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.

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…

Thank you, Sallie, for that review. In my remarks, in early May, I did mention that April was off to a good start, and that I was cautiously optimistic that this would continue for the remainder of the second quarter rather than the head fake that we saw last year between Q1 and Q2. The results that Sallie just reported justified a cautious optimism as they were significantly better than last year and, clearly, above our expectations, primarily due to the increased housing activity, up 22% quarter-to-quarter and 27%, 6 months to 6 months. This led to improved OSB pricing which is 22% above last year, and volumes that were 13% better. We also had a much better quarter in Siding where sales were up 16%, and segment earnings higher by over 70% compared to Q2 of last year. In fact, after adjusting for the costs associated with our successful debt refinancing, LP made money. This quarter, we find ourselves once again leaning towards cautious optimism. On the plus side, single-family housing permits ended June in the annual rate of 540,000, a 22% improvement over last year, and multi-family permits June's number was 262,000, 52% higher than last year. Inventory of new homes for sale continued to decline now standing at about 115,000. In addition, there have been comments about the shortage of existing homes for sale now stands at about 2.5 million. Vacancy rates both for apartments and vacant homes for sale continued to decline. So with that, the current consensus for 2012 stands at about 750,000 single and multi-family housing starts. This is a forecasted increase of slightly over 25% compared to last year. For 2013, the consensus is now just above 900,000, a 21% increase over the forecast for 2012. Confidence in the housing market is continuing…

Great. Thank you, Curt. Bree, we're ready for questions.

[Operator Instructions]. And your first question comes the line of Mark Connelly from CLSA.

This is Kurt Shown [ph] filling in for Mark. So in SmartSide, where is all the growth coming from? Is it more a market share story? Is it more of a general demand growth story? And what markets are you seeing growth in?

Well, we've talked about in the past was Siding is -- Siding was about a 65% to 70% new home construction when we entered into the downturn. With housing falling off as dramatically as it has, we have refocused our efforts into a couple different segments. One, retail is very important to us so if you go into a Menards, or Lowe's, or Home Depot, you will see our Siding products in all those stores, and we've expanded the number of SKUs. So we've seen growth in retail. The other area we've seen quite a bit of growth is in the nonresidential construction area. And this would be sheds and barns and those kinds of structures. We've done very well in penetrating that with a variety of products, both really the entire shell of those sheds. And then in the repair remodel sector, we just began about a year ago, penetrating that. So this would be the one step distributors to go directly to the installers. So we've seen growth in those segments. And then from a product standpoint, we've seen a wide acceptance of our trim products, and this would be soft [ph] Trim and Fascia. So we're seeing growth there.

Are there any specific areas of the country that you're seeing more growth than others?

Yes. Siding, as a cladding for a house, is very regional. Where Siding is very strong, it's strong in the middle of the country. So the Kansas City, St. Louis those markets are strong, and the Denver market, strong, wood-based siding is strong in the Pacific Northwest. And we are seeing a lot of growth in our panel products in the southeast and southwest.

Okay. And then secondly, it looks like OSB prices are basically back to '06 levels besides the spike back in 2010. When do you expect idle capacity to come back online? What's your inflection point in terms of housing starts and pricing?

Well, if you look at what capacity is currently running, we can add about 3 billion square feet of capacity to what is running today. So our numbers in the 850,000 to 900,000 housing start level, that's when we need to consider looking at some of the capacity coming back online.

Your next question comes from the line of Gail Glazerman from USB (sic) [ UBS ].

Speaking on OSB pricing a little bit, can you touch on what you think has driven some of the regional variation that's developed over the last couple of quarters, and if there's any signs of those gaps narrowing?

Well, as you -- you're exactly right. The pricing, from a regional standpoint, and it's not just regional, as Sallie mentioned it's also by product type. So if you look at the Random Lengths trans and -- tracks like 90 products, there's been quite a divergence in the last 2 quarters, probably the most significant is Western Canada. If we look back to the middle of last year, Western Canada was selling at a significant discount to the rest of the regions. And now it is the highest. So you're seeing pricing from the Southeast forego go for approximately $208 per 1,000, for Western Canada $267. So you are seeing a wide variation. There is a natural arbitration that takes place there. When you have this big a disparity, manufacturers in the Southeast will sell into those other regions and take the freight differential off of that and that will have a tendency to drive the prices closer together. So we do see that, that pricing will come closer together as the year progresses.

Okay. And when you look at kind of ramping up your capacity and adding shifts, I guess, one, can you just kind of outline what your current operating rate is both effective and actual? And have you had any issues, kind of, adding shifts as you wanted? Have there been any kind of roadblocks and stumbling blocks there?

The operating rates for what is running, we ran in the low 80s for the second quarter. If you take the 1.6 billion square feet that's not running, that would put us in the 65 kind of range. As far as adding shifts, we have not had any significant issues in the U.S. We are having some issues in Canada, and that's largely related to skilled trades. So one of the projects that I mentioned as we ramp-up is to make sure that we have adequate human capital needs to staff these mills. So we are focused on that aspect of it.

Okay. And just going back to the potential expansion in Chile, can you give a sense of timeframe and cost? And also how does that impact your thought process on ramping up and adding -- expanding production in Brazil?

Well, the problem, both from North America and from Brazil, is it's very expensive from a freight standpoint to satisfy the demand in Chile. So that's why we're looking at local capacity. The -- we expect the site selection and environmental permitting process to take at least 1 year. And then as we're going through that process, we'll also be putting together the project plan to determine how much the plan will cost. It is our intention to use -- do what we did for the first 2 mills there and use used equipment from North America to satisfy the primary machinery and equipment. So we think we can do this on a very low cost basis as we do have permanently curtailed facilities with assets that we -- can be deployed. So the growth -- back to your question on Brazil, the growth in capacity in Brazil will be predicated upon local demand and then the recovery of the export market that Sallie talked about so often in the first half of the year.

Your next question comes from Mike Roxland with Bank of America Merrill Lynch.

Speaking in line with the last couple of questions, you've given improved OSB demand and pricing. Have you heard of any mills that have been shut -- or idled that might restart? And in your own internal budgeting, are you accounting for any potential mill restarts?

Well, we haven't put our budget together for the 2014 and '15 timeframe yet. If you think about what I said that we have to consider whether we bring on capacity when we get to 850,000 to 900,000 housing starts, the current consensus is for housing starts to be 900,000 next year. Now as we think that is reality, we will have to make some decisions probably in the middle of the year on we're bringing capacity online. Now let me be very clear on that, that this is a long-term decision that's based on demand. It isn't a short-term decision based on pricing. If the facility has been down less than 2 years, we believe that it will take 6 to 8 months to bring that operation back online and probably $5 million to $7 million worth of cash. If it's been idle more than 2 years, our timeframe probably moves out to the 10 to 12 months, and the cost goes anywhere between $8 million to $10 million. And then there are some idle facilities that we count as idle facilities that have never operated. And it's unknown how long it would take to complete those operations to hire the people, to put the infrastructure in place. So these are not short-term decisions. They're longer-term decisions. But specific to LP, we will probably need to make some decisions as we see the market moving to 900,000 or more in the middle of next year.

Got you. Appreciate that, Curt. Just last question on exports. Have there been any noticeable change in exports from North America to Chile? I would have seen -- even seeing less exports and hence, better pricing dynamics in Chile, given what we've seen through the better domestic demand.

I'm not sure there've been less exports to Chile. In answer to your question, what we're trying to do there is we're trying to satisfy a market until we can bring on that local capacity. Now I will tell you that export pricing hasn't moved nearly as much as the domestic pricing, and that is obviously creating a quandary for all manufacturers who are looking at export volumes.

When you say that export pricing have -- it's been pretty stable?

It hasn't moved much if I look at what's been exported to Europe and to Asia. It's been pretty flat. And as a result, I think, certainly, we have de-emphasized our shipments to Asia, in particular.

Your next question comes from Chip Dillon with Vertical -- from Vertical Research Partners.

Curt, you mentioned that there are -- and by the way, thanks for the specifics on, sort of, the restart process. You mentioned that there were some facilities that have not run before, and obviously you're including Clarke County. Is there something else in your system that you were thinking about beyond Clarke County when you said that?

I was actually talking about the industry, Chip. So I was talking about the capacity that could come back on from the industry. Our Clarke County facility, we actually did run that for 2 to 3 months. So we have gone through a big piece of the debugging but it, obviously will take us a period of time to bring that back online. I was referring to some of the facilities that were under construction, where the construction was either halted or -- yes, was primarily halted.

Got you. Like in South Carolina and maybe Alberta, places like that.

Right. Just to put it -- be very clear for our system, we've got 1.6 billion of idled capacity, half of that is the Clarke County facility that we'd -- that I would put in the category kind of between the -- been shut for more than 2 years and never, because we did run it a little bit. Then we have 1 in the category of being shut more than 2 years, and that's the Chambord facility. And then our Dawson Creek facility has only been shut down since last October.

And what is Chambord and Dawson's relative capacities?

Dawson is around 420 million square feet and Chambord is about the same.

Got you. And I guess the trick is, I mean, being -- having been around the block, a lot, in this industry, is that as you get into the middle of next year, obviously, Dawson and probably even Chambord would easily make it into that next season. But there is a seasonal element. And are you going to -- not to pin you down, but are you going to need to see several months or quarters of starts at and above this 900,000 level before you pull the trigger?

I think what we're going to have the look at is the leading indicators to give us a degree of confidence that's going to be north of 900. As you get to 900, the industry running what it's running today, even filling out with shifts, can't satisfy the demand.

Got you. And on that point, there are a number of mills out there that are running that had cut back on shifts. And could you just -- imagine there's a big variation, but you're on the front lines. Are there facilities or how does it work when you've had, like, 1 shift working in a facility that could handle 2, but you've only had 1 shift, say, for 5 years because of the downturn. How quickly can you add that second shift? Does that build in to a number of months or can it be done more quickly than that?

Well, first, what you do is you use overtime. And so you use the people that you've already got to run on the weekends. You get additional capacity through the overtime. And then as you decide to make that a more permanent addition of the shift, you bring people in to replace overtime. So you move into it gradually. And so it's probably no more than 1 month to 1.5 months.

After you've kind of exhausted the overtime option?

Right.

And then the last question, is the equipment that you're thinking about for Brazil, I guess, that would be in some of the -- like, I know there was a mill in Texas that you shut down a few years ago, but would that be -- that wouldn't be in these 3 facilities that are considered indefinitely down. These would be in some of the older facilities you've had down for longer, is that correct?

That's correct. And there's couple of reasons for that. One, generally the result of the one who we permanently curtailed have production capacities are more in line with adding incremental volume in South America. What you wouldn't want to do is take a 500 million square foot mill and drop it into a market, that's 300 million square feet. So the mills we've used -- Woodland, we shut down 7 years ago. So we have equipment there, Athens, Silsbee we've talked about and then Sam Michele, potentially.

And then last question, I'll turn it over after this. When you look at the -- I think it's the LSL plant that was built in a converted operation in Maine, do you see that in the next housing cycle being able to get close to what you thought it could do at least? Is the market likely to be there or do you think that there's been some changes in the market that might not make that plant as relevant as you thought it might be when you planned it?

Last year, I think, there's been some changes on the market that are just the opposite, because we do think that lumber is going to come over -- come under pressure availability. The beetle kill in British Columbia is, obviously, the first thing that comes to mind, but also the change in the design values for Southern Yellow pine are going to make it a much easier decision for the builder to use our Laminated Strand Lumber as a replacement for beams and headers.

Your next question comes the line of Alex Ovshey from Goldman Sachs.

On the OSB side, to be clear, some of that volume that's booked in that segment, is that export volume to South America?

Yes.

Okay. Would you be able to quantify what percentage of your volume, in the quarter, went into the export market?

Probably 5% to 10%.

Okay. So in that volume you said because of freight you're not really making any margin?

That's correct.

Okay. That's helpful. And then on the input cost side, can you talk about what the input costs did for you guys there in the quarter? And if you have any forward commentary on costs over the next couple of quarters or into the third quarter?

Yes. I -- in terms of input costs for the quarter, they -- all in, we actually had lower costs than we have had quarter-over-quarter. We think going forward that, in particular, our benzene costs may show some increases, and we had hoped to see some of the benefit from oil -- lower oil pricing. But that's not, unfortunately, that's not really what's occurring, benzene sort of moved away from oil. And we think those prices, we may see some upticks in the third quarter. But all in, Alex, the big product increases for us came in 2011, and we're not -- cost increases, and we're not really anticipating similarly large raw material increases in 2012.

Got it, Sallie. And then just on the operating leverage in the OSB segment, can you just talk about how you see the incremental profitability of an additional 1,000 square feet of OSB sold in that segment? Maybe the other way to ask that question is, what the mix between fixed and variable costs for your domestic OSB business?

When we look at the OSB results for the second quarter, what we really see is some improvement based on the increased throughput. But the real lever there is the improvement in pricing.

But going forward, should we think that there is going to be an additional benefit from increase in throughput? Or why would you not also see the increase in throughput in that business?

Well, we will see some improvement. But historically, it's not really moved the needle nearly as much as the changes in OSB pricing.

Right. Right. Okay, that's fair. And then just shifting to the Engineered Wood Products business, can you just talk about at what level of housing starts do you think that's a business that can turn profitable?

Yes. We -- again, I keep coming back to that 900,000, I think that's where it probably is contributing a little bit. At 1.2 million I think it's returning its cost of capital.

Okay. Got you, Curt. And just lastly for Sallie just a couple of modeling questions. Just -- can you just give us an update on what the run rate interest expense is, quarterly, post the refi? What do you write fully diluted share count is? And then just maintenance CapEx in the business on an annual basis?

Okay. So the interest expense going forward, I'd have to do the math, but it's decreased by the -- by that -- the interest -- the $13 million.

Okay, per annum, so just...

Right. So that's the way to do that off of a -- do it off of -- calculate it off of the 2011 numbers. What was the second question? Maintenance capital is $1 million to $2 million per plant, assuming they're running full out. And as I mentioned, that's $25 million of CapEx we're anticipating for the full year of 2012. And then what was your middle question?

Fully diluted share count and also just on the normalized tax rate.

Well, the normalized tax rate, again, we're recommending that you all use a 35% rate, which is what it would look like if we had normalized earnings, and we're earning -- we didn't have to take these Canadian valuation allowances. And on the share count, that will change as we become profitable. So it will -- you'll see the -- it should go up to about $142 million once we go profitable on a full year basis. But until we're profitable on a GAAP basis, we don't count those additional shares.

Your next question comes from the line of Joe Stivaletti of Goldman Sachs.

Yes, just a couple little things to follow-up. You talked a lot about your perspective on potentially adding shifts or opening capacity at some point in the future. I wonder, though, if you could talk more broadly about the market on the supply side. I mean, are you seeing much happening there, or are you seeing people being quite disciplined? Have you heard of anything being added in terms of supply, recently? Just trying to get color on that, that you might have.

Yes. Well, the demand is actually in pretty good balance. If you look at the increase in volume that APA announced, it's about 11% increase in Q2 -- over Q2. That's pretty consistent if you think about it. Housing up 22%, housing's less than 1/2 of the demand for OSB. So if you do the numbers, 11% sounds about right from a production to match the increase in the housing demand. I am not aware of any facilities in the process of being started up right now.

Okay. And the other thing is I was wondering if you could just shed a little bit of light on the fact that you indicate that your average OSB price, year-over-year, was up 22%, which is a fair amount below the 3 benchmarks you show in your -- in the back of your 10-Q when you -- on a year-over-year basis. So I'm just wondering if you could expand a little bit on why there's that differential, what are the major reasons why that exists?

Well, there's a -- let me start out with a couple things. One is there is the regional difference. So we've got, just between the Southeast at the end of July -- running into June, and Western Canadian, you have an $80-gap there. So the first thing you have to do is you have to adjust for the regional mix of where you sell your products. The second thing is less than 20% of our product is actually 7/16. So then you have to look at what the other increases, or the changes in prices, have been for your flooring products, for your radiant barrier products, for thin OSB. So you have to look at the differences there. As an example, T&G flooring, actually the price was less than the price in 7/16 in the second quarter, which is odd because you're adding value to it, but that's the way Random Length is printed. So you have how to look at that. Then the third thing you have to look at is what is your mix of value-added products, and how does that play into the overall pricing environment. Remember from a value-added standpoint, what you try to do is you try to price that based on competitive substitutions of that product, and you don't always get all the increase in the Random Lengths, and you certainly don't get the decrease in the Random Lengths. So you try to maintain a more steady margin there. An example there would be what we're selling into the furniture market. Furniture market -- the pricing there certainly goes up with Random Lengths, but it doesn't go up nearly as much. And then the fourth factor you have to look at is how are you selling your product. If you're selling your product on contract, then it is priced at the time of shipment, and whatever I ship this week, it's priced based on last week's. If you're pricing it on the time of order, and you're out 3 weeks to the order file, then you got a lag in a rising market, but you also have the same lag in a falling market where you'd have an advantage. So those are the, kind of, the 4 areas I would look at.

And then, Joe, the export aspect that we've mentioned previously.

Okay. Yes. That's very helpful. And just one quick follow-up there. Do you -- I don't see in your filings where you explicitly state what your average realizations for OSB were. I mean, is that a number that you provide or -- I don't see it anywhere.

It is not.

Yes, we don't share that.

Okay. So it -- when you show your sales for the OSB segment, which is $195 million this quarter, does that correspond to when you show your production volume chart, does that correspond to just the one line, the $922 million? Or is that not really -- does that math not really work? Does that include other things?

Well, the production is what we produced and then the sales volume is the -- you can get it from the increase that we give. We give an increased percentage, but we don't specifically state that.

Your next question comes from the line of Mark Weintraub with Buckingham Research.

First, just a quick clarification on -- when you said making a decision in the middle of next year, so does that mean that the earliest that realistically you'd be restarting a new facility would be for the 2014 building season?

If we make a decision in the middle of next year, that would be the earliest.

Okay. And that is what you had said, that, that will be the soonest you would make a decision?

Well remember what I said is I'm basing this on what I expect housing starts to exceed 900 -- the 850,000 to 900,000. And we have confidence on that. Today given what the forecasts are, I would say that, that's the middle of next year. That's my comment.

Okay. And then you also mentioned that less than 20% of your OSB mix is actually the 7/16 et cetera and in the benchmark that many of us often look at. Can you help us a little bit as to what are some of the other large percentage categories? And if now is not the time, that's fine, but that would be really helpful if at some point, and if you can do it now great but give us color on that.

What we said is over 1/3 of our volume was value-added products. So that would include our flooring products which are thicker products. It would include our radiant barrier product, it would include rim board, web stock and our FlameBlock. So the remaining 2/3 is going to be -- about 1/2 of the remaining 2/3 is going to be commodity, 7/16 and 3/8 and the rest is going to be different thicknesses, 9 and 10-foot panels and others.

Mark, well -- point taken. I mean, we'll try to figure out if there are any other sort of standards that we can provide. But not promising anything, but we'll take that into consideration.

Great. Appreciate that. One small question too. I saw that the LVL/LSL volume was down year-over-year despite housing, obviously, being stronger. What was going on in that on the volume basis?

That was principally the export. We exported a fair amount of LVL to Australia last year. In the first half of this year, we haven't exported as much. They're going through a little bit of a slowdown in the building in Australia, plus there was some inventory issues at several of our big customers. But that was -- we actually were up in the U.S., quarter-over-quarter, and down internationally.

Okay. And then one last one. If you look at your price in your various OSB categories in July or where it is currently, how does that stack up relative to the 2Q average, because, clearly, if you're looking at Random Length, and you look at the mainstay benchmarks it's about $25 per unit higher. How would your actual, given the mix that you have and all the various points that you've been making, how would it compare, again, either now or the July average versus 2Q?

I don't have an answer to that because I don't have that data in front of me. I would expect our realization would be higher in July than it was in June.

Right. And then versus the 2Q average as well.

Well, right now, Random Lengths in July is higher than the Q2 average.

Your next question comes from the line of Mark Wilde from Deutsche Bank.

I, kind of, feel like you ought to bring Rick Frost [ph] back for a little bow here after what he went through the last 5 or 6 years. I'm curious if you can talk, first of all, about any just near-term supply disruptions that are going on in the industry, we'd, I think, heard about a mill that didn't have any power up in Saskatchewan or Alberta. That and any other things that you think may be affecting the market in the near term?

Well, there's couple things. There have been several lightning strikes, I think, our mills have been affected a couple of times with lightning strikes. We've had, within LP, we've had some log outages in Canada in our Swan Valley mill, and we've had some difficult log situations in some of the southern mills in Jasper, Carthage and Hanceville where we've lost a few days of production there just because of inavailability of logs. And then we did have one equipment failure that we lost, I think, 1 or 2 days in 1 of our mills. But that's not atypical, I mean, there's things you have to deal with, but those are the ones that I've heard about.

Okay. Right. Second question just the thoughts on, kind of, consolidation in the business. Rick used to say he thought pretty much everybody that was in it was in it to stay. But if you look at the structure of the OSB business, it seems like there's a reasonably long tail of, sort of, second and third tier producers. And I just wonder, with the business picking up, whether you think there's room for some more consolidation in the business?

Yes. I think, as you and I've talked in the past, I think there is room for consolidation. But you have to have a willing buyer and a willing seller that put a value on it that makes sense. And as we've talked about it when the market's going down, we didn't see a lot of activity, whereas at the bottom, we saw a little bit of activity because we had some folks go through bankruptcy. So there's some ownership changes there. And now that we're coming out of it, we'll see from a consolidation -- from my perspective, the easiest one, and I have to have a willing seller, is to consolidate our position in the Peace Valley mill.

Okay. All right. Another question, kind of going back to Chile. I just -- I've seen that one of the biggest -- the biggest forest products company down in Chile, or Alco, has made a couple of good sized acquisitions here in the U.S., most recently Flakeboard, yet they don't seem to want to do anything in the OSB business down in Chile. Do you have any thoughts on that?

Well, they do want to do something in OSB. They're private labeling from us.

All right. But they haven't done anything in terms of production. And now they've bought about 7 or 8 wood panel plants up here in the U.S. to go with what they have down in South America.

We have a weary eye on them because, you're right, they are an inquisitive bunch.

Your next question comes from the line of Steve Chercover with D.A. Davidson. Steven Chercover - D.A. Davidson & Co., Research Division: I, too, wanted to drill in a little bit on the cost structure because it occurs to me that the costs were up about $20 per thousand. And I would've thought they were going to fall. So is there anything else beyond the occasional wood problem freight and benzene?

Steve, we're not saying that. How are you doing that calculation?

Maybe we ought to take that off-line and talk to Mike. But our costs were not up in Q2. Steven Chercover - D.A. Davidson & Co., Research Division: Yes, I'll speak to Mike on that then. And then, I guess, it's terrific that you're at the point in Chile that you think you're ready for another facility. I guess, it's a little ironic to me that Brazil, which has got Olympics pending, and I think World Cup soccer is not growing a little faster. Are they still resistant to single-family dwellings?

Actually, it is a visionary effort there to make it out of wood products. But just a couple anecdotes there, we have more sales, more houses, let's see, how do I put this, more houses were sold with wood in Q2 than all of last year, with our system. So we had -- we're having very good success in the penetration, but it's just slow to get going. And when we do get it going, that mill's going to be exactly at the right place. Now there is a little bit of turmoil going on in Brazil. As you know, their growth rate has slowed. The economy is in a -- kind of a difficult spot. And then the reai has certainly, Sallie mentioned the foreign exchange loss that we had, the reai has weakened considerably against the dollar. Steven Chercover - D.A. Davidson & Co., Research Division: So I guess you outlined 4 potential sets of assets that could go down to South America. I mean, despite the slow absorption in Brazil, you think one of them could have -- you could have another one -- facility in Brazil as well?

I think, over time, that's going to be necessary. Because If we get just a fraction of the penetration we've had in Chile, we're going to need additional capacity there now. Steven Chercover - D.A. Davidson & Co., Research Division: So you might be almost at the tipping point then, given your comments on Q2 versus all of last year.

Well, again we're starting from a very low base. I wouldn't read that into it. But I would suspect that when we get out to 2014, we're going to have to think seriously about relocating some of those assets. Steven Chercover - D.A. Davidson & Co., Research Division: Okay. And then all the anecdotal discussion says that field inventories are still very tight. Can you just confirm that?

From everything I've seen, and it's the same thing you can do, drive around, look at your lumber yards. And if you can see a material above the fence line, they probably have adequate stock. If you can't see anything, they probably don't. Steven Chercover - D.A. Davidson & Co., Research Division: Okay. And last quick question, you gave us some good color, I guess, where Houlton becomes profitable and then earns its cost of capital. How would you characterize just the -- its operational elements? Is it running sufficiently for you to say that you did a good job bringing it up? Or does it need any tweaks at all?

No. The mill is running very, very well. But it's only running at 20% of capacity. So we've changed shifting patterns there. So it's -- we're running it as cost effective as we can. So we're confident that we can run that mill at high yield and high quality levels because we have been doing that even if it has reduced capacity. I think the only additional capitals required would be a little bit on the green end. But it's not significant.

Your next question comes from the line of Paul Quinn with RBC Capital Markets.

A quick question -- question on that capacity adds. If -- Curt, you've done a good job, sort of, explaining how do you think about it. But in terms of your regional order files, is there an area with a longer order file that might suggest that would be an area that you'd look at adding capacity to? Because it seems like you've got mills located all around North America.

Yes. Where we're seeing strength is in the West Coast. Amazingly enough, Phoenix and Las Vegas are actually got home starts going in, the coast of California communities are pretty strong. And then we're seeing pretty good activity in the Pacific Northwest. So the West is strong. And then Texas, as you know, is whether this, as well as any region, they continue to build in the Texas region. Where we aren't seeing anything really is, there's nothing going on in the Atlantic area. What's going on at Florida is mainly high-rise stuff, so that's not helping a whole lot. And then there's lot of building activity going on in North Dakota, but it's starting from a pretty low base.

Okay. And then just on the Siding side, CanExel, you mentioned de-stocking there. Is that over now, going forward?

Yes, we believe so. What we saw is we were on allocation through August the last year. Again -- so what was happening was our distribution partners were taking everything they could get. We went off allocation, they said, "Wooh, we don't have to build up our own inventory, we can rely on them." And so they brought their inventories down in the second half of last year and into the first half of this year. Now we think where -- they're buying at their replacement level. And so we should see -- we suspect that year-over-year you're actually going to see a slight increase in CanExel.

Bree, thank you. I think that's all the time we have for questions. So if you could provide the replay number. And I'd like to thank everybody for participating in the call. And as always, Mike and Becky are available to answer any follow-up questions.

Ladies and gentlemen, the replay number is 1 (888) 286-8010 and the pass code is 33944069. And ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect and have a great day.