LP Reports Second Quarter 2020 Results and Announces Quarterly Dividend

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

Key Highlights for the Second Quarter

– Total net sales decreased by seven percent to $548 million: LP® SmartSide® strand revenue increased by four percent to $207 million; OSB segment revenue increased by three percent to $204 million – 16% lower volume offset by 22% higher prices; EWP segment revenue decreased by $28 million; The strategic exit of SmartSide fiber and CanExel® decreased net sales by $14 million and $4 million, respectively

– Net income attributed to LP increased by 94% to $33 million ($0.29 per diluted share)
– Adjusted Diluted EPS(1) increased by $0.32 to $0.43 per share
– Adjusted EBITDA(1) increased by $44 million to $97 million, including $37 million due to increased OSB prices
– Cash flow from operating activities of $129 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.

“This was a transformative quarter for LP,” said LP Chief Executive Officer Brad Southern. “The Siding segment completed its strategic exit from fiber and demonstrated the value of deeper relationships with our retail customers. The OSB segment achieved outstanding cost of production despite a volatile production schedule. As the housing sector rebounded sharply in the second quarter, LP’s growing product diversity and customer breadth positioned us well to participate in the recovery. As demand accelerated through May and June, LP’s agility and strategic focus generated EBITDA and EPS growth despite significant downtime in April. I am extremely proud of and grateful for the resilience, creativity, and grit of LP’s employees.”

Liquidity Update

– Cash and cash equivalents of $259 million as of June 30, 2020
– Completed the sale of CanExel for $14 million in cash proceeds
– Amended credit facility to expand capacity from $350 million to $550 million
– Repaid the $350 million of revolving credit drawn in March

“There is still significant uncertainty about the duration of the COVID-19 pandemic, as well as the nature and severity of economic impacts,” said LP Chief Financial Officer, Alan Haughie. “However, we remain confident in LP’s ability to preserve liquidity and deliver value as challenges and opportunities arise during the pandemic and beyond.”

COVID-19 Response Update

The COVID-19 pandemic and actions taken in response thereto did not materially impact our results of operations for the three and six months ended June 30, 2020. However, the COVID-19 pandemic and actions taken in response thereto are continuing to have a significant adverse effect on many sectors of the economy and the overall financial condition in the United States.

We continue to take the following measures:

– LP is following national, state, and local guidelines while also continuing to provide LP products to support critical infrastructure needs. Employees able to work from home have continued to do so. We have instituted rigorous cleaning and social distancing protocols as outlined by the Centers for Disease Control and Prevention.
– LP initially reduced mill operating schedules to balance production and demand but has resumed full operating schedules as of June 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.

Second Quarter of 2020 Results

Total net sales for the second quarter of 2020 decreased by $40 million over the prior year to $548 million compared to the second quarter of 2019. SmartSide strand revenue increased by $7 million (or four percent) and OSB prices increased by $37 million on 16% lower volume. EWP revenue was lower by $28 million and exiting SmartSide fiber and CanExel reduced net sales by $14 million and $4 million, respectively.

Net income attributed to LP for the second quarter of 2020 increased by $16 million over the prior year to $33 million, or $0.29 per diluted share. In addition to the increase in OSB pricing, wood fiber and resin costs were favorable to the prior year by $6 million. Net income attributed to LP includes $14 million of non-cash exit and impairment charges and $2 million of severance costs related to the discontinuance of SmartSide fiber.

Adjusted Diluted EPS for the second quarter of 2020 was $0.43 per diluted share compared to $0.11 per diluted share in the second quarter of 2019. Adjusted EBITDA for the second quarter of 2020 increased by $44 million over the prior year to $97 million.

First Six Months of 2020 Results

Total net sales for the first six months of 2020 decreased by $37 million over the prior year to $1.133 billion compared to the first six months of 2019. SmartSide strand revenue increased by $11 million (or three percent) and OSB prices increased by $56 million on 10% lower volume. EWP revenue was lower by $19 million, South America revenue was impacted by $14 million of unfavorable foreign currency movements, and exiting SmartSide fiber and CanExel reduced net sales by $21 million and $10 million, respectively.

Net income attributed to LP for the first six months of 2020 increased by $22 million over the prior year to $66 million, or $0.58 per diluted share. In addition to the increase in OSB prices, wood fiber and resin costs were favorable to the prior year by $12 million. Net income attributed to LP includes $19 million of non-cash exit and impairment charges and $2 million of severance costs related to the discontinuance of SmartSide fiber.

Adjusted Diluted EPS for the first six months of 2020 was $0.77 per diluted share compared to $0.23 per diluted share in the first six months of 2019. Adjusted EBITDA for the first six months of 2020 increased by $69 million over the prior year to $180 million.

Segment Results

Siding

The Siding segment consists of LP SmartSide Trim & Siding and LP Outdoor Building Solutions® innovative products for premium outdoor buildings. During the six months ended June 30, 2020, LP CanExel prefinished siding was reclassified from Siding to Other, all prior periods presented have been adjusted for comparability.

Net sales for the three and six months ended June 30, 2020 decreased by $11 million (or five percent) and by $18 million (or four percent), respectively, compared to the corresponding periods in 2019, primarily due to decreases in sales of SmartSide fiber, partially offset by SmartSide strand volume increases of three percent in both periods.

Adjusted EBITDA increased year over year by $6 million and $9 million, respectively, for the three and six months ended June 30, 2020, primarily due to the increased SmartSide strand revenue, increased production at the Dawson Creek facility after the prior year conversion to SmartSide strand, and sourcing and operational efficiency savings, partially offset by a decrease in SmartSide 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 $5 million (or three percent) and by $17 million (or four percent) for the three and six months ended June 30, 2020, respectively, compared to the corresponding periods in 2019. OSB prices increased over the prior year by $37 million and $56 million for the three- and six-month periods, partially offset by 16% and 10% lower volumes, respectively. Structural Solutions volumes, as a percentage of total OSB segment volume, were 41% and 42% for the three and six months ended June 30, 2020, respectively, compared to 43% and 42% in the comparable periods of 2019.

Adjusted EBITDA increased over the prior year by $49 million and $76 million for the three and six months ended June 30, 2020, respectively, primarily due to increased prices, lower raw material costs, and cost containment efforts.

Engineered Wood Products (“EWP”)

The EWP segment consists of LP SolidStart® I-Joist (IJ), 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 $28 million (or 26%) and by $19 million (or ten percent) and Adjusted EBITDA decreased by $7 million and $5 million for the three and six months ended June 30, 2020, respectively, compared to the corresponding periods in 2019.

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, Columbia, and Argentina.

Foreign currency changes lowered net sales and Adjusted EBITDA by $8 million and $1 million, respectively, for the three months ended June 30, 2020, compared to 2019. For the six months ended June 30, 2020, foreign currency changes lowered net sales and Adjusted EBITDA by $14 million and $1 million, respectively, compared to 2019. Excluding foreign currency changes, net sales in both the three- and six-month periods increased due to higher OSB and Siding volumes (local and export), partially offset by lower export prices.

2020 Full Year Guidance

LP’s guidance is based on current plans and expectations and is subject to a number of known and unknown uncertainties and risks, including those related to the COVID-19 pandemic and set forth below in “Forward-Looking Statements.”

– LP continues to expect 2020 capital expenditures to be approximately $70 million.
– LP continues to suspend its SmartSide strand sales growth guidance for the full year 2020 but expects high single digit growth for the third quarter.

For the full second 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