Louisiana-Pacific(LPX) - 2022 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents Louisiana-Pacific Corporation's unaudited condensed consolidated financial statements for Q2 2022 and 2021, including income, comprehensive income, balance sheets, cash flows, and stockholders' equity, with detailed notes Condensed Consolidated Statements of Income For Q2 2022, net sales were $1.13 billion, down from $1.17 billion in Q2 2021, with net income attributed to LP at $384 million, while six-month net sales increased to $2.30 billion from $2.06 billion, and net income rose to $868 million | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | :--- | :--- | | (In millions) | 2022 | 2021 | 2022 | 2021 | | Net sales | $1,130 | $1,168 | $2,297 | $2,062 | | Gross profit | $518 | $684 | $1,139 | $1,152 | | Income from operations | $462 | $634 | $1,019 | $1,058 | | Net income attributed to LP | $384 | $498 | $868 | $818 | | Net income per share - diluted | $4.73 | $4.90 | $10.36 | $7.85 | Condensed Consolidated Balance Sheets As of June 30, 2022, total assets increased to $2.55 billion from $2.19 billion at year-end 2021, driven by higher cash and current assets held for sale, with total liabilities rising to $1.06 billion and stockholders' equity to $1.48 billion | | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | (In millions) | | | | Total current assets | $1,208 | $890 | | Total assets | $2,547 | $2,194 | | Total current liabilities | $464 | $351 | | Total liabilities | $1,059 | $955 | | Total stockholders' equity | $1,484 | $1,235 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2022, net cash provided by operating activities increased to $908 million, while net cash used in investing activities rose to $135 million, and financing activities used $626 million, primarily for stock repurchases | | Six Months Ended June 30, | | :--- | :--- | :--- | | (In millions) | 2022 | 2021 | | Net cash provided by operating activities | $908 | $772 | | Net cash used in investing activities | $(135) | $(63) | | Net cash used in financing activities | $(626) | $(642) | | Net increase in cash | $145 | $68 | Notes to the Condensed Consolidated Financial Statements These notes provide crucial context, detailing revenue recognition, the significant divestiture of the Engineered Wood Products (EWP) segment, segment performance, and other key accounting policies and events - In June 2022, LP entered into an agreement to sell its Engineered Wood Products (EWP) segment for $210 million in cash, completed on August 1, 2022, with its assets, liabilities, and operating results now classified as held for sale and discontinued operations respectively[32][33] | Revenue by Segment (In millions) | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Siding | $358 | $689 | | OSB | $673 | $1,417 | | South America | $70 | $137 | | Total Sales | $1,130 | $2,297 | - In March 2022, the company sold its 50% equity interest in two EWP joint ventures for $59 million, recognizing a pre-tax gain of $39 million included in income from discontinued operations[51] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, focusing on the EWP divestiture and core segments, detailing segment-level results, liquidity, capital expenditures for siding conversions, and substantial share repurchase activity - The company completed the sale of its Engineered Wood Products (EWP) segment assets on August 1, 2022, for $210 million, with EWP results now presented as discontinued operations[79][80] | Adjusted EBITDA Reconciliation (In millions) | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net income | $385 | $868 | | Adjustments | $106 | $221 | | Adjusted EBITDA | $491 | $1,089 | Results of Operations Overall net sales for Q2 2022 decreased 3% to $1.13 billion, with Siding segment sales growing 23% to $358 million, while OSB sales fell 14% to $673 million due to lower average selling prices, leading to a decline in total Adjusted EBITDA Siding Segment Performance (Q2 2022 vs Q2 2021) | Metric | Q2 2022 | Q2 2021 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $358M | $291M | +23% | | Adjusted EBITDA | $78M | $77M | 0% | | Avg. Selling Price | - | - | +12% | | Unit Shipments | - | - | +10% | OSB Segment Performance (Q2 2022 vs Q2 2021) | Metric | Q2 2022 | Q2 2021 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $673M | $778M | -14% | | Adjusted EBITDA | $403M | $565M | -29% | | Avg. Selling Price | - | - | -22% | | Unit Shipments | - | - | +10% | South America Segment Performance (Q2 2022 vs Q2 2021) | Metric | Q2 2022 | Q2 2021 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $70M | $74M | -5% | | Adjusted EBITDA | $26M | $34M | -23% | Liquidity and Capital Resources The company maintained strong liquidity with $503 million in cash at Q2 2022, with cash from operations at $908 million for the first half, primarily used for $575 million in share repurchases and $196 million in capital expenditures for siding conversions - Cash provided by operations for the first six months of 2022 was $908 million, an increase from $772 million in the prior year period, mainly due to working capital changes[117] - Capital expenditures for the first six months of 2022 were $196 million, a significant increase from $65 million in the same period of 2021, largely for siding conversion and growth projects[118] - The company used $575 million to repurchase common stock in the first six months of 2022, with a new $600 million share repurchase program authorized in May 2022[119] PART II - OTHER INFORMATION Item 1A. Risk Factors This section updates the company's risk factors, specifically highlighting the adverse effects of rising inflation, which could increase costs and depress consumer demand, negatively impacting profitability and financial condition - The company identifies rising inflation as a key risk that could adversely affect business by increasing costs of raw materials and labor, potentially impacting operating results and financial condition if not offset by higher prices[139][140] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company details its common stock repurchase activities for Q2 2022, including the authorization of a new $600 million share repurchase program on May 3, 2022, and the repurchase of 7,337,813 shares during the quarter - On May 3, 2022, the Board of Directors authorized a new share repurchase program for up to $600 million of the company's common stock[143] Share Repurchases (Q2 2022) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2022 | 2,560,504 | $62.17 | | May 2022 | 2,346,876 | $68.56 | | June 2022 | 2,430,433 | $62.00 | | Total Q2 2022 | 7,337,813 | - | Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective[134] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, internal controls[135]