Weyerhaeuser Company — FY 2021 Form 10-K Summary
Business context and reporting period
Weyerhaeuser is a real estate investment trust and a major North American timberland owner and wood-products manufacturer. Its reportable segments are Timberlands, Real Estate, Energy and Natural Resources, and Wood Products. The filing covers the fiscal year ended December 31, 2021; fourth-quarter 2021 results are discussed within the annual filing but are not separately presented in the supplied text as a complete quarterly income statement.
- Owned or controlled approximately 10.6 million U.S. timberland acres and managed 14.1 million Canadian acres under long-term licenses.
- Operated 35 wood-products manufacturing facilities and 18 distribution centers.
- Reported 9,214 employees at year-end, including 2,337 covered by collective-bargaining agreements.
Financial performance and key metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Net sales | $10.201 billion | $7.532 billion | 35% |
| Gross margin | $4.098 billion | $2.085 billion | 97% |
| Operating income | $3.643 billion | $1.710 billion | 113% |
| Net earnings | $2.607 billion | $797 million | 227% |
| Diluted EPS | $3.47 | $1.07 | $2.40 |
| Adjusted EBITDA | $4.094 billion | $2.201 billion | 86% |
| Cash from operations | $3.159 billion | $1.529 billion | 106% |
| Capital expenditures | $441 million | $281 million | 57% |
- Approximate margins were 40.2% gross, 35.7% operating and 25.6% net, compared with approximately 27.7%, 22.7% and 10.6%, respectively, in 2020.
- Wood Products generated $8.221 billion of sales and $3.211 billion of net contribution to earnings, compared with $5.790 billion and $1.340 billion in 2020.
- Timberlands generated $1.636 billion of unaffiliated sales and $464 million of net contribution, compared with $1.466 billion and $455 million in 2020.
- Real Estate, Energy and Natural Resources generated $344 million of sales and $210 million of net contribution, compared with $276 million and $86 million in 2020.
- Net earnings benefited from lower non-operating pension costs, lower interest expense and strong product pricing, partially offset by $709 million of income tax expense versus $185 million in 2020.
Liquidity, debt and capital allocation
- Cash and cash equivalents were $1.879 billion at December 31, 2021, with total cash, cash equivalents and restricted cash of $1.999 billion.
- The company had $1.5 billion of availability under its unsecured revolving credit facility, expiring January 2025, with no borrowings outstanding at year-end.
- Long-term debt, including current maturities, declined to approximately $5.1 billion from $5.5 billion. Weighted-average interest was 6.06%, with weighted-average maturity of 6.7 years.
- Debt-to-total-capital was 31.2%, compared with a covenant limit of 65%; adjusted shareholders’ equity was $11.2 billion.
- The company paid $884 million of common dividends, including a $375 million supplemental dividend, and repurchased approximately $100 million of shares during 2021.
- Remaining share-repurchase authorization was $927 million at year-end. A $1.45-per-share supplemental dividend was declared on January 28, 2022.
- Management expects approximately $440 million of capital expenditures and approximately $30 million of pension and post-employment contributions in 2022.
Material changes versus the prior comparable period
- Revenue growth was driven principally by higher Wood Products sales realizations, including a 42% increase for structural lumber and a 97% increase for oriented strand board.
- Wood Products operating income increased 140%, despite higher freight, sales-volume and raw-material costs.
- Timberlands sales increased 12%, primarily from stronger Western and Southern log realizations; fee harvest volume declined modestly to 32.5 million tons from 32.9 million tons.
- Real Estate, Energy and Natural Resources contribution increased 144%, helped by higher mitigation-bank sales, higher average real-estate prices and higher energy and natural-resource sales.
- 2021 included a $32 million gain on the sale of 145,000 Washington timberland acres and a $37 million product-remediation insurance recovery. The prior year included a $182 million Oregon timberland gain, an $80 million Oregon wildfire casualty loss and $253 million of noncash pension settlement charges.
- The company repaid a $225 million variable-rate term loan and $150 million of 9% notes in 2021.
Guidance, outlook, commentary and risks
Management characterized housing, repair and remodeling demand as resilient entering 2022. Fourth-quarter 2021 U.S. housing starts averaged a seasonally adjusted annual rate of 1.644 million units, while lumber and oriented strand board prices rebounded sharply from third-quarter lows. Management expects results to remain sensitive to housing activity, repair and remodeling, interest rates, inflation, COVID-19 developments, material availability and transportation constraints.
- Strategic priorities include operational excellence, cost reduction, disciplined capital deployment, higher-value wood products, timberland optimization and development of natural-climate-solutions businesses such as forest carbon, mitigation banking, renewable-energy leasing and carbon capture and storage.
- The company established 2030 science-based targets to reduce Scope 1 and 2 emissions by 42% and Scope 3 emissions intensity by 25% per ton of production.
- Environmental remediation accruals were $63 million at year-end. Management believes reasonably possible additional remediation costs could reach $126 million above recorded accruals.
- The company is involved in ordinary-course legal proceedings and does not currently believe any proceeding will have a material adverse effect on its consolidated financial statements, although outcomes remain uncertain.
- Key risks include cyclical housing and commodity markets, product-price volatility, inflation, labor and contractor shortages, transportation disruptions, fires and other natural disasters, climate change, environmental and forestry regulation, trade policy, cybersecurity, pension funding, litigation and maintaining REIT qualification.
- The company does not insure its timberlands against damage from fire, pests and certain other hazards, creating potential exposure to significant losses.
- KPMG issued unqualified opinions on the consolidated financial statements and internal control over financial reporting. The critical audit matter involved pension projected benefit obligations and discount-rate assumptions.
Important facts for investors to verify
- Confirm the sustainability of 2021’s unusually high Wood Products pricing and margins as housing, supply and commodity conditions normalize.
- Review debt maturities, particularly the $1.051 billion due in 2023, and assess refinancing exposure as interest rates change.
- Evaluate the $63 million environmental accrual and the potential for up to $126 million of additional remediation costs.
- Assess exposure to wildfire, storms, pests, drought, climate-related regulation and the absence of timberland insurance.
- Verify the timing and economics of the planned $440 million 2022 capital program and the company’s continuing dividend and repurchase capacity.
- Monitor REIT qualification, taxable REIT subsidiary earnings and the tax treatment of future distributions.
- Track housing starts, repair-and-remodel demand, lumber and OSB prices, log prices, export markets and transportation availability.