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Item 2. Management’s Discussion and Analysis

2024-05-08 compared with 2023-11-01 · 111 added, 160 removed, 150 unchanged (64% of the section changed)

1 unchanged sentence

This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Condensed Consolidated Financial Statements and related Notes and other financial information appearing elsewhere in this quarterly report on Form 10-Q.

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

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

We encourage you to review the risks and uncertainties described in the sections titled "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements" included in our 2023 Annual Report on Form 10-K and in this quarterly report on Form 10-Q.

These risks and uncertainties could cause actual results to differ materially from those projected in the forward-looking statements contained in this quarterly report on Form 10-Q or implied by past results and trends.

Our historical results are not necessarily indicative of the results that may be expected for any period in the future, and our interim results are not necessarily indicative of the results we expect for the full fiscal year or any other period.

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

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

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

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

To serve these markets, we primarily operate in three segments:

Siding, OSB, and South America.

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

Accordingly, the results of our previously owned EWP segment have been presented as discontinued operations in our Condensed Consolidated Statements of Income for all periods presented.

See "Note 7 –Discontinued Operations" for additional information.

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

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

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

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

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

To serve these markets, we operate in three segments:

Siding, OSB, and LPSA.

Demand for Building Products

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

Census Bureau reported on October 18, 2023, that actual single-family housing starts were 7% higher for the three months ended September 30, 2023, and 13% lower for the nine months ended September 30, 2023, as compared to the same periods in 2022.

Actual multi-family housing starts for the three and nine months ended September 30, 2023 were about 28% lower and 11% lower, respectively, as compared to the same period in 2022.

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

Census Bureau reported on April 16, 2024, that actual single-family housing starts were 27% higher for the three months ended March 31, 2024 as compared to the same period in 2023.

Actual multi-family housing starts for the three months ended March 31, 2024 were about 37% lower as compared to the same period in 2023.

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

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

Additionally, we have experienced increases in material prices, supply disruptions, and labor challenges, which we continue to address as we work to meet the demands of builders, remodelers, and homeowners worldwide.

The potential effect of these factors on our future operational and financial performance is uncertain.

As a result, our past performance may not be indicative of future results.

Supply and Demand for Siding

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

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

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

Siding is generally less sensitive to new housing market cyclicality since demand also comes from other markets, including sheds and repair and remodel.

Our growth in this market depends upon the continued displacement of vinyl, wood,

fiber cement, stucco, bricks, and other alternatives, our product innovation and our technological expertise in wood and wood composites to address the needs of our customers.

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

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

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

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

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

Supply and Demand for OSB

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

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

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

We have included Adjusted EBITDA in this report because we view it as an important supplemental measure of our performance and believe that it is frequently used by interested persons in the evaluation of companies that have different financing and capital structures and/or tax rates.

We also disclose Income attributed to LP from continuing operations, excluding loss on impairment attributed to LP, business exit charges, product-line discontinuance charges, interest expense outside of normal operations, other operating credits and charges, net, loss on early debt extinguishment, gain (loss) on acquisition, and pension settlement charges, and adjusting for a normalized tax rate as Adjusted Income (Adjusted Income).

We also disclose income attributed to LP, excluding loss on impairment attributed to LP, business exit charges, product-line discontinuance charges, interest expense outside of normal operations, other operating credits and charges, net, loss on early debt extinguishment, gain (loss) on acquisition, and pension settlement charges, and adjusting for a normalized tax rate, as Adjusted Income (Adjusted Income).

We also disclose Adjusted Diluted EPS, which is calculated as Adjusted Income divided by diluted shares outstanding.

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Adjusted EBITDA, Adjusted Income, and Adjusted Diluted EPS are not substitutes for the U.S.

GAAP measures of Net income, Income attributed to LP from continuing operations, and Income attributed to LP from continuing operations per diluted share or for any other U.S.

GAAP measures of net income, income attributed to LP, and income attributed to LP per diluted share or for any other U.S.

GAAP measures of operating performance.

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

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

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

We consider business exit charges to be outside the performance of our

ongoing core business operations and believe that presenting Adjusted EBITDA, Adjusted Income, and Adjusted Diluted EPS excluding business exit charges provides increased transparency as to the operating costs of our current business performance.

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Net income $ 108 $ 22

Add (deduct):

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

Income from discontinued operations, net of income taxes — (97) — (196)

Income attributed to LP from continuing operations 118 129 119 898

Net income attributed to non-controlling interest — (1)

Income attributed to LP 108 21

Provision for income taxes 41 1

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Stock-based compensation expense 6 4

Loss on impairment attributed to LP 1 — 1 —

Other operating credits and charges, net — 5

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Investment income (6) (5)

Other non-operating items — (1) 11 7

Pension settlement charges — 6

Other non-operating items (1) 3

Adjusted EBITDA $ 182 $ 66

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Siding $ 90 $ 67

OSB 120 113 161 1,021

South America 6 14 31 65

Other (1) (9)

Corporate (7) (9)

Total Adjusted EBITDA $ 190 $ 200 $ 349 $ 1,289

Adjusted EBITDA $ 182 $ 66

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

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Net income attributed to LP from continuing operations per share - diluted $ 1.63 $ 1.74 $ 1.65 $ 11.16

Three Months Ended March 31,

Net income per share - diluted $ 1.48 $ 0.29

Net income $ 108 $ 22

Add (deduct):

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

Income from discontinued operations, net of income taxes — (97) — (196)

Income attributed to LP from continuing operations 118 129 119 898

Loss on impairment attributed to LP 1 — 1 —

Net income attributed to non-controlling interest — (1)

Income attributed to LP 108 21

Other operating credits and charges, net — 5

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Census Bureau.

The following tables set forth:

(1) housing starts, (2) our North American sales volume, and (3) OEE.

We consider the following items to be key performance indicators because LP’s management uses these metrics to evaluate our business and trends, measure our performance, and make strategic decisions, and believes that the key performance indicators presented provide additional perspective and insights when analyzing the core operating performance of LP.

These key performance indicators should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the U.S.

GAAP financial measures presented herein.

The following tables present summary data relating to:

(i) housing starts within the United States, (ii) our sales volumes, and (iii) our OEE performance.

We consider the following items to be key performance indicators for our business because LP’s management uses these metrics to evaluate our business and trends in our industry, measure our performance, and make strategic decisions.

We believe that the key performance indicators presented may provide additional perspective and insights when analyzing our core operating performance.

These key performance indicators should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the financial measures that were prepared in accordance with U.S.

These measures may not be comparable to similarly titled performance indicators used by other companies.

We monitor housing starts, which is a leading external indicator of residential construction in the United States that correlates with the demand for many of our products.

We believe that this is a useful measure for evaluating our results and that providing this measure should allow interested persons to more readily compare our sales volume for past and future periods to an external indicator of product demand.

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

(thousands of units) Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

We believe that housing starts is a useful measure for evaluating our results and that providing this measure should allow interested persons to more readily compare our sales volume for past and future periods to an external indicator of product demand.

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

The following table sets forth housing starts for the three months ended March 31, 2024 and 2023 (in thousands):

Three Months Ended March 31,

Housing starts 1 :

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Multi-Family 80 127

362 386 1,077 1,225

1 Actual U.S.

housing starts data reported by U.S.

Census Bureau as published through October 18, 2023.

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

housing starts data, in thousands, reported by the U.S.

Census Bureau as published through April 16, 2024.

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

Evaluating sales volume by product type helps us identify and address changes in product demand, broad market factors that may affect our performance, and opportunities for future growth.

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

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

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

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

Three Months Ended September 30, 2023 Three Months Ended September 30, 2022

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

Siding Solutions (MMSF) 398 — 6 405 471 — 9 480

OSB - Structural Solutions (MMSF) — 412 115 528 — 460 127 587

OSB - commodity (MMSF) — 401 — 401 — 544 — 544

Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022

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

The following table sets forth sales volumes for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31, 2024 Three Months Ended March 31, 2023

Sales Volume Siding OSB LPSA Total Siding OSB LPSA Total

Siding Solutions (MMSF) 399 — 12 411 383 — 11 394

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

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

We use a best-in-class target across all LP sites that allows us to optimize capital investments, focus maintenance and reliability improvements, and improve overall equipment efficiency.

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

OEE for the three months ended March 31, 2024 and 2023 for each of our segments is listed below:

Three Months Ended March 31,

Siding 78 % 76 %

OSB 78 % 76 %

South America 74 % 64 % 74 % 72 %

LPSA 76 % 76 %

Results of Operations

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See "Note 14 - Selected Segment Data" of the Notes to the Condensed Consolidated Financial Statements included in "Item 1 - Financial Statements" of this quarterly report on Form 10-Q for further information regarding our segments.

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

The 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.

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

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 % Change 2023 2022 % Change

Three Months Ended March 31,

2024 2023 % Change

Net sales $ 361 $ 331 9 %

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

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 % Change 2023 2022 % Change

Three Months Ended March 31,

2024 2023 % Change

Siding Solutions $ 359 $ 329 9 %

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Total $ 361 $ 331 9 %

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

Percent changes in average net sales prices and unit shipments for the three months ended March 31, 2024, compared to the corresponding period in 2023, were as follows:

Three Months Ended

September 30, 2023 versus 2022 Nine Months Ended

September 30, 2023 versus 2022

Selling Price Unit

Shipments Average Net

March 31, 2024 versus 2023

Selling Price Unit

Siding Solutions 5 % 4 %

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

The volume decreases for the three and nine months ended September 30, 2023 were driven by record results in the comparable periods and challenging new and existing home selling markets in the current periods.

Adjusted EBITDA decreased year-over-year by $19 million in the third quarter of 2023, reflecting the net impact of lower volumes and $5 million of press rebuild costs, partially offset by higher average selling prices and $9 million in lower inflationary costs including freight, raw materials, and labor.

Adjusted EBITDA decreased year-over-year by $53 million for the nine months ended September 30, 2023, which reflects the net impact of lower volumes, $8 million in discretionary investments to support future growth (including siding mill conversions and sales and marketing costs), and $5 million in press rebuild costs, partially offset by higher average selling prices and $13 million in lower inflationary costs (including freight, raw materials, and labor).

The OSB segment manufactures and distributes OSB structural panel products, including our value-added OSB portfolio known as LP ® Structural Solutions (which includes LP ® TechShield ® Radiant Barrier, LP WeatherLogic ® Air & Water Barrier, LP Legacy ® Premium Sub-Flooring, LP NovaCore ® Thermal Insulated Sheathing, LP ® FlameBlock ® Fire-Rated Sheathing, and LP ® TopNotch ® 350 Durable Sub-Flooring).

The year-over-year net sales increase for the Siding segment of $30 million for the three months ended March 31, 2024 reflects increased sales volumes and list price increases.

First quarter 2024 Adjusted EBITDA increased year-over-year by $23 million, including the impact of the net sales increase and a $10 million decrease in costs, including freight, raw materials, and labor, partially offset by a $7 million increase in mill overhead.

The 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.

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

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 % Change 2023 2022 % Change

Three Months Ended March 31,

2024 2023 % Change

Net sales $ 313 $ 189 65 %

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

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 % Change 2023 2022 % Change

Three Months Ended March 31,

2024 2023 % Change

OSB - Structural Solutions $ 174 $ 104 67 %

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Total $ 313 $ 189 65 %

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

Percent changes in average net sales prices and unit shipments for the three months ended March 31, 2024, compared to the corresponding period in 2023, were as follows:

Three Months Ended

September 30, 2023 versus 2022

Nine Months Ended

September 30, 2023 versus 2022

Selling Price Unit

Shipments Average Net

March 31, 2024 versus 2023

Selling Price Unit

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OSB - commodity 49 % 9 %

The year-over-year Net sales decrease of $53 million for the three months ended September 30, 2023 reflects a $28 million increase in OSB prices, a $33 million decrease in sales volumes primarily from market curtailments, and $43 million less production volume due to the conversion of our Sagola, Michigan mill to siding production.

The year-over-year Net sales decrease of $1,051 million for the nine months ended September 30, 2023 reflects an $813 million decrease in OSB prices, a $115 million decrease in sales volumes primarily from market curtailments, and a $98 million decrease related to production volumes from the conversion of the Sagola mill to siding production.

Adjusted EBITDA increased year-over-year by $7 million in the third quarter of 2023, reflecting the net impact of higher OSB commodity prices and lower mill-related costs, partially offset by lower sales volumes.

Adjusted EBITDA decreased year-over-year by $860 million for the nine months ended September 30, 2023, which reflects the net impact of lower OSB commodity prices and sales volumes, partially offset by lower mill-related costs.

South America

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

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

The year-over-year net sales increase for the OSB segment of $124 million for the three months ended March 31, 2024 reflects a $62 million increase in OSB prices and a $56 million increase in sales volumes.

First quarter 2024 Adjusted EBITDA increased year-over-year by $86 million, reflecting the impact of higher OSB prices and sales volumes, partially offset by higher mill-related costs.

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

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

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 % Change 2023 2022 % Change

Three Months Ended March 31,

2024 2023 % Change

Net sales $ 47 $ 55 (15) %

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

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 % Change 2023 2022 % Change

Three Months Ended March 31,

2024 2023 % Change

OSB - Structural Solutions $ 38 $ 46 (17) %

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Total $ 47 $ 55 (15) %

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

Percent changes in average net sales price and unit shipments for the three months ended March 31, 2024, compared to the corresponding period in 2023, were as follows:

Three Months Ended

September 30, 2023 versus 2022 Nine Months Ended

September 30, 2023 versus 2022

Selling Price Unit

Shipments Average Net

March 31, 2024 versus 2023

Selling Price Unit

1 unchanged sentence

Siding (14) % 3 %

South America Net sales decreased year-over-year by $8 million and $38 million for the three and nine months ended September 30, 2023, respectively, predominantly driven by lower OSB sales volumes and average selling prices.

The year-over-year decreases in Adjusted EBITDA of $7 million and $34 million for the three and nine months ended September 30, 2023, respectively, reflect the lower sales volumes and average selling prices (described above) and equipment relocation cost of $3 million.

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

During the second quarter of 2023, we announced the shutdown of Entekra and recognized business exit charges of $1 million and $35 million for the three and nine months ended September 30, 2023, respectively.

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

Other Net sales were $4 million and $21 million for the three and nine months ended September 30, 2023, respectively, as compared to $17 million and $72 million for the corresponding periods in 2022.

The year-over-year decrease in other Net sales for the three and nine months ended September 30, 2023 is primarily due to lower Entekra sales volumes as a result of the aforementioned shutdown.

Adjusted EBITDA was $0 million and $(15) million for the three and nine months ended September 30, 2023, respectively, as compared to $(7) million and $(19) million for the corresponding periods in 2022, respectively.

The year-over-year net sales decrease for the LPSA segment of $8 million for the three months ended March 31, 2024 reflects lower average selling prices and unfavorable currency fluctuations, partially offset by higher sales volumes.

First quarter 2024 Adjusted EBITDA decreased year-over-year by $2 million, reflecting lower average selling prices and unfavorable currency fluctuations, partially offset by lower raw material costs.

Our other products segment includes other minor products, services, and closed operations, which do not qualify as discontinued operations.

During the second quarter of 2023, we announced the shutdown of our off-site framing operation Entekra Holdings LLC (Entekra).

Other net sales were $3 million for the three months ended March 31, 2024, as compared to $8 million for the corresponding period in 2023.

The year-over-year decrease in other net sales for the three months ended March 31, 2024 was primarily due to lower Entekra sales volumes as a result of the aforementioned shutdown.

Adjusted EBITDA was $(1) million for the three months ended March 31, 2024, as compared to $(9) million for the corresponding period in 2023.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses were $58 million and $191 million for the three and nine months ended September 30, 2023, respectively, compared to $67 million and $196 million for the corresponding periods in 2022.

The year-over-year decrease in Selling, general, and administrative expenses is driven by lower incentive based compensation.

We recognized an estimated tax provision from continuing operations of $44 million and $66 million for the three and nine months ended September 30, 2023, respectively, compared to $44 million and $284 million for the corresponding periods of 2022.

The total effective tax rate for continuing operations for the three and nine months ended September 30, 2023, was 27% and 36%, respectively, compared to 26% and 24%, respectively, for the comparable periods in 2022.

Each quarter the income tax accrual is adjusted to the latest estimate and the difference

from the previously accrued year to date balance is recorded in the current quarter.

Selling, general, and administrative expenses were $69 million for the three months ended March 31, 2024, compared to $66 million for the corresponding period in 2023.

The year-over-year increase in Selling, general, and administrative expenses was driven by higher employee compensation.

We recognized an estimated tax provision of $41 million and $1 million in the three months ended March 31, 2024, and 2023, respectively.

The total effective tax rate for the three months ended March 31, 2024 and 2023 was 28% and 5%, respectively.

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

For 2024, the primary differences between the U.S.

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

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

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

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

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

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

statutory rate of 21% and the effective rate related to state taxes and inflationary tax adjustments in certain South American entities.

For 2023 the primary differences between the U.S.

statutory rate of 21% and the effective rate related to benefits from stock-based compensation and inflationary tax adjustments in certain South American entities, partially offset by expenses from state taxes and executive compensation deduction limitations.

Legal and Environmental Matters

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We anticipate long-term cash uses may also include strategic acquisitions.

On a long-term basis, we will continue to rely on our credit facility for any long-term funding not provided by operating cash flows.

On a long-term basis, we expect to rely on our credit facility for any long-term funding not provided by operating cash flows.

We may also, from time to time, issue and sell equity, debt, or hybrid securities or engage in other capital market transactions.

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Operating Activities

During the nine months ended September 30, 2023 and 2022, cash provided by operations was $157 million and $1,103 million, respectively.

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

During the three months ended March 31, 2024 and 2023, cash provided by operations was $105 million and $(119) million, respectively.

The increase in cash provided by operations was primarily related to higher net income, partially offset by changes in working capital.

Investing Activities

During the nine months ended September 30, 2023 and 2022, cash used in investing activities was $312 million and $14 million, respectively.

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

During the nine months ended September 30, 2022, we received $265 million in proceeds from sales of assets, primarily associated with the sale of the EWP segment assets and the sale of our 50% equity interest in two joint ventures.

Capital expenditures for the nine months ended September 30, 2023 and 2022, were $236 million and $282 million, respectively, primarily related to siding conversion expenditures and growth and maintenance capital.

During the three months ended March 31, 2024 and 2023, cash used in investing activities was $41 million and $113 million, respectively.

Capital expenditures for the three months ended March 31, 2024 and 2023, were $41 million and $114 million, respectively.

The year-over-year decrease was primarily related to siding conversion expenditures in the prior year.

Capital expenditures for the three months ended March 31, 2024 were primarily related to growth and sustaining maintenance projects.

Financing Activities

During the nine months ended September 30, 2023, cash used in financing activities was $61 million.

We paid cash dividends of $52 million and used $10 million to repurchase stock from employees in connection with income tax withholding requirements associated with our employee stock-based compensation plans.

During the nine months ended September 30, 2023, we borrowed and subsequently repaid $80 million from our Amended Credit Facility.

During the nine months ended September 30, 2022, cash used in financing activities was $968 million.

During the nine months ended September 30, 2022, we used $900 million to repurchase shares of LP common stock ($500 million from the share repurchase program approved by the Board of Directors on November 2, 2021 and $400 million from the 2022 Share Repurchase Program (defined below)).

During the three months ended March 31, 2024, cash used in financing activities was $39 million.

During this period we used $13 million to repurchase shares of LP common stock under the 2022 Share Repurchase Program.

Additionally, we paid cash dividends of $19 million and used $6 million to repurchase stock from employees in connection with income tax withholding requirements associated with our employee stock-based compensation plans.

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

During this period we paid cash dividends of $17 million and used $10 million to repurchase stock from employees in connection with income tax withholding requirements associated with our employee stock-based compensation plans.

Credit Facility and Letter of Credit Facility

In November 2022, LP entered into the Credit Agreement with American AgCredit, PCA, as administrative agent and sole lead arranger, and CoBank, ACB, as letter of credit issuer, relating to 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.

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.

All loans under the Credit Agreement become due on November 29, 2028.

As of September 30, 2023, we had no outstanding borrowings under our Amended Credit Facility.

As of March 31, 2024, we had no outstanding borrowings under our Amended Credit Facility.

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

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

As of September 30, 2023, we were in compliance with all financial covenants under the Credit Agreement.

As of March 31, 2024, we were in compliance with all financial covenants under the Credit Agreement.

In March 2020, LP entered into the Letter of Credit Facility, which provides for the funding of letters of credit up to an aggregate outstanding amount of $20 million, which may be secured by certain cash collateral of LP.

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

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

As of March 31, 2024, we were in compliance with all covenants under the Letter of Credit Facility.

Other Liquidity Matters

Off-Balance Sheet Arrangements

As of September 30, 2023, we had standby letters of credit of $13.7 million outstanding related to collateral for environmental impact on owned properties, a deposit for a forestry license, and insurance collateral, including workers' compensation.

As of March 31, 2024, we had standby letters of credit of $14 million outstanding related to collateral for environmental impact on owned properties, a deposit for a forestry license, and insurance collateral, including workers' compensation.

Potential Impairments

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

In April 2023, we announced the shutdown of Entekra resulting in pre-tax, non-cash charges of $31 million for the nine months ended September 30, 2023.

See further discussion in “Note 8 - Business Exit Charges.”

We review the carrying values of our long-lived assets for potential impairments and believe we have adequate support for such carrying values as of March 31, 2024.

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

As of September 30, 2023, there were no indications of impairment.

As of March 31, 2024, there were no indications of impairment.

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

net cash flows, we may be required to record impairment charges in connection with decisions to dispose of assets.

During the nine months ended September 30, 2023, we recorded impairment charges of $13 million and $3 million related to property, plant, and equipment and operating lease assets, respectively, related to Entekra which were written down to fair value based on Level 2 inputs under ASC 820, using quoted market prices.

See further discussion in “Note 8 - Business Exit Charges.”

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.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis