Louisiana-Pacific Management Discusses Q2 2012 Results - Earnings Call Transcript

Louisiana-Pacific (LPX)

Q2 2012 Earnings Call

July 31, 2012 11:00 am ET

Executives

Sallie B. Bailey - Chief Financial Officer and Executive Vice President

Curtis M. Stevens - Chief Executive Officer and Director

Analysts

Gail S. Glazerman - UBS Investment Bank, Research Division

Michael A. Roxland - BofA Merrill Lynch, Research Division

Chip A. Dillon - Vertical Research Partners Inc.

Alex Ovshey Ovshey - Goldman Sachs Group Inc., Research Division

Joseph Stivaletti - Goldman Sachs Group Inc., Research Division

Mark A. Weintraub - The Buckingham Research Group Incorporated

Mark Wilde - Deutsche Bank AG, Research Division

Steven Chercover - D.A. Davidson & Co., Research Division

Paul C. Quinn - RBC Capital Markets, LLC, Research Division

Presentation

Operator

Good day, ladies and gentlemen. And welcome to the Louisiana-Pacific Corp. Quarter 2 2012 Earnings Conference Call. My name is Bree, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

Now I would like to turn the conference over to your host for today, Ms. Sallie Bailey, Vice President and Chief Financial Officer.

Please proceed.

Sallie B. Bailey

Thank you very much, Bree, and good morning. Thank you for joining our conference call to discuss LP's financial results for the second quarter of 2012. I'm Sallie Bailey, LP's Chief Financial Officer. And with me today are Curt Stevens, LP's Chief Executive Officer; as well as Mike Kinney and Becky Barckley, our primary Investor Relation contacts.

I will begin the discussion with a review of the financial results for the second quarter of 2012 and the first half of 2012. This will be followed by some comments on the performance of individual segments and selected balance sheet items. After I finish my comments, Curt will discuss the general market environment in which LP has been operating, provide his perspective on our operating results for the second quarter of 2012, and give some thoughts on the outlook for the second half of 2012.

As we have done in the past, we have opened up this call to the public and are doing a webcast. The webcast can be accessed at www.lpcorp.com. Additionally, to help with the discussion, we have provided a presentation with supplemental information that should be reviewed in conjunction with the earnings release. I'll be referencing these slides in my comments this morning. We have also filed an 8-K this morning with some supplemental information as well as our second quarter 10-Q.

I want to remind all the participants about the forward-looking statements comments on Slide 2 of the presentation. Please also be aware of the discussion of our use of non-GAAP financial information included on Slide 3 of the presentation. The appendix attached to the presentation has some of the necessary reconciliation that been supplemental -- been supplemented by the form 8-K filing we made this morning. Rather than reading these 2 statements, I incorporate them with this reference.

Before I get started on the detailed discussion of LP's financial results for the second quarter, I would like to summarize our successful debt refinancing. We strengthened our balance sheet during the quarter by issuing $350 million, a new unsecured bond with a 7.5% interest rate and an 8-year maturity. The majority of the proceeds were used to refinance our 13% bond which had a 2017 maturity date. As a reminder, due to the discounted nature of that bond, the effective interest rate was slightly higher than 19%.

In addition to replacing the secured debt with unsecured debt, we added approximately $100 million to the balance sheet while reducing annual cash interest expense by $5.4 million, and the annual book interest expense by over $13 million. The offering was well received in the market, and we are pleased to end the quarter with a stronger balance sheet and lower interest cost.

With that, let me go into the details.

Moving to Slide 4 of the presentation for a discussion of the second quarter 2012 and first half 2012 consolidated results. We reported net income of $428 million for the second quarter of 2012 -- I'm sorry, we reported net sales of $428 million for the second quarter of 2012, an increase of 18% from the sales reported for the second quarter of 2011. In the second quarter of 2012, we reported a net loss of $37 million or $0.27 per diluted share. We reported a $52 million pretax charge associated with the early debt extinguishment. This represents the make whole provision for the debt which was tendered but associated the deferred cost.

In the second quarter of 2011, we reported a net loss of $33 million or $0.25 per diluted share and the $362 million of net sales. The adjusted income from continuing operations for the quarter is $3 million, or $0.02 per share, based upon a normalized tax rate of 35% compared to a loss of $26 million or $0.19 per share in the second quarter of 2011.

Adjusted EBITDA from continuing operations was $37 million in the second quarter, compared to negative EBITDA of $4 million in the second quarter of 2011. Another solid improvement quarter-over-quarter with a $65 million increase in net sales and higher adjusted EBITDA of $40 million, compared to the second quarter of 2011.

On a year-to-date basis, we recorded $789 million in net sales, a $48 million net loss, and a loss per share of $0.35 as compared to net sales of $694 million and net loss of $56 million and a loss per share of $0.43 in the first half of 2011.

On a non-GAAP basis, we recorded adjusted operating income of $17 million, a loss per share of $0.05 and adjusted EBITDA of $58 million for the first 6 months of 2012, a significant improvement over the first 6 months of 2011 when we recorded a loss of $35 million, a loss per share of $0.32 and adjusted EBITDA of $10 million.

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