Louisiana-Pacific(LPX) - 2023 Q4 - Annual Report

Financial Performance - Total net sales for 2023 reached $2,581 million, with Siding contributing $1,328 million (51%), OSB contributing $1,026 million (40%), and LP South America contributing $205 million (8%) [22] - Net sales for 2023 decreased by $1,273 million (33%) to $2,581 million, with OSB revenue down $1,036 million due to 40% lower prices and 18% lower volumes [172] - Net income fell by $905 million (84%) to $178 million ($2.46 per diluted share), primarily due to a decrease in Adjusted EBITDA of $911 million (66%) [173] - Adjusted EBITDA for 2023 was $478 million, down from $1,389 million in 2022, reflecting a decrease of $911 million year-over-year [192] - Adjusted Diluted EPS for 2023 was $3.22, a decrease from $11.77 in 2022 [193] - Cash generated from operations in 2023 was $316 million, down from $1,144 million in 2022, primarily due to lower net income and higher working capital [213] Segment Performance - The Siding segment reported net sales of $1,328 million in 2023, a 10% decrease from $1,469 million in 2022 [195] - Segment net sales for 2023 decreased by 50% to $1,026 million from $2,062 million in 2022, with Adjusted EBITDA dropping 79% to $220 million from $1,034 million [199] - OSB - Structural Solutions net sales fell by 49% to $565 million, while OSB - Commodity sales decreased by 52% to $446 million in 2023 compared to 2022 [199] - Full year 2023 net sales for the LPSA segment decreased by 15% to $205 million, with Adjusted EBITDA declining 46% to $42 million [202] - Other products segment net sales decreased by 73% to $22 million, with Adjusted EBITDA improving slightly to $(17) million from $(23) million in 2022 [204] Operational Developments - The Siding segment is the largest producer of engineered wood siding in North America, with plans to increase production capacity through new plants and conversions of existing facilities [23] - In 2023, the conversion of the OSB mill in Sagola, Michigan into a Siding Solutions mill added 300 million square feet of Siding Solutions capacity [28] - The company acquired an idle manufacturing facility in Wawa, Ontario for $80 million, which will be converted into an LP SmartSide Trim & Siding mill [24] - The company operates 23 plants across the U.S., Canada, Chile, and Brazil, with a focus on maintaining geographic proximity to customers [22] Market Conditions - Housing starts in the U.S. for single-family homes were 945,000 and for multi-family homes were 469,000, totaling 1,413,000 for the year ended December 31, 2023 [66] - The overall siding market is estimated to be a $17 billion industry, with the company being the largest manufacturer in the engineered wood siding market in North America and South America [177] - The company anticipates that future economic conditions and demand for homes may be uncertain due to inflationary impacts, including interest rates and consumer confidence [175] Safety and Compliance - The Total Incident Rate (TIR) for the year ended December 31, 2023, was 0.5, outperforming the targeted TIR of less than 1.0, indicating industry-leading safety performance [54] - The company is committed to improving health and safety performance, with annual targets established for continual improvement [54] - The company has implemented a Serious Injury and Fatality (SIF) prevention program to enhance safety measures and track incidents [54] - The company emphasizes the importance of compliance with environmental laws and regulations, dedicating significant management attention to these matters [49] Challenges and Risks - Approximately 50% of sales in 2023 came from the top ten customers, indicating a concentrated customer base [36] - The business is subject to seasonal demand variances, with higher demand typically occurring in the second and third quarters in North America [44] - The company may face difficulties in developing and ramping up new products, which could adversely impact its financial position and results of operations [86] - Cybersecurity risks could lead to operational disruptions and potential liabilities, impacting the company's ability to operate effectively [88] - The company is exposed to risks associated with international operations, including political and economic changes in countries where it manufactures products [92] - Climate change and related regulations may increase operating costs and compliance burdens, potentially affecting the company's results of operations [99] Financial Management - The company paid quarterly cash dividends of $0.24 per share for each quarter of 2023, up from $0.22 per share in 2022, and declared a quarterly dividend of $0.26 per share on February 9, 2024 [165] - The company has $200 million remaining under its 2022 Share Repurchase Program, which authorized up to $600 million in share repurchases [166] - The company maintains cash balances exceeding FDIC insurance limits, posing a risk if financial institutions fail [140] - The company issued 3.625% Senior Notes due in 2029 totaling $350 million, with future interest payments of $70 million as of December 31, 2023 [221]