Louisiana-Pacific Corporation (LPX) — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparisons are with Q1 2021 unless noted. Dollar amounts are in millions except per-share data. LP makes building products for construction, repair and remodeling, and outdoor structures, with Siding, OSB, EWP, and South America segments.
Financial and operating results
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Net sales | $1,337 | $1,017 |
| Gross profit | $661 | $479 |
| Income from operations | $633 | $431 |
| Net income attributed to LP | $484 | $320 |
| Diluted EPS | $5.60 | $3.00 |
| Operating cash flow | $425 | $314 |
| Capital expenditures | $92 | $34 |
| Adjusted EBITDA (non-GAAP) | $636 | $461 |
Sales grew 31%; reported net income increased 51%. Gross margin was approximately 49.4% versus 47.1%, and operating margin approximately 47.3% versus 42.4%. Adjusted diluted EPS was $5.08 versus $3.01; adjusted income was $439 versus $320. These non-GAAP measures are not substitutes for GAAP results.
- Siding: Sales rose 16% to $332; Adjusted EBITDA fell 8% to $83, with margin declining to 25% from 32%. Price and shipment increases were offset by $26 of raw-material and freight inflation and $12 of growth investments.
- OSB: Sales increased 38% to $744; Adjusted EBITDA rose 43% to $505. Higher prices and sales volumes drove results; the filing reports a 23% increase in average OSB selling prices and 12% volume growth.
- EWP: Sales rose 38% to $170 and Adjusted EBITDA increased to $38 from $7, primarily reflecting price increases. LP had discontinued LSL production at Houlton during 2021.
- South America: Sales increased 26% to $67 and Adjusted EBITDA rose 23% to $25, mainly on higher OSB and siding prices.
Liquidity, debt, and capital allocation
At March 31, 2022, cash and cash equivalents were $624, current assets $1,341, and current liabilities $459. Long-term debt was $346, unchanged from year-end; there were no borrowings under the $550 revolving credit facility, which matures in 2027. LP reported compliance with its credit-facility covenants. Cash, cash equivalents, and restricted cash totaled $637 at quarter-end. Cash exceeded reported debt by $278, excluding restricted cash.
Operating cash flow was $425; investing cash outflow was $33 and financing cash outflow was $137. Operating cash flow benefited from higher OSB commodity prices and Siding Solutions revenue growth, while receivables and inventories used cash. LP paid $19 in dividends and repurchased $104 of stock during the quarter. After quarter-end, through May 3, it repurchased another $182 of stock, or 2.9 million shares. Capital spending was $92, primarily for siding conversion, growth, and maintenance projects.
Material changes, unusual items, and outlook
- LP sold its 50% interests in two I-joist joint ventures for $59 and recognized a $39 gain; the ventures had a $19 net carrying value. LP remains their exclusive distributor. The gain increased reported operating income but is excluded from Adjusted EBITDA.
- Other non-operating items included $9 of realized foreign-currency losses, primarily related to the Chilean peso and Brazilian real. The effective tax rate was 22%, including a $9 discrete tax benefit.
- LP initiated termination of its frozen U.S. and Canadian defined-benefit plans. Settlement was expected by the end of 2022, but timing and final charges were not estimable. The company expected a pre-tax charge including recognition of $99 in accumulated actuarial losses and a potential $8 cash contribution, subject to market and plan outcomes.
- Management cited strong housing demand, with U.S. single-family starts up 3% year over year, while warning that future demand and OSB prices were uncertain. Supply disruptions, labor shortages, and inflation in materials and freight were affecting operations. The filing provides no specific quantified earnings or revenue guidance.
- Risks include housing-market cyclicality, commodity-price volatility, raw-material and energy availability and costs, transportation and labor constraints, COVID-related disruption, and uncertainty from Russia’s invasion of Ukraine and related sanctions, including possible inflation and supply impacts.
Important facts for investors to verify
- How much of the earnings increase reflects volatile OSB pricing and the one-time $39 joint-venture sale gain.
- Whether input-cost inflation, freight, labor constraints, and planned growth spending continue to pressure Siding margins.
- OSB market prices, housing and repair-and-remodel demand, and the company’s sales volumes in subsequent periods.
- The timing and ultimate cost of pension-plan settlement, including the actuarial-loss charge and any cash contribution.
- Cash deployment under the repurchase authorization and the effect of buybacks on liquidity and share count.
- Environmental and warranty reserves: LP cautioned that contingency estimates may change and ultimate payments could exceed amounts accrued.