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Item 1. Financial Statements

2022-05-03 compared with 2021-11-03 · 92 added, 244 removed, 323 unchanged (51% of the section changed)

2 unchanged sentences

Dollar amounts in millions, except per share amounts

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Net sales $ 1,337 $ 1,017

2 unchanged sentences

Selling, general, and administrative expenses ( 65 ) ( 48 )

Loss on impairment — ( 1 ) — ( 16 )

Other operating credits and charges, net 38 —

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Net income attributed to LP $ 484 $ 320

Basic net income per share of common stock:

Net income per share of common stock:

Net income per share - basic $ 5.64 $ 3.02

Diluted net income per share of common stock:

Net income per share - diluted $ 5.60 $ 3.00

Average shares of common stock used to compute net income per share:

Basic 94 112 100 112

Diluted 86 107

2 unchanged sentences

Dollar amounts in millions

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Net income $ 483 $ 320

1 unchanged sentence

Foreign currency translation adjustments 23 ( 7 )

Unrealized gains on securities, net of reversals — — — ( 3 )

Amortization of pension and post-retirement prior service costs and net loss 2 1 3 3

Changes in defined benefit pension plans 1 —

Other comprehensive income (loss), net of tax 24 ( 6 )

5 unchanged sentences

Dollar amounts in millions

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Cash and cash equivalents $ 624 $ 358

Receivables, net of allowance for doubtful accounts of $ 2 million at September 30, 2021, and December 31, 2020

Receivables, net of allowance for doubtful accounts of $ 2 million as of March 31, 2022, and December 31, 2021

Inventories 382 323

13 unchanged sentences

Income tax payable 129 13

Current portion of contingency reserves 1 1

Total current liabilities 459 351

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Common stock, $1 par value, 200,000,000 shares authorized;

107,035,818 and 90,222,524 shares issued and outstanding, respectively, as of September 30, 2021;

and 123,547,974 and 106,240,030 shares issued and outstanding, respectively, as of December 31, 2020

100,884,145 and 84,496,113 shares issued and outstanding, respectively, at March 31, 2022;

and 102,415,883 and 85,636,154 shares issued and outstanding, respectively, at December 31, 2021

Additional paid-in capital 451 458

Retained earnings 1,601 1,239

Treasury stock, 16,813,294 shares and 17,307,944 shares, at cost as of September 30, 2021, and December 31, 2020, respectively

Treasury stock, 16,388,032 shares and 16,779,729 shares, at cost as of March 31, 2022, and December 31, 2021, respectively

( 391 ) ( 390 )

5 unchanged sentences

Dollar amounts in millions

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

2 unchanged sentences

Depreciation and amortization 32 29

Loss on impairment — 1 — 16

Gain on sale of joint ventures ( 39 ) —

Deferred taxes 11 4

11 unchanged sentences

Proceeds from business divestiture 59 —

Redemption of insurance cash surrender value — — — 10

Other investing activities 1 2

33 unchanged sentences

Balance, March 31, 2022 101 $ 101 16 $ ( 391 ) $ 451 $ 1,601 $ ( 149 ) $ 1,613

Net income attributed to LP — — — — — 498 — 498

Dividends paid ($0.16 per share) — — — — — ( 16 ) — ( 16 )

Issuance of shares under stock plans — — — 2 ( 1 ) — — 1

Purchase of stock ( 7 ) ( 7 ) — — — ( 458 ) — ( 465 )

Compensation expense associated with stock-based compensation — — — — 4 — — 4

Other comprehensive loss — — — — — — 8 8

Balance, June 30, 2021 114 $ 114 17 $ ( 390 ) $ 446 $ 1,413 $ ( 149 ) $ 1,433

Net income attributed to LP — — — — — 365 — 365

Dividends paid ($0.18 per share) — — — — — ( 17 ) — ( 17 )

Purchase of stock ( 7 ) ( 7 ) — — — ( 392 ) — ( 399 )

Compensation expense associated with stock-based compensation — — — — 5 — — 5

Other comprehensive loss — — — — — — ( 19 ) ( 19 )

Balance, September 30, 2021 107 $ 107 17 $ ( 390 ) $ 451 $ 1,369 $ ( 168 ) $ 1,368

Common Stock Treasury Stock Additional

9 unchanged sentences

Taxes paid related to net settlement of stock-based awards — — — ( 6 ) — — — ( 6 )

Purchase of stock ( 2 ) ( 2 ) — — — ( 120 ) — ( 122 )

Compensation expense associated with stock-based compensation — — — — 1 — — 1

1 unchanged sentence

Balance, March 31, 2021 121 $ 121 17 $ ( 393 ) $ 443 $ 1,390 $ ( 157 ) $ 1,404

Net income attributed to LP — — — — — 33 — 33

Dividends paid ($0.145 per share) — — — — — ( 17 ) — ( 17 )

Issuance of shares under stock plans — — ( 1 ) 2 ( 1 ) — — 1

Compensation expense associated with stock-based compensation — — — — 1 — — 1

Noncontrolling interest redemption value adjustment — — — — (2) — — (2)

Other comprehensive income — — — — — — — —

Balance, June 30, 2020 130 $ 130 17 $ ( 400 ) $ 446 $ 999 $ ( 175 ) $ 1,000

Net income attributed to LP — — — — — 177 — 177

Dividends paid ($0.145 per share) — — — — — ( 16 ) — ( 16 )

Issuance of shares under stock plans — — — 1 ( 1 ) — — —

Purchase of stock ( 1 ) ( 1 ) — — — ( 28 ) — ( 29 )

Compensation expense associated with stock-based compensation — — — — 5 — — 5

Other comprehensive income — — — — — — 5 5

Balance, September 30, 2020 129 $ 129 17 $ ( 399 ) $ 450 $ 1,132 $ ( 170 ) $ 1,142

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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Nature of Operations

Louisiana-Pacific Corporation and our subsidiaries is a leading provider of high-performance building solutions that meet the demands of builders, remodelers, and homeowners worldwide.

We have leveraged our expertise serving the new home construction, repair and remodeling, and outdoor structures markets to become an industry leader known for innovation, quality, and reliability.

In addition to our U.S.

operations, the Company also maintains manufacturing facilities in Canada, Chile, and Brazil through foreign subsidiaries, and operates facilities through joint ventures.

Louisiana-Pacific Corporation and our subsidiaries are a leading provider of high-performance building solutions that meet the demands of builders, remodelers, and homeowners worldwide.

Serving the new home construction, repair and remodeling, and outdoor structures markets, we have leveraged our expertise to become an industry leader known for innovation, quality, and reliability.

The Company operates 25 plants across the U.S., Canada, Chile, and Brazil, through foreign subsidiaries, and operates facilities through joint ventures.

The principal customers for our building solutions are retailers, wholesalers, and homebuilding and industrial businesses, in North America and South America, with limited sales to Asia, Australia, and Europe.

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In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal and recurring nature.

These Condensed Consolidated Financial Statements and Notes hereto should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on February 18, 2021 (2020 Annual Report on Form 10-K).

These Condensed Consolidated Financial Statements and related Notes should be read in conjunction with our annual report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 22, 2022 (2021 Annual Report on Form 10-K).

Results of operations for interim periods are not necessarily indicative of results to be expected for an entire year.

All dollar amounts are shown in millions except per share.

Recently Adopted Accounting Policies

In December 2019, the FASB issued ASU No.

2019-12, Simplifying the Accounting for Income Taxes (Topic 740).

This ASU simplifies the accounting for income taxes by, among other things, eliminating certain existing exceptions related to the general approach in ASC 740 relating to franchise taxes, reducing complexity in the interim-period accounting for year-to-date loss limitations and changes in tax laws, and clarifying the accounting for transactions outside of business combinations that result in a step-up in the tax basis of goodwill.

The Company adopted ASU 2019-12 effective as of January 1, 2021.

There was no impact on our Condensed Consolidated Financial Statements upon adoption .

The following table presents our reportable segment revenues, disaggregated by revenue source.

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We have determined that disaggregating revenue into these categories achieves the disclosure objective to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

As noted in the segment reporting information in Note 18 below, our reportable segments are Siding, Oriented Strand Board (OSB), Engineered Wood Products (EWP), and South America.

Three Months Ended September 30, 2021

By product type and family:

Siding OSB EWP South America Other Inter-segment Total

Siding Solutions $ 310 $ — $ — $ 9 $ — $ — $ 319

OSB - Structural Solutions — 307 — 65 — — 372

I-Joist — — 109 — — — 109

LVL — — 51 — — — 51

LSL — — 20 — — ( 1 ) 20

310 307 180 75 — ( 1 ) 871

OSB - commodity — 290 — — — — 290

Plywood — — 9 — — — 9

— 290 9 — — — 299

Other products 3 4 11 2 30 — 49

$ 312 $ 600 $ 201 $ 76 $ 30 $ ( 1 ) $ 1,219

Nine Months Ended September 30, 2021

By product type and family:

Siding OSB EWP South America Other Inter-segment Total

Siding Solutions $ 879 $ — $ — $ 29 $ — $ — $ 908

OSB - Structural Solutions — 912 — 171 — — 1,082

I-Joist — — 232 — — — 232

LVL — — 140 — — — 140

LSL — — 39 — — ( 2 ) 39

879 912 411 200 — ( 2 ) 2,402

OSB - commodity — 997 — — — — 997

Plywood — — 41 — — — 41

— 997 41 — — — 1,038

Other products 9 9 29 3 73 — 123

$ 889 $ 1,917 $ 481 $ 203 $ 73 $ ( 2 ) $ 3,561

Three Months Ended September 30, 2020

As noted in the segment reporting information in Note 18 below, our reportable segments are Siding, Oriented Strand Board (OSB), Engineered Wood Products (EWP), and South America (dollar amounts in millions).

Three Months Ended March 31, 2022

By product type and family:

4 unchanged sentences

LVL — — 65 — — — 65

LSL — — 14 — — — 14

330 406 144 64 — ( 1 ) 945

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$ 332 $ 744 $ 170 $ 67 $ 26 $ ( 1 ) $ 1,337

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

By product type and family:

11 unchanged sentences

$ 285 $ 539 $ 123 $ 53 $ 18 $ — $ 1,017

Revenue is recognized when obligations under the terms of a contract (i.e., purchase orders) with our customers are satisfied;

Revenue is recognized when obligations under the terms of a contract (i.e.

, purchase orders) with our customers are satisfied;

generally, this occurs with the transfer of control of our products at a point in time.

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At that time, we invoice the retailers and recognize revenue for these consignment transactions.

We do not offer a right of return for products shipped to the retailers’ stores from the distribution.

We do not offer a right of return for products shipped to the retailers’ stores from the distribution centers.

EARNINGS PER SHARE

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This method requires that the effect of potentially dilutive common stock equivalents (stock options, stock-settled appreciation rights (SSARs), restricted stock units, and performance stock units) be excluded from the calculation of diluted earnings per share for the periods in which losses are reported because the effect is anti-dilutive.

The following table sets forth the computation of basic and diluted earnings per share (in millions, except per share amounts):

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

The following table sets forth the computation of basic and diluted earnings per share (dollar amounts in millions, except per share amounts):

Three Months Ended March 31,

Net income attributed to LP $ 484 $ 320

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The assets of the rabbi trust are invested in mutual funds and are reported at fair value based on active market quotations, which represent Level 1 inputs.

The assets of the rabbi trust were $ 6 million and $ 5 million at September 30, 2021, and December 31, 2020, respectively.

The fair value of the 3.625% Senior Notes due in 2029 (2029 Senior Notes) is estimated to be $ 354 million as of September 30, 2021, based upon market quotations.

The fair value of the 3.625% Senior Notes due in 2029 (2029 Senior Notes) was estimated to be $ 324 million and $ 358 million as of March 31, 2022, and December 31, 2021, respectively, based upon market quotations.

The 2029 Senior Notes and other long-term debt are categorized as Level 1 in the U.S.

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Fair values are based on trading activity among the Company’s lenders and the average bid and ask price as determined using published rates.

There were no outstanding amounts borrowed under our Amended Credit Facility as of September 30, 2021.

During the nine months ended September 30, 2020, we sold our auction rate securities (ARS) and recognized a $3 million gain on available for sale securities, which is included in Investment income in the Condensed Consolidated Statements of Income.

There were no outstanding amounts borrowed under our Amended Credit Facility (defined below) as of March 31, 2022.

Carrying amounts reported on the balance sheet for cash and cash equivalents, accounts receivables, and accounts payable approximate fair value due to the short-term maturity of these items.

Receivables consisted of the following:

September 30, 2021 December 31, 2020

Receivables consisted of the following (dollar amounts in millions):

March 31, 2022 December 31, 2021

Trade receivables $ 305 $ 172

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Trade receivables are primarily generated by sales of our products to our wholesale and retail customers.

Other receivables, as of September 30, 2021, and December 31, 2020, primarily consist of sales tax receivables, vendor rebates, a receivable associated with an affiliate, and other miscellaneous receivables.

Other receivables as of March 31, 2022 and December 31, 2021, primarily consist of sales tax receivables, vendor rebates, and other miscellaneous receivables.

Inventories are valued at the lower of cost or net realizable value.

Inventory cost includes materials, labor, and operating overhead.

The major types of inventories are as follows (work in process is not material and is included in Semi-finished inventory below):

September 30, 2021 December 31, 2020

The major types of inventories (work in process is not material and is included in Semi-finished inventory) are as follows (dollar amounts in millions):

March 31, 2022 December 31, 2021

Logs $ 86 $ 59

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Total $ 382 $ 323

During the three months ended March 31, 2022, we sold our 50% equity interest in two joint ventures that produce I-joists to Resolute Forest Products Inc.

(Resolute) for $ 59 million.

The total net carrying value of our equity method

investment at the date of sale was $19 million, and we recognized a gain associated with the sale of $ 39 million in the three-month period ended March 31, 2022, within Other operating credits and charges, net, in the Condensed Consolidated Statements of Income.

The Condensed Consolidated Statements of Income for the three months ended March 31, 2022 and 2021, include income from these joint ventures of $ 5 million and $ 2 million, respectively.

In connection with the closing of the sale of our equity interest in the joint ventures, LP entered into separate agreements with Resolute to continue serving as the exclusive distributor of the engineered wood products manufactured at the two operations.

GOODWILL AND OTHER INTANGIBLES

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The Company’s annual assessment date is October 1.

Changes in goodwill and other intangible assets as of September 30, 2021, are provided in the following table:

Changes in goodwill and other intangible assets for the three months ended March 31, 2022, are provided in the following table (dollar amounts in millions):

Timber licenses 1

2 unchanged sentences

Amortization ( 1 ) — ( 1 ) —

Ending balance September 30, 2021 $ 32 $ 25 $ 17 $ 2

Ending balance March 31, 2022 $ 31 $ 19 $ 16 $ 2

1 Timber licenses are included in Timber and timberlands on the Condensed Consolidated Balance Sheets.

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Any adjustments to the redemption value of redeemable noncontrolling interest are recognized in either net income or through accumulated paid-in capital, depending on the nature of the underlying security (preferred or common units).

The components of redeemable noncontrolling interest are as follows:

The components of redeemable noncontrolling interest as of March 31, 2022, are as follows (dollar amounts in millions):

Beginning balance December 31, 2021 $ 4

Net loss attributed to noncontrolling interest ( 1 )

Ending balance September 30, 2021 $ 9

LONG-TERM DEBT

The following table summarizes our outstanding debt:

September 30, 2021 December 31, 2020

2029 Senior Notes $ 350 $ —

2024 Senior Notes — 350

Amended Credit Facility — —

Financing leases — 1

Unamortized debt costs ( 4 ) ( 2 )

Total 346 348

current portion — —

Long-term portion $ 346 $ 348

In March 2021, LP issued $ 350 million of the 2029 Senior Notes.

The Company may redeem the 2029 Senior Notes, in whole or in part, prior to March 15, 2024, at a redemption price equal to 100% of the principal amount thereof plus a “make-whole” premium set forth in the indenture governing the 2029 Senior Notes, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

On or after March 15, 2024, LP may, at its option on one or more occasions, redeem all or any portion of these notes at the redemption prices set forth in the indenture governing the 2029 Senior Notes, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

The indenture governing the 2029 Senior Notes contains certain covenants that, among other things, limit the Company's ability to grant liens to secure indebtedness, engage in sale and leaseback transactions and merge or consolidate or sell all or substantially all of its assets.

If LP is subject to a "change of control," as defined in the indenture, LP is required to offer to repurchase the 2029 Senior Notes at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, thereon to, but not including, the date of purchase.

The indenture governing the 2029 Senior Notes contains customary events of default, including failure to make required payments on the 2029 Senior Notes, failure to comply with certain agreements or covenants contained in the indenture, failure to pay or acceleration of certain other indebtedness and certain events of bankruptcy and insolvency.

An event of default in the indenture allows either the indenture trustee or the holders of at least 25% in aggregate principal amount of the then-outstanding 2029 Senior Notes to accelerate, or in certain cases, automatically causes the acceleration of, the amounts due under the 2029 Senior Notes.

In September 2016, LP issued $ 350 million aggregate principal amount Senior Notes due 2024 (2024 Senior Notes).

In February 2021, LP delivered to holders of the 2024 Senior Notes a conditional notice of redemption to redeem on March 27, 2021 all of the 2024 Senior Notes outstanding at a redemption price of 102.438 % of the principal amount thereof plus accrued and unpaid interest to, but not including, the redemption date.

The redemption notice became irrevocable on March 11, 2021, and the 2024 Senior Notes were fully redeemed on March 27, 2021.

In connection with this redemption, LP recorded an early debt extinguishment charge of $ 11 million, recorded within Other non-operating items on the Condensed Consolidated Statements of Income, which included $ 9 million of redemption premium and $ 2 million of unamortized debt costs associated with these notes.

Deferred debt costs are amortized over the life of the related debt using a straight-line basis which approximates the effective interest method.

If the debt is retired early, the related unamortized deferred financing costs are written off in the period the debt is retired to Other non-operating items.

During the nine months ended September 30, 2021, $ 2 million of deferred debt costs were written off in association with the 2024 Senior Notes extinguishment, and LP paid $ 4 million in debt issuance costs that will be deferred and amortized over the life of the 2029 Senior Notes.

Credit Facility

In August 2021, LP entered into a fourth amendment (Fourth Amendment) to its revolving credit facility, dated as of June 27, 2019 (Credit Facility), with American AgCredit, PCA, as administrative agent and CoBank, ACB, as letter of credit issuer, (as amended, the Amended Credit Facility).

The Amended Credit Facility provides a revolving credit facility in the principal amount of up to $ 550 million, with a $60 million sub-limit for letters of credit.

The revolving facility, pursuant to the Amended Credit Facility, terminates, and all loans made thereunder become due in June 2027.

LP has granted a security interest in substantially all of its U.S.

personal property to secure the Amended Credit Facility, and certain of LP’s existing and future wholly-owned domestic subsidiaries may guaranty its obligations under the Amended Credit Facility and, subject to certain limited exceptions, provide security through a security interest in substantially all the personal property of these subsidiaries.

The Amended Credit Facility provides a release of security interest after obtaining an Investment Grade rating from any one of the Moody's, S&P, or Fitch.

There are no outstanding amounts borrowed under the Amended Credit Facility as of September 30, 2021.

Revolving borrowings under the Amended Credit Facility accrue interest, at the Company's option, at either (a) a “base rate” plus a margin of 0.500 % to 1.500 % or (b) LIBOR plus a margin of 1.500 % to 2.500 %.

The Amended Credit Facility also includes an unused commitment fee, due quarterly, ranging from 0.200 % to 0.425 %.

The applicable margins and fees within these ranges are based on our ratio of consolidated EBITDA to cash interest

The “base rate” is the highest of (i) the Federal funds rate plus 0.5%, (ii) the U.S.

prime rate, and (iii) one-month LIBOR plus 1.0%.

The Amended Credit Facility contains various restrictive covenants and customary events of default, the occurrence of which could result in the acceleration of our obligation to repay the indebtedness outstanding thereunder.

The Amended Credit Facility also contains financial covenants that require the Company and its consolidated subsidiaries to have, as of the end of each quarter, a capitalization ratio (i.e., funded debt less unrestricted cash to total capitalization) of no more than 57.5 %.

In March 2020, LP entered into a letter of credit facility agreement (Letter of Credit Facility) with Bank of America, N.A., which provides for the funding of letters of credit up to an aggregate outstanding amount of $20 million, which may be secured by certain cash collateral of LP.

The Letter of Credit Facility includes an unused commitment fee, due quarterly, ranging from 0.50% to 1.875% of the daily available amount to be drawn on each letter of credit issued under the Letter of Credit Facility.

The Letter of Credit Facility is subject to similar affirmative, negative, and financial covenants as those set forth in the Amended Credit Facility, including the capitalization ratio covenant.

As of September 30, 2021, LP secured $ 13 million of outstanding letters of credit with cash collateral, included in Restricted cash in its Condensed Consolidated Balance Sheets.

Deferred debt costs are amortized over the life of the related debt using a straight-line basis, which approximates the effective interest method.

Included in such amortized amounts are deferred debt costs associated with LP's Amended Credit Facility, which are recorded within Other assets on its Condensed Consolidated Balance Sheets .

During the nine months ended September 30, 2021, the Company paid $2 million in debt issuance costs in connection with the third amendment to the Credit Facility that LP entered into in June 2021 (Third Amendment).

These debt issuance costs were deferred and will be amortized over the life of the Amended Credit Facility.

As of September 30, 2021, LP was in compliance with all covenants under the 2029 Senior Notes and the Amended Credit Facility (as well as the Letter of Credit Facility by such compliance).

Ending balance March 31, 2022 $ 3

For interim periods, we recognize income tax expense by applying the estimated annual effective income tax rate to year-to-date results unless this method does not result in a reliable estimate of year-to-date income tax expense.

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Changes in profitability estimates in various jurisdictions will impact our quarterly effective income tax rates.

The tax provision for income taxes for the nine months ended September 30, 2021 and 2020, reflected an estimated annual tax rate of 24 % and 26 %, respectively, excluding discrete items discussed below.

The total effective tax rate for the three and nine months ended September 30, 2021, was 25 % and 24 %, respectively, compared to 25 % and 27 % for the comparable periods in 2020, respectively.

We recognized a net discrete tax benefit of $ 7 million during the nine months ended September 30, 2021, primarily related to stock-based compensation and adjustments to prior year, including an adjustment to the deferred tax rate.

We recognized a net discrete tax expense of $ 3 million during the nine months ended September 30, 2020, primarily related to the surrender of a corporate-owned life insurance contract and a sale of ARS, offset by a benefit related to stock-based compensation.

The tax provision for income taxes for the three months ended March 31, 2022 and 2021, reflected an estimated annual tax rate of 24 % and 25 %, respectively, excluding discrete items discussed below.

The total effective tax rate for the three months ended March 31, 2022 was 22 %, compared to 23 % for the comparable period in 2021.

We recognized a net discrete tax benefit of $ 9 million and $ 5 million during the three months ended March 31, 2022 and 2021, respectively, with the most significant benefit related to excess tax benefits from stock-based compensation for both periods.

STOCK-BASED COMPENSATION

We have stock award plans for key employees and directors, pursuant to which awards of stock options, SSARs, restricted stock, restricted stock units, and performance stock units (PSUs) are granted.

We have stock award plans for key employees and directors, pursuant to which awards of stock options, SSARs, restricted stock, restricted stock units, and performance stock units are granted.

In addition, we offer an employee stock purchase plan to employees.

In July 2021, LP modified the performance vesting criteria of approximately 149,000 PSU awards granted in 2020.

The modification was considered a Type III modification under the Accounting for Share-Based Payments (Topic 718), in which the original awards were canceled, and the modified awards were considered granted on the modification date.

Post-modification stock-based compensation expense related to these awards will be recognized over the remaining service period using modification date fair values of between $ 56.35 and $ 64.12 and the number of awards expected to vest.

We recognized $ 5 million in stock-based compensation expense during the three months ended September 30, 2021, and 2020.

We recognized $ 10 million and $ 8 million in stock-based compensation expense during the nine months ended September 30, 2021, and 2020, respectively.

At September 30, 2021, there was $ 34 million of unrecognized stock-based compensation expense related to unvested PSUs, restricted stock units, and SSARs attributable to future service.

During the three months ended March 31, 2022, we granted awards of 135,381 restricted stock units and 88,239 performance stock units, at an average grant date fair value of $ 70.55 per share.

We recognized $ 7 million and $ 1 million in stock-based compensation expense during the three months ended March 31, 2022 and 2021, respectively.

At March 31, 2022, there was $ 36 million of unrecognized stock-based compensation expense related to unvested performance stock units, restricted stock units, and SSARs attributable to future service.

COMMITMENTS AND CONTINGENCIES

We maintain reserves for various contingent liabilities as follows:

September 30, 2021 December 31, 2020

We maintain reserves for various contingent liabilities as follows (dollar amounts in millions):

March 31, 2022 December 31, 2021

Environmental reserves $ 24 $ 25

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Total contingencies 24 25

Current portion (included in Accrued liabilities) ( 1 ) ( 1 )

Long-term portion (included in Other long-term liabilities) $ 13 $ 13

Current portion (included in Accounts payable and accrued liabilities) ( 1 ) ( 1 )

Long-term portion $ 23 $ 24

Estimates of our loss contingencies are based on various assumptions and judgments.

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Our estimates of our environmental loss contingencies are based on various assumptions and judgments, the specific nature of which varies considering the particular facts and circumstances surrounding each environmental loss contingency.

These estimates typically reflect assumptions and judgments as to the probable nature, magnitude and timing of the required investigation, remediation and/or monitoring activities and the probable cost of these activities, and in some cases reflect assumptions and judgments as to the obligation or willingness and ability of third parties to bear a proportionate or allocated share of the cost of these activities.

These estimates typically reflect assumptions and judgments as to the

probable nature, magnitude, and timing of the required investigation, remediation and/or monitoring activities and the probable cost of these activities, and in some cases reflect assumptions and judgments as to the obligation or willingness and ability of third parties to bear a proportionate or allocated share of the cost of these activities.

Due to the numerous uncertainties and variables associated with these assumptions and judgments, and the effects of changes in governmental regulation and environmental technologies, both the precision and reliability of the resulting estimates of the related contingencies are subject to substantial uncertainties.

We regularly monitor our estimated exposure to environmental loss contingencies and, as additional information becomes known, may change our estimates significantly.

However, no estimate of the range of any such change can be made at this time.

Other Proceedings

From time to time, we and our subsidiaries are parties to certain legal proceedings.

Based on the information currently available, management believes the resolution of such proceedings will not have a material adverse effect on our financial position, results of operations, cash flows, or liquidity.

Based on the information currently available, management believes the resolution of such proceedings will not have a material effect on our financial position, results of operations, cash flows, or liquidity.

IMPAIRMENT OF LONG-LIVED ASSETS

We review the carrying values of our long-lived assets for potential impairments and believe we have adequate support for the carrying value of our long-lived assets.

If demand and pricing for our products fall to levels significantly below cycle average demand and pricing, or 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, 2021, there were no indications of impairment.

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 March 31, 2022, there were no indications of impairment.

We also review from time to time potential dispositions of various assets, considering current and anticipated economic and industry conditions, our strategic plan, and other relevant factors.

Because a determination to dispose of particular assets can require management to make assumptions regarding the transaction structure of the disposition and to estimate the net sales proceeds, which may be less than previous estimates of undiscounted future net cash flows, we may be required to record impairment charges in connection with decisions to dispose of assets.

During the three and nine months ended September 30, 2020, we recorded $ 1 million and $ 9 million, respectively, in pre-tax impairment charges primarily related to our fiber producing assets at a Siding facility.

PRODUCT WARRANTIES

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Such accruals are based upon historical experience and management’s estimate of the level of future claims.

The activity in warranty reserves for the three and nine months ended September 30, 2021, and 2020, is summarized in the following table:

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

The activity in warranty reserves for the three months ended March 31, 2022 and 2021, is summarized in the following table (dollar amounts in millions):

Three Months Ended March 31,

Beginning balance $ 7 $ 8

2 unchanged sentences

Total warranty reserves 8 8

Current portion of warranty reserves (included in Other current liabilities) ( 2 ) ( 2 ) ( 2 ) ( 2 )

Current portion of warranty reserves (included in Accounts payable and accrued liabilities) ( 2 ) ( 2 )

Long-term portion of warranty reserves (included in Other long-term liabilities) $ 6 $ 6

We continue to monitor warranty and other claims associated with our products and believe as of September 30, 2021, that the warranty reserve balances associated with these matters are adequate to cover future warranty payments.

We continue to monitor warranty and other claims associated with our products and believe as of March 31, 2022, that the warranty reserve balances associated with these matters are adequate to cover future warranty payments.

However, it is possible that additional changes may be required in the future.

DEFINED BENEFIT PENSION PLANS

Th e following table summarizes our net periodic pension cost for our defined benefit pension and postretirement plans during the three and nine months ended September 30, 2021, and 2020:

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Th e following table summarizes our net periodic pension cost for our defined benefit pension and postretirement plans during the three months ended March 31, 2022 and 2021 (dollar amounts in millions):

Three Months Ended March 31,

Service cost $ 1 $ —

6 unchanged sentences

1 Other components of net periodic pension cost are included in Other non-operating items on our Condensed Consolidated Statements of Income.

In November 2021, the Company initiated the termination of our frozen U.S.

and Canadian defined benefit pension plans (the Plan), which would result in the full settlement of the Company's Plan obligations.

The distribution of Plan assets pursuant to the termination will not be made until the Plan termination satisfies all regulatory requirements, which is expected to occur by the end of 2022.

Plan participants will receive their full accrued benefits from Plan assets by electing either lump-sum distributions or annuity contracts with a qualifying third-party annuity provider.

The Plan termination is expected to result in pension settlement expense in 2022, which will be determined based on prevailing market conditions, the actual lump-sum distributions, and annuity purchase rates at the date of distribution.

As a result, we are currently unable to reasonably estimate the timing or final amount of such settlement charges.

Upon settlement, we expect to recognize pre-tax pension settlement charges that will include (1) a non-cash charge for the recognition of all pre-tax actuarial losses accumulated in Accumulated other comprehensive loss ($99

million as of March 31, 2022) and (2) any cash contributions to settle the Plan’s obligations ($8 million net projected benefit obligation as of March 31, 2022).

The actual amount of the settlement charges and any potential cash contribution will depend on various factors, including interest rates, Plan asset returns, and the lump-sum election rate.

ACCUMULATED COMPREHENSIVE LOSS

Accumulated comprehensive loss is provided in the following table for the three and nine months ended September 30, 2021, and 2020:

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Balance at beginning of period $ ( 80 ) $ ( 87 ) $ ( 81 ) $ ( 89 )

Amounts reclassified from accumulated other comprehensive loss to income 2

Total other comprehensive income 2 1 3 3

Balance at end of period ( 78 ) ( 86 ) ( 78 ) ( 86 )

Accumulated comprehensive loss is provided in the following table for the three months ended March 31, 2022 and 2021 (dollar amounts in millions):

Pension Translation Adjustments Other Total

Balance at December 31, 2021 $ (76) $ (96) $ (1) $ (174)

Reclassified to income statement, net of taxes 1

Translation adjustments — 23 — 23

Balance at beginning of period ( 68 ) ( 88 ) ( 68 ) ( 67 )

Balance at March 31, 2022 $ (75) $ (73) $ (1) $ (149)

Pension Translation Adjustments Other Total

Balance at December 31, 2020 $ (81) $ (68) $ (2) $ (151)

Reclassified to income statement, net of taxes 1

Translation adjustments — (7) — (7)

Balance at end of period ( 89 ) ( 84 ) ( 89 ) ( 84 )

Balance at beginning of period ( 2 ) — ( 2 ) 3

Unrealized gains on securities, net of reversals — — — ( 3 )

Balance at end of period ( 2 ) — ( 2 ) —

Accumulated other comprehensive loss, end of period $ ( 168 ) $ ( 170 ) $ ( 168 ) $ ( 170 )

1 Amounts are presented net of tax.

Balance at March 31, 2021 $ (81) $ (75) $ (2) $ (157)

1 Amounts of actuarial loss and prior service cost are components of net periodic benefit cost.

1 unchanged sentence

Other operating credits and charges, net

Other operating credits and charges, net is comprised of the following components:

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Reorganization charges $ ( 1 ) $ ( 1 ) $ ( 1 ) $ ( 5 )

Canadian wage subsidies — 5 — 9

Product-line discontinuance charges — 1 — ( 9 )

Insurance recoveries 1 — 3 —

Environmental costs — ( 2 ) — ( 2 )

Other 1 — 3 2

Other operating credits and charges, net 2 3 5 ( 5 )

During the three and nine months ended September 30, 2021, we incurred severance and other charges of $ 1 million related to certain reorganizations.

We received $ 1 million and $ 3 million in insurance recoveries during the three and nine months ended September 30, 2021, respectively, related to business interruption claims for weather-related downtime sustained in the prior year.

During the three and nine months ended September 30, 2020, we recognized a charge of $ 2 million related to additional estimated environmental costs to be paid by a third party associated with a non-operating site.

We incurred severance and other charges of $ 1 million and $ 5 million for the three and nine months ended September 30, 2020, respectively, related to certain reorganizations and product-line discontinuance.

We received $ 5 million and $ 9 million of Canadian wage subsidies during the three and nine months ended September 30, 2020, respectively.

Additionally, we recorded a recovery of $ 1 million and charges of $ 9 million for the three and nine months ended September 30, 2020, respectively, related to the discontinuance of our fiber product (primarily related to fiber inventory adjustments to net realizable values).

Other non-operating items

Other non-operating items is comprised of the following components:

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Interest expense $ ( 4 ) $ ( 5 ) $ ( 12 ) $ ( 16 )

Amortization of debt charges — — ( 1 ) ( 1 )

Interest expense $ ( 4 ) $ ( 5 ) $ ( 12 ) $ ( 17 )

Interest income — — 1 1

Gain on sale of auction rate securities — — — 3

SERP market adjustments — — — ( 1 )

Investment income $ — $ — $ 1 $ 3

Net periodic pension cost, excluding service cost — — — ( 1 )

Loss on early debt extinguishment — — ( 11 ) —

Foreign currency gain (loss) 2 — ( 3 ) 5

During the three months ended March 31, 2022, we recognized a gain of $ 39 million on the sale of our 50% interest in two joint ventures.

See Note 7 above.

In addition, we incurred severance and other charges of $ 1 million related to certain reorganizations.

During the three months ended March 31, 2021, we recorded a gain of $ 1 million related to the sale of assets previously classified as held for sale, offset by other expenses, including severance associated with certain reorganizations within the corporate office.

Other non-operating items

During the three months ended March 31, 2022, we recorded realized foreign currency losses of $ 9 million primarily related to the strengthening of the Chilean peso and Brazilian real.

During the three months ended March 31, 2021, we recorded an early debt extinguishment charge of $ 11 million related to the redemption of our 2024 Senior Notes, offset by a foreign currency gain of $ 1 million.

SELECTED SEGMENT DATA

5 unchanged sentences

Accordingly, our chief operating decision maker evaluates performance and allocates resources based primarily on net sales and Adjusted EBITDA for our business segments.

Adjusted EBITDA is a non-GAAP financial measure and is defined as income attributed to LP before interest expense, provision for income taxes, depreciation and amortization, and excludes stock-based compensation expense, loss on impairment attributed to LP, product-line discontinuance charges, other operating credits and charges, net, loss on early debt extinguishment, investment income, and other non-operating items.

Information about our product segments is as follows:

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Information about our product segments is as follows (dollar amounts in millions):

Three Months Ended March 31,

Siding $ 332 $ 285

OSB 600 368 1,917 792

EWP 201 103 481 281

South America 67 53

Other 30 11 73 36

Intersegment sales ( 1 ) —

8 unchanged sentences

Stock-based compensation expense 7 1

Loss on impairment attributed to LP — 1 — 15

Other operating credits and charges, net ( 38 ) —

Product-line discontinuance charges — ( 1 ) — 9

Loss on early debt extinguishment — 11

4 unchanged sentences

Siding $ 83 $ 90

OSB 381 189 1,300 270

EWP 42 9 68 21

South America 25 21

3 unchanged sentences

SUBSEQUENT EVENT

On May 4, 2021, our Board of Directors authorized a share repurchase program (2021 Share Repurchase Program) under which we may repurchase up to $1 billion of shares of our common stock.

Subsequent to September 30, 2021 through November 2, 2021, we paid $ 150 million to repurchase 2.3 million shares of LP common stock under the 2021 Share Repurchase Program.

On November 2, 2021, LP's Board of Directors authorized the Second 2021 Share Repurchase Program under which we may repurchase up to $500 million of shares of our common stock.

Subsequent to March 31, 2022, through May 3, 2022, we used $ 182 million to repurchase 2.9 million shares of LP common stock under the Second 2021 Share Repurchase Program.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements