What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-03 compared with 2022-08-09 · 79 added, 80 removed, 210 unchanged (43% of the section changed)

8 unchanged sentences

Siding, OSB, and South America.

In March 2022, we sold our 50% equity interest in two joint ventures that produce I-joists to Resolute Forest Products Inc.

(Resolute) for $59 million.

In March 2022, we sold our 50% equity interest in two joint ventures that produce I-joists to Resolute for $59 million.

The joint ventures were comprised of Resolute-LP Engineered Wood Larouche Inc.

1 unchanged sentence

The total net carrying value of our equity method investment at the date of sale was $19 million.

We recognized a gain on the sale of $39 million during the six months ended June 30, 2022, within Income from discontinued operations in the Condensed Consolidated Statements of Income.

In June 2022, LP and one of its wholly-owned subsidiaries entered into an asset purchase agreement with Pacific Woodtech Corporation, a Washington corporation, and Pacific Woodtech Canada Holdings Limited, a British Columbia limited company (collectively, the Purchaser).

Pursuant to the terms and conditions of the asset purchase agreement, LP agreed to sell to the Purchaser the assets related to its Engineered Wood Products (EWP) segment in exchange for the Purchaser’s payment to the Company of $210 million in cash, subject to certain purchase price adjustments, and the Purchaser’s assumption of certain liabilities of the EWP segment.

On August 1, 2022, the Company completed the sale of the EWP assets to the Purchaser.

Upon closing, the Company entered into a transition services agreement with the Purchaser, pursuant to which the Company agreed to support the various activities of the EWP segment for a period not to exceed eight months.

As of June 30, 2022, we have classified the related assets and liabilities associated with the EWP segment as held for sale in our Condensed Consolidated Balance Sheets.

We recognized a gain on the sale of $39 million during the nine months ended September 30, 2022, within Income from discontinued operations in the Condensed Consolidated Statements of Income.

In August 2022, LP completed the sale of the EWP segment assets to the Purchaser in exchange for the Purchaser’s payment to the Company of $217 million in gross cash proceeds after taking into account working capital adjustments (including $3 million received subsequent to September 30, 2022).

Upon closing, the Company entered into the TSA with the Purchaser, pursuant to which the Company agreed to support the various activities of the EWP segment for a period not to exceed eight months.

We have classified the related assets and liabilities associated with the EWP segment as discontinued operations in our Condensed Consolidated Balance Sheets.

The results of our EWP segment have been presented as discontinued operations in our Condensed Consolidated Statements of Income for all periods presented.

2 unchanged sentences

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.

Department of Census reported on July 19, 2022, that actual single housing starts were 3% lower for the three months ended June 30, 2022, and flat for the six months ended June 30, 2022, as compared to the same periods in 2021.

Department of Census reported on October 19, 2022, that actual single housing starts were 18% lower for the three months ended September 30, 2022, and 6% lower for the nine months ended September 30, 2022, as compared to the same periods in 2021.

Repair and remodeling activity is difficult to reasonably measure, but many indications, including the increase in LP’s retail sales, suggest that repair and remodeling activity is continuing to grow.

Although housing market demand has recently been strong, future economic conditions in the United States and the demand for homes remain uncertain due to inflationary impacts on the economy, including interest rates, employment levels, consumer confidence, and financial markets, among other things.

Future economic conditions in the United States and the demand for homes are uncertain due to inflationary impacts on the economy, including interest rates, employment levels, consumer confidence, and financial markets, among other things.

Additionally, we have experienced increases in material prices, supply disruptions, and labor shortages, which will be a challenge as we continue to work to meet the demands of builders, remodelers, and homeowners worldwide.

The potential effect of

these factors on our future operational and financial performance is uncertain.

The potential effect of these factors on our future operational and financial performance is uncertain.

As a result, our past performance may not be indicative of future results.

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Adjusted EBITDA, Adjusted Income, and Adjusted Diluted EPS are not substitutes for the U.S.

GAAP measures of net income and net income per diluted share or for any other U.S.

GAAP measures of net income and net income attributed to LP from continuing operations per diluted share or for any other U.S.

GAAP measures of operating performance.

2 unchanged sentences

The following table reconciles Net income to Adjusted EBITDA (dollar amounts in millions):

Three Months Ended June 30, Six Months Ended June 30,

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

2022 2021 2022 2021

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Other non-operating items (1) 2 7 2

Pension settlement charges 4 — 4 —

Adjusted EBITDA $ 200 $ 480 $ 1,289 $ 1,600

6 unchanged sentences

The following table provides the reconciliation of Net income to Adjusted Income (dollar amounts in millions, except per share amounts):

Three Months Ended June 30, Six Months Ended June 30,

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

2022 2021 2022 2021

6 unchanged sentences

Loss on early debt extinguishment — — — 11

Pension settlement charges 4 — 4 —

Reported tax provision 44 111 284 350

3 unchanged sentences

Diluted shares outstanding 74 94 80 101

Diluted net income attributed to LP per share $ 4.73 $ 4.90 $ 10.36 $ 7.85

Diluted net income attributed to LP from continuing operations per share $ 1.74 $ 3.52 $ 11.16 $ 11.26

Adjusted Diluted EPS $ 1.72 $ 3.52 $ 10.91 $ 11.08

11 unchanged sentences

Other companies may present housing start data differently, and therefore, housing starts data presented by us may not be comparable to similarly-titled indicators reported by other companies.

Three Months Ended June 30, Six Months Ended June 30,

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

2022 2021 2022 2021

5 unchanged sentences

Housing starts data reported by U.S.

Census Bureau as published through July 19, 2022.

Census Bureau as published through October 19, 2022.

We monitor sales volumes for our products in our Siding and OSB segments, which we define as the number of units of our products sold within the applicable period.

2 unchanged sentences

We believe that sales volumes can be a useful measure for evaluating and understanding our business.

The following table sets forth sales volumes for the three and six months ended June 30, 2022 and 2021:

Three Months Ended June 30, 2022 Three Months Ended June 30, 2021

The following table sets forth sales volumes for the three and nine months ended September 30, 2022 and 2021:

Three Months Ended September 30, 2022 Three Months Ended September 30, 2021

Sales Volume Siding OSB South America Total Siding OSB South America Total

2 unchanged sentences

OSB - Structural Solutions (MMSF) — 460 127 587 — 419 149 567

Six Months Ended June 30, 2022 Six Months Ended June 30, 2021

Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021

Sales Volume Siding OSB South America Total Siding OSB South America Total

6 unchanged sentences

We believe that when used in conjunction with other metrics, OEE can be a useful measure for evaluating our ability to generate profits, and providing this measure should allow interested persons to more readily monitor operational improvements.

OEE for the three and six months ended June 30, 2022 and 2021, for each of our segments is listed below:

Three Months Ended June 30, Six Months Ended June 30,

OEE for the three and nine months ended September 30, 2022 and 2021, for each of our segments is listed below:

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

2022 2021 2022 2021

4 unchanged sentences

Our results of operations are separately discussed below for each of our segments, as well as for the “Other” category, which comprises other products that are not individually significant.

See Note 17 of the Notes to the Condensed Consolidated Financial Statements included in Item 1 of this quarterly report on Form 10-Q for further information regarding our segments.

See Note 17 of the Notes to the

Condensed Consolidated Financial Statements included in Item 1 of this quarterly report on Form 10-Q for further information regarding our segments.

The Siding segment serves diverse end markets with a broad product offering of engineered wood siding, trim, and fascia, including LP ® SmartSide ® Trim & Siding, LP ® SmartSide ® ExpertFinish ® Trim & Siding, LP BuilderSeries ® Lap Siding, and LP ® Outdoor Building Solutions ® (collectively referred to as Siding Solutions).

Segment sales, Adjusted EBITDA, and Adjusted EBITDA margin for this segment were as follows (dollar amounts in millions):

Three Months Ended June 30, Six Months Ended June 30,

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

2022 2021 % Change 2022 2021 % Change

3 unchanged sentences

Sales in this segment by product line were as follows (dollar amounts in millions):

Three Months Ended June 30, Six Months Ended June 30,

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

2022 2021 % Change 2022 2021 % Change

2 unchanged sentences

Total $ 394 $ 312 26 % $ 1,083 $ 889 22 %

Percent changes in average sales prices and unit shipments for the three and six months ended June 30, 2022, compared to the corresponding periods in 2021, were as follows:

Percent changes in average sales prices and unit shipments for the three and nine months ended September 30, 2022, compared to the corresponding periods in 2021, were as follows:

Three Months Ended

June 30, 2022 versus 2021 Six Months Ended

June 30, 2022 versus 2021

September 30, 2022 versus 2021 Nine Months Ended

September 30, 2022 versus 2021

Selling Price Unit

2 unchanged sentences

Siding Solutions 16 % 9 % 14 % 8 %

The combined effects of list price increases and improving mix of innovative products drove year-over-year increases in the average net selling price for the three and six months ended June 30, 2022.

Additionally, the production ramp-up of the Houlton facility was ahead of schedule and contributed almost half of the year-over-year sales volume increase during the three months ended June 30, 2022.

Adjusted EBITDA increased for the three months ended June 30, 2022, reflecting price and volume growth largely offset by $29 million of raw material and freight inflation and $7 million of discretionary investments in support of future growth, including siding mill conversions and sales and marketing costs.

The decrease in Adjusted EBITDA of $8 million for the six months ended June 30, 2022, reflects price and volume growth offset primarily by $55 million of raw material and freight inflation and $19 million of discretionary investments in support of future growth, including siding mill and sales and marketing costs.

The combined effects of list price increases and improving mix of innovative products drove year-over-year increases in the average net selling price for the three and nine months ended September 30, 2022.

The volume increases for the three and nine months ended September 30, 2022 are attributable to steady customer demand and production increases made possible by the ongoing ramp-up of the Houlton facility as well as increasing operational efficiency at other Siding facilities.

Adjusted EBITDA year-over-year increase of $17 million for the three months ended September 30, 2022 reflects price and volume growth largely offset by $32 million of raw material, freight and labor inflation and $4 million of facility maintenance costs.

The year-over-year increase in Adjusted EBITDA of $11 million for the nine months ended September 30, 2022 reflects price and volume growth, offset primarily by $89 million of raw material, freight, and labor inflation, $8 million of facility maintenance costs, and $19 million of discretionary investments in support of future growth, including siding mill conversions and sales and marketing costs.

The OSB segment manufactures and distributes OSB structural panel products, including our value-added OSB portfolio known as LP Structural Solutions (which includes LP ® TechShield ® Radiant Barrier, LP WeatherLogic ® Air & Water Barrier, LP Legacy ® Premium Sub-Flooring, and LP ® FlameBlock ® Fire-Rated Sheathing) and LP ® TopNotch ® Sub-Flooring.

1 unchanged sentence

Segment sales, Adjusted EBITDA, and Adjusted EBITDA margin for this segment were as follows (dollar amounts in millions):

Three Months Ended June 30, Six Months Ended June 30,

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

2022 2021 % Change 2022 2021 % Change

3 unchanged sentences

Sales in this segment by product line were as follows (dollar amounts in millions):

Three Months Ended June 30, Six Months Ended June 30,

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

2022 2021 % Change 2022 2021 % Change

3 unchanged sentences

Total $ 388 $ 600 (35) % $ 1,805 $ 1,917 (6) %

Percent changes in average sales prices and unit shipments for the three and six months ended June 30, 2022, compared to the corresponding periods in 2021, were as follows:

Percent changes in average net sales prices and unit shipments for the three and nine months ended September 30, 2022, compared to the corresponding periods in 2021, were as follows:

Three Months Ended

June 30, 2022 versus 2021

Six Months Ended

June 30, 2022 versus 2021

September 30, 2022 versus 2021

Nine Months Ended

September 30, 2022 versus 2021

Selling Price Unit

3 unchanged sentences

OSB - commodity (39) % 2 % (18) % (2) %

OSB average net selling prices decreased year-over-year by 22% on 10% higher OSB sales volume for the three months ended June 30, 2022, resulting in a 14% decrease in net sales.

OSB average net selling prices decreased year-over-year by 3% on 11% higher OSB sales volume for the six months ended June 30, 2022, resulting in an 8% increase in net sales.

The decrease in Adjusted EBITDA of $162 million for the three months ended June 30, 2022, reflects $195 million from lower prices and $22 million of increased raw material inflation offset partially by $54 million from higher sales volume.

The decrease in Adjusted EBITDA of $11 million for the six months ended June 30, 2022, reflects $65 million from lower prices and $45 million of increased raw material inflation offset partially by $96 million from higher sales volume.

OSB average net selling prices decreased year-over-year by 39% on 5% higher OSB sales volume for the three months ended September 30, 2022, resulting in a 35% decrease in net sales.

OSB average net selling prices decreased year-over-year by 14% on 9% higher OSB sales volume for the nine months ended September 30, 2022, resulting in a 6% decrease in net sales.

The year-over-year decrease in Adjusted EBITDA of $268 million for the three months ended September 30, 2022 reflects $252 million from lower prices, $25 million of increased raw material and wage inflation, and $10 million facility maintenance costs, partially offset by $29 million from higher sales volume and the positive incremental margin generated by Structural Solutions products compared to commodity OSB products.

The year-over-year decrease in Adjusted EBITDA of $279 million for the nine months ended September 30, 2022 reflects $325 million from lower prices, $68 million of increased raw material and wage inflation, and $12 million facility maintenance costs, offset partially by $140 million from higher sales volume.

South America

2 unchanged sentences

Segment sales, Adjusted EBITDA, and Adjusted EBITDA margin for this segment were as follows (dollar amounts in millions):

Three Months Ended June 30, Six Months Ended June 30,

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

2022 2021 % Change 2022 2021 % Change

3 unchanged sentences

Sales in this segment by product line were as follows (dollar amounts in millions):

Three Months Ended June 30, Six Months Ended June 30,

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

2022 2021 % Change 2022 2021 % Change

3 unchanged sentences

Total $ 53 $ 76 (30) % $ 190 $ 203 (6) %

Percent changes in average sales prices and unit shipments for the three and six months ended June 30, 2022, compared to the corresponding periods in 2021, were as follows:

Percent changes in average sales prices and unit shipments for the three and nine months ended September 30, 2022, compared to the corresponding periods in 2021, were as follows:

Three Months Ended

June 30, 2022 versus 2021 Six Months Ended

June 30, 2022 versus 2021

September 30, 2022 versus 2021 Nine Months Ended

September 30, 2022 versus 2021

Selling Price Unit

3 unchanged sentences

Siding (18) % (21) % (13) % (68) %

Net sales in South America decreased year-over-year by 5% for the three months ended June 30, 2022, predominately due to 6% lower sales volume.

Net sales increased year-over-year by 8% for the six months ended June 30, 2022, due in large part to higher OSB prices.

The year-over-year decrease in Adjusted EBITDA of $8 million for the three months ended June 30, 2022, reflects lower sales volume and higher costs for raw material costs.

The year-over-year decrease in Adjusted EBITDA of $3 million for the first six months of 2022 reflects the net effect of lower sales volume, higher raw materials costs, and higher OSB prices.

Net sales in South America decreased year-over-year by 30% for the three months ended September 30, 2022, predominantly driven by lower OSB sales volumes and $10 million of unfavorable currency movements.

Net sales decreased year-over-year by 6% for the nine months ended September 30, 2022, due in large part to lower Siding sales volumes and prices.

The year-over-year decrease in Adjusted EBITDA of $23 million and $26 million for the three and nine months ended September 30, 2022, respectively, reflects lower sales volumes, higher raw material costs, and unfavorable currency movements.

Other Products

Our Other products segment includes off-site framing operation Entekra Holdings LLC (Entekra), remaining timber and timberlands, and other minor products, services, and closed operations, which do not qualify as discontinued operations.

Other net sales were $30 million and $55 million for the three and six months ended June 30, 2022, respectively, as compared to $26 million and $43 million for the corresponding periods in 2021.

These increases are primarily due to increases in Entekra sales volumes.

Adjusted EBITDA was $(7) million and $(13) million for the three and six months ended June 30, 2022, respectively, as compared to $(4) million and $(8) million for the corresponding periods in 2021.

Other net sales were $17 million and $72 million for the three and nine months ended September 30, 2022, respectively, as compared to $30 million and $73 million for the corresponding periods in 2021.

The decrease in net sales for the three months ended September 30, 2022 is primarily due to lower Entekra revenue.

Adjusted EBITDA was $(7) million and $(19) million for the three and nine months ended September 30, 2022, respectively, as compared to $(3) million and $(11) million for the corresponding periods in 2021.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses were $67 million and $129 million for the three and six months ended June 30, 2022, respectively, compared to $53 million and $97 million for the corresponding periods in 2021.

The increase in 2022 is due to increased travel, sales and marketing, and corporate overhead primarily driven by the reduction of restrictions related to the COVID-19 pandemic and costs associated with stock compensation and performance incentives.

We recognized an estimated tax provision from continuing operations of $116 million and $240 million for the three and six months ended June 30, 2022, respectively, compared to $144 million and $239 million for the corresponding periods of 2021.

The total effective tax rate for continuing operations for the three and six months ended June 30, 2022, was 25% and 24% compared to the 23% for the comparable periods in 2021, respectively.

Selling, general, and administrative expenses were $67 million and $196 million for the three and nine months ended September 30, 2022, respectively, compared to $58 million and $155 million for the corresponding periods in 2021.

The increase in 2022 is due to increased labor, travel, sales and marketing, and corporate overhead costs primarily driven by the reduction of restrictions related to the COVID-19 pandemic and costs associated with stock compensation and performance incentives.

We recognized an estimated tax provision from continuing operations of $44 million and $284 million for the three and nine months ended September 30, 2022, respectively, compared to $111 million and $350 million for the corresponding periods of 2021.

The total effective tax rate for continuing operations for the three and nine months ended September 30, 2022, was 26% and 24% compared to 25% and 24% for the comparable periods in 2021, 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.

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Any such repurchases may be commenced, suspended, discontinued, or resumed, and the method or methods of effecting any such repurchases may be changed, at any time, or from time to time, without prior notice.

We expect to fund our capital expenditures through cash on hand, cash generated from operations, and available borrowing under our Amended Credit Facility, as necessary.

We expect to fund our capital expenditures through cash on hand, cash generated from operations, and available borrowing under our Amended Credit Facility (as defined below), as necessary.

Operating Activities

During the six months ended June 30, 2022 and 2021, cash provided by operations was $908 million and $772 million, respectively.

The improvement in cash provided by operations for the period ended June 30, 2022, was primarily related to changes in working capital and lower income payments.

During the nine months ended September 30, 2022 and 2021, cash provided by operations was $1,103 million and $1,283 million, respectively.

The decrease in cash provided by operations was primarily related a lower income from operations offset by improvements in working capital.

Investing Activities

During the six months ended June 30, 2022 and 2021, cash used in investing activities was $135 million and $63 million, respectively.

During the six months ended June 30, 2022, we received $59 million in proceeds from the sale of our 50% equity interest in two joint ventures.

Capital expenditures for the six months ended June 30, 2022 and 2021, were $196 million and $65 million, respectively, primarily related to siding conversion expenditures and growth and maintenance capital.

During the nine months ended September 30, 2022 and 2021, cash used in investing activities was $14 million and $131 million, respectively.

During the nine months ended September 30, 2022, we received $265 million in proceeds from sales of assets, primarily associated with the sale of the EWP segment assets and the sale of our 50% equity interest in two joint ventures.

Capital expenditures for the nine months ended September 30, 2022 and 2021, were $282 million and $133 million, respectively, primarily related to siding conversion expenditures and growth and maintenance capital.

Financing Activities

During the six months ended June 30, 2022, cash used in financing activities was $626 million.

On May 3, 2022, LP's Board of Directors authorized a share repurchase plan under which LP was authorized to repurchase shares of LP's common stock totaling up to $600 million (the 2022 Share Repurchase Program).

During the six months ended June 30, 2022, we used $575 million to repurchase shares of LP common stock ($500 million from the Second 2021 Share Repurchase Program (defined below) and $75 million from the 2022 Share Repurchase Program (defined below)).

During the nine months ended September 30, 2022, cash used in financing activities was $968 million.

On November 2, 2021, LP's Board of Directors authorized a share repurchase plan under which LP may repurchase shares of its common stock totaling up to $500 million (the Second 2021 Share Repurchase Program).

In May 2022, LP's Board of Directors authorized a share repurchase plan under which LP was authorized to repurchase shares of LP's common stock totaling up to $600 million (the 2022 Share Repurchase Program).

During the nine months ended September 30, 2022, we used $900 million to repurchase shares of LP common stock ($500 million from the Second 2021 Share Repurchase Program and $400 million from the 2022 Share Repurchase Program).

Additionally, we paid cash dividends of $53 million and used $15 million to repurchase stock from employees in connection with income tax withholding requirements associated with our employee stock-based compensation plans.

During the six months ended June 30, 2021, cash used in financing activities was $642 million.

During the six months ended June 30, 2021, we used $300 million to repurchase shares of LP common stock under the share repurchase program authorized by LP's Board of Directors in 2020 and $288 million to repurchase shares of LP common stock under the repurchase program authorized by LP's Board of Directors in May 2021.

During the nine months ended September 30, 2021, cash used in financing activities was $1,058 million.

During the nine months ended September 30, 2021, we used $300 million to repurchase shares of LP common stock under the share repurchase program authorized by LP's Board of Directors in 2020 and $687 million to repurchase shares of LP common stock under the repurchase program authorized by LP's Board of Directors in May 2021.

Additionally, we paid cash dividends of $50 million and used $6 million to repurchase stock from employees in connection with income tax withholding requirements associated with our employee stock-based compensation plans.

In March 2021, we issued $350 million in aggregate principal amount of the 2029 Senior Notes, and 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 up to, but not including, the redemption date.

In March 2021, we issued $350 million in aggregate principal amount of the 2029 Senior Notes, and 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 up 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.

4 unchanged sentences

The Amended Credit Facility, and all loans thereunder, become due on June 8, 2027.

As of June 30, 2022, we had no amounts outstanding under the Amended Credit Facility.

As of September 30, 2022, we had no amounts outstanding under the Amended Credit Facility.

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.

1 unchanged sentence

, funded debt less unrestricted cash to total capitalization) of no more than 57.5%.

As of June 30, 2022, we were in compliance with all financial covenants under the Amended Credit Facility.

As of September 30, 2022, we were in compliance with all financial covenants under the Amended Credit Facility.

In March 2020, LP entered into the Letter of Credit Facility, 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.

1 unchanged sentence

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 June 30, 2022, we were in compliance with all financial covenants under the Letter of Credit Facility.

As of September 30, 2022, we were in compliance with all financial covenants under the Letter of Credit Facility.

Other Liquidity Matters

Off-Balance Sheet Arrangements

As of June 30, 2022, we had standby letters of credit of $13 million outstanding related to collateral for environmental impact on owned properties, a deposit for a forestry license, and insurance collateral, including workers' compensation.

As of September 30, 2022, we had standby letters of credit of $13 million outstanding related to collateral for environmental impact on owned properties, a deposit for a forestry license, and insurance collateral, including workers' compensation.

Potential Impairments

We review our mill and investment assets for potential impairments at least annually and believe we have adequate support for the carrying value of our assets as of June 30, 2022.

If demand and pricing for our products are significantly below cycle average demand and pricing, should we decide to invest capital in alternative projects, should changes occur related to our wood supply for these locations, or should demand and pricing of our products fall as a result of the long-term effects of the COVID-19 pandemic, it is possible that future impairment charges will be required.

As of June 30, 2022, there were no indications of impairment.

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

We review the carrying values of our long-lived assets for potential impairments and believe we have adequate support for the carrying values of our long-lived assets as of September 30, 2022.

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, 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.

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 2. Management’s Discussion and Analysis