-term fixed rate debt (including current maturities):
Carrying value	$	5,053	$	5,099
Fair value (level 2)	$	4,846	$	6,221

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 line of credit has a net carrying value that approximates its fair value within an insignificant difference. 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:

●	are a party to various proceedings related to the cleanup of hazardous waste sites and

●	have been notified that we may be a potentially responsible party related to the cleanup of other hazardous waste sites for which proceedings have not yet been initiated.

As of September 30, 2022, our total accrual for future estimated remediation costs on active Superfund sites and other sites for which we are potentially responsible was approximately $63 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:

	QUARTER ENDED						YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS	SEPTEMBER 2022			SEPTEMBER 2021			SEPTEMBER 2022			SEPTEMBER 2021
Pension(1)
Balance at beginning of period	$	(632	)	$	(924	)	$	(720	)	$	(1,064	)
Other comprehensive income before reclassifications		14			6			65			102
Amounts reclassified from accumulated other comprehensive loss to earnings(2)		19			23			56			67
Total other comprehensive income		33			29			121			169
Balance at end of period	$	(599	)	$	(895	)	$	(599	)	$	(895	)
Other post-employment benefits(1)
Balance at beginning of period	$	—		$	(10	)	$	(2	)	$	(12	)
Other comprehensive loss before reclassifications		(1	)		(1	)		(1	)		(1	)
Amounts reclassified from accumulated other comprehensive loss to earnings(2)		1			2			3			4
Total other comprehensive income		—			1			2			3
Balance at end of period	$	—		$	(9	)	$	—		$	(9	)
Translation adjustments and other
Balance at beginning of period	$	234		$	278		$	243		$	254
Translation adjustments		(53	)		(25	)		(62	)		(1	)
Total other comprehensive loss		(53	)		(25	)		(62	)		(1	)
Balance at end of period		181			253			181			253
Accumulated other comprehensive loss, end of period	$	(418	)	$	(651	)	$	(418	)	$	(651	)

(1)	Amounts presented are net of tax.

(2)	Amounts of actuarial loss and prior service (cost) credit are components of net periodic benefit cost (credit). See Note 6: Pension and Other Post-Employment Benefit Plans.

NOTE 12: SHARE-BASED COMPENSATION

Share-based compensation activity during year-to-date 2022 included the following:

SHARES IN THOUSANDS		GRANTED				VESTED
Restricted stock units (RSUs)			626				857
Performance share units (PSUs)			306				419

A total of 1.5 million shares of common stock were issued as a result of RSU vestings, PSU vestings and stock option exercises.

Restricted Stock Units

The weighted average fair value of the RSUs granted in 2022 was $41.94. The vesting provisions for RSUs granted in 2022 were consistent with prior year grants.

Performance Share Units

The weighted average grant date fair value of PSUs granted in 2022 was $49.77. The final number of shares granted in 2022 will vest between a range of 0 percent to 150 percent of each grant's target, depending upon actual company performance compared against an industry peer group. PSUs granted in 2022 will vest at a maximum of 100 percent of target value in the event of negative absolute company total shareholder return.

Weighted Average Assumptions Used in Estimating the Value of Performance Share Units Granted in 2022

		PERFORMANCE SHARE UNITS
Performance period		2/10/2022 – 12/31/2024
Valuation date average stock price(1)		$42.16
Expected dividends		1.72%
Risk-free rate		0.34% – 1.84%
Expected volatility		26.27% – 41.01%

(1)	Calculated as an average of the high and low prices on grant date.

NOTE 13: OTHER OPERATING COSTS (INCOME), NET

Other operating costs (income), net were comprised of the following:

	QUARTER ENDED						YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS	SEPTEMBER 2022			SEPTEMBER 2021			SEPTEMBER 2022			SEPTEMBER 2021
Foreign exchange gains, net	$	(8	)	$	(5	)	$	(12	)	$	(2	)
Gain on sale of timberlands		—			(32	)		—			(32	)
Litigation expense, net		2			5			10			11
Research and development expenses		1			1			4			3
Other, net		6			16			17			28
Total other operating costs (income), net	$	1		$	(15	)	$	19		$	8

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 includes our Wood Products segment earnings and portions of our Timberlands and Real Estate & ENR segments' earnings.

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 2022 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: 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:

DOLLAR AMOUNTS IN MILLIONS	SEPTEMBER 30, 2022		SEPTEMBER 30, 2021		DECEMBER 31, 2021
Cash and cash equivalents	$	1,920	$	2,326	$	1,879
Restricted cash included in other assets(1)		—		120		120
Total cash, cash equivalents and restricted cash	$	1,920	$	2,446	$	1,999

(1)	Amounts included in restricted cash as of September 30, 2021 and December 31, 2021 were comprised of proceeds held by a qualified intermediary that were intended to be reinvested in timber and timberlands through a like-kind exchange transaction. In first quarter 2022, the proceeds were released as a like-kind property was not identified.

NOTE 16: TIMBERLAND ACQUISITIONS AND DIVESTITURES

Carolinas Acquisition

On April 14, 2022, we announced an agreement to purchase 81 thousand acres of North and South Carolina timberlands for approximately $265 million. We completed the purchase on May 18, 2022 and recorded $263 million of timberland assets in “Timber and timberlands at cost, less depletion” and $2 million of related assets in “Property and equipment, net” on our Consolidated Balance Sheet.

Washington Divestiture

On April 30, 2021, we announced an agreement to sell 145 thousand acres of timberlands in the North Cascades region of Washington. On July 7, 2021, we completed the sale for $261 million in cash proceeds, which is net of purchase price adjustments and closing costs. This transaction was structured as a like-kind exchange along with the Alabama acquisition discussed below. As a result of the sale, a gain of $32 million was recorded in the Timberlands segment in our third quarter 2021 Consolidated Statement of Operations.

This divestiture was not considered a strategic shift that had, or will have, a major effect on our operations or financial results and therefore did not meet the requirements for presentation as discontinued operations.

Alabama Acquisition

On February 25, 2021, we announced an agreement to purchase 69 thousand acres of southwest Alabama timberlands for approximately $149 million. We completed the purchase on April 27, 2021 and recorded $148 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. As discussed above, this transaction was structured as a like-kind exchange.

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