LOUISIANA-PACIFIC CORP 10-Q

ITEM 1. FINANCIAL STATEMENTS Condensed Consolidated Statements of Income Dollar and share amounts in millions, except per share amounts (Unaudited) Three Months Ended March 31, 2023 2022 Net sales $ 584 $ 1,167 Cost of sales ( 483 ) ( 547 ) Gross profit 101 620 Selling, general, and administrative expenses ( 66 ) ( 62 ) Other operating credits and charges, net ( 5 ) ( 1 ) Income from operations 30 556 Interest expense ( 3 ) ( 3 ) Investment income 5 1 Other non-operating items ( 8 ) ( 10 ) Income before income taxes 23 544 Provision for income taxes ( 1 ) ( 124 ) Equity in unconsolidated affiliate — 1 Income from continuing operations 22 421 Income from discontinued operations, net of income taxes — 62 Net income $ 22 $ 483 Net (income) loss attributed to noncontrolling interest ( 1 ) 1 Net income attributed to LP $ 21 $ 484 Net income attributed to LP per share of common stock: Income per share continuing operations - basic $ 0.29 $ 4.92 Income per share discontinued operations - basic — 0.72 Net income per share - basic $ 0.29 $ 5.64 Income per share continuing operations - diluted $ 0.29 $ 4.89 Income per share discontinued operations - diluted — 0.71 Net income per share - diluted $ 0.29 $ 5.60 Average shares of common stock used to compute net income per share: Basic 72 86 Diluted 72 86 The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements. 4 Condensed Consolidated Statements of Comprehensive Income Dollar amounts in millions (Unaudited) Three Months Ended March 31, 2023 2022 Net income $ 22 $ 483 Other comprehensive income, net of tax Foreign currency translation adjustments 15 23 Changes in defined benefit pension plans 4 1 Other comprehensive income, net of tax 19 24 Comprehensive income 42 508 Comprehensive (income) loss associated with noncontrolling interest ( 1 ) 1 Comprehensive income attributed to LP $ 41 $ 508 The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements. 5 Condensed Consolidated Balance Sheets Dollar amounts in millions (Unaudited) March 31, 2023 December 31, 2022 ASSETS Cash and cash equivalents $ 126 $ 369 Receivables, net of allowance for doubtful accounts of $1 million as of March 31, 2023 and December 31, 2022 148 127 Inventories 415 337 Prepaid expenses and other current assets 23 20 Total current assets 713 854 Timber and timberlands 33 40 Property, plant, and equipment, net 1,397 1,326 Operating lease assets, net 42 44 Goodwill and other intangible assets 36 36 Investments in and advances to affiliates 5 6 Restricted cash — 14 Other assets 24 24 Deferred tax asset 10 7 Total assets $ 2,259 $ 2,350 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued liabilities $ 227 $ 317 Income taxes payable 1 19 Total current liabilities 229 336 Long-term debt 347 346 Deferred income taxes 115 113 Non-current operating lease liabilities 35 41 Contingency reserves, excluding current portion 26 26 Other long-term liabilities 56 53 Total liabilities $ 808 $ 916 Redeemable noncontrolling interest 1 — Stockholders’ equity: Common stock, $ 1 par value, 200,000,000 shares authorized; 87,986,865 and 72,031,465 shares issued and outstanding, respectively, as of March 31, 2023; and 87,986,865 and 71,748,200 shares issued and outstanding, respectively, as of December 31, 2022 88 88 Additional paid-in capital 455 462 Retained earnings 1,375 1,371 Treasury stock, 15,955,400 shares and 16,238,665 shares, at cost as of March 31, 2023, and December 31, 2022, respectively ( 388 ) ( 388 ) Accumulated comprehensive loss ( 80 ) ( 99 ) Total stockholders’ equity 1,450 1,433 Total liabilities and stockholders’ equity $ 2,259 $ 2,350 The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements. 6 Condensed Consolidated Statements of Cash Flows Dollar amounts in millions (Unaudited) Three Months Ended March 31, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 22 $ 483 Adjustments to net income: Depreciation and amortization 28 32 Gain on sale of assets — ( 39 ) Pension loss due to settlement 6 — Deferred taxes ( 2 ) 11 Other adjustments, net 9 5 Changes in assets and liabilities (net of acquisitions and divestitures): Receivables ( 8 ) ( 127 ) Inventories ( 76 ) ( 55 ) Prepaid expenses and other current assets ( 2 ) 3 Accounts payable and accrued liabilities ( 66 ) ( 2 ) Income taxes payable, net of receivables ( 30 ) 116 Net cash (used) provided by operating activities ( 119 ) 425 CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant, and equipment additions ( 114 ) ( 92 ) Proceeds from sales of assets 1 59 Other investing activities — 1 Net cash used in investing activities ( 113 ) ( 33 ) CASH FLOWS FROM FINANCING ACTIVITIES: Payment of cash dividends ( 17 ) ( 19 ) Purchase of stock — ( 104 ) Other financing activities ( 10 ) ( 15 ) Net cash used in financing activities ( 27 ) ( 137 ) EFFECT OF EXCHANGE RATE ON CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 3 11 Net (decrease) increase in cash, cash equivalents, and restricted cash ( 257 ) 266 Cash, cash equivalents, and restricted cash at beginning of period 383 371 Cash, cash equivalents, and restricted cash at end of period $ 126 $ 637 Supplemental cash flow information: Cash paid for income taxes, net $ 33 $ 12 Cash paid for interest, net $ 7 $ 4 Unpaid capital expenditures $ 28 $ 41 The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements. 7 Condensed Consolidated Statements of Stockholders’ Equity Dollar and share amounts in millions, except per share amounts (Unaudited) Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings Accumulated Comprehensive Loss Total Stockholders’ Equity Shares Amount Shares Amount Balance, December 31, 2022 88 $ 88 16 $ ( 388 ) $ 462 $ 1,371 $ ( 99 ) $ 1,433 Net income attributed to LP — — — — — 21 — 21 Dividends paid ($ 0.24 per share) — — — — — ( 17 ) — ( 17 ) Issuance of shares under stock plans — — — 10 ( 10 ) — — — Taxes paid related to net settlement of stock-based awards — — — ( 10 ) — — — ( 10 ) Compensation expense associated with stock-based compensation — — — — 4 — — 4 Other comprehensive income — — — — — — 19 19 Balance, March 31, 2023 88 $ 88 16 $ ( 388 ) $ 455 $ 1,375 $ ( 80 ) $ 1,450 Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings Accumulated Comprehensive Loss Total Stockholders’ Equity Shares Amount Shares Amount Balance, December 31, 2021 102 $ 102 17 $ ( 390 ) $ 458 $ 1,239 $ ( 174 ) $ 1,235 Net income attributed to LP — — — — — 484 — 484 Dividends paid ($ 0.22 per share) — — — — — ( 19 ) — ( 19 ) Issuance of shares under stock plans — — (1) 14 ( 14 ) — — — Taxes paid related to net settlement of stock-based awards — — — ( 15 ) — — — ( 15 ) Purchase of stock ( 2 ) ( 2 ) — — — ( 102 ) — ( 104 ) Compensation expense associated with stock-based compensation — — — — 7 — — 7 Other comprehensive income — — — — — — 24 24 Balance, March 31, 2022 101 $ 101 16 $ ( 391 ) $ 451 $ 1,601 $ ( 149 ) $ 1,613 The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements. 8 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. NATURE OF OPERATIONS AND BASIS FOR PRESENTATION Nature of Operations 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, reliability, and sustainability. 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. The Company operates 22 plants across the U.S., Canada, Chile, and Brazil through foreign subsidiaries, an d operates additional facilities through a joint venture. References to "LP," the "Company," "we," "our," and "us" refer to Louisiana-Pacific Corporation and its consolidated subsidiaries as a whole. During the year ended December 31, 2022, we sold our 50% equity interest in two joint ventures that produce I-joists to Resolute Forest Products Inc., and we sold the remaining assets related to the EWP segment to Pacific Woodtech Corporation, a Washington corporation, and Pacific Woodtech Canada Holdings Limited, a British Columbia limited company (collectively, the Purchaser). Accordingly, the results of our previously-owned EWP segment have been presented as discontinued operations in our Condensed Consolidated Statements of Income for all periods presented. See "Note 7 –Discontinued Operations" for additional information. Basis for Presentation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) for interim financial information. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete consolidated financial statements. 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 related Notes should be read in conjunction with our annual report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 21, 2023 (2022 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. NOTE 2. REVENUE The following table presents our reportable segment revenues, disaggregated by revenue source. We disaggregate revenue from contracts with customers into major product lines. We have determined that disaggregating revenue into these categories depicts 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 16 below, our reportable segments are Siding, Oriented Strand Board (OSB), and South America (dollar amounts in millions). 9 Three Months Ended March 31, 2023 By Product type and family: Siding OSB South America Other Inter-segment Total Value-add Siding Solutions $ 329 $ — $ 8 $ — $ — $ 337 OSB - Structural Solutions — 112 46 — — 158 329 112 54 — — 495 Commodity OSB - commodity — 75 — — — 75 Other Other products 2 2 1 8 — 14 $ 331 $ 189 $ 55 $ 8 $ — $ 584 Three Months Ended March 31, 2022 By Product type and family: Siding OSB South America Other Inter-segment Total Value-add Siding Solutions $ 330 $ — $ 6 $ — $ — $ 336 OSB - Structural Solutions — 406 58 — ( 1 ) 464 330 406 64 — ( 1 ) 799 Commodity OSB - commodity — 334 — — — 334 Other Other products 2 4 2 26 — 34 $ 332 $ 744 $ 67 $ 26 $ ( 1 ) $ 1,167 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. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods. The shipping cost incurred by us to deliver products to our customers is recorded in cost of sales. The expected costs associated with our warranties continue to be recognized as an expense when the products are sold. Our businesses routinely incur customer program costs to obtain favorable product placement, promote sales of products, and maintain competitive pricing. Customer program costs and incentives, including rebates and promotion and volume allowances, are accounted for as deductions from Net sales at the time the program is initiated. These reductions from revenue are recorded at the time of sale or the implementation of the program based on management’s best estimates. Estimates are based on historical and projected experience for each type of program or customer. Volume allowances are accrued based on management’s estimation of customer volume achievement and other factors incorporated into customer agreements, such as new product purchases, store sell-through, and merchandising support. Management adjusts accruals when circumstances indicate (typically as a result of a change in volume expectations). We ship some of our products to customers’ distribution centers on a consignment basis. We retain title to our products stored at the distribution centers. As our products are removed from the distribution centers by retailers and shipped to retailers’ stores, title passes from us to the retailers. 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 centers. 10 NOTE 3. EARNINGS PER SHARE Basic earnings per share is based on the weighted-average number of shares of common stock outstanding. Diluted earnings per share is based upon the weighted-average number of shares of common stock outstanding, plus all potentially dilutive securities that were assumed to be converted into common shares at the beginning of the period under the treasury stock method. 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 from continuing operations are reported because the effect is anti-dilutive. The following table sets forth the computation of basic and diluted earnings per share (dollar and share amounts in millions, except per share amounts): Three Months Ended March 31, 2023 2022 Income from continuing operations $ 22 $ 421 Net (income) loss attributed to noncontrolling interest ( 1 ) 1 Income attributed to LP from continuing operations 21 422 Income for discontinued operations, net of income taxes — 62 Net income attributed to LP $ 21 $ 484 Weighted average common shares outstanding - basic 72 86 Dilutive effect of employee stock plans — 1 Shares used for diluted earnings per share 72 86 Net income attributed to LP per share - basic: Continuing operations $ 0.29 $ 4.92 Discontinued operations — 0.72 Net income attributed to LP per share - basic $ 0.29 $ 5.64 Net income attributed to LP per share – diluted: Continuing operations $ 0.29 $ 4.89 Discontinued operations — 0.71 Net income attributed to LP per share - diluted $ 0.29 $ 5.60 NOTE 4. FAIR VALUE MEASUREMENTS Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. We are required to classify these financial assets and liabilities into two groups: (i) recurring—measured on a periodic basis, and (ii) non-recurring—measured on an as-needed basis. The fair value of the 3.625 % Senior Notes due in 2029 (2029 Senior Notes) was estimated to be $ 302 million and $ 306 million as of March 31, 2023 and December 31, 2022, respectively, based on market quotations. The 2029 Senior Notes and other long-term debt are categorized as Level 1 in the U.S. GAAP fair value hierarchy. Fair values are based on trading activity among the Company’s lenders and the average bid and ask price is determined using published rates. 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, and all loans thereunder, become due on November 29, 2028. 11 As of March 31, 2023, there were no outstanding amounts borrowed under our Amended Credit Facility. As of May, 3, 2023, there was $45 million outstanding under the Amended Credit Facility. 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. NOTE 5. RECEIVABLES Receivables consisted of the following (dollar amounts in millions): March 31, 2023 December 31, 2022 Trade receivables $ 112 $ 106 Other receivables 23 19 Income tax receivable 15 4 Allowance for doubtful accounts (1) (1) Total $ 148 $ 127 Trade receivables are primarily generated by sales of our products to our wholesale and retail customers. Other receivables as of March 31, 2023 and December 31, 2022, primarily consist of sales tax receivables, vendor rebates, and other miscellaneous receivables. NOTE 6. INVENTORIES 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 (work in process is not material and is included in Semi-finished inventory) are as follows (dollar amounts in millions): March 31, 2023 December 31, 2022 Logs $ 102 $ 59 Other raw materials 75 72 Semi-finished inventories 34 25 Finished products 204 180 Total $ 415 $ 337 NOTE 7. DISCONTINUED OPERATIONS Engineered Wood Products (EWP) In March 2022, the Company sold its 50 % equity interest in two joint ventures that produce I-joists to Resolute Forest Products Inc. for $ 59 million, resulting in a pre-tax gain associated with the sale of $ 39 million recorded in the year ended December 31, 2022 within Income from discontinued operations, net of income taxes in the Condensed Consolidated Statements of Income. On August 1, 2022, the Company completed the sale of the assets related to the EWP segment to the Purchaser. As a result of the sale, the Company received $ 217 million in gross cash proceeds after taking into account working capital adjustments. The Company paid $ 12 million in direct transaction costs, resulting in net proceeds of $205 million. During the year ended December 31, 2022, the Company recorded a pre-tax gain of approximately $ 118 million within Income from discontinued operations, net of income taxes in the Condensed Consolidated Statements of Income. 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, which concluded during the three months ended March 31, 2023. During the three months ended March 31, 2023, the Company collected $ 11 million on the Purchaser's behalf pursuant to the TSA. As of March 31, 2023, the 12 Company had no amounts due to or due from the Purchaser. The Company has classified the results of its EWP segment as discontinued operations in its Condensed Consolidated Statements of Income for the prior period presented. The following table presents the financial results of the EWP segment for the three months ended March 31, 2022 (dollar amounts in millions): Three Months Ended March 31, 2022 Net sales $ 170 Cost of sales ( 129 ) Gross profit 41 Selling, general, and administrative expenses ( 3 ) Income from operations of discontinued operations 38 Other non-operating items — Gain on disposal before income taxes 39 Income from discontinued operations before income taxes 77 Provision for income taxes ( 15 ) Income from discontinued operations, net of income taxes $ 62 The following summarizes the total cash provided by operations and total cash provided by investing activities related to the EWP segment and included in the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 (dollar amounts in millions): Net cash provided by discontinued operating activities $ 13 Net cash provided by discontinued investing activities $ 59 Net cash provided by discontinued investing activities for the three months ended March 31, 2022, includes $ 59 million of proceeds from the sale of our 50 % equity interest in two joint ventures that produce I-joists. NOTE 8. GOODWILL AND OTHER INTANGIBLES Goodwill and indefinite-lived intangible assets are not amortized and are subject to assessment for impairment by applying a fair value-based test on an annual basis, or more frequently if circumstances indicate a potential impairment. The Company’s annual assessment date is October 1. Changes in goodwill and other intangible assets for the three months ended March 31, 2023, are provided in the following table (dollar amounts in millions): Timber Licenses 1 Goodwill Developed Technology Trademarks Beginning balance December 31, 2022 $ 28 $ 19 $ 15 $ 2 Amortization ( 1 ) — — — Ending balance March 31, 2023 $ 27 $ 19 $ 15 $ 2 1 Timber licenses are included in Timber and timberlands on the Condensed Consolidated Balance Sheets. NOTE 9. INCOME TAXES 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. Each period, the income tax accrual is adjusted to the latest estimate, and the difference from the previously accrued year-to-date balance is adjusted in the current quarter. Changes in profitability estimates in various jurisdictions will impact our quarterly effective income tax rates. The tax provision for income taxes from continuing operations for the three months ended March 31, 2023 and 2022, reflected an estimated annual effective tax rate of 28 % and 24 %, respectively, excluding discrete items 13 discussed below. The total effective tax rate for continuing operations for the three months ended March 31, 2023 was 5 %, compared to 23 % for the comparable period in 2022. We recognized net discrete tax benefits of $ 5 million and $ 9 million in the three months ended March 31, 2023 and 2022, respectively. The discrete benefits primarily relate to excess tax benefits from stock-based compensation and inflationary adjustments. On August 16, 2022, the Inflation Reduction Act of 2022 ("IRA") was signed into law. The IRA levies a 1% excise tax on net stock repurchases after December 31, 2022 and imposes a 15% corporate alternative minimum tax ("CAMT") for tax years beginning after December 31, 2022. The Company did not repurchase any shares during the three months ended March 31, 2023. CAMT is not expected to have a material impact on our results of operations or financial position. NOTE 10. COMMITMENTS AND CONTINGENCIES We maintain reserves for various contingent liabilities as follows (dollar amounts in millions): March 31, 2023 December 31, 2022 Environmental reserves $ 27 $ 27 Other reserves — — Total contingencies 27 27 Current portion (included in Accounts payable and accrued liabilities) ( 1 ) ( 1 ) Long-term portion $ 26 $ 26 Estimates of our loss contingencies are based on various assumptions and judgments. Due to the numerous uncertainties and variables associated with these assumptions and judgments, 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 contingencies and, as additional information becomes known, may change our estimates significantly. While no estimate of the range of any such change can be made at this time, the amount that we may ultimately pay in connection with these matters could materially exceed, in either the near term or the longer term, the amounts accrued to date. Our estimates of our loss contingencies do not reflect potential future recoveries from insurance carriers except to the extent that recovery may, from time to time, be deemed probable as a result of an insurer’s agreement to payment terms. Environmental Matters We maintain a reserve for undiscounted estimated environmental loss contingencies. This reserve is primarily for estimated future costs of remediation of hazardous or toxic substances at numerous sites currently or previously owned by the Company. 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. 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. 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 effect on our financial position, results of operations, cash flows, or liquidity. 14 NOTE 11. 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 values of our long-lived assets. 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, 2023, 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. NOTE 12. PRODUCT WARRANTIES We offer warranties on the sale of most of our products and record an accrual for estimated future claims. 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 months ended March 31, 2023 and 2022, is summarized in the following table (dollar amounts in millions): Three Months Ended March 31, 2023 2022 Beginning balance $ 8 $ 7 Accrued to expense 1 1 Payments made — — Total warranty reserves 8 8 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) $ 7 $ 6 We continue to monitor warranty and other claims associated with our products and believe, as of March 31, 2023, 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. NOTE 13. DEFINED BENEFIT PENSION PLANS The following table summarizes our net periodic pension cost for our defined benefit pension and postretirement plans during the three months ended March 31, 2023 and 2022 (dollar amounts in millions): Three Months Ended March 31, 2023 2022 Service cost $ — $ 1 Other components of net periodic pension cost 1 : Interest cost — 2 Expected return on plan assets — ( 2 ) Amortization of prior service cost — — Amortization of net loss — 1 Net periodic pension costs before loss due to settlement — 2 Loss due to settlement 6 — Total net periodic pension cost $ 6 $ 2 1 Other components of net periodic pension cost are included in Other non-operating items on our Condensed Consolidated Statements of Income. 15 In November 2021, the Company initiated the termination of our frozen U.S. and Canadian defined benefit pension plans (collectively, the Plan), which would result in the full settlement of the Company's Plan obligations. During the year ended December 31, 2022, the Company liquidated substantially all of the Plan assets to fund lump-sum distributions to participants and purchase non-participating group annuity contracts. As a result, a substantial portion of the Plan was settled during the year ended December 31, 2022. During the three months ended March 31, 2023, the Company completed the termination of the Plan resulting in recognition of non-cash, pre-tax charges of $6 million from Accumulated comprehensive loss to Other non-operating items in our Condensed Consolidated Statements of Income. Liquidation of remaining Plan assets in surplus of the defined benefit pension obligation will be made once the Plan satisfies all regulatory requirements, which is expected to be completed during 2023. The changes recognized in Other comprehensive loss were as follows (dollar amounts in millions): Three Months Ended March 31, 2023 2022 Net actuarial gain (loss) and prior service (cost) arising during the period, net of tax $ — $ — Amortization of actuarial loss, prior service cost and settlements, net of tax 4 1 Total amounts recognized in Other comprehensive income $ 4 $ 1 NOTE 14. ACCUMULATED COMPREHENSIVE LOSS Accumulated comprehensive loss is provided in the following table for the three months ended March 31, 2023 and 2022 (dollar amounts in millions): Pension Translation Adjustments Other Total Balance at December 31, 2022 $ ( 5 ) $ ( 94 ) $ — $ ( 99 ) Reclassified to income statement, net of taxes 1 4 — — 4 Translation adjustments — 15 — 15 Balance at March 31, 2023 $ — $ ( 79 ) $ — $ ( 80 ) Pension Translation Adjustments Other Total Balance at December 31, 2021 $ ( 76 ) $ ( 96 ) $ ( 1 ) $ ( 174 ) Reclassified to income statement, net of taxes 1 1 — — 1 Translation adjustments — 23 — 23 Balance at March 31, 2022 $ ( 75 ) $ ( 73 ) $ ( 1 ) $ ( 149 ) 1 Amounts of actuarial loss and prior service cost are components of net periodic benefit cost. See Note 14 above for additional details. NOTE 15. OTHER OPERATING AND NON-OPERATING ITEMS Other operating credits and charges, net Other operating credits and charges, net, is comprised of the following components (dollar amounts in millions): Three Months Ended March 31, 2023 2022 Insurance recoveries $ — $ — Reorganization charges ( 2 ) ( 1 ) Environmental costs — — Other ( 3 ) — Other operating credits and charges, net $ ( 5 ) $ ( 1 ) 16 Other non-operating items Other non-operating items is comprised of the following components (dollar amounts in millions): Three Months Ended March 31, 2023 2022 Net periodic pension cost, excluding service cost $ — $ ( 1 ) Pension settlement charges ( 6 ) — Foreign currency loss ( 3 ) ( 9 ) Other 1 — Other non-operating items $ ( 8 ) $ ( 10 ) NOTE 16. SELECTED SEGMENT DATA We operate in three segments: Siding, OSB, and South America. Our business units have been aggregated into these three segments based upon the similarity of economic characteristics, customers, and distribution methods. Our results of operations are summarized below for each of these segments separately, as well as for the “Other” category, which comprises other products that are not individually significant. We evaluate the performance of our business segments based on Net sales and segment Adjusted EBITDA. Accordingly, our chief operating decision maker evaluates performance and allocates resources based primarily on Net sales and segment Adjusted EBITDA for our business segments. Segment Adjusted EBITDA 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, pension settlement charges, and other non-operating items. 17 Information about our business segments is as follows (dollar amounts in millions): Three Months Ended March 31, 2023 2022 Net sales Siding $ 331 $ 332 OSB 189 744 South America 55 67 Other 8 26 Intersegment sales — ( 1 ) Total sales $ 584 $ 1,167 NET INCOME TO ADJUSTED EBITDA RECONCILIATION Net income $ 22 $ 483 Add (deduct): Net loss (income) attributed to noncontrolling interest ( 1 ) 1 Income from discontinued operations, net of income taxes — ( 62 ) Income attributed to LP from continuing operations 21 422 Provision for income taxes 1 124 Depreciation and amortization 28 32 Stock-based compensation expense 4 6 Other operating credits and charges, net 5 1 Interest expense 3 3 Investment income ( 5 ) ( 1 ) Pension settlement charges 6 — Other non-operating items 3 10 Adjusted EBITDA $ 66 $ 598 SEGMENT ADJUSTED EBITDA Siding $ 67 $ 83 OSB 5 505 South America 12 25 Other ( 9 ) ( 6 ) Corporate ( 9 ) ( 9 ) Total Adjusted EBITDA $ 66 $ 598 NOTE 17. SUBSEQUENT EVENTS In April 2023, the Company announced the shutdown of Entekra Holdings, LLC (Entekra), an off-site framing operation previously reported within our "other" operating segment, which is expected to result in a pre-tax, non-cash charges of between $ 25 million and $ 30 million in the second quarter of 2023. In May 2023, the Company acquired substantially all of the assets of Wawa OSB Inc., an Ontario, Canada corporation, for $ 80 million . The acquisition was funded together with cash on hand and borrowings under the Amended Credit Facility. 18