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Item 1. Financial Statements

2023-08-02 compared with 2023-05-03 · 200 added, 105 removed, 358 unchanged (46% of the section changed)

2 unchanged sentences

Dollar and share amounts in millions, except per share amounts

Three Months Ended March 31,

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

2023 2022 2023 2022

Net sales $ 611 $ 1,130 $ 1,195 $ 2,297

2 unchanged sentences

Selling, general, and administrative expenses ( 66 ) ( 67 ) ( 133 ) ( 129 )

Impairment of long-lived assets, net ( 24 ) — ( 24 ) —

Other operating credits and charges, net ( 21 ) 11 ( 26 ) 10

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Other non-operating items ( 8 ) 2 ( 16 ) ( 8 )

Income before income taxes 23 544

Income (loss) before income taxes ( 1 ) 463 22 1,007

Provision for income taxes ( 21 ) ( 116 ) ( 22 ) ( 240 )

Equity in unconsolidated affiliate 1 1 1 2

Income from continuing operations 22 421

Income (loss) from continuing operations ( 21 ) 348 1 769

Income from discontinued operations, net of income taxes — 37 — 99

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

Net income (loss) $ ( 21 ) $ 385 $ 1 $ 868

Net loss attributed to non-controlling interest 1 — — 1

Net income (loss) attributed to LP $ ( 20 ) $ 384 $ 1 $ 868

Net income (loss) attributed to LP per share of common stock:

Income (loss) per share continuing operations - basic $ ( 0.28 ) $ 4.30 $ 0.02 $ 9.25

Income per share discontinued operations - basic — 0.46 — 1.18

Net income per share - basic $ 0.29 $ 5.64

Income per share continuing operations - diluted $ 0.29 $ 4.89

Net income (loss) attributed to LP per share - basic $ ( 0.28 ) $ 4.76 $ 0.02 $ 10.43

Income (loss) per share continuing operations - diluted $ ( 0.28 ) $ 4.28 $ 0.02 $ 9.19

Income per share discontinued operations - diluted — 0.45 — 1.18

Net income per share - diluted $ 0.29 $ 5.60

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

Net income (loss) attributed to LP per share - diluted $ ( 0.28 ) $ 4.73 $ 0.02 $ 10.36

Average shares of common stock used to compute Net income (loss) per share:

Basic 72 81 72 83

Diluted 72 81 72 84

2 unchanged sentences

Dollar amounts in millions

Three Months Ended March 31,

Net income $ 22 $ 483

Other comprehensive income, net of tax

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

2023 2022 2023 2022

Net income (loss) $ ( 21 ) $ 385 $ 1 $ 868

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments 1 ( 32 ) 16 ( 9 )

Changes in defined benefit pension plans — 1 4 2

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

Other comprehensive income (loss), net of tax 1 ( 31 ) 21 ( 7 )

Comprehensive income (loss) ( 20 ) 354 22 861

Comprehensive loss associated with non-controlling interest 1 — — 1

Comprehensive income (loss) attributed to LP $ ( 19 ) $ 354 $ 22 $ 862

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

1 unchanged sentence

Dollar amounts in millions

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Cash and cash equivalents $ 71 $ 369

Receivables, net of allowance for doubtful accounts of $1 million as of March 31, 2023 and December 31, 2022

Receivables, net of allowance for doubtful accounts of $ 3 million and $ 1 million as of June 30, 2023, and December 31, 2022, respectively

Inventories 407 337

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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;

87,986,865 and 72,103,762 shares issued and outstanding, respectively, as of June 30, 2023;

and 87,986,865 and 71,748,200 shares issued and outstanding, respectively, as of December 31, 2022

1 unchanged sentence

Retained earnings 1,337 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

Treasury stock, 15,883,103 shares and 16,238,665 shares, at cost as of June 30, 2023, and December 31, 2022, respectively

( 387 ) ( 388 )

5 unchanged sentences

Dollar amounts in millions

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

2 unchanged sentences

Depreciation and amortization 57 65

Gain on sale of assets — ( 39 )

Impairment of goodwill and long-lived assets 24 —

Gain on sale of assets, net — ( 39 )

Pension loss due to settlement 6 —

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Property, plant, and equipment additions ( 188 ) ( 196 )

Acquisition of facility assets ( 80 ) —

Proceeds from sales of assets 1 —

Other investing activities — 1

Proceeds from divestiture of business — 59

Other investing activities, net ( 4 ) 2

Net cash used in investing activities ( 271 ) ( 135 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowing of long-term debt 70 —

Repayment of long-term debt ( 40 ) —

Payment of cash dividends ( 35 ) ( 37 )

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Other financing activities ( 9 ) ( 15 )

Net cash used in financing activities ( 27 ) ( 137 )

Net cash provided by (used in) financing activities ( 14 ) ( 626 )

EFFECT OF EXCHANGE RATE ON CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 3 ( 2 )

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Taxes paid related to net settlement of stock-based awards — — — ( 10 ) — — — ( 10 )

Purchase of stock — — — — — — — —

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

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88 $ 88 16 $ ( 388 ) $ 455 $ 1,375 $ ( 80 ) $ 1,450

Net loss attributed to LP — — — — — ( 20 ) — ( 20 )

Dividends paid ($ 0.24 per share)

— — — — — ( 17 ) — ( 17 )

Issuance of shares under stock plans — — — 2 — — — 2

Taxes paid related to net settlement of stock-based awards — — — ( 1 ) — — — ( 1 )

Purchase of stock — — — — — — — —

Compensation expense associated with stock-based compensation — — — — 3 — — 3

Other comprehensive income — — — — — — 1 1

Balance, June 30, 2023

88 $ 88 16 $ ( 387 ) $ 458 $ 1,337 $ ( 78 ) $ 1,419

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

Common Stock Treasury Stock Additional

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101 $ 101 16 $ ( 391 ) $ 451 $ 1,601 $ ( 149 ) $ 1,613

Net income attributed to LP — — — — — 384 — 384

Dividends paid ($ 0.22 per share)

— — — — — ( 18 ) — ( 18 )

Issuance of shares under stock plans — — — 2 — — — 2

Taxes paid related to net settlement of stock-based awards — — — ( 1 ) — — — ( 1 )

Purchase of stock ( 7 ) ( 7 ) — — — ( 463 ) — ( 471 )

Compensation expense associated with stock-based compensation — — — — 7 — — 7

Other comprehensive loss — — — — — — ( 31 ) ( 31 )

Balance, June 30, 2022

94 $ 94 16 $ ( 390 ) $ 457 $ 1,505 $ ( 181 ) $ 1,484

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

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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 principal customers for our building solutions are retailers, wholesalers, and home building 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).

During the year ended December 31, 2022, we sold our 50% equity interest in t wo joint ventures that produce I-joists, and we sold the remaining assets related to the Engineered Wood Product (EWP) segment.

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.

In May 2023, we acquired a manufacturing facility in Wawa, Ontario from Wawa OSB, Inc.

a subsidiary of Forex Inc., for $ 80 million, financed by a combination of cash on hand and availability under the Amended Credit Facility (defined below).

The manufacturing facility is expected to be converted into an LP® SmartSide® Trim & Siding mill.

We are evaluating project schedules and market demand to determine when construction will begin.

The facility will remain shut down until such time construction is completed.

Basis for Presentation

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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).

Three Months Ended March 31, 2023

As noted in the segment reporting information in “Note 17 - Selected Segment Data” below, our reportable segments are Siding, Oriented Strand Board (OSB), and South America (dollar amounts in millions).

Three Months Ended June 30, 2023

By Product type and family:

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$ 320 $ 229 $ 53 $ 9 $ — $ 611

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

By Product type and family:

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$ 358 $ 673 $ 70 $ 30 $ ( 1 ) $ 1,130

Six Months Ended June 30, 2023

By Product type and family:

Siding OSB South America Other Inter-segment Total

Siding Solutions $ 647 $ — $ 14 $ — $ — $ 661

OSB - Structural Solutions — 239 92 — — 330

647 239 106 — — 992

OSB - commodity — 175 — — — 175

Other products 4 4 2 17 — 28

$ 651 $ 418 $ 108 $ 17 $ — $ 1,195

Six Months Ended June 30, 2022

By Product type and family:

Siding OSB South America Other Inter-segment Total

Siding Solutions $ 686 $ — $ 12 $ — $ — $ 698

OSB - Structural Solutions — 791 123 — ( 2 ) 913

686 791 135 — ( 2 ) 1,611

OSB - commodity — 621 — — — 621

Other products 3 5 2 55 — 66

$ 689 $ 1,417 $ 137 $ 55 $ ( 2 ) $ 2,297

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

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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,

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

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

2023 2022 2023 2022

Income (loss) from continuing operations $ ( 21 ) $ 348 $ 1 $ 769

Net loss attributed to non-controlling interest 1 — — 1

Income (loss) attributed to LP from continuing operations ( 20 ) 348 1 770

Income from discontinued operations, net of income taxes — 37 — 99

Net income (loss) attributed to LP $ ( 20 ) $ 384 $ 1 $ 868

Weighted average common shares outstanding - basic 72 81 72 83

1 unchanged sentence

Shares used for diluted earnings per share 72 81 72 84

Net income attributed to LP per share - basic:

Net income (loss) attributed to LP per share - basic:

Continuing operations $ ( 0.28 ) $ 4.30 $ 0.02 $ 9.25

Discontinued operations — 0.46 — 1.18

Net income attributed to LP per share - basic $ 0.29 $ 5.64

Net income attributed to LP per share – diluted:

Net income (loss) attributed to LP per share - basic $ ( 0.28 ) $ 4.76 $ 0.02 $ 10.43

Net income (loss) attributed to LP per share - diluted:

Continuing operations $ ( 0.28 ) $ 4.28 $ 0.02 $ 9.19

Discontinued operations — 0.45 — 1.18

Net income attributed to LP per share - diluted $ 0.29 $ 5.60

Net income (loss) attributed to LP per share - diluted $ ( 0.28 ) $ 4.73 $ 0.02 $ 10.36

FAIR VALUE MEASUREMENTS

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(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 net carrying value of the 3.625 % Senior Notes due in 2029 (2029 Senior Notes) was $ 347 million and $ 346 million as of June 30, 2023 and December 31, 2022, respectively.

The fair value was estimated to be $ 307 million and $ 306 million as of June 30, 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.

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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).

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.

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.

As of June 30, 2023, there was $ 30 million in outstanding borrowings under our Amended Credit Facility.

The carrying value of the Amended Credit Facility approximates fair value.

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

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Trade receivables $ 126 $ 106

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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.

Other receivables as of June 30, 2023 and December 31, 2022, primarily consist of sales tax receivables, vendor rebates, and other miscellaneous receivables.

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

1 unchanged sentence

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

June 30, 2023 December 31, 2022

Logs $ 78 $ 59

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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.

In March 2022, the Company sold its 50 % equity interest in two joint ventures that produce I-joists 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.

As a result of the sale, the Company received $ 217 million in gross cash proceeds after taking into account working capital adjustments.

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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

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):

Upon closing, the Company entered into the transition services agreement with the purchaser of the assets, pursuant to which the Company agreed to support the various activities of the EWP segment, which concluded during the

three months ended March 31, 2023.

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 and six months ended June 30, 2022 (dollar amounts in millions):

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

Net sales $ 218 $ 388

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Income from operations of discontinued operations 42 80

Other non-operating items —

Gain on disposal before income taxes — 39

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Income from discontinued operations, net of income taxes $ 37 $ 99

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):

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 six months ended June 30, 2022 (dollar amounts in millions):

Net cash provided by discontinued operating activities $ 46

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.

Net cash provided by (used in) discontinued investing activities $ 56

Net cash provided by discontinued investing activities for the six months ended June 30, 2022, includes $ 59 million of proceeds from the sale of our 50 % equity interest in two joint ventures that produce I-joists .

BUSINESS EXIT CHARGES

During the second quarter of 2023, we ceased the manufacturing operations of Entekra Holdings, LLC (Entekra), an off-site framing operation previously reported within our “Other” category, which comprises other products that are not individually significant.

Business exit charges were $ 34 million, which include the following for the three months ended June 30, 2023 (dollar amounts in millions):

Three Months Ended June 30,

Impairment of property, plant and equipment, operating lease assets, and other intangible assets 1

Inventory write-down 2

Other expenses including personnel-related costs such as severance 3

1 Included within Impairment of long-lived assets, net on the Condensed Consolidated Income Statements.

2 Included within Cost of sales on the Condensed Consolidated Income Statements.

3 Included within Other operating credits and charges, net on the Condensed Consolidated Income Statements.

GOODWILL AND OTHER INTANGIBLES

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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):

During the three months ended June 30, 2023, we recorded impairment charges of $ 9 million related to developed technology and trademarks related to Entekra, which is discussed further in “Note 8 - Business Exit Charges.”

Changes in goodwill and other intangible assets for the six months ended June 30, 2023, are provided in the following table (dollar amounts in millions):

Timber Licenses 1

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$ 40 $ 19 $ 15 $ 2

Impairment charges — — ( 7 ) ( 2 )

Amortization ( 8 ) — ( 1 ) —

Ending balance March 31, 2023

Ending balance June 30, 2023

$ 32 $ 19 $ 8 $ —

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

The tax provision for income taxes 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

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.

The tax provision for income taxes from continuing operations for the six months ended June 30, 2023 and 2022, reflected an estimated annual effective tax rate of 34 % and 25 %, respectively, excluding discrete items discussed below.

The total tax provision for the three and six months ended June 30, 2023 was $ 21 million and $ 22 million, compared to $ 116 million and $ 240 million for the comparable periods in 2022, respectively.

The total effective tax rate for continuing operations for the six months ended June 30, 2023 was 95 %, compared to 24 % for the comparable period in 2022.

The total tax provision as a percentage of income from continuing operations is significantly higher for the six months ended June 30, 2023 when compared to same period in 2022.

This is primarily a result of a discrete tax expense of $ 22 million being recorded in the quarter ended June 30, 2023 relating to the change in indefinite reinvestment assertion on Chile and Brazil earnings described in “Item 2 - Management's Discussion and Analysis of Financial Conditions and Results of Operation”.

We recognized net discrete tax expense of $ 15 million and discrete tax benefits of $ 9 million in the six months ended June 30, 2023 and 2022, respectively.

The net discrete tax expense in the current year relates primarily to the second quarter change in management’s indefinite reinvestment assertion on Chile and Brazil earnings described in “Item 2 - Management's Discussion and Analysis of Financial Conditions and Results of Operation” of this quarterly report on Form 10-Q, while the net discrete tax benefit in the prior year primarily relates to excess tax benefits from stock-based compensation.

COMMITMENTS AND CONTINGENCIES

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Environmental reserves $ 27 $ 27

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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.

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.

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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.

During the second quarter of 2023, we agreed to pay $ 16 million to resolve certain patent-related claims and to obtain certain patent rights, which is recorded within Other operating credits and charges.

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

IMPAIRMENT OF LONG-LIVED ASSETS

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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.

As of June 30, 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.

During the three months ended June 30, 2023, we recorded impairment charges of $ 12 million and $ 3 million related to property, plant, and equipment and operating lease assets related to Entekra which were written down to fair value based on Level 2 inputs under ASC 820 using quoted market prices.

See further discussion in “Note 8 - Business Exit Charges.” As of June 30, 2023, there were no other indications of impairment.

PRODUCT WARRANTIES

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

The activity in warranty reserves for the three months ended March 31, 2023 and 2022, is summarized in the following table (dollar amounts in millions):

Three Months Ended March 31,

The activity in warranty reserves for the three and six months ended June 30, 2023 and 2022, is summarized in the following table (dollar amounts in millions):

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

2023 2022 2023 2022

Beginning balance $ 8 $ 8 $ 8 $ 7

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Long-term portion of warranty reserves (included in Other long-term liabilities) $ 7 $ 6 $ 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.

We continue to monitor warranty and other claims associated with our products and believe, as of June 30, 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.

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,

The following table summarizes our net periodic pension cost for our defined benefit pension and postretirement plans during the three and six months ended June 30, 2023 and 2022 (dollar amounts in millions):

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

2023 2022 2023 2022

Service cost $ — $ 1 $ — $ 2

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Loss due to settlement — — 6 —

Total net periodic pension cost $ 6 $ 2

Net periodic pension cost $ — $ 2 $ 6 $ 4

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

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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.

During the three months ended March 31, 2023, the Company completed the termination of the Plan resulting in the 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,

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

2023 2022 2023 2022

Net actuarial gain (loss) and prior service (cost) arising during the period, net of tax $ — $ — $ — $ —

2 unchanged sentences

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):

Accumulated comprehensive loss is provided in the following table for the three months ended June 30, 2023, and 2022 (dollar amounts in millions):

Pension Translation Adjustments Other Total

Balance at December 31, 2022

Balance at March 31, 2023

$ — $ ( 79 ) $ — $ ( 80 )

1 unchanged sentence

Translation adjustments — 1 — 1

Balance at June 30, 2023

$ — $ ( 78 ) $ — $ ( 78 )

Pension Translation Adjustments Other Total

Balance at March 31, 2022

$ ( 75 ) $ ( 73 ) $ ( 1 ) $ ( 149 )

Reclassified to income statement, net of taxes 1

Translation adjustments — ( 32 ) — ( 32 )

Balance at June 30, 2022

$ ( 74 ) $ ( 105 ) $ ( 1 ) $ ( 181 )

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

See “Note 14 - Defined Benefit Pension Plans” above for additional details.

Accumulated comprehensive loss is provided in the following table for the six months ended June 30, 2023 and 2022 (dollar amounts in millions):

Pension Translation Adjustments Other Total

3 unchanged sentences

Translation adjustments — 16 — 16

Balance at March 31, 2022

Balance at June 30, 2023

$ — $ ( 78 ) $ — $ ( 78 )

Pension Translation Adjustments Other Total

Balance at December 31, 2021

$ ( 76 ) $ ( 96 ) $ ( 1 ) $ ( 174 )

Reclassified to income statement, net of taxes 1

Translation adjustments — ( 9 ) — ( 9 )

Balance at June 30, 2022

$ ( 74 ) $ ( 105 ) $ ( 1 ) $ ( 181 )

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

See Note 14 above for additional details.

See “Note 14 - Defined Benefit Pension Plans” above for additional details.

OTHER OPERATING AND NON-OPERATING ITEMS

1 unchanged sentence

Other operating credits and charges, net, is comprised of the following components (dollar amounts in millions):

Three Months Ended March 31,

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

2023 2022 2023 2022

Insurance recoveries $ — $ 13 $ — $ 13

Reorganization charges ( 5 ) — ( 7 ) ( 1 )

Legal settlement ( 16 ) — ( 16 ) —

Environmental costs — ( 2 ) — ( 2 )

3 unchanged sentences

Other non-operating items is comprised of the following components (dollar amounts in millions):

Three Months Ended March 31,

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

2023 2022 2023 2022

Net periodic pension cost, excluding service cost $ — $ ( 1 ) $ — $ ( 3 )

Pension settlement charges — — ( 6 ) —

Foreign currency loss ( 3 ) ( 9 )

Foreign currency gain (loss) $ ( 8 ) $ 3 $ ( 11 ) $ ( 5 )

Other $ — $ — $ 1 $ —

Other non-operating items $ ( 8 ) $ 2 $ ( 16 ) $ ( 8 )

4 unchanged sentences

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.

We evaluate the performance of our business segments based on Net sales and segment Adjusted EBITDA (defined below).

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.

Segment Adjusted EBITDA is defined as Income (loss) attributed to LP from continuing operations before interest expense, provision for income taxes, depreciation and amortization, and excludes stock-based compensation expense, loss on impairment attributed to LP, business exit charges, product-line discontinuance charges, other operating credits and charges, net, loss on early debt extinguishment, investment income, pension settlement charges, and other non-operating items.

During the three months ended June 30, 2023, we updated our definition of Adjusted EBITDA to exclude other business exit charges not classified as exit operations.

Business exit charges consist of inventory and other asset impairment and exit charges related to the exit of businesses not individually significant.

We consider business exit charges to be outside the performance of our ongoing core business operations and believe that presenting Adjusted EBITDA excluding business exit charges provides increased transparency as to the operating costs of our current business performance.

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

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

Three Months Ended March 31,

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

2023 2022 2023 2022

Siding $ 320 $ 358 $ 651 $ 689

OSB 229 673 418 1,417

South America 53 70 108 137

Other 9 30 17 55

Intersegment sales — ( 1 ) — ( 2 )

Total sales $ 611 $ 1,130 $ 1,195 2,297

NET INCOME TO ADJUSTED EBITDA RECONCILIATION

Net income $ 22 $ 483

NET INCOME TO ADJUSTED EBITDA

Net income (loss) $ ( 21 ) $ 385 $ 1 $ 868

Add (deduct):

Net loss (income) attributed to noncontrolling interest ( 1 ) 1

Net loss attributed to non-controlling interest 1 — — 1

Income from discontinued operations, net of income taxes — ( 37 ) — ( 99 )

Income attributed to LP from continuing operations 21 422

Income (loss) attributed to LP from continuing operations ( 20 ) 348 1 770

Provision for income taxes 21 116 22 240

2 unchanged sentences

Other operating credits and charges, net 17 ( 11 ) 22 ( 10 )

Business exit charges 34 — 34 —

Interest expense 3 3 6 6

Investment income ( 2 ) ( 2 ) ( 7 ) ( 3 )

Pension settlement charges 6 —

Other non-operating items 8 ( 2 ) 11 8

Pension settlement charges — — 6 —

Adjusted EBITDA $ 93 $ 491 $ 159 $ 1,089

1 unchanged sentence

Siding $ 59 $ 78 $ 126 $ 160

OSB 37 403 42 908

South America 13 26 24 51

2 unchanged sentences

Total Adjusted EBITDA $ 93 $ 491 $ 159 $ 1,089

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.

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

What changed 10-Q

Item 1. Financial Statements