WEYERHAEUSER CO - Quarter Report: 2021 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

☐	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

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of July 26, 2021, 749,784 thousand shares of the registrant’s common stock ($1.25 par value) were outstanding.

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS:
	CONSOLIDATED STATEMENT OF OPERATIONS	1
	CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME	2
	CONSOLIDATED BALANCE SHEET	3
	CONSOLIDATED STATEMENT OF CASH FLOWS	4
	CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	5
	INDEX FOR NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	6
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	7
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)	14
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	27
ITEM 4.	CONTROLS AND PROCEDURES	27

PART II	OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	27
ITEM 1A.	RISK FACTORS	27
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	27
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES – NOT APPLICABLE
ITEM 4.	MINE SAFETY DISCLOSURES – NOT APPLICABLE
ITEM 5.	OTHER INFORMATION – NOT APPLICABLE
ITEM 6.	EXHIBITS	28
	SIGNATURES	29

PART I – FINANCIAL INFORMATION

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	JUNE 2021			JUNE 2020			JUNE 2021			JUNE 2020
Net sales (Note 3)	$	3,144		$	1,631		$	5,650		$	3,359
Costs of sales		1,583			1,283			3,013			2,665
Gross margin		1,561			348			2,637			694
Selling expenses		24			18			44			40
General and administrative expenses		95			84			185			158
Other operating costs, net (Note 15)		13			3			23			13
Operating income		1,429			243			2,385			483
Non-operating pension and other post-employment benefit costs (Note 7)		(1	)		(10	)		(9	)		(19	)
Interest income and other		2			2			3			3
Interest expense, net of capitalized interest		(78	)		(103	)		(157	)		(188	)
Earnings before income taxes		1,352			132			2,222			279
Income taxes (Note 16)		(324	)		(60	)		(513	)		(57	)
Net earnings	$	1,028		$	72		$	1,709		$	222

Earnings per share, basic and diluted (Note 4)	$	1.37		$	0.10		$	2.28		$	0.30
Weighted average shares outstanding (in thousands) (Note 4):
Basic		750,127			746,896			749,429			746,715
Diluted		751,508			746,984			750,773			747,070

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	JUNE 2021		JUNE 2020		JUNE 2021		JUNE 2020
Net earnings	$	1,028	$	72	$	1,709	$	222
Other comprehensive income (loss):
Foreign currency translation adjustments		15		17		24		(25	)
Changes in unamortized actuarial loss, net of tax expense of $38, $8, $45 and $24		121		23		141		67
Changes in unamortized net prior service credit, net of tax expense of $1, $0, $0 and $0		—		1		1		2
Total other comprehensive income		136		41		166		44
Total comprehensive income	$	1,164	$	113	$	1,875	$	266

See accompanying Notes to Consolidated Financial Statements.

WEYERHAEUSER COMPANY

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PAR VALUE	JUNE 30, 2021			DECEMBER 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	1,777		$	495
Receivables, net		702			450
Receivables for taxes		7			82
Inventories (Note 5)		499			443
Assets held for sale (Note 14)		229			—
Prepaid expenses and other current assets		141			139
Total current assets		3,355			1,609
Property and equipment, less accumulated depreciation of $3,550 and $3,432		1,965			2,013
Construction in progress		102			73
Timber and timberlands at cost, less depletion		11,643			11,827
Minerals and mineral rights, less depletion		262			268
Deferred tax assets		71			120
Other assets		432			401
Total assets	$	17,830		$	16,311
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt (Note 9)	$	150		$	150
Accounts payable		253			204
Accrued liabilities (Note 8)		775			596
Total current liabilities		1,178			950
Long-term debt, net (Note 9)		5,100			5,325
Deferred tax liabilities		42			24
Deferred pension and other post-employment benefits (Note 7)		747			911
Other liabilities		363			370
Total liabilities		7,430			7,580
Commitments and contingencies (Note 11)
Equity:
Common shares: $1.25 par value; authorized 1,360 million shares; issued and outstanding: 749,782 thousand shares at June 30, 2021 and 747,385 thousand shares at December 31, 2020		937			934
Other capital		8,258			8,208
Retained earnings		1,861			411
Accumulated other comprehensive loss (Note 12)		(656	)		(822	)
Total equity		10,400			8,731
Total liabilities and equity	$	17,830		$	16,311

See accompanying Notes to Consolidated Financial Statements.

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

	YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS	JUNE 2021			JUNE 2020
Cash flows from operations:
Net earnings	$	1,709		$	222
Noncash charges (credits) to earnings:
Depreciation, depletion and amortization		238			240
Basis of real estate sold		51			96
Deferred income taxes, net		19			(2	)
Pension and other post-employment benefits (Note 7)		30			37
Share-based compensation expense (Note 13)		15			15
Change in:
Receivables, net		(252	)		(112	)
Receivables and payables for taxes		236			61
Inventories		(51	)		2
Prepaid expenses and other current assets		(1	)		5
Accounts payable and accrued liabilities		65			(61	)
Pension and post-employment benefit contributions and payments		(33	)		(16	)
Other		(20	)		(10	)
Net cash from operations		2,006			477
Cash flows from investing activities:
Capital expenditures for property and equipment		(93	)		(102	)
Capital expenditures for timberlands reforestation		(32	)		(32	)
Acquisition of Alabama timberlands (Note 14)		(149	)		—
Proceeds from note receivable held by variable interest entities (Note 6)		—			362
Proceeds from sale of Montana timberlands (Note 14)		—			145
Other		1			3
Net cash from investing activities		(273	)		376
Cash flows from financing activities:
Cash dividends on common shares		(255	)		(254	)
Net proceeds from issuance of long-term debt (Note 9)		—			732
Payments on long-term debt (Note 9)		(225	)		(588	)
Proceeds from borrowings on line of credit (Note 9)		—			550
Payments on line of credit (Note 9)		—			(780	)
Proceeds from exercise of stock options		45			6
Other		(16	)		(15	)
Net cash from financing activities		(451	)		(349	)
Net change in cash and cash equivalents		1,282			504
Cash and cash equivalents at beginning of period		495			139
Cash and cash equivalents at end of period	$	1,777		$	643
Cash paid (received) during the period for:
Interest, net of amount capitalized of $2 and $3	$	154		$	178
Income taxes, net of refunds	$	263		$	1

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	JUNE 2021			JUNE 2020			JUNE 2021			JUNE 2020
Common shares:
Balance at beginning of period	$	936		$	933		$	934		$	932
Issued for exercise of stock options and vested units		1			—			3			1
Balance at end of period		937			933			937			933
Other capital:
Balance at beginning of period		8,222			8,159			8,208			8,152
Issued for exercise of stock options		27			—			43			6
Share-based compensation		8			8			15			15
Other transactions, net		1			(1	)		(8	)		(7	)
Balance at end of period		8,258			8,166			8,258			8,166
Retained earnings (accumulated deficit):
Balance at beginning of period		962			(109	)		411			(3	)
Net earnings		1,028			72			1,709			222
Dividends on common shares		(129	)		—			(259	)		(256	)
Balance at end of period		1,861			(37	)		1,861			(37	)
Accumulated other comprehensive loss:
Balance at beginning of period		(792	)		(901	)		(822	)		(904	)
Other comprehensive income		136			41			166			44
Balance at end of period (Note 12)		(656	)		(860	)		(656	)		(860	)
Total equity:
Balance at end of period	$	10,400		$	8,202		$	10,400		$	8,202

Dividends paid per common share	$	0.17		$	—		$	0.34		$	0.34

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	8

NOTE 5:	INVENTORIES	9

NOTE 6:	VARIABLE INTEREST ENTITIES	9

NOTE 7:	PENSION AND OTHER POST-EMPLOYMENT BENEFIT PLANS	10

NOTE 8:	ACCRUED LIABILITIES	10

NOTE 9:	LONG-TERM DEBT AND LINE OF CREDIT	11

NOTE 10:	FAIR VALUE OF FINANCIAL INSTRUMENTS	11

NOTE 11:	LEGAL PROCEEDINGS, COMMITMENTS AND CONTINGENCIES	11

NOTE 12:	ACCUMULATED OTHER COMPREHENSIVE LOSS	12

NOTE 13:	SHARE-BASED COMPENSATION	12

NOTE 14:	TIMBERLAND ACQUISITIONS AND DIVESTITURES	13

NOTE 15:	OTHER OPERATING COSTS, NET	13

NOTE 16:	INCOME TAXES	13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTERS AND YEAR-TO-DATE PERIODS ENDED JUNE 30, 2021 AND 2020

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, 2020. 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	JUNE 2021			JUNE 2020			JUNE 2021			JUNE 2020
Sales to unaffiliated customers:
Timberlands	$	405		$	359		$	784		$	740
Real Estate & ENR		110			65			216			177
Wood Products		2,629			1,207			4,650			2,442
		3,144			1,631			5,650			3,359
Intersegment sales:
Timberlands		136			121			270			243

Total sales		3,280			1,752			5,920			3,602
Intersegment eliminations		(136	)		(121	)		(270	)		(243	)
Total	$	3,144		$	1,631		$	5,650		$	3,359
Net contribution (charge) to earnings:
Timberlands	$	113		$	75		$	221		$	180
Real Estate & ENR		63			19			129			55
Wood Products		1,338			159			2,178			293
		1,514			253			2,528			528
Unallocated items⁽¹⁾		(84	)		(18	)		(149	)		(61	)
Net contribution to earnings		1,430			235			2,379			467
Interest expense, net of capitalized interest		(78	)		(103	)		(157	)		(188	)
Earnings before income taxes		1,352			132			2,222			279
Income taxes		(324	)		(60	)		(513	)		(57	)
Net earnings	$	1,028		$	72		$	1,709		$	222

(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	JUNE 2021		JUNE 2020		JUNE 2021		JUNE 2020
Net sales to unaffiliated customers:
Timberlands segment
Delivered logs:
West
Domestic sales	$	80	$	71	$	159	$	158
Export grade sales		142		108		264		198
Subtotal West		222		179		423		356
South		145		145		276		295
North		9		7		25		24
Subtotal delivered logs sales		376		331		724		675
Stumpage and pay-as-cut timber		7		5		13		10
Recreational and other lease revenue		16		16		32		31
Other⁽¹⁾		6		7		15		24
Net sales attributable to Timberlands segment		405		359		784		740
Real Estate & ENR segment
Real estate		83		48		167		143
Energy and natural resources		27		17		49		34
Net sales attributable to Real Estate & ENR segment		110		65		216		177
Wood Products segment
Structural lumber		1,349		538		2,339		1,046
Oriented strand board		605		179		1,043		369
Engineered solid section		166		111		308		238
Engineered I-joists		104		70		187		148
Softwood plywood		69		34		125		73
Medium density fiberboard		43		33		91		77
Complementary building products		213		169		384		322
Other⁽²⁾		80		73		173		169
Net sales attributable to Wood Products segment		2,629		1,207		4,650		2,442
Total net sales	$	3,144	$	1,631	$	5,650	$	3,359

(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

Our basic and diluted earnings per share were:

●	$1.37 during second quarter 2021 and $2.28 during year-to-date 2021;

●	$0.10 during second quarter 2020 and $0.30 during year-to-date 2020.

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	JUNE 2021		JUNE 2020		JUNE 2021		JUNE 2020
Weighted average common shares outstanding – basic		750,127		746,896		749,429		746,715
Dilutive potential common shares:
Stock options		443		—		330		169
Restricted stock units		659		38		699		161
Performance share units		279		50		315		25
Total effect of outstanding dilutive potential common shares		1,381		88		1,344		355
Weighted average common shares outstanding – dilutive		751,508		746,984		750,773		747,070

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	JUNE 2021		JUNE 2020		JUNE 2021		JUNE 2020
Stock options		—		4,676		—		4,676
Performance share units		1,142		1,139		1,142		1,139

NOTE 5: INVENTORIES

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

DOLLAR AMOUNTS IN MILLIONS	JUNE 30, 2021		DECEMBER 31, 2020
LIFO inventories:
Logs	$	17	$	24
Lumber, plywood, panels and fiberboard		80		59
Other products		10		9
Moving average cost or FIFO inventories:
Logs		67		64
Lumber, plywood, panels, fiberboard and engineered wood products		104		84
Other products		109		100
Materials and supplies		112		103
Total	$	499	$	443

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: VARIABLE INTEREST ENTITIES

From 2002 through 2004, we sold certain nonstrategic timberlands. As a result of these sales, buyer-sponsored and monetization variable interest entities, or special purpose entities (SPEs), were formed. We were the primary beneficiary and consolidated the assets and liabilities of the SPEs involved in these transactions.

The assets of the buyer-sponsored SPEs were financial investments which consisted of bank guarantees. These bank guarantees were in turn backed by bank notes, which were the liabilities of the monetization SPEs. Interest earned from the financial investments within the buyer-sponsored SPEs was used to pay interest accrued on the corresponding monetization SPE’s note.

During first quarter 2020, we received $362 million in proceeds from our final buyer-sponsored SPE at maturity. The corresponding $302 million in liabilities of this SPE was paid in third quarter 2019.

NOTE 7: 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	JUNE 2021			JUNE 2020			JUNE 2021			JUNE 2020
Service cost	$	10		$	8		$	21		$	18
Interest cost		25			34			49			69
Expected return on plan assets		(53	)		(57	)		(102	)		(116	)
Amortization of actuarial loss		27			31			57			61
Amortization of prior service cost		—			1			1			2
Total net periodic benefit cost – pension	$	9		$	17		$	26		$	34

	OTHER POST-EMPLOYMENT BENEFITS
	QUARTER ENDED				YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS	JUNE 2021		JUNE 2020		JUNE 2021		JUNE 2020
Interest cost	$	1	$	1	$	2	$	2
Amortization of actuarial loss		—		—		2		1
Amortization of prior service credit		1		—		—		—
Total net periodic benefit cost – other post-employment benefits	$	2	$	1	$	4	$	3

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 2021, we recorded an increase to the beginning of the year fair value of the pension assets of $155 million, or 5 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 increase of $17 million, or less than 1 percent. The net effect of these updates was a $138 million improvement in funded status. This change in funded status was reflected on our Consolidated Balance Sheet as of June 30, 2021.

NOTE 8: ACCRUED LIABILITIES

Accrued liabilities were comprised of the following:

DOLLAR AMOUNTS IN MILLIONS	JUNE 30, 2021		DECEMBER 31, 2020
Compensation and employee benefit costs	$	185	$	204
Current portion of lease liabilities		23		26
Customer rebates, volume discounts and deferred income		160		111
Interest		86		87
Taxes payable		235		75
Other		86		93
Total	$	775	$	596

NOTE 9: LONG-TERM DEBT AND LINE OF CREDIT

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

In March 2020, we issued $750 million of 4.00 percent notes due in April 2030. The net proceeds after deducting the discount, underwriting fees and issuance costs were $732 million. In May 2020, a portion of the net proceeds was used to redeem our $569 million 4.70 percent notes due in March 2021. A net pretax charge of $11 million was included in “Interest expense, net of capitalized interest” in the Consolidated Statement of Operations in second quarter 2020 for the make-whole premium in connection with the early extinguishment of the $569 million notes, partially offset by the write-off of an unamortized fair value step-up adjustment.

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 June 30, 2021 and December 31, 2020.

NOTE 10: FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values and carrying values of our long-term debt and line of credit consisted of the following:

	JUNE 30, 2021				DECEMBER 31, 2020
DOLLAR AMOUNTS IN MILLIONS	CARRYING VALUE		FAIR VALUE (LEVEL 2)		CARRYING VALUE		FAIR VALUE (LEVEL 2)
Long-term debt (including current maturities) and line of credit:
Fixed rate	$	5,250	$	6,529	$	5,250	$	6,718
Variable rate		—		—		225		225
Total debt	$	5,250	$	6,529	$	5,475	$	6,943

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 values with only insignificant differences. The inputs to these valuations 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, and 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 11: 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 June 30, 2021, our total accrual for future estimated remediation costs on active Superfund sites and other sites for which we are potentially responsible was approximately $58 million. These amounts are recorded in "Accrued liabilities" and "Other liabilities" on our Consolidated Balance Sheet.

NOTE 12: 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	JUNE 2021			JUNE 2020			JUNE 2021			JUNE 2020
Pension⁽¹⁾
Balance at beginning of period	$	(1,044	)	$	(1,084	)	$	(1,064	)	$	(1,128	)
Other comprehensive income before reclassifications		100			—			96			20
Amounts reclassified from accumulated other comprehensive loss to earnings⁽²⁾		20			24			44			48
Total other comprehensive income		120			24			140			68
Balance at end of period		(924	)		(1,060	)		(924	)		(1,060	)
Other Post-Employment Benefits⁽¹⁾
Balance at beginning of period	$	(11	)	$	(11	)	$	(12	)	$	(12	)
Amounts reclassified from accumulated other comprehensive loss to earnings⁽²⁾		1			—			2			1
Total other comprehensive income		1			—			2			1
Balance at end of period		(10	)		(11	)		(10	)		(11	)
Translation Adjustments and Other
Balance at beginning of period	$	263		$	194		$	254		$	236
Translation adjustments		15			17			24			(25	)
Total other comprehensive income (loss)		15			17			24			(25	)
Balance at end of period		278			211			278			211
Accumulated other comprehensive loss, end of period	$	(656	)	$	(860	)	$	(656	)	$	(860	)

(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 7: Pension and Other Post-Employment Benefit Plans.

NOTE 13: SHARE-BASED COMPENSATION

Share-based compensation activity during year-to-date 2021 included the following:

SHARES IN THOUSANDS	GRANTED		VESTED
Restricted stock units (RSUs)		769		781
Performance share units (PSUs)		354		229

A total of 2.4 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 2021 was $34.38. The vesting provisions for RSUs granted in 2021 were consistent with prior year grants.

Performance Share Units

The weighted average grant date fair value of PSUs granted in 2021 was $38.50. The final number of shares granted in 2021 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 2021 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 2021

		PERFORMANCE SHARE UNITS
Performance period		2/11/2021 – 12/31/2023
Valuation date average stock price⁽¹⁾		$34.14
Expected dividends		1.99%
Risk-free rate		0.02% – 0.20%
Expected volatility		32.87% – 52.82%

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

NOTE 14: TIMBERLAND ACQUISITIONS AND DIVESTITURES

Washington Divestiture

On April 30, 2021, we announced an agreement to sell 145,000 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 approximately $30 million will be recorded in the Timberlands segment in our third quarter 2021 Consolidated Statement of Operations.

This divestiture is not considered a strategic shift that has, or will have, a major effect on our operations or financial results and therefore does not meet the requirements for presentation as discontinued operations. However, the related assets have met the relevant criteria to be classified as held for sale in the current period Consolidated Balance Sheet. The designation as held for sale requires us to record the related net assets at the lower of their current cost basis or fair value, less an amount of estimated selling costs. This classification does not affect the presentation in the Consolidated Statement of Operations. The held for sale classification did change the presentation of the related assets from long-term to current on our Consolidated Balance Sheet.

As of June 30, 2021, “Assets held for sale” had a balance of $229 million, which consisted primarily of timberlands and other related assets.

Alabama Acquisition

On February 25, 2021, we announced an agreement to purchase 69,200 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, and therefore, the southwest Alabama timberlands were held on our behalf by an intermediary as of June 30, 2021.

Montana Divestiture

On December 17, 2019, we announced an agreement to sell 630,000 acres of Montana timberlands, which was part of our Timberlands business segment. On March 26, 2020, we completed the sale for $145 million in cash proceeds, which is net of purchase price adjustments and closing costs. Due to the impairment recorded during fourth quarter 2019, no material gain or loss was recorded as a result of this sale.

The 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.

NOTE 15: OTHER OPERATING COSTS, NET

Other operating costs, net were comprised of the following:

	QUARTER ENDED					YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS	JUNE 2021		JUNE 2020			JUNE 2021		JUNE 2020
Foreign exchange losses (gains), net	$	1	$	(3	)	$	3	$	5
Litigation expense, net		3		6			6		2
Product remediation recovery		—		(8	)		—		(8	)
Research and development expenses		1		2			2		3
Other, net		8		6			12		11
Total other operating costs, net	$	13	$	3		$	23	$	13

NOTE 16: 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 2021 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.

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; estimated taxes and tax provision; our capital structure and the sufficiency of our liquidity position to meet future cash requirements; future debt maturities, compliance with our debt agreements and the effect on our financial position of the expected discontinuation of LIBOR; expected results of litigation and other legal proceedings and contingent liabilities, and the sufficiency of litigation and other contingent liability reserves and related accruals; expected uses of cash, including future dividends and expected capital expenditures; expected effects of certain acquisitions and divestitures on our operations and financial results; expected economic conditions, including markets, pricing and demand for our products; laws and regulations relevant to our businesses; assumptions used in valuing incentive compensation and related expense; and our expectations relating to returns on invested pension plan assets and expected benefit payments.

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," "future," "intend," "maintain," "may," "plan," "potential," "project," "should," "targeted," "will," and "would," 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. These risks and uncertainties include, but are not limited to:

●	the effect of general economic conditions, including employment rates, interest rate levels, 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 and their potential effects on our business, results of operations, cash flows, financial condition and future prospects;

●	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 international economic conditions;

●	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 requirements;

●	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;

●

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 agreements;

●	raw material availability and prices;

●	the effect of weather;

●	changes in global or regional climate conditions and governmental response to such changes;

●	the risk of loss from fires, floods, windstorms, hurricanes, pest infestation and other natural disasters;

●	energy prices;

●	transportation and labor availability and costs;

●	federal tax policies;

●	the effect of forestry, land use, environmental and other governmental regulations;

●	legal proceedings;

●	performance of pension fund investments and related derivatives;

●	the effect of timing of employee retirements and changes in the market price of our common stock on charges for share-based compensation;

●	the accuracy of our estimates of costs and expenses related to contingent liabilities and the accuracy of our estimates of charges related to casualty losses;

●	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 2020 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 SEC.

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:

●	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 or income taxes.

ECONOMIC AND MARKET CONDITIONS AFFECTING OUR OPERATIONS

Overview

In March 2020, COVID-19 was officially declared a global pandemic by the World Health Organization, and a national emergency was declared by the United States. The immediate economic effects of the pandemic were severe, as U.S. gross domestic product (GDP) declined 31 percent in the second quarter of 2020 and the national unemployment rate soared to a record-high of nearly 15 percent in April 2020 driven by the restrictions imposed in response to the pandemic. Since that time the unemployment rate has fallen steadily, and U.S. GDP has rebounded significantly as states have continued to reopen their economies and loosen restrictions. Although market conditions across our businesses deteriorated rapidly in late first quarter and early second quarter 2020, they quickly rebounded as demand for housing and wood products proved resilient. Growth in repair and remodel demand and new residential construction activity resulted in demand for wood products that significantly outpaced available supply, and benchmark pricing for our commodity wood products reached record levels. After declining briefly in the final months of 2020, benchmark prices for our commodity wood products rose sharply through May 2021 beyond the record levels established in the prior year. At the end of the second quarter, lumber prices had begun a substantial correction as demand and supply came into balance. Looking ahead to the remainder of 2021, our market conditions and the strength of the broader U.S. economy will continue to be influenced by the trajectory of U.S. housing activity, the ongoing pace of reopening economic activities due to COVID-related restrictions, inflation trends, interest rates, and the nature and extent of future government stimulus including the proposed infrastructure bill.

We have taken proactive steps to safeguard the health of our employees and preserve business continuity from the beginning of the pandemic. These actions included detailed cleaning and disinfecting procedures, strict processes around masking, social distancing and personal hygiene, clear communication with our employees, contractors, vendors and visitors about our safety protocols, comprehensive guidance for response to any COVID-19 diagnoses or exposures in our operations, suspension of all air travel and non-essential meetings, and a directive that employees work from home if feasible. In light of the recent adjustments to federal, state and local health and safety restrictions, we have begun a phased-in approach to return those employees who have been working from home back to their work locations. We remain vigilant about employee safety and will continue to monitor developments, including but not limited to the spread of disease variants and their impact on local health systems.

Business Outlook

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, especially 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. In second quarter 2021, wet weather constrained harvest operations for producers in the U.S. South. 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 pellets made from pulpwood. The Timberlands segment is also influenced by the availability of harvestable timber. In general, Western log markets are highly tensioned while Southern log markets have more available supply. However, additional mill capacity is contributing to some tightening in the South.

On a seasonally adjusted annual basis, as reported by the U.S. Census Bureau, housing starts for second quarter 2021 averaged 1.57 million units, which was 2 percent below first quarter 2021. Single family starts averaged 1.1 million units, a 4 percent decline from first quarter 2021 but a 43 percent improvement over second quarter 2020. Multi-family starts averaged 464 thousand units in second quarter 2021, which was 5 percent higher than first quarter 2021 and 49 percent higher than second quarter 2020. Sales of newly built, single family homes averaged a seasonally adjusted annual rate of 728 thousand units for second quarter 2021, a 19 percent decrease from the prior quarter average of 896 thousand units and a 4 percent increase from the second quarter 2020 average of 703 thousand units.

Repair and remodeling expenditures declined by 10 percent from March to June 2021 according to the Census Bureau Advance Retail Spending report. A decrease in do-it-yourself activity contributed to lower sales at home improvement centers offset in part by a transition to larger projects undertaken by professional contractors.

In U.S. wood product markets, demand for commodity products was strong during the first half of the second quarter, and benchmark pricing for lumber and OSB reached record highs as demand continued to outpace production capacity. As repair and remodeling demand fell, lumber prices declined. OSB, which is much more focused on new residential construction activity than repair and remodeling, had not seen similar price declines as lumber at the end of the quarter. The Random Lengths Framing Lumber Composite price averaged $1,260/MBF and the OSB Composite averaged $1,373/MSF in second quarter 2021. At the end of the second quarter, prices were $770/MBF for the Lumber Composite and $1,501/MSF for the OSB composite. Through the end of July, lumber prices continued to fall, and OSB prices began to decline in the second half of July.

In Western log markets, Douglas fir sawlog prices decreased 3 percent in second quarter 2021 compared with first quarter 2021 as reported by RISI Log Lines, in part a response to the recent decline in lumber prices. In the South, sawlog prices increased by 3 percent from first quarter 2021 as reported by TimberMart-South.

Exchange rates, available supply from other countries and trade policy affect our export businesses. During second quarter 2021, continued disruptions in shipping, diversion of European log and lumber supply to other markets, and curtailments on Australian log imports to China generally had a positive impact on China’s demand for logs imported from the U.S. In Japan, total housing starts increased 2.5 percent year to date through May compared to the same period in 2020, while the key Post and Beam segment saw a 6 percent increase. Decreased lumber imports from Europe to Japan were favorable to our Japanese log export business.

CONSOLIDATED RESULTS

How We Did Second Quarter 2021 and Year-to-Date 2021

	QUARTER ENDED				AMOUNT OF CHANGE		YEAR-TO-DATE ENDED				AMOUNT OF CHANGE
DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES	JUNE 2021		JUNE 2020		2021 VS. 2020		JUNE 2021		JUNE 2020		2021 VS. 2020
Net sales	$	3,144	$	1,631	$	1,513	$	5,650	$	3,359	$	2,291
Costs of sales		1,583		1,283		300		3,013		2,665		348
Operating income		1,429		243		1,186		2,385		483		1,902
Net earnings		1,028		72		956		1,709		222		1,487
Earnings per share, basic and diluted		1.37		0.10		1.27		2.28		0.30		1.98

Comparing Second Quarter 2021 with Second Quarter 2020

Net sales

Net sales increased $1,513 million – 93 percent – primarily due to a $1,422 million increase in Wood Products sales to unaffiliated customers attributable to increased sales realizations across all product lines.

Costs of sales

Costs of sales increased $300 million – 23 percent – primarily due to increased sales volumes within our Wood Products segment and increased freight costs and third-party log purchases within our Timberlands segment.

Operating income

Operating income increased $1,186 million – 488 percent – primarily due to a $1,213 million increase in consolidated gross margin (see discussion of components above).

Net earnings

Net earnings increased $956 million – 1,328 percent – primarily due to the $1,186 million increase in operating income discussed above.

This increase was partially offset by a $264 million increase in income tax expense (refer to Income Taxes).

Comparing Year-to-Date 2021 with Year-to-Date 2020

Net sales

Net sales increased $2,291 million – 68 percent – primarily due to a $2,208 million increase in Wood Products sales to unaffiliated customers attributable to increased sales realizations across all product lines.

Costs of sales

Costs of sales increased $348 million – 13 percent – primarily due to increased sales volumes within our Wood Products segment and increased freight costs and third-party log purchases within our Timberlands segment.

These increases were partially offset by decreased real estate acres sold within our Real Estate & ENR segment.

Operating income

Operating income increased $1,902 million – 394 percent – primarily due to a $1,943 million increase in consolidated gross margin (see discussion of components above).

Net earnings

Net earnings increased $1,487 million – 670 percent – primarily due to the $1,902 million increase in operating income discussed above.

This increase was partially offset by a $456 million increase in income tax expense (refer to Income Taxes).

TIMBERLANDS

How We Did Second Quarter 2021 and Year-to-Date 2021

	QUARTER ENDED				AMOUNT OF CHANGE			YEAR-TO-DATE ENDED				AMOUNT OF CHANGE
DOLLAR AMOUNTS IN MILLIONS	JUNE 2021		JUNE 2020		2021 VS. 2020			JUNE 2021		JUNE 2020		2021 VS. 2020
Net sales to unaffiliated customers:
Delivered logs:
West	$	222	$	179	$	43		$	423	$	356	$	67
South		145		145		—			276		295		(19	)
North⁽¹⁾		9		7		2			25		24		1
Subtotal delivered logs sales		376		331		45			724		675		49
Stumpage and pay-as-cut timber		7		5		2			13		10		3
Recreational and other lease revenue		16		16		—			32		31		1
Other⁽²⁾		6		7		(1	)		15		24		(9	)
Subtotal net sales to unaffiliated customers		405		359		46			784		740		44
Intersegment sales		136		121		15			270		243		27
Total sales	$	541	$	480	$	61		$	1,054	$	983	$	71
Costs of sales	$	407	$	383	$	24		$	790	$	758	$	32
Operating income and Net contribution to earnings	$	113	$	75	$	38		$	221	$	180	$	41

(1)	In March 2020, we sold our Montana timberlands.

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

Comparing Second Quarter 2021 with Second Quarter 2020

Net sales to unaffiliated customers

Net sales to unaffiliated customers increased $46 million – 13 percent – primarily due to a $43 million increase in Western log sales attributable to a 31 percent increase in sales realizations, partially offset by a 6 percent decrease in sales volumes.

Intersegment sales

Intersegment sales increased $15 million – 12 percent – primarily due to a 15 percent increase in sales realizations, partially offset by a 2 percent decrease in sales volumes.

Costs of sales

Costs of sales increased $24 million – 6 percent – primarily due to increased freight costs and third-party log purchases, partially offset by decreased fee harvest volumes.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings increased $38 million – 51 percent – primarily due to the change in the components of gross margin, as discussed above.

Comparing Year-to-Date 2021 with Year-to-Date 2020

Net sales to unaffiliated customers

Net sales to unaffiliated customers increased $44 million – 6 percent – primarily due to a $67 million increase in Western log sales attributable to a 28 percent increase in sales realizations, partially offset by a 7 percent decrease in sales volumes. The increase was partially offset by a $19 million decrease in Southern log sales attributable to a 9 percent decrease in sales volumes.

Intersegment sales

Intersegment sales increased $27 million – 11 percent – primarily due to a 15 percent increase in sales realizations, partially offset by a 3 percent decrease in sales volumes.

Costs of sales

Costs of sales increased $32 million – 4 percent – primarily due to increases in freight costs and third-party log purchases, partially offset by decreased fee harvest volumes.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings increased $41 million – 23 percent – primarily due to the change in the components of gross margin, as discussed above.

Third-Party Log Sales Volumes and Fee Harvest Volumes

	QUARTER ENDED				AMOUNT OF CHANGE			YEAR-TO-DATE ENDED				AMOUNT OF CHANGE
VOLUMES IN THOUSANDS	JUNE 2021		JUNE 2020		2021 VS. 2020			JUNE 2021		JUNE 2020		2021 VS. 2020
Third-party log sales – tons:
West⁽¹⁾		1,608		1,714		(106	)		3,147		3,398		(251	)
South		4,150		4,307		(157	)		7,932		8,672		(740	)
North⁽²⁾		115		113		2			376		397		(21	)
Total		5,873		6,134		(261	)		11,455		12,467		(1,012	)
Fee harvest volumes – tons:
West⁽¹⁾		2,099		2,236		(137	)		4,200		4,546		(346	)
South		5,856		5,914		(58	)		11,232		12,044		(812	)
North⁽²⁾		199		194		5			536		580		(44	)
Total		8,154		8,344		(190	)		15,968		17,170		(1,202	)

(1)	Western logs are primarily transacted in thousand board feet (MBF) but are converted to ton equivalents for external reporting purposes.

(2)	In March 2020, we sold our Montana timberlands.

REAL ESTATE, ENERGY AND NATURAL RESOURCES

How We Did Second Quarter 2021 and Year-to-Date 2021

	QUARTER ENDED				AMOUNT OF CHANGE		YEAR-TO-DATE ENDED				AMOUNT OF CHANGE
DOLLAR AMOUNTS IN MILLIONS	JUNE 2021		JUNE 2020		2021 VS. 2020		JUNE 2021		JUNE 2020		2021 VS. 2020
Net sales:
Real estate	$	83	$	48	$	35	$	167	$	143	$	24
Energy and natural resources		27		17		10		49		34		15
Total	$	110	$	65	$	45	$	216	$	177	$	39
Costs of sales	$	41	$	40	$	1	$	75	$	110	$	(35	)
Operating income and Net contribution to earnings	$	63	$	19	$	44	$	129	$	55	$	74

The volume of real estate sales is a function of many factors, including the general state of the economy, demand in local real estate markets, the ability of buyers to obtain financing, the number of competing properties listed for sale, the seasonal nature of sales (particularly in the northern states), the plans of adjacent landowners, our expectation of future price appreciation, the timing of harvesting activities, and the availability of government and not-for-profit funding. In any period, the average sales price per acre will vary based on the location and physical characteristics of parcels sold.

Comparing Second Quarter 2021 with Second Quarter 2020

Net sales

Net sales increased $45 million – 69 percent – primarily due to an increase in the average price per real estate acre sold.

Costs of sales

Costs of sales increased $1 million – 3 percent – primarily due to increased basis per real estate acre sold, partially offset by decreased real estate acres sold.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings increased $44 million – 232 percent – primarily due to the change in the components of gross margin, as discussed above.

Comparing Year-to-Date 2021 with Year-to-Date 2020

Net sales

Net sales increased $39 million – 22 percent – primarily due to an increase in the average price per real estate acre sold.

Costs of sales

Costs of sales decreased $35 million – 32 percent – primarily due to decreased real estate acres sold.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings increased $74 million – 135 percent – primarily due to the change in the components of gross margin, as discussed above.

REAL ESTATE SALES STATISTICS

	QUARTER ENDED				AMOUNT OF CHANGE			YEAR-TO-DATE ENDED				AMOUNT OF CHANGE
	JUNE 2021		JUNE 2020		2021 VS. 2020			JUNE 2021		JUNE 2020		2021 VS. 2020
Acres sold		18,415		31,337		(12,922	)		37,870		76,310		(38,440	)
Average price per acre	$	3,227	$	1,501	$	1,726		$	3,523	$	1,790	$	1,733

WOOD PRODUCTS

How We Did Second Quarter 2021 and Year-to-Date 2021

	QUARTER ENDED				AMOUNT OF CHANGE		YEAR-TO-DATE ENDED				AMOUNT OF CHANGE
DOLLAR AMOUNTS IN MILLIONS	JUNE 2021		JUNE 2020		2021 VS. 2020		JUNE 2021		JUNE 2020		2021 VS. 2020
Net sales:
Structural lumber	$	1,349	$	538	$	811	$	2,339	$	1,046	$	1,293
Oriented strand board		605		179		426		1,043		369		674
Engineered solid section		166		111		55		308		238		70
Engineered I-joists		104		70		34		187		148		39
Softwood plywood		69		34		35		125		73		52
Medium density fiberboard		43		33		10		91		77		14
Complementary building products		213		169		44		384		322		62
Other products produced⁽¹⁾		80		73		7		173		169		4
Total	$	2,629	$	1,207	$	1,422	$	4,650	$	2,442	$	2,208
Costs of sales	$	1,229	$	997	$	232	$	2,353	$	2,037	$	316
Operating income and Net contribution to earnings	$	1,338	$	159	$	1,179	$	2,178	$	293	$	1,885

(1)	Other products produced sales include wood chips, other byproducts and third-party residual log sales from our Canadian Forestlands operations.

Comparing Second Quarter 2021 with Second Quarter 2020

Net sales

Net sales increased $1,422 million – 118 percent – due to:

●	an $811 million increase in structural lumber sales attributable to a 146 percent increase in sales realizations, as well as a 2 percent increase in sales volumes;

●	a $426 million increase in oriented strand board sales attributable to a 280 percent increase in sales realizations, partially offset by an 11 percent decrease in sales volumes primarily due to planned maintenance outages;

●	a $55 million increase in engineered solid section sales attributable to a 27 percent increase in sales volumes, as well as an 18 percent increase in sales realizations;

●	a $44 million increase in complementary building product sales attributable to increased sales volumes and sales realizations;

●	a $35 million increase in softwood plywood sales attributable to a 153 percent increase in sales realizations, partially offset by a 19 percent decrease in sales volumes primarily due to the ongoing effects of weather-related disruptions that occurred in first quarter 2021;

●	a $34 million increase in engineered I-joists sales attributable to a 26 percent increase in sales volumes, as well as a 20 percent increase in sales realizations;

●	a $10 million increase in medium density fiberboard sales attributable to a 25 percent increase in sales volumes, as well as a 5 percent increase in sales realizations and

●	a $7 million increase in other products produced sales attributable to increased sales volumes and sales realizations.

Costs of sales

Costs of sales increased $232 million – 23 percent – primarily due to an increase in sales volumes across most product lines.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings increased $1,179 million – 742 percent – primarily due to the change in the components of gross margin, as discussed above.

Comparing Year-to-Date 2021 with Year-to-Date 2020

Net sales

Net sales increased $2,208 million – 90 percent – primarily due to:

●	a $1,293 million increase in structural lumber sales attributable to a 128 percent increase in sales realizations, partially offset by a 2 percent decrease in sales volumes;

●	a $674 million increase in oriented strand board sales attributable to a 211 percent increase in sales realizations, partially offset by a 9 percent decrease in sales volumes primarily due to planned maintenance outages;

●	a $70 million increase in engineered solid section sales attributable to a 15 percent increase in sales volumes, as well as a 12 percent increase in sales realizations;

●	a $62 million increase in complementary building product sales attributable to increased sales volumes and sales realizations;

●	a $52 million increase in softwood plywood sales attributable to a 108 percent increase in sales realizations, partially offset by an 18 percent decrease in sales volumes primarily due to the effects of weather-related disruptions that occurred in first quarter 2021;

●	a $39 million increase in engineered I-joists sales attributable to a 14 percent increase in sales realizations, as well as a 12 percent increase in sales volumes and

●	a $14 million increase in medium density fiberboard sales attributable to a 16 percent increase in sales volumes, as well as a 2 percent increase in sales realizations.

Costs of sales

Costs of sales increased $316 million – 16 percent – primarily due to an increase in sales volumes for engineered wood products and complementary building products, as discussed above.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings increased $1,885 million – 643 percent – primarily due to the change in the components of gross margin, as discussed above.

Third-Party Sales Volumes

	QUARTER ENDED				AMOUNT OF CHANGE			YEAR-TO-DATE ENDED				AMOUNT OF CHANGE
VOLUMES IN MILLIONS⁽¹⁾	JUNE 2021		JUNE 2020		2021 VS. 2020			JUNE 2021		JUNE 2020		2021 VS. 2020
Structural lumber – board feet		1,252		1,225		27			2,397		2,447		(50	)
Oriented strand board – square feet (3/8”)		663		747		(84	)		1,377		1,517		(140	)
Engineered solid section – cubic feet		6.6		5.2		1.4			12.8		11.1		1.7
Engineered I-joists – lineal feet		53		42		11			100		89		11
Softwood plywood – square feet (3/8”)		77		95		(18	)		171		208		(37	)
Medium density fiberboard – square feet (3/4”)		50		40		10			107		92		15

(1)	Sales volumes include sales of internally produced products and products purchased for resale primarily through our distribution business.

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.

	QUARTER ENDED				AMOUNT OF CHANGE			YEAR-TO-DATE ENDED				AMOUNT OF CHANGE
VOLUMES IN MILLIONS	JUNE 2021		JUNE 2020		2021 VS. 2020			JUNE 2021		JUNE 2020		2021 VS. 2020
Structural lumber – board feet:
Production		1,234		1,108		126			2,445		2,317		128
Outside purchase		49		51		(2	)		104		110		(6	)
Total		1,283		1,159		124			2,549		2,427		122
Oriented strand board – square feet (3/8”):
Production		683		742		(59	)		1,425		1,519		(94	)
Outside purchase		71		64		7			139		151		(12	)
Total		754		806		(52	)		1,564		1,670		(106	)
Engineered solid section – cubic feet:
Production		6.2		5.3		0.9			12.2		11.4		0.8
Outside purchase		0.2		0.1		0.1			0.5		0.3		0.2
Total		6.4		5.4		1.0			12.7		11.7		1.0
Engineered I-joists – lineal feet:
Production		51		38		13			95		85		10
Outside purchase		2		3		(1	)		5		5		—
Total		53		41		12			100		90		10
Softwood plywood – square feet (3/8”):
Production		62		76		(14	)		142		173		(31	)
Outside purchase		12		14		(2	)		26		30		(4	)
Total		74		90		(16	)		168		203		(35	)
Medium density fiberboard – square feet (3/4"):
Production		52		35		17			108		91		17
Total		52		35		17			108		91		17

UNALLOCATED ITEMS

Net Charge to Earnings – Unallocated Items

	QUARTER ENDED						AMOUNT OF CHANGE			YEAR-TO-DATE ENDED						AMOUNT OF CHANGE
DOLLAR AMOUNTS IN MILLIONS	JUNE 2021			JUNE 2020			2021 VS. 2020			JUNE 2021			JUNE 2020			2021 VS. 2020
Unallocated corporate function and variable compensation expense	$	(36	)	$	(23	)	$	(13	)	$	(61	)	$	(42	)	$	(19	)
Liability classified share-based compensation		—			(4	)		4			(1	)		6			(7	)
Foreign exchange gain (loss)		(1	)		3			(4	)		(3	)		(5	)		2
Elimination of intersegment profit in inventory and LIFO		(28	)		18			(46	)		(45	)		5			(50	)
Other		(20	)		(4	)		(16	)		(33	)		(9	)		(24	)
Operating loss		(85	)		(10	)		(75	)		(143	)		(45	)		(98	)
Non-operating pension and other post-employment benefit costs		(1	)		(10	)		9			(9	)		(19	)		10
Interest income and other		2			2			—			3			3			—
Net charge to earnings	$	(84	)	$	(18	)	$	(66	)	$	(149	)	$	(61	)	$	(88	)

Comparing Second Quarter 2021 with Second Quarter 2020

Net charge to earnings increased $66 million – 367 percent – primarily due to:

●	a $46 million increase in elimination of intersegment profit in inventory and LIFO and

●	a $13 million increase in unallocated corporate function and variable compensation expense.

Comparing Year-to-Date 2021 with Year-to-Date 2020

Net charge to earnings increased $88 million – 144 percent – primarily due to:

●	a $50 million increase in elimination of intersegment profit in inventory and LIFO;

●	a $19 million increase in unallocated corporate function and variable compensation expense;

●	a $12 million legal benefit recognized in first quarter 2020 and

●	a $7 million increase in liability classified share-based compensation due to an increase in our stock price for the year-to-date period ended June 30, 2021 compared to a decrease for the same period in 2020.

INTEREST EXPENSE

Our interest expense, net of capitalized interest, was:

●	$78 million for second quarter 2021 and $157 million year-to-date 2021;

●	$103 million for second quarter 2020 and $188 million year-to-date 2020.

Interest expense decreased by $25 million compared to second quarter 2020 and by $31 million compared to year-to-date 2020. The decreases were primarily due to an $11 million charge related to the early extinguishment of debt recorded in second quarter 2020, with no similar activity in second quarter and year-to-date 2021, as well as a decrease in the average outstanding debt in second quarter and year-to-date 2021.

Refer to Note 9: Long-Term Debt and Line of Credit for further information.

INCOME TAXES

Our provision for income taxes was:

●	a $324 million expense for second quarter 2021 and a $513 million expense year-to-date 2021;

●	a $60 million expense for second quarter 2020 and a $57 million expense year-to-date 2020.

Our provision for income taxes is primarily driven by earnings generated by our TRSs. Income tax expense increased by $456 million compared to year-to-date 2020 primarily due to an increase in our TRS earnings in 2021.

Refer to Note 16: Income Taxes for further information.

LIQUIDITY AND CAPITAL RESOURCES

We are committed to maintaining an appropriate capital structure that provides flexibility and enables us to protect the interests of our shareholders and meet our obligations to our lenders, while also maintaining access to all major financial markets. As of June 30, 2021, we had over $1.7 billion in cash and cash equivalents and $1.5 billion of availability on our line of credit, which expires in January 2025. We believe we have sufficient liquidity to meet our cash requirements for the foreseeable future.

CASH FROM OPERATIONS

Consolidated net cash from operations was:

●	$2,006 million for year-to-date 2021 and

●	$477 million for year-to-date 2020.

Net cash from operations increased $1,529 million, primarily due to:

●	increased cash inflows from our business segments and

●	decreased cash used for interest payments.

These changes were partially offset by a $262 million increase in cash paid for income taxes.

CASH FROM INVESTING ACTIVITIES

Consolidated net cash from investing activities was:

●	$(273) million for year-to-date 2021 and

●	$376 million for year-to-date 2020.

Net cash from investing activities decreased $649 million, primarily due to:

●	a $362 million decrease in proceeds received from variable interest entities;

●	a $149 million increase in cash paid for timberlands acquisitions and

●	a $145 million decrease in proceeds from the sale of timberlands.

Summary of Capital Spending by Business Segment

	YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS	JUNE 2021		JUNE 2020
Timberlands	$	49	$	51
Wood Products		76		83
Total	$	125	$	134

We expect our capital expenditures for 2021 will be approximately $460 million. The amount we spend on capital expenditures could change.

CASH FROM FINANCING ACTIVITIES

Consolidated net cash from financing activities was:

●	$(451) million for year-to-date 2021 and

●	$(349) million for year-to-date 2020.

Net cash from financing activities decreased $102 million, primarily due to a $369 million increase in net cash used for payments on long-term debt.

This change was partially offset by:

●	a $230 million decrease in net cash paid related to borrowings on our line of credit and

●	a $39 million increase in cash received from exercise of stock options.

Line of Credit

We had no outstanding borrowings on our $1.5 billion five-year senior unsecured revolving credit facility as of June 30, 2021 or December 31, 2020. This credit facility expires in January 2025.

Refer to Note 9: Long-Term Debt and Line of Credit for further information.

Long-Term Debt

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

Refer to Note 9: Long-Term Debt and Line of Credit for further information.

Our revolving credit agreement utilizes the London Inter-bank Offered Rate (LIBOR) as a basis for one of the interest rate options available to the company to apply to outstanding borrowings. Publication of USD LIBOR is expected to cease between January 1, 2022 and July 1, 2023, and we are closely monitoring ongoing market developments in the identification or creation of a widely accepted replacement rate. We have included provisions in our revolving credit agreement that specifically contemplate the transition from LIBOR to a replacement benchmark rate.

Debt Covenants

As of June 30, 2021, Weyerhaeuser Company was in compliance with its debt covenants. There have been no significant changes to the debt covenants presented in our 2020 Annual Report on Form 10-K for our existing long-term debt instruments, and we expect to remain in compliance with our debt covenants for the foreseeable future.

Option Exercises

We received cash proceeds from the exercise of stock options of:

●	$45 million for year-to-date 2021 and

●	$6 million for year-to-date 2020.

Our average stock price was $35.60 and $23.24 for year-to-date 2021 and 2020, respectively.

Dividend Payments

We paid cash dividends on common shares of $255 million and $254 million for year-to-date 2021 and 2020, respectively.

Share Repurchases

We did not repurchase shares during year-to-date 2021 or 2020. There were no unsettled repurchases as of June 30, 2021 or December 31, 2020.

PERFORMANCE 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.

	QUARTER ENDED						AMOUNT OF CHANGE			YEAR-TO-DATE ENDED						AMOUNT OF CHANGE
DOLLAR AMOUNTS IN MILLIONS	JUNE 2021			JUNE 2020			2021 VS. 2020			JUNE 2021			JUNE 2020			2021 VS. 2020
Adjusted EBITDA by Segment:
Timberlands	$	180		$	140		$	40		$	352		$	313		$	39
Real Estate & ENR		91			57			34			187			158			29
Wood Products		1,386			198			1,188			2,275			382			1,893
		1,657			395			1,262			2,814			853			1,961
Unallocated Items		(84	)		(9	)		(75	)		(140	)		(54	)		(86	)
Adjusted EBITDA	$	1,573		$	386		$	1,187		$	2,674		$	799		$	1,875

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:

DOLLAR AMOUNTS IN MILLIONS	Timberlands		Real Estate & ENR		Wood Products		Unallocated Items			Total
Adjusted EBITDA by Segment:
Net earnings										$	1,028
Interest expense, net of capitalized interest											78
Income taxes											324
Net contribution (charge) to earnings	$	113	$	63	$	1,338	$	(84	)	$	1,430
Non-operating pension and other post-employment benefit costs		—		—		—		1			1
Interest income and other		—		—		—		(2	)		(2	)
Operating income (loss)		113		63		1,338		(85	)		1,429
Depreciation, depletion and amortization		67		4		48		1			120
Basis of real estate sold		—		24		—		—			24
Adjusted EBITDA	$	180	$	91	$	1,386	$	(84	)	$	1,573

The table below reconciles Adjusted EBITDA for the quarter ended June 30, 2020:

DOLLAR AMOUNTS IN MILLIONS	Timberlands		Real Estate & ENR		Wood Products			Unallocated Items			Total
Adjusted EBITDA by Segment:
Net earnings											$	72
Interest expense, net of capitalized interest⁽¹⁾												103
Income taxes												60
Net contribution (charge) to earnings	$	75	$	19	$	159		$	(18	)	$	235
Non-operating pension and other post-employment benefit costs		—		—		—			10			10
Interest income and other		—		—		—			(2	)		(2	)
Operating income (loss)		75		19		159			(10	)		243
Depreciation, depletion and amortization		65		4		47			1			117
Basis of real estate sold		—		34		—			—			34
Special items included in operating income (loss)⁽²⁾		—		—		(8	)		—			(8	)
Adjusted EBITDA	$	140	$	57	$	198		$	(9	)	$	386

(1)	Interest expense, net of capitalized interest includes a pretax special item of $11 million related to a net charge for the early extinguishment of debt.

(2)	Operating income (loss) includes a pretax special item consisting of an $8 million product remediation insurance recovery.

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

DOLLAR AMOUNTS IN MILLIONS	Timberlands		Real Estate & ENR		Wood Products		Unallocated Items			Total
Adjusted EBITDA by Segment:
Net earnings										$	1,709
Interest expense, net of capitalized interest											157
Income taxes											513
Net contribution (charge) to earnings	$	221	$	129	$	2,178	$	(149	)	$	2,379
Non-operating pension and other post-employment benefit costs		—		—		—		9			9
Interest income and other		—		—		—		(3	)		(3	)
Operating income (loss)		221		129		2,178		(143	)		2,385
Depreciation, depletion and amortization		131		7		97		3			238
Basis of real estate sold		—		51		—		—			51
Adjusted EBITDA	$	352	$	187	$	2,275	$	(140	)	$	2,674

The table below reconciles Adjusted EBITDA for the year-to-date period ended June 30, 2020:

DOLLAR AMOUNTS IN MILLIONS	Timberlands		Real Estate & ENR		Wood Products			Unallocated Items			Total
Adjusted EBITDA by Segment:
Net earnings											$	222
Interest expense, net of capitalized interest⁽¹⁾												188
Income taxes												57
Net contribution (charge) to earnings	$	180	$	55	$	293		$	(61	)	$	467
Non-operating pension and other post-employment benefit costs		—		—		—			19			19
Interest income and other		—		—		—			(3	)		(3	)
Operating income (loss)		180		55		293			(45	)		483
Depreciation, depletion and amortization		133		7		97			3			240
Basis of real estate sold		—		96		—			—			96
Special items included in operating income (loss)⁽²⁾		—		—		(8	)		(12	)		(20	)
Adjusted EBITDA	$	313	$	158	$	382		$	(54	)	$	799

(1)	Interest expense, net of capitalized interest includes a pretax special item of $11 million related to a net charge for the early extinguishment of debt.

(2)	Operating income (loss) includes pretax special items consisting of a $12 million noncash legal benefit within Unallocated Items and an $8 million product remediation insurance recovery within Wood Products.

Net Earnings and Net Earnings per Diluted Share Before Special Items

We use net earnings before special items and net earnings per diluted share before special items as key performance measures to evaluate the performance of the consolidated company. These measures should not be considered in isolation from, and are not intended to represent an alternative to, our results reported in accordance with U.S. GAAP. However, we believe the measures provide meaningful supplemental information for investors about our operating performance, better facilitate period to period comparisons and are widely used by analysts, lenders, rating agencies and other interested parties.

Net Earnings Before Special Items

	QUARTER ENDED					YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS	JUNE 2021		JUNE 2020			JUNE 2021		JUNE 2020
Net earnings	$	1,028	$	72		$	1,709	$	222
Early extinguishment of debt charge		—		11			—		11
Legal benefit		—		—			—		(12	)
Product remediation recovery		—		(6	)		—		(6	)
Net earnings before special items	$	1,028	$	77		$	1,709	$	215

Net Earnings per Diluted Share Before Special Items

	QUARTER ENDED					YEAR-TO-DATE ENDED
	JUNE 2021		JUNE 2020			JUNE 2021		JUNE 2020
Net earnings per diluted share	$	1.37	$	0.10		$	2.28	$	0.30
Early extinguishment of debt charge		—		0.02			—		0.02
Legal benefit		—		—			—		(0.02	)
Product remediation recovery		—		(0.01	)		—		(0.01	)
Net earnings per diluted share before special items	$	1.37	$	0.11		$	2.28	$	0.29

CRITICAL ACCOUNTING POLICIES

There have been no significant changes during year-to-date 2021 to the critical accounting policies presented in our 2020 Annual Report on Form 10-K.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

LONG-TERM INDEBTEDNESS OBLIGATIONS

The following summary of our long-term indebtedness obligations includes:

●	scheduled principal repayments for the next five years and after;

●	weighted average interest rates for debt maturing in each of the next five years and after and

●	estimated fair values of outstanding obligations.

We estimate the fair value of our debt instruments using quoted market prices we received 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 Indebtedness Principal Obligations as of June 30, 2021

DOLLAR AMOUNTS IN MILLIONS	2021			2022			2023			2024			2025			THEREAFTER			TOTAL⁽¹⁾			FAIR VALUE
Fixed-rate debt	$	150		$	—		$	1,051		$	—		$	436		$	3,638		$	5,275		$	6,529
Average interest rate		9.00	%		—	%		5.56	%		—	%		8.33	%		5.94	%		6.15	%	N/A

(1)	Excludes $25 million of unamortized discounts, capitalized debt expense and business combination fair value adjustments.

Item 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Disclosure controls are controls and other procedures that are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosure. The company’s principal executive officer and principal financial officer have concluded that the company’s disclosure controls and procedures were effective as of June 30, 2021, based on an evaluation of the company’s disclosure controls and procedures as of that date.

CHANGES IN INTERNAL CONTROLS

No changes occurred in the company’s internal control over financial reporting during year-to-date 2021 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 11: 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 2020 Annual Report on Form 10-K.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

There were no share repurchases during second quarter 2021.

Item 6. EXHIBITS


4.1	Second Amendment to Installment Loan Agreement (including as Annex A the Amended Installment Note) dated as of June 30, 2021 between Weyerhaeuser Company, as borrower, and MeadWestvaco Timber Note Holding Company II, LLC as Holder (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on July 7, 2021 – Commission File Number 1-4825).

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.

32	Certification pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).

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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

104	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, has been formatted in Inline XBRL.

SIGNATURES

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.

	WEYERHAEUSER COMPANY
	(Registrant)

Date: July 30, 2021	By:	/s/ David M. Wold
		David M. Wold
		Vice President and Chief Accounting Officer
		(Principal Accounting Officer and Duly Authorized Officer)