Louisiana-Pacific Corporation

11/05/2025 | Press release | Distributed by Public on 11/05/2025 13:46

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 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. We encourage you to review the risks and uncertainties described in the sections titled "Risk Factors" and "Cautionary Statement Regarding Forward-Looking Statements" included in our 2024 Annual Report on Form 10-K and in this quarterly report on Form 10-Q. These risks and uncertainties could cause actual results to differ materially from those projected in the forward-looking statements contained in this quarterly report on Form 10-Q or implied by past results and trends. Our historical results are not necessarily indicative of the results that may be expected for any period in the future, and our interim results are not necessarily indicative of the results we expect for the full fiscal year or any other period.
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 three segments: Siding, Oriented Strand Board (OSB), and LP South America (LPSA).
Demand for Building Products
Demand for our products correlates positively with new home construction and repair and remodeling activity in North America, which historically has been characterized by significant cyclicality. The U.S. Census Bureau published actual U.S. housing starts data on September 17, 2025. September 2025 housing starts have not yet been published by the U.S. Census Bureau, and therefore, we have calculated September housing starts as the average of July and August 2025 actual housing starts. Actual single-family housing starts were approximately 4% and 5% lower, respectively, for the three and nine months ended September 30, 2025, as compared to the same periods in 2024. Actual multi-family housing starts for the three and nine months ended September 30, 2025, were approximately 24% and 20% higher, respectively, as compared to the same periods in 2024. Repair and remodeling activity is difficult to reasonably measure, but the general sentiment among repair and remodeling contractors is more cautious than expected earlier in the year.
Future economic conditions in the United States and the demand for homes are uncertain due to various macroeconomic factors, including interest rates, employment levels, changing trade policy in various jurisdictions (including the imposition of trade barriers, new tariffs and the modification of existing tariffs), consumer confidence, and financial markets, among other things. Additionally, we have experienced increases in material prices, supply disruptions, and labor challenges, which we continue to address as we work to meet the demands of builders, remodelers, and homeowners worldwide.
The international trade landscape has been extremely volatile in recent periods. Earlier this year, the U.S. government announced significant changes to U.S. trade policy, including the implementation or planned imposition of new or increased tariffs and trade barriers on a broad range of goods imported from international markets, including Canada and China, as well as the potential modification or termination of existing trade agreements between the U.S. and certain other countries. In response, certain countries have imposed, or are considering, retaliatory tariffs on U.S. exports. The global tariff landscape continues to shift rapidly, with changes impacting businesses and markets around the world. These changes could negatively affect our sales and our competitive position within the U.S. market and in markets outside the U.S. Further, changing trade policy in the U.S. and other countries, particularly Canada and China, could continue to increase the cost of certain raw materials or components that are critical to our manufacturing process, which could have a material negative impact on our manufacturing costs and our overall financial performance. While we are actively exploring opportunities to mitigate these increased costs, there can be no guarantee that we will be able to achieve successful mitigation strategies or meaningfully offset the financial impact of new or increased tariffs, or other adverse changes to trade policy, in the U.S. or other countries. In the nine months ended September 30, 2025, our cost of sales in the Siding segment was negatively impacted by $7 million related to new or increased tariffs. Based on a preliminary analysis of the potential effects of the tariffs that are currently in force in the United States, as well as in other markets where we operate, we estimate that we could incur potential incremental costs of approximately $8 million in 2025, most of which would likely be incurred by the Siding segment. The potential impact 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 Siding
Our Siding Solutions products are specialty building materials and are subject to competition from various siding technologies, including vinyl, stucco, wood, fiber cement, brick, and others. We believe we are the largest manufacturer of engineered wood siding in North America and South America. We have consistently grown our Siding segment above the underlying market growth rates. Our Siding segment is generally less sensitive to new housing market cyclicality since a majority of its demand comes from other markets, including off-site structure producers and repair and remodel. Our growth in this market depends upon the continued displacement of vinyl, wood, fiber cement, stucco, bricks, and other alternatives, our product innovation, and our technological expertise in wood and wood composites to address the needs of our customers.
Supply and Demand for OSB
OSB is a commodity product, and it is subject to competition from manufacturers worldwide. Product supply is influenced primarily by fluctuations in available manufacturing capacity and imports. The ratio of overall OSB demand to capacity generally drives prices. We cannot predict whether the prices of our OSB products will remain at current levels or fluctuate in the future.
Critical Accounting Policies and Significant Estimates
Note 1 of the Notes to the Consolidated Financial Statements included in our 2024 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.
There have been no changes in the application of principles, methods, and assumptions used to determine our significant estimates since December 31, 2024.
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 net income excluding interest expense, provision for income taxes, depreciation and amortization, stock-based compensation expense, loss on impairment attributed to LP, business exit credits and charges, product-line discontinuance charges, other operating credits and charges, net, loss on early debt extinguishment, investment income, pension settlement charges, other non-operating items, income from discontinued operations, net of income taxes, and net income attributed to noncontrolling interest, 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 net income excluding loss on impairment attributed to LP, business exit credits and charges, 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, pension settlement charges, income from discontinued operations, net of income taxes, and net income attributed to noncontrolling interest, and adjusting for a normalized tax rate, as Adjusted Income (Adjusted Income), which is a non-GAAP financial measure. In addition, we disclose Adjusted Diluted EPS, which is calculated as Adjusted Income divided by diluted shares outstanding (Adjusted Diluted EPS). We believe that Adjusted Diluted EPS and Adjusted Income are useful measures for evaluating our ability to generate earnings and that providing these measures should allow interested persons to more readily compare the earnings for past and future periods. Reconciliations of Adjusted EBITDA, Adjusted Income, and Adjusted Diluted EPS to their most directly comparable U.S. GAAP financial measures, net income and net income per share of common stock - diluted, respectively, are presented below.
Adjusted EBITDA, Adjusted Income, and Adjusted Diluted EPS are not substitutes for the U.S. GAAP measures of net income and net income per share of common stock - diluted 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 operation of our business.
The following table reconciles net income to Adjusted EBITDA (dollar amounts in millions):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Net income $ 9 $ 90 $ 154 $ 358
Add (deduct):
Provision for income taxes 9 23 54 117
Depreciation and amortization 36 31 106 93
Stock-based compensation expense 12 4 24 15
Loss on impairment 13 - 31 -
Other operating credits and charges, net 1 1 5 2
Business exit credits and charges 1 - 1 (14)
Interest expense 4 4 11 12
Investment income (5) (6) (12) (17)
Other non-operating items 1 4 13 (2)
Adjusted EBITDA $ 82 $ 153 $ 386 $ 564
ADJUSTED EBITDA BY SEGMENT
Siding $ 117 $ 123 $ 348 $ 318
OSB (27) 33 46 249
LPSA 5 9 25 29
Other (13) (12) (33) (32)
Adjusted EBITDA $ 82 $ 153 $ 386 $ 564
The following table reconciles net income to Adjusted Income (dollar amounts in millions, except per share amounts):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Net income per share of common stock - diluted $ 0.13 $ 1.28 $ 2.20 $ 5.00
Net income $ 9 $ 90 $ 154 $ 358
Add (deduct):
Loss on impairment 13 - 31 -
Other operating credits and charges, net 1 1 5 2
Business exit credits and charges 1 - 1 (14)
Reported tax provision 9 23 54 117
Adjusted income before tax 34 115 244 463
Normalized tax provision at 25% (8) (29) (61) (116)
Adjusted Income $ 25 $ 86 $ 183 $ 347
Diluted shares outstanding 70 71 70 72
Adjusted Diluted EPS $ 0.36 $ 1.22 $ 2.62 $ 4.84
Key Performance Indicators
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. Census Bureau.
The following tables present summary data relating to: (i) housing starts within the United States, (ii) our sales volumes, and (iii) our OEE performance. We consider these items to be key performance indicators for our business because LP's management uses these metrics to evaluate our business and trends in our industry, measure our performance, and make strategic decisions. We believe that the key performance indicators presented may provide additional perspective and insights when analyzing our core operating performance. These key performance indicators should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the financial measures that were prepared in accordance with U.S. GAAP. These measures may not be comparable to similarly titled performance indicators used by other companies.
We monitor housing starts, which is a leading external indicator of residential construction in the United States that correlates with the demand for many of our products. We believe that this is a useful measure for evaluating our results and that providing this measure should allow interested persons to more readily compare our sales volume for past and future periods to an external indicator of product demand. Other companies may present housing start data differently, and therefore, as presented by us, our housing start data may not be comparable to similarly titled performance indicators reported by other companies.
The following table sets forth housing starts for the three and nine months ended September 30, 2025 and 2024 (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Housing starts1:
Single-Family 249 260 742 782
Multi-Family 116 93 315 263
365 353 1,057 1,045
1Actual U.S. housing starts data, in thousands, reported by the U.S. Census Bureau as published through September 17, 2025. September 2025 housing starts have not yet been published by the U.S. Census Bureau, and therefore, we have calculated September housing starts as the average of July and August 2025 actual housing starts.
We monitor sales volumes for our products in our Siding, OSB, and LPSA segments, which we define as the amount of our products sold within the applicable period measured in million square feet (MMSF) on a standard 3/8" thickness basis. Evaluating sales volume by product type helps us identify and address changes in product demand, broad market factors that may affect our performance, and opportunities for future growth. It should be noted that other companies may present sales volume data differently, and therefore, as presented by us, sales volume data may not be comparable to similarly titled measures reported by other companies. We believe that sales volumes can be a useful measure for evaluating and understanding our business.
The following table sets forth sales volumes for the three and nine months ended September 30, 2025 and 2024 (in MMSF):
Three Months Ended September 30, 2025 Three Months Ended September 30, 2024
Sales Volume Siding OSB LPSA Total Siding OSB LPSA Total
Siding Solutions
461 - 35 496 460 - 11 470
OSB - Structural Solutions
- 379 121 500 - 402 130 532
OSB - commodity
- 376 - 376 - 431 - 431
Nine Months Ended September 30, 2025 Nine Months Ended September 30, 2024
Sales Volume Siding OSB LPSA Total Siding OSB LPSA Total
Siding Solutions
1,393 - 53 1,446 1,318 - 29 1,347
OSB - Structural Solutions
- 1,227 400 1,627 - 1,297 397 1,693
OSB - commodity
- 1,232 - 1,232 - 1,261 - 1,261
We measure OEE of each of our mills to track improvements in the utilization and productivity of our manufacturing assets. OEE is a composite metric that considers asset uptime (adjusted for capital project downtime and similar events), production rates, and finished product quality. We believe that when used in conjunction with other metrics, OEE can be a useful measure for evaluating our ability to generate profits, and that providing this measure should allow interested persons to monitor operational improvements. We use a best-in-class target across all LP sites that allows us to optimize capital investments, focus maintenance and reliability improvements, and improve overall equipment efficiency. It should be noted that other companies may present OEE data differently, and therefore, as presented by us, OEE data may not be comparable to similarly titled measures reported by other companies.
OEE for the three and nine months ended September 30, 2025 and 2024, for each of our segments is listed below:
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Siding 77 % 77 % 77 % 78 %
OSB 80 % 78 % 79 % 78 %
LPSA 72 % 68 % 69 % 73 %
Results of Operations
Our results of operations for each of our segments are discussed below, as are the results of operations for the "Other" category, which comprises other products that are not individually significant. See "Note 13. Selected Segment Data" of the Notes to the Condensed Consolidated Financial Statements included in "Item 1. Financial Statements" 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 portfolio of engineered wood siding, trim, soffit, 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 net sales and Adjusted EBITDA for this segment were as follows (dollar amounts in millions):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
Net sales $ 443 $ 420 5 % $ 1,305 $ 1,196 9 %
Adjusted EBITDA 117 123 (4) % 348 318 9 %
Net sales in this segment by product line were as follows (dollar amounts in millions):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
Siding Solutions $ 440 $ 418 5 % $ 1,298 $ 1,190 9 %
Other 2 3 (11) % 7 7 8 %
Total $ 443 $ 420 5 % $ 1,305 $ 1,196 9 %
Percent changes in average net sales prices and unit shipments for the three and nine months ended September 30, 2025, compared to the corresponding periods in 2024, were as follows:
Three Months Ended
September 30, 2025 versus 2024 		Nine Months Ended
September 30, 2025 versus 2024
Average Net
Selling Price 		Unit
Shipments 		Average Net
Selling Price 		Unit
Shipments
Siding Solutions 5 % - % 3 % 6 %
For the three and nine months ended September 30, 2025, Siding net sales increased year over year by $22 million and $108 million, respectively, reflecting higher selling prices. The nine-month increase also included a benefit from higher sales volume. Within the Siding segment, ExpertFinish®net sales increased by 31% and 24% for the three and nine months ended September 30, 2025, respectively, compared to the prior-year periods.
Adjusted EBITDA for the Siding segment decreased year over year by $6 million for the three months ended September 30, 2025, with improved pricing of $18 million more than offset by $13 million mill overhead and inventory absorption, $5 million of strategic investments in sales and marketing, $3 million of SG&A, and $2 million of tariff expenses. Adjusted EBITDA increased $30 million for the nine months ended September 30, 2025, compared to the prior-year period. This growth was driven by higher sales volume and higher selling prices of $70 million, partially offset by strategic investments in sales and marketing of $12 million, $13 million of mill overhead and inventory absorption, $7 million of tariff expenses, and $5 million of SG&A.
OSB
The OSB segment manufactures and distributes OSB structural panel products, including the innovative value-added OSB product portfolio known as LP®Structural Solutions (which includes LP®TechShield®Radiant Barrier Sheathing, LP WeatherLogic®Air & Water Barrier, LP Legacy®Premium Sub-Flooring, LP®FlameBlock®Fire-Rated Sheathing, and LP®TopNotch®350 Durable Sub-Flooring) and LP®Oriented Strand Board.
Segment net sales and Adjusted EBITDA for this segment were as follows (dollar amounts in millions):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
Net sales $ 179 $ 253 (29) % $ 696 $ 917 (24) %
Adjusted EBITDA (27) 33 (182) % 46 249 (82) %
Net sales in this segment by product line were as follows (dollar amounts in millions):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
OSB - Structural Solutions $ 105 $ 136 (23) % $ 391 $ 507 (23) %
OSB - commodity 71 112 (37) % 295 395 (25) %
Other 3 5 (36) % 11 15 (27) %
Total $ 179 $ 253 (29) % $ 696 $ 917 (24) %
Percent changes in average net sales prices and unit shipments for the three and nine months ended September 30, 2025, compared to the corresponding periods in 2024, were as follows:
Three Months Ended
September 30, 2025 versus 2024
Nine Months Ended
September 30, 2025 versus 2024
Average Net
Selling Price 		Unit
Shipments 		Average Net
Selling Price 		Unit
Shipments
OSB - Structural Solutions (18) % (6) % (19) % (5) %
OSB - commodity (28) % (13) % (24) % (2) %
For the three and nine months ended September 30, 2025, OSB net sales decreased year over year by $74 million and $221 million, respectively. These decreases were primarily driven by lower OSB prices and a decline in sales volume.
Adjusted EBITDA for the OSB segment for the same periods decreased year over year by $60 million and $203 million, respectively, also reflecting the impact of lower OSB prices and a decline in sales volume.
LPSA
The LPSA segment manufactures and distributes OSB structural panel and Siding Solutions products in South America and certain export markets. This segment also sells and distributes a variety of companion products to support the region's transition to wood frame construction. The LPSA segment carries out manufacturing operations in Chile and Brazil and operates sales offices in Argentina, Brazil, Chile, Colombia, Mexico, Paraguay, and Peru.
Segment net sales and Adjusted EBITDA for this segment were as follows (dollar amounts in millions):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
Net sales $ 39 $ 47 (17) % $ 134 $ 140 (4) %
Adjusted EBITDA 5 9 (50) % 25 29 (13) %
For the three and nine months ended September 30, 2025, net sales decreased year over year by $8 million and $6 million, respectively, primarily due to lower OSB prices.
For the three and nine months ended September 30, 2025, Adjusted EBITDA decreased by $5 million and $4 million year over year, respectively, primarily due to lower OSB prices.
Other
Our other products segment includes other minor products, services, and closed operations, which do not qualify as discontinued operations. Additionally, this segment includes corporate expenses that are not allocated, such as general administrative costs and stock-based compensation. During 2024, the equity method investment held by Entekra Holdings LLC, our off-site framing operation, sold substantially all of its net assets. Other net sales were $2 million and $6 million for the three and nine months ended September 30, 2025, respectively, as compared to $2 million and $7 million for the corresponding periods in 2024, respectively. Adjusted EBITDA was $(13) million and $(33) million for the three and nine months ended September 30, 2025, respectively, as compared to $(12) million and $(32) million for the corresponding periods in 2024, respectively.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses were $95 million and $250 million for the three and nine months ended September 30, 2025, respectively, compared to $75 million and $215 million for the corresponding periods in 2024, respectively. The year-over-year increase in selling, general, and administrative expenses for both periods was primarily driven by higher employee compensation.
Income Taxes
We recognized an estimated tax provision of $9 million and $54 million in the three and nine months ended September 30, 2025, respectively, as compared to $23 million and $117 million for the comparable periods in 2024, respectively. 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 the nine months ended September 30, 2025, the primary difference between the U.S. statutory rate of 21% and the total effective tax rate of 26% relates to state income tax and non-deductible compensation. For the nine months ended September 30, 2024, the primary difference between the U.S. statutory rate of 21% and the total effective tax rate of 25% relates to state income tax.
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 2024 Annual Report on Form 10-K and "Note 10. Commitments and Contingencies" of the Notes to the Condensed Consolidated Financial Statements included in "Item 1. Financial Statements" 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 assess our liquidity in terms of our ability to generate cash to fund our short- and long-term cash requirements. As such, we project our anticipated cash requirements as well as cash flows generated from operating activities to meet those needs. We anticipate long-term cash uses may also include strategic acquisitions. On a long-term basis, we expect to rely on our credit facilities in effect from time to time for any long-term funding not provided by operating cash flows. 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 share repurchases may be commenced, suspended, discontinued, or resumed, and the method or methods of effecting any such repurchases may be changed, at any time, or from time to time, without prior notice.
We expect to fund our capital expenditures over at least the next 12 months through cash on hand, cash generated from operations, and available borrowing under our Amended Credit Facility, as necessary.
Operating Activities
During the nine months ended September 30, 2025 and 2024, cash provided by operations was $315 million and $500 million, respectively. The decrease in cash provided by operations was primarily related to lower net income and changes in working capital.
Investing Activities
During the nine months ended September 30, 2025 and 2024, cash used in investing activities was $216 million and $122 million, respectively, relating to capital expenditures. The year-over-year increase in capital expenditures was primarily related to higher spend on growth and sustaining maintenance projects in the current year.
Capital expenditures in 2025 are expected to be approximately $315 million. We expect to fund our short-term and long-term capital expenditures in 2025 through cash on hand, cash generated from operations, and available borrowing under our Amended Credit Facility, as necessary.
Financing Activities
During the nine months ended September 30, 2025, cash used in financing activities was $124 million, which included $61 million for share repurchases of LP common stock under the 2024 Share Repurchase Program (defined below) in the three months ended March 31, 2025. Additionally, we paid cash dividends of $58 million and used $3 million to repurchase stock from employees in connection with income tax withholding requirements associated with our employee stock-based compensation plans. In connection with other financing activities, we paid $2 million of debt issuance costs related to the amendment of our credit facility.
During the nine months ended September 30, 2024, cash used in financing activities was $252 million, which included $188 million for share repurchases of LP common stock under the share repurchase program authorized by LP's Board of Directors in May 2022. Additionally, during this period we had $56 million of dividend payments and $8 million of stock repurchases from employees in connection with income tax withholding requirements associated with our employee stock-based compensation plans.
Credit Facility and Letter of Credit Facility
In November 2022, LP entered into the Credit Agreement with American AgCredit, PCA, as administrative agent, CoBank, ACB, as letter of credit issuer, and the lenders and the guarantors from time to time party thereto relating to its revolving credit facility. On March 26, 2025, LP entered into the First Amendment with American AgCredit, PCA, as administrative agent, CoBank, ACB, as letter of credit issuer, and the lenders and voting participants party thereto, which amended the Credit Agreement (the Amended Credit Agreement) to (1) increase the aggregate principal amount for the credit facility from $550 million to $750 million, (2) increase the sub-limit for letters of credit from $60 million to $75 million, (3) change the interest rate for revolving borrowing, (4) change the capitalization ratio limit, and (5) extend the maturity date to March 26, 2032. As of September 30, 2025, there were no outstanding borrowings under the Amended Credit Facility.
The Amended Credit Agreement contains various restrictive covenants and customary events of default. The breach of restrictive covenants or the occurrence of any other event of default under the Amended Credit Agreement could result in the acceleration of our obligation to repay the indebtedness outstanding thereunder. The Amended Credit Agreement also contains financial covenants that require us and our consolidated subsidiaries to have, as of the end of each quarter, a capitalization ratio (i.e., funded debt less unrestricted cash to total capitalization) of no more than 65%. As of September 30, 2025, we were in compliance with all financial covenants under the Amended Credit Agreement.
In May 2024, LP entered into a new letter of credit facility agreement, replacing the letter of credit facility agreement dated May 2020. This agreement 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). The Letter of Credit Facility provides for a letter of credit fee, due quarterly, ranging from 1.000% 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 Agreement, including the capitalization ratio covenant. All amounts outstanding under the Letter of Credit Facility become due on April 15, 2029. As of September 30, 2025, we were in compliance with all covenants under the Letter of Credit Facility.
Other Liquidity Matters
Off-Balance Sheet Arrangements
As of September 30, 2025, we had standby letters of credit of $14 million outstanding related to collateral for environmental impact on owned properties, a deposit for a forestry license, and insurance collateral, including workers' compensation.
Potential Impairments
The carrying values of our long-lived assets are reviewed for potential impairments, and adequate support is believed by management to exist for each asset's carrying value based on anticipated cash flows derived from estimates of future demand, pricing, and production costs, assuming certain levels of planned capital expenditures. However, if demand and pricing for our products decline significantly below cycle-average levels, if capital is allocated to alternative projects, or if changes occur in the wood supply for mills, future impairment charges may be required.
Potential asset dispositions are also periodically reviewed, taking into account current and anticipated economic and industry conditions, the strategic plan, and other relevant factors. A decision to dispose of specific assets may require assumptions regarding the transaction structure of the disposition to estimate the net sales proceeds, which could be lower than prior estimates of undiscounted future net cash flows. As a result, impairment charges may be necessary in connection with such dispositions.
During the third quarter ended September 30, 2025, $13 million in non-cash, pre-tax impairment charges were recorded related to equipment that will not be utilized in future operations.
During the second quarter ended June 30. 2025, $17 million in non-cash, pre-tax impairment charges were recorded. These included $11 million related to acquired equipment that will not be utilized in future operations, $4 million related to property, plant, and equipment associated with a facility closure, and $2 million primarily related to an operating lease asset associated with a previously closed facility.
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