Weyerhaeuser Co: Form 10-Q for the period ended Mar 31, 2025

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; our capital structure and the sufficiency of our liquidity position to meet future cash requirements; our cash dividend framework, including our target percentage return to shareholders of Adjusted Funds Available for Distribution, including expected supplemental cash dividends and/or future share repurchases; compliance with covenants in our debt agreements; our expectations concerning our contingent liabilities and the sufficiency of related reserves and accruals including, but not limited to, cost estimates of future litigation and environmental remediation; our provision for income taxes; expected capital expenditures; estimated returns on pension plan assets; expected market and general economic conditions, including related influencing factors such as the trajectory of U.S. housing construction activity, repair and remodel activity, inflation trends and interest rates; our expectations about our future opportunities in emerging carbon credit and carbon capture and storage markets; assumptions used in valuing incentive compensation and related expense and the expected effects of U.S. international trade policy.

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,” “maintain,” “may,” "plan," “potential,” and “will,” 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. There is no guarantee that any of the events anticipated by our forward-looking statements will occur. If any of the events occur, there is no guarantee what effect it will have on our operations, cash flows, or financial condition. We undertake no obligation to update our forward-looking statements after the date of this report. The factors listed below, as well as other factors not described herein because they are not currently known to us or we currently judge them to be immaterial, may cause our actual results to differ significantly from our forward-looking statements:

• the effect of general economic conditions, including employment rates, interest rates, inflation rates, housing starts, general availability and cost of financing for home mortgages and the relative strength of the U.S. dollar;
• 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;
• U.S. trade policy and resulting 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;
• our ability to hire and retain capable employees;
• the successful and timely execution and integration of our strategic acquisitions, including our ability to realize expected benefits and synergies, and the successful and timely execution of our strategic divestitures, each of which is subject to a number of risks and conditions beyond our control including, but not limited to, timing and required regulatory approvals or the occurrence of any event, change or other circumstances that could give rise to a termination of any acquisition or divestiture transaction under the terms of the governing transaction 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;
• the effects of significant geopolitical conditions or developments such as significant international trade disputes or domestic or foreign terrorist attacks, armed conflict and political unrest;
• the occurrence of regional or global health epidemics and their potential effects on our business, results of operations, cash flows, financial condition and future prospects;
• 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 as it relates to the cost of pension benefits 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 2024 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

Our market conditions and the strength of the broader U.S. economy are, and will continue to be, influenced by the trajectory of activity in the U.S. housing and repair and remodel segments, inflation trends and interest rates. 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, particularly 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. Our Timberlands segment, particularly 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 wood-burning pellets made from pulpwood. Our Timberlands segment is also influenced by the availability of harvestable timber. In general, Western log markets are highly tensioned by available supply, while Southern log markets have more available supply. However, additional mill capacity being added in the U.S. South has led to tightening of markets in certain geographies. Our Real Estate, Energy and Natural Resources segment is affected by a variety of factors, including the general state of the economy, local real estate market conditions, the level of construction activity in the U.S. and evolution of emerging renewable energy and carbon-related markets.

Recently announced and ongoing U.S. trade policy actions have resulted in elevated macroeconomic uncertainty and a decrease in consumer confidence. These policies, along with potential countermeasures by other countries, and the outcome of certain executive orders and trade investigations relating to our businesses, have the potential to affect supply and demand trends, import and export dynamics, and pricing for our products.

Home sales and building activity have continued at a moderated pace in response to elevated mortgage interest rates, reduced affordability and lower consumer confidence. New single-family home construction remained generally resilient in the first quarter, as existing homeowners continued to be constrained by the lock-in effect of lower mortgage rates compared to current rates, keeping inventories of existing homes relatively low. Multi-family construction remains more muted given the elevated supply of recently completed projects in conjunction with higher interest rates and other factors constraining the underwriting of proposed projects. On a seasonally adjusted annual basis, as reported by the U.S. Census Bureau, housing starts for first quarter 2025 averaged 1.4 million units, a 0.1 percent increase from fourth quarter 2024. Single-family starts averaged 1.0 million units in first quarter 2025, a 0.5 percent decrease from fourth quarter 2024. Multi-family starts averaged 381 thousand units in first quarter 2025, a 1.8 percent increase from fourth quarter 2024. Single-family construction is the primary driver for our business as compared to multi-family due to the amount of wood products used. Sales of newly built, single-family homes averaged a seasonally adjusted annual rate of 684 thousand units for first quarter 2025, an increase of 1.6 percent from fourth quarter 2024, supported by a moderate decrease in mortgage rates in March. Notwithstanding current macroeconomic uncertainty and potential impacts to housing demand, we expect a favorable U.S. housing construction market over the medium to long-term, supported by strong demographics in the key home buying age cohorts, a decade of under building and historically low housing inventory.

Repair and remodeling expenditures decreased by 1.6 percent from fourth quarter 2024 to first quarter 2025 according to the Census Bureau Advance Retail Spending report. While there continues to be steady demand due to growing home equity and the previously mentioned lock-in effect, many homeowners have been more cautious in discretionary spending on large projects. This softness has been reflected in both the do-it-yourself (DIY) and professionally built segments. Over the longer term, we expect this sector to return to historical growth trends driven by recent deferrals in repair and remodel spending, elevated home equity and an aging U.S. housing stock, with a median age of 45 years.

In U.S. wood product markets, pricing for lumber increased during first quarter 2025, driven by more constrained market supply from previously announced mill curtailments and closures and speculation around tariffs on imported supply. In contrast, OSB prices decreased in response to cautious buyer sentiment given tariff-related uncertainty and a softer than expected start to the spring building season. In first quarter 2025, the Random Lengths Framing Lumber Composite price averaged $455/MBF and the OSB Composite averaged $376/MSF. Over the course of first quarter 2025, composite prices for lumber increased from $433/MBF to $488/MBF and composite prices for OSB decreased from $418/MSF to $358/MSF.

In Western log markets, Douglas-fir sawlog prices increased 13.3 percent in first quarter 2025 compared with fourth quarter 2024, as reported by Fastmarkets RISI Log Lines based on Weyerhaeuser’s sales mix. This was primarily driven by strengthening lumber prices and seasonal reductions in log supply. In the South, delivered sawlog prices decreased 0.1 percent in first quarter 2025 compared to fourth quarter 2024 and declined 3.1 percent from first quarter 2024, as reported by TimberMart-South. In general, Southern log supply remains ample and mills continue to align capacity with end-market demand.

Currency exchange rates, available supply from other countries and trade policy affect our export businesses. During first quarter 2025, end use demand in export markets moderated. In Japan, total housing starts decreased 1.1 percent year to date through February compared to the same period in 2024, while the key Post and Beam segment saw a 2.1 percent decrease. The slowing demand was partially offset by a decrease in lumber imports to Japan from Europe and reduced inventories of European lumber in the Japanese market. In China, log demand moderated in the quarter in response to reduced consumption during the Lunar New Year holiday. In early March, Chinese regulators announced an immediate suspension of log imports from the U.S.

Interest rates affect our business primarily through their impact on mortgage rates and housing affordability, their general impact on the economy and their influence on our capital management activities. Actions by the U.S. Federal Reserve, the overall condition of the economy and fluctuations in financial markets are all factors that influence long-term interest rates. 30-year mortgage rates, which are correlated with long-term interest rates, decreased from 6.9 percent in fourth quarter 2024 to 6.7 percent in first quarter 2025, according to economic data from Freddie Mac. Many builders have been able to offset higher mortgage rates through discounts, mortgage rate buydowns and modifying product offerings such as home sizes and finishes. Higher rates have also locked-in many existing homeowners from selling, thereby reducing inventories of existing homes for sale which has led to demand for available new homes.

Increased inflation affects the cost of our operations across each of our business segments, including costs for raw materials, transportation, energy and labor. The Consumer Price Index increased at an annual rate of 2.4 percent as of March 2025 compared to 2.9 percent in December 2024. This rate is markedly down from its peak of over 9.0 percent in June 2022. While we can offset some of the impacts of inflation through our sales activities, operational excellence initiatives and procurement practices, not all costs associated with inflation can be fully mitigated or passed on to the customer.

The condition of the labor market affects all of our businesses as it relates to our ability to attract and retain employees and contractors. The unemployment rate increased slightly from 4.1 percent in fourth quarter 2024 to 4.2 percent in first quarter 2025.

Governments and businesses across the globe are taking action on climate change and are making significant commitments toward decarbonizing operations and reducing greenhouse gas emissions to net zero. Achieving these commitments will require governments and companies to take major steps to modify operations, invest in low-carbon activities and purchase credits to reduce environmental impacts. We believe we are uniquely positioned to help entities achieve these commitments through natural climate solutions, including forest carbon sequestration, carbon capture and storage and renewable energy activities.

CONSOLIDATED RESULTS

How We Did First Quarter 2025

DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER-SHARE FIGURES

Comparing First Quarter 2025 with First Quarter 2024

Net sales

Net sales decreased $33 million – 2 percent – primarily due to a $15 million decrease in Wood Products net sales attributable to decreased sales realizations across most product lines, partially offset by increased structural lumber sales, as well as a $13 million decrease in Real Estate & ENR net sales attributable to a decrease in acres sold.

Costs of sales

Costs of sales decreased $13 million – 1 percent – primarily due to a decrease in acres sold in our Real Estate & ENR segment, as well as decreased Western sales volumes and export log freight costs in our Timberlands segment, partially offset by increased structural lumber sales volumes in our Wood Products segment.

Operating income

Operating income decreased $17 million – 9 percent – primarily due to a $20 million decrease in consolidated gross income (see discussion of components above).

Net earnings

Net earnings decreased $31 million – 27 percent – primarily due to the $17 million decrease in operating income discussed above, as well as an $11 million decrease in interest income and other and an $8 million increase in non-operating pension and other post-employment benefit costs. These changes were partially offset by a $4 million decrease in income tax expense.

TIMBERLANDS

How We Did First Quarter 2025

DOLLAR AMOUNTS IN MILLIONS

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

Comparing First Quarter 2025 with First Quarter 2024

Net sales to unaffiliated customers

Net sales to unaffiliated customers decreased $5 million – 1 percent – primarily due to a $7 million decrease in Western log sales attributable to a 2 percent decrease in sales volumes and sales realizations. This decrease was partially offset by a $1 million increase in Northern log sales attributable to a 10 percent increase in sales volumes, partially offset by a 3 percent decrease in sales realizations.

Intersegment sales

Intersegment sales increased $18 million – 13 percent – primarily due to a 13 percent increase in sales volumes.

Costs of sales

Costs of sales decreased $6 million – 1 percent – primarily due to decreased Western sales volumes and export log freight costs.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings increased $22 million – 28 percent – primarily due to the change in the components of gross margin, as discussed above.

Third-Party Log Sales Volumes and Fee Harvest Volumes

VOLUMES IN THOUSANDS

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

REAL ESTATE, ENERGY AND NATURAL RESOURCES

How We Did First Quarter 2025

DOLLAR AMOUNTS IN MILLIONS

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, 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 price per acre will vary based on the location and physical characteristics of parcels sold.

Comparing First Quarter 2025 with First Quarter 2024

Net sales

Net sales decreased $13 million – 12 percent – primarily due to a decrease in acres sold, partially offset by an increase in average price per acre sold.

Costs of sales

Costs of sales decreased $9 million – 22 percent – primarily due to a decrease in acres sold.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings decreased $4 million – 7 percent – primarily due to the change in the components of gross margin, as discussed above.

REAL ESTATE SALES STATISTICS

19

WOOD PRODUCTS

How We Did First Quarter 2025

DOLLAR AMOUNTS IN MILLIONS

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

Comparing First Quarter 2025 with First Quarter 2024

Net sales

Net sales decreased $15 million – 1 percent – primarily due to:

• a $27 million decrease in oriented strand board sales attributable to a 12 percent decrease in sales realizations, partially offset by a 1 percent increase in sales volumes;
• a $16 million decrease in engineered solid section sales attributable to a 6 percent decrease in sales realizations, as well as a 2 percent decrease in sales volumes;
• a $16 million decrease in complementary building products sales attributable to decreased sales volumes across most products;
• an $11 million decrease in engineered I-joist sales attributable to a 5 percent decrease in sales volumes and sales realizations and
• a $7 million decrease in medium density fiberboard sales attributable to an 18 percent decrease in sales volumes, as well as a 2 percent decrease in sales realizations.

These decreases were partially offset by a $63 million increase in structural lumber sales attributable to an 8 percent increase in sales realizations and a 5 percent increase in sales volumes.

Costs of sales

Costs of sales increased $7 million – 1 percent – primarily due to increased sales volumes for structural lumber and oriented strand board.

Operating income and Net contribution to earnings

Operating income and net contribution to earnings decreased $22 million – 17 percent – primarily due to the change in the components of gross margin, as discussed above.

Third-Party Sales Volumes

(1) Sales volumes include 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.

VOLUMES IN MILLIONS

21

UNALLOCATED ITEMS

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.

Net Charge to Earnings – Unallocated Items

DOLLAR AMOUNTS IN MILLIONS

Comparing First Quarter 2025 with First Quarter 2024

Net charge to earnings increased $32 million – 48 percent – primarily due to:

• a $12 million increase in the charge for elimination of intersegment profit in inventory and LIFO;
• an $11 million decrease in interest income and other, primarily attributable to a decrease in cash and cash equivalents and
• an $8 million increase in non-operating pension and other post-employment benefit costs.

INTEREST EXPENSE

Our interest expense, net of capitalized interest, was:

• $66 million for first quarter 2025 and
• $67 million for first quarter 2024.

Interest expense decreased by $1 million compared to first quarter 2024 primarily due to debt retirements and a debt issuance in first quarter 2025 that slightly decreased our average outstanding debt and weighted average interest rate.

INCOME TAXES

Our provision for income taxes was:

• a $16 million expense for first quarter 2025 and
• a $20 million expense for first quarter 2024.

Our provision for income taxes is primarily driven by earnings generated by our TRSs. Income tax expense decreased by $4 million compared to first quarter 2024 primarily due to a decrease in our overall earnings in first quarter 2025.

Refer to Note 14: Income Taxes for further information.

LIQUIDITY AND CAPITAL RESOURCES

We are committed to maintaining an appropriate capital structure that provides financial 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 March 31, 2025, we had $560 million in cash and cash equivalents and $1.5 billion of availability on our line of credit, which expires in March 2028. We believe we have sufficient liquidity to meet our cash requirements for the foreseeable future.

CASH FROM OPERATIONS

Consolidated net cash from operations was:

• $70 million for first quarter 2025 and
• $124 million for first quarter 2024.

Net cash from operations decreased $54 million primarily due to decreased cash inflows from our business operations, as well as an $11 million increase in cash paid for income taxes.

CASH FROM INVESTING ACTIVITIES

Consolidated net cash from investing activities was:

• $(97) million for first quarter 2025 and
• $(77) million for first quarter 2024.

Net cash from investing activities decreased $20 million primarily due to a $14 million increase in cash paid for capital expenditures.

Summary of Capital Spending by Business Segment

DOLLAR AMOUNTS IN MILLIONS

During fourth quarter 2024, we announced our plan to invest approximately $500 million to build a new TimberStrand® facility in Monticello, Arkansas. This capital outlay may be sourced from cash on hand or through future financing, as deemed appropriate. Construction began in 2025, with the goal of starting operations in 2027. Once completed, the new facility will increase our engineered wood products capacity by approximately 10 million cubic feet.

We anticipate our capital expenditures for 2025 to be approximately $440 million, excluding the investment in our Monticello engineered wood products facility. The amount we spend on capital expenditures could change.

CASH FROM FINANCING ACTIVITIES

Consolidated net cash from financing activities was:

• $(97) million for first quarter 2025 and
• $(308) million for first quarter 2024.

Net cash from financing activities increased $211 million primarily due to:

• a $299 million increase in net proceeds from issuance of long-term debt,
• a $96 million decrease in cash paid for dividends and
• a $25 million decrease in cash used for repurchases of common stock.

These changes were partially offset by a $210 million increase in payments on long-term debt.

Line of Credit

We had no outstanding borrowings on our $1.5 billion five-year senior unsecured revolving credit facility as of March 31, 2025 or December 31, 2024. This credit facility expires in March 2028.

Refer to Note 8: Long-Term Debt and Line of Credit for further information.

Long-Term Debt

During first quarter 2025, we repaid our $139 million 8.50 percent debentures and our $71 million 7.95 percent debentures at maturity. We also entered into a $300 million senior unsecured term loan that will mature in March 2030. Net proceeds after fees were $299 million. Borrowings will bear interest at a floating rate based on either the adjusted term SOFR plus a spread or a mutually agreed upon base rate plus a spread.

Refer to Note 8: Long-Term Debt and Line of Credit for further information.

Debt Covenants

As of March 31, 2025, Weyerhaeuser Company was in compliance with its debt covenants. There have been no significant changes to the debt covenants presented in our 2024 Annual Report on Form 10-K for our long-term debt instruments, and we expect to remain in compliance with our debt covenants for the foreseeable future.

Dividend Payments

We paid cash dividends on common shares of:

• $152 million for first quarter 2025 and
• $248 million for first quarter 2024.

The decrease in dividends paid is primarily due to a supplemental dividend of $0.14 per share based on 2023 financial results for a total of $102 million paid in first quarter 2024.

Under our cash return framework, we plan to supplement our base dividend with an additional return of variable cash, as appropriate, in the form of a supplemental cash dividend and/or share repurchase to achieve a targeted total return to shareholders of 75 to 80 percent of annual Adjusted Funds Available for Distribution (Adjusted FAD). For further information on Adjusted FAD see Performance and Liquidity Measures.

Share Repurchases

We repurchased 845,049 common shares for approximately $25 million (including transaction fees) during first quarter 2025 under the 2021 Repurchase Program. During first quarter 2024, we repurchased 1,472,369 common shares for approximately $49 million (including transaction fees) under the 2021 Repurchase Program. There were no unsettled shares as of March 31, 2025 and 12,436 unsettled shares (less than $1 million) as of December 31, 2024. Refer to Note 4: Net Earnings Per Share and Share Repurchases for further information.

PERFORMANCE AND LIQUIDITY 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, including those in our industry. Adjusted EBITDA, as we define it, is operating income adjusted for depreciation, depletion, amortization, basis of real estate sold and special items.

DOLLAR AMOUNTS IN MILLIONS

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 March 31, 2025:

DOLLAR AMOUNTS IN MILLIONS

The table below reconciles Adjusted EBITDA for the quarter ended March 31, 2024:

DOLLAR AMOUNTS IN MILLIONS

Adjusted FAD

We use Adjusted Funds Available for Distribution (Adjusted FAD) to evaluate the company’s liquidity and measure cash generated during the period (net of capital expenditures and significant non-recurring items) that is available for dividends, repurchases of common shares, debt reduction, acquisitions and other discretionary and nondiscretionary capital allocation activities. Adjusted FAD should not be considered in isolation from, and is not intended to represent an alternative to, our results reported in accordance with U.S. GAAP. However, we believe the measure provides meaningful supplemental information for investors about our liquidity. Adjusted FAD, as we define it, is net cash from operations adjusted for capital expenditures and significant non-recurring items. Our definition of Adjusted FAD may be different from similarly titled measures reported by other companies, including those in our industry. We reconcile Adjusted FAD to net cash from operations, as that is the most directly comparable U.S. GAAP measure.

The table below reconciles Adjusted FAD to net cash from operations:

DOLLAR AMOUNTS IN MILLIONS

25

CRITICAL ACCOUNTING ESTIMATES

There have been no material changes during first quarter 2025 to the critical accounting estimates presented in our 2024 Annual Report on Form 10-K.

LONG-TERM DEBT OBLIGATIONS

The following summary of our long-term debt 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 long-term debt based on quoted market prices we receive 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 Debt Obligations as of March 31, 2025

DOLLAR AMOUNTS IN MILLIONS

(1) Excludes $38 million of unamortized discounts and capitalized debt expense.

(2) As of March 31, 2025, the weighted average interest rate for our variable-rate debt was 6.27 percent, excluding estimated patronage refunds.

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 Securities Exchange Act of 1934, as amended (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 March 31, 2025, 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 first quarter 2025 that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.