Louisiana-Pacific Corporation (LPX) — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; comparisons are to FY2020 unless stated otherwise. This is an annual filing, not a standalone fourth-quarter report. LP makes engineered wood building products, including siding, OSB, engineered wood products, and products sold in South America.
Financial results and key metrics
| Metric | FY2021 | FY2020 | Change / context |
|---|---|---|---|
| Net sales | $4.553 billion | $2.788 billion | Up 63% |
| Gross profit / margin | $2.070 billion / 45.5% | $867 million / 31.1% | Margin calculated from reported sales and gross profit |
| Income from operations | $1.824 billion | $636 million | Operating margin approximately 40.1%, versus 22.8% |
| Net income attributed to LP | $1.377 billion | $499 million | Diluted EPS $14.09, versus $4.46 |
| Adjusted EBITDA | $1.972 billion | $781 million | Up 153%; non-GAAP |
| Cash from operations | $1.484 billion | $659 million | Cash generation rose with higher OSB pricing and Siding Solutions growth |
| Capital expenditures | $254 million | $77 million | Primarily siding conversions, growth, and maintenance spending |
| Cash and cash equivalents | $358 million | $535 million | Plus $13 million of restricted cash at year-end 2021 |
| Long-term debt | $346 million | $348 million | 2021 balance reflects $350 million of 2029 notes, net of debt costs |
| Working capital | $181 million | $172 million | Current assets $890 million; current liabilities $351 million |
OSB was the largest segment, at $2.387 billion of sales, or 52% of total sales. Its Adjusted EBITDA was $1.531 billion, with a 64% margin. Siding sales were $1.170 billion and Adjusted EBITDA was $289 million (25% margin); EWP sales were $638 million and Adjusted EBITDA was $95 million (15% margin); South America sales were $265 million and Adjusted EBITDA was $113 million (43% margin). Segment Adjusted EBITDA is a non-GAAP measure.
Material changes versus FY2020
- Record OSB pricing was the principal earnings driver: OSB sales rose 96%, including $1.113 billion of increased OSB prices. Average selling prices rose 87% for Structural Solutions and 90% for commodity OSB; unit shipments rose 6% and 2%, respectively.
- Siding Solutions revenue increased 27%, supported by 16% higher shipments and 9% higher average selling prices. Segment Adjusted EBITDA rose 17%, but margin declined to 25% from 26%, reflecting $66 million of raw-material and freight inflation and $36 million of discretionary growth-related spending.
- EWP sales increased 64%, mainly from higher prices amid raw-material cost increases. South America sales rose 57%, primarily from higher prices, while OSB shipments there declined 11%.
- Cash from operations increased to $1.484 billion. Investing cash outflow rose to $247 million, principally reflecting capital expenditures. Financing cash outflow was $1.388 billion, including $1.3 billion of share repurchases and $66 million of dividends.
Outlook, management commentary, and risks
- LP expected 2022 capital expenditures of $400 million to $430 million, funded by cash on hand, operating cash flow, and borrowing capacity as needed. The filing does not provide a specific sales or earnings forecast.
- LP planned to convert its Houlton, Maine facility to siding production, with production expected to begin in early 2022, and then convert Sagola, Michigan. The two conversions were expected to add approximately 520 million square feet of siding capacity and remove 670 million square feet of OSB capacity, on a 3/8-inch basis.
- LP continued to assess strategic alternatives for EWP. Separately, on February 14, 2022, it agreed to sell its 50% interests in two I-joist joint ventures to Resolute Forest Products for $50 million, subject to adjustments, approvals, and closing conditions; closing was expected in the first half of 2022.
- In November 2021, LP initiated termination of its U.S. and Canadian defined-benefit pension plans, with settlement expected by the end of 2022. LP anticipated a 2022 pre-tax settlement charge including a non-cash recognition of $101 million of accumulated actuarial losses; the final charge and any cash contribution were uncertain. The net projected benefit obligation was $6 million at year-end.
- LP issued $350 million of 3.625% senior notes due 2029 and redeemed its $350 million 4.875% notes due 2024, recording an $11 million early-extinguishment charge. It had no borrowings under its $550 million revolving credit facility at year-end and reported compliance with its debt covenants.
- Key risks include volatile OSB prices and the company’s significant OSB exposure; housing-market cyclicality; inflation and availability of wood fiber, resin, labor, energy, and transportation; supply-chain and COVID-19 disruption; manufacturing interruptions; environmental and product-related claims; foreign-exchange exposure; and pension settlement uncertainty. Environmental contingency reserves were $25 million, up from $14 million; actual costs could materially exceed recorded reserves.
- Auditors issued unqualified opinions on the financial statements and internal control over financial reporting. LP also reported effective disclosure controls and internal controls as of December 31, 2021.
Important facts for investors to verify
- How sustainable earnings and cash flow are if OSB prices normalize; OSB contributed most of the FY2021 earnings surge.
- Whether siding conversions meet their production, cost, timing, and capacity targets, and how reduced OSB capacity affects results.
- The final pension settlement charge and cash funding needs in 2022, as well as the outcome and proceeds of the planned joint-venture sale.
- Capital spending, dividends, and remaining buyback authorization: LP repurchased approximately 21 million shares for $1.3 billion in 2021 and ended the year with $500 million authorized under its second 2021 program.
- Potential changes to environmental reserves, product warranty exposure, and raw-material and freight costs; assess non-GAAP Adjusted EBITDA alongside GAAP results.