WEYERHAEUSER CO (WY) FY 2022 MD&A

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

WHAT YOU WILL FIND IN THIS MD&A

Our MD&A includes the following major sections:

For Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) related to the year ended December 31, 2020, refer to this same section in our 2021 annual report on Form 10-K as filed with the Securities and Exchange Commission on February 18, 2022.

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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, impacts from any future restrictions related to COVID-19 or other viral or similar outbreak, 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, 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 wood-burning pellets made from pulpwood. The 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.

While underlying longer-term fundamentals remain favorable for construction of new housing in the U.S., home sales and building activity have slowed due in part to higher mortgage interest rates, reduced affordability and general macroeconomic conditions. On a seasonally adjusted annual basis, as reported by the U.S. Census Bureau, housing starts for fourth quarter 2022 averaged 1.4 million units, a 3.2 percent decrease from third quarter 2022. Single family starts averaged 0.9 million units, a 4.8 percent decrease from third quarter 2022. Multi-family starts averaged 541 thousand units in fourth quarter 2022, which was a 0.6 percent decrease from third quarter 2022. Sales of newly built, single family homes averaged a seasonally adjusted annual rate of 605 thousand units for fourth quarter 2022, an increase of 4.4 percent from the prior quarter. Over the medium to long-term, we expect continued strength in the U.S. housing construction market, supported by strong demographics in the key homebuying age cohorts, a decade of underbuilding and an aging housing stock.

Repair and remodeling expenditures decreased by 0.8 percent from third quarter 2022 to fourth quarter 2022 according to the Census Bureau Advance Retail Spending report. Do-it-yourself activity has been returning to more normalized levels while professionally contracted activities have benefited from larger projects and increases in home equity levels. Over the longer term, we expect this sector to return to pre-pandemic growth trends with healthy household balance sheets, elevated home equity and a U.S. housing stock median age of 43 years.

In U.S. wood product markets, demand felt the effects of a slowing housing market and more uncertain economic environment over most of fourth quarter 2022. The Random Lengths Framing Lumber Composite price averaged $452/MBF and the OSB Composite averaged $360/MSF in fourth quarter 2022. Over the course of the fourth quarter, prices declined from $512/MBF to $380/MBF for lumber and from $402/MSF to $288/MSF for OSB.

In Western log markets, Douglas fir sawlog prices fell by 7.4 percent in fourth quarter 2022 compared with third quarter 2022 as reported by RISI Log Lines based on Weyerhaeuser’s portfolio mix. Overall, domestic prices in the West fell moderately, as mills felt the effects of lower lumber prices, partially offset by continued constraints in log supply. In the South, delivered sawlog prices increased by 1.2 percent in fourth quarter 2022 compared to third quarter 2022 and 4.6 percent from fourth quarter 2021 as reported by Timber Mart-South, as mills are carrying higher inventories to mitigate log and haul capacity constraints.

Currency exchange rates, available supply from other countries and trade policy affect our export businesses. During fourth quarter 2022, end use demand softened in export markets, partially offset by continued disruptions in global log and lumber supply. In Japan, total housing starts increased 0.8 percent year to date through November compared to the same period in 2021, while the key Post and Beam segment saw a 4.0 percent decrease. An increase in lumber imports from Europe to Japan placed downward pressure on market conditions. China demand was held back by zero COVID-19 policies and general economic conditions, but constraints of supply sources from other countries, particularly Russia, supported demand from U.S. producers.

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 6.7 percent at the end of third quarter 2022 to 6.4 percent at the end of the fourth quarter. While mortgage rates fell over the quarter and from a high of over 7 percent in November, the rapid increase in mortgage rates since the end of 2021 has had a negative impact on home affordability and reduced demand for homebuying.

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 6.5 percent year over year in December 2022, primarily due to demand and supply for goods and services, fluctuations in labor markets, and monetary policy set by the U.S. Federal Reserve. While we can offset some of the impacts of inflation through our sales activities, our operational excellence initiatives and our procurement practices, not all of the costs associated with inflation can be fully mitigated or passed on to the consumer.

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 of 3.5 percent in December 2022 remained near historically low levels and was unchanged from the end of the third quarter.

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Labor force participation has increased to 62.3 percent in December 2022, from 61.9 percent in December 2021, but this remains below pre-pandemic levels of over 63 percent.

Governments and businesses across the globe are taking action on climate change and are making significant commitments towards 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 offsets to reduce environmental impacts. We believe we are uniquely positioned to help entities achieve these commitments through natural climate solutions, including forest carbon sequestration and carbon capture and storage activities.

In mid-September 2022, Weyerhaeuser employee members of the International Association of Machinists and Aerospace Workers union commenced a work stoppage affecting the company’s operations in Washington and Oregon. The stoppage involved approximately 1,200 employees and affected four lumber mills in our Wood Products segment and a portion of our Western Timberlands operations. This event had a negative impact on our operations for the third and fourth quarter, including reductions in fee harvest volumes and sale volumes for Western Timberlands, as well as reductions in production volumes and sales volumes for our lumber business. On October 28, 2022, the company announced the successful resolution of the work stoppage and resumed operations.

FINANCIAL PERFORMANCE SUMMARY

Net Sales by Segment

Contribution to Earnings by Segment

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RESULTS OF OPERATIONS

In reviewing our results of operations, it is important to understand these terms:

CONSOLIDATED RESULTS

HOW WE DID

Summary of Financial Results

COMPARING 2022 WITH 2021

Net Sales

Net sales decreased $17 million — less than 1 percent — primarily due to a $263 million decrease in Wood Products net sales to unaffiliated customers, primarily attributable to decreased sales volumes across most product lines and decreased realizations for structural lumber and oriented strand board.

This decrease was partially offset by a $222 million increase in Timberlands net sales to unaffiliated customers, primarily due to increased sales realizations in the Western and Southern regions.

Costs of Sales

Costs of sales increased $461 million — 8 percent — primarily due to increased freight and raw material costs within our Wood Products segment, as well as increased logging and hauling costs and increased third party log purchase costs within our Timberlands segment.

Operating Income

Operating income decreased $563 million — 15 percent — primarily due to a $478 million decrease in consolidated gross margin (see discussion of components above).

Net Earnings

Net earnings decreased $727 million — 28 percent — primarily due to:

These decreases were partially offset by a $284 million decrease in income tax expense, as well as a $43 million decrease in interest expense (refer to Income Taxes and Interest Expense).

TIMBERLANDS

HOW WE DID

We report sales volumes and annual production data for our Timberlands segment in Our Business/What We Do/Timberlands.

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Net Sales and Net Contribution to Earnings for Timberlands

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

COMPARING 2022 WITH 2021

Net Sales — Unaffiliated Customers

Net sales to unaffiliated customers increased $222 million — 14 percent — primarily due to a $135 million increase in Western log sales attributable to a 14 percent increase in sales realizations and a 1 percent increase in sales volumes, as well as a $56 million increase in Southern log sales attributable to an 8 percent increase in sales realizations and a 2 percent increase in sales volumes.

Intersegment Sales

Intersegment sales increased $26 million — 5 percent — primarily due to a 13 percent increase in sales realizations, partially offset by a 7 percent decrease in sales volumes.

Costs of Sales

Costs of sales increased $146 million — 9 percent — primarily due to increased logging and hauling costs, as well as increased third party log purchase costs.

Operating Income and Net Contribution to Earnings

Operating income and net contribution to earnings increased $64 million — 14 percent — primarily due to the change in the components of gross margin, as discussed above, partially offset by a $32 million gain on sale of timberlands recorded in third quarter 2021.

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REAL ESTATE, ENERGY AND NATURAL RESOURCES

HOW WE DID

We report acres sold and average price per acre for our Real Estate, Energy and Natural Resources segment in Our Business/What We Do/Real Estate, Energy and Natural Resources.

Net Sales and Net Contribution to Earnings for Real Estate, Energy and Natural Resources

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 expectations 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 2022 WITH 2021

Net Sales

Net sales increased $24 million — 7 percent — primarily attributable to an increase in royalty income from our Energy and Natural Resources business.

Costs of Sales

Costs of sales increased $4 million — 4 percent — primarily attributable to an increase in acres sold.

Operating Income and Net Contribution to Earnings

Operating income and net contribution to earnings increased $8 million — 4 percent — attributable to the change in the components of gross margin, as discussed above, partially offset by a $10 million noncash impairment charge related to the planned divestiture of legacy coal assets.

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WOOD PRODUCTS

HOW WE DID

We report sales volumes and annual production data for our Wood Products segment in Our Business/What We Do/Wood Products.

Net Sales and Net Contribution to Earnings for Wood Products

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

COMPARING 2022 WITH 2021

Net Sales

Net sales decreased $263 million — 3 percent — primarily due to:

These decreases were partially offset by:

Costs of Sales

Costs of sales increased $358 million — 7 percent — primarily due to increased freight and raw material costs, partially offset by lower sales volumes.

Operating Income and Net Contribution to Earnings

Operating income and net contribution to earnings decreased $675 million — 21 percent — primarily due to the change in the components of gross margin, as discussed above.

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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:

Net Charge to Earnings for Unallocated Items

Net charge to earnings increased by $175 million — 68 percent — primarily due to a $235 million increase in non-operating pension and other post-employment benefit costs primarily attributable to a $205 million pension settlement charge (refer to Note 9: Pension and Other Post-Employment Benefit Plans).

This increase was partially offset by:

INTEREST EXPENSE

Our net interest expense incurred for the last two years was:

Interest expense decreased by $43 million compared to 2021 primarily due to decreases in the average outstanding debt and weighted average interest rate.

Refer to Note 12: Long-Term Debt, Net for further information.

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INCOME TAXES

As a REIT, we generally are not subject to federal corporate level income taxes on REIT taxable income that is distributed to shareholders. Historical distributions to shareholders, including amounts and tax characteristics, are summarized in the table below.

We are required to pay corporate income taxes on earnings of our TRSs, which include our Wood Products segment and portions of our Timberlands and Real Estate & ENR segments' earnings. Our provision for income taxes is primarily driven by earnings generated by our TRSs.

Our provision for income taxes the last two years was:

Income tax expense decreased by $284 million compared to 2021 due to decreases in our pretax earnings and effective income tax rate. We recorded a $69 million tax benefit related to the premiums paid in connection with our early debt retirement and a $53 million tax benefit related to our noncash pension settlement charge during 2022.

Refer to Note 20: Income Taxes, Note 12: Long-Term Debt, Net and Note 9: Pension and Other Post-Employment Benefit Plans 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 December 31, 2022, we had $1.6 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:

COMPARING 2022 WITH 2021

Net cash from operations decreased by $327 million, primarily due to decreased cash inflows from our Wood Products segment.

This change was partially offset by a $43 million decrease in cash paid for income taxes, as well as a $32 million decrease in cash used for interest payments.

Pension Contributions and Benefit Payments Made and Expected

During 2022, we contributed a total of $24 million to our pension and post-employment plans, compared to a total of $59 million during 2021.

For 2023, we expect to contribute approximately $25 million to our pension and post-employment benefit plans. Refer to Note 9: Pension and Other Post-Employment Benefit Plans for further information.

INVESTING IN OUR BUSINESS

Cash from investing activities includes items such as:

Consolidated net cash from investing activities was:

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COMPARING 2022 WITH 2021

Net cash from investing activities decreased by $434 million, primarily due to:

Summary of Capital Spending by Business Segment

We expect our capital expenditures for 2023 to be approximately $440 million. The amount we spend on capital expenditures could change due to:

FINANCING

Cash from financing activities includes items such as:

Consolidated net cash from financing activities was:

COMPARING 2022 WITH 2021

Net cash from financing activities decreased $1,161 million in 2022, primarily due to:

LONG-TERM DEBT

Our consolidated long-term debt (including current portion) was:

The decrease in our long-term debt during 2022 is primarily attributable to the retirement of $592 million of our 7.375 percent notes, $161 million of our 8.500 percent notes, $73 million of our 7.125 percent notes, $65 million of our 7.950 percent notes and $40 million of our 7.850 percent notes, offset by the March 2022 issuance of $450 million of 3.375 percent notes and $450 million of 4.000 percent notes.

The weighted average interest rate and the weighted average maturity on our long-term debt as of December 31, 2022 were 5.36 percent and 8.1 years, respectively.

We have $118 million and $860 million of long-term debt scheduled to mature during third and fourth quarter 2023, respectively.

See Note 12: Long-Term Debt, Net for more information.

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LINE OF CREDIT

In January 2020, we refinanced and extended our $1.5 billion five-year senior unsecured revolving credit facility, which expires in January 2025. As of December 31, 2022 and December 31, 2021, we had no outstanding borrowings on the revolving credit facility and we were in compliance with the revolving credit facility covenants.

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. We plan to transition our revolving credit facility to an alternate reference rate prior to the cessation of LIBOR. We have included provisions in our revolving credit agreement that specifically contemplate the transition from LIBOR to a replacement benchmark rate.

Our Covenants

Our key covenants include the requirement to maintain:

Our total adjusted shareholders' equity is comprised of:

Our capitalization is comprised of:

As of December 31, 2022, we had:

When calculating compliance in accordance with financial debt covenants as of December 31, 2022 and December 31, 2021, we excluded the full amount of accumulated other comprehensive loss of $247 million and $479 million, respectively. See Note 15: Shareholders’ Interest for further information on accumulated other comprehensive loss.

There are no other significant financial debt covenants related to our third-party debt.

CREDIT RATINGS

As of December 31, 2022, our long-term issuer credit rating was BBB and Baa2 from S&P and Moody’s, respectively.

OPTION EXERCISES

Our cash proceeds from the exercise of stock options were:

Our average stock price was $35.67 and $36.06 in 2022 and 2021, respectively.

DIVIDENDS

We paid cash dividends on common shares of:

The increase in dividends paid is primarily due to the supplemental dividend of $1.1 billion paid in the first quarter of 2022 based on 2021 financial results, partially offset by the interim supplemental dividend of $375 million paid in the fourth quarter of 2021. On January 26, 2023, our board of directors declared a supplemental dividend of $0.90 per share based on 2022 financial results. The dividend is payable on February 27, 2023 to shareholders of record as of the close of business on February 15, 2023.

SHARE REPURCHASES

We repurchased 16.0 million common shares for approximately $550 million (including transaction fees) during the year ended December 31, 2022. We repurchased over 2.7 million common shares for approximately $100 million (including transaction fees) in 2021. As of December 31, 2022, we had remaining authorization of $377 million for future share repurchases. For further information on share repurchases see Note 15: Shareholders’ Interest.

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OUR CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

More details about our contractual obligations and commercial commitments are in Note 9: Pension and Other Post-Employment Benefit Plans, Note 11: Line of Credit, Note 12: Long-Term Debt, Net, Note 14: Legal Proceedings, Commitments and Contingencies and Note 20: Income Taxes.

Significant Contractual Obligations as of December 31, 2022

Significant contractual obligations as of December 31, 2022 include our long-term debt obligations and lease obligations. Refer to Note 12: Long Term Debt, Net and Note 17: Leases, respectively, for further information. Additional significant contractual obligations are included below.

(1)
Amounts presented for interest payments assume that all long-term debt obligations outstanding as of December 31, 2022 will remain outstanding until maturity.

(2)
Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on the company and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions and the approximate timing of the transaction. Purchase obligations exclude arrangements that the company can cancel without penalty.

(3)
The timing of certain payments within this category will be triggered by retirements or other events. These payments can include workers compensation, deferred compensation and banked vacation, among other obligations. When the timing of payment is uncertain, the amounts are included in the total column only. Minimum pension funding is required by established funding standards and estimates are not made for 2024 onward. Estimated payments of contractually obligated post-employment benefits are not included due to the uncertainty of payment timing.

OFF-BALANCE SHEET ARRANGEMENTS

Off-balance sheet arrangements have not had — and are not reasonably likely to have — a material effect on our current or future financial condition, results of operations or cash flows. Note 8: Related Parties and Note 11: Line of Credit contain our disclosures of:

ENVIRONMENTAL MATTERS, LEGAL PROCEEDINGS AND OTHER CONTINGENCIES

See Note 14: Legal Proceedings, Commitments and Contingencies.

ACCOUNTING MATTERS

CRITICAL ACCOUNTING POLICIES

In the preparation of our financial statements we follow established accounting policies and make estimates that affect both the amounts and timing of the recording of assets, liabilities, revenues and expenses. Some of these estimates require judgments about matters that are inherently uncertain. Accounting policies whose application may have a significant effect on the reported results of operations and financial position are considered critical accounting policies.

In accounting, we base our judgments and estimates on:

Actual results, however, may differ from the estimated amounts we have recorded.

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Our most critical accounting policies relate to our:

Details about our other significant accounting policies — what we use and how we estimate — are in Note 1: Summary of Significant Accounting Policies.

DISCOUNT RATES FOR PENSION AND POST-EMPLOYMENT BENEFIT PLANS

Discount rates are used to estimate the net present value of our pension and other post-employment plan obligations. These rates are determined at the measurement date by matching current spot rates of high-quality corporate bonds with maturities similar to the timing of expected cash outflows for benefits. The selection of discount rates requires judgment as well as the involvement of actuarial specialists. These specialists assist with selecting yield curves based on published indices for high-quality corporate bonds and projecting the timing and amount of cash flows associated with our obligations to ultimately support our determination of an appropriate discount rate for each plan.

Our discount rates as of December 31, 2022 are:

Pension expenses for 2023 will be based on the 5.4 percent and 5.3 percent assumed discount rates for the U.S. pension plans and the Canadian pension plans, respectively, and the 5.4 percent and 5.3 percent assumed discount rates for the U.S. and Canadian post-employment benefit plans, respectively.

Our discount rates are important in determining the cost of our plans. A 50 basis point decrease in our discount rate would increase expense or reduce a credit by approximately:

IMPAIRMENT OF LONG-LIVED ASSETS

We review the carrying value of long-lived assets whenever an event or a change in circumstance indicates that the carrying value of the asset or asset group may not be recoverable through future operations. The carrying value is the original cost, less accumulated depreciation and any past impairments recorded.

If we evaluate recoverability, we are required to estimate future cash flows and residual values of the asset or asset group. Key assumptions used in developing these estimates would include probability of alternative outcomes, product pricing, raw material cost and product sales.

An impairment occurs when the carrying value of a long-lived asset is greater than the amount that could be recovered from the estimated future cash flows of the asset and greater than fair market value (the amount we could receive if we were to sell the asset). Key assumptions used in developing estimates of fair value would include the estimated future cash flows used to assess recoverability, discount rates and probability of alternative outcomes.

CONTINGENT LIABILITIES

We are subject to lawsuits, investigations and other claims related to environmental, product and other matters, and are required to assess the likelihood of any adverse judgments or outcomes to these matters, as well as the amount or range of potential loss.

We record contingent liabilities when:

Assessing probability of loss and estimating the amount of loss can require analysis of multiple factors, such as:

In addition to contingent liabilities recorded for probable losses, we disclose contingent liabilities when there is a reasonable possibility that a loss may have been incurred.

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Recorded contingent liabilities are based on the best information available and actual losses in any future period are inherently uncertain. If estimated probable future losses or actual losses exceed our recorded liability for such claims, we record additional charges. These exposures and proceedings can be significant and the ultimate negative outcomes could be material to our operating results or cash flows in any given quarter or year. See Note 14: Legal Proceedings, Commitments and Contingencies for more information.

PROSPECTIVE ACCOUNTING PRONOUNCEMENTS

A summary of prospective accounting pronouncements is in Note 1: Summary of Significant Accounting Policies.

PERFORMANCE MEASURES

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 our 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.

Adjusted EBITDA by Segment

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 by segment to net earnings for the year ended December 31, 2022:

(1)
Loss on debt extinguishment is a special item consisting of a pretax charge of $276 million related to early debt retirement.

(2)
Operating income (loss) for Real Estate & ENR includes a pretax special item consisting of a $10 million noncash impairment charge related to the planned divestiture of legacy coal assets.

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The table below reconciles Adjusted EBITDA by segment to net earnings for the year ended December 31, 2021:

(1)
Operating Income (loss) for Timberlands includes a pretax special item consisting of a $32 million gain on sale of timberlands.

(2)
Operating income (loss) for Wood Products includes pretax special items consisting of a $37 million product remediation insurance recovery and a $13 million insurance recovery.

(3)
Operating income (loss) for Unallocated Items includes a pretax special item consisting of a $15 million noncash legal benefit.

We also reconcile net earnings before special items to net earnings and net earnings per diluted share before special items to net earnings per diluted share, as those are the most directly comparable U.S. GAAP measures. 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.

The table below reconciles net earnings before special items to net earnings:

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The table below reconciles net earnings per diluted share before special items to net earnings per diluted share: