Louisiana-Pacific Corporation (LPX) Q1 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Louisiana-Pacific Corp. Q1 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference is being recorded. I would like to introduce your host for today's conference, Ms. Sallie Bailey, Executive Vice President and Chief Financial Officer. Ma'am, please go ahead. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Great. Thank you very much, Michelle, and good morning. Thank you for joining our conference call to discuss LP's financial results for the first quarter of 2015. I am 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 Relations contacts. I will begin the discussion with a review of the financial results for the first quarter of 2015. This will be followed by some comments on the performance of individual segments and selected balance sheet items. After I finish my remarks, Curt will discuss the general market environment in which LP has been operating, provide his perspective on our operating results and give some thoughts on the outlook. As we have done in the past, we've opened up this call to the public and are doing a webcast. And that 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 will be referencing these slides in my comment this morning. We have filed an 8-K this morning with some supplemental information, as well as our Form 10-Q. I want to remind all the participants about the forward-looking statements comment on slide two of the presentation. Please also be aware of the discussion of our use of non-GAAP financial information included on slide three of the presentation. The appendix attached to the presentation has some of the necessary reconciliations that have been supplemented by the Form 8-K filing we made this morning. Rather than reading these two statements, I incorporate them with this reference. The housing market was still in recovery mode for the first quarter of 2015. The results in our OSB segment reflect the lower pricing environment, down 13% from last year and impacted the company's financial results for the quarter. The reduction in OSB pricing accounts for approximately $29 million of the change in our operating loss and adjusted EBITDA relative to the first quarter of 2014. The stronger dollar, lower raw material costs, better plant operating performance and the record selling quarter in our Siding segment offset the impact of the decline in OSB price. With that, let me go into the details. Moving to slide 4 of the presentation for a discussion of the first quarter 2015 consolidated results. We are reporting net sales of $472 million for the first quarter of 2015, a 6% increase from the net sales of $445 million reported in the first quarter of 2014. In the first quarter, we recorded a net loss of $35 million or a loss per diluted share of $0.24 as compared to a net loss for the first three months of 2014 of $14 million or a loss of $0.10 per diluted share. Included in our GAAP results for the quarter is $11.6 million write-off of the timber licenses associated with our indefinitely idle Chambord, Québec facility. Given our ongoing losses in Canada, this write-off provides no immediate tax benefit to LP due to our valuation reserves. The Québec Ministry of Forestry terminated our license in the first quarter of 2015 and Curt will discuss this a bit more in more detail in a few minutes. The adjusted loss for the quarter was $19 million, or a loss of $0.13 per diluted share based upon the normalized tax rate of 35% compared to adjusted loss of $7 million, or a loss of $0.05 per diluted share for the first quarter of 2014. Adjusted EBITDA from continuing operations was $6 million in the quarter, compared to $23 million in the first quarter of 2014. I'll move to slide five and review of our segment results, beginning with OSB. OSB recorded an operating loss of $28 million on $190 million of sales in the quarter compared to an operating loss of $2 million on $195 million of sales in the first quarter of 2014. For the quarter, we are reporting negative adjusted EBITDA of $13 million, compared to positive EBITDA of $12 million in the first quarter of 2014. We have a 14% increase in sales volume and a 4% increase in the OSB segment production. Pricing for OSB was down 13% over the first quarter of 2014. The decrease in pricing resulted in lower operating results by about $29 million. OSB segment took 127 down days or the equivalent of just under 200 million square feet of reduced production during the quarter. Despite the significant number of down days, our cost of sales per MSF improved relative to the first quarter of 2014, as well as the fourth quarter of 2014 due to the impact of the weaker Canadian dollar, lower raw material costs and improved operating performance at our Clarke County facility. Slide six reports the results of the Siding segment. This segment includes our Smart Side and Careel siding products. The first quarter of 2015 was a record quarter for the Siding segment for sales, operating income and adjusted EBITDA. The Siding segment reported sales of $174 million in the first quarter of 2015, an increase of 21% from $144 million reported in the first quarter of 2014. The Siding segment reported operating income of $33 million, compared to $19 million in the first quarter of 2014, and adjusted EBITDA of $38 million as compared to $24 million in the same quarter of 2014. For the second quarter in a row, the Siding segment did not produce any OSB. Consistent with the past several quarters, the Siding segment continued to experience higher wood cost. However, we're able to acquire logs to run our facility as is planned and took no downtime in the quarter related to log shortages. The higher wood cost in the first quarter of 2015 were partially offset by lower resin cost and improved absorption in our manufacturing facility. The results for the quarter were also positively impacted by improved product mix and higher sales volume. For the quarter, SmartSide average sales prices were up 8%, and volumes increased 19%. Volumes increased in our SmartSide siding line due to continued penetration in several key focus markets, including retail, repair and remodel markets, and sheds. CanExel prices were flat in U.S. dollars. However, prices were up 12% in Canadian dollars, which is CanExel's primary market. Volumes were down 18% in the quarter due to decreases in Canadian and international demand. Please turn to slide seven of the presentation, which shows the results for our Engineered Wood Products segment. This segment includes I-Joist, laminated strand lumber, laminated veneer lumber plus other related products. This segment also includes the sale of I-Joist and LVL products produced by the Abitibi joint venture or under our sales arrangement with Murphy Plywood. The EWP segment did produce 10 million square feet of OSB in the first quarter of 2015 out of the Houlton, Maine facility. The Engineered Wood Products segment recorded sales of $65 million in the first quarter of 2015, up from $62 million in the first quarter of 2014. The segment's operating loss in the first quarter of 2015 was $4 million, as compared to a loss of $3 million in the first quarter of 2014. For the first quarter of 2015, adjusted EBITDA from continuing operations declined to a negative $400,000, as compared to a positive adjusted EBITDA of $1.3 million in the first quarter of 2014. Volumes of I-Joist were down 12%, primarily due to lower volumes in Western Canada while volumes in LVL and LSL were up 16% compared to the same quarter last year as we focus more on export and industrial markets. Pricing was up 6% in I-Joist and down 3% in LVL and LSL. The increase in I-Joists reflects price increases introduced to offset rising raw material costs during 2014. The decline in LVL and LSL reflects changes in mix through a higher percentage of industrial uses which are sold at a lower price. Turning to slide eight of the presentation. For the quarter, our South American segment recorded sales of $36 million, as compared to $37 million in the first quarter of 2014. Operating income was $2 million in the first quarter of 2015 compared to $4 million in the first quarter of 2014. South America's adjusted EBITDA from continuing operations was $5 million for the first quarter of 2014, as compared to $7 million in the first quarter of 2014. Volumes in the quarter were up 31% lower by 18% in Brazil compared to the same quarter last year. The sales volume increase in Chile was primarily due to improved housing demand. In Brazil, the reduction in sales volume was due to the economic recession, which led to less demand. Pricing was down 13% in Chile and down 16% in Brazil and in local currency, Chile's pricing was lower by 1% compared with the same quarter in 2014 and Brazil recorded a 3% improvement in pricing. Total SG&A costs were $39 million in the first quarter of 2015, compared to $41 million in the same quarter of 2014. For the quarter, the reduction in SG&A cost is primarily related to legal costs incurred in 2014 associated with the aborted Ainsworth transaction. We recorded $2 million of foreign exchange loss in the quarter compared to $4 million loss in the same quarter last year, and net interest expense was flat between quarters. Please refer to slide nine of the presentation. As of March 31, 2015, we have cash, cash equivalents, investments and restricted cash of $483 million, working capital of $742 million, net cash of $114 million, and in addition to the $483 million of cash on our balance sheet; we had $200 million of availability on our credit facility. March year-to-date capital expenditures were $15 million. We do expect capital expenditures for 2015 to be in the range of $120 million to $130 million with over half of this amount related to Swan Valley mill conversion. We did not repurchase any shares of LP stock during the quarter, but we do continue to evaluate opportunities to repurchase shares along with other uses of the company's capital. Now, I'll turn the call over to Curt for his comments. Curtis M. Stevens - Chief Executive Officer & Director: Thanks, Sallie, for that review. Good morning to all of you and thanks for joining us on the call. Let me start with LP's safety performance. Last week, the APA announced the results of their Safety and Health Awards program for 2014. I'm pleased that LP was named the safest large company in our industry for the year. This is the fifth time we have been so recognized in the last seven years. We also had 10 facilities included in the Incident Free Honor Society. I'm very proud of all of our employees who recognize the value of being safe and act accordingly. In addition to the obvious savings in workers' compensation cost, LP believes that our safety culture gives us a competitive edge in the hiring and retention of our employees. This morning, I'll provide a few comments on the results of the first quarter, talk about the state of the housing market, and give you my views for the next several quarters. After that, I'll turn the call back to Sallie for questions. With two notable exceptions that negatively affected our results, OSB pricing and the write-off the wood license, LP actually had a pretty good quarter. Let me just start with a quick review of the two negative items. OSB pricing has fallen below analysts' projections for the last six quarters and Random Lengths North Central was 12% and already low 2014 pricing level. The easy scapegoat in Q1 is always the weather. Well, I know this did have an impact; the primary driver of lower pricing was more available supply than demand. As a result, we had to take significant downtime in our mills in the quarter. In Q2, we continue to evaluate and take market-related downtime as the recovery in new residential demand has been short of economists' projections. Further, while we are meeting commitments to our customers, we're also aggressively exploring other applications beyond single-family new construction. These areas include repair/remodeling, industrial, transportation and modest exports. Let me give you some background on the Chambord wood license. We indefinitely curtail production at the Chambord, Québec mill in 2008 as the Great Recession whacked housing. Over the intervening years, we have been in regular contact with the Québec government and we've met all of our mutually agreed upon obligations to retain the license. Over the last year, there's been increasing pressure to use the wood to create jobs in the area. Unfortunately, the government decided that they would not wait for LP to restart the mill and informed us last quarter that they had canceled our wood license. They will be setting up a project office to review alternative proposals for the wood. We will be a part of this process and believe that the LP mill is still the best alternative to use the wood in the area. We do have other options for these assets we were also being exploring. As to the write-off, the accounting rules dictated that we take a non-cash charge for the carrying value of the wood license. On the positive side, as Sallie mentioned, our Siding business had a record quarter. SmartSide shipments, revenue and EBITDA. We did enjoy lower resin costs in Q1 and the lower Canadian Dollar made our operations north of the border more competitive. Efforts to fully convert our Swan Valley mill to SmartSide production are underway with initial production expected in Q4 of this year. Next, let me just share some views on the housing market. As you know, there are mountains of data on the future of the housing market that are confusing sometimes conflicting and definitely frustrating. My bottom line is housing is improving, but not at the pace forecast by most economists. Here are some numbers on expected housing starts. The consensus forecast for this year is 1.153 million, which would represent a 15% increase over 2014. Consensus forecast for 2016 stands at 1.36 million, which is a further 18% increase on the forecast for this year. At LP, as I mentioned last quarter, we forecast 1.1 million housing starts for 2015 and I believe that still looks like a reasonable number. In 2016, we expect a 10% to 15% improvement in starts. Other positive housing-related news, household formations accelerated in Q4 to 1.7 million and follow that up with about 1.5 million in Q1 of this year. This is much better than the anemic 400,000 to 500,000 pace of the last several years. And when a household is formed, this usually means that a home is occupied, which is good news for industry. A Deutsche Bank economist just published a following tidbit which might be of interest. The number of people per household returns to the 2000 to 2003 level, this would lead to 4 million new households, a very positive for housing looking forward. Mortgage rates remain below 4%. The inventory of new and existing homes for sale is shrinking. And most of the big builders who have reported first quarter results have mentioned a strong's spring selling season. Repair/remodel expenditures are expected to be strong and the rental vacancy rate is at the lowest level in 20 years. So what does this all mean for LP in the next several quarters? With spring finally happening in most of the country and positive momentum in the housing sector, we should see increased demand in North America. Obviously, we would like to see an improvement in OSB pricing as well. With high channel inventories and ready wood in the market, we didn't see an increase in pricing or demand in April. We have taken steps to adjust our production levels to take this into consideration as we focus on meeting our customer commitments while limiting the sale of unprofitable open market wood. Before I turn it back to Sallie, let me make a few comments on South America. We continue to see high demand in Chile due to increased spending by the government on housing. And with the terrible floods in Northern Chile, 24,000 homes were destroyed and we are helping with emergency shelters. We're supplying this demand currently from Brazil and, as you know, we are working on a project to add a third mill into Chile to eliminate the costly freight coming from Brazil. With that, let me turn it back over to Sallie for questions. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Great. Well, thank you, Curt. Michelle, we'd like to go to the queue for questions, please.

Thank you. [Operator Instruction] Our first question comes from the line of Gail Glazerman with UBS. Your line is open. Please go ahead.

Hi, good morning Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Morning

Can you give maybe a little bit more color on the strength in Siding, particularly looking at close to 20% volume growth on top of what I think was double-digit growth last year? Was there some sort of catch-up from prior quarters or what you shipped in the quarter is a sustainable level moving forward? Curtis M. Stevens - Chief Executive Officer & Director: Well, Gail, I'll take that. We did enjoy a very good quarter in Q1. A couple things there. One, Siding is not solely tied to single-family new construction. We have a big repair/remodel portion of that, and we also have at least two SKUs in every Home Depot, Lowe's and Menards store in North America. So we've been exploring those other markets and satisfying the needs there. In the first quarter, a little bit of an anomaly is in the repair/remodel business, they need to pre-finish – we have a series of pre-finishers that are our customers that then sell directly into the market. Those pre-finishers don't have the capability of finishing enough product to meet the annual demand unless they do it in the first quarter, so there is a little bit of a channel fill for the repair/remodel part of that, and we enjoyed those volumes that went into that market. As far as the sustainability going forward, for the next two quarters – actually the next three quarters we'll be constrained until Swan Valley comes online. As Sallie said, we didn't produce any OSB in our Siding mills; we ran them basically at capacity, but we also pulled down our inventories in the first quarter. And we won't have the opportunity to do that in the next couple of quarters. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: And I'd add one other thing, Gail, just to remind you that we did have a Tomahawk expansion last year, so we increased the capacity in our Siding business last year with that project.

Okay, thanks. And can you expand a little bit on the comments about inventory channels being pretty full and ready availability? Is your – I mean, just how full do you think they are and are they full like ahead of a normal seasonal spring building season or a little bit chunkier than that? Curtis M. Stevens - Chief Executive Officer & Director: Well, it's all anecdotal because there's no firm data out there. But I was actually with a big customer yesterday and what they said is they expected takeaways to be better than they were in April because of the return of the cold weather in the Northwest and the rain in the South – or Northeast rather and the rain in the South. They said the last couple of weeks, however, with the warmer weather they are seeing, those inventories come down. So I think it's a three- to four-week kind of issue. It probably started to dissipate a little bit in the middle of last month.

Okay. And can you talk a little bit about the wood situation in late state? I guess you're able to get wood; there's just the question at what cost and is there any line of sight for the cost normalizing? Curtis M. Stevens - Chief Executive Officer & Director: Well, in the late stage, we're in a little bit of a – I mean, if you look at the wood supply in that area overall, we're in a little bit of a dip but we should come out of that the next couple of years where the growth should significantly exceed the drain. It's kind of the age classification of the wood there. What we did is we reach further out principally into Canada and again, we were aided by the Canadian exchange rate, so that helped us a little bit. So we are going to pull in wood from Canada to support those mills probably for the next couple of years. But then at that point in time, it also depends on what happens with the pulp mills in the area. We would expect to see wood costs to come down a little bit.

Okay. And on Chambord, when you're talking about other option, is that other option to secure wood for the facility should you choose to restart it? Or is that just other options at the facility other than keeping additional thing that could restart? Curtis M. Stevens - Chief Executive Officer & Director: I think there's three things we're looking at. One is to get the wood license back so we can run that at full capacity when it's needed in the market. Second is there is enough non-governmental wood in the area to run that 50% to 60%, so we'd look at how we could modify the facility to run at 50% to 60% on OSB and use the other capacity for some other use, and I don't know what that might be. And the third is we have shown an ability to relocate physical assets in other parts of the world. We would look at Chambord as another opportunity to do that, so that be the third option.

Okay. And then just quickly last quarter, I think you had indicated that oil prices to be, I think, $40 million to $50 million benefit this year. Is that still your view? And if not, can you give an updated estimate? Curtis M. Stevens - Chief Executive Officer & Director: Yeah, that is current – our current view is at $50 million number.

All right. Thank you.

Thank you. And our next question comes from the line of Chip Dillon with Vertical Research Partners. Your line is open. Please go ahead.

Yes. Good morning and congratulations on the way you've really managed and grown the Siding business. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Thank you.

Question about that is as we go – if we look at the last few years, there does seem to be a seasonal element there and I know that could have been influenced by the fact you used to make more commodity OSB in that segment. But at any rate, it looks like the seasonal rise in revenue has been roughly $20 million from the first to the second quarter. I just didn't know if there's any reason not to assume something roughly similar, not asking you for a specific forecast, but are there factors that might have made the first quarter either unusually strong or – and therefore not in the normal pattern? Curtis M. Stevens - Chief Executive Officer & Director: Well, as we just said, Chip, we had – Tomahawk was down as part of the first quarter of last year as we increased the capacity there. So we added significantly more available capacity in Tomahawk this first quarter than we did last year. In addition to that, we've manufactured probably 40 million square feet of OSB in Hayward last year and we didn't manufacture any this year. So we utilized the increased capacity at Tomahawk plus the conversion of the OSB we're running through Siding, so that allowed us to sell more product. And we are gaining traction in the – there's no question about that. We are seeing single-family new constructions coming back a little bit. We do have a presence in the multi-family with that product. And then repair/remodel in the non-residential structures have really been the bulk of the growth over the last year.

I see. So what you're sure of suggesting is not quite the same bump seasonally. But is there also – as you think about costs going from first to second quarter, obviously you're dealing with less winter weather, but we do here about wood cost especially in the Upper Midwest being still elevated. Any thoughts on what you see profitability in that particular segment doing from first to the second? Curtis M. Stevens - Chief Executive Officer & Director: Well, from first to second, as I said, we're probably going to have less volume actually ship because we shipped that inventory in addition to what we produced. So we're going to be constrained on the volume side until Swan Valley comes up in the fourth quarter. On the wood costs, our guys are saying we're going to be probably about flat on wood cost. We don't see any big change in Q2. We plan for the breakup, so we're in pretty good shape from that perspective.

Okay. Curtis M. Stevens - Chief Executive Officer & Director: So I would say volumes modify a little bit, not a lot. I can assure you if we can produce it, we'll sell it.

Yeah. And could you just update us quickly on what you're doing in South America? At this point, I know – I believe you're building something down there or moving a plant down there as well. Curtis M. Stevens - Chief Executive Officer & Director: Yeah. We're doing a couple of things. One, we are making a very small investment in an I-Joist line that probably will be operational towards the end of the year. When I say small, less than 5 million because we have been shipping product from our Engineered Wood business up here down there, and they do think they've got enough demand to begin to run their own. On the OSB side, we applied for the environmental permits last October. We got the comments from the government in the first quarter of January, February. We have now responded to all those comments and we'll be entering into – I think at the end of this week, we'll enter into a 30-day wait period for the government to hear back on that environmental permit. So we've been doing base engineering. We have acquired used equipment in the market for a portion of that facility. Actually, probably 75% of it we've acquired to-date. So the plan is as soon we get the environmental permitting, we'll complete the engineering and we hope to get board approval with that – for that project in October and we immediately start construction of that in the summer period in South America.

And maybe with startup like second quarter next year, would that be a good guess or maybe later? Curtis M. Stevens - Chief Executive Officer & Director: Probably later than that. It's probably a 9- to 12-month construction period, so it'd probably be towards the end of 2016.

Got you. Okay, helpful. Thank you Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Great. Thanks, Chip.

Thank you. And our next question comes from the line of Ketan Mamtora with BMO Capital. Please go ahead.

Good morning, Sallie. Good morning, Curt. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Morning. Curtis M. Stevens - Chief Executive Officer & Director: Good morning.

Just one quick question, just coming back to Chambord again. So, should we assume that converting that Chambord machine to Siding is completely ruled out or is that option on the table? Curtis M. Stevens - Chief Executive Officer & Director: We did look at it. Chambord doesn't have rail which makes it a little bit hard from a logistic standpoint. What's nice about Swan is it does have rail service directly there. The other is that the wood species mix and Swan is better for – we consider better for our Siding products than the mix in Chambord. Chambord needs to be an OSB mill.

Got you. That's helpful. And then coming back to Siding, obviously, it was a very good quarter. You talked about how volumes could be down a little bit. But just looking out a little bit on a medium-term basis, do you think margins in the 20% range are achievable if you go back to housing starts at 1.4 million, 1.5 million? Curtis M. Stevens - Chief Executive Officer & Director: I certainly think they're achievable, yes.

Okay, that's helpful. That's all I've got. Thank you. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Okay. Thanks.

Thank you. And our next question comes from the line of Bill Hoffmann with RBC Capital Markets. Your line is open. Please go ahead.

Yeah. Thanks. Curt, can you just talk a little bit more about what's going on down in Latin America with the weakness in Brazil? You guys able to operate there. Are you pushing product out of market and what's the strategy? Curtis M. Stevens - Chief Executive Officer & Director: Well, what's hurting us in Brazil right now is when we've acquired that mill, most of the product going into Brazil was going into these industrial markets. So was for hoarding material like construction site, it was on packaging, it was being used for concrete forming. And we went in there with the expectation that we could change building practices like we did in Chile and we are, but we're doing that in a much slower rate. With the decline in the Brazilian economy, that core business that we acquired, that's the business that's declining. We're actually selling more into new home construction and we're selling more from an export standpoint, but we're selling less for that basic hoarding material on concrete forms because there's less activity going on. But what's been good for us is we've been able to take that excess capacity we have, manufacture the product and ship it to Chile to meet this demand that we have in Chile until we have the new mill operating. But similar to providing product for North America, you give all your profits to the shipper. So, shipping it from Brazil actually – to Chile is not any less expensive than shipping it out of the Southern U.S.

Right. But at least it allows you to run those plants, right? Curtis M. Stevens - Chief Executive Officer & Director: So, we're running the plant and we're making a contribution from an absorption standpoint, but we're not putting the profitability in than we need to.

Got you. Okay. And then just on the OSB side, one of the things that we've talked about before is diversifying OSB. I mean, obviously, Siding has been a great end market, but can you just talk a little bit more about what other end markets you feel like you've been able to move product into and what percent of sales you're at, at this point and what the targets might be? Curtis M. Stevens - Chief Executive Officer & Director: Yeah. I can't give you the sales breakdown. I don't have it in front of me. But we've been successful probably right after the Great Recession started, we started focusing on the furniture market and we've been successful in several manufacturers there. OSB actually provides better product for the frame of couches and chairs than plywood does. As we've had some success there, we've had some success in the transportation market and that's pretty broad. That could be inside of trailers, inside of trucks, be inside of containers. As we've had some success there, I think those are the principal areas. We are, as I said, continuing to look at other industrial applications that may have an opportunity. You can provide – you put a surface on the OSB and actually increase its usefulness.

Any sense on how much your product can go into those other markets or is it going into those other markets? I mean, is it like orders or the sales... Curtis M. Stevens - Chief Executive Officer & Director: It's not that big right now. It's probably 10% – 5% to 10% right now. But we do think that there's the opportunity to grow that. The export market hasn't been that attractive to us with the strong dollar, so that's hurt our export business so it's down a little bit.

Okay. And then just in Engineered Wood Products, the decline I-Joist in Q1, what's your outlook for that? Is that market balanced here in Q2 or... Curtis M. Stevens - Chief Executive Officer & Director: It was almost all in Western Canada, it was all pricing because we produce that in California and ship it to Canada in an $0.82 [Canadian] dollar. The local producers have a huge advantage and we just didn't want to take the loss.

Okay. Are those markets getting any better? I mean, obviously not Canada, but can you move it in other markets? Curtis M. Stevens - Chief Executive Officer & Director: Western Canada, we did put a price increase, but we're frankly focused at domestic markets in the U.S. and then out of our Eastern Canadian, the joint venture we have with Resolute, they benefit from the cost. And so our I-Joist sales into the eastern half of the U.S. are pretty good from a profitability standpoint.

Okay, thank you.

Thank you. And our next question comes from the line of Mark Weintraub with Buckingham Research. Your line is open. Please go ahead.

Thank you. A couple quick follow-ups, if I could. First, can you give a sense of how much of the volume in Siding was from the drawdown of inventory? Did that account for like 5% or 10%, or how much the volume was? Curtis M. Stevens - Chief Executive Officer & Director: I think we drew it down by about 20 million feet, about 20 million feet.

Okay. And order of magnitude, what's the total production in this quarter or volumes? Curtis M. Stevens - Chief Executive Officer & Director: We did about 240 million.

Okay, great. And... Curtis M. Stevens - Chief Executive Officer & Director: A little less than 10%, looks like.

Great. And then the Swan River, how much capacity will that be adding to the system in terms of capability, recognizing you may ramp it up over time? Curtis M. Stevens - Chief Executive Officer & Director: It should add about 450 million square feet. For OSB, it's a little higher than that, but can't run it as fast.

Okay. So that's as much as a 40% type of increased capability? Curtis M. Stevens - Chief Executive Officer & Director: Yeah. There's about 1 billion square feet of capacity for strand.

Okay. And so, is it reasonable to expect? I think you've talked in the past about the market growing at about a 15% clip. Is it conceivable that you can get that 15% and some catch-up from any constraint that might have developed this year? Is that a reasonable way to think about it for next year? Curtis M. Stevens - Chief Executive Officer & Director: Well, first let me just clarify what – if I ever said anything about 15%, that would have been our own growth. The growth of Siding is dependent on level of housing activity and repair/remodel activity and the rest of that. We think we can grow faster than if we have the capacity. So we think we should be in the high teens double-digit.

Okay, great. And then shifting real quickly, if I could, to OSB. You had indicated you thought it was about a three- to four-week issue in terms of the high channel – the high inventories in the channel, and I think you said that you thought it started to reverse in the middle of last month, so... Curtis M. Stevens - Chief Executive Officer & Director: Again, anecdotally, that's what our customers have said is that they've seen the takeaway from their inventory.

Okay, great. So is it fair to say that hopefully, we're getting close to the point where the inventories in the channel you would think are reasonably balanced or am I misreading that? Curtis M. Stevens - Chief Executive Officer & Director: I think we're a couple of weeks away, but that's what it feels like to me.

Okay, great. Thanks so much. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Thank you.

Thank you. And our next question comes from the line of Paul Quinn with RBC Capital Markets. Your line is open. Please go ahead.

Yeah. Thanks very much. Guys, outlined the expansion at Tomahawk, and if you could just give us the numbers on that expansion. And there also was an expansion at Two Harbors was there not? I'm just kind of understand how you've grown that Siding segment in terms of capability over the last couple of years. Curtis M. Stevens - Chief Executive Officer & Director: We did the expansion at Two Harbors in 2013. We added about 25% capacity, and that was in smaller mills of like 120 million square feet, so I think we added 25 million square feet, 30 million square feet there and that is – we're producing all of that . In the Tomahawk, it was about a 50% expansion, so we probably went from 130 million to 190 million square feet.

Okay, great. And then just on Chambord, have you got any kind of legal or financial recourse on that for taking away the license? And then in terms of the wood supply for competing uses, I mean, is there other mills in that area that would automatically grab that wood or is that – you expect to get that back? Curtis M. Stevens - Chief Executive Officer & Director: We expect to get it back. I think the premier is from the Lake Sanguinet (38:59) area, so it's very sensitive to the jobs in the area. I think we had a local mayor say if that wood was available, my god, there'd be a sawmill in here. So I think it's a little bit of French-Canadian bravado. We are the logical user of that. Resolute is the other big user in the area and they're our partner in the JV. And they think it would be the right thing to do to restart Chambord because we provide the web stock by truck to those operations, so it's very convenient from a JV standpoint.

That makes sense, French-Canadians are known for that. And just lastly on North America, flat sales, profit down, is that all on FX or is there a cost increase in Brazil? Curtis M. Stevens - Chief Executive Officer & Director: No, it's mainly FX. There is a little bit of pressure because there is a small amount of imported product that goes into Chile and puts a cap on pricing, so we have had pricing down in real dollars, but the FX is the biggest part of that.

Great. That's all I had. Thanks, guys. Good luck. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Great. Thank you, Paul.

And I'm showing no further questions at this time and I would like to turn the conference back over to Ms. Sallie Bailey for any closing comments. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Great. Well, thank you very much, Michelle and I'd like to thank everybody for participating in our call today. As always, Mike and Becky are here to answer any follow-up questions you may have. Thank you and we hope you have a very good day.