Item 7. Management’s Discussion and Analysis
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Consolidated Financial Statements and related Notes and other financial information appearing elsewhere in this annual report on Form 10-K, and with Part II, Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our annual report on Form 10-K for our fiscal year ended December 31, 2022, filed with the SEC on February 21, 2023, which provides a discussion of our financial condition and results of operations for fiscal year 2022 compared to fiscal year 2021. 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.
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OVERVIEW
General
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, and reliability. Our manufacturing facilities are located in the U.S., Canada, Chile, and Brazil. To serve these markets, we operate in three segments: 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 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. The U.S. 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. Additionally, we have experienced increases in material prices, supply disruptions, and labor challenges, which we continue to address as we work to meet the demands of builders, remodelers, and homeowners worldwide. The potential effect of these factors on our future operational and financial performance is uncertain. As a result, our past performance may not be indicative of future results.
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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 (in thousands).
Supply and Demand for Siding
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 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.
Supply and Demand for OSB
OSB is a commodity product, and it is subject to competition from manufacturers worldwide. Product supply is influenced primarily by fluctuations in available manufacturing capacity and imports. The ratio of overall OSB demand to capacity generally drives price. We cannot predict whether the prices of our OSB products will remain at current levels or increase or decrease in the future.
CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES
Management’s Discussion and Analysis of Financial Condition and Results of Operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make informed estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Our financial position and/or results of operations may be materially different when reported under different conditions or when using different assumptions in the application of such policies. In the event estimates or assumptions prove to be different from actual amounts, adjustments are made in subsequent periods to reflect more current information. Our significant accounting policies are disclosed in the Consolidated Financial Statements and Item 8 of this annual report on Form 10-K. The following discussion addresses our most critical accounting policies, which are those that are both important to the portrayal of our financial condition and results of operations and that require significant judgment or use of complex estimates.
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Long-lived Assets
Property, plant and equipment, and long-lived assets (including amortizable identifiable intangible assets) are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable, including but not limited to facility curtailments and asset abandonments. When such events occur, we group long-lived assets with other assets and liabilities at the lowest level for which identifiable cash flows exist. We compare the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group to the carrying amount of a long-lived asset or asset group. The cash flows are based on our best estimate of future cash flows derived from the most recent business projections. The significant assumptions used to determine estimated cash flows are the cash inflows and outflows directly resulting from the use of those assets in operations, including sales volume, product pricing, support costs, and other costs to operate. We recognize an impairment loss if the amount of the asset’s carrying value exceeds the asset’s estimated fair value. Fair value is estimated primarily using discounted expected future cash flows on a market-participant basis. If we recognize an impairment loss, the adjusted carrying amount of the asset becomes its new cost basis. For a depreciable long-lived asset, the new cost basis is depreciated (amortized) over the remaining estimated useful life of that asset.
Our impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values. We have not made any material changes in our impairment loss assessment methodology in the periods presented. We do not believe a material change in the estimates or assumptions that we use to calculate long-lived asset impairments is likely. 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.
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. Customer program costs and incentives, including rebates and promotion and volume allowances, are accounted for as a reduction in net sales at the time the program is initiated and/or the revenue is recognized. The costs include, but are not limited to, volume allowances and rebates, promotional allowances, and cooperative advertising programs. These costs are recorded at the later of the time of sale or the implementation of the program based on management’s best estimates.
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 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 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.
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.
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NON-GAAP FINANCIAL MEASURES
In evaluating our business, we utilize non-GAAP financial measures that fall within the meaning of SEC Regulation G and Regulation S-K Item 10(e), which we believe provide users of the financial information with additional meaningful comparison to prior reported results. Non-GAAP financial measures do not have standardized definitions and are not defined by U.S. GAAP. 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, 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 Income attributed to LP from continuing operations per diluted share, or for any other U.S. GAAP measures of operating performance. It should be noted that other companies may present similarly titled measures differently, and therefore, as presented by us, these measures may not be comparable to similarly titled measures reported by other companies. 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.
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The following table presents significant items by operating segment and reconciles net income to Adjusted EBITDA (dollar amounts in millions):
Year ended December 31, 2023 2022 2021
Net income $ 178 $ 1,083 $ 1,373
Add (deduct):
Net loss attributed to non-controlling interest — 3 4
Income from discontinued operations, net of income taxes — (198) (71)
Income attributed to LP from continuing operations $ 178 $ 888 $ 1,306
Provision for income taxes 74 274 402
Depreciation and amortization 119 129 114
Stock-based compensation expense 13 19 16
Loss on impairment attributed to LP 6 1 5
Other operating credits and charges, net 18 (16) (1)
Business exit charges 32 — —
Pension settlement charges 4 82 2
Interest expense 14 11 14
Investment income (18) (14) (1)
Loss on early debt extinguishment — — 11
Other non-operating items 39 15 9
Adjusted EBITDA $ 478 $ 1,389 $ 1,877
Siding 269 339 289
OSB 220 1,034 1,531
LPSA 42 77 113
Other (17) (23) (20)
General corporate and other expenses, net (36) (38) (36)
Total Adjusted EBITDA $ 478 $ 1,389 $ 1,877
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The following table provides the reconciliation of net income to Adjusted income (dollar amounts in millions, except earnings per share):
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 non-controlling interest — 3 4
Income from discontinued operations, net of income taxes — (198) (71)
Income attributed to LP from continuing operations 178 888 1,306
Loss on impairment attributed to LP 6 1 5
Other operating credits and charges, net 18 (16) (1)
Business exit charges 32 — —
Loss on early debt extinguishment — — 11
Pension settlement charges 4 82 2
Reported tax provision 74 274 402
Adjusted income before tax 311 1,229 1,725
Normalized tax provision at 25% (78) (307) (431)
Adjusted income $ 233 $ 922 $ 1,294
Diluted shares outstanding 72 78 98
Adjusted Diluted EPS $ 3.22 $ 11.77 $ 13.24
OUR OPERATING RESULTS
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 - 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.
Siding
The Siding segment serves diverse end markets with a broad product offering of engineered wood siding, trim, and fascia, including LP SmartSide Trim & Siding, LP SmartSide ExpertFinish Trim & Siding, LP BuilderSeries Lap Siding, and LP Outdoor Building Solutions (collectively referred to as Siding Solutions).
Segment net sales and Adjusted EBITDA for this segment were as follows:
Dollar amounts in millions Increase (decrease)
Year Ended December 31, 2023 2022 2023 - 2022
Net sales $ 1,328 $ 1,469 (10) %
Adjusted EBITDA 269 339 (21) %
Net sales in this segment by product line were as follows:
Dollar amounts in millions Increase (decrease)
Year Ended December 31, 2023 2022 2023 - 2022
Siding Solutions $ 1,319 $ 1,463 (10) %
Other 9 6 41 %
Total $ 1,328 $ 1,469
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Percent changes in average net sales price and unit shipments were as follows:
2023 versus 2022
Average
Selling Price Unit
Shipments
Siding Solutions 5 % (14) %
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.
OSB
The OSB segment manufactures and distributes OSB structural panel products, including our value-added OSB portfolio known as LP Structural Solutions (which includes LP TechShield Radiant Barrier, LP WeatherLogic Air & Water Barrier, LP Legacy Premium Sub-Flooring, LP NovaCore Thermal Insulated Sheathing, LP FlameBlock Fire-Rated Sheathing, and LP TopNotch Sub-Flooring). OSB is manufactured using wood strands arranged in layers and bonded with resins. Significant cost inputs to produce OSB (including approximate breakdown percentages for 2023) were as follows: wood fiber (26%), resin and wax (23%), labor and burden (18%), utilities (5%), and other manufacturing costs (28%).
Segment net sales and Adjusted EBITDA for this segment were as follows:
Dollar amounts in millions Increase (decrease)
Year Ended December 31, 2023 2022 2023 - 2022
Net sales $ 1,026 $ 2,062 (50) %
Adjusted EBITDA 220 1,034 (79) %
Net sales in this segment by product line were as follows:
Dollar amounts in millions Increase (decrease)
Year Ended December 31, 2023 2022 2023 - 2022
OSB - Structural Solutions $ 565 $ 1,110 (49) %
OSB - Commodity 446 938 (52) %
Other 15 14 5 %
Total $ 1,026 $ 2,062
Percent changes in average net sales prices and unit shipments were as follows:
2023 versus 2022
Average
Selling Price Unit
Shipments
OSB - Structural Solutions (41) % (14) %
OSB - Commodity (39) % (22) %
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.
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LPSA
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:
Dollar amounts in millions Increase (decrease)
Year Ended December 31, 2023 2022 2023 - 2022
Net sales $ 205 $ 241 (15) %
Adjusted EBITDA 42 77 (46) %
Net sales in this segment by product were as follows:
Dollar amounts in millions Increase (decrease)
Year Ended December 31, 2023 2022 2023 - 2022
OSB - Structural Solutions $ 177 $ 215 (18) %
Siding 24 23 6 %
Other 4 3 4 %
Total $ 205 $ 241
Percent changes in average net sales prices and unit shipments for 2023 compared to 2022 were as follows:
2023 versus 2022
Average
Selling Price Unit
Shipments
OSB (9) % (9) %
Siding 7 % (1) %
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.
Other
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
General corporate and other expenses primarily comprise corporate overhead unrelated to business activities such as wages and benefits, professional fees, insurance, and other expenses for corporate functions, including certain executive officers, public company activities, tax, internal audits, and other corporate functions. 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 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 - 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 - 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.
INCOME TAXES
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 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 - Commitments and Contingencies" of the Notes to the Consolidated Financial Statements included in Item 8 of this annual report on Form 10-K.
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LIQUIDITY AND CAPITAL RESOURCES
Overview
Our principal sources of liquidity are existing cash and investment balances, cash generated by our operations, and our ability to borrow under such credit facilities as we may have in effect from time to time. We assess our liquidity in terms of our ability to generate cash to fund our short- and long-term cash requirements. As such, we project our anticipated cash requirements as well as cash flows generated from operating activities to meet those needs. We anticipate long-term cash uses may also include strategic acquisitions. On a long-term basis, we will continue to rely on our credit facility for any long-term funding not provided by operating cash flows. We may also, from time to time, issue and sell equity, debt, or hybrid securities or engage in other capital market transactions.
Our principal uses of liquidity are paying the costs and expenses associated with our operations, servicing outstanding indebtedness, paying dividends, and making capital expenditures. We may also, from time to time, prepay or repurchase outstanding indebtedness or shares or acquire assets or businesses that are complementary to our operations. Any such repurchases may be commenced, suspended, discontinued, or resumed, and the method or methods of affecting any such repurchases may be changed at any time, or from time to time, without prior notice.
Operating Activities
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 net income and higher working capital. At December 31, 2023 and 2022, we had working capital of $296 million and $148 million, respectively.
Investing Activities
During 2023, net cash used for investing activities was $376 million as compared to $146 million in 2022. 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 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). In May 2022, LP's Board of Directors authorized a share repurchase plan under which LP was authorized to repurchase shares of its common stock totaling up to $600 million (the 2022 Share Repurchase Program). During the year ended December 31, 2022, we used $900 million to repurchase shares of LP common stock ($500 million from the Second 2021 Share Repurchase Program and $400 million from the 2022 Share Repurchase Program). Additionally, during the year ended December 31, 2022, we paid cash dividends of $69 million. 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.
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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, 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 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 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%. As of December 31, 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. The Letter of Credit Facility includes an unused commitment fee, due quarterly, ranging from 0.50% to 1.875% of the daily available amount to be drawn on each letter of credit issued under the Letter of Credit Facility. The Letter of Credit Facility is subject to similar affirmative, negative, and financial covenants as those set forth in the Credit Agreement, including the capitalization ratio covenant. 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 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 - 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
Contingency reserves, which represent an estimate of future cash needs for various contingencies (principally, environmental reserves), totaled $26 million at December 31, 2023, of which $1 million is estimated to be payable within one year of such date. There is inherent uncertainty concerning the reliability and precision of such estimates, and as such, the amounts ultimately paid in resolving these contingencies could exceed the current reserves by a material amount.
Leases
We have lease arrangements for real estate, mobile equipment at our manufacturing facilities, rail cars to transport our products, and a fleet of vehicles. As of December 31, 2023, we had fixed lease payment obligations of $34 million, with $7 million payable within 12 months of such date.
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Other Purchase Obligations
Our other purchase obligations primarily consist of obligations related to information technology infrastructure. As of December 31, 2023, we had other purchase obligations of $43 million, with $21 million payable within 12 months of such date.
Off-Balance Sheet Arrangements
As of December 31, 2023, we had standby letters of credit of $14 million outstanding related to collateral for environmental impact on owned properties, deposit for forestry license, and insurance collateral, including workers' compensation.
Potential Impairments
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 - 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.
ITEM 6. (Reserved)
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