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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 MARCH 31, 2021

or

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

FOR THE TRANSITION PERIOD FROM              TO             

COMMISSION FILE NUMBER: 1-4825

 

WEYERHAEUSER COMPANY

(Exact name of registrant as specified in its charter)

 

 

Washington

 

91-0470860

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

 

 

220 Occidental Avenue South

Seattle, Washington

 

98104-7800

(Address of principal executive offices)

 

(Zip Code)

 

(206) 539-3000

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $1.25 per share

 

WY

 

New York Stock Exchange

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

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

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

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

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

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

As of April 26, 2021, 749,215 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

25

ITEM 4.

CONTROLS AND PROCEDURES

25

 

 

 

PART II

OTHER INFORMATION

 

ITEM 1.

LEGAL PROCEEDINGS

25

ITEM 1A.

RISK FACTORS

25

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

25

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES – NOT APPLICABLE

 

ITEM 4.

MINE SAFETY DISCLOSURES – NOT APPLICABLE

 

ITEM 5.

OTHER INFORMATION – NOT APPLICABLE

 

ITEM 6.

EXHIBITS

26

 

SIGNATURES

27

 

 

 

 


 

 

PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

 

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

 

 

 

QUARTER ENDED

 

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES

 

MARCH 2021

 

 

MARCH 2020

 

Net sales (Note 3)

 

$

2,506

 

 

$

1,728

 

Costs of sales

 

 

1,430

 

 

 

1,382

 

Gross margin

 

 

1,076

 

 

 

346

 

Selling expenses

 

 

20

 

 

 

22

 

General and administrative expenses

 

 

90

 

 

 

74

 

Other operating costs, net (Note 15)

 

 

10

 

 

 

10

 

Operating income

 

 

956

 

 

 

240

 

Non-operating pension and other post-employment benefit costs (Note 7)

 

 

(8

)

 

 

(9

)

Interest income and other

 

 

1

 

 

 

1

 

Interest expense, net of capitalized interest

 

 

(79

)

 

 

(85

)

Earnings before income taxes

 

 

870

 

 

 

147

 

Income taxes (Note 16)

 

 

(189

)

 

 

3

 

Net earnings

 

$

681

 

 

$

150

 

 

 

 

 

 

 

 

 

 

Earnings per share, basic and diluted (Note 4)

 

$

0.91

 

 

$

0.20

 

Weighted average shares outstanding (in thousands) (Note 4):

 

 

 

 

 

 

 

 

Basic

 

 

748,718

 

 

 

746,534

 

Diluted

 

 

750,024

 

 

 

747,155

 

 

See accompanying Notes to Consolidated Financial Statements.

1


 

 

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(UNAUDITED)

 

 

 

QUARTER ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2021

 

 

MARCH 2020

 

Net earnings

 

$

681

 

 

$

150

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

9

 

 

 

(42

)

Changes in unamortized actuarial loss, net of tax expense of $7 and $16

 

 

20

 

 

 

44

 

Changes in unamortized net prior service credit, net of tax benefit of $1 and $0

 

 

1

 

 

 

1

 

Total other comprehensive income

 

 

30

 

 

 

3

 

Total comprehensive income

 

$

711

 

 

$

153

 

 

See accompanying Notes to Consolidated Financial Statements.

2


 

 

WEYERHAEUSER COMPANY

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

 

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PAR VALUE

 

MARCH 31,

2021

 

 

DECEMBER 31,

2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,016

 

 

$

495

 

Receivables, net

 

 

589

 

 

 

450

 

Receivables for taxes

 

 

7

 

 

 

82

 

Inventories (Note 5)

 

 

505

 

 

 

443

 

Prepaid expenses and other current assets

 

 

141

 

 

 

139

 

Total current assets

 

 

2,258

 

 

 

1,609

 

Property and equipment, less accumulated depreciation of $3,487 and $3,432

 

 

1,971

 

 

 

2,013

 

Construction in progress

 

 

91

 

 

 

73

 

Timber and timberlands at cost, less depletion

 

 

11,776

 

 

 

11,827

 

Minerals and mineral rights, less depletion

 

 

265

 

 

 

268

 

Deferred tax assets

 

 

106

 

 

 

120

 

Other assets

 

 

407

 

 

 

401

 

Total assets

 

$

16,874

 

 

$

16,311

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current maturities of long-term debt (Note 9)

 

$

150

 

 

$

150

 

Accounts payable

 

 

236

 

 

 

204

 

Accrued liabilities (Note 8)

 

 

549

 

 

 

596

 

Total current liabilities

 

 

935

 

 

 

950

 

Long-term debt, net (Note 9)

 

 

5,325

 

 

 

5,325

 

Deferred tax liabilities

 

 

26

 

 

 

24

 

Deferred pension and other post-employment benefits (Note 7)

 

 

893

 

 

 

911

 

Other liabilities

 

 

367

 

 

 

370

 

Total liabilities

 

 

7,546

 

 

 

7,580

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

Common shares: $1.25 par value; authorized 1,360 million shares; issued and outstanding: 748,751 thousand shares at March 31, 2021 and 747,385 thousand shares at

December 31, 2020

 

 

936

 

 

 

934

 

Other capital

 

 

8,222

 

 

 

8,208

 

Retained earnings

 

 

962

 

 

 

411

 

Accumulated other comprehensive loss (Note 12)

 

 

(792

)

 

 

(822

)

Total equity

 

 

9,328

 

 

 

8,731

 

Total liabilities and equity

 

$

16,874

 

 

$

16,311

 

 

See accompanying Notes to Consolidated Financial Statements.

3


 

 

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

 

 

 

QUARTER ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2021

 

 

MARCH 2020

 

Cash flows from operations:

 

 

 

 

 

 

 

 

Net earnings

 

$

681

 

 

$

150

 

Noncash charges (credits) to earnings:

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

118

 

 

 

123

 

Basis of real estate sold

 

 

27

 

 

 

62

 

Deferred income taxes, net

 

 

8

 

 

 

(82

)

Pension and other post-employment benefits (Note 7)

 

 

19

 

 

 

19

 

Share-based compensation expense (Note 13)

 

 

7

 

 

 

7

 

Change in:

 

 

 

 

 

 

 

 

Receivables, net

 

 

(139

)

 

 

(82

)

Receivables and payables for taxes

 

 

120

 

 

 

79

 

Inventories

 

 

(60

)

 

 

(72

)

Prepaid expenses and other current assets

 

 

(2

)

 

 

(2

)

Accounts payable and accrued liabilities

 

 

(60

)

 

 

(91

)

Pension and post-employment benefit contributions and payments

 

 

(8

)

 

 

(10

)

Other

 

 

(13

)

 

 

(15

)

Net cash from operations

 

 

698

 

 

 

86

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures for property and equipment

 

 

(31

)

 

 

(47

)

Capital expenditures for timberlands reforestation

 

 

(22

)

 

 

(21

)

Proceeds from note receivable held by variable interest entities (Note 6)

 

 

 

 

 

362

 

Proceeds from sale of Montana timberlands (Note 14)

 

 

 

 

 

145

 

Other

 

 

 

 

 

2

 

Net cash from investing activities

 

 

(53

)

 

 

441

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Cash dividends on common shares

 

 

(127

)

 

 

(254

)

Net proceeds from issuance of long-term debt (Note 9)

 

 

 

 

 

732

 

Proceeds from borrowings on line of credit (Note 9)

 

 

 

 

 

550

 

Payments on line of credit (Note 9)

 

 

 

 

 

(230

)

Proceeds from exercise of stock options

 

 

17

 

 

 

6

 

Other

 

 

(14

)

 

 

(12

)

Net cash from financing activities

 

 

(124

)

 

 

792

 

Net change in cash and cash equivalents

 

 

521

 

 

 

1,319

 

Cash and cash equivalents at beginning of period

 

 

495

 

 

 

139

 

Cash and cash equivalents at end of period

 

$

1,016

 

 

$

1,458

 

Cash paid (received) during the period for:

 

 

 

 

 

 

 

 

Interest, net of amount capitalized of $1 and $1

 

$

75

 

 

$

108

 

Income taxes, net of refunds

 

$

66

 

 

$

 

 

See accompanying Notes to Consolidated Financial Statements.

4


 

 

WEYERHAEUSER COMPANY

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(UNAUDITED)

 

 

 

QUARTER ENDED

 

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES

 

MARCH 2021

 

 

MARCH 2020

 

Common shares:

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

934

 

 

$

932

 

Issued for exercise of stock options and vested restricted stock units

 

 

2

 

 

 

1

 

Balance at end of period

 

 

936

 

 

 

933

 

Other capital:

 

 

 

 

 

 

 

 

Balance at beginning of period

 

 

8,208

 

 

 

8,152

 

Issued for exercise of stock options

 

 

16

 

 

 

6

 

Shared-based compensation

 

 

7

 

 

 

7

 

Other transactions, net

 

 

(9

)

 

 

(6

)

Balance at end of period

 

 

8,222

 

 

 

8,159

 

Retained earnings (accumulated deficit):

 

 

 

 

 

 

 

 

Balance at beginning of period

 

 

411

 

 

 

(3

)

Net earnings

 

 

681

 

 

 

150

 

Dividends on common shares

 

 

(130

)

 

 

(256

)

Balance at end of period

 

 

962

 

 

 

(109

)

Accumulated other comprehensive loss:

 

 

 

 

 

 

 

 

Balance at beginning of period

 

 

(822

)

 

 

(904

)

Other comprehensive income

 

 

30

 

 

 

3

 

Balance at end of period (Note 12)

 

 

(792

)

 

 

(901

)

Total equity:

 

 

 

 

 

 

 

 

Balance at end of period

 

$

9,328

 

 

$

8,082

 

 

 

 

 

 

 

 

 

 

Dividends paid per common share

 

$

0.17

 

 

$

0.34

 

 

See accompanying Notes to Consolidated Financial Statements.

5


 

 

INDEX FOR NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

6


 

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE QUARTERS ENDED MARCH 31, 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

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2021

 

 

MARCH 2020

 

Sales to unaffiliated customers:

 

 

 

 

 

 

 

 

Timberlands

 

$

379

 

 

$

381

 

Real Estate & ENR

 

 

106

 

 

 

112

 

Wood Products

 

 

2,021

 

 

 

1,235

 

 

 

 

2,506

 

 

 

1,728

 

Intersegment sales:

 

 

 

 

 

 

 

 

Timberlands

 

 

134

 

 

 

122

 

 

 

 

 

 

 

 

 

 

Total sales

 

 

2,640

 

 

 

1,850

 

Intersegment eliminations

 

 

(134

)

 

 

(122

)

Total

 

$

2,506

 

 

$

1,728

 

Net contribution (charge) to earnings:

 

 

 

 

 

 

 

 

Timberlands

 

$

108

 

 

$

105

 

Real Estate & ENR

 

 

66

 

 

 

36

 

Wood Products

 

 

840

 

 

 

134

 

 

 

 

1,014

 

 

 

275

 

Unallocated items(1)

 

 

(65

)

 

 

(43

)

Net contribution to earnings

 

 

949

 

 

 

232

 

Interest expense, net of capitalized interest

 

 

(79

)

 

 

(85

)

Earnings before income taxes

 

 

870

 

 

 

147

 

Income taxes

 

 

(189

)

 

 

3

 

Net earnings

 

$

681

 

 

$

150

 

(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.

7


 

NOTE 3: REVENUE RECOGNITION

A reconciliation of revenue recognized by our major products:

 

 

 

QUARTER ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2021

 

 

MARCH 2020

 

Net sales to unaffiliated customers:

 

 

 

 

 

 

 

 

Timberlands segment

 

 

 

 

 

 

 

 

Delivered logs:

 

 

 

 

 

 

 

 

West

 

 

 

 

 

 

 

 

Domestic sales

 

$

79

 

 

$

87

 

Export grade sales

 

 

122

 

 

 

90

 

Subtotal West

 

 

201

 

 

 

177

 

South

 

 

131

 

 

 

150

 

North

 

 

16

 

 

 

17

 

Subtotal delivered logs sales

 

 

348

 

 

 

344

 

Stumpage and pay-as-cut timber

 

 

6

 

 

 

5

 

Recreational and other lease revenue

 

 

16

 

 

 

15

 

Other(1)

 

 

9

 

 

 

17

 

Net sales attributable to Timberlands segment

 

 

379

 

 

 

381

 

Real Estate & ENR segment

 

 

 

 

 

 

 

 

Real estate

 

 

84

 

 

 

95

 

Energy and natural resources

 

 

22

 

 

 

17

 

Net sales attributable to Real Estate & ENR segment

 

 

106

 

 

 

112

 

Wood Products segment

 

 

 

 

 

 

 

 

Structural lumber

 

 

990

 

 

 

508

 

Oriented strand board

 

 

438

 

 

 

190

 

Engineered solid section

 

 

142

 

 

 

127

 

Engineered I-joists

 

 

83

 

 

 

78

 

Softwood plywood

 

 

56

 

 

 

39

 

Medium density fiberboard

 

 

48

 

 

 

44

 

Complementary building products

 

 

171

 

 

 

153

 

Other(2)

 

 

93

 

 

 

96

 

Net sales attributable to Wood Products segment

 

 

2,021

 

 

 

1,235

 

Total net sales

 

$

2,506

 

 

$

1,728

 

(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:

$0.91 during first quarter 2021 and

$0.20 during first quarter 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.

8


 

 

 

QUARTER ENDED

 

SHARES IN THOUSANDS

 

MARCH 2021

 

 

MARCH 2020

 

Weighted average common shares outstanding – basic

 

 

748,718

 

 

 

746,534

 

Dilutive potential common shares:

 

 

 

 

 

 

 

 

Stock options

 

 

217

 

 

 

338

 

Restricted stock units

 

 

738

 

 

 

283

 

Performance share units

 

 

351

 

 

 

 

Total effect of outstanding dilutive potential common shares

 

 

1,306

 

 

 

621

 

Weighted average common shares outstanding – dilutive

 

 

750,024

 

 

 

747,155

 

 

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

 

SHARES IN THOUSANDS

 

MARCH 2021

 

 

MARCH 2020

 

Stock options

 

 

147

 

 

 

2,292

 

Performance share units

 

 

1,115

 

 

 

1,390

 

 

 

NOTE 5: INVENTORIES

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

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 31,

2021

 

 

DECEMBER 31,

2020

 

LIFO inventories:

 

 

 

 

 

 

 

 

Logs

 

$

20

 

 

$

24

 

Lumber, plywood, panels and fiberboard

 

 

80

 

 

 

59

 

Other products

 

 

8

 

 

 

9

 

Moving average cost or FIFO inventories:

 

 

 

 

 

 

 

 

Logs

 

 

92

 

 

 

64

 

Lumber, plywood, panels, fiberboard and engineered wood products

 

 

90

 

 

 

84

 

Other products

 

 

106

 

 

 

100

 

Materials and supplies

 

 

109

 

 

 

103

 

Total

 

$

505

 

 

$

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.

 

 

9


 

 

NOTE 7: PENSION AND OTHER POST-EMPLOYMENT BENEFIT PLANS

The components of net periodic benefit cost are:

 

 

 

PENSION

 

 

 

QUARTER ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2021

 

 

MARCH 2020

 

Service cost

 

$

11

 

 

$

10

 

Interest cost

 

 

24

 

 

 

35

 

Expected return on plan assets

 

 

(49

)

 

 

(59

)

Amortization of actuarial loss

 

 

30

 

 

 

30

 

Amortization of prior service cost

 

 

1

 

 

 

1

 

Total net periodic benefit cost - pension

 

$

17

 

 

$

17

 

 

 

 

OTHER POST-EMPLOYMENT BENEFITS

 

 

 

QUARTER ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2021

 

 

MARCH 2020

 

Interest cost

 

$

1

 

 

$

1

 

Amortization of actuarial loss

 

 

2

 

 

 

1

 

Amortization of prior service credit

 

 

(1

)

 

 

 

Total net periodic benefit cost - other post-employment benefits

 

$

2

 

 

$

2

 

 

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.

 

 

NOTE 8: ACCRUED LIABILITIES

Accrued liabilities were comprised of the following:

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 31,

2021

 

 

DECEMBER 31,

2020

 

Compensation and employee benefit costs

 

$

150

 

 

$

204

 

Current portion of lease liabilities

 

 

23

 

 

 

26

 

Customer rebates, volume discounts and deferred income

 

 

84

 

 

 

111

 

Interest

 

 

84

 

 

 

87

 

Taxes payable

 

 

115

 

 

 

75

 

Other

 

 

93

 

 

 

93

 

Total

 

$

549

 

 

$

596

 

 

 

NOTE 9: LONG-TERM DEBT AND LINE OF CREDIT

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 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 March 31, 2021 and December 31, 2020.

 

 

10


 

 

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:

 

 

 

MARCH 31,

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

 

 

$

6,413

 

 

$

5,250

 

 

$

6,718

 

Variable rate

 

 

225

 

 

 

225

 

 

 

225

 

 

 

225

 

Total debt

 

$

5,475

 

 

$

6,638

 

 

$

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, mutual fund investments held in grantor trusts, 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.

 

 

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 March 31, 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.

 

 

11


 

 

NOTE 12: ACCUMULATED OTHER COMPREHENSIVE LOSS

 

Changes in amounts included in our accumulated other comprehensive loss by component are:

 

 

 

QUARTER ENDED

 

DOLLAR AMOUNTS IN MILLIONS

 

MARCH 2021

 

 

MARCH 2020

 

Pension(1)

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

(1,064

)

 

$

(1,128

)

Other comprehensive income (loss) before reclassifications

 

 

(4

)

 

 

20

 

Amounts reclassified from accumulated other comprehensive loss to earnings(2)

 

 

24

 

 

 

24

 

Total other comprehensive income

 

 

20

 

 

 

44

 

Balance at end of period

 

 

(1,044

)

 

 

(1,084

)

Other Post-Employment Benefits(1)

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

(12

)

 

$

(12

)

Amounts reclassified from accumulated other comprehensive loss to earnings(2)

 

 

1

 

 

 

1

 

Total other comprehensive income

 

 

1

 

 

 

1

 

Balance at end of period

 

 

(11

)

 

 

(11

)

Translation Adjustments and Other