What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-02 compared with 2023-05-03 · 123 added, 88 removed, 177 unchanged (54% of the section changed)

4 unchanged sentences

We are a leading provider of high-performance building solutions that meet the demands of builders, remodelers, and homeowners worldwide.

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

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

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

1 unchanged sentence

Siding, OSB, and South America.

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

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

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

In August 2022, LP completed the sale of the EWP segment assets to the Purchaser in exchange for the Purchaser’s payment to the Company of $217 million in gross cash proceeds.

The historical results of the EWP segment are reflected in the Company’s Condensed Consolidated Financial Statements as discontinued operations.

See "Note 7 – Discontinued Operations" of the Notes to the Condensed Consolidated Financial Statements included in Item 1 of this quarterly report on Form 10-Q for additional information.

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 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 .

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.

Demand for Building Products

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

Census Bureau reported on April 18, 2023, that actual single-family housing starts were 29% lower for the three months ended March 31, 2023, as compared to the same period in 2022.

Actual multi-family housing starts for the three months ended March 31, 2023 were about 5% higher as compared to the same period in 2022.

Census Bureau reported on July 19, 2023, that actual single-family housing starts were 14% lower for the three months ended June 30, 2023, and 21% lower for the six months ended June 30, 2023, as compared to the same periods in 2022.

Actual multi-family housing starts for the three and six months ended June 30, 2023 were about 6% lower and 2% lower, respectively, as compared to the same period in 2022.

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

13 unchanged sentences

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

During the three months ended March 31, 2023, OSB commodity prices have fallen with the decline in market demand for OSB commodity product.

During the three and six months ended June 30, 2023, 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.

8 unchanged sentences

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

In this quarterly report on Form 10-Q, we disclose Income attributed to LP from continuing operations before interest expense, provision for income taxes, depreciation and amortization, and excluding 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.

In this quarterly report on Form 10-Q, we disclose income (loss) attributed to LP from continuing operations before interest expense, provision for income taxes, depreciation and amortization, and excluding 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, 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 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 also disclose income (loss) attributed to LP from continuing operations, excluding loss on impairment attributed to LP, business exit charges, 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 (Adjusted Income).

We also disclose Adjusted Diluted EPS, which is 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, 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 Net income (loss), Income (loss) attributed to LP from continuing operations, and Income (loss) attributed to LP from continuing operations per diluted share or for any other U.S.

GAAP measures of operating performance.

1 unchanged sentence

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.

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

Business exit charges consist of inventory and other asset impairment and exit charges related to the exit of other 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, Adjusted Income, and Adjusted Diluted EPS 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, Adjusted Income, and Adjusted Diluted EPS amounts because there were no significant costs similar in nature to these items.

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

Three Months Ended March 31,

Net income $ 22 $ 483

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

2023 2022 2023 2022

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

Add (deduct):

Net (income) loss 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

3 unchanged sentences

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

Three Months Ended March 31,

Net income attributed to LP from continuing operations per share - diluted $ 0.29 $ 4.89

Net income $ 22 $ 483

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

2023 2022 2023 2022

Net income (loss) attributed to LP from continuing operations per share - diluted $ (0.28) $ 4.28 $ 0.02 $ 9.19

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

Add (deduct):

Net (income) loss 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

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

Business exit charges 34 — 34 —

Pension settlement charges — — 6 —

17 unchanged sentences

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

(thousands of units) Three Months Ended March 31,

(thousands of units) Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Housing starts 1 :

1 unchanged sentence

Multi-Family 138 147 264 270

399 450 714 840

1 Actual U.S.

housing starts data reported by the U.S.

Census Bureau as published through April 18, 2023.

housing starts data reported by U.S.

Census Bureau as published through July 19, 2023.

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

2 unchanged sentences

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

The following table sets forth sales volumes for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31, 2023 Three Months Ended March 31, 2022

The following table sets forth sales volumes for the three and six months ended June 30, 2023 and 2022:

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022

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

Siding Solutions (MMSF) 377 — 7 384 448 — 9 457

OSB - Structural Solutions (MMSF) — 412 128 540 — 514 149 664

OSB - commodity (MMSF) — 354 — 354 — 460 — 460

Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

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

Siding Solutions (MMSF) 760 — 19 779 869 — 16 885

OSB - Structural Solutions (MMSF) — 739 255 993 — 1,040 293 1,333

OSB - commodity (MMSF) — 736 — 736 — 897 — 897

We measure OEE of each of our mills to track improvements in the utilization and productivity of our manufacturing assets.

OEE is a composite metric that considers asset uptime (adjusted for capital project downtime and similar events), production rates, and finished product quality.

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

It should be noted that other companies may present OEE differently, and therefore, as presented by us, OEE may not be comparable to similarly titled measures reported by other companies.

OEE for the three months ended March 31, 2023 and 2022, for each of our segments is listed below:

Three Months Ended March 31,

OEE for the three and six months ended June 30, 2023 and 2022, for each of our segments is listed below:

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

2023 2022 2023 2022

Siding 78 % 76 % 77 % 75 %

3 unchanged sentences

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

See Note 16 of the Notes to the Condensed Consolidated Financial Statements included in Item 1 of this quarterly report on Form 10-Q for further information regarding our segments.

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

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

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

Three Months Ended March 31,

2023 2022 % Change

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

2023 2022 % Change 2023 2022 % Change

Net sales $ 320 $ 358 (10) % $ 651 $ 689 (5) %

1 unchanged sentence

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

Three Months Ended March 31,

2023 2022 % Change

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

2023 2022 % Change 2023 2022 % Change

Siding Solutions $ 318 $ 356 (11) % $ 647 $ 686 (6) %

1 unchanged sentence

Total $ 320 $ 358 (10) % $ 651 $ 689 (5) %

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

Percent changes in average Net sales prices and unit shipments for the three and six months ended June 30, 2023, compared to the corresponding periods in 2022, were as follows:

Three Months Ended

March 31, 2023 versus 2022

June 30, 2023 versus 2022 Six Months Ended

June 30, 2023 versus 2022

Selling Price Unit

Shipments Average Net

Selling Price Unit

Siding Solutions 6 % (16) % 8 % (13) %

The combined effects of list price increases and customer mix shifts drove year-over-year increases in the average net selling price for the three months ended March 31, 2023.

The volume decrease for the three months ended March 31, 2023 was driven by a challenging new home construction market and elevated levels of channel inventory compared to the prior period.

Adjusted EBITDA decreased year-over-year by $15 million in the first quarter of 2023 due to lower volume and $17 million of raw material, freight and labor inflation, partially offset by an increase in the average net sales price.

The effects of list price increases drove year-over-year increases in the average net selling price for the three and six months ended June 30, 2023.

The volume decreases for the three and six months ended June 30, 2023 were driven by challenging new and existing home selling markets and elevated levels of channel inventory compared to the prior periods.

Adjusted EBITDA decreased year-over-year by $19 million in the second quarter of 2023, reflecting the net impact of lower volumes, $6 million of raw material inflation, and $6 million of discretionary investments in support of future growth, including siding mill conversions and sales and marketing costs, partially offset by higher average selling prices.

The year-over-year decrease in Adjusted EBITDA of $34 million for the six months ended June 30, 2023, reflects the net impact of lower volumes, $20 million of raw material inflation, and $9 million of discretionary investments in support of future growth, including siding mill conversions and sales and marketing costs, partially offset by higher average selling prices.

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).

1 unchanged sentence

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

Three Months Ended March 31,

2023 2022 % Change

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

2023 2022 % Change 2023 2022 % Change

Net sales $ 229 $ 673 (66) % $ 418 $ 1,417 (70) %

1 unchanged sentence

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

Three Months Ended March 31,

2023 2022 % Change

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

2023 2022 % Change 2023 2022 % Change

OSB - Structural Solutions $ 127 $ 384 (67) % $ 239 $ 791 (70) %

2 unchanged sentences

Total $ 229 $ 673 (66) % $ 418 $ 1,417 (70) %

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

Percent changes in average Net sales prices and unit shipments for the three and six months ended June 30, 2023, compared to the corresponding periods in 2022, were as follows:

Three Months Ended

March 31, 2023 versus 2022

June 30, 2023 versus 2022

Six Months Ended

June 30, 2023 versus 2022

Selling Price Unit

Shipments Average Net

Selling Price Unit

OSB - Structural Solutions (59) % (20) % (58) % (29) %

OSB - commodity (55) % (23) % (66) % (18) %

The year-over-year net sales decrease of $555 million for the three months ended March 31, 2023 reflects a $470 million decrease in OSB prices, a $51 million decrease in sales volume from production curtailments, and a $27 million decrease related in production volume from the conversion of the Sagola mill to Siding production.

The year-over-year decrease in Adjusted EBITDA of $500 million for the three months ended March 31, 2023 reflects lower OSB prices and sales volume (as described above) and increased raw material and wage inflation of $7 million.

The year-over-year net sales decrease of $444 million for the three months ended June 30, 2023 reflects a $368 million decrease in OSB prices, a $33 million decrease in sales volume from production curtailments, and a $28 million decrease related to production volume from the conversion of our Sagola, Michigan mill to siding production.

The year-over-year net sales decrease of $998 million for the six months ended June 30, 2023 reflects an $838 million decrease in OSB prices, an $84 million decrease in sales volume from production curtailments, and a $55 million decrease related in production volume from the conversion of the Sagola mill to siding production.

The year-over-year decreases in Adjusted EBITDA of $366 million and $866 million for the three and six months ended June 30, 2023, respectively, reflects lower OSB prices and sales volumes (as described above), partially offset by lower mill-related costs.

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, Colombia, Argentina, and Paraguay.

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

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

Three Months Ended March 31,

2023 2022 % Change

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

2023 2022 % Change 2023 2022 % Change

Net sales $ 53 $ 70 (25) % $ 108 $ 137 (21) %

1 unchanged sentence

Net sales in this segment by product were as follows (dollar amounts in millions):

Three Months Ended March 31,

2023 2022 % Change

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

2023 2022 % Change 2023 2022 % Change

OSB - Structural Solutions $ 46 $ 64 (29) % $ 92 $ 123 (25) %

2 unchanged sentences

Total $ 53 $ 70 (25) % $ 108 $ 137 (21) %

Percent changes in average Net sales price and unit shipments were as follows:

Percent changes in average Net sales price and unit shipments for the three and six months ended June 30, 2023, compared to the corresponding periods in 2022, were as follows:

Three Months Ended

March 31, 2023 versus 2022

June 30, 2023 versus 2022 Six Months Ended

June 30, 2023 versus 2022

Selling Price Unit

Shipments Average Net

Selling Price Unit

OSB - Structural Solutions (17) % (15) % (14) % (13) %

Siding 20 % (17) % — % 18 %

South America net sales decreased year-over-year by $13 million, or 17%, for the three months ended March 31, 2023, predominantly driven by lower OSB sales volumes and pricing.

The year-over-year decrease in Adjusted EBITDA of $13 million for the three months ended March 31, 2023 reflects lower sales volumes and pricing as well as higher raw material costs.

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

Other net sales were $8 million for the three months ended March 31, 2023, as compared to $26 million for the corresponding period in 2022.

The decrease in Other net sales for the three months ended March 31, 2023 was primarily due to lower Entekra sales volumes.

Adjusted EBITDA was $(9) million for the three months ended March 31, 2023, as compared to $(6) million for the corresponding period in 2022.

South America net sales decreased year-over-year by $18 million and $29 million for the three and six months ended June 30, 2023, respectively, predominantly driven by lower OSB sales volumes and average selling prices.

The year-over-year decrease in Adjusted EBITDA of $14 million and $27 million for the three and six months ended June 30, 2023, respectively, reflects the lower sales volumes and average selling prices (described above) as well as higher raw material costs.

Our other products segment includes the 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.

During the second quarter of 2023, we announced the shutdown of Entekra and recognized business exit charges charges of $34 million, which consisted of severance costs, inventory obsolescence, impairment of property, plant, and equipment, impairment of right-of-use lease assets, and impairment definite-lived intangible assets.

Other Net sales were $9 million and $17 million for the three and six months ended June 30, 2023, respectively, as compared to $30 million and $55 million for the corresponding periods in 2022.

The year-over-year decrease in Net sales for the three and six months ended June 30, 2023 is primarily due to lower Entekra sales volumes.

Adjusted EBITDA was $(6) million and $(14) million for the three and six months ended June 30, 2023, respectively, as compared to $(7) million and $(13) million for the corresponding periods in 2022.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses were $66 million for the three months ended March 31, 2023, compared to $62 million for the corresponding period in 2022.

The increase in 2023 was due to increased labor, travel, and sales and marketing, partially offset by costs associated with stock compensation.

We recognized an estimated tax provision from continuing operations of $1 million and $124 million in the three months ended March 31, 2023, and 2022, respectively.

The total effective tax rate for continuing operations for the three months ended March 31, 2023 and 2022 was 5% and 23%, respectively.

Selling, general, and administrative expenses were $66 million and $133 million for the three and six months ended June 30, 2023, respectively, compared to $67 million and $129 million for the corresponding periods in 2022.

We recognized an estimated tax provision from continuing operations of $21 million and $22 million for the three and six months ended June 30, 2023, respectively, compared to $116 million and $240 million for the corresponding periods of 2022.

Each quarter the income tax accrual is adjusted to the latest estimate, and the difference from the previously accrued year-to-date balance is recorded in the current quarter.

For 2023 the primary differences between the U.S.

statutory rate of 21% and the effective rate relates to benefits from stock-based compensation and inflationary adjustments, partially offset by expenses from state taxes and executive compensation deduction limitations.

statutory rate of 21% and the effective rate relates to the $22 million tax expense impact from a change in indefinite reinvestment assertion on Chile and Brazil earnings, which is discussed below.

For 2022, the primary difference between the U.S.

statutory rate of 21% and the effective rate relates to state income tax.

In the second quarter of 2023, management changed its intent and will no longer assert indefinite reinvestment related to undistributed earnings in Chile and Brazil.

As a result, we established a net $22 million deferred tax liability for the expected tax consequences of repatriating all beginning-of-year cumulative Chile and Brazil earnings, which was recorded as an expense in the second quarter of 2023.

Additionally, the incremental tax expense pertaining to the repatriation of current-year earnings in Chile and Brazil is accounted for within the estimated annual effective income tax rate.

Legal and Environmental Matters

For a discussion of legal and environmental matters involving us and the potential impact thereof on our financial position, results of operations, and cash flows, see Items 3, 7, and 8 in our 2022 Annual Report on Form 10-K and Note 10 of the Notes to the Condensed Consolidated Financial Statements included in Item 1 of this quarterly report on Form 10-Q.

For a discussion of legal and environmental matters involving us and the potential impact thereof on our financial position, results of operations, and cash flows, see Items 3, 7, and 8 in our 2022 Annual Report on Form 10-K and "Note 11 - Commitments and Contingencies" of the Notes to the Condensed Consolidated Financial Statements included in "Item 1 - Financial Statements" of this quarterly report on Form 10-Q.

Liquidity and Capital Resources

10 unchanged sentences

Operating Activities

During the three months ended March 31, 2023 and 2022, cash provided by operations was $(119) million and $425 million, respectively.

The decrease in cash provided by operations was primarily related a lower income from operations and timing of cash paid for income taxes.

During the six months ended June 30, 2023 and 2022, cash provided by operations was $(30) million and $908 million, respectively.

The decrease in cash provided by operations was primarily related to lower income from operations, increases in working capital, and timing of cash paid for income taxes.

Investing Activities

During the three months ended March 31, 2023 and 2022, cash used in investing activities was $113 million and $33 million, respectively.

During the three months ended March 31, 2022, we received $59 million in proceeds from the sale of our 50% equity interest in two joint ventures.

Capital expenditures for the three months ended March 31, 2023 and 2022, were $114 million and $92 million, respectively, primarily related to siding conversion expenditures and growth and maintenance capital.

During the six months ended June 30, 2023 and 2022, cash used in investing activities was $271 million and $135 million, respectively.

During the six months ended June 30, 2023, we paid $80 million to acquire the assets owned by Wawa OSB, Inc.

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

Capital expenditures for the six months ended June 30, 2023 and 2022, were $188 million and $196 million, respectively, primarily related to siding conversion expenditures and growth and maintenance capital.

Financing Activities

During the three months ended March 31, 2023, cash used in financing activities was $27 million.

During the six months ended June 30, 2023, cash used in financing activities was $14 million.

We paid cash dividends of $35 million and used $9 million to repurchase stock from employees in connection with income tax withholding requirements associated with our employee stock-based compensation plans.

During the three months ended March 31, 2022, cash used in financing activities was $137 million.

During the three months ended March 31, 2022, we used $104 million to repurchase shares of LP common stock under the share repurchase program authorized by LP's Board of Directors in November 2021 for the repurchase of up to $500 million shares of LP common stock and we paid cash dividends of $19 million.

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

These payments were partially financed by net borrowings of $30 million under our Amended Credit Facility during the six months ended June 30, 2023.

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

During the six months ended June 30, 2022, we used $575 million to repurchase shares of LP common stock ($500 million from the share repurchase program approved by the Board of Directors on November 2, 2021 and $75 million from the 2022 Share Repurchase Program (defined below)).

Additionally, we paid cash dividends of $37 million and used $15 million to repurchase stock from employees in connection with income tax withholding requirements associated with our employee stock-based compensation plans.

Credit Facility and Letter of Credit Facility

2 unchanged sentences

The Credit Agreement, and all loans thereunder, become due on November 29.

As of March 31, 2023, we had no amounts outstanding under the Amended Credit Facility.

As of May 3, 2023, the outstanding amount under the Amended Credit Facility was $45 million.

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

The Credit Agreement contains various restrictive covenants and customary events of default.

2 unchanged sentences

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

As of March 31, 2023, we were in compliance with all financial covenants under the Credit Agreement.

As of June 30, 2023, 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.

1 unchanged sentence

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 March 31, 2023, we were in compliance with all covenants under the Letter of Credit Facility.

As of June 30, 2023, we were in compliance with all covenants under the Letter of Credit Facility.

Other Liquidity Matters

Off-Balance Sheet Arrangements

As of March 31, 2023, we had standby letters of credit of $13 million outstanding related to collateral for environmental impact on owned properties, a deposit for a forestry license, and insurance collateral, including workers' compensation.

As of June 30, 2023, we had standby letters of credit of $13.5 million outstanding related to collateral for environmental impact on owned properties, a deposit for a forestry license, and insurance collateral, including workers' compensation.

Potential Impairments

We review the carrying values of our long-lived assets for potential impairments and believe we have adequate support for the carrying values of our long-lived assets as of March 31, 2023.

In April 2023, we announced the shutdown of Entekra.

We expect this to result in a pre-tax, non-cash impairment charge of between $25 million and $30 million in the second quarter of 2023.

We review the carrying values of our long-lived assets for potential impairments and believe we have adequate support for the carrying values of our long-lived assets as of June 30, 2023.

In April 2023, we announced the shutdown of Entekra resulting in pre-tax, non-cash impairment charges of $30 million for the three and six months ended June 30, 2023.

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.”

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis