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OFFON

LOUISIANA-PACIFIC CORPORATION

(LPX)
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LOUISIANA PACIFIC : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

08/04/2021 | 03:55pm EDT
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.

General


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 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 operate in four segments: Siding, OSB, EWP, and South America.


In February 2021, we announced (i) that LSL production will cease during 2021 in
connection with the conversion of the Houlton, Maine facility from LSL and OSB
production to Siding production and (ii) our decision to explore strategic
alternatives with respect to the Company's remaining EWP segment, including a
possible sale in whole or in part.

The COVID-19 pandemic did not materially impact our results of operations for
the three and six months ended June 30, 2021. LP is continuing to follow
national, state and local health and safety guidelines and is running full mill
operating schedules as of June 30, 2021. The number of cases of COVID-19 has
decreased in the United States and certain other parts of the world in recent
months as vaccines have become more widely available, and most restrictions
related to the COVID-19 pandemic in the United States have been relaxed as the
result of such decrease. However, the duration of the COVID-19 pandemic, the
emergence of new variants of the virus, the effect of easing restrictions,
actions to contain the pandemic and mitigate its impacts, and the effects on our
operations cannot be reasonably estimated.

Demand for our Building Products


Demand for our products correlates positively with new home construction and
repair and remodeling activity in North America, which historically have been
characterized by significant cyclicality. The U.S. Department of Census reported
on July 20, 2021, that actual single housing starts were 46% and 33% higher for
the three and six months ended June 30, 2021, respectively, as compared to the
same periods in 2020. Repair and remodeling activity is difficult to reasonably
measure, but many indications, including the substantial increase in LP's retail
sales, suggest that repair and remodeling activity grew significantly in the
first six months of 2021 as compared to the corresponding period in the prior
year.

Although housing market demand has recently been very strong, future economic
conditions in the United States and the demand for homes remain uncertain due to
continuing COVID-19-related disruptions, government directives, actions and
economic relief efforts related thereto, and the impact of these actions on the
economy, employment levels, consumer confidence, and financial markets, among
other things. Additionally, as a result of increased demand in the housing
market and a strengthening economy in the United States, we have experienced
increases in material prices, supply disruptions, and labor shortages, which
will be a challenge for LP as we continue to 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 OSB

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OSB is sold as a commodity for which sales prices fluctuate daily based on
market factors over which we have little or no control. We have experienced
increased demand for commodity OSB in the first and second quarters of 2021;
however, we cannot predict whether the prices of our OSB products will remain at
current levels or increase or decrease in the future.

For additional factors affecting our results, refer to the "Overview" within our
Management's Discussion and Analysis of Financial Condition and Results of
Operations and "Risk Factors" contained in our 2020 Annual Report on Form 10-K,
and to "About Forward-Looking Statements" in this quarterly report on Form 10-Q.

Critical Accounting Policies and Significant Estimates


Note 1 of the Notes to the Consolidated Financial Statements included in our
2020 Annual Report on Form 10-K is a discussion of our significant accounting
policies and significant accounting estimates and judgments. Throughout the
preparation of the financial statements, we employ significant judgments in the
application of accounting principles and methods. These judgments are primarily
related to the assumptions used to arrive at various estimates.

While there have been no changes in the application of principles, methods, and
assumptions used to determine our significant estimates, we may be required to
revise certain accounting estimates and judgments related to the economic and
business impact of the COVID-19 pandemic, such as, but not limited to, those
related to the valuation of goodwill, intangibles, long-lived assets, accounts
receivable, and inventory, which could have a material adverse effect on our
financial position and results of operations.

Non-GAAP Financial Measures and Other Key Performance Indicators


In evaluating our business, we utilize non-GAAP financial measures that fall
within the meaning of SEC Regulation G and Regulation S-K Item 10(e), which we
believe provide users of the financial information with additional meaningful
comparison to prior reported results. Non-GAAP financial measures do not have
standardized definitions and are not defined by U.S. GAAP. 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 excludes
stock-based compensation expense, loss on impairment attributed to LP,
product-line discontinuance charges, other operating credits and charges, net,
loss on early debt extinguishment, investment income, 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, excluding loss on impairment attributed to LP,
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 adjusts for a normalized tax
rate as Adjusted Income (Adjusted Income). We also disclose Adjusted Diluted
EPS, calculated as Adjusted Income divided by diluted shares outstanding. We
believe that Adjusted Diluted EPS and Adjusted Income are useful measures for
evaluating our ability to generate earnings and that providing this measure
should allow interested persons to more readily compare the earnings for past
and future periods.

Neither Adjusted EBITDA, Adjusted Income, nor Adjusted Diluted EPS is a
substitute for the U.S. GAAP measure of net income or for any other U.S. GAAP
measures of operating performance. It should be noted that other companies may
present similarly-titled measures differently and therefore, as presented by us,
these measures may not be comparable to similarly-titled measures reported by
other companies. 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 operations of our
business.

The following table presents significant items by operating segment and reconciles Net income to Adjusted EBITDA (dollar amounts in millions):

                                       23
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                                                  Three Months Ended June 30,                  Six Months Ended June 30,
                                                    2021                  2020                  2021                   2020
Net income                                   $           497          $      31          $            817          $      64
Add (deduct):
Net loss attributed to noncontrolling
interest                                                   -                  2                         1                  2
Income attributed to LP                                  498                 33                       818                 66
Provision for income taxes                               147                 19                       244                 28
Depreciation and amortization                             29                 28                        58                 56
Stock-based compensation expense                           4                  1                         5                  3
Loss on impairment attributed to LP                        -                  7                         -                 14
Other operating credits and charges, net                  (3)                (4)                       (3)                (2)
Product-line discontinuance charges                        -                 10                         -                 10
Loss on early debt extinguishment                          -                  -                        11                  -
Interest expense                                           4                  6                         9                 12
Investment income                                          -                 (4)                       (1)                (3)
Other non-operating items                                  6                  1                         5                 (4)
Adjusted EBITDA                              $           684          $      97          $          1,145          $     180

Siding                                       $            77          $      51          $            168          $      93
OSB                                                      565                 46                       919                 81
EWP                                                       18                  3                        26                 12
South America                                             34                 11                        54                 18
Other                                                     (4)                (5)                       (8)                (8)
Corporate                                                 (7)                (9)                      (14)               (16)
Adjusted EBITDA                              $           684          $      97          $          1,145          $     180

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

                                                  Three Months Ended June 30,                 Six Months Ended June 30,
                                                    2021                  2020                 2021                  2020
Net income                                   $           497          $      31          $          817          $      64
Add (deduct):
Net loss attributed to noncontrolling
interest                                                   -                  2                       1                  2

Income attributed to LP                                  498                 33                     818                 66
Loss on impairment attributed to LP                        -                  7                       -                 14
Other operating credits and charges, net                  (3)                (4)                     (3)                (2)
Product line discontinuance charges                        -                 10                       -                 10
Loss on early debt extinguishment                          -                  -                      11                  -
Reported tax provision                                   147                 19                     244                 28
Adjusted income before tax                               642                 65                   1,069                116
Normalized tax provision at 25%                         (160)               (16)                   (267)               (29)
Adjusted Income                              $           481          $      49          $          802          $      87
Diluted shares outstanding                               102                113                     104                113
Adjusted Diluted EPS                         $          4.74          $    0.43          $         7.70          $    0.77



                                       24
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In addition, management monitors certain key performance indicators to evaluate
our business performance, which include our Overall Equipment Effectiveness
(OEE) and our sales volume relative to housing starts, as provided by reports
from the U.S. Department of Census. These key performance indicators are further
described on page 35 of this quarterly report on Form 10-Q and are incorporated
herein by reference.

Results of Operations

Our results of operations are separately discussed below for each of our
segments, as well as for the "Other" category, which comprises other products
that are not individually significant. See Note 17 of the Notes to the Condensed
Consolidated Financial Statements included in Item 1 of this quarterly report on
Form 10-Q for further information regarding our segments.

SIDING


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® (collectively referred to as Siding
Solutions).

Segment sales, Adjusted EBITDA, and Adjusted EBITDA margin for this segment were
as follows:
                                                Three Months Ended June 30,                                  Six Months Ended June 30,
                                        2021                 2020              Change                2021               2020              Change
Net sales                         $        291            $   220                   32  %       $      576           $   432                   33  %
Adjusted EBITDA                             77                 51                   52  %              168                93                   80  %
Adjusted EBITDA margin                      27    %            23  %                                    29   %            22  %


Sales in this segment by product line were as follows:

                                                Three Months Ended June 30,                                   Six Months Ended June 30,
                                         2021                2020              Change                 2021                2020              Change
Siding Solutions                   $         288          $   207                   39  %       $         570          $   398                   43  %
Other                                          3               13                  (75) %                   6               34                  (81) %
Total                              $         291          $   220                   32  %       $         576          $   432                   33  %


Percent changes in average sales prices and unit shipments for the three and six
months ended June 30, 2021, compared to the corresponding periods in 2020, were
as follows:
                                                  Three Months Ended June 30,                                  Six Months Ended June 30,
                                                       2021 versus 2020                                            2021 versus 2020
                                            Average Net                      Unit                       Average Net                      Unit
                                           Selling Price                   Shipments                   Selling Price                   Shipments
Siding Solutions                                          9  %                       27  %                            8  %                       33  %


Siding net sales increased by $71 million (or 32%) and $144 million (or 33%) for
the three and six months ended June 30, 2021, respectively, compared to the
corresponding periods in 2020. These increases are primarily due to the Siding
Solutions revenue increases of 39% and 43% for the three and six months ended
June 30, 2021, respectively, partially offset by decreases in fiber sales
(included in the Other product line).

Adjusted EBITDA increased by $26 million and $75 million for the three and six
months ended June 30, 2021, respectively, compared to the corresponding periods
in 2020, primarily due to the increased Siding Solutions revenue, partially
offset by increases in raw material prices, freight costs, and mill spending.

OSB

                                       25
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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, and LP® FlameBlock® Fire-Rated Sheathing) and
LP® TopNotch® Sub-Flooring. OSB is manufactured using wood strands arranged in
layers and bonded with resins.

Segment sales, Adjusted EBITDA, and Adjusted EBITDA Margin for this segment were
as follows:
                                                Three Months Ended June 30,                                     Six Months Ended June 30,
                                        2021                 2020              Change                  2021                2020              Change
Net sales                         $        778            $   204                   281  %       $      1,317           $   424                   211  %
Adjusted EBITDA                            565                 46                 1,128  %                919                81                 1,035  %
Adjusted EBITDA margin                      73    %            23  %                                       70   %            19  %

Sales in this segment by product line were as follows:

                                                 Three Months Ended June 30,                                 Six Months Ended June 30,
                                          2021                2020              Change              2021              2020              Change
OSB - commodity                     $         425          $   108                  294  %       $    707          $   221                  221  %
OSB - Structural Solutions                    350               95                  268  %            605              198                  205  %
Other                                           2                1                  100  %              5                5                    2  %
Total                               $         778          $   204                  281  %       $  1,317          $   424                  211  %


Percent changes in average sales prices and unit shipments for the three and six
months ended June 30, 2021, compared to the corresponding periods in 2020, were
as follows:
                                                   Three Months Ended June 30,                                  Six Months Ended June 30,
                                                        2021 versus 2020                                            2021 versus 2020
                                             Average Net                      Unit                       Average Net                      Unit
                                            Selling Price                   Shipments                   Selling Price                   Shipments
OSB - commodity                                          301  %                        -  %                          248  %                       (7) %
OSB - Structural Solutions                               205  %                       19  %                          174  %                        9  %


OSB net sales increased by $574 million (or 281%) and $893 million (or 211%) for
the three and six months ended June 30, 2021, respectively, compared to the
corresponding periods in 2020. OSB prices increased by $554 million and $888
million for the three and six months ended June 30, 2021, respectively, compared
to the corresponding periods in 2020. OSB sales volume increased by 8% for the
three months ended June 30, 2021, compared to the corresponding period in 2020,
primarily due to the nonoccurrence of last year's COVID-related downtime. OSB
sales volume was flat for the six months ended June 30, 2021, compared to the
corresponding period in 2020. Structural Solutions volume, as a percentage of
total OSB segment volume, was 46% for the three and six months ended June 30,
2021, compared to 41% and 42% in the corresponding periods in 2020,
respectively.

Adjusted EBITDA increased over the prior year by $519 million and $838 million
for the three and six months ended June 30, 2021, respectively, primarily due to
increased OSB prices, slightly offset by increases in raw material prices and
mill spending.

EWP

The EWP segment is comprised of LP® SolidStart® I-Joist (I-Joist), Laminated
Veneer Lumber (LVL), and Laminated Strand Lumber (LSL) and other related
products. This segment also includes the sales of I-Joist and LVL products
produced by our joint venture and sales of plywood produced as a by-product of
the LVL production
                                       26
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process. In February 2021, we announced that LSL production will cease during 2021 and that we are exploring strategic alternatives to the remaining EWP business, including a possible sale in whole or in part.


Segment sales, Adjusted EBITDA, and Adjusted EBITDA margin for this segment were
as follows:
                                                Three Months Ended June 30,                                  Six Months Ended June 30,
                                        2021                 2020              Change                2021               2020              Change
Net sales                         $        158            $    79                   99  %       $      280           $   178                   58  %
Adjusted EBITDA                             18                  3                  513  %               26                12                  116  %
Adjusted EBITDA margin                      12    %             4  %                                     9   %             7  %


Sales in this segment by product line were as follows:

                                                 Three Months Ended June 30,                                   Six Months Ended June 30,
                                         2021                 2020              Change                 2021                2020              Change
I-Joist                            $           75          $    32                  134  %       $         123          $    69                   79  %
LVL                                            45               30                   51  %                  89               66                   34  %
LSL                                            11                9                   26  %                  19               21                   (8) %
Other, including plywood and
related products                               26                8                  225  %                  49               22                  123  %
Total                              $          158          $    79                   99  %       $         280          $   178                   58  %


Percent changes in average sales prices and unit shipments for the three and six
months ended June 30, 2021, compared to the corresponding periods in 2020, were
as follows:
                  Three Months Ended June 30,                    Six Months Ended June 30,
                       2021 versus 2020                              2021 versus 2020
                  Average Net                Unit               Average Net               Unit
                 Selling Price             Shipments           Selling Price            Shipments
I-Joist                          69  %          39  %                         41  %          27  %
LVL                              29  %          18  %                         19  %          13  %
LSL                              31  %          (6) %                         18  %         (23) %



EWP net sales increased by $79 million (or 99%) and $102 million (or 58%) for
the three and six months ended June 30, 2021, respectively, compared to the
corresponding periods in 2020. Adjusted EBITDA increased by $15 million and $14
million for the three and six months ended June 30, 2021, respectively, compared
to the corresponding periods in 2020. The increases to net sales and Adjusted
EBITDA are primarily due to increased pricing to offset increased input 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 Chile, Brazil, Peru, Colombia, and Argentina.

Segment sales, Adjusted EBITDA, and Adjusted EBITDA margin for this segment were as follows:

                                       27
--------------------------------------------------------------------------------
                                               Three Months Ended June 30,                                    Six Months Ended June 30,
                                        2021                2020              Change                 2021                 2020              Change
Net sales                         $        74            $    38                   94  %       $        126            $    74                   71  %
Adjusted EBITDA                            34                 11                  206  %                 54                 18                  202  %
Adjusted EBITDA margin                     46    %            29  %                                      43    %            24  %

Sales in this segment by product line were as follows:

                                                 Three Months Ended June 30,                                  Six Months Ended June 30,
                                         2021                2020              Change                 2021                2020              Change
OSB - Structural Solutions          $         63          $    32                   98  %       $         104          $    64                   63  %
Siding                                        10                5                  104  %                  20                8                  144  %
Other                                          -                1                  (80) %                   3                2                   35  %
Total                               $         74          $    38                   94  %       $         126          $    74                   71  %


Percent changes in average sales prices and unit shipments for the three and six
months ended June 30, 2021, compared to the corresponding periods in 2020, were
as follows:
                 Three Months Ended June 30,                    Six Months Ended June 30,
                      2021 versus 2020                              2021 versus 2020
                 Average Net                Unit               Average Net               Unit
                Selling Price             Shipments           Selling Price            Shipments
OSB                             97  %          (1) %                         71  %          (3) %
Siding                          48  %          32  %                         39  %          65  %


South America net sales increased by $36 million (or 94%) and $52 million (or
71%) for the three and six months ended June 30, 2021, respectively, compared to
the corresponding periods in 2020, primarily due to higher OSB and siding
pricing.

Adjusted EBITDA increased by $23 million and $36 million for the three and six
months ended June 30, 2021, respectively, compared to the corresponding periods
in 2020, primarily due to the increased pricing, partially offset by higher
imported raw material costs.

OTHER PRODUCTS


Our Other products segment includes 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. Other net sales were $26 million and $43 million for three and six
months ended June 30, 2021, respectively, as compared to $7 million and
$25 million for the corresponding periods in 2020. These increases are primarily
due to increases in Entekra sales volume.

Adjusted EBITDA was $(4) million and (8) million for the three and six months
ended June 30, 2021, respectively, as compared to $(5) million and $(8) million
for the corresponding periods in 2020, respectively.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES


Selling, general and administrative expenses were $57 million and $105 million
for the three and six months ended June 30, 2021, respectively, compared to $50
million and $105 million for the corresponding periods in 2020. The increase in
2021 is primarily due to increased travel, sales-related initiatives, and
corporate overhead primarily driven by restrictions on such activities in 2020
in response to the onset of the COVID-19 pandemic.

INCOME TAXES

                                       28
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We recognized an estimated tax provision of $147 million and $244 million for
the three and six months ended June 30, 2021, respectively, compared to $19
million and $28 million for the corresponding periods of 2020. 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 2021, the primary differences between the U.S. statutory rate of 21% and the
effective rate relate to state income tax. For 2020, the primary differences
between the U.S. statutory rate of 21% and the effective rate related to state
income tax, foreign tax rates, tax credits, stock-based compensation, the sale
of our ARS and the redemption of our company-owned life insurance cash surrender
value.


Legal and Environmental Matters


For a discussion of legal and environmental matters involving us and the
potential impact thereof on our financial position, results of operations and
cash flows, see Items 3, 7 and 8 in our 2020 Annual Report on Form 10-K and Note
11 of the Notes to the Condensed Consolidated Financial Statements included in
Item 1 of this quarterly report on Form 10-Q.


Liquidity and Capital Resources

OVERVIEW


Our principal sources of liquidity are existing cash and investment balances,
cash generated by our operations, and our ability to borrow under such credit
facilities as we may have in effect from time to time. We may also, from time to
time, issue and sell equity, debt or hybrid securities, or engage in other
capital market transactions.

Our principal uses of liquidity are paying the costs and expenses associated
with our operations, servicing outstanding indebtedness, paying dividends, and
making capital expenditures. We may also, from time to time, prepay or
repurchase outstanding indebtedness or shares or acquire assets or businesses
that are complementary to our operations. Any such repurchases may be commenced,
suspended, discontinued or resumed, and the method or methods of affecting any
such repurchases may be changed at any time, or from time to time, without prior
notice.

OPERATING ACTIVITIES

During the three months ended June 30, 2021, and 2020, cash provided by operations was $457 million and $129 million, respectively. During the six months ended June 30, 2021, and 2020, cash provided by operations was $772 million and $120 million, respectively. The improvement in cash provided by operations for the period ended June 30, 2021, was primarily related to increases in OSB commodity pricing and revenue growth in Siding Solutions.

INVESTING ACTIVITIES


During the three months ended June 30, 2021, and 2020, cash used in investing
activities was $31 million and cash provided by investing activities was $12
million, respectively. During the six months ended June 30, 2021, and 2020, cash
used in investing activities was $63 million and $12 million, respectively.

Capital expenditures for the three months ended June 30, 2021, and 2020, were
$32 million and $15 million, respectively. Capital expenditures for the six
months ended June 30, 2021, and 2020, were $65 million and $39 million,
respectively, primarily related to siding conversion expenditures and growth and
maintenance capital. We expect to fund our capital expenditures through cash on
hand and cash generated from operations.

During the three and six months ended June 30, 2020, we received $14 million in
cash related to the divestiture of our East River facility and assets and brand
rights of CanExel®, $10 million related to the cash surrender value of the
company-owned life insurance policy, and $3 million related to the sale of our
ARS.
                                       29
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FINANCING ACTIVITIES


During the three and six months ended June 30, 2021, cash used in financing
activities was $484 million and $642 million, respectively. During the three and
six months ended June 30, 2021, we used $178 million and $300 million,
respectively, to repurchase shares of LP common stock under the 2020 Share
Repurchase Program. During the three months ended June 30, 2021, we used
$288 million to repurchase shares of LP common stock under the 2021 Share
Repurchase Program. We paid cash dividends of $16 million and $33 million in the
three and six months ended June 30, 2021, respectively.

Additionally, in March 2021, we issued $350 million aggregate principal amount
of the 2029 Senior Notes. In February 2021, LP delivered to holders of the 2024
Senior Notes a conditional notice of redemption to redeem on March 27, 2021 all
of the 2024 Senior Notes outstanding at a redemption price of 102.438% of the
principal amount thereof plus accrued and unpaid interest to, but not including,
the redemption date. The redemption notice became irrevocable on March 11, 2021,
and the 2024 Senior Notes were fully redeemed on March 27, 2021. In connection
with financing activities, we paid $2 million in debt issuance costs related to
the Third Amendment during the three months ended June 30, 2021, and $13 million
in redemption premiums and debt issuance costs related to the 2024 Senior Notes
during the six months ended June 30, 2021. The remaining financing activities
relate to the repurchase of stock from employees in connection with income tax
withholding requirements associated with our employee stock-based compensation
plans.

During the three and six months ended June 30, 2020, cash used in financing
activities was $368 million and $39 million, respectively. In March 2020, we
borrowed $350 million under our Amended Credit Facility as a precautionary
measure due to the COVID-19 pandemic, and we repaid the outstanding balance in
June 2020. We also paid $1 million of financing costs associated with our
Amended Credit Facility and the Third Amendment during the three and six months
ended June 30, 2020. During the three and six months ended June 30, 2020, we
paid cash dividends of $17 million and $33 million, respectively. Additionally,
we used $5 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


The Amended Credit Facility provides for a revolving credit facility in the
principal amount of up to $550 million, with a $60 million sub-limit for letters
of credit. The Amended Credit Facility, and all loans thereunder become due, on
June 8, 2027. As of June 30, 2021, we had no amounts outstanding under the
Amended Credit Facility.

The Amended Credit Facility contains various restrictive covenants and customary
events of default, the occurrence of which could result in the acceleration of
our obligation to repay the indebtedness outstanding thereunder. The Amended
Credit Facility also contains financial covenants that requires us and our
consolidated subsidiaries to have, as of the end of each quarter, (i) a
capitalization ratio (i.e., funded debt less unrestricted cash to total
capitalization) of no more than 57.5% and (ii) a minimum consolidated net worth
of at least $475 million plus 70% of consolidated net income after December 31,
2019, without deduction for net losses.  As of June 30, 2021, we were in
compliance with all financial covenants under the Amended Credit Facility.

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. The Letter of
Credit Facility includes an unused commitment fee, due quarterly, ranging from
0.50% to 1.875% of the daily available amount to be drawn on each letter of
credit issued under the Letter of Credit Facility. The Letter of Credit Facility
is subject to similar affirmative, negative and financial covenants as those set
forth in the Amended Credit Facility, including capitalization ratio and minimum
net worth covenants. As of June 30, 2021, we were in compliance with all
covenants under the Letter of Credit Facility.

OTHER LIQUIDITY MATTERS

                                       30
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Off-Balance Sheet Arrangements


As of June 30, 2021, we had standby letters of credit of $12 million outstanding
related to collateral for environmental impact on owned properties, deposit for
forestry license, and insurance collateral, including workers' compensation.


Potential Impairments

We review our mill and investment assets for potential impairments at least annually and believe we have adequate support for the carrying value of our assets as of June 30, 2021.


If demand and pricing for our products are significantly below cycle average
demand and pricing, or should we decide to invest capital in alternative
projects, or should changes occur related to our wood supply for these
locations, or should demand and pricing of our products fall as a result of the
long-term effects of the COVID-19 pandemic, it is possible that future
impairment charges will be required. As of June 30, 2021, there were no
indications of impairment.

We also review from time to time possible 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.

                                       31

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© Edgar Online, source Glimpses

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