LOUISIANA-PACIFIC CORP 10-Q

ITEM 1. FINANCIAL STATEMENTS Condensed Consolidated Statements of Income Amounts in millions, except per share amounts (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net sales $ 722 $ 728 $ 2,261 $ 1,923 Cost of sales ( 530 ) ( 514 ) ( 1,591 ) ( 1,489 ) Gross profit 193 214 669 434 Selling, general, and administrative expenses ( 75 ) ( 58 ) ( 215 ) ( 191 ) Impairment of long-lived assets — ( 1 ) — ( 25 ) Other operating credits and charges, net ( 1 ) 6 2 ( 20 ) Income from operations 116 161 455 198 Interest expense ( 4 ) ( 4 ) ( 12 ) ( 9 ) Investment income 6 4 17 10 Other non-operating income (expense) ( 4 ) — 2 ( 17 ) Income before income taxes 113 160 462 183 Provision for income taxes ( 23 ) ( 44 ) ( 117 ) ( 66 ) Equity in unconsolidated affiliate — 1 12 3 Net income $ 90 $ 118 $ 358 $ 119 Net income attributed to non-controlling interest — — — — Net income attributed to LP $ 90 $ 118 $ 358 $ 119 Net income attributed to LP per share of common stock: Basic $ 1.28 $ 1.63 $ 5.01 $ 1.65 Diluted $ 1.28 $ 1.63 $ 5.00 $ 1.65 Average shares of common stock used to compute net income (loss) per share: Basic 70 72 71 72 Diluted 71 72 72 72 The accompanying Notes are an integral part of these unaudited Condensed Consolidated Financial Statements. 4 Condensed Consolidated Statements of Comprehensive Income Amounts in millions (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net income $ 90 $ 118 $ 358 $ 119 Other comprehensive income (loss), net of tax Foreign currency translation adjustments 9 ( 19 ) ( 11 ) ( 3 ) Other — — — 4 Other comprehensive income (loss), net of tax 9 ( 19 ) ( 11 ) 2 Comprehensive income 99 99 347 120 Comprehensive income associated with non-controlling interest — — — — Comprehensive income attributed to LP $ 99 $ 99 $ 347 $ 121 The accompanying Notes are an integral part of these unaudited Condensed Consolidated Financial Statements. 5 Condensed Consolidated Balance Sheets Amounts in millions, except per share amounts (Unaudited) September 30, 2024 December 31, 2023 ASSETS Cash and cash equivalents $ 346 $ 222 Receivables, net of allowance for doubtful accounts of $ 2 as of September 30, 2024 and December 31, 2023 136 155 Inventories 372 378 Prepaid expenses and other current assets 30 23 Total current assets 885 778 Property, plant, and equipment, net 1,567 1,540 Timber and timberlands 30 32 Operating lease assets, net 25 25 Goodwill and other intangible assets 26 27 Investments in and advances to affiliates 18 5 Other assets 21 20 Deferred tax asset 4 11 Total assets $ 2,576 $ 2,437 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued liabilities $ 282 $ 254 Income taxes payable 22 5 Total current liabilities 303 259 Long-term debt 347 347 Deferred income taxes 153 162 Non-current operating lease liabilities 25 25 Contingency reserves, excluding current portion 25 25 Other long-term liabilities 56 61 Total liabilities $ 910 $ 880 Stockholders’ equity: Common stock, $ 1 par value per share, 200 shares authorized; 86 and 70 shares issued and outstanding, respectively, as of September 30, 2024; and 88 and 72 shares issued and outstanding, respectively, as of December 31, 2023 86 88 Additional paid-in capital 472 465 Retained earnings 1,594 1,479 Treasury stock, 16 shares at cost as of September 30, 2024 and December 31, 2023 ( 386 ) ( 386 ) Accumulated comprehensive gain (loss) ( 100 ) ( 89 ) Total stockholders’ equity 1,666 1,557 Total liabilities and stockholders’ equity $ 2,576 $ 2,437 The accompanying Notes are an integral part of these unaudited Condensed Consolidated Financial Statements. 6 Condensed Consolidated Statements of Cash Flows Amounts in millions (Unaudited) Nine Months Ended September 30, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 358 $ 119 Adjustments to net income: Depreciation and amortization 93 87 Impairment of goodwill and long-lived assets — 25 Gain on sale of assets, net — ( 6 ) Pension loss due to settlement — 6 Deferred taxes ( 1 ) 44 Foreign currency remeasurement and transaction loss (gain) ( 2 ) 20 Other adjustments, net ( 2 ) 28 Changes in assets and liabilities (net of acquisitions and divestitures): Receivables ( 6 ) ( 52 ) Inventories 4 ( 46 ) Prepaid expenses and other current assets ( 11 ) ( 5 ) Accounts payable and accrued liabilities 28 ( 36 ) Income taxes payable, net of receivables 39 ( 26 ) Net cash provided by operating activities 500 157 CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant, and equipment additions ( 121 ) ( 236 ) Acquisition of facility assets — ( 80 ) Proceeds from sales of assets — 9 Investment in affiliates ( 17 ) — Other investing activities, net 16 ( 4 ) Net cash used in investing activities ( 122 ) ( 312 ) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowing of long-term debt — 80 Repayment of long-term debt — ( 80 ) Payment of cash dividends ( 56 ) ( 52 ) Repurchase of common stock ( 188 ) — Other financing activities ( 8 ) ( 10 ) Net cash used in financing activities ( 252 ) ( 61 ) EFFECT OF EXCHANGE RATE ON CASH, CASH EQUIVALENTS, AND RESTRICTED CASH ( 2 ) ( 6 ) Net increase (decrease) in cash, cash equivalents, and restricted cash 124 ( 223 ) Cash, cash equivalents, and restricted cash at beginning of period 222 383 Cash, cash equivalents, and restricted cash at end of period $ 346 $ 160 Supplemental cash flow information: Cash paid for income taxes, net $ 80 $ 49 Cash paid for interest, net $ 14 $ 14 Unpaid capital expenditures $ 17 $ 17 The accompanying Notes are an integral part of these unaudited Condensed Consolidated Financial Statements. 7 Condensed Consolidated Statements of Stockholders’ Equity Amounts in millions, except per share amounts (Unaudited) Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings Accumulated Comprehensive Loss Total Stockholders' Equity Shares Amount Shares Amount Balance, December 31, 2023 88 $ 88 16 $ ( 386 ) $ 465 $ 1,479 $ ( 89 ) $ 1,557 Net income attributed to LP — — — — — 108 — 108 Dividends paid ($ 0.26 per share) — — — — — ( 19 ) — ( 19 ) Issuance of shares under stock plans — — — 6 ( 6 ) — — — Taxes paid related to net settlement of stock-based awards — — — ( 6 ) — — — ( 6 ) Purchase of stock — — — — — ( 13 ) — ( 13 ) Compensation expense associated with stock-based compensation — — — — 6 — — 6 Other comprehensive loss — — — — — — ( 15 ) ( 15 ) Balance, March 31, 2024 88 $ 88 16 $ ( 386 ) $ 465 $ 1,555 $ ( 104 ) $ 1,617 Net income attributed to LP — — — — — 160 — 160 Dividends paid ($ 0.26 per share) — — — — — ( 19 ) — ( 19 ) Issuance of shares under stock plans — — — 1 1 — — 3 Taxes paid related to net settlement of stock-based awards — — — — — — — — Purchase of stock ( 1 ) ( 1 ) — — — ( 101 ) — ( 103 ) Compensation expense associated with stock-based compensation — — — — 4 — — 4 Other comprehensive loss — — — — — — ( 4 ) ( 4 ) Balance, June 30, 2024 87 $ 87 16 $ ( 385 ) $ 471 $ 1,595 $ ( 109 ) $ 1,658 Net income attributed to LP — — — — — 90 — 90 Dividends paid ($ 0.26 per share) — — — — — ( 18 ) — ( 18 ) Issuance of shares under stock plans — — — 3 ( 3 ) — — — Taxes paid related to net settlement of stock-based awards — — — ( 4 ) — — — ( 4 ) Purchase of stock ( 1 ) ( 1 ) — — — ( 73 ) — ( 74 ) Compensation expense associated with stock-based compensation — — — — 4 — — 4 Other comprehensive loss — — — — — — 9 9 Balance, September 30, 2024 86 $ 86 16 $ ( 386 ) $ 472 $ 1,594 $ ( 100 ) $ 1,666 8 Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings Accumulated Comprehensive Loss Total Stockholders' Equity Shares Amount Shares Amount Balance, December 31, 2022 88 $ 88 16 $ ( 388 ) $ 462 $ 1,371 $ ( 99 ) $ 1,433 Net income attributed to LP — — — — — 21 — 21 Dividends paid ($ 0.24 per share) — — — — — ( 17 ) — ( 17 ) Issuance of shares under stock plans — — — 10 ( 10 ) — — — Taxes paid related to net settlement of stock-based awards — — — ( 10 ) — — — ( 10 ) Compensation expense associated with stock-based compensation — — — — 4 — — 4 Other comprehensive income — — — — — — 19 19 Balance, March 31, 2023 88 $ 88 16 $ ( 388 ) $ 455 $ 1,375 $ ( 80 ) $ 1,450 Net loss attributed to LP — — — — — ( 20 ) — ( 20 ) Dividends paid ($ 0.24 per share) — — — — — ( 17 ) — ( 17 ) Issuance of shares under stock plans — — — 2 — — — 2 Taxes paid related to net settlement of stock-based awards — — — ( 1 ) — — — ( 1 ) Compensation expense associated with stock-based compensation — — — — 3 — — 3 Other comprehensive income — — — — — — 1 1 Balance, June 30, 2023 88 $ 88 16 $ ( 387 ) $ 458 $ 1,337 $ ( 78 ) $ 1,419 Net income attributed to LP — — — — — 118 — 118 Dividends paid ($ 0.24 per share) — — — — — ( 17 ) — ( 17 ) Issuance of shares under stock plans — — — — — — — — Taxes paid related to net settlement of stock-based awards — — — — — — — — Compensation expense associated with stock-based compensation — — — — 2 — — 2 Other comprehensive loss — — — — — — ( 19 ) ( 19 ) Balance, September 30, 2023 88 $ 88 16 $ ( 387 ) $ 460 $ 1,438 $ ( 98 ) $ 1,502 The accompanying Notes are an integral part of these unaudited Condensed Consolidated Financial Statements. 9 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION 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 22 plants across the U.S., Canada, Chile, and Brazil, in certain cases through foreign subsidiaries . References to "LP," the "Company," "we," "our," and "us" refer to Louisiana-Pacific Corporation and its consolidated subsidiaries as a whole. See "Note 15 - Selected Segment Data" below for further information regarding our products and segments. Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal and recurring nature. These Condensed Consolidated Financial Statements and related Notes should be read in conjunction with our annual report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 14, 2024 (2023 Annual Report on Form 10-K). Results of operations for interim periods are not necessarily indicative of results to be expected for an entire year. The Condensed Consolidated Financial Statements include the accounts of LP and our controlled subsidiaries. All intercompany transactions, profits, and balances have been eliminated. All dollar amounts included in tables in the Notes are in millions except per share amounts. 10 NOTE 2. 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. As noted in the segment reporting information in “Note 15 - Selected Segment Data” below, our reportable segments are Siding, Oriented Strand Board (OSB), and LP South America (LPSA). The following tables present our reportable segment revenues, disaggregated by revenue source (dollar amounts in millions): Three Months Ended September 30, 2024 By product type and family: Siding OSB LPSA Other Total Value-add Siding Solutions $ 418 $ — $ 6 $ — $ 423 OSB - Structural Solutions — 136 40 — 175 418 136 46 — 599 Commodity OSB - commodity — 112 — — 112 Other Other products 3 5 1 2 11 $ 420 $ 253 $ 47 $ 2 $ 722 Three Months Ended September 30, 2023 By product type and family: Siding OSB LPSA Other Total Value-add Siding Solutions $ 342 $ — $ 5 $ — $ 347 OSB - Structural Solutions — 174 40 — 213 342 174 44 — 560 Commodity OSB - commodity — 157 — — 157 Other Other products 2 5 — 4 11 $ 345 $ 335 $ 45 $ 4 $ 728 11 Nine Months Ended September 30, 2024 By product type and family: Siding OSB LPSA Other Total Value-add Siding Solutions $ 1,190 $ — $ 17 $ — $ 1,207 OSB - Structural Solutions — 507 119 — 626 1,190 507 136 — 1,833 Commodity OSB - commodity — 395 — — 395 Other Other products 7 15 4 7 33 $ 1,196 $ 917 $ 140 $ 7 $ 2,261 Nine Months Ended September 30, 2023 By product type and family: Siding OSB LPSA Other Total Value-add Siding Solutions $ 989 $ — $ 19 $ — $ 1,008 OSB - Structural Solutions — 412 132 — 544 989 412 151 — 1,552 Commodity OSB - commodity — 332 — — 332 Other Other products 7 9 2 21 39 $ 996 $ 754 $ 153 $ 21 $ 1,923 Revenue is recognized when obligations under the terms of contracts (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. 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 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 (i) the time of sale or (ii) 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). 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. 12 NOTE 3. 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, stock-settled appreciation rights, restricted stock units, and performance stock units) be excluded from the calculation of diluted earnings per share for the periods in which losses are reported because the effect is anti-dilutive. The following table sets forth the computation of basic and diluted earnings per share (dollar and share amounts in millions, except per share amounts): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net income attributed to LP $ 90 $ 118 $ 358 $ 119 Weighted average common shares outstanding - basic 70 72 71 72 Dilutive effect of employee stock plans — — — — Shares used for diluted earnings per share 71 72 72 72 Earnings per share: Basic $ 1.28 $ 1.63 $ 5.01 $ 1.65 Diluted $ 1.28 $ 1.63 $ 5.00 $ 1.65 NOTE 4. 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: (i) recurring—measured on a periodic basis, and (ii) non-recurring—measured on an as-needed basis. The net carrying value of the 3.625 % Senior Notes due in 2029 (2029 Senior Notes) was $ 347 million as of September 30, 2024 and December 31, 2023. Based on market quotations, the fair value of the 2029 Senior Notes was estimated to be $ 333 million and $ 314 million as of September 30, 2024 and December 31, 2023, respectively. The 2029 Senior Notes and other long-term debt are categorized as Level 1 in the U.S. GAAP fair value hierarchy. Fair values are based on trading activity among the Company’s lenders and the average bid and ask price is determined using published rates. In November 2022, LP entered into a Second Amended and Restated Credit Agreement with American AgCredit, PCA, as administrative agent and sole lead arranger, and CoBank, ACB, as letter of credit issuer (the Credit Agreement), relating to its revolving credit facility (as amended, the Amended Credit Facility). The Credit Agreement provides for the Amended 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, 2024, there were no outstanding borrowings under our Amended Credit Facility. Carrying amounts reported on the balance sheet for cash and cash equivalents, accounts receivables, and accounts payable approximate fair value due to the short-term maturity of these items. 13 NOTE 5. RECEIVABLES Receivables consisted of the following (dollar amounts in millions): September 30, 2024 December 31, 2023 Trade receivables $ 109 $ 104 Income tax receivable 3 27 Other receivables 27 26 Allowance for doubtful accounts ( 2 ) ( 2 ) Total Receivables $ 136 $ 155 Trade receivables are primarily generated by sales of our products to our wholesale and retail customers. Other receivables as of September 30, 2024 and December 31, 2023 primarily consist of sales tax receivables, vendor rebates, and other miscellaneous receivables. NOTE 6. INVENTORIES Inventories are valued at the lower of cost or net realizable value. Inventory cost includes materials, labor, and operating overhead. The major types of inventories (work in process is not material and is included in semi-finished inventory) are as follows (dollar amounts in millions): September 30, 2024 December 31, 2023 Logs $ 62 $ 81 Other raw materials 48 53 Semi-finished inventories 31 27 Finished products 232 217 Total Inventories $ 372 $ 378 14 NOTE 7. BUSINESS EXIT CREDITS AND CHARGES During the second quarter of 2023, we ceased the manufacturing operations of Entekra Holdings, LLC (Entekra), an off-site framing operation previously reported within our “Other” category, which comprises other products that are not individually significant. During the second quarter of 2024, the equity method investment held by Entekra sold substantially all of its net assets resulting in a $ 16 million distribution to LP and a gain of $ 11 million, which was recorded within equity in unconsolidated affiliate on the Condensed Consolidated Statements of Income. Business exit credits and charges consisted of the following (dollar amounts in millions): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Impairment of property, plant and equipment, operating lease assets, and other intangible assets 1 $ — $ — $ — $ ( 24 ) Gain on sale of assets from an equity method investment 2 — — 11 — Restructuring and other related charges: Inventory write-down 3 — — — ( 6 ) Other expenses including personnel-related costs such as severance 4 — ( 1 ) 3 ( 4 ) $ — $ ( 1 ) $ 14 $ ( 35 ) 1 Included within impairment of long-lived assets on the Condensed Consolidated Statements of Income. 2 Included within equity in unconsolidated affiliate on the Condensed Consolidated Statements of Income. 3 Included within cost of sales on the Condensed Consolidated Statements of Income. 4 Included within other operating credits and charges, net on the Condensed Consolidated Statements of Income. NOTE 8. GOODWILL AND OTHER INTANGIBLES Goodwill and indefinite-lived intangible assets are not amortized and are subject to assessment for impairment by applying a fair value-based test on an annual basis, or more frequently if circumstances indicate a potential impairment. The Company’s annual assessment date is October 1. Changes in goodwill and other intangible assets for the nine months ended September 30, 2024 are provided in the following table (dollar amounts in millions): Timber Licenses 1 Goodwill Developed Technology Beginning balance December 31, 2023 $ 25 $ 19 $ 7 Amortization ( 2 ) — — Ending balance September 30, 2024 $ 23 $ 19 $ 7 1 Timber licenses are included in timber and timberlands on the Condensed Consolidated Balance Sheets. NOTE 9. INCOME TAXES For interim periods, we recognize income tax expense by applying the estimated annual effective income tax rate to year-to-date results unless this method does not result in a reliable estimate of year-to-date income tax expense. Each period, the income tax accrual is adjusted to the latest estimate and the difference from the previously accrued year-to-date balance is adjusted in the current quarter. Changes in profitability estimates in various jurisdictions will impact our quarterly effective income tax rates. T he provision for income taxes for the nine months ended September 30, 2024 and 2023 reflected an estimated annual effective tax rate of 25 % and 27 %, respectively, excluding discrete items discussed below. The total tax provision for the three and nine months ended September 30, 2024 was $ 23 million and $ 117 million, respectively, compared to $ 44 million and $ 66 million for the comparable periods in 2023, respectively. The total effective tax 15 rate for the three and nine months ended September 30, 2024 was 20 % and 25 %, respectively, compared to 27 % and 36 %, respectively, for the comparable period in 2023. The year-to-date decrease in the effective tax rate was primarily a result of a discrete tax expense of $ 22 million recorded in the quarter ended June 30, 2023 relating to the change in indefinite reinvestment assertion on Chile and Brazil earnings. During the nine months ended September 30, 2024, we recognized a $ 1 million net discrete tax benefit and during the nine months ended September 30, 2023, we recognized a net discrete tax expense of $ 16 million. The current year net tax benefit related primarily to stock based compensation while the net discrete tax expense in the prior year primarily related to the $ 22 million second quarter expense recognized in connection with the change in management’s indefinite reinvestment assertion described in "Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 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 establishes a global minimum effective tax rate of 15% for multinational enterprise groups with annual global revenue exceeding 750 million Euros. On June 20, 2024, the Canadian government enacted legislation implementing aspects of the OECD’s minimum tax rules under the Pillar Two Framework, effective in 2024. We considered the new Canadian legislation as part of our third quarter 2024 tax provision and concluded that (i) it had no impact on our consolidated financial statements for the nine months ended September 30, 2024, and (ii) we expect there to be no impact on our Consolidated Financial Statements for the year ending December 31, 2024. The Canadian government issued draft legislative proposals in August of 2024 to implement remaining OECD Pillar Two framework enforcement mechanisms proposed to take effect in 2025 for calendar year companies. No other jurisdictions in which LP operates have enacted Pillar Two legislation at this time. The Company is continuously monitoring the expanding adoptions of Pillar Two legislation and assessing its potential impact on our future tax liability. NOTE 10. COMMITMENTS AND CONTINGENCIES We maintain reserves for various contingent liabilities as follows (dollar amounts in millions): September 30, 2024 December 31, 2023 Environmental reserves $ 26 $ 26 Other reserves — — Total contingencies 26 26 Current portion (included in Accounts payable and accrued liabilities) ( 1 ) ( 1 ) Long-term portion $ 25 $ 25 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 based on 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 16 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. Other Proceedings From time to time, we and our subsidiaries are parties to certain legal proceedings arising in our ordinary course of business. Based on the information currently available, management believes the resolution of such ongoing and future proceedings will not have a material effect on our financial position, results of operations, cash flows, or liquidity. NOTE 11. 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 such carrying values. 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, 2024, there were no indicators of impairment. We also review from time to time potential dispositions of various assets, considering current and anticipated economic and industry conditions, our strategic plan, and other relevant factors. Because a determination to dispose of particular assets can require management to make assumptions regarding the transaction structure of the disposition and to estimate the net sales proceeds, which may be less than previous estimates of undiscounted future net cash flows, we may be required to record impairment charges in connection with decisions to dispose of assets. NOTE 12. 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 for the three and nine months ended September 30, 2024 and 2023, is summarized in the following table (dollar amounts in millions): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Beginning balance $ 8 $ 8 $ 8 $ 8 Change in warranty provision ( 1 ) ( 1 ) — 1 Payments made ( 1 ) — ( 1 ) ( 1 ) Total warranty reserves 7 7 7 7 Current portion of warranty reserves (included in accounts payable and accrued liabilities) ( 2 ) ( 2 ) ( 2 ) ( 2 ) Long-term portion of warranty reserves (included in other long-term liabilities) $ 5 $ 6 $ 5 $ 6 We continue to monitor warranty and other claims associated with our products and believe, as of September 30, 2024, that the warranty reserve balances associated with these matters are adequate to cover future warranty payments. However, it is possible that additional changes may be required in the future. 17 NOTE 13. ACCUMULATED COMPREHENSIVE LOSS Accumulated comprehensive loss is provided in the following table for the three months ended September 30, 2024 and 2023 (dollar amounts in millions): Translation Adjustments Other Total Balance at June 30, 2024 $ ( 108 ) $ — $ ( 109 ) Translation adjustments 9 — 9 Balance at September 30, 2024 $ ( 100 ) $ — $ ( 100 ) Translation Adjustments Other Total Balance at June 30, 2023 $ ( 78 ) $ ( 1 ) $ ( 78 ) Translation adjustments ( 19 ) — ( 19 ) Balance at September 30, 2023 $ ( 97 ) $ ( 1 ) $ ( 98 ) Accumulated comprehensive loss is provided in the following table for the nine months ended September 30, 2024 and 2023 (dollar amounts in millions): Translation Adjustments Other Total Balance at December 31, 2023 $ ( 89 ) $ ( 1 ) $ ( 89 ) Translation adjustments ( 11 ) — ( 11 ) Balance at September 30, 2024 $ ( 100 ) $ — $ ( 100 ) Translation Adjustments Other Total Balance at December 31, 2022 $ ( 94 ) $ ( 5 ) $ ( 99 ) Reclassified to income statement, net of taxes 1 — 4 4 Translation adjustments ( 3 ) — ( 3 ) Balance at September 30, 2023 $ ( 97 ) $ ( 1 ) $ ( 98 ) 1 Amounts of actuarial loss and prior service cost are components of net periodic benefit cost. NOTE 14. OTHER OPERATING AND NON-OPERATING ITEMS Other operating credits and charges, net Other operating credits and charges, net, is comprised of the following components (dollar amounts in millions): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Reorganization charges $ ( 1 ) $ ( 2 ) $ ( 1 ) $ ( 9 ) Legal settlement — — 3 ( 16 ) Gain on asset sales — 6 — 6 Other — 1 — ( 1 ) Other operating credits and charges, net $ ( 1 ) $ 6 $ 2 $ ( 20 ) 18 Other non-operating items Other non-operating items is comprised of the following components (dollar amounts in millions): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Pension settlement charges $ — $ — $ — $ ( 6 ) Foreign currency gain (loss) ( 4 ) — 2 ( 12 ) Other — — — 1 Other non-operating items $ ( 4 ) $ — $ 2 $ ( 17 ) NOTE 15. SELECTED SEGMENT DATA 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. • 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 products are 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, business exit credits and 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. 19 Information about our business segments is as follows (dollar amounts in millions): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 NET SALES BY BUSINESS SEGMENT Siding $ 420 $ 345 $ 1,196 $ 996 OSB 253 335 917 754 LPSA 47 45 140 153 Other 2 4 7 21 Total sales $ 722 $ 728 $ 2,261 1,923 NET INCOME TO ADJUSTED EBITDA RECONCILIATION Net income $ 90 $ 118 $ 358 $ 119 Add (deduct): Net income attributed to non-controlling interest — — — — Income attributed to LP 90 118 358 119 Provision for income taxes 23 44 117 66 Depreciation and amortization 31 30 93 87 Stock-based compensation expense 4 2 15 9 Loss on impairment attributed to LP — 1 — 1 Other operating credits and charges, net 1 ( 7 ) 2 16 Business exit credits and charges — 1 ( 14 ) 35 Interest expense 4 4 12 9 Investment income ( 6 ) ( 4 ) ( 17 ) ( 10 ) Pension settlement charges — — — 6 Other non-operating items 4 — ( 2 ) 11 Adjusted EBITDA $ 153 $ 190 $ 564 $ 349 SEGMENT ADJUSTED EBITDA Siding $ 123 $ 71 $ 318 $ 198 OSB 33 120 249 161 LPSA 9 6 29 31 Other ( 3 ) — ( 6 ) ( 15 ) Corporate ( 9 ) ( 7 ) ( 26 ) ( 26 ) Adjusted EBITDA $ 153 $ 190 $ 564 $ 349 20