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Item 7. Management’s Discussion and Analysis

2024-02-14 compared with 2023-02-21 · 99 added, 94 removed, 208 unchanged (48% of the section changed)

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

We encourage you to review the risks and uncertainties described in the sections titled "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements" above.

Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

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

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To serve these markets, we operate in three segments:

Siding, OSB, and South America.

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

(Resolute) for $59 million.

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

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

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

We recognized a gain on the sale of $39 million during the year ended December 31, 2022, within Income from discontinued operations, net of income taxes in the Consolidated Statements of Income.

In August 2022, LP completed the sale of the Engineered Wood Products (EWP) segment assets to P acific Woodtech Corporation, a Washington corporation, and Pacific Woodtech Canada Holdings Limited, a British Columbia limited company (collectively, the Purchaser) in exchange for the Purchaser’s payment to the Company of $217 million in gross cash proceeds after taking into account working capital adjustments.

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

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

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

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

Siding, OSB, and LPSA.

In May 2023, we acquired an idle manufacturing facility in Wawa, Ontario, Canada from a third party for $80 million.

We anticipate converting the Wawa manufacturing facility into an LP SmartSide Trim & Siding mill in the future according to the needs of our business.

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

Executive Summary

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

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

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

Net sales for 2023 decreased year-over-year by $1,273 million (or 33%) to $2,581 million.

OSB revenue decreased $1,036 million due to 40% lower prices and 18% lower volumes.

Siding revenue decreased $141 million (or 10%), due to 14% lower volumes, partially offset by 5% higher prices.

The LPSA segment and Other revenues decreased year-over-year by $36 million and $61 million, respectively.

Net income decreased year-over-year by $905 million (or 84%) to $178 million ($2.46 per diluted share) primarily due to a decrease in Adjusted EBITDA (defined below) of $911 million (or 66%) and a decrease in income from discontinued operations, net of income taxes of $198 million, partially offset by a $200 million decrease in the provision for income taxes.

The decrease in Adjusted EBITDA includes a $793 million decrease in OSB selling prices, a decrease in OSB sales volumes of $87 million, and a decline in Siding sales volumes, net of increases in average selling prices, of $43 million.

Adjusted EBITDA is a non-GAAP financial measure.

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

Demand for Building Products

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

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

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

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

Census Bureau reported on January 18, 2024, that 2023 actual single-family housing starts were 6% lower than those in 2022.

Actual multi-family housing starts in 2023 were about 14% lower than those in 2022.

Repair and remodeling activity is difficult to reasonably measure, but many indications suggest that repair and remodeling activity is moderating and may have exhibited year-over-year declines.

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

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The chart below, which is based on data published by U.S.

Census Bureau, provides a graphical summary of new housing starts for single- and multi-family in the U.S., showing actual and rolling five- and ten-year averages for housing starts.

Census Bureau, provides a graphical summary of new housing starts for single- and multi-family in the U.S., showing actual and rolling five- and ten-year averages for housing starts (in thousands).

Supply and Demand for Siding

Siding Solutions is a specialty building material and is subject to competition from various siding technologies, including vinyl, stucco, wood, fiber cement, brick, and others.

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

Our Siding Solutions products are specialty building materials and are subject to competition from various siding technologies, including vinyl, stucco, wood, fiber cement, brick, and others.

We believe we are the largest manufacturer in the engineered wood siding market in North America and South America.

The overall siding market is estimated to be a $17 billion industry.

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

Siding Solutions is generally less sensitive to new housing market cyclicality since roughly 60% of its demand comes from other markets, including sheds and repair and remodel.

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

Our Siding segment is generally less sensitive to new housing market cyclicality since a majority of its demand comes from other markets, including off-site structure producers and repair and remodel.

Our growth in this market depends upon the continued displacement of vinyl, wood, fiber cement, stucco, bricks, and other alternatives, our product innovation and our technological expertise in wood and wood composites to address the needs of our customers.

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

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

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

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

Customer Program Costs

Revenue Recognition, Including Customer Program Costs

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

, purchase orders) with our customers are satisfied;

generally, this occurs with the transfer of control of our products to the customer 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.

Our businesses routinely incur customer program costs to obtain favorable product placement, promote sales of products, and maintain competitive pricing.

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Our estimates are based on historical and projected experience for each type of program or customer.

Volume allowances are accrued based on our estimates of customer volume achievement and other factors incorporated into customer agreements, such as new products, merchandising support, and customer training.

Volume allowances are accrued based on our estimates of customer volume achievement and other factors incorporated into customer agreements, such as new product purchases, store sell-through, merchandising support, and customer training.

Although we believe we can reasonably estimate customer volumes and support and the related customer payments at interim periods, it is possible that actual results could be different from previously estimated amounts.

At the end of each year, a significant portion of the actual volume and support activity is known.

Thus, we do not believe that a material change in the amounts recorded as customer program costs payable is likely.

Thus, we do not currently believe that a material change in the amounts recorded as customer program costs payable is reasonably likely.

We had $37 million and $46 million accrued as customer rebates as of December 31, 2023 and 2022, respectively.

Defined Benefit Pension Plans

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

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

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

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

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

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

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

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

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.

NON-GAAP FINANCIAL MEASURES

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

In this annual report on Form 10-K, we disclose income attributed to LP from continuing operations before interest expense, provision for income taxes, depreciation and amortization, and exclude stock-based compensation expense, loss on impairment attributed to LP, product-line discontinuance charges, other operating credits and charges, net, loss on early debt extinguishment, investment income, pension settlement charges, and other non-operating items as Adjusted EBITDA from continuing operations (Adjusted EBITDA), which is a non-GAAP financial measure.

In this annual report on Form 10-K, we disclose income attributed to LP from continuing operations before interest expense, provision for income taxes, depreciation and amortization, and excluding stock-based compensation expense, loss on impairment attributed to LP, product-line discontinuance charges, business exit 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 income 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 from continuing operations (Adjusted Income).

We also disclose Adjusted Diluted EPS from continuing operations (Adjusted Diluted EPS), calculated as Adjusted Income divided by diluted shares outstanding.

We believe that Adjusted Diluted EPS and Adjusted Income are useful measures for evaluating our ability to generate earnings and that providing these measures should allow interested persons to more readily compare the earnings for past and future periods.

Reconciliations of Adjusted EBITDA, Adjusted Income and Adjusted Diluted EPS to their most directly comparable U.S.

GAAP financial measure, are presented below.

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

GAAP measures of operating performance.

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

During the year ended December 31, 2023, we updated our definitions 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 presents significant items by operating segment and reconciles net income to Adjusted EBITDA (dollar amounts in millions):

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Add (deduct):

Net loss attributed to noncontrolling interest 3 4 2

Net loss attributed to non-controlling interest — 3 4

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

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Other operating credits and charges, net 18 (16) (1)

Business exit charges 32 — —

Pension settlement charges 4 82 2

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Loss on early debt extinguishment — — 11

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

Other non-operating items 39 15 9

Adjusted EBITDA $ 478 $ 1,389 $ 1,877

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OSB 220 1,034 1,531

South America 77 113 42

LPSA 42 77 113

Other (17) (23) (20)

Corporate (38) (36) (30)

General corporate and other expenses, net (36) (38) (36)

Total Adjusted EBITDA $ 478 $ 1,389 $ 1,877

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Year ended December 31, 2023 2022 2021

Net income attributed to LP from continuing operations per share - diluted $ 2.46 $ 11.34 $ 13.37

Net income $ 178 $ 1,083 $ 1,373

Add (deduct):

Net loss attributed to noncontrolling interest 3 4 2

Net loss attributed to non-controlling interest — 3 4

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

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Other operating credits and charges, net 18 (16) (1)

Business exit charges 32 — —

Loss on early debt extinguishment — — 11

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Adjusted income $ 233 $ 922 $ 1,294

Weighted average shares - diluted 78 98 112

Diluted income attributed to LP from continuing operations per

share $ 11.34 $ 13.37 $ 4.35

Diluted shares outstanding 72 78 98

Adjusted Diluted EPS $ 3.22 $ 11.77 $ 13.24

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

See Note 18 of the Notes to the Consolidated Financial Statements included in Item 8 of this annual report on Form 10-K for further information regarding our segments.

See "Note 18 - Segment Information" of the Notes to the Consolidated Financial Statements included in Item 8 of this annual report on Form 10-K for further information regarding our segments.

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

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Siding Solutions 5 % (14) %

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

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

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

List price increases drove year-over-year increases in the average net selling price for 2023.

The year-over-year volume decreases in 2023 were driven by record results in the comparable period and challenging new and existing home sales markets in the current period.

Full year 2023 Adjusted EBITDA decreased year-over-year by $70 million, which reflects the net impact of lower volumes, a $10 million decrease in Siding mill capacity investments, a $10 million increase in operational support costs, and a $5 million press rebuild, 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).

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OSB - Commodity (39) % (22) %

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

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

South America

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

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

Full year 2023 net sales decreased year-over-year by $1,036 million (or 50%) including a $793 million decrease in revenue due to lower average selling prices and a $217 million decrease in sales volumes, including $112 million of lower production volume from the conversion of the Sagola mill to siding production.

Adjusted EBITDA decreased year-over-year by $814 million primarily due to the lower average selling prices.

Our LPSA segment manufactures and distributes LP OSB structural panel and Siding Solutions products in South America and certain export markets.

This segment also sells and distributes a variety of companion products to support the region’s transition to wood frame construction.

The LPSA segment carries out manufacturing operations in Chile and Brazil and operates sales offices in Argentina, Brazil, Chile, Colombia, Mexico, Paraguay, and Peru.

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

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OSB - Structural Solutions $ 177 $ 215 (18) %

Siding 24 23 6 %

Other 4 3 4 %

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Siding 7 % (1) %

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

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

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

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

LPSA net sales for full year 2023 decreased year-over-year by $36 million driven by lower OSB sales volumes and average selling prices.

Full year 2023 Adjusted EBITDA decreased year-over year by $36 million, reflecting the lower sales volumes and average selling prices, unfavorable foreign currency impacts of $6 million, and equipment relocation cost of $3 million.

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 of $32 million for the twelve months ended December 31, 2023.

These charges consisted of severance costs, inventory obsolescence, impairment of property, plant, and equipment, impairment of right-of-use lease assets, and impairment of definite-lived intangible assets.

Net sales decreased year-over-year by $61 million (or 73%) to $22 million primarily due to lower Entekra sales volumes as a result of the aforementioned shutdown.

Adjusted EBITDA was $(17) million for 2023 as compared to $(23) million in 2022.

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General corporate and other expense, net, was $42 million in 2023 as compared to $47 million in 2022.

This decrease was driven by a decrease in stock compensation expense.

LOSS ON IMPAIRMENTS

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

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

During 2023, we recorded $30 million of non-cash, pre-tax impairment charges, $24 million of which was related to the shutdown of Entekra, including $13 million of property, plant, and equipment, $9 million of intangible assets, and $3 million related to operating lease assets.

See further discussion in “Note 7 - Business Exit Charges” of the Notes to the Consolidated Financial Statements included in Item 8 of this annual report on Form 10-K.

Further, $6 million of non-cash, pre-tax impairment charges were recognized related to the Granite City, Illinois facility which is scheduled for closure in 2024, including $4 million of property, plant, and equipment and $2 million related to operating lease assets.

During 2022, we recognized $1 million of pre-tax impairment charges.

OTHER OPERATING CREDITS AND CHARGES, NET

For a discussion of Other operating credits and charges, net, see Note 12 of the Notes to the Consolidated Financial Statements included in Item 8 of this annual report on Form 10-K.

For a discussion of Other operating credits and charges, net, see "Note 12 - Other Operating and Non-Operating Income (Expense)" of the Notes to the Consolidated Financial Statements included in Item 8 of this annual report on Form 10-K.

NON-OPERATING INCOME (EXPENSE)

For a discussion of non-operating income (expense), see Note 12 of the Notes to the Consolidated Financial Statements included in Item 8 of this annual report on Form 10-K.

For a discussion of non-operating income (expense), see "Note 12 - Other Operating and Non-Operating Income (Expense)" of the Notes to the Consolidated Financial Statements included in Item 8 of this annual report on Form 10-K.

We recognized a tax provision of $74 million in 2023 compared to $274 million in 2022.

For 2023, the primary differences between the U.S.

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

statutory rate of 21% and the effective rate was related to the $25 million tax expense impact from a change in management’s intent to indefinitely reinvest undistributed earnings in Chile and Brazil.

See “Note 8 – Income Taxes” below for further discussion.

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

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

We paid $65 million and $320 million of income taxes net of refunds in 2023 and 2022, respectively.

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 Item 3 in this annual report on Form 10-K as well as Note 14 of the Notes to the Consolidated Financial Statements included in Item 8 of this annual report on Form 10-K.

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 Item 3 in this annual report on Form 10-K as well as "Note 14 - Commitments and Contingencies" of the Notes to the Consolidated Financial Statements included in Item 8 of this annual report on Form 10-K.

LIQUIDITY AND CAPITAL RESOURCES

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During 2023, we generated $316 million of cash from operations as compared to $1,144 million in 2022.

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

The decrease in cash provided by operations was primarily related to lower net income and higher working capital.

At December 31, 2023 and 2022, we had working capital of $296 million and $148 million, respectively.

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During 2023, net cash used for investing activities was $376 million as compared to $146 million in 2022.

During 2022, we received $268 million in proceeds from sales of assets, primarily associated with the sale of the EWP segment assets and the sale of our 50% equity interest in two joint ventures.

During 2023, we paid $80 million to acquire an idle manufacturing facility in Wawa, Ontario, Canada.

During 2022, we received $268 million in proceeds from sales of assets, primarily associated with the sale of the Engineered Wood Products (EWP) segment assets and the sale of our 50% equity interest in two joint ventures.

Capital expenditures for the year ended December 31, 2023 and 2022, were $300 million and $414 million, respectively, primarily related to siding conversion expenditures and growth and maintenance capital.

Capital expenditures in 2024 are expected to be in the range of $200 million to $220 million.

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

We expect to fund our short-term and long-term capital expenditures in 2024 through cash on hand, cash generated from operations, and available borrowing under our Amended Credit Facility, as necessary.

Financing Activities

During 2023, cash used in financing activities was $77 million.

We paid cash dividends of $69 million and borrowed and subsequently repaid $80 million from our Amended Credit Facility during the year ended December 31, 2023.

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

During 2022, cash used in financing activities was $982 million.

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

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During the year ended December 31, 2022, we used $900 million to repurchase shares of LP common stock ($500 million from the Second 2021 Share Repurchase Program and $400 million from the 2022 Share Repurchase Program).

Additionally, we paid cash dividends of $69 million.

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

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

We used $300 million to repurchase shares of LP common stock under the share repurchase program authorized by LP's Board of Directors in 2020 and $1 billion to repurchase shares of LP common stock under the additional share repurchase program (authorized by LP's Board of Directors in May 2021.

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

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

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

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

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

Additionally, during the year ended December 31, 2022, we paid cash dividends of $69 million.

CREDIT FACILITIES

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).

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

The Credit Agreement provides for a revolving credit facility in the principal amount of up to $550 million, with a $60 million sub-limit for letters of credit.

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

As of December 31, 2022, we had no amounts

outstanding under the Amended Credit Facility.

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

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

The Credit Agreement contains various restrictive covenants and customary events of default, the occurrence of which could result in the acceleration of our obligation to repay the indebtedness outstanding thereunder.

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

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

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

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

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

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

OTHER LIQUIDITY MATTERS

2029 Senior Notes

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

In March 2021, we issued the 3.625% Senior notes due in 2029 in the aggregate principal amount of $350 million, which mature on March 15, 2029 (2029 Senior Notes).

As of December 31, 2023, future interest payments associated with the 2029 Senior Notes totaled $70 million, with $13 million payable within 12 months of such date.

For additional information regarding the 2029 Senior Notes, please see Note 10 of the Notes to the Consolidated Financial Statements included in Item 8 of this annual report on Form 10-K.

For additional information regarding the 2029 Senior Notes, please see "Note 10 - Long-Term Debt" of the Notes to the Consolidated Financial Statements included in Item 8 of this annual report on Form 10-K.

Contingency Reserves

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Potential Impairments

We continue to review several mills and investments for potential impairments.

Management currently believes we have adequate support for the carrying value of each of these assets based upon the anticipated cash flows that result from our estimates of future demand, pricing, and production costs, assuming certain levels of planned capital expenditures.

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

However, if demand and pricing

for our products fall to levels significantly below cycle average demand and pricing, or should we decide to invest capital in alternative projects, or should changes occur related to our wood supply for these locations, it is possible that future impairment charges will be required.

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

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.

For a discussion of potential impairments, see "Note 13 - Impairment of Long-Lived Assets" and "Note 5 - Goodwill and Other Intangibles Assets" of the Notes to the Consolidated Financial Statements included in Item 8 of this annual report on Form 10-K.

PROSPECTIVE ACCOUNTING PRONOUNCEMENTS

For a discussion of prospective accounting pronouncements, see Note 2 of the Notes to the Consolidated Financial Statements included in Item 8 of this annual report on Form 10-K.

For a discussion of prospective accounting pronouncements, see "Note 2 - Present and Prospective Accounting Pronouncements" of the Notes to the Consolidated Financial Statements included in Item 8 of this annual report on Form 10-K.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis