LP Reports Third Quarter 2020 Results

Louisiana-Pacific Corporation (“LP”) reported its financial results for the three and nine months ended September 30, 2020.

Key Highlights for the Third Quarter versus Same Quarter Prior Year

– Total net sales increased by 32% to $795 million; LP® SmartSide® siding revenue increased by 22% to $260 million – 19% higher sales volume and 3% higher prices; OSB segment revenue increased by 87% to $368 million – 97% higher prices offset by 5% lower sales volume; South America revenue increased by 25% to $45 million – 33% higher sales volume; The strategic exit of fiber decreased net sales by $22 million

– Net income attributed to LP increased by $175 million to $177 million ($1.57 per diluted share)

– Adjusted Diluted EPS(1) increased by $1.48 to $1.56 per share

– Adjusted EBITDA(1) increased by $224 million to $273 million, including $179 million due to increased OSB prices and $23 million due to increased SmartSide sales

– Cash flow from operating activities of $218 million

– LP announces a quarterly cash dividend of $0.145 per share

(1) This is a non-GAAP financial measure. See “Use of Non-GAAP Information” and “Reconciliation of Net Income to Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Income, and Non-GAAP Adjusted Diluted EPS” below.

“Q3 was a record quarter for SmartSide sales, with revenue growth of 22% above Q3 2019,” said LP Chief Executive Officer Brad Southern. “LP is almost a year ahead of pace to achieve our transformation targets for growth and efficiency. Most importantly, we accomplished this sustainably and safely.”

Strategic Update and Execution of Capital Allocation Plan

– Achieved $137 million in cumulative EBITDA from growth and efficiency since January 2019 towards the 2021 target of $165 million

– Paid $49 million in dividends during the first nine months of 2020 and announced an additional $0.145 per share dividend

– Paid $29 million to repurchase 0.9 million shares through share repurchase programs during the three and nine months ending September 30, 2020

– Cash and cash equivalents of $420 million as of September 30, 2020

“Being ahead of pace with regard to growth and efficiency targets has contributed to significant cash generation in the quarter,” said LP Executive Vice President and Chief Financial Officer Alan Haughie. “LP has generated $338 million in cash flow from operations year to date. After dividends of $49 million and $29 million in share repurchases, we ended the quarter with nearly $1 billion of liquidity, including $420 million in cash.”

COVID-19 Response Update

The COVID-19 pandemic did not materially impact our results of operations for the three and nine months ended September 30, 2020, but continues to have a significant adverse effect on many sectors of the economy and the overall financial condition in the U.S. LP is continuing to follow national, state and local health and safety guidelines while it operates to provide LP products to support critical infrastructure needs. Employees able to work from home have continued to do so. LP has rigorous cleaning and social distancing protocols as outlined by the Centers for Disease Control and Prevention (“CDC”). LP is running full mill operating schedules as of September 30, 2020. However, the duration of the COVID-19 pandemic, the actions to contain the pandemic and mitigate its impacts, and the effects on our operations cannot be reasonably estimated.

Third Quarter of 2020 Results

Total net sales for the third quarter of 2020 increased by $192 million to $795 million compared to the third quarter of 2019. SmartSide revenue increased by $47 million (or 22%) and OSB prices increased by $179 million on five percent lower sales volume. Revenue for LP South America increased by $9 million due to 33% higher sales volume. The strategic exits from fiber and CanExel® products reduced net sales by $22 million and $15 million, respectively.

Net income attributed to LP for the third quarter of 2020 increased by $175 million over the prior year to $177 million, or $1.57 per diluted share. In addition to the increase in OSB pricing and SmartSide growth, wood fiber and resin costs were favorable in the quarter by $9 million compared to the same period in 2019.

Adjusted EBITDA for the third quarter of 2020 increased by $224 million over the prior year to $273 million, including $179 million of OSB pricing, $23 million of SmartSide growth, and $9 million of favorable raw material prices. Adjusted Diluted earnings per share for the third quarter of 2020 was $1.56 compared to $0.08 in the third quarter of 2019.

First Nine Months of 2020 Results

Total net sales for the first nine months of 2020 increased by $155 million over the prior year to $1.9 billion. SmartSide revenue increased by $57 million (or 10%), and OSB prices increased by $235 million, partially offset by eight percent lower sales volume. LP South America revenue was $2 million lower than the prior year, which includes $22 million of unfavorable foreign currency movements. EWP net sales was lower by $22 million and the strategic exits from fiber and CanExel products reduced net sales by $43 million and $24 million, respectively.

Net income attributed to LP for the first nine months of 2020 increased by $197 million to $243 million, or $2.15 per diluted share, compared to the prior year. In addition to the increase in OSB prices and growth in SmartSide sales, raw material costs (wood fiber and resin) and freight expenses were favorable to the prior year by $16 million and $11 million, respectively. Fiber discontinuance costs of $21 million were recognized during the nine months ended September 30, 2020, which includes non-cash exit and impairment charges totaling $18 million as well as $3 million of severance costs.

Adjusted EBITDA for the first nine months of 2020 increased by $293 million over the prior year to $453 million, including $235 million of OSB pricing, $28 million of SmartSide growth, and $27 million of favorable freight and raw material prices. Adjusted Diluted EPS for the first nine months of 2020 was $2.32 per diluted share compared to $0.32 per diluted share in the first nine months of 2019.

Segment Results

Siding

The Siding segment consists of LP® SmartSide® Trim & Siding and LP® Outdoor Building Solutions®. During the nine months ended September 30, 2020, LP CanExel® prefinished siding was reclassified from Siding to Other. All prior periods presented have been adjusted for comparability.

Net sales increased by $24 million (or 10%) and by $5 million (or one percent) for the three and nine months ended September 30, 2020, respectively, compared to the corresponding periods in 2019. This is primarily due to SmartSide revenue increases of 22% (19% volume, 3% prices) and 10% (9% volume, 1% prices) for the three and nine months ended September 30, 2020, respectively. The strategic exit of fiber decreased revenue by $22 million and $43 million for the three and nine months ended September 30, 2020.

Adjusted EBITDA increased over the prior year by $32 million and $41 million, respectively, for the three and nine months ended September 30, 2020, primarily due to the increased SmartSide revenue, increased production at the Dawson Creek facility, and lower raw material costs, partially offset by a decrease in fiber sales.

Oriented Strand Board (“OSB”)

The OSB segment manufactures and distributes OSB structural panel products including LP OSB and Structural Solutions products such as LP® TechShield® Radiant Barrier, LP® TopNotch® Sub-Flooring, LP Legacy® Premium Sub-Flooring, LP WeatherLogic® Air & Water Barrier, and LP® FlameBlock® Fire-Rated Sheathing.

Net sales increased by $171 million (or 87%) and by $187 million (or 31%) for the three and nine months ended September 30, 2020, respectively, compared to the corresponding periods in 2019. OSB prices increased over the prior year by $179 million and $235 million for the three and nine month periods, partially offset by five percent and eight percent lower volumes. Structural Solutions sales volume as a percentage of total OSB segment sales volume was 44% and 43% for the three and nine months ended September 30, 2020, compared to 43% and 42% in the comparable periods of 2019.

Adjusted EBITDA increased over the prior year by $190 million and $266 million for the three and nine months ended September 30, 2020, respectively, primarily due to increased OSB prices and lower raw material costs.

Engineered Wood Products (“EWP”)

The EWP segment consists of LP® SolidStart® I-Joist (“I-Joist”), Laminated Veneer Lumber (“LVL”), Laminated Strand Lumber (“LSL”), and other related products. This segment also includes the sales of I-Joist and LVL products produced by the joint venture and sales of plywood produced as a by-product of the LVL production process.

Net sales decreased by $2 million (or two percent) and by $22 million (or seven percent) and Adjusted EBITDA increased by $3 million and decreased by $1 million for the three and nine months ended September 30, 2020, respectively, compared to the corresponding periods in 2019.

South America

LP’s South American segment manufactures and distributes OSB structural panel and siding products in South America and certain export markets. This segment has manufacturing operations in Chile and Brazil and operates sales offices in Chile, Brazil, Peru, Columbia and Argentina.

Foreign currency changes lowered net sales and Adjusted EBITDA by $7 million and $1 million, respectively, for the three months ended September 30, 2020, compared to 2019. For the nine months ended September 30, 2020, foreign currency changes lowered net sales and Adjusted EBITDA by $22 million and $2 million, respectively, compared to 2019. Excluding foreign currency changes, net sales in both the three and nine month periods increased due to higher OSB and Siding volumes (local and export), partially offset by higher imported resin costs.

For the full third quarter results, click here.

About Louisiana-Pacific Corporation

As a leader in high-performance building solutions, Louisiana-Pacific Corporation (LP Building Solutions, NYSE: LPX) manufactures engineered wood building products that meet the demands of builders worldwide. Its extensive offerings include innovative and dependable building products and accessories, such as the LP Structural Solutions portfolio (LP WeatherLogic® Air & Water Barrier, LP Legacy® Premium Sub-Flooring, LP® TechShield® Radiant Barrier, LP® FlameBlock® Fire-Rated Sheathing and more), oriented strand board (“OSB”), LP® TopNotch® Sub-Flooring, LP® SmartSide® Trim & Siding, LP® Outdoor Building Solutions®, and LP Elements® Performance Fencing. In addition to product solutions, LP provides industry-leading service and warranties. Since its founding in 1973, LP has been Building a Better World™ by helping customers construct beautiful, durable homes. Headquartered in Nashville, Tennessee, LP operates 25 plants across the U.S., Canada, Chile and Brazil. For more information, visit LPCorp.com.

Contact:

Aaron Howald – Investor Relations – aaron.howald@lpcorp.com – (615) 986-5792

Source: Louisiana-Pacific Corporation