LOUISIANA-PACIFIC CORP 10-K

ITEM 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Louisiana-Pacific Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Louisiana-Pacific Corporation and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, cash flows, and stockholders’ equity, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 14, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenue — Refer to Note 3 to the Financial Statements Critical Audit Matter Description The Company’s revenue consists of product sales and is recognized when obligations under the terms of a contract (i.e., purchase order) with the Company’s customers are satisfied. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. 46 Auditing revenue required a significant extent of effort and the involvement of professionals with expertise in information technology ("IT") necessary for us to identify, test, and evaluate the Company's system and automated controls. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the Company’s revenue transactions included the following, among others: • With the assistance of our IT specialists, we: • Identified the significant system used to process revenue transactions and tested the general IT controls over the system, including testing of user access controls, change management controls, and IT operations controls. • Performed testing of automated controls within the relevant revenue streams, as well as the controls designated to ensure the accuracy and completeness of revenue. • We tested the design and operating effectiveness of internal controls within the relevant revenue business processes. • With the assistance of our data specialists, we created data visualizations to evaluate recorded revenue and evaluate trends in the transactional revenue data. • For a sample of revenue transactions, we performed detail transaction testing by agreeing the amounts recognized to source documents and testing the mathematical accuracy of the recorded revenue. • With the assistance of our data specialists, we performed a reconciliation of all automated revenue transactions recorded in the system, and for a sample of revenue transactions within the population, traced the transaction from the testing performed to the respective journal entry data. /s/ Deloitte & Touche LLP Nashville, Tennessee February 14, 2024 We have served as the Company’s auditor since 1997. 47 Consolidated Statements of Income Dollar amounts in millions, except per share Year Ended December 31, 2023 2022 2021 Net sales $ 2,581 $ 3,854 $ 3,915 Cost of sales ( 1,988 ) ( 2,355 ) ( 1,952 ) Gross profit 593 1,498 1,963 Selling, general, and administrative expenses ( 257 ) ( 264 ) ( 223 ) Loss on impairments ( 30 ) ( 1 ) ( 6 ) Other operating credits and charges, net ( 19 ) 16 1 Income from operations 287 1,250 1,734 Interest expense ( 14 ) ( 11 ) ( 14 ) Investment income 18 14 1 Other non-operating items ( 43 ) ( 97 ) ( 22 ) Income before income taxes 248 1,155 1,700 Provision for income taxes ( 74 ) ( 274 ) ( 402 ) Equity in unconsolidated affiliate 3 4 4 Income from continuing operations 178 885 1,302 Income from discontinued operations, net of income taxes — 198 71 Net income $ 178 $ 1,083 $ 1,373 Net loss attributed to noncontrolling interest — 3 4 Net income attributed to LP $ 178 $ 1,086 $ 1,377 Net income attributed to LP per share of common stock: Income per share continuing operations - basic $ 2.47 $ 11.40 $ 13.46 Income per share discontinued operations - basic — 2.54 0.73 Net income per share - basic $ 2.47 $ 13.94 $ 14.19 Income per share continuing operations - diluted $ 2.46 $ 11.34 $ 13.37 Income per share discontinued operations - diluted — 2.52 0.73 Net income per share - diluted $ 2.46 $ 13.87 $ 14.09 Average shares of common stock used to compute net income per share: Basic 72 78 97 Diluted 72 78 98 See Notes to the Consolidated Financial Statements. 48 Consolidated Statements of Comprehensive Income Dollar amounts in millions Year Ended December 31, 2023 2022 2021 Net income $ 178 $ 1,083 $ 1,373 Other comprehensive income, net of tax Foreign currency translation adjustments 6 2 ( 28 ) Unrealized gains on securities, net of reversals — — — Changes in defined benefit pension plans 4 71 5 Other — 1 — Other comprehensive income (loss), net of tax 10 75 ( 23 ) Comprehensive income $ 187 $ 1,158 $ 1,350 Comprehensive loss associated with noncontrolling interest — 3 4 Comprehensive income attributed to LP $ 187 $ 1,161 $ 1,354 See Notes to the Consolidated Financial Statements. 49 Consolidated Balance Sheets Dollar amounts in millions December 31, 2023 2022 ASSETS Cash and cash equivalents $ 222 $ 369 Receivables, net of allowance for doubtful accounts of $ 2 million at December 31, 2023, and $ 1 million at December 31, 2022, respectively 155 127 Inventories 378 337 Prepaid expenses and other current assets 23 20 Total current assets 778 854 Timber and timberlands 32 40 Property, plant and equipment, net 1,540 1,326 Operating lease assets, net 25 44 Goodwill and other intangible assets 27 36 Investments in and advances to affiliates 5 6 Restricted cash — 14 Other assets 20 24 Deferred tax assets 11 7 Total assets $ 2,437 $ 2,350 LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts payable and accrued liabilities $ 254 $ 317 Income taxes payable 5 19 Total current liabilities 259 336 Long-term debt 347 346 Deferred income taxes 162 113 Non-current operating lease liabilities 25 41 Contingency reserves, excluding current portion 25 26 Other long-term liabilities 61 53 Total liabilities 880 916 Commitments and contingencies (Note 14) Stockholders’ equity: Preferred stock, $ 1 par value; 15,000,000 shares authorized, no shares issued — — Common stock, $ 1 par value; 200,000,000 shares authorized; 87,986,865 shares issued, and 72,155,979 shares issued and outstanding, respectively, as of December 31, 2023; 87,986,865 shares issued and 71,748,200 shares issued and outstanding, respectively, as of December 31, 2022 88 88 Additional paid-in capital 465 462 Retained earnings 1,479 1,371 Treasury stock, 15,830,886 shares and 16,238,665 shares, at cost as of December 31, 2023 and 2022, respectively ( 386 ) ( 388 ) Accumulated comprehensive loss ( 89 ) ( 99 ) Total stockholders’ equity 1,557 1,433 Total liabilities and stockholders’ equity $ 2,437 $ 2,350 See Notes to the Consolidated Financial Statements. 50 Consolidated Statements of Cash Flows Dollar amounts in millions Year Ended December 31, 2023 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 178 $ 1,083 $ 1,373 Adjustments to net income: Depreciation and amortization 119 132 119 Impairment of goodwill and long-lived assets 30 1 6 Gain on sale of assets, net ( 7 ) ( 157 ) — Pension loss due to settlement 4 82 2 Loss on early debt extinguishment — — 11 Deferred taxes 44 1 7 Foreign currency remeasurement and transaction (gains) losses 50 ( 2 ) 2 Other adjustments, net 26 35 9 Changes in assets and liabilities (net of acquisitions and divestitures): Receivables ( 8 ) 22 ( 14 ) Inventories ( 46 ) ( 66 ) ( 71 ) Prepaid expenses and other current assets ( 1 ) ( 7 ) — Accounts payable and accrued liabilities ( 40 ) 15 46 Income taxes payable, net of receivables ( 33 ) 6 ( 5 ) Net cash provided by operating activities 316 1,144 1,484 CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant, and equipment additions ( 300 ) ( 414 ) ( 254 ) Acquisition of facility assets ( 80 ) — — Proceeds from business divestiture — 268 — Proceeds from sale of assets 9 — — Other investing activities, net ( 4 ) — 5 Net cash used in investing activities ( 376 ) ( 146 ) ( 247 ) CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of long-term debt ( 80 ) — ( 359 ) Borrowing of long-term debt 80 — 350 Payment of cash dividends ( 69 ) ( 69 ) ( 66 ) Purchase of stock — ( 900 ) ( 1,300 ) Other financing activities ( 8 ) ( 13 ) ( 13 ) Net cash used in financing activities ( 77 ) ( 982 ) ( 1,388 ) EFFECT OF EXCHANGE RATE ON CASH, CASH EQUIVALENTS, AND RESTRICTED CASH ( 24 ) ( 5 ) ( 14 ) Net increase (decrease) in cash, cash equivalents, and restricted cash ( 161 ) 12 ( 164 ) Cash, cash equivalents, and restricted cash at beginning of period 383 371 535 Cash, cash equivalents, and restricted cash at end of period $ 222 $ 383 $ 371 Supplemental cash flow information: Cash paid for income taxes, net $ ( 65 ) $ ( 320 ) $ ( 421 ) Cash paid for interest, net $ ( 15 ) $ ( 14 ) $ ( 16 ) Unpaid capital expenditures $ 15 $ 48 $ 46 See Notes to the Consolidated Financial Statements. 51 Consolidated Statements of Stockholders’ Equity Dollar and share amounts in millions, except per share amounts Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings Accumulated Comprehensive Loss Total Stockholders’ Equity Shares Amount Shares Amount Balance as of December 31, 2020 124 $ 124 17 $ ( 397 ) $ 452 $ 1,206 $ ( 151 ) $ 1,234 Net income attributed to LP — — — — — 1,377 — 1,377 Cash dividends on common stock paid ($ 0.16 per share for the first and second quarters and $ 0.18 per share for the third and fourth quarters) — — — — — ( 66 ) — ( 66 ) Issuance of shares under stock plans — — ( 1 ) 14 ( 12 ) — — 2 Taxes paid on net settlement — — — ( 7 ) — — — ( 7 ) Purchase of stock ( 21 ) ( 21 ) — — — ( 1,279 ) — ( 1,300 ) Compensation expense associated with stock-based compensation — — — — 17 — — 17 Other comprehensive loss — — — — — — ( 23 ) ( 23 ) Balance as of December 31, 2021 102 102 17 ( 390 ) 458 1,239 ( 174 ) 1,235 Net income attributed to LP — — — — — 1,086 — 1,086 Cash dividends on common stock paid ($ 0.22 per share quarterly) — — — — — ( 69 ) — ( 69 ) Issuance of shares under stock plans — — ( 1 ) 18 ( 15 ) — — 3 Taxes paid on net settlement — — — ( 16 ) — — — ( 16 ) Purchase of stock ( 14 ) ( 14 ) — — — ( 886 ) — ( 900 ) Compensation expense associated with stock-based compensation — — — — 19 — — 19 Other comprehensive loss — — — — — — 75 75 Balance as of December 31, 2022 88 88 16 ( 388 ) 462 1,371 ( 99 ) 1,433 Net income attributed to LP — — — — — 178 — 178 Cash dividends on common stock paid ($ 0.24 per share quarterly) — — — — — ( 69 ) — ( 69 ) Issuance of shares under stock plans — — ( 1 ) 14 ( 10 ) — — 4 Taxes paid on net settlement — — — ( 12 ) — — — ( 12 ) Purchase of stock — — — — — — — — Compensation expense associated with stock-based compensation — — — — 13 — — 13 Other comprehensive loss — — — — — — 10 10 Balance as of December 31, 2023 88 $ 88 16 $ ( 386 ) $ 465 $ 1,479 $ ( 89 ) $ 1,557 See Notes to the Consolidated Financial Statements. 52 INDEX TO THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note: Description Page No. Note 1 Summary of Significant Accounting Policies 54 Note 2 Present and Prospective Accounting Pronouncements 60 Note 3 Revenue 60 Note 4 Earnings Per Share 62 Note 5 Goodwill and Other Intangible Assets 63 Note 6 Discontinued Operations 64 Note 7 Business Exit Charges 65 Note 8 Income Taxes 66 Note 9 Leases 69 Note 10 Long-Term Debt 71 Note 11 Stockholders' Equity 72 Note 12 Other Operating and Non-Operating Income (Expense) 75 Note 13 Impairment of Long-Lived Assets 76 Note 14 Commitments and Contingencies 77 Note 15 Product Warranties 79 Note 16 Retirement Plans and Post-Retirement Benefits 79 Note 17 Accumulated Comprehensive Loss 84 Note 18 Segment Information 84 53 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Louisiana-Pacific Corporation and our subsidiaries are a leading provider of high-performance building solutions that meet the demands of builders, remodelers, and homeowners worldwide. Serving the new home construction, repair and remodeling, and outdoor structures markets, we have leveraged our expertise to become an industry leader known for innovation, quality, reliability, and sustainability. The principal customers for our building solutions are retailers, wholesalers, and home building and industrial businesses in North America and South America, and we make limited sales to customers in Asia, Australia, and Europe. The Company operates 23 plants across the U.S., Canada, Chile, and Brazil, in certain cases, through foreign subsidiaries, and operates additional facilities through a joint venture. References to "LP," the "Company," "we," "our," and "us" refer to Louisiana-Pacific Corporation and its consolidated subsidiaries as a whole. 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. See "Note 18 - Segment Information" below for further information regarding our products and segments. Basis of Presentation The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results could differ from those estimates. The Consolidated Financial Statements include the accounts of LP and our controlled subsidiaries. All intercompany transactions, profits, and balances have been eliminated. All dollar amounts are in millions except per share. Cash and Cash Equivalents Cash and cash equivalents include cash on hand and short-term investments of three months or less when purchased. These investments are stated at cost, which approximates market value. Receivables Receivables consisted of the following (dollars in millions): December 31, 2023 2022 Trade receivables $ 104 $ 106 Income tax receivables 27 4 Other receivables 26 19 Allowance for doubtful accounts ( 2 ) ( 1 ) Total Receivables $ 155 $ 127 Trade receivables are primarily generated by sales of our products to our wholesale and retail customers. Other receivables at December 31, 2023 and 2022 primarily consisted of sales tax receivables, vendor rebates, and other miscellaneous receivables. 54 Fair Value Measurements Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. We are required to classify these financial assets and liabilities into two groups: (1) recurring, measured on a periodic basis, and (2) non-recurring, measured on an as-needed basis. There are three levels of inputs that may be used to measure fair value: Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 2 Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable or can be corroborated by observable market data. Level 3 Valuations based on models where significant inputs are not observable. Unobservable inputs are used when little or no market data is available and reflect the Company’s own assumptions about the assumptions market participants would use. The Company's financial instruments consist of cash and cash equivalents, short-term receivables, trade payables, debt instruments, and trading securities. Carrying amounts reported on the balance sheet for cash and cash equivalents, receivables, and accounts payable approximate fair value due to the short-term maturity of these instruments. See "Note 10 - Long Term Debt" below for further information regarding the fair value of long-term debt instruments. Trading securities consist of rabbi trust financial assets, which are recorded in other assets in our Consolidated Balance Sheets. The rabbi trust holds assets attributable to the elections of certain management employees to defer the receipt of a portion of their compensation. The assets of the rabbi trust are invested in mutual funds and are reported at fair value based on active market quotations, which represent Level 1 inputs. Inventories Inventories are valued at the lower of cost or net realizable value. Inventory costs include materials, labor, and operating overhead. The FIFO (first-in, first-out) or average cost methods are used to value our inventories as of December 31, 2023. Inventories include a lower of cost or market adjustment of $ 7 million and $ 22 million as of December 31, 2023, and 2022, respectively. Inventory consisted of the following (dollars in millions): December 31, 2023 2022 Logs $ 81 $ 59 Other raw materials 53 72 Semi-finished inventory 27 25 Finished products 217 180 Total Inventories $ 378 $ 337 Timber and Timberlands Timber and timberlands are comprised of timber deeds and allocations of the purchase price to Canadian timber harvesting licenses. Timber deeds are transactions in which we purchase timber but not the underlying land. The cost of timber deeds is capitalized in timber and timberlands and charged to the cost of timber harvested as the volume is removed. Timber that has been severed but has not yet been delivered to a facility is included in timber and timberlands. As of December 31, 2023, and 2022, we had timber and timberlands of $ 7 million and $ 12 million, respectively. 55 Timber licenses have a life of 20 to 25 years. These licenses are amortized on a straight-line basis over the life of the facilities. As of December 31, 2023 and 2022, we had timber licenses of $ 25 million and $ 28 million, respectively. Certain Canadian timber harvesting licenses also include future requirements for reforestation. The fair value of the future estimated reforestation obligation is accrued and recognized in Cost of sales based on the volume of timber harvested; fair value is determined by discounting the estimated future cash flows using a credit adjusted risk-free rate. Subsequent changes to the fair value resulting from the passage of time and revisions to fair value calculations are recognized in earnings as they occur. Property, Plant, and Equipment Property, plant, and equipment, including capitalized interest, are recorded at cost and consisted of the following (dollars in millions): December 31, 2023 2022 Land, land improvements, and logging roads, net of road amortization $ 212 $ 193 Buildings 493 428 Machinery and equipment 2,352 2,124 Construction in progress 236 253 3,293 2,998 Accumulated depreciation ( 1,753 ) ( 1,672 ) Property, plant, and equipment, net $ 1,540 $ 1,326 Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, which typically range from 5 to 20 years for buildings and land improvements, 3 to 15 years for equipment, and the shorter of the lease term or estimated useful lives for leasehold improvements. Depreciation and amortization expense on property, plant, and equipment was included in our Consolidated Statements of Income as noted below (dollars in millions): Year Ended December 31, 2023 2022 2021 Cost of sales $ 111 $ 121 $ 107 Selling, general and administrative expenses 4 4 2 Total depreciation and amortization $ 115 $ 124 $ 109 Logging road construction costs are capitalized and included in land and land improvements. These costs are amortized as the timber volume adjacent to the road system is harvested. Long-lived assets to be held and used (primarily property, plant, and equipment and timber and timberlands) are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. When impairment is indicated, the book values of the assets are written down to their estimated fair value as calculated by the expected discounted cash flow or estimated net sales price. See "Note 13 - Impairment of Long-Lived Assets" below for a discussion of charges related to impairments of property, plant, and equipment. Long-lived assets that are held for sale are written down to the estimated sales proceeds less cost to sell unless the estimated net proceeds exceed the carrying value. 56 Goodwill and Intangible Assets Goodwill and indefinite-lived intangible assets are assessed annually for impairment during the fourth quarter or earlier upon the occurrence of certain events or substantive changes in circumstances. In accordance with Accounting Standards Codification (ASC) 350, Intangibles – Goodwill and Other, companies may opt to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. A qualitative assessment includes factors such as financial performance, industry and market metrics, and other factors affecting the reporting unit. If this assessment concludes that it is more likely than not that the fair value of a reporting unit exceeds its carrying value, then goodwill is not considered impaired, and no further impairment testing is required. Conversely, if the qualitative assessment concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we must then compare the fair value of the reporting unit to its carrying value. Impairment is evaluated by applying a fair value-based test. Impairment losses would be recognized when the implied fair value of goodwill is less than its carrying value. In 2023, we announced the shutdown of our off-site framing operation Entekra Holdings LLC (Entekra), resulting in impairment charges of $ 9 million related to definite-lived intangible assets. During the year ended December 31, 2021, we recognized non-cash impairment charges of $ 5 million, associated with the remaining goodwill from the purchase of Entekra. See "Note 5 - Goodwill and Other Intangible Assets" below for further discussion. Investments in Affiliates We account for investments in affiliates when we do not have a controlling financial interest using the equity method under which LP’s share of earnings and losses of the affiliate is reflected in earnings, and dividends are credited against the investment in the affiliate when declared. Restricted Cash Our restricted cash accounts generally secure outstanding letters of credit. The restricted cash balance at December 31, 2022 was $ 14 million. There were no restricted cash balances as of December 31, 2023. Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities were as follows (dollars in millions): December 31, 2023 2022 Trade accounts payable $ 141 $ 178 Salaries and wages payable 57 66 Accrued customer incentives 37 46 Taxes other than income taxes 3 10 Current portion of operating lease liabilities 6 8 Other accrued liabilities 10 9 Total Accounts payable and accrued liabilities $ 254 $ 317 Other accrued liabilities at December 31, 2023 and 2022, primarily consisted of accrued interest, worker compensation liabilities, warranty reserves, and other items. Additionally, trade accounts payable included $ 15 million and $ 48 million related to capital expenditures that had not yet been paid as of December 31, 2023 and 2022, respectively. 57 Other Long-Term Liabilities Other long-term liabilities were as follows (dollars in millions): December 31, 2023 2022 Post-retirement obligations $ 7 $ 7 Asset retirement obligations 8 8 Uncertain tax positions 15 7 Warranty reserves 6 6 Pension benefit obligation 2 1 Other 23 25 Total Other long-term liabilities $ 61 $ 53 Other long-term liabilities at December 31, 2023 and 2022, consisted primarily of workers' compensation liabilities and investment tax incentives associated with property, plant, and equipment. Asset Retirement Obligations We record the fair value of the legal and conditional obligations to retire and remove long-lived assets in the periods in which the obligations are incurred. These obligations primarily consist of monitoring costs on closed landfills, timber reforestation obligations associated with our timber licenses in Canada, and site restoration costs. When the related liability is initially recorded, we capitalize the cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its settlement value, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, we recognize a gain or loss for any difference between the settlement amount and the liability recorded. The activity in our asset retirement obligation liability for 2023 and 2022 is summarized in the following table (dollars in millions). Year Ended December 31, 2023 2022 Beginning balance $ 8 $ 8 Accretion expense — — Adjusted to expense (cost of sales and other operating credits and charges, net) — ( 1 ) Payments made — — Ending balance $ 8 $ 8 Income Taxes We account for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our Consolidated Financial Statements or tax returns. In estimating future tax consequences, we generally consider all expected future events other than the enactment of changes in tax laws or rates. The effect on deferred tax assets and liabilities of a change in tax rates will be recognized as income or expense in the period that includes the enactment date. Additionally, deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion of the deferred tax assets will not be realized. We recognize the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We classify interest related to income tax liabilities or uncertain tax positions as interest expense or interest income and, if applicable, penalties are recognized as a component of income tax expense. We are subject to global intangible low-taxed income, an incremental tax on foreign income. We have made an accounting election to record this tax in the period the tax arises. 58 Stock-Based Compensation We have stock award plans covering certain key employees and directors, which provide for awards of restricted stock units, performance stock units, stock-settled stock appreciation rights (SSARS), and stock options. In addition, we offer an Employee Stock Purchase Plan (ESPP) to employees. The fair value of our restricted stock and restricted stock units is the closing stock price of LP’s common stock the day preceding the grant date. The fair value of our performance stock units is estimated using the Monte Carlo simulation pricing model. The key assumptions used in this model include expected volatility, risk-free rate, and average and grant date stock prices. The estimate of expected volatility for performance stock units is based upon historical stock price volatility and the length of the performance period. The risk-free interest rate is based on zero-coupon U.S. Treasury bonds. The beginning average stock price equals the average closing value stock price over the defined period of trading days with the assumption that dividends distributed during the period were reinvested. Foreign Currency Translation The functional currency for our Canadian subsidiaries is the U.S. dollar. The books and records for these subsidiaries are maintained in the Canadian dollar. The financial statements of these foreign subsidiaries are remeasured into U.S. dollars using the historical exchange rate for property, plant, and equipment, timber and timberlands (related depreciation and amortization on both property, plant, and equipment and timber and timberlands), goodwill, and certain other non-monetary assets. We use the exchange rate at the balance sheet date for the remaining assets and liabilities, including deferred taxes. A weighted average exchange rate is used for each period for revenues and expenses. These transaction gains or losses are recorded in Other non-operating items on the Consolidated Statements of Income. The functional currencies of our Chilean, Brazilian, Colombian, Peruvian, and Paraguayan subsidiaries are their respective local currencies. Our Argentinean subsidiary operates under a highly inflationary economy and uses the Chilean Peso as the functional currency. Assets and liabilities are translated into U.S. dollars using rates of exchange at the balance sheet date. Translation adjustments, which are based upon the exchange rate at the balance sheet date for assets and liabilities and the weighted average rate for the income statement, are recorded in Accumulated comprehensive loss in stockholders’ equity on the Consolidated Balance Sheets. Transaction gains and losses are recorded in Other non-operating items on the Consolidated Statements of Income. Advertising costs Advertising costs of $ 25 million, $ 28 million, and $ 24 million in 2023, 2022, and 2021, respectively, are principally expensed as incurred and included as part of selling, general, and administrative expenses within our Consolidated Statements of Income. Advertising costs include product displays, media production costs, agency fees, sponsorships, and cooperating advertising Other Operating Credits and Charges, Net We classify amounts unrelated to ongoing core operating activities as other operating credits and charges, net in the Consolidated Statements of Income. Such items include, but are not limited to, restructuring charges (including severance charges), business exit charges, charges to establish and maintain litigation or environmental reserves, product reserves, gains or losses from settlements with governmental or other organizations, and gains or losses on the sale or disposal of long-lived assets. Due to the nature of these items, amounts in the income statement can fluctuate from year to year. The determination of which items are considered significant and unrelated to core operations is based upon management’s judgment. Retirement Benefits We are required to use actuarial methods and assumptions in the valuation of defined benefit obligations and the determination of expense. Actuarial gains or losses, curtailments, prior service costs or credits, and transition obligations not previously recognized are recorded as a component of Accumulated comprehensive loss. 59 Comprehensive Income Comprehensive income consists of Net income and other gains and losses affecting stockholders’ equity that are excluded from Net income, including foreign currency translation adjustments, costs associated with pension or other post-retirement benefits that have not been recognized as components of net periodic benefit costs, and net unrealized gains or losses on securities and is presented in the accompanying Consolidated Statements of Comprehensive Income. 2. PRESENT AND PROSPECTIVE ACCOUNTING PRONOUNCEMENTS Recent Pronouncements Not Yet Adopted Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures In November 2023, the FASB issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, and an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. This pronouncement is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements and disclosures. Income Taxes (Topic 740): Improvements to Income Tax Disclosures In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which focuses on the rate reconciliation and income taxes paid. ASU No. 2023-09 requires a public business entity (PBE) to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. This pronouncement is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements and disclosures. 3 . REVENUE We disaggregate revenue from contracts with customers into major product lines. We have determined that disaggregating revenue into these categories depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. 60 As noted in the segment reporting information in "Note 18 - Segment Information" below, our reportable segments are: Siding, OSB, and LPSA. The following table presents our reportable segment revenues, disaggregated by revenue source (dollars in millions): Year Ended December 31, 2023 By Product type and family: Siding OSB LPSA Other Inter-segment Total Value-add Siding Solutions $ 1,319 $ — $ 24 $ — — $ 1,343 OSB - Structural Solutions — 565 177 — — 742 1,319 565 201 — — 2,086 Commodity OSB - Commodity — 446 — — — 446 Other Other products 9 15 4 22 — 49 $ 1,328 $ 1,026 $ 205 $ 22 $ — $ 2,581 Year Ended December 31, 2022 By Product type and family: Siding OSB LPSA Other Inter-segment Total Value-add Siding Solutions $ 1,463 $ — $ 23 $ — $ — $ 1,486 OSB - Structural Solutions — 1,110 215 — ( 2 ) 1,323 1,463 1,110 238 — ( 2 ) 2,809 Commodity OSB - Commodity — 938 — — ( 1 ) 937 Other Other products 6 14 3 84 — 107 $ 1,469 $ 2,062 $ 241 $ 84 $ ( 2 ) $ 3,854 Year Ended December 31, 2021 By Product type and family: Siding OSB LPSA Other Inter-segment Total Value-add Siding Solutions $ 1,158 $ — $ 33 $ — $ — $ 1,191 OSB - Structural Solutions — 1,152 227 — — 1,379 1,158 1,152 260 — — 2,570 Commodity OSB - Commodity — 1,221 — — — 1,221 Other Other products 12 14 5 95 ( 3 ) 123 $ 1,170 $ 2,387 $ 265 $ 95 $ ( 3 ) $ 3,915 61 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 at a point in time. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods. The shipping cost incurred by us to deliver products to our customers is recorded in Cost of sales. The expected costs associated with our warranties continue to be recognized as an expense when the products are sold. During 2023, 2022, and 2021, our top ten customers accounted for approximately 50 %, 48 %, and 45 % of our sales, respectively, in the aggregate. No individual customer exceeded 10% of our sales in 2023, 2022, or 2021. 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. 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. Management adjusts accruals when circumstances indicate (typically as a result of a change in volume expectations). As of December 31, 2023 and 2022, we accrued $ 37 million and $ 46 million, respectively, for customer rebates recorded in accounts payable and accrued liabilities on our Consolidated Balance Sheets. 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. The amount of consignment inventory as of December 31, 2023 and 2022, was $ 28 million and $ 20 million, respectively. 4. EARNINGS PER SHARE Basic earnings per share is based on the weighted average number of shares of common stock outstanding. Diluted earnings per share is based upon the weighted average number of shares of common stock outstanding plus all potentially dilutive securities that were assumed to be converted into common shares at the beginning of the period under the treasury stock method. This method requires that the effect of potentially dilutive common stock equivalents (stock options, SSARs, restricted stock or units, and performance stock units) be excluded from the calculation of diluted earnings per share for the periods in which losses from continuing operations are reported because the effect is anti-dilutive. 62 The following table sets forth the computation of basic and diluted earnings per share (dollars and shares in millions): Year Ended December 31, 2023 2022 2021 Income from continuing operations $ 178 $ 885 $ 1,302 Net loss attributed to non-controlling interest — 3 4 Income attributed to LP from continuing operations 178 888 1,306 Income from discontinued operations, net of income taxes — 198 71 Net income attributed to LP $ 178 $ 1,086 $ 1,377 Weighted average common shares outstanding - basic 72 78 97 Dilutive effect of employee stock plans — — 1 Shares used for diluted earnings per share 72 78 98 Net income attributed to LP per share - basic: Continuing operations $ 2.47 $ 11.40 $ 13.46 Discontinued operations — 2.54 0.73 Net income attributed to LP per share - basic $ 2.47 $ 13.94 $ 14.19 Net income attributed to LP per share – diluted: Continuing operations $ 2.46 $ 11.34 $ 13.37 Discontinued operations — 2.52 0.73 Net income attributed to LP per share - diluted $ 2.46 $ 13.87 $ 14.09 5. GOODWILL AND OTHER INTANGIBLE ASSETS Changes in goodwill by segment for the years ended December 31, 2023 and 2022, are provided in the following table (dollars in millions): Siding OSB Total Balance at December 31, 2021 $ 4 $ 16 $ 19 Impairment charges — — — Balance at December 31, 2022 4 16 19 Impairment charges — — — Balance at December 31, 2023 $ 4 $ 16 $ 19 63 Changes in other intangible assets for the years ended December 31, 2023 and 2022, are provided in the following table (dollars in millions): Timber Licenses 1 Developed Technology Trademark Total Other Intangibles Balance at December 31, 2021 $ 30 $ 17 $ 2 $ 49 Amortization ( 3 ) ( 2 ) — ( 5 ) Balance at December 31, 2022 28 15 2 45 Impairment — ( 7 ) ( 2 ) ( 9 ) Amortization ( 3 ) ( 1 ) — ( 4 ) Balance at December 31, 2023 $ 25 $ 7 $ — $ 32 1 Timber licenses are included in timber and timberlands on the Consolidated Balance Sheets. The Company’s goodwill and other intangible assets are evaluated for impairment annually during the fourth quarter or more frequently if events indicate the carrying value of a reporting unit may not be recoverable. During the year ended December 31, 2023, we recorded impairment charges of $ 9 million related to developed technology and trademarks related to Entekra, which is discussed further in “Note 7 - Business Exit Charges.” Included in the balance of timber licenses are values allocated to Canadian forest licenses whose initial value of $ 91 million is amortized over the estimated useful life of 20 to 25 years. Amortization expense related to definite-lived intangible assets was $ 4 million for the year ended December 31, 2023 and $ 5 million for each of the years ended December 31, 2022 and 2021. Amortization of the above-described intangible assets will be $ 3 million per year over the next five years. 6. DISCONTINUED OPERATIONS Engineered Wood Products (EWP) In March 2022, the Company sold its 50 % equity interest in two joint ventures that produce I-joists to Resolute Forest Products Inc. for $ 59 million. The total net carrying value of our equity method investment at the date of sale was $ 19 million, and the Company recognized a gain associated with the sale of $ 39 million within Income from discontinued operations, net of income taxes in the Consolidated Statements of Income. On August 1, 2022, the Company completed the sale of the assets related to the EWP segment. As a result of the sale, the Company received $ 217 million in gross cash proceeds after taking into account working capital adjustments. The Company paid $ 12 million in direct transaction costs, resulting in net proceeds of $ 205 million. The net carrying value of the EWP assets at the time of sale was $ 87 million, which resulted in a pre-tax gain of approximately $ 118 million within Income from discontinued operations, net of income taxes in the Consolidated Statements of Income. Upon closing, the Company entered into a transition services agreement, pursuant to which the Company agreed to support the various activities of the EWP segment, which concluded during the year ended December 31, 2023. The Company has classified the results of its EWP segment as discontinued operations in its Consolidated Statements of Income for the prior periods presented. 64 The following table presents the financial results of the EWP segment (dollars in millions): December 31, 2022 1 2021 Net sales $ 455 $ 638 Cost of sales ( 355 ) ( 531 ) Gross profit 101 107 Selling, general, and administrative expenses ( 10 ) ( 18 ) Other operating credits and charges, net — — Income from operations of discontinued operations 91 90 Other non-operating items — 5 Gain on disposal before income taxes 158 — Income from discontinued operations before income taxes 249 95 Provision for income taxes ( 51 ) ( 24 ) Income from discontinued operations, net of income taxes $ 198 $ 71 1 Reflects operating results through August 1, 2022, when the assets related to the EWP segment were sold. The following summarizes the total cash provided by operations and total cash used for investing activities related to the EWP segment and included in the Consolidated Statements of Cash Flows (dollars in millions): 2022 2021 Net cash provided by discontinued operating activities $ 16 $ 71 Net cash provided by (used in) discontinued investing activities $ 261 $ ( 6 ) Net cash provided by discontinued investing activities for the year ended December 31, 2022, included $59 million of proceeds from the sale of our 50% equity interest in two joint ventures that produced I-joists and $ 205 million of net proceeds from the sale of the EWP segment assets. Capital expenditures for discontinued operations totaled $ 3 million and $ 6 million for the years ended December 31, 2022 and 2021, respectively. Included in net cash provided by discontinued operating activities is depreciation and amortization of $ 3 million and $ 5 million for the years ended December 31, 2022 and 2021, respectively. 7. BUSINESS EXIT CHARGES During the second quarter of 2023, we ceased the manufacturing operations of Entekra, an off-site framing operation previously reported within our “Other” category, which comprises other products that are not individually significant. Business exit charges were $ 32 million for year ended December 31, 2023, which consisted of the following (dollar amounts in millions): Year Ended December 31, 2023 Impairment of property, plant and equipment, operating lease assets, and other intangible assets 1 $ 24 Restructuring and other related charges: Inventory write-down 2 7 Other expenses including personnel-related costs such as severance 3 1 Total Business exit charges $ 32 1 Included within impairment of long-lived assets, net on the Consolidated Income Statements. 2 Included within cost of sales on the Consolidated Income Statements. 3 Included within other operating credits and charges, net on the Consolidated Income Statements. 65 8. INCOME TAXES Income Tax Provision The components of income from continuing operations before income taxes, including equity in unconsolidated affiliates, were (dollars in millions): Years Ended December 31, 2023 2022 2021 Domestic $ 207 $ 961 $ 1,491 Foreign 45 198 212 Total $ 252 $ 1,159 $ 1,704 The components of our income tax provision (benefit) from continuing operations were (dollars in millions): Years Ended December 31, 2023 2022 2021 Current tax provision (benefit): U.S. federal $ 17 $ 180 $ 284 State and local ( 1 ) 51 56 Foreign 14 42 56 Net current tax provision 30 273 396 Deferred tax provision (benefit): U.S. federal 22 ( 1 ) 2 State and local 1 ( 4 ) — Foreign 21 12 4 Net valuation allowance increase (decrease) — ( 6 ) — Net deferred tax provision 44 1 6 Total income tax provision $ 74 $ 274 $ 402 We paid income taxes, net of refunds, of $ 65 million, $ 320 million, and $ 421 million during 2023, 2022, and 2021, respectively. Included in our Consolidated Balance Sheet at December 31, 2023 is a net income tax receivable of $ 22 million compared to a net income tax payable of $ 16 million at December 31, 2022. 66 Deferred Taxes The tax effects of significant temporary differences creating deferred tax assets and liabilities were (dollars in millions): December 31, 2023 2022 Deferred tax assets: Accrued liabilities $ 21 $ 20 Research expenditures 19 14 Inventories 14 9 Benefit relating to capital loss, NOL carryforward, and credit carryforwards 10 6 Operating lease liabilities 8 7 Deferred revenue 3 3 Other deferred tax assets 11 15 Total deferred tax assets 86 74 Valuation allowance ( 4 ) ( 4 ) Total deferred tax asset after valuation allowance 82 70 Deferred tax liabilities: Property, plant, and equipment ( 188 ) ( 152 ) Unremitted foreign earnings ( 21 ) — Operating lease assets ( 8 ) ( 7 ) Investment in Entekra ( 7 ) ( 7 ) Timber and timberlands ( 6 ) ( 7 ) Other deferred tax liabilities ( 4 ) ( 3 ) Total deferred tax liabilities ( 234 ) ( 176 ) Net deferred tax liabilities $ ( 152 ) $ ( 106 ) Balance sheet classification: Long-term deferred tax asset $ 11 $ 7 Long-term deferred tax liability ( 162 ) ( 113 ) Net deferred tax liabilities $ ( 152 ) $ ( 106 ) The benefit relating to capital loss, operating loss, and credit carryforwards included in the above table at December 31, 2023, consisted of (dollars in millions): Operating Loss Benefit Amount Valuation Allowance Expiration Beginning in Argentina operating loss carryforwards $ 8 $ 3 $ — 2028 Canadian capital loss carryforwards — 4 ( 4 ) No expiration Chile operating loss carryforwards 4 1 — No expiration State credit carryforwards — 2 — 2034 Total $ 12 $ 10 $ ( 4 ) 67 We periodically review the need for valuation allowances against deferred tax assets and recognize these deferred tax assets to the extent that their realization is more likely than not. As part of our review, we consider all positive and negative evidence, including earnings history, the future reversal of deferred tax liabilities, and the relevant expirations of carryforwards. We believe that the valuation allowances provided are appropriate. If future years’ earnings differ from the estimates used to establish these valuation allowances, or other objective positive or negative evidence arises, we may record an adjustment to the valuation allowance resulting in an impact on tax provision (benefit) for that period. In the second quarter of 2023 we assessed the overall financial position of our foreign subsidiaries and management decided it no longer has the intent to indefinitely reinvest undistributed earnings in Chile and Brazil. As a result of this change, we recorded deferred taxes relating to the tax effect of repatriating all unremitted earnings in Chile and Brazil. The deferred tax liability is reflective of the difference between outside book and outside tax basis associated with the investments in LP Brasil, LP Chile, and LP South America. However, LP expects the outside basis difference to reverse through dividend distributions and the primary tax impacts of these distributions are expected to be Chilean income tax withheld on dividend income received by LP Corporation, and tax related to Section 986(c) foreign exchange gain or loss on distributions of earnings subject to U.S. GILTI tax in prior periods. As of December 31, 2023, LP Corporation expects to incur Chilean withholding tax of approximately $ 22 million on the potential distributions of Chile and Brazil cumulative earnings and will be able to claim a foreign tax credit of $ 1 million, for a net tax deferred tax liability of $ 21 million. The charge was recorded as a component of income tax expense from continuing operations for the year ended December 31, 2023. In 2021 the Organization for Economic Cooperation and Development (OECD) announced an Inclusive Framework on Base Erosion and Profit Shifting including Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations at a minimum rate of 15%. Subsequently multiple sets of administrative guidance have been issued. Many non-U.S. tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 with the adoption of additional components in later years or announced their plans to enact legislation in future years. Although we expect increased tax compliance efforts as a result of new legislation, we do not expect Pillar 2 to have a significant impact on our effective tax rate or our consolidated results of operations, financial position and cash flows. Reconciliation of the U.S. Federal Statutory Rate to the Effective Rate Reconciliation of the U.S. federal statutory tax rate to the total effective tax rates from continuing operations (dollars in millions): Years Ended December 31, 2023 2022 2021 Amount ($) Percent (%) Amount ($) Percent (%) Amount ($) Percent (%) U.S. Federal tax rate $ 53 21 % $ 243 21 % $ 358 21 % State and local income taxes 8 3 34 3 43 3 Effect of foreign tax rates 3 1 9 1 16 1 Uncertain tax positions 7 3 ( 2 ) — ( 1 ) — Unremitted foreign earnings 25 10 — — — — Non deductible compensation 6 2 6 — 3 — Tax credits ( 5 ) ( 2 ) ( 4 ) — ( 4 ) — Prior year changes in tax laws and positions ( 9 ) ( 3 ) — — — — Revisions to prior year estimates ( 7 ) ( 3 ) 2 — ( 3 ) — Other items, net ( 7 ) ( 3 ) ( 14 ) ( 1 ) ( 10 ) ( 1 ) Provision for income taxes $ 74 29 % $ 274 24 % $ 402 24 % We are subject to U.S. federal income tax as well as income taxes of multiple state jurisdictions. Our foreign subsidiaries are subject to income tax in Canada, Chile, Brazil, Peru, Colombia, Argentina, Paraguay, and Mexico. 68 We generally remain subject to U.S. federal and state examinations for tax years 2018 and subsequent. In addition to the U.S., we have tax years that remain open and subject to examination by tax authorities in the following major tax jurisdictions: Brazil and Chile for tax years 2017 and subsequent; and Canada for tax years 2018 and subsequent. Our tax returns are currently under examination by tax authorities in the U.S. for years 2018, 2019, and 2020, in Canada for year 2019, and in Chile for years 2016 and 2020. Uncertain Tax Positions Tabular reconciliation of the total amount of unrecognized tax benefits at the beginning and end of the years (dollars in millions): December 31, 2023 2022 2021 Beginning balance $ 6 $ 9 $ 11 Increases: Tax positions taken in current year 1 1 1 Tax positions taken in prior years 6 — — Decreases: Lapse of statute in current year — ( 4 ) ( 3 ) Ending balance $ 13 $ 6 $ 9 Included in the above balances at December 31, 2023, are $ 13 million of tax benefits that, if recognized, would affect our effective tax rate. We accrued interest of $ 2 million and paid no interest during 2023. We accrued and paid no interest during 2022. 9 . LEASES Our lease portfolio consists primarily of real estate, mobile equipment at our manufacturing facilities, rail cars to transport our products, and a fleet of vehicles. We determine if an arrangement is a lease at contract inception. A lease exists when a contract conveys to the customer the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. As most of our leases do not provide an implicit rate, we used our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The lease term for all our leases includes the non-cancellable period of the lease plus any additional periods covered by either an option to extend (or not to terminate) the lease that we are reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor. As of December 31, 2023 , our weighted average discount rate was 3 % , and our weighted average remaining lease term was seven years for operating leas es. 69 Our operating leases are included in our Consolidated Balance Sheets and Consolidated Statements of Income as follows (dollars in millions): Classification December 31, Consolidated Balance Sheet 2023 2022 Assets: Operating lease assets Operating lease assets, net $ 25 $ 44 Total lease assets $ 25 $ 44 Liabilities: Current Operating Accounts payable and accrued liabilities $ 6 $ 8 Non-current Operating Non-current operating lease liabilities 25 41 Total lease liabilities $ 32 $ 49 Fo r the years ended December 31, 2023 and 2022, we incurred operating lease expenses of $ 10 million and $ 10 million, respectively, included within costs of sales and selling, general and administrative expenses. We made cash payments of $ 10 million and $ 9 million during the years ended December 31, 2023 and 2022, respectively, related to our operating leases. We further incurred operating lease expense of $ 4 million and $ 6 million related to short-term rent expense for the years ended December 31, 2023 and 2022, respectively. We obtained right of use (ROU) assets in exchange for new operating lease liabilities of $ 4 million and $ 4 million for the years ended December 31, 2023 and 2022, respectively. We did not enter into any financing leases during 2023 or 2022. In connection with the Entekra shutdown described in " Note 7 - Business Exit Charges,” we terminated the related lease arrangements and derecognized the associated operating lease assets and liabilities, resulting in a non-cash pre-tax impairment charge of $ 3 million. The following table sets forth the minimum lease payments that are expected to be made in each of the years indicated (dollars in millions): Operating Leases 2024 $ 7 2025 6 2026 5 2027 3 2028 3 2029 and thereafter 9 Total lease payments 34 Less: Interest ( 3 ) Present value of lease liabilities $ 32 70 10. LONG-TERM DEBT December 31, 2023 December 31, 2022 (Dollars in millions) Interest Rate Principal Unamortized Debt Costs Total Principal Unamortized Debt Costs Total Debentures: Senior unsecured notes, maturing 2029, interest rates fixed 3.625 % $ 350 $ ( 3 ) $ 347 $ 350 $ ( 4 ) $ 346 Amended Credit Facility, maturing 2028, interest rates variable varies — — — — — — Total 350 ( 3 ) 347 350 ( 4 ) 346 Less: current portion — — — — Long-term portion $ 350 $ ( 3 ) $ 347 $ 350 $ ( 4 ) $ 346 Senior Notes In March 2021, we issued $ 350 million of 3.625 % Senior Notes due in 2029 (2029 Senior Notes). We may redeem the 2029 Senior Notes, in whole or in part, prior to March 15, 2024, at a redemption price equal to 100 % of the principal amount thereof plus a “make-whole” premium set forth in the indenture governing our 2029 Senior Notes, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. On or after March 15, 2024, we may, at our option on one or more occasions, redeem all or any portion of these notes at the redemption prices set forth in the indenture governing the 2029 Senior Notes, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. The indenture governing the 2029 Senior Notes contains certain covenants that, among other things, limit our ability to grant liens to secure indebtedness, engage in sale and leaseback transactions, merge or consolidate or sell all or substantially all of our assets. If we are subject to a "change of control," as defined in the indenture governing our 2029 Senior Notes, we are required to offer to repurchase the 2029 Senior Notes at a purchase price equal to 101 % of the principal amount thereof plus accrued and unpaid interest, if any, thereon to, but not including, the date of purchase. The indenture governing the 2029 Senior Notes contains customary events of default, including failure to make required payments on the 2029 Senior Notes, failure to comply with certain agreements or covenants contained in the indenture governing our 2029 Senior Notes, failure to pay or acceleration of certain other indebtedness and certain events of bankruptcy and insolvency. An event of default in the indenture allows either the indenture trustee or the holders of at least 25 % in aggregate principal amount of the then-outstanding 2029 Senior Notes to accelerate, or in certain cases, automatically causes the acceleration of, the amounts due under the 2029 Senior Notes. Deferred debt costs are amortized over the life of the related debt using a straight-line basis which approximates the effective interest method. If the debt is retired early, the related unamortized deferred financing costs are written off in the period the debt is retired to other non-operating items. 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. 71 There were no outstanding amounts borrowed under the Amended Credit Facility as of December 31, 2023. Revolving borrowings under the Amended Credit Facility accrue interest, at our option, at either (a) a “base rate” plus a margin of 0.500 % to 1.500 % or (b) Adjusted Term SOFR ( i.e. , Term SOFR Rate plus an adjustment of 0.10 %) plus a margin of 1.500 % to 2.500 %. The Amended Credit Facility also includes an unused commitment fee, due quarterly, ranging from 0.200 % to 0.425 %. The applicable margins and fees within these ranges are based on our ratio of consolidated Earnings before interest, taxes, depreciation and amortization (EBITDA) to cash interest charges. The “base rate” is the highest of (i) the Federal funds rate plus 0.5 %, (ii) the U.S. prime rate, and (iii) one-month Adjusted Term SOFR plus 1.0 %. 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, 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 %. In March 2020, LP entered into a letter of credit facility agreement (the Letter of Credit Facility) with Bank of America, N.A., 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 quarterly a letter of credit fee in an amount equal to 1.875 % of the daily available amount to be drawn on each letter of credit issued under the facility; provided, that if all letters of credits issued under the Letter of Credit Facility have been cash collateralized, the applicable rate of the letter of credit fee is reduced to 0.500 %. The Letter of Credit Facility is subject to similar affirmative, negative, and financial covenants as those set forth in the Credit Agreement, including capitalization ratio covenants. As of December 31, 2023, we were in compliance with all financial covenants under the 2029 Senior Notes, the Credit Agreement and the Letter of Credit Facility. Deferred debt costs are amortized over the life of the related debt using a straight-line basis, which approximates the effective interest method. Included in such amortized amounts are deferred debt costs associated with our Amended Credit Facility of $ 3 million, which are recorded within other assets on our Consolidated Balance Sheets . We amortized deferred debt costs of $ 1 million for each of the years ended December 31, 2023, 2022, and 2021. The weighted average interest rate for all long-term debt at both December 31, 2023 and 2022 was approximately 3.6 %. Required repayment of principal for long-term debt is as follows (dollars in millions): Years ending December 31, 2024 $ — 2025 — 2026 — 2027 — 2028 — 2029 and thereafter 350 Total $ 350 We estimated the 2029 Senior Notes to have a fair value of $ 314 million and $ 306 million at December 31, 2023 and 2022, respectively, based upon market quotations. Fair values were based on trading activity among the Company’s lenders and the average bid and ask price as determined using published rates (Level 1 in the U.S. GAAP fair value hierarchy). 11. STOCKHOLDERS' EQUITY Preferred Stock We are authorized to issue up to 15,000,000 shares of preferred stock at $ 1.00 par value. At December 31, 2023, no shares of preferred stock have been issued. 72 Stock Award Plan We have a stock-based compensation plan under which stock options, SSARs, restricted stock, restricted stock units, and performance stock units may be granted. At December 31, 2023, approximately four million shares were available under the current plan for these awards. Year ended December 31, (Dollars in millions) 2023 2022 2021 Total stock-based compensation expense (cost of sales, selling, general and administrative, and other operating credits and charges, net) $ 13 $ 19 $ 16 Income tax benefit related to stock-based compensation $ 2 $ 8 $ 3 Impact on cash flow due to taxes paid related to net share settlement of equity awards $ ( 12 ) $ ( 16 ) $ ( 7 ) We recognize the compensation costs on a straight-line basis over the requisite service period of the award, which is generally the vesting term of three years. SSARs Prior to January 1, 2018, we granted SSARs to key employees under the Company's then-current stock award plan. On exercise, we generally issue these shares from treasury. The SSARs were granted at market price at the date of grant. The SSARs became exercisable over three years and expire ten years after the date of grant. All outstanding SSARs were vested as of December 31, 2023. Restricted Stock Units and Performance Stock Units We grant time-vested restricted stock units and performance stock units (PSUs) to certain key employees and time-vested restricted stock units to non-employee directors under our stock award plan. Restricted stock units (RSUs) vest ratably over a three-year vesting period for employees and vest in full on the first anniversary of the grant date for non-employee directors. Certain of these awards are eligible to receive dividend equivalent shares. The grant date fair value of these awards approximates market value of the shares. PSUs vest based upon the attainment of certain performance and market metrics over a three-year cumulative performance period. Awards based upon the achievement of the performance goals are earned ratably from 0 % to 200 %. If the performance goals are met at the end of the performance period, the award may be adjusted based on LP's three-year total shareholder return (TSR) performance relative to a capital market peer group. This TSR modifier can increase or decrease the award by 20 %, although the TSR modifier cannot cause the award to exceed the maximum of 200 %. 73 Summary of Stock Awards Outstanding The following table summarizes stock awards as of December 31, 2023, as well as activity during the last year. Stock Options / SSARS Restricted Stock Units and Performance Stock Units Number of Awards Weighted Average Exercise Price Number of Awards Weighted Average Grant Date Fair Value Outstanding at December 31, 2022 182,989 $ 17.59 645,504 $ 48.49 Granted — — 590,817 54.97 Exercised ( 42,278 ) 17.87 — — Vested — — ( 468,148 ) 38.97 Forfeited/cancelled — — ( 200,182 ) 62.60 Outstanding at December 31, 2023 140,711 $ 17.50 567,991 $ 62.59 Vested and expected to vest at December 31, 2023 1 140,711 $ 17.50 Exercisable at December 31, 2023 140,711 $ 17.50 Unrecognized compensation costs (in millions) $ — $ 10 To be recognized over weighted-average period of years 0 1 1 Expected to vest based upon historical forfeiture rate. In October 2023, LP modified the performance vesting criteria of approximately 105,000 and 75,000 PSU awards outstanding that were granted in 2021 and 2022, respectively. The original awards were canceled, and the modified awards were considered granted on the modification date. Stock-based compensation expense related to these modified awards will be recognized over the remaining vesting period based on the expected number of awards to vest using fair values per share of between $49.36 and $53.47. Stock-based compensation expense related to 2021 PSU modification was $4 million for the year ended December 31, 2023. The aggregate intrinsic value of the stock options and SSARs is the total pre-tax intrinsic value (the difference between our closing stock price on the last trading day of a fiscal year and the exercise price, multiplied by the number of in-the-money options and SSARs) that would have been received by the holders had all holders exercised their awards on the last day of such fiscal year. This amount changes based on the market value of our stock, as reported by the New York Stock Exchange. The intrinsic value of SSARs and stock options exercised in the years ended December 31, 2023, 2022, and 2021 was $ 3 million, $ 4 million, and $ 8 million, respectively. The total fair value of awards vested during the years ended December 31, 2023, 2022, and 2021, was $ 31 million, $ 42 million, and $ 20 million, respectively. Share Repurchases On May 4, 2021, our Board of Directors authorized a share repurchase program (First 2021 Share Repurchase Program) under which we had the ability to repurchase shares of our common stock totaling up to $ 1 billion. On November 2, 2021, our Board of Directors authorized an additional share repurchase plan under which we had the ability to repurchase shares of our common stock totaling up to $ 500 million (Second 2021 Share Repurchase Program). On May 3, 2022, we announced that our Board of Directors authorized a share repurchase program (2022 Share Repurchase Program) under which we may repurchase shares of our common stock totaling up to $ 600 million. During 2021, we paid $ 1.3 billion to repurchase approximately 21 million shares of our common stock at an average price of $ 61.52 per share through market purchases. During 2022, we paid $ 900 million to repurchase approximately 14 million shares of our common stock through market purchases at an average price of $ 62.37 per share. No purchases were made under the 2022 Share Repurchase Program during 2023. 74 There are no amounts remaining under the First 2021 Share Repurchase Program or the Second 2021 Share Repurchase Program as of December 31, 2023. There is $ 200 million remaining under the 2022 Share Repurchase Program as of December 31, 2023. Employee Stock Purchase Plan Our employee stock purchase plan (ESPP) provides our participating employees an opportunity to obtain shares of our common stock at a discount (through payroll deductions over six-month periods). At December 31, 2023, two million shares of common stock were reserved for issuance under the ESPP. 12. OTHER OPERATING AND NON-OPERATING INCOME (EXPENSE) Other operating credits and charges, net The major components of Other operating credits and charges, net in the Consolidated Statements of Income for the years ended December 31, 2023, 2022, and 2021 are reflected in the table below and described in the paragraphs following the table (dollars in millions): Year Ended December 31, 2023 2022 2021 Insurance recoveries $ — $ 15 $ 4 Legal settlement ( 16 ) — — Reorganization charges ( 8 ) ( 7 ) ( 1 ) Environment costs — ( 2 ) ( 4 ) Product liability settlement — 8 — Gain (loss) on asset sales 6 ( 1 ) ( 2 ) Other ( 1 ) 2 3 $ ( 19 ) $ 16 $ 1 During 2023, we agreed to pay $ 16 million to resolve certain patent-related claims and to obtain certain patent rights. We incurred severance and other charges of $ 8 million related to certain reorganizations and recognized a $ 6 million gain on the sale of assets. During 2022, we received $ 15 million in insurance recoveries related to business interruption claims for weather-related downtime sustained in the prior year. We incurred severance and other charges of $ 7 million related to certain reorganizations and we recognized a charge of $ 2 million related to additional estimated environmental costs associated with a non-operating site. During 2021, we recognized a charge of $ 4 million related to additional estimated environmental costs associated with a non-operating site. We incurred severance and other charges of $ 1 million related to certain reorganizations. Additionally, we received $ 4 million in insurance recoveries related to business interruption claims for weather-related downtime sustained in the prior year. 75 Non-operating income (expense) Non-operating income (expense) is comprised of the following components (dollars in millions): Year Ended December 31, 2023 2022 2021 Interest expense $ ( 17 ) $ ( 14 ) $ ( 15 ) Amortization of debt charges ( 1 ) ( 1 ) ( 2 ) Capitalized interest 4 5 3 Interest expense, net of capitalized interest $ ( 14 ) $ ( 11 ) $ ( 14 ) Interest income $ 18 $ 14 $ 1 Investment income $ 18 $ 14 $ 1 Net periodic pension cost, excluding service cost $ — $ ( 6 ) $ ( 1 ) Foreign currency gains (losses), net ( 40 ) ( 11 ) ( 8 ) Loss on early debt extinguishment — — ( 11 ) Pension settlement charges ( 4 ) ( 82 ) ( 2 ) Other 1 2 — Other non-operating items $ ( 43 ) $ ( 97 ) $ ( 22 ) During 2023, we completed the termination of our U.S. and Canadian defined benefit pension plans resulting in the recognition of non-cash, pre-tax charges of $ 4 million. Additionally, we recognized $ 40 million of foreign currency losses primarily driven by $ 32 million of transactional losses on the Argentine peso. During 2022, we recognized $ 82 million of pension settlement expense related to a portion of the unrecognized actuarial loss that was included in accumulated comprehensive loss. During 2021, we recorded an early debt extinguishment charge of $ 11 million, which included $ 9 million of redemption premium and $ 2 million of unamortized debt costs associated with the early redemption of our Senior Notes due 2024. Additionally, we recognized $ 2 million of pension settlement expense related to a portion of the unrecognized actuarial loss. 13. IMPAIRMENT OF LONG-LIVED ASSETS We review the carrying values of our long-lived assets for potential impairments and believe we have adequate support for the carrying 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. However, 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. 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. 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”. 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 76 to operating lease assets. During 2022, we recognized $1 million of pre-tax impairment charges. These assets were written down to fair value based on Level 2 inputs under ASC 820, Fair Value Measurement, using quoted market prices. 14. COMMITMENTS AND CONTINGENCIES We maintain reserves for various contingent liabilities as follows (dollars in millions): December 31, 2023 2022 Environmental reserves $ 26 $ 27 Other reserves — — Total contingencies 26 27 Current portion* ( 1 ) ( 1 ) Long-term portion $ 25 $ 26 *The current portion of the contingency reserve is included in accounts payable and accrued liabilities on our Consolidated Balance Sheets. Estimates of our loss contingencies are based on various assumptions and judgments. Due to the numerous uncertainties and variables associated with these assumptions and judgments, both the precision and reliability of the resulting estimates of the related contingencies are subject to substantial uncertainties. We regularly monitor our estimated exposure to contingencies and, as additional information becomes known, may change our estimates significantly. While no estimate of the range of any such change can be made at this time, the amount that we may ultimately pay in connection with these matters could materially exceed, in either the near term or the longer term, the amounts accrued to date. Our estimates of our loss contingencies do not reflect potential future recoveries from insurance carriers except to the extent that recovery may, from time to time, be deemed probable as a result of an insurer’s agreement to payment terms. Environmental Matters We maintain a reserve for undiscounted estimated environmental loss contingencies. This reserve is primarily for estimated future costs of remediation of hazardous or toxic substances at numerous sites currently or previously owned by the Company. Our estimates of our environmental loss contingencies are based on various assumptions and judgments, the specific nature of which varies considering the particular facts and circumstances surrounding each environmental loss contingency. These estimates typically reflect assumptions and judgments as to the probable nature, magnitude, and timing of the required investigation, remediation and/or monitoring activities and the probable cost of these activities, and in some cases reflect assumptions and judgments as to the obligation or willingness and ability of third parties to bear a proportionate or allocated share of the cost of these activities. Due to the numerous uncertainties and variables associated with these assumptions and judgments, and the effects of changes in governmental regulation and environmental technologies, both the precision and reliability of the resulting estimates of the related contingencies are subject to substantial uncertainties. We regularly monitor our estimated exposure to environmental loss contingencies and, as additional information becomes known, may change our estimates significantly. 77 The activity in our reserve for estimated environmental loss contingency reserves is summarized in the following table (dollars in millions): Year Ended December 31, 2023 2022 Beginning balance $ 27 $ 25 Adjustments to expense during the year (other operating credits charges, net and cost of sales) — 2 Adjustments to amounts to be paid by a third party — 2 Payments made ( 1 ) ( 2 ) Ending balance $ 26 $ 27 During 2023 and 2022, we adjusted our reserves at several sites to reflect current estimates of remediation costs and environmental settlements. Other Proceedings We are party to other legal proceedings in the ordinary course of business. Based on the information currently available, we do not believe that the resolution of such proceedings could reasonably be expected to have a material adverse effect on our financial position, results of operations, cash flows, or liquidity. During the second quarter of 2023, we agreed to pay $ 16 million to resolve certain patent-related claims and to obtain certain patent rights, which is recorded within other operating credits and charges, net in our Consolidated Statements of Income. See "Note 12 - Other Operating and Non-Operating Income (Expense)" As of December 31, 2023, $ 8 million of the settlement amount is outstanding and is included in accounts payable and accrued liabilities in the Consolidated Balance Sheets. Self-Insurance We are primarily self-insured for workers’ compensation and employee health care liability costs. Self-insurance liabilities for workers’ compensation are determined based upon a valuation performed by an actuarial firm. The estimate of future workers’ compensation liabilities incorporates loss development and an estimate associated with incurred but not yet reported claims. These claims are discounted. Self-insurance liabilities for employee health costs are determined actuarially based upon claims filed and estimated claims incurred but not yet reported. These claims are not discounted. Indemnities and Guarantees We are a party to certain contracts in which we agree to indemnify third parties for certain liabilities that arise out of or relate to the subject matter of the contract. In some cases, this indemnity extends to related liabilities arising out of the negligence of the indemnified parties, but usually excludes any liabilities caused by gross negligence or willful misconduct of the indemnified parties. We cannot estimate the potential amount of future payments under these agreements until events arise that would trigger the liability. Additionally, in connection with certain sales of assets and divestitures of businesses, we have agreed to indemnify the applicable buyer and certain related parties for certain losses or liabilities incurred by the buyer or such related parties with respect to (1) the representations and warranties made to the buyer by us in connection with the applicable sale or divestiture and (2) liabilities related to the pre-closing operations of the assets or businesses sold. Indemnities related to pre-closing operations generally include environmental liabilities, tax liabilities, and other liabilities not assumed by the buyer. Indemnities related to the pre-closing operations of sold assets or divested businesses typically do not represent added liabilities for us, but simply serve to protect the buyer from potential liability associated with the obligations that existed (known and unknown) at the time of the sale. We record accruals for those pre-closing obligations that are considered probable and estimable. We have not accrued any additional amounts as a result of the indemnity agreements summarized below, as we believe the fair value of the guarantees is not material. 78 • In connection with various sales of our timberlands, we have agreed to indemnify the relevant buyers with respect to losses resulting from breaches of limited representations and warranties contained in the related agreements. These indemnities generally are capped at a maximum potential liability and have an unspecified duration. We also have various other indemnities that are individually and in the aggregate immaterial. We record a liability related to specific indemnification when future payment is probable, and the amount is estimable. 15. PRODUCT WARRANTIES We offer warranties on the sale of most of our products and record an accrual for estimated future claims. Such accruals are based upon historical experience and management’s estimate of the level of future claims. The activity in warranty reserves is summarized in the following table (dollars in millions): Year Ended December 31, 2023 2022 Beginning balance $ 8 $ 7 Accrued to expense during the year 2 3 Reduced to other operating credits and charges ( 1 ) — Payments made ( 2 ) ( 3 ) Total warranty reserves 8 8 Current portion of warranty reserves ( 2 ) ( 2 ) Long-term portion of warranty reserves $ 6 $ 6 The current portion of the warranty reserve is included in accounts payable and accrued liabilities, and the long-term portion is included in other long-term liabilities on our Consolidated Balance Sheets. We believe that the warranty reserve balances at December 31, 2023 are adequate to cover future warranty payments. However, it is possible that additional charges may be required. 16. RETIREMENT PLANS AND POST-RETIREMENT BENEFITS We sponsor various defined contribution retirement plans and benefit pension plans that provide retirement benefits to substantially all our employees. Most regularly scheduled employees are eligible to participate in the defined contribution retirement plans except those covered by a collective bargaining agreement unless the collective bargaining agreement explicitly allows for participation in our plans. We contribute to a multiemployer plan for certain employees covered by collective bargaining agreements. We also provide other post-retirement benefits consisting primarily of healthcare benefits to certain retirees who meet age and service requirements. The defined benefit pension plans were limited to active and retired employees that were eligible prior to the plans being frozen. The defined benefit pension plans were substantially settled through lump sum distributions and purchase of third-party annuity contracts in 2022. 79 Defined Benefit Pension Plans During the year ended December 31, 2022, 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 in 2023, we recognized $ 6 million of non-cash, pre-tax charges from Accumulated comprehensive loss and realized pre-tax gains of $ 2 million related to refunds from the annuity provider to the Plan associated with the final reconciliation of participant data. The remaining Plan asset balance of $ 2 million was refunded in 2023. 80 The projected benefit obligation is the actuarial present value of benefits attributable to employee service rendered to date, including the effects of estimated salary increases. The following table details information regarding our pension plans at December 31, 2023 and 2022 (dollars in millions): 2023 2022 Change in benefit obligation: Beginning of year balance $ 3 $ 301 Service cost 1 3 Interest cost — 7 Actuarial (gains) losses, net — ( 47 ) Foreign exchange rate changes — ( 2 ) Benefits paid — ( 13 ) Pension settlements ( 2 ) ( 247 ) End of year balance $ 2 $ 3 Change in assets (fair value): Beginning of year balance $ 6 $ 296 Actual return on plan assets ( 1 ) ( 33 ) Employer contribution ( 2 ) 5 Foreign exchange rate changes — ( 2 ) Benefits paid — ( 13 ) Pension settlements ( 2 ) ( 247 ) End of year balance $ — $ 6 Plan assets less than benefit obligations $ ( 2 ) $ 2 Amounts included in the balance sheet: Non-current pension assets, included in “Other assets” $ — $ 4 Current pension liabilities, included in “Accounts payable and accrued liabilities” — — Non-current pension liabilities, included in “Other long-term liabilities” ( 2 ) ( 2 ) Net amount recognized $ ( 2 ) $ 2 Amounts in accumulated comprehensive loss: Net actuarial loss $ ( 1 ) $ ( 1 ) Prior service costs — ( 6 ) Total pre-tax amounts in accumulated comprehensive loss $ ( 1 ) $ ( 6 ) The 2022 actuarial gains of $ 47 million were primarily related to a change in interest rates from prior year-end to those effective for settling the benefit plan obligations and actual return on Plan assets of $ 33 million was primarily related to market returns realized prior to the pension settlement dates. The changes recognized in other comprehensive loss were as follows (dollars in millions): Year Ended December 31, 2023 2022 2021 Pension settlements, net of tax $ 4 $ 62 $ 2 Net actuarial gain (loss) and prior service (cost) arising during the period, net of tax — 5 ( 1 ) Amortization of actuarial loss, prior service cost, net of tax — 4 5 Total amounts recognized in other comprehensive income $ 4 $ 71 $ 5 81 Weighted-average assumptions used to calculate our benefit obligations at December 31, 2022 was as follows: 2022 Discount rate: U.S. 2.3 % Canada 3.8 % Rate of compensation increase: U.S. NA Canada NA Benefit obligations by plan category are as follows (dollars in millions): 2023 U.S. Canada Total Fair value of plan assets $ — $ — $ — Benefit obligation 1 1 2 Funded Status $ ( 1 ) $ ( 1 ) $ ( 2 ) 2022 U.S. Canada Total Fair value of plan assets $ 1 $ 4 $ 6 Benefit obligation 2 2 3 Funded Status $ — $ 3 $ 2 The following table sets forth the net periodic pension cost for our defined benefit pension plans. The components of our net periodic pension costs consisted of the following (dollars in millions): Year Ended December 31, 2023 2022 2021 Service cost $ 1 $ 3 $ 1 Other components of net periodic pension cost: Interest cost — 7 7 Expected return on plan assets — ( 7 ) ( 13 ) Amortization of prior service cost and net transition asset — 1 1 Amortization of net actuarial loss — 5 6 Net periodic pension cost before loss due to settlement 1 8 2 Loss due to pension settlement 4 82 2 Total net periodic pension cost $ 4 $ 91 $ 4 Net periodic pension cost included in cost of sales $ — $ — $ — Net periodic pension cost included in selling, general, and administrative expenses 1 3 1 Net periodic pension cost included in other non-operating items 4 88 3 $ 4 $ 91 $ 4 82 Weighted average assumptions used to calculate our net periodic pension costs for the years ended December 31, 2022, and 2021 were as follows: 2022 2021 Discount rate: U.S. 2.6 % 2.3 % Canada 2.6 % 2.3 % Expected return on plan assets: U.S. 3.0 % 5.3 % Canada 2.0 % 2.3 % Rate of compensation increase: U.S. NA NA Canada NA NA The expected long-term rate of return on plan assets reflects the weighted average expected long-term rates of return for the broad categories of investments currently held in the plans (adjusted for expected changes), based on historical rates of return for each broad category, as well as factors that may constrain or enhance returns in the broad categories in the future. The expected long-term rate of return on plan assets is adjusted when there are fundamental changes in expected returns in one or more broad asset categories and when the weighted average mix of assets in the plans changes significantly. The fair value of our pension plan assets was $ 6 million as of December 31, 2022, respectively, based on Level 1 inputs. Refer to "Note 1 - Summary of Significant Accounting Policies" for further detail on the level of inputs as defined. Defined Contribution Plans We also sponsor defined contribution plans in the U.S. and Canada. In the U.S., these plans are primarily 401(k) plans for hourly and salaried employees that allow for pre-tax employee deferrals and a Company match of up to 5 % of an employee’s eligible wages (subject to certain limits). Under the profit-sharing feature of these plans, we may elect to contribute a discretionary amount as a percentage of eligible wages. Included in the assets of the 401(k) and profit-sharing plans are one million shares of LP common stock that represented approximately 8 % of the total market value of plan assets at December 31, 2023. In Canada, we sponsor both defined contribution plans and Registered Retirement Savings Plans for hourly and salaried employees that allow for employee tax deferrals. We provide a 100 % match for employee contributions up to 4 % and provide a 50 % match of employee's contributions from 4 % to 6 % (subject to certain limits). Expenses related to the U.S. and Canadian defined contribution plans and the Registered Retirement Savings Plans, including the profit-sharing feature, were $ 15 million, $ 23 million, and $ 21 million in 2023, 2022, and 2021, respectively. Other Benefit Plans We have several plans that provide post-retirement benefits other than pensions, primarily for salaried employees in the U.S. and certain groups of Canadian employees. The obligation at December 31, 2023 and 2022 for these post-retirement benefits was $ 8 million and $ 7 million, respectively. The net expense related to these plans was not significant in 2023, 2022, or 2021. 83 In 2004, we adopted the Louisiana-Pacific Corporation 2004 Executive Deferred Compensation Plan (the Deferred Compensation Plan). Pursuant to the Deferred Compensation Plan, participants are eligible to defer up to 90 % of their base salary and annual cash incentives that exceed the limitation as set forth by the Internal Revenue Service and receive a 5 % match on their contributions. Each Deferred Compensation Plan participant is fully vested in all employee deferred compensation and earnings credited associated with employee contributions. Employer contributions and associated earnings vest over periods not exceeding five years . The liability under the Deferred Compensation Plan amounted to $ 3 million and $ 2 million as of December 31, 2023 and 2022, respectively, and is included in other long-term liabilities on our Consolidated Balance Sheets. 17. ACCUMULATED COMPREHENSIVE LOSS Accumulated comprehensive loss includes cumulative translation adjustments, unrealized gains (losses) on certain financial instruments, and pension and post-retirement adjustments. Other comprehensive income activity, net of tax, is provided in the following table (dollars in millions): Pension Translation Adjustments Other Total Balance at December 31, 2020 $ ( 81 ) $ ( 68 ) $ ( 2 ) $ ( 151 ) Reclassified to income statement, net of taxes 1 5 — — 5 Pension settlement loss, net of taxes — — — — Translation adjustments — ( 28 ) — ( 28 ) Balance at December 31, 2021 ( 76 ) ( 96 ) ( 1 ) ( 174 ) Reclassified to income statement, net of taxes 1 — — 1 1 Pension settlement loss, net of taxes 71 — — 71 Translation adjustments — 2 — 2 Balance at December 31, 2022 ( 5 ) ( 94 ) — ( 99 ) Reclassified to income statement, net of taxes 1 — — — — Pension settlement loss, net of taxes 4 — — 4 Translation adjustments — 6 — 6 Balance at December 31, 2023 $ — $ ( 89 ) $ — $ ( 89 ) 1 Amounts of actuarial loss and prior service cost are components of net periodic benefit cost. See "Note 16 - Retirement Plans and Post-Retirement Benefits" above for additional details. Foreign translation adjustments exclude income tax expense (benefit) given that there are no deferred tax assets or liabilities recorded on outside basis differences on the foreign subsidiaries to which the currency translation losses relates and consequently the translation adjustments will not trigger an incremental U.S. tax effect. The pension amounts reclassified from Accumulated comprehensive loss included an income tax provision of $ 1 million, $ 23 million, and $ 2 million in 2023, 2022, and 2021, respectively. 18. SEGMENT INFORMATION We operate in three segments: Siding, OSB, and LPSA. Our business units have been aggregated into these three segments based upon the similarity of economic characteristics, customers, and distribution methods. Our results of operations are summarized below for each of these segments separately as well as for the “Other” category, which comprises other products that are not individually significant. • Our Siding segment serves diverse end markets with a broad product offering, 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). Our Siding Solutions products consist of a full line of engineered wood siding, trim, soffit, and fascia. 84 • Our OSB segment manufactures and distributes OSB structural panel products, including the innovative value-added OSB product 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 ® 350 Durable Sub-Flooring). OSB is manufactured using wood strands arranged in layers and bonded with resins. • 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. We evaluate the performance of our business segments based on net sales and segment Adjusted EBITDA. Accordingly, our chief operating decision maker evaluates performance and allocates resources based primarily on net sales and segment Adjusted EBITDA for our business segments. Segment Adjusted EBITDA is defined as income attributed to LP before interest expense, provision for income taxes, depreciation and amortization, and excludes stock-based compensation expense, loss on impairment attributed to LP, product-line discontinuance charges, other operating credits and charges, net, loss on early debt extinguishment, investment income, pension settlement charges, and other non-operating items. 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. 85 Information about our product segments is as follows (dollars in millions): Year Ended December 31, 2023 2022 2021 NET SALES BY BUSINESS SEGMENT Siding $ 1,328 $ 1,469 $ 1,170 OSB 1,026 2,062 2,387 LPSA 205 241 265 Other 22 84 95 Intersegment Sales — ( 2 ) ( 3 ) Total sales $ 2,581 $ 3,854 $ 3,915 NET INCOME TO ADJUSTED EBITDA RECONCILIATION 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 SEGMENT ADJUSTED EBITDA Siding $ 269 $ 339 $ 289 OSB 220 1,034 1,531 LPSA 42 77 113 Other ( 17 ) ( 23 ) ( 20 ) Corporate ( 36 ) ( 38 ) ( 36 ) Adjusted EBITDA $ 478 $ 1,389 $ 1,877 86 Year Ended December 31, 2023 2022 2021 Depreciation and Amortization Siding $ 67 $ 46 $ 34 OSB 43 71 69 LPSA 7 8 8 Other 2 4 4 Non-segment related — — — Total depreciation and amortization $ 119 $ 129 $ 114 Capital Expenditures Siding $ 212 $ 316 $ 177 OSB 59 53 47 LPSA 19 20 20 Other — 1 2 Non-segment related 10 21 4 Total capital expenditures $ 300 $ 412 $ 250 Information concerning identifiable assets by segment is as follows (dollars in millions): December 31, 2023 2022 Identifiable Assets Siding $ 1,291 $ 1,045 OSB 526 491 LPSA 165 151 Other 11 74 Non-segment related 444 589 Total assets $ 2,437 $ 2,350 Non-segment related assets include cash and cash equivalents, short-term and long-term investments, corporate assets, and other items. 87 Information concerning our geographic segments is as follows (dollars in millions): Year Ended December 31, 2023 2022 2021 GEOGRAPHIC LOCATIONS Total Sales—Point of origin U.S. $ 2,265 $ 3,329 $ 3,354 Canada 610 827 613 LPSA 241 273 291 Intercompany sales ( 535 ) ( 575 ) ( 344 ) Total Sales $ 2,581 $ 3,854 $ 3,915 Operating profit (loss) U.S. $ 304 $ 1,084 $ 1,567 Canada 40 129 112 LPSA 35 70 106 Other operating credits and charges, net and loss on impairments of assets ( 49 ) 15 ( 5 ) General corporate expense, loss on early debt extinguishment, other income (expense), interest, net and equity in unconsolidated affiliates ( 78 ) ( 139 ) ( 77 ) Income before income taxes, including equity in unconsolidated affiliates 252 1,159 1,704 Provision for income taxes ( 74 ) ( 274 ) ( 402 ) Income from continuing operations $ 178 $ 885 $ 1,302 Loss attributed to noncontrolling interest — 3 4 Income attributed to LP from continuing operations $ 178 $ 888 $ 1,306 IDENTIFIABLE TANGIBLE LONG LIVED ASSETS U.S. $ 996 $ 939 $ 671 Canada 472 356 359 South America 104 87 75 Total assets $ 1,572 $ 1,382 $ 1,106 88 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.