Senior Vice President and Chief Financial Officer at Weyerhaeuser
Thank you, Devin. And good morning, everyone. It's a pleasure to be speaking with you all today and an honor to be serving as the CFO during such an exciting time in our company's history. I look forward to capitalizing on the opportunities in front of us and working with our incredible teams to continue driving growth for our businesses and superior long-term value for our shareholders.
This morning, I will be covering key financial items and second quarter financial performance before moving into our third quarter outlook. I'll begin with key financial items, which are summarized on page 16.
We generated over $1.1 billion of cash from operations in the second quarter and more than $2.1 billion year-to-date. This represents our highest first half operating cash flow on record, surpassing the previous record established just last year. We ended the quarter with approximately $1.7 billion of cash and cash equivalents, and total debt of just over $5 billion.
Capital expenditures for the quarter were $81 million, which is a typical level for the second quarter. We returned $138 million to shareholders through share repurchase activity. These shares were repurchased at an average price of $36.23. And as of quarter-end, we had approximately $670 million of remaining capacity under our $1 billion share repurchase program. We will continue to leverage our flexible cash return framework and look to repurchase shares opportunistically.
We also returned $134 million to shareholders through the payment of our quarterly base dividend, which was increased in the first quarter by 5.9% to $0.18 per share.
Adjusted funds available for distribution for the second quarter totaled $1.1 billion, as highlighted on page 18, and we have generated over $1.9 billion of adjusted FAD year-to-date. As a reminder, we will supplement our base dividends each year with an additional return of cash to achieve the targeted annual payout of 75% to 80% of adjusted FAD.
As demonstrated in 2021, we have the flexibility in our framework to return this additional cash in the form of a supplemental dividend or a combination of supplemental dividend and opportunistic share repurchase.
Second quarter results for our unallocated items are summarized on page 15. Adjusted EBITDA for this segment increased by $66 million compared to the first quarter. This increase was primarily attributable to an $18 million non-cash benefit for the elimination of inter-segment profit in inventory and LIFO in the second quarter compared to a $59 million non-cash charge in the prior quarter. The benefit was driven by a decrease in log and lumber inventories from elevated levels at the end of the first quarter.
Key outlook items for the third quarter are presented on page 19. In our timberlands business, we expect third quarter earnings before special items and adjusted EBITDA will be lower than the second quarter, but moderately higher than the third quarter of 2021.
Turning to our western timberlands operations. Domestic log demand was favorable at the outset of the third quarter, particularly in Oregon, as mills sought to bolster inventories prior to wildfire season.
Log supply has improved following a period of unseasonably wet weather in the second quarter and is expected to remain elevated for the majority of the third quarter. As a result, we expect our domestic log sales realizations to be moderately lower into the third quarter, absent fire-related disruptions in the region.
Forestry and road costs are expected to be seasonally higher and per unit log and haul costs are expected to be lower as fuel prices have decreased. We anticipate our fee harvest volumes will be comparable to the second quarter.
Moving to the export markets. In Japan, demand for our logs is expected to soften in the third quarter due to a number of factors, including a recent increase of European lumber imports into Japan and a weakening Japanese housing market. As a result, our Japanese log sales realizations are expected to decrease moderately from the second quarter and sales volumes are expected to decrease significantly.
In China, although log consumption has improved slightly as pandemic-related lockdowns have eased, log demand is expected to soften in the third quarter, resulting from elevated log inventories at the ports and a reduction in construction activity during the summer rainy season.
As a result, our sales realizations on log imports into China are expected to be moderately lower compared to the second quarter. We anticipate our sales volumes will be lower as we continue to flex logs to our domestic customers to capture the highest margin.
In the south, log demand in the third quarter is expected to remain stable as the mills continue to mitigate risks from ongoing transportation challenges by maintaining elevated inventories. As a result, we expect our sales realizations to be comparable to the second quarter. We anticipate our fee harvest volumes will be moderately higher in the third quarter as weather conditions remain favorable. Forestry and road costs are expected to be seasonally higher, and we anticipate comparable per unit log and haul costs.
In the north, sales realizations are expected to be moderately lower due to mix. Fee harvest volumes are expected to be significantly higher compared to the second quarter as we have fully transitioned from spring breakup conditions.
Turning to Real Estate, Energy & Natural Resources. Consistent with prior years, we expect our real estate activity will be heavily weighted towards the first half of the year. We expect third quarter earnings and adjusted EBITDA will be slightly lower than the third quarter of 2021 due to a decrease in acres sold year-over-year.
As Devin mentioned, real estate markets have remained strong year-to-date, and we have capitalized on strong demand and pricing for HBU properties. As a result, we are revising our guidance for full-year 2022 adjusted EBITDA to $325 million, an increase of $25 million from prior guidance. Additionally, we now expect basis as a percentage of real estate sales to be 30% to 40% for the year.
For our Wood Products segment, we expect third quarter earnings and adjusted EBITDA will be comparable to the second quarter, excluding the effects of changes in average sales realizations for lumber and oriented strand board.
Following a substantial reduction in pricing during the second quarter, benchmark prices for lumber and OSB entered the third quarter having stabilized as buyers reentered the market to bolster lean inventories. This dynamic continued throughout July, resulting in a steady increase in benchmark prices for both products.
As shown on page 21, for both lumber and OSB, our current and quarter-to-date realizations are significantly lower than the second quarter averages. For our lumber business, we expect comparable sales volumes in the third quarter and moderately lower log costs. Unit manufacturing costs are expected to be comparable. For our oriented strand board business, we expect slightly lower sales volumes and significantly higher unit manufacturing costs due to planned annual maintenance outages. Fiber costs are expected to be comparable.
For our engineered wood products business, we expect significantly lower raw material costs, primarily for OSB webstock. We anticipate this will be partially offset by lower sales realizations, primarily for plywood products. Sales realizations for our solid section and I-joist products are expected to be comparable. Our sales volumes are expected to be comparable to the second quarter and unit manufacturing costs will be slightly higher as a result of planned annual maintenance outages in the third quarter.
For our distribution business, we are expecting adjusted EBITDA to be lower than the second quarter due to lower sales realizations for most products.
I'll wrap up with a few additional comments on our total company financial items, all of which are summarized in our full-year 2022 outlook update on page 20. As a result of the debt refinancing transactions executed in the first quarter, we now expect our full-year interest expense to be $275 million, a $30 million decrease from prior guidance.
Each year in the second quarter, we finalized prior year-end estimates for pension assets and liabilities. As a result, we recorded a $67 million improvement in our net funded status as well as a reduction in our non-cash, non-operating pension and post-employment expense.
Finally, we now anticipate our full-year outlook for capital expenditures to be $460 million due primarily to the acceleration of equipment orders with extended lead times for future planned capital projects. There is no change to our previously announced multi-year guidance of $420 million to $440 million of annual capital expenditures for 2023 through 2025.
With that, I'll now turn the call back to Devin, and I look forward to your questions.