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Item 7. Management’s Discussion and Analysis

2023-02-21 compared with 2022-02-22 · 92 added, 145 removed, 210 unchanged (53% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Consolidated Financial Statements and related Notes and other financial information appearing elsewhere in this annual report on Form 10-K, and with Part II, Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) of our annual report on Form 10-K for our fiscal year ended December 31, 2020, filed with the SEC on February 18, 2021, which provides a discussion of our financial condition and results of operations for fiscal year 2020 compared to fiscal year 2019.

This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Consolidated Financial Statements and related Notes and other financial information appearing elsewhere in this annual report on Form 10-K, and with Part II, Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our annual report on Form 10-K for our fiscal year ended December 31, 2021, filed with the SEC on February 22, 2022, which provides a discussion of our financial condition and results of operations for fiscal year 2021 compared to fiscal year 2020.

The following discussion includes forward-looking statements that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management.

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Our manufacturing facilities are located in the U.S., Canada, Chile, and Brazil.

To serve these markets, we operate in four segments:

Siding, OSB, EWP, and South America.

To serve these markets, we operate in three segments:

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.

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

in Larouche, Quebec, and Resolute-LP Engineered Wood St-Prime Limited Partnership in Saint-Prime, Quebec.

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 year ended December 31, 2022, within Income from discontinued operations, net of income taxes in the Consolidated Statements of Income.

In August 2022, LP completed the sale of the Engineered Wood Products (EWP) segment assets to P acific Woodtech Corporation, a Washington corporation, and Pacific Woodtech Canada Holdings Limited, a British Columbia limited company (collectively, 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.

Upon closing, the Company entered into the transition services agreement (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 Consolidated Balance Sheets for prior periods presented.

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

See Note 6 – Discontinued Operations of the Notes to the Consolidated Financial Statements included in Item 8 of this annual report on Form 10-K.

Executive Summary

Total net sales for 2021 increased year-over-year by $1,765 million (or 63%) to $4,553 million, including Siding Solutions growth of $243 million (or 27%), $1,113 million from higher OSB prices, an EWP revenue increase of $249 million (or 64%) due to price increases in response to significantly higher raw material input costs, and an increase of $96 million (or 57%) in South America due to higher prices.

Net income attributed to LP increased year-over-year by $878 million (or 176%) to $1,377 million ($14.09 per diluted share) primarily due to the record OSB prices.

Adjusted EBITDA (defined below) increased by $1,191 million (or 153%) over the prior year to $1,972 million.

Adjusted EBITDA is a non-GAAP financial measure.

Please see “—Non-GAAP Financial Measures” below for more information about our use of non-GAAP financial measures in this annual report on Form 10-K and the reconciliation of Adjusted EBITDA to Net income.

Net sales for 2022 decreased year-over-year by $61 million (or 2%), including a decrease in OSB prices of $400 million and a decrease in South America revenue of $24 million due to lower volumes and unfavorable currency movements, partially offset by Siding Solutions growth of $305 million (14% pricing, 11% volume) and an increase in OSB volume of $53 million.

Income attributed to LP from continuing operations decreased year-over-year by $418 million to $888 million, or $11.34 per diluted share, reflecting a $488 million drop in Adjusted EBITDA and non-cash pension settlement charges of $82 million, partially offset by $128 million lower income tax provisions.

Income from discontinued operations, net of income taxes, increased year-over-year by $126 million to $198 million, or $2.52 per diluted share, primarily due to the $118 million gain on the sale of EWP assets and a $39 million gain on the sale of the equity interests in two joint ventures that produced I-joists, partially offset by a $27 million increase in income tax provision.

Demand for Building Products

Demand for our products correlates positively with new home construction and repair and remodeling activity in North America, which historically have been characterized by significant cyclicality.

Census Bureau reported on January 19, 2022, that 2021 actual single-housing starts were 13% higher than those in 2020.

Census Bureau reported on February 16, 2023, that 2022 actual single-family housing starts were 11% lower than those in 2021.

Actual multi-family housing starts in 2022 were about 16% higher than those in 2021.

Repair and remodeling activity is difficult to reasonably measure, but many indications, including the substantial increase in LP’s retail sales, suggest that it grew significantly in 2021.

Although housing market demand has recently been very strong, future economic conditions in the United States and the demand for homes remain uncertain due to continuing COVID-19-related disruptions, government directives, actions and economic relief efforts related thereto, and the impact of these actions on the economy, employment levels, consumer confidence, and financial markets, among other things.

Additionally, as a result of increased demand in the housing market and a strengthening economy in the United States, we have experienced increases in material prices, supply disruptions, and labor shortages, which will be a challenge for LP as we continue

to work to meet the demands of builders, remodelers, and homeowners worldwide.

Repair and remodeling activity is difficult to reasonably measure, but many indications suggest that repair and remodeling activity is continuing to show resiliency.

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 challenges, which we continue to address as we 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.

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We believe we are the largest manufacturer in the engineered wood siding market.

The overall siding market is estimated to be an overall $12 billion industry.

The overall siding market is estimated to be a $15 billion industry.

We have consistently grown our Siding Solutions above the underlying market growth rates.

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The ratio of overall OSB demand to capacity generally drives price.

We experienced increased demand for commodity OSB during 2021;

however, we cannot predict whether the prices of our OSB products will remain at current levels or increase or decrease in the future.

During the three months ended December 31, 2022, OSB commodity prices have fallen with the decline in market demand for OSB commodity product.

We cannot predict whether the prices of our OSB products will remain at current levels or increase or decrease in the future.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES

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Our financial position and/or results of operations may be materially different when reported under different conditions or when using different assumptions in the application of such policies.

In the event estimates or assumptions prove

to be different from actual amounts, adjustments are made in subsequent periods to reflect more current information.

In the event estimates or assumptions prove to be different from actual amounts, adjustments are made in subsequent periods to reflect more current information.

Our significant accounting policies are disclosed in the Consolidated Financial Statements and Item 8 of this annual report on Form 10-K.

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However, if actual results are not consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to losses that could be material.

Defined Benefit Pension Plans

We have a number of pension plans in the U.S.

and Canada, covering many of our employees.

Benefit accruals under our defined benefit pension plan in the U.S.

were frozen as of January 1, 2010, and benefit accruals under our defined benefit pension plan in Canada were frozen as of January 1, 2020.

We are required to make assumptions that are used to calculate the related assets, liabilities, and expenses recorded in our Consolidated Financial Statements.

Net actuarial gains and losses occur when actual experience differs from any of the assumptions used to value defined benefit pension plans or when assumptions change as they may each year.

The primary factors contributing to actuarial gains and losses are changes in the discount rate and the differences between expected and actual returns on pension plan assets.

This accounting method results in the potential for volatile and challenging to forecast gains and losses.

We record amounts relating to these defined benefit pension plans based on various actuarial assumptions, including discount rates, assumed rates of return, compensation increases, and life expectancy.

We review our actuarial assumptions on an annual basis and make modifications to the assumptions based on current economic conditions and trends.

The assumptions utilized in recording our obligations under our plans are based on our experience and on advice from our independent actuaries.

However, differences in actual experience or changes in the assumptions may materially affect our financial condition or results of operations.

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 net pension benefit 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 be completed 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 timing nor the final amount of such settlement charges.

Upon settlement, we expect to recognize pre-tax pension settlement charges that will include a non-cash charge for the recognition of all pre-tax actuarial losses accumulated in Accumulated Other Comprehensive Loss ($101 million as of December 31, 2021) and (2) any cash contributions to settle the Plan’s obligations ($6 million net projected benefit obligation as of December 31, 2021).

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.

As of December 31, 2021, we used a discount rate and long-term rate of return assumption of 2.6% and 5.3%, respectively, for our U.S.

defined benefit pension plan.

We used a discount rate and a long-term rate of return assumption of 2.6% and 2.3%, respectively, for our Canadian plans as of December 31, 2021.

• A 50-basis point change in our discount rate assumption would lead to an increase or decrease in our pension liability of approximately $13 million and would have a nominal impact on pension expenses.

• A 50-basis point change in the long-term rate of return on plan assets used in accounting for our pension plans would have a $1 million impact on pension expense.

It is not possible to forecast or predict whether there will be actuarial gains and losses in future periods, and if required, the magnitude of any such adjustment.

These gains and losses are driven by differences in actual experience or changes in the assumptions that are beyond our control, such as changes in interest rates and the actual return on pension plan assets.

Customer Program Costs

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We had $46 million and $31 million accrued as customer rebates as of December 31, 2022, and 2021, respectively.

Defined Benefit Pension Plans

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

and Canadian defined benefit pension plans (collectively, the Plan).

Plan participants were provided the opportunity to receive their full accrued benefits from Plan assets by either electing immediate lump sum distributions or annuity contracts with a qualifying third-party annuity provider.

During the year ended December 31, 2022, we contributed $5 million to fund the liquidation of the Plan.

Plan assets of $247 million were liquidated to fund lump sum distributions to participants and purchase annuity contracts.

As a result, a substantial portion of the Plan was settled during the year ended December 31, 2022, resulting in recognition of non-cash, pre-tax charges of $82 million from Accumulated comprehensive loss to Other non-operating items in our Consolidated Statements of Income.

Upon final termination of the Plan, we expect to recognize the remaining unrecognized pre-tax charges within Accumulated comprehensive loss ($6 million as of December 31, 2022).

The Plan will be terminated in future periods after satisfaction of all regulatory requirements, which may result in additional funding.

NON-GAAP FINANCIAL MEASURES

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Non-GAAP financial measures do not have standardized definitions and are not defined by U.S.

In this annual report on Form 10-K, we disclose income attributed to LP before interest expense, provision for income taxes, depreciation and amortization, and exclude 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, pension settlement charges, and other non-operating items as Adjusted EBITDA (Adjusted EBITDA), which is a non-GAAP financial measure.

In this annual report on Form 10-K, we disclose income attributed to LP from continuing operations before interest expense, provision for income taxes, depreciation and amortization, and exclude 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, pension settlement charges, and other non-operating items as Adjusted EBITDA from continuing operations (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, 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, pension settlement charges, and adjusting for a normalized tax rate as Adjusted Income (Adjusted Income).

We also disclose Adjusted Diluted EPS, calculated as Adjusted Income divided by diluted shares outstanding.

We also disclose income attributed to LP from continuing operations, excluding loss on impairment attributed to LP, 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 from continuing operations (Adjusted Income).

We also disclose Adjusted Diluted EPS from continuing operations (Adjusted Diluted EPS), 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.

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

GAAP measures of operating performance.

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Adjusted EBITDA, Adjusted Income, and Adjusted Diluted EPS have material limitations as performance measures because they exclude items that are actually incurred or experienced in connection with the operation of our business.

We have elected to change our definition of Adjusted EBITDA and Adjusted Income to exclude pension settlement costs incurred during the year ended December 31, 2021.

Pension settlement costs relate to any acceleration of the unrecognized actuarial loss related to our frozen U.S.

and Canadian defined benefit pension plans.

We consider pension settlement charges not to be reflective of our ongoing operations and believe that presenting Adjusted EBITDA and Adjusted Income excluding pension settlement charges provides increased transparency as to the operating costs of our current business performance.

We did not revise prior years’ Adjusted EBITDA or Adjusted Income amounts because there were no significant costs similar in nature to these items.

The following table presents significant items by operating segment and reconciles Net income to Adjusted EBITDA (dollar amounts in millions):

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Add (deduct):

Loss from noncontrolling interest 4 2 5

Net income attributed to LP 1,377 499 (5)

Net loss attributed to noncontrolling interest 3 4 2

Income from discontinued operations, net of income taxes (198) (71) (12)

Income attributed to LP from continuing operations 888 1,306 487

Provision for income taxes 274 402 121

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Other operating credits and charges, net (16) (1) 7

Product-line discontinuance charges — 8 —

Pension settlement charges 82 2 —

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Loss on early debt extinguishment — 11 —

Other non-operating items 4 — (6)

Other non-operating items, not included above 15 9 (4)

Adjusted EBITDA $ 1,389 $ 1,877 $ 757

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Corporate (38) (36) (30)

Adjusted EBITDA $ 1,972 $ 781 $ 209

Total Adjusted EBITDA $ 1,389 $ 1,877 $ 757

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

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Add (deduct):

Loss from noncontrolling interest 4 2 5

Net income attributed to LP 1,377 499 (5)

Net loss attributed to noncontrolling interest 3 4 2

Income from discontinued operations, net of income taxes (198) (71) (12)

Income attributed to LP from continuing operations 888 1,306 487

Loss on impairment attributed to LP 1 5 15

Other operating credits and charges, net (16) (1) 7

Product-line discontinuance charges — 8 —

Loss on early debt extinguishment — 11 —

Pension settlement charges 82 2 —

Gain on acquisition — — (14)

Reported tax provision 274 402 121

Normalized tax provision at 25% for 2021, 2020, and 2019 (455) (161) (16)

Adjusted income before tax 1,229 1,725 629

Normalized tax provision at 25% (307) (431) (157)

Adjusted Income $ 922 $ 1,294 $ 472

Adjusted weighted average shares - diluted 98 112 123

Diluted net income per share attributed to LP $ 14.09 $ 4.46 $ (0.04)

Weighted average shares - diluted 78 98 112

Diluted income attributed to LP from continuing operations per

share $ 11.34 $ 13.37 $ 4.35

Adjusted Diluted EPS $ 11.77 $ 13.24 $ 4.22

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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 Net sales, Adjusted EBITDA, and Adjusted EBITDA margin for this segment were as follows:

Segment Net sales and Adjusted EBITDA for this segment were as follows:

Dollar amounts in millions Increase (decrease)

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Adjusted EBITDA 339 289 17 %

Adjusted EBITDA margin 25 % 26 %

Net sales in this segment by product line were as follows:

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Siding Solutions 14 % 11 %

Year Ended December 31, 2021, Compared to Year Ended December 31, 2020

For the full year, Siding net sales increased year-over-year by $211 million (or 22%), primarily due to a 27% increase in Siding Solutions revenue partially offset by the discontinuation of fiber (included in the Other product line) in 2020.

The increase in Adjusted EBITDA of $43 million reflects revenue growth offset by $66 million of raw material & freight cost inflation and $36 million of discretionary investments in support of future growth, including capacity expansions, equipment maintenance, and sales & marketing.

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.

List price increases and positive mix effects drove year-over-year increases in the average net selling price for year ended December 31, 2022.

The volume increases for the year ended December 31, 2022 are attributable to steady customer demand and production increases made possible by the ramp-up of the Houlton facility and the non-recurrence of production downtime in the prior year for a major scheduled maintenance project.

Adjusted EBITDA increased $50 million year-over-year, reflecting revenue growth largely offset by $123 million of raw material, freight & wage cost inflation, and $31 million of discretionary investments in capacity and sales & marketing.

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, LP NovaCore™ Thermal Insulated Sheathing, LP ® FlameBlock ® Fire-Rated Sheathing, and LP ® TopNotch ® Sub-Flooring).

OSB is manufactured using wood strands arranged in layers and bonded with resins.

Significant cost inputs to produce OSB (including approximate breakdown percentages for 2022) were as follows:

wood fiber (26%), resin and wax (20%), labor and burden (16%), utilities (six percent), and other manufacturing costs (32%).

Segment Net sales, Adjusted EBITDA, and Adjusted EBITDA margin for this segment were as follows:

wood fiber (25%), resin and wax (23%), labor and burden (15%), utilities (5%), and other manufacturing costs (32%).

Segment Net sales and Adjusted EBITDA for this segment were as follows:

Dollar amounts in millions Increase (decrease)

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Adjusted EBITDA 1,034 1,531 (32) %

Adjusted EBITDA margin 64 % 43 %

Net sales in this segment by product line were as follows:

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OSB - Commodity (20) % (3) %

Year Ended December 31, 2021, Compared to Year Ended December 31, 2020

OSB net sales increased year-over-year by $1,167 million (or 96%), largely due to $1,113 million in increased OSB prices.

Structural Solutions sales volume, as a percentage of total OSB segment sales volume, was 45% in 2021 compared to 44% in 2020.

Adjusted EBITDA increased by $1,012 million, with price increases partially offset by $41 million of increased raw material costs and $38 million of maintenance and Peace Valley restart costs.

The EWP segment is comprised of LP ® SolidStart ® I-Joist (I-Joist), Laminated Veneer Lumber (LVL), and Laminated Strand Lumber (LSL) and other related products.

This segment also includes the sales of I-Joist and LVL products produced by our joint venture and sales of plywood produced as an ancillary product of the LVL production process.

During 2021, we ceased LSL production at our Houlton, Maine facility to begin the conversion of that facility to Siding Solutions production.

Segment Net sales, Adjusted EBITDA, and Adjusted EBITDA margin for this segment were as follows:

Dollar amounts in millions Increase (decrease)

Year Ended December 31, 2021 2020 2021 - 2020

Net Sales $ 638 $ 389 64 %

Adjusted EBITDA 95 23 307 %

Adjusted EBITDA margin 15 % 6 %

Net sales in this segment by product line were as follows:

Dollar amounts in millions Increase (decrease)

Year Ended December 31, 2021 2020 2021 - 2020

I-Joist $ 309 $ 148 109 %

LVL 194 141 38 %

LSL 47 45 5 %

Other, including plywood and related products 88 55 59 %

Total $ 638 $ 389

Percent changes in average net sales prices and unit shipments were as follows:

2021 versus 2020

Selling Price Unit

I-Joist 83 % 14 %

LSL 41 % (26) %

Year Ended December 31, 2021, Compared to Year Ended December 31, 2020

EWP net sales increased year-over-year by $249 million (or 64%) from 2020, predominantly due to price increases in response to significantly higher raw material costs.

Resulting increases in Adjusted EBITDA reflect the net effect of these price and cost increases.

OSB Net sales decreased year-over-year by $326 million (or 14%), including a $400 million decrease in OSB prices, partially offset by an increase in Structural Solutions sales volume.

Adjusted EBITDA decreased by $497 million primarily due to the decrease in OSB prices and $79 million of raw material cost and wage inflation.

South America

Our South America segment manufactures and distributes OSB structural panel and siding products in South America and certain export markets.

This segment has manufacturing operations in two countries, Chile and Brazil, and operates sales offices in Chile, Brazil, Peru, Columbia, Argentina, and Paraguay.

Segment Net sales, Adjusted EBITDA, and Adjusted EBITDA margin for this segment were as follows:

This segment has manufacturing operations in two countries, Chile and Brazil, and operates sales offices in Chile, Brazil, Peru, Colombia, Argentina, and Paraguay.

Segment Net sales and Adjusted EBITDA for this segment were as follows:

Dollar amounts in millions Increase (decrease)

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Adjusted EBITDA 77 113 (32) %

Adjusted EBITDA margin 43 % 25 %

Net sales in this segment by product were as follows:

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Siding (6) % (28) %

Year Ended December 31, 2021, Compared to Year Ended December 31, 2020

South America net sales increased year-over-year by $96 million (or 57%) compared to 2020, predominantly due to higher OSB and siding prices.

Increased Adjusted EBITDA reflects the effect of these price increases, partially offset by higher costs of imported raw material.

South America Net sales decreased year-over-year by $24 million (or 9%), predominantly due to lower volumes of $29 million and unfavorable foreign currency movements of $31 million, partially offset by higher local prices of $37 million.

The decrease in Adjusted EBITDA of $36 million reflect the impacts of the lower revenue and higher raw material costs.

Our other products segment includes our 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.

Net sales increased year-over-year by $43 million (or 83%) to $95 million primarily due to the Entekra growth.

Net sales decreased year-over-year by $12 million (or 12%) to $84 million primarily due to lower Entekra sales volumes.

Adjusted EBITDA was $(23) million for 2022 as compared to $(20) million in 2021.

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General corporate and other expense, net, was $47 million in 2022 as compared to $46 million in 2021.

The increase in 2021 as compared to 2020 was primarily due to increased costs associated with stock compensation and performance incentives.

LOSS ON IMPAIRMENTS

During 2022, $1 million of impairment charges were recognized.

During 2021, we recognized $6 million of pre-tax impairment charges primarily due to a non-cash impairment charge of $5 million related to goodwill associated with our off-site construction operation Entekra.

During 2020, we recognized $16 million of pre-tax impairment charges.

Included within these impairment charges was a $9 million charge related to our fiber-producing assets.

These impairment charges reflect the accelerated conversion from fiber production to pre-finishing.

Additionally, we recognized $2 million in non-cash impairment charges related to our divestiture of the East River facility and $5 million related to goodwill associated with Entekra.

OTHER OPERATING CREDITS AND CHARGES, NET

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During 2022, we generated $1,144 million of cash from operations as compared to $1,484 million in 2021.

The improvement in cash provided by operations was primarily related to increases in OSB pricing and growth in Siding Solutions revenue.

The decrease in cash provided by operations was primarily related to lower income from operations.

At December 31, 2022, and 2021, we had working capital of $148 million and $181 million, respectively.

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During 2022, net cash used for investing activities was $146 million as compared to $247 million in 2021.

Capital expenditures for 2021 and 2020 were $254 million and $77 million, respectively.

This increase in capital expenditures was primarily related to Siding conversion expenditures and growth and maintenance capital.

During 2020, we received $15 million in cash related to the divestiture of our East River facility assets and brand rights of CanExel ® .

Additionally, we received $10 million related to the cash surrender value of the company-owned life insurance policy and $3 million related to the sale of our auction rate securities (ARS).

During 2022, we received $268 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 year ended December 31, 2022 and 2021, were $414 million and $254 million, respectively, primarily related to siding conversion expenditures and growth and maintenance capital.

Capital expenditures in 2023 are expected to be in the range of $385 million to $485 million.

We expect to fund our

short-term and long-term 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 short-term and long-term capital expenditures through cash on hand, cash generated from operations, and available borrowing under our Amended Credit Facility, as necessary.

Financing Activities

During 2021, net cash used in financing activities was $1,388 million as compared to $272 million in 2020.

We used $300 million to repurchase shares of LP common stock under the 2020 Share Repurchase Program, which was exhausted in May 2021.

We used $1,000 million to repurchase shares of LP common stock under the First 2021 Share Repurchase Program, which was exhausted in December 2021.

During 2022, cash used in financing activities was $982 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 its common stock totaling up to $600 million (the 2022 Share Repurchase Program).

During the year ended December 31, 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 $69 million.

The remaining financing activities are primarily related to funds used to repurchase stock from employees in connection with income tax withholding requirements associated with our employee stock-based compensation plans.

During 2021, cash used in financing activities was $1,388 million.

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 $1 billion to repurchase shares of LP common stock under the additional share repurchase program (authorized by LP's Board of Directors in May 2021.

Additionally, we used $66 million to pay quarterly cash dividends.

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

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

In March 2021, LP used the proceeds from the issuance of the 2029 Senior Notes and cash on hand to redeem all of the 2024 Senior Notes at a redemption price of 102.438% of the principal amount thereof plus accrued and unpaid interest to, but not including, the redemption date.

In March 2021, LP used the proceeds from the issuance of the 2029 Senior Notes and cash on hand to redeem all of the outstanding 2024 Senior Notes at a redemption price of 102.438% of the principal amount thereof plus accrued and unpaid interest to, but not including, the redemption date.

In connection with financing activities, we paid $2 million in debt issuance costs related to the third amendment to our Amended Credit Facility and $13 million in redemption premiums and debt issuance costs related to the 2024 Senior Notes.

The remaining financing activities relate to the repurchase of stock from employees in connection with income tax withholding requirements associated with our employee stock-based compensation plans.

During 2020, net cash used in financing activities was $272 million as compared to $717 million in 2019.

We used $200 million to repurchase LP common stock under the 2020 Share Repurchase Program.

Additionally, we used $65 million to pay quarterly cash dividends.

In the first quarter of 2020, we borrowed $350 million under our Amended Credit Facility as a precautionary measure due to the COVID-19 pandemic, and we repaid the outstanding balance in the second quarter of 2020.

The remaining financing activities related to the repurchase of stock from employees in connection with income tax withholding requirements associated with our employee stock-based compensation plans.

CREDIT FACILITIES

The Amended Credit Facility 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.

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

As of December 31, 2021, 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.

The Amended Credit Facility also contains financial covenants that require us and our consolidated subsidiaries to have, as of the end of each quarter, a capitalization ratio ( i.e.

In November 2022, LP entered into a Second Amended and Restated Credit Agreement with American AgCredit, PCA, as administrative agent and sole lead arranger, and CoBank, ACB, as letter of credit issuer (the Credit Agreement), relating to its revolving credit facility (as amended, 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.

The Credit Agreement amended and restated the Company’s existing credit facility dated as of June 27, 2019, as amended, in its entirety to, among other things, (i) reflect the release of the collateral that secures the indebtedness evidenced by the Credit Agreement as a result of the Company’s obtaining an Investment Grade rating on November 1, 2022 (which collateral may be reinstated from time to time in accordance with the terms of the Credit Agreement), (ii) extend the maturity date to November 29, 2028, (iii) make certain changes to effect a transition from the LIBOR interest rate benchmark to Term SOFR Rate (as defined in the Credit Agreement) and (iv) provide for certain other modifications (including modifications to certain basket and threshold levels in the negative covenants) as set forth in the Credit Agreement.

As of December 31, 2022, we had no amounts

outstanding under the Amended Credit Facility.

The Credit Agreement 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 Credit Agreement also contains financial covenants that require us and our consolidated subsidiaries to have, as of the end of each fiscal quarter, a capitalization ratio ( i.e.

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

As of December 31, 2021, we were in compliance with all financial covenants under the Amended Credit Facility.

As of December 31, 2022, we were in compliance with all financial covenants under the Credit Agreement.

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.

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.

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

As of December 31, 2022, we were in compliance with all covenants under the Letter of Credit Facility.

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2029 Senior Notes

In March 2021, we issued the 2029 Senior Notes in the aggregate principal amount of $350 million, which mature

on March 15, 2029.

In March 2021, we issued the 2029 Senior Notes in the aggregate principal amount of $350 million, which mature on March 15, 2029.

As of December 31, 2022, future interest payments associated with the 2029 Senior Notes totaled $83 million, with $13 million payable within 12 months of such date.

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As of December 31, 2022, the fair values of LP's facilities were in excess of their carrying value, which supported the conclusion that no impairment is necessary for those facilities.

However, 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 these locations, it is possible that future impairment charges will be required.

However, 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 these locations, it is possible that future impairment charges will be required.

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

3 unchanged sentences

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-K

Item 7. Management’s Discussion and Analysis