LOUISIANA-PACIFIC CORP

Previous wording

Demand for our products correlates positively with new home construction and repair and remodeling activity in North America, which historically has been characterized by significant cyclicality. The U.S. Census Bureau reported on July 17, 2024, that actual single-family housing starts were 7% higher for the three months ended June 30, 2024, and 16% higher for the six months ended June 30, 2024, as compared to the same periods in 2023. Actual multi-family housing starts for the three and six months ended June 30, 2024 were about 35% lower as compared to the same periods in 2023. Repair and remodeling activity is difficult to reasonably measure, but many indicators suggest that it has declined modestly year-over-year.

Current wording

Demand for our products correlates positively with new home construction and repair and remodeling activity in North America, which historically has been characterized by significant cyclicality. The U.S. Census Bureau reported on October 18, 2024 that actual single-family housing starts were flat for the three months ended September 30, 2024 and 10% higher for the nine months ended September 30, 2024, as compared to the same periods in 2023. Actual multi-family housing starts for the three and nine months ended September 30, 2024 were 10% and 29% lower, respectively, as compared to the same periods in 2023. Repair and remodeling activity is difficult to reasonably measure, but many indicators suggest that it has declined modestly year-over-year.

Previous wording

OSB is a commodity product, and it is subject to competition from manufacturers worldwide. Product supply is influenced primarily by fluctuations in available manufacturing capacity and imports. The ratio of overall OSB demand to capacity generally drives price. We cannot predict whether the prices of our OSB products will remain at current levels or increase or decrease in the future.

Current wording

OSB is a commodity product, and it is subject to competition from manufacturers worldwide. Product supply is influenced primarily by fluctuations in available manufacturing capacity and imports. The ratio of overall OSB demand to capacity generally drives price. We cannot predict whether the prices of our OSB products will remain at current levels or fluctuate in the future.

Previous wording

In evaluating our business, we utilize non-GAAP financial measures that fall within the meaning of SEC Regulation G and Regulation S-K Item 10(e), which we believe provide users of the financial information with additional meaningful comparison to prior reported results. Non-GAAP financial measures do not have standardized definitions and are not defined by U.S. GAAP. In this quarterly report on Form 10-Q, we disclose income attributed to LP before interest expense, provision for income taxes, depreciation and amortization, and excluding stock-based compensation expense, loss on impairment attributed to LP, business exit charges and credits, product-line discontinuance charges, other operating credits and charges, net, loss on early debt extinguishment, investment income, pension settlement charges, and other non-operating items, as Adjusted EBITDA (Adjusted EBITDA), which is a non-GAAP financial measure. We have included Adjusted EBITDA in this report because we view it as an important supplemental measure of our performance and believe that it is frequently used by interested persons in the evaluation of companies that have different financing and capital structures and/or tax rates. We also disclose income attributed to LP, excluding loss on impairment attributed to LP, business exit charges and credits, product-line discontinuance charges, interest expense outside of normal operations, other operating credits and charges, net, loss on early debt extinguishment, gain (loss) on acquisition, and pension settlement charges, and adjusting for a normalized tax rate, as Adjusted Income (Adjusted Income). We also disclose Adjusted Diluted EPS, which is calculated as Adjusted Income divided by diluted shares outstanding. We believe that Adjusted Diluted EPS and Adjusted Income are useful measures for evaluating our ability to generate earnings and that providing these measures should allow interested persons to more readily compare the earnings for past and future periods. Reconciliations of Adjusted EBITDA, Adjusted Income and Adjusted Diluted EPS to their most directly comparable U.S. GAAP financial measures, net income, income attributed to LP, and income attributed to LP per diluted share, respectively, are presented below.

Current wording

In evaluating our business, we utilize non-GAAP financial measures that fall within the meaning of SEC Regulation G and Regulation S-K Item 10(e), which we believe provide users of the financial information with additional meaningful comparison to prior reported results. Non-GAAP financial measures do not have standardized definitions and are not defined by U.S. GAAP. In this quarterly report on Form 10-Q, we disclose income attributed to LP before interest expense, provision for income taxes, depreciation and amortization, and excluding stock-based compensation expense, loss on impairment attributed to LP, business exit credits and charges, product-line discontinuance charges, other operating credits and charges, net, loss on early debt extinguishment, investment income, pension settlement charges, and other non-operating items, as Adjusted EBITDA (Adjusted EBITDA), which is a non-GAAP financial measure. We have included Adjusted EBITDA in this report because we view it as an important supplemental measure of our performance and believe that it is frequently used by interested persons in the evaluation of companies that have different financing and capital structures and/or tax rates. We also disclose income attributed to LP, excluding loss on impairment attributed to LP, business exit credits and charges, product-line discontinuance charges, interest expense outside of normal operations, other operating credits and charges, net, loss on early debt extinguishment, gain (loss) on acquisition, and pension settlement charges, and adjusting for a normalized tax rate, as Adjusted Income (Adjusted Income). We also disclose Adjusted Diluted EPS, which is calculated as Adjusted Income divided by diluted shares outstanding. We believe that Adjusted Diluted EPS and Adjusted Income are useful measures for evaluating our ability to generate earnings and that providing these measures should allow interested persons to more readily compare the earnings for past and future periods. Reconciliations of Adjusted EBITDA, Adjusted Income and Adjusted Diluted EPS to their most directly comparable U.S. GAAP financial measures, net income, income attributed to LP and income attributed to LP per diluted share, respectively, are presented below.

Previous wording

The following tables present summary data relating to: (i) housing starts within the United States, (ii) our sales volumes, and (iii) our OEE performance. We consider the following items to be key performance indicators for our business because LP’s management uses these metrics to evaluate our business and trends in our industry, measure our performance, and make strategic decisions. We believe that the key performance indicators presented may provide additional perspective and insights when analyzing our core operating performance. These key performance indicators should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the financial measures that were prepared in accordance with U.S. GAAP. These measures may not be comparable to similarly titled performance indicators used by other companies.

Current wording

The following tables present summary data relating to: (i) housing starts within the United States, (ii) our sales volumes, and (iii) our OEE performance. We consider these items to be key performance indicators for our business because LP’s management uses these metrics to evaluate our business and trends in our industry, measure our performance, and make strategic decisions. We believe that the key performance indicators presented may provide additional perspective and insights when analyzing our core operating performance. These key performance indicators should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the financial measures that were prepared in accordance with U.S. GAAP. These measures may not be comparable to similarly titled performance indicators used by other companies.

Previous wording

The following table sets forth housing starts for the three and six months ended June 30, 2024 and 2023 (in thousands):

Current wording

The following table sets forth housing starts for the three and nine months ended September 30, 2024 and 2023 (in thousands):

Previous wording

The following table sets forth sales volumes for the three and six months ended June 30, 2024 and 2023:

Current wording

The following table sets forth sales volumes for the three and nine months ended September 30, 2024 and 2023:

Previous wording

We measure OEE at each of our mills to track improvements in the utilization and productivity of our manufacturing assets. OEE is a composite metric that considers asset uptime (adjusted for capital project downtime and similar events), production rates, and finished product quality. We believe that OEE, when used in conjunction with other metrics, can be a useful measure for evaluating our ability to generate profits, and that providing this measure should allow interested persons to monitor operational improvements. We use a best-in-class target across all LP manufacturing sites that allows us to optimize capital investments, focus maintenance and reliability improvements, and improve overall equipment efficiency. It should be noted that other companies may present OEE data differently, and therefore, as presented by us, OEE data may not be comparable to similarly titled measures reported by other companies.

Current wording

We measure OEE at each of our mills to track improvements in the utilization and productivity of our manufacturing assets. OEE is a composite metric that considers asset uptime (adjusted for capital project downtime and similar events), production rates, and finished product quality. We believe that OEE, when used in conjunction with other metrics, can be a useful measure for evaluating our ability to generate profits, and that providing this measure should allow interested persons to monitor operational improvements. We believe that we use a best-in-class target across all LP manufacturing sites that allows us to optimize capital investments, focus maintenance and reliability improvements, and improve overall equipment efficiency. It should be noted that other companies may present OEE data differently, and therefore, as presented by us, OEE data may not be comparable to similarly titled measures reported by other companies.

Previous wording

OEE for the three and six months ended June 30, 2024 and 2023 for each of our segments is listed below:

Current wording

OEE for the three and nine months ended September 30, 2024 and 2023 for each of our segments is listed below:

Previous wording

Percent changes in average net sales prices and unit shipments for the three and six months ended June 30, 2024, compared to the corresponding periods in 2023, were as follows:

Current wording

Percent changes in average net sales prices and unit shipments for the three and nine months ended September 30, 2024, compared to the corresponding periods in 2023, were as follows:

Previous wording

The year-over-year net sales increase for the Siding segment for the three and six months ended June 30, 2024 reflects increased sales volumes and list price increases.

Current wording

The year-over-year net sales increase for the Siding segment for the three and nine months ended September 30, 2024 reflects increased sales volumes and list price increases.

Previous wording

Second quarter 2024 Adjusted EBITDA increased year-over-year by $46 million, reflecting the impact of the net sales increase and a $5 million net decrease in freight, raw materials, and labor, partially offset by a $7 million increase in mill overhead. For the six months ended June 30, 2024, the year-over-year increase in Adjusted EBITDA of $69 million primarily reflects the impact of the net sales increase.

Current wording

Third quarter 2024 Adjusted EBITDA increased year-over-year by $51 million, primarily reflecting the impacts of the net sales increase and a $5 million increase due to the non-recurrence of a manufacturing press rebuild in 2023. For the nine months ended September 30, 2024, the year-over-year increase in Adjusted EBITDA of $120 million primarily reflects the impact of the net sales increase.

Previous wording

Percent changes in average net sales prices and unit shipments for the three and six months ended June 30, 2024, compared to the corresponding periods in 2023, were as follows:

Current wording

Percent changes in average net sales prices and unit shipments for the three and nine months ended September 30, 2024, compared to the corresponding periods in 2023, were as follows:

Previous wording

Second quarter 2024 net sales for the OSB segment increased year-over-year by $122 million (or 53%), reflecting a $73 million increase in revenue due to higher OSB selling prices and a $40 million increase in sales volumes. For the six months ended June 30, 2024, the year-over-year increase in net sales of $246 million (or 59%) reflects a $135 million increase in revenue due to higher OSB selling prices and a $96 million increase in sales volumes.

Current wording

Third quarter 2024 net sales for the OSB segment decreased year-over-year by $82 million (or 24%), reflecting an $88 million decrease from lower OSB selling prices, partially offset by a $4 million increase in sales volumes. For the nine months ended September 30, 2024, the year-over-year increase in net sales of $164 million (or 22%) reflects a $47 million increase in revenue due to higher OSB selling prices and a $100 million increase in sales volumes.

Previous wording

Adjusted EBITDA for the three and six months ended June 30, 2024 increased year-over-year by $88 million and $174 million, respectively, reflecting the impact of higher OSB prices and sales volumes, partially offset by higher mill-related costs.

Current wording

Adjusted EBITDA for the three months ended September 30, 2024 decreased year-over-year by $87 million, primarily reflecting the impact of lower OSB prices. Adjusted EBITDA for the nine months ended September 30, 2024 increased year-over-year by $87 million, reflecting the impact of higher OSB prices and sales volumes, partially offset by higher mill-related costs.

Previous wording

Percent changes in average net sales price and unit shipments for the three and six months ended June 30, 2024, compared to the corresponding periods in 2023, were as follows:

Current wording

Percent changes in average net sales price and unit shipments for the three and nine months ended September 30, 2024, compared to the corresponding periods in 2023, were as follows:

Previous wording

The year-over-year net sales and Adjusted EBITDA decreases for the LPSA segment for the three and six months ended June 30, 2024 reflect unfavorable currency fluctuations, partially offset by local currency revenues.

Current wording

The year-over-year net sales and Adjusted EBITDA increases for the three months ended September 30, 2024 reflect higher sales volumes offset by unfavorable currency fluctuations. The year-over-year net sales and Adjusted EBITDA decreases for the nine months ended September 30, 2024 reflect lower constant currency selling prices and unfavorable currency fluctuations, partially offset by higher sales volumes.

Previous wording

Our other products segment includes other minor products, services, and closed operations, which do not qualify as discontinued operations. During the second quarter of 2023, we announced the shutdown of our off-site framing operation Entekra Holdings LLC (Entekra). Other net sales were $2 million and $5 million for the three and six months ended June 30, 2024, respectively, as compared to $9 million and $17 million for the corresponding periods in 2023. The year-over-year decrease in other net sales for the three and six months ended June 30, 2024 was primarily due to lower Entekra sales volumes as a result of the aforementioned shutdown. Adjusted EBITDA was $(2) million and $(3) million for the three and six months ended June 30, 2024, respectively, as compared to $(6) million and $(14) million for the corresponding periods in 2023.

Current wording

Our other products segment includes other minor products, services, and closed operations, which do not qualify as discontinued operations. During the second quarter of 2023, we announced the shutdown of our off-site framing operation Entekra Holdings LLC (Entekra). Other net sales were $2 million and $7 million for the three and nine months ended September 30, 2024, respectively, as compared to $4 million and $21 million for the corresponding periods in 2023, respectively. The year-over-year decrease in other net sales for the three and nine months ended September 30, 2024 was primarily due to lower Entekra sales volumes as a result of the aforementioned shutdown. Adjusted EBITDA was $(3) million and $(6) million for the three and nine months ended September 30, 2024, respectively, as compared to $0 million and $(15) million for the corresponding periods in 2023, respectively.

Previous wording

Selling, general, and administrative expenses were $71 million and $140 million for the three and six months ended June 30, 2024, respectively, compared to $66 million and $133 million for the corresponding periods in 2023. The year-over-year increase in selling, general, and administrative expenses was driven by higher employee compensation.

Current wording

Selling, general, and administrative expenses were $75 million and $215 million for the three and nine months ended September 30, 2024, respectively, compared to $58 million and $191 million for the corresponding periods in 2023, respectively. The year-over-year increase in selling, general, and administrative expenses was driven by higher employee compensation and marketing expenses.

Previous wording

We recognized an estimated tax provision of $53 million and $94 million in the three and six months ended June 30, 2024, respectively, as compared to $21 million and $22 million for the corresponding periods in 2023, respectively. Each quarter the income tax accrual is adjusted to the latest estimate and the difference from the previously accrued year-to-date balance is recorded in the current quarter. For 2024, the primary differences between the U.S. statutory rate of 21% and the effective rate relates to state income tax and foreign tax rates. For 2023, the primary difference between the U.S. statutory rate of 21% and the effective rate relates to the $22 million tax expense impact from a change in indefinite reinvestment assertion on Chile and Brazil earnings, which is discussed immediately below.

Current wording

We recognized an estimated tax provision of $23 million and $117 million in the three and nine months ended September 30, 2024, respectively, as compared to $44 million and $66 million for the corresponding periods in 2023, respectively. Each quarter the income tax accrual is adjusted to the latest estimate and the difference from the previously accrued year-to-date balance is recorded in the current quarter. For 2024, the primary differences between the U.S. statutory rate of 21% and the effective rate relates to state income tax. For 2023, the primary difference between the U.S. statutory rate of 21% and the effective rate relates to the $22 million tax expense impact from a change in indefinite reinvestment assertion on Chile and Brazil earnings, which is discussed immediately below.

Previous wording

In the second quarter of fiscal 2023 management changed its intent to no longer assert indefinite reinvestment related to undistributed earnings in Chile and Brazil. As a result, we established a net $22 million deferred tax liability for the expected tax consequences of repatriating all beginning of year cumulative Chile and Brazil earnings, which was recorded as an expense in the second quarter of 2023.

Current wording

In the second quarter of 2023, management changed its intent to no longer assert indefinite reinvestment related to undistributed earnings in Chile and Brazil. As a result, we established a net $22 million deferred tax liability for the expected tax consequences of repatriating all beginning of year cumulative Chile and Brazil earnings, which was recorded as an expense in the second quarter of 2023.

Previous wording

During the six months ended June 30, 2024 and 2023, cash provided (used) by operations was $317 million and $(30) million, respectively. The increase in cash provided by operations was primarily related to higher net income, partially offset by changes in working capital.

Current wording

During the nine months ended September 30, 2024 and 2023, cash provided by operations was $500 million and $157 million, respectively. The increase in cash provided by operations was primarily related to higher net income and changes in working capital, partially offset by $31 million of higher income taxes paid.

Previous wording

During the six months ended June 30, 2024 and 2023, cash used in investing activities was $61 million and $271 million, respectively. During the six months ended June 30, 2024, we received $16 million in proceeds from our share of the sale of certain assets from an equity method investment. During the six months ended June 30, 2023, we paid $80 million to acquire the assets owned by Wawa OSB, Inc.

Current wording

During the nine months ended September 30, 2024 and 2023, cash used in investing activities was $122 million and $312 million, respectively. During the nine months ended September 30, 2024, we received $16 million in proceeds from our share of the sale of certain assets from an equity method investment. We also paid $17 million for an equity investment in South America. During the nine months ended September 30, 2023, we paid $80 million to acquire the assets owned by Wawa OSB, Inc.

Previous wording

Capital expenditures for the six months ended June 30, 2024 and 2023, were $77 million and $188 million, respectively. The year-over-year decrease was primarily related to siding conversion expenditures in the prior year. Capital expenditures for the six months ended June 30, 2024 were primarily related to growth and sustaining maintenance projects.

Current wording

Capital expenditures for the nine months ended September 30, 2024 and 2023, were $121 million and $236 million, respectively. The year-over-year decrease was primarily related to siding conversion expenditures in the prior year. Capital expenditures for the nine months ended September 30, 2024 were primarily related to growth and sustaining maintenance projects.

Previous wording

During the six months ended June 30, 2024, cash used in financing activities was $157 million. During this period, we used $115 million to repurchase shares of LP common stock under the 2022 Share Repurchase Program (defined below). Additionally, we paid cash dividends of $37 million and used $5 million to repurchase stock from employees in connection with income tax withholding requirements associated with our employee stock-based compensation plans.

Current wording

During the nine months ended September 30, 2024, cash used in financing activities was $252 million, which includes $188 million to repurchase shares of LP common stock under the 2022 Share Repurchase Program (defined below). Additionally, we paid cash dividends of $56 million and used $8 million to repurchase stock from employees in connection with income tax withholding requirements associated with our employee stock-based compensation plans.

Previous wording

During the six months ended June 30, 2023, cash used in financing activities was $14 million. During this period, we paid cash dividends of $35 million and used $9 million to repurchase stock from employees in connection with income tax withholding requirements associated with our employee stock-based compensation plans. These payments were partially financed by net borrowings of $30 million under our Amended Credit Facility during the six months ended June 30, 2023.

Current wording

During the nine months ended September 30, 2023, cash used in financing activities was $61 million, which includes $52 million of dividend payments and $10 million of stock repurchases from employees in connection with income tax withholding requirements associated with our employee stock-based compensation plans. We borrowed and subsequently repaid $80 million from our Amended Credit Facility.

Previous wording

In November 2022, LP entered into the Credit Agreement with American AgCredit, PCA, as administrative agent and sole lead arranger, and CoBank, ACB, as letter of credit issuer, relating to the Amended Credit Facility. The Credit Agreement provides for a revolving credit facility in the principal amount of up to $550 million, with a $60 million sub-limit for letters of credit. All loans under the Credit Agreement become due on November 29, 2028. As of June 30, 2024, we had no outstanding borrowings under our Amended Credit Facility.

Current wording

In November 2022, LP entered into the Credit Agreement with American AgCredit, PCA, as administrative agent and sole lead arranger, and CoBank, ACB, as letter of credit issuer, relating to the Amended Credit Facility. The Credit Agreement provides for the Amended Credit Facility in the principal amount of up to $550 million, with a $60 million sub-limit for letters of credit. All loans under the Credit Agreement become due on November 29, 2028. As of September 30, 2024, we had no outstanding borrowings under our Amended Credit Facility.

Previous wording

If demand and pricing for our products fall to levels significantly below cycle average demand and pricing, should we decide to invest capital in alternative projects, or should changes occur related to our wood supply for our mills, it is possible that future impairment charges will be required. As of June 30, 2024, there were no indications of impairment.

Current wording

If demand and pricing for our products fall to levels significantly below cycle average demand and pricing, should we decide to invest capital in alternative projects, or should changes occur related to our wood supply for our mills, it is possible that future impairment charges will be required. As of September 30, 2024, there were no indicators of impairment.