Louisiana-Pacific Corporation (LPX) Q1 2016 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Louisiana-Pacific Corporation First Quarter 2016 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 be given at that time. As a reminder, this conference is being recorded. I would now like to hand the meeting over to Sallie Bailey, Chief Financial Officer. Please go ahead. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Great. Thank you very much, Karen, and good morning. Thank you for joining our conference call to discuss LP's financial results for the first quarter of 2016. 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 contact. I will begin the discussion with a review of the financial results for the first quarter of 2016, and this will be followed by some comments on the performance of the 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 and 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 the webcast can be accessed at www.lpcorp.com. Additionally, to help with the discussion, we've 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've 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 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 reconciliations that have been supplemented by the Form 8-K filing we made this morning. Now rather than reading these two statements, I incorporate them with this reference. The first quarter was a good start to 2016 for LP and has set us up for continued improvement for the remainder of the year. U.S. housing start data does remain choppy, but the market appears to be on a trajectory for 10% to 15% improvement over 2015. Overall, in the past couple of quarters, we've had a number of questions and meetings on this call about the market demand for our SmartSide siding. The Siding segment's result this quarter demonstrate that we are back on track given the 22% improvement in SmartSide volume from the fourth quarter of 2015. And with that, let me go into the detail. Moving to slide 4 of the presentation for a discussion of our first quarter 2016 consolidated results. We are reporting net sales of $505 million for the first quarter of 2016, a 7% increase from the net sales of $472 million reported in the first quarter of 2015. In the first quarter, we recorded net income of $10 million or $0.07 per diluted share, compared to a loss of $35 million or a loss of $0.24 per diluted share in the first quarter of 2015. The adjusted income from continuing operations for the quarter was $10 million or $0.07 per diluted share based upon the normalized tax rate of 35%, as compared to a loss of $19 million or a loss per share of $0.13 reported in the first quarter of 2015. Adjusted EBITDA from continuing operations was $52 million in the quarter, compared to $6 million in the first quarter of 2015. Moving on to slide 5 of the presentation and overview of our segments results, starting with OSB. OSB reported net sales for the first quarter of 2016 of $217 million, up 14% from $190 million in the first quarter of 2015. OSB reported operating income of $15 million, compared to a loss of $29 million in the first quarter of 2015. Adjusted EBITDA from continuing operations was $30 million, compared to negative adjusted EBITDA of $13 million in the first quarter of 2015. Sales volumes were flat. Pricing for OSB was higher by 14%, which improved operating results by $27 million. For first quarter 2016, OSB operating results were positively impacted by the reductions in raw material costs, higher utilization rate, as well as the positive impact of the Canadian currency. Slide 6 reports the result of the Siding business. This segment includes our SmartSide and CanExel siding products, as well as minor amounts of OSB. Siding recorded net sales for the first quarter of 2016 of $181 million, up 4% from $174 million in the first quarter of 2015. Siding reported operating income of $27 million, compared to operating income of $33 million in the first quarter of 2015. Adjusted EBITDA from continued operations was $34 million, compared to $38 million in the first quarter of 2015. SmartSide volume was up 1% from the prior year and 22% sequentially. Sales prices in SmartSide were down 2% due to changes in product mix with individual pricing remaining relatively flat. For CanExel, sales volumes increased 15% primarily due to increased demand in Europe. Sales prices for CanExel were lower by 11% in U.S. dollars. CanExel Canadian dollar sales prices were up 2%. As a reminder, with the Swan conversion from the OSB mill to a siding mill, the Siding segment started producing and selling OSB again out of our Hayward, Wisconsin mill. For the first quarter of 2016, the Siding segment produced about 53 million square feet of OSB, as compared to no OSB production in the first quarter of 2015. The negative impact of the Swan conversion on the Siding segment's financial results for the quarter was less than $1 million; and we are not anticipating any negative impact of the Swan conversion in the second quarter on earnings. The reduction in operating result for the Siding segment for the first quarter of 2016 compared to the first quarter of 2015 was primarily due to higher cost of sales related to fourth quarter's higher cost of production due to downtime. The higher cost of production in the fourth quarter was capitalized into the inventory, which was then sold in the first quarter. The cost of production in the first quarter was lower than the cost of production in the fourth quarter of 2015. An increase in OSB production and increased sales and marketing cost to support future growth also contributed to the lower operating result in the quarter. These higher costs were partially offset by lower raw material cost. Please turn to slide 7 of the presentation, which shows the results from our Engineered Wood Products segment. This segment includes I-Joist, Laminated Strand Lumber, Laminated Veneer Lumber, OSB produced at our Houlton, Maine facility plus other related products. This segment also includes the sale of I-Joist and LVL products produced by the Abitibi joint venture under our sales arrangement with Murphy Plywood. The Engineered Wood Products segment recorded sales of $72 million in the first quarter of 2016, up from $65 million in the first quarter of 2015. The segment's results were a loss of $2.5 million in the first quarter of 2016 as compared to a loss of $4 million in the first quarter of 2015. For the first quarter of 2016, adjusted EBITDA from continuing operations improved by $1 million as compared to the first quarter of 2015. Volumes of I-Joist were up 19% while volumes of LVL and LSL were up 18% compared to the same quarter last year. Pricing was up 3% in LVL and up 2% in I-Joist. Moving on to slide 8 of the presentation. For the quarter, our South American segment reported sales of $31 million as compared to $36 million on the first quarter 2015. Operating income was $5 million as compared to $2 million in the first quarter 2015 and adjusted EBITDA was higher by $2 million for the first quarter of 2016 as compared to the first quarter of 2015. Volumes were down 12% in Chile and 3% in Brazil compared to the same quarter last year. The sales volume decrease in Chile was due to increased exports impacting local demand and in Brazil due to decreased local sales as Brazil continues to face an economic recession in their local market. On a U.S. dollar basis, pricing was up 1% in Chile and down 11% in Brazil. In local currency, Chile's pricing was up 14% compared to the same quarter in 2015, and Brazil's pricing was 25% higher in local currency. Total selling, general and administrative expense was $42 million in the first quarter of 2016 compared to $39 million in the same quarter of 2015. For the quarter, the increase in selling, general and administrative expense was primarily due to increases in certain management incentives in 2016 and higher costs associated with corporate sales and marketing to support our revenue growth. Interest expense net was flat between the period. Please turn to slide 9 of the presentation. As of March 31, 2016, we had cash, cash equivalents, investments, and restricted cash of $424 million; working capital of $650 million; net cash of $58 million; and in addition to the $424 million of cash on our balance sheet, we had $2 million of availability on our credit facility. Capital expenditures through March 31, 2016 were $26 million. We are projecting capital expenditures for 2016 at $120 million to $130 million. Approximately $100 million has been allocated to the North American project, 50% for growth and the remaining for capital maintenance and cost reduction. The remaining $20 million to $30 million has been allocated to our South American segment, primarily for the building of a third mill in Chile. Now with that, I'll turn the call over to Curt for his comments. Curtis M. Stevens - Chief Executive Officer & Director: Thank you, Sallie, and good morning and thanks for participating on today's call. As I usually do, I'll start with our safety performance. The American Panel Association just announced the results of their Safety and Health Awards program for 2015, and I'm pleased that for the second year in a row, LP was recognized with the safest large company as a company with more than four mills. This is the sixth time that we've been so recognized in the last eight years. Our I-Joist JV, which has two mills of Resolute in Quebec, was named the safest small company with three or fewer mills. There's been 11 facilities included in the Incident Free Honor Society. The American Forest and Paper Association also released their safety data for 2015 for their universe of companies, and LP was identified as having the best total incident rate. I continue to be extremely proud of all of our employees who recognize the value of being safe, have committed to it, and act accordingly. In addition to the obvious savings of workers' compensation cost, LP employees had made their commitment to safety the cornerstone of our company's culture, which we believe gives us a competitive edge in the hiring and retention of our people. Finally, this safety culture extends to the many contractors that we used in implementing our capital projects. We've gone over two years without a single contractor injury associated with these non-routine tasks. We did have our board meeting and our annual meeting of shareholders last Friday. I'm pleased to report that all the nominees for director were handily elected, the others were ratified and our annual say on pay advisory vote passed with over a 98% approval rate. Also, our board did name a new officer. Greg Harrison, a long time LP Manager, has been named Vice President Siding Manufacturing, as recognition of his importance to the success of this business. Greg was instrumental in the successful conversion and startup of the Swan Valley mill. Today, I'll be providing comments on our results and accomplishments discuss key demand drivers and give you my views on the outlook for the rest of this year. For the second consecutive quarter, all business segments recorded a positive adjusted EBITDA that totaled $52 million for the company. EBITDA improved by $46 million over Q1 of 2015 and by $18 million compared to last quarter. OSB Random Lengths reported North Central 7/16's Q1 pricing down $17 versus the last quarter but we're actually reporting flat due to an increase on our value-added mix and improved crate realization. As the result of these significant factors, improved operational productivity and cost control, our EBITDA improved to $30 million versus $25 million in Q4. During the quarter, we also successfully completed the press rebuild of our Hanceville, Alabama mill. In Siding, our SmartSide revenue grew 28% versus Q4, driven by a 22% volume increase. The SmartSide volume matched the highest volume ever that we've achieved in Q1 of last year. The Swan Valley siding mill conversion is ahead of the pro forma production schedule, and we expect this mill to make a positive contribution next quarter. We are very pleased with the rebound on our siding sales as we put a major focus on returning to growth as we've put capacity back in front of this business. As I said last quarter, we have unleashed our sales and marketing team along with our distribution partners, and we are seeing the results. The EWP, we were EBITDA positive for the quarter and performed better than Q1 of last year. However, we did see a drop in EBITDA performance compared to Q4 last year due to an equipment failure in one of our mills that reduced quarter-over-quarter sales and had changed the mix. Sallie said in South America, we had a very good first quarter with adjusted EBITDA of $7 million. Prices improved in Chile and Brazil in local currency versus last quarter. Strong export volumes to China and other South American countries offset weak domestic demand in Brazil. We continue with the engineering design work for our third mill in Chile in anticipation of board approval of this project over the summer. The housing market, as Sallie mentioned, the Q1 news, was a little bit mixed. Overall, Q1 housing starts ran an annual rate of 1.13 million, actually flat to Q4 of last year. The consensus for 2016 starts is now at 1.23 million, a 10% improvement over 2015, which I believe is possible. The consensus forecast for 2017 is 1.37 million, another 12% increase. The good news for us is that in Q1, single family starts averaged a seasonally adjusted rate of 792,000. This is the highest quarterly rate since Q4 of 2007, and this represents an increase of 23% over the same quarter last year. We believe the good weather in February, March aided starts, also notable on improvements in new home demand for entry level buyers. We estimate that the OSB consumption ratio between single and multifamily is about 3 to 1. The improvement in single-family starts was offset by a decline in multifamily starts. Compared to Q4 of last year, multifamily starts declined 10% falling from 379,000 to 341,000 which happened to be flat with last year. Household formation growth continues to drive rising rents and low vacancy rates across the country. Other positive housing data, existing home inventory was down 1.1% year-over-year for January. So, home inventory is very tight on a historical basis. On the financing side, average 30-year fixed-rate mortgage rates were at 3.58% for the week ended April 15, which was down from 3.9% to three months earlier. In Canada, for the first quarter, starts were at seasonally adjusted rate of C$200,000, a growth of 2% from Q4. Almost all of this increase was in single-family detached units, which makes up about 35% of Canadian starts. So while there is forecasted growth in housing for the next several years, it is incumbent on us to focus on continuing to increase our growth outside of our traditional market by developing products, product applications and market segments that can address needs in industrial repair model where year-over-year growth has exceeded 10% unlike commercial activities. Year-over-year non-residential construction was up 11.2% through February. So while the consensus for 2016 housing starts has moved down slightly since January, I am encouraged by the increase in single-family starts and the supporting data for sales of building materials by dealers are up double-digits in the first part of the year. So I remain optimistic about the rest of 2016. As I've said before, I continue to be concerned about labor and land availability for builders, uncertainty relative to lending standards for buyers and the impact of the presidential race on our nation and, more specifically, potentially on consumer confidence. But continued strong employment growth will bolster secure household formation. And, fundamentally, housing demand should strengthen throughout this year, providing a positive market environment for our products. In our Siding business, strong order rates continue through April. In OSB, Random Lengths has reported North Central pricing flat or increasing each week since the end of the quarter. So compared to this time last year, pricing is higher by 37%. Strong single-family starts is driving demand for both these businesses, as well as engineered wood. South America expects good OSB and Siding demand in Chile throughout the year. For Brazil, we will continue to focus on export opportunities as these are generally priced in U.S. dollars, and we can benefit from the weak Brazilian real. With that, let me turn it over to Sallie for questions. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Great. Well, thank you, Curt. Karen, we're ready for questions if you could go to the queue.

Certainly. Our first question comes from the line of Mark Wilde from Bank of Montreal.

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

Curt, I wonder if you can talk a little bit about your operating rate in OSB in the first quarter. And also, if you could just talk a little bit about your margins in OSB, because you've had a couple of competitors report last week. Their OSB margins were quite a bit higher on a reported basis than yours and I wanted to keep just talk to that disparity? Curtis M. Stevens - Chief Executive Officer & Director: Yes. Our operating rates in the first quarter were 86% if you don't include the Chambord mill. And as a reminder, what we did have in the quarter is we did take a month of downtime at our Hanceville, Alabama mill to do the press rebuild. As far as the margins, we do focus on the margin compared to our public peers; and we actually made some progress in the first quarter versus the fourth quarter. Fundamentally, in the past, we have taken more of the industry downtime, so operating rates have been a little bit lower. I think our public competitors talk about operating rates about 92%, so we're about 6 points below that. We do believe that if Hanceville had to run all quarter instead of taking the month of downtime, there probably have been another $3 per thousand that we would have added to our margin. So we are focused on that. I think that fundamentally it's tied to the operating rates and how much we run these operations. We are advantaged a little bit by a value-added percentage, but our competitors also focused on value-added product.

What would the operating rate be down in Brazil and Chile, Curt? Curtis M. Stevens - Chief Executive Officer & Director: Chile's running 100%. And actually, we're adding product from Brazil to Chile and as well as North America to satisfy that demand. That's why we're looking at the third mill. In Brazil, were probably operating about 60%. We've seen local demand fall by about 20% just due to the economy. We've been able to fill that with some of the export business that I talked about earlier.

Okay. And then, Sallie, can you just kind of update us on kind of current market conditions? We had quite a flurry in the recent reported Random Lengths prices last week. I think some of that was tied to the story around the Norbord outage? Curtis M. Stevens - Chief Executive Officer & Director: Yeah. I think that's exactly right because when that fire was reported at the end of the day on Wednesday and early Thursday, we did see pricing go up on the west side, principally a little bit in the North Central. And I just think that as we go on to the quarter, the demand is closer to the supply and we're seeing a tightening up. I did see that Norbord issued a release today that they expect the outage to only last about two weeks.

Yeah. And then, last question along those lines, I mean, just with these fires so early in the season, do you guys have any view on the likelihood of any kind of logging restrictions or logging difficulties as we kind of move into the summer season? Curtis M. Stevens - Chief Executive Officer & Director: That's a great question. Sallie and I talked to our forestry group, and we do have fires in the Peace Valley area of British Columbia. There are three fires there that have happened in the last 24 hours. We don't think that's going to affect our operating areas. Where the fires are in Fort McMurray doesn't affect us. It may have some impact on our competitors, but it's certainly not a threat to us. The other part that we're worried about is the rain we've had in Texas and Alabama. East Texas is 20 inches above normal so far this season; Alabama is 15 inches above normal. The good news is we did put in inventory in our log decks in the fourth quarter to take advantage both of lower pricing in the asset, maybe some of the risk adverse. So, we think we're in pretty good shape there. In North Carolina, we've also had heavy rainfall but we think we're in pretty good shape in North Carolina. But the fire season in Western Canada is of concern, and so we're going to be very cognizant of that. Fortunately, we build a pretty good log deck at Peace Valley in Dawson Creek.

Okay. Great. I'll turn it over, Curt. Thanks very much and good luck in the quarter. Curtis M. Stevens - Chief Executive Officer & Director: I'll see you tomorrow morning, Mark.

You will indeed.

Thank you. Our next question comes from the line of George Staphos from Bank of America. John P. Babcock - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Hey. Good morning. This is actually John Babcock on the line for George. Just quickly here with regards to EWP, I mean, you as well as some of your peers have done pretty well this quarter from a volume perspective there. And I just want to get a sense for ultimately what factors you look at when you're trying to gauge whether or not the markets tightened up to have some pricing up but there and then also given where the market stands right now if you see that potential for price increase this year. Curtis M. Stevens - Chief Executive Officer & Director: Well, I think the thing that we really look after for engineered wood is single family. There's a little bit of multi-family activity but this is largely a single-family new construction-driven business and so the housing starts that we had in the first quarter where permits are I think bodes well for continued demand. I think the difficulty with the price increase is that we do have a lot of excess capacity in this business and we just have to be cognizant of that. We did have a recent consolidation and that has created some turmoil in the market as producers are pursuing new business or customers are looking for new business partners and so that I would characterize Q1 as a bit of turmoil and is probably going to extend into Q2. That's probably – when you have that kind of turmoil, it's probably not a time for price increase, but I can see the second half of the year, at least LP, considering price increases, and as we will see higher raw materials particularly in the OSB side. John P. Babcock - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Okay. And then just next on the siding side of things. You talked a little bit about how when you tried to get your sales force out there and other factors to drive volumes there. I'm just wondering were there any market factors that also might've helped you or was there any sort of volume kind of pull-forward that could also might have driven things there. Curtis M. Stevens - Chief Executive Officer & Director: No. I think it's just the opposite. I think we did have – because we are on allocation last year, I think last year's Q1 was inordinately high. So if you average that with Q2 of last year, that's probably kind of where the lending demand was in 2015. The good news for us is we are seeing order rates that are higher in Q2 than we did in Q1 which means there's not much inventory in the channel, and what we're hearing from our distribution partners is what they are taking is leaving their yards. So I think that's good news for us looking forward. John P. Babcock - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Okay. Great. Thanks. I think that's all I have for now. Curtis M. Stevens - Chief Executive Officer & Director: Sure. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Thanks, John.

Thank you. And our next question comes from the line of Bill Hoffman from RBC Capital Markets.

Hi. Thanks. Good morning. Curt, can you talk a little bit about your success or how you're doing on some of that growth in industrial applications, et cetera, in the OSB side? Curtis M. Stevens - Chief Executive Officer & Director: Very circumspect, I'll talk about that, because I don't necessarily want our public competitors to know how we're doing in there. We do have – I think we've talked about – a little bit about growth and innovation in the past. We are spending a lot of resources looking at alternative markets to have traditional single-family and multifamily housing. And we are having some success, but as I think everybody in the phone realizes, it's hard to get a new product in the market and have a big revenue impact in the first year or two, but we're certainly setting a foundation for continuing to grow. I'll give you a few examples. We went in to the furniture market in 2009, right? We were in the midst of the downturn. It took us a while, but now, most furniture manufacturers that converted to OSB from plywood. That's benefited not just us, but it's benefited the entire industry. With our fire-retardant product, we actually introduced that about five years ago. And now, we are adding a second production facility so we can satisfy market demand. Hopefully, right after that, we'll provide a third manufacturing facility so we can do that. So, it's a little slow taking off, but I'm pleased with the progress. If I look at the funnel of projects we've got, it's very robust. We're limiting where we put our resources to those highest priorities, but I feel pretty good about it. And our goal is to have 50% of the overall company at high value-added margin products in the next couple of years.

Great. Thanks. And then just with regards to South America and Chile, just given some of the issues down there, any thoughts on slowing down your expansion project down there or what do you think the market condition is going to look like going forward here? Curtis M. Stevens - Chief Executive Officer & Director: Well, I think that project is going to be somewhere around $60 million to put another mill down there. Today, the product that we ship from either Brazil or from North America ends up not providing any margin to the corporation because we give it all to the transportation company. That's about $100 to $110 bill. So if I could put that mill in place and capture it at $110 per thousand, I have a pretty immediate return on that that's significant. So, it's really just having local production. Plus the other thing that's going on is we are seeing Argentina bounce back with the new government. We're seeing Colombia become a stronger economy and we have – we've long had sales into Peru. So, I think there's great growth opportunities for us both in margin and in product.

Great. Thanks. Good luck. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Thank you.

And your next question comes from the line of Chip Dillon from Vertical Research.

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

Hi, there. Sallie, you mentioned that there was probably about $1 million – I think you mentioned it in terms of the inventory. I want to mix – or maybe I got my terms mixed up. But how much was that inventory adjustment in the Siding business? You mentioned you had higher costs capitalized in inventories you went to the first quarter shift. Did you actually tell us what the impact of that was? Sallie B. Bailey - Chief Financial Officer & Executive Vice President: No, Chip. We didn't really quantify it, but it did impact the – it was a piece of why we had higher sales and lower EBITDA in the first quarter of 2016 relative to the first quarter of 2015.

And I guess on that, it seems like I remember from a year ago, you had some very strong shipments in that first quarter of 2015 and that you all correctly let us know that maybe some of the – of what normally would have been felt in the second quarter was pull forward. Did you see that this year or should we see a more normal progression from first to second? Sallie B. Bailey - Chief Financial Officer & Executive Vice President: We think we should be a much more normal progression from first to second similar to what you would have seen in years like 2013 and 2014.

Okay. Okay. And then, I guess, getting back on OSB situation, it looked like you had a big pop in the benchmark from mid-week to the end of the week last week and not to split here about day-to-day. But it seemed like the other regions were only – the North Central would have 16 or 18, but the other regions went up about 7 or 8. And I guess, in terms of your business, did you really see any change in behavior on the part of your customers in response to the high-level shutdown or not really? Curtis M. Stevens - Chief Executive Officer & Director: We did see a response. I think all of our partners on the West Coast are concerned about getting sufficient volume to satisfy their customer demand in the second quarter going into third quarter. So, my view, Western Canada was a direct reaction to the fire.

Okay. And then the last question is, I would imagine, you're selling more of your product down here than you're making here. I would suppose that some of the Canadian production comes down here and that certainly help your OSB margins given how weak the C dollar had been. But it has strengthened of late. And I just didn't know if you could give us some help in terms of how you think your costs are going to flow through over the next couple of quarters. It'd be either based on the C dollar being stronger or maybe there are other cost issues like resins that you could help us get our arms around? Curtis M. Stevens - Chief Executive Officer & Director: What we said in the past is that penny for the Canadian dollar is about $2 million annualized. And that's still probably a pretty good number. So, each penny change would either raise or lower it by about $2 million. So, I assumed same amount of product comes down and so, it does fluctuate but that's a good rule of thumb. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: And we haven't specifically quantified for OSB the improvement in raw material costs, but we have said that we thought this year, as you'll recall, 2015 we saw a lot of improvement due to raw material costs. We thought 2016 would look similar to 2015, and we haven't really come off that. For a while, I think we would have thought oil and resins would help us a little bit. That may still be the case. We just have to see what happens with oil to go further.

Okay. All right. Thank you.

Thank you. And our next question comes from the line of Mark Weintraub from Buckingham Research.

Thank you. One question on pricing for OSB. Obviously, it has continued to move higher. A competitor of your indicated that their average prices in April had been up about $15 versus the first quarter and then they gave some color on where they were now versus April. Could you provide a similar type of framework for us? Curtis M. Stevens - Chief Executive Officer & Director: I think it's tough. I will do that in July.

Okay. And, obviously, a lot of good news in the quarter. But one area where you do, on a relative basis, seem to continue to struggle quite a bit is the engineered wood business where some of your competitors are doing a lot better. Any thoughts as to what the relative issues might be at this point? Curtis M. Stevens - Chief Executive Officer & Director: Well, we do a competitive analysis every quarter of looking at what is publicly available; and it's a little tough because some of our competitors include plywood in that and MDF and particleboard. Some include their distribution operations. So you can't really see what the pricing is. But when you look at a relative change between quarters, both the last quarter and then the same quarter the prior year, and from a relative change basis, we were pretty consistent both on a volume standpoint and a pricing standpoint with our competitors and the industry. What hurt us in the first quarter is we did have one of our press lines for LVL did go down on the East Coast and we had about a month of outage. And what we did is we replaced that volume to satisfy our customers' needs with the production that we get out of Murphy Plywood. When we sell that we are basically recovering our sales cost, but not any manufacturing margin. So our volumes were good, but we had to replace it with manufactured product outside. The other thing when you look at our margins versus our competitor, just remember is that the activity or the Resolute joint venture in Quebec, we only get half of that margin because we share with our partner. We also only have half the investment in that. So I believe our numbers were about $2 million lower than they should have been due to the fact of having to satisfy our customers out of the Murphy volume.

Okay. That's helpful. And lastly, if you could just give us an update on cap spend expectations for this year and if there are any very early reads for next year? Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Mark, we're continuing to forecast very similar as we said in the first quarter, we're now at $120 million to $130 million, down a little bit from what I said three months ago. Still $100 million in the U.S. And the $20 million to $30 million is in Chile, primarily for the South America but primarily for the third Chilean mill.

Great. Thanks very much.

Thank you. And our next question comes from the line of Mark Connelly from CLSA.

Thank you. So, Curt, you said that you think you're going to be okay with fiber despite the rains and floods and fires. Are you worried about risk to average prices if you end up with competitors who are scrambling in those same regions? Curtis M. Stevens - Chief Executive Officer & Director: Well, I think the risk is that commodity pricing will go up, which is a good risk to have. If you're the king of fiber, then the end product is going to go up. I don't think that we're going to see any – well, we could see some short-term pricing, but we have a strategic supplier program and we've got long-term relationships with most of our fiber suppliers. So I don't think that's going to be a significant risk; maybe a spot risk, but not significant.

Sure. Okay. And just changing gears, can you talk about how you're thinking about OSB acquisitions? If something came up now, how much you might be willing to stretch the balance sheet? And whether your thinking is any different after Ainsworth about what makes sense? Curtis M. Stevens - Chief Executive Officer & Director: Well, Ainsworth was a very difficult process. I think if they were a one-off mill, we would consider it. I think anything of scale I committed to waiting so we would have change in administration or change of view. If you just look at the public comments on the difficultly of GP buying or selling two relatively modest engineered woods operations to Boise, (39:12) do anything of significance can be a little bit problematic.

Okay. Curtis M. Stevens - Chief Executive Officer & Director: So... Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Mark, it may be worth noting that in particular, mills that are located in Afton based regions would be interesting to us because our Siding business primarily is Afton based.

Sure. Sure. Now that's very helpful and especially with the GP problems. Thank you.

Thank you. And our next question is a follow-up from the line of Mark Wilde from Bank of Montreal.

Yeah. I've just got a few. Sallie, can you just walk us through, if it's possible, sort of financially how the ramp on the Swan Valley will look as we move through the year? I think you said it was about $1 million drag in the first quarter and it sounded like it was at least breakeven in the second quarter. And I'm just curious about how that sequences into quarter three and quarter four? Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Well, I think what you need to do, Mark, is really go back and think about what happened in the third quarter and fourth quarter of 2015, and what we said and I know it was $10 million for the whole year. I think it was $4 million... Curtis M. Stevens - Chief Executive Officer & Director: (40:26). Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Okay. So, Mark, we believe it was $6 million in the third quarter and $4 million in the fourth quarter, other way around, $4 million in the fourth quarter and $6 million in the – $4 million in the third quarter and $6 million in the fourth quarter, so $10 million for the whole year. And so, I think the way to think about that is we said it was less than $1 million in the first quarter, and we don't anticipate any negative drag in the remainder of this year. And so, at this point, yeah, it just will be fully incorporated into our Siding business, and we don't expect it to be any different from any of our other siding mills albeit the ramp-up will be fully completed by the end of the quarter.

Okay. Right. And then, Curt, any sense that you can give us of what the underlying growth rate is for your Siding business in your view? Curtis M. Stevens - Chief Executive Officer & Director: When we just take the market and look at the mix between repair/remodel, new home construction, retail business, the inherent growth rate is 7% to 8%. So penetration, we think, is another 5% to 6% on top of that. So I think you're 13% to 14% overall, and if some of these new products really take off in the marketplace, it'll be higher than that.

Yeah. And any thoughts on how you think about the potential of having another player coming to the market? Curtis M. Stevens - Chief Executive Officer & Director: I think it's been rumored for a long time. I just think that there would be a big uphill climb. We have a 25-year history of product reliability and warranty information. We've got a sales force in the field that's now 140 people strong and marketing to support that. It's a different kind of sale than this commodity OSB. And then, as you know, we spent $85 million converting Swan into a siding mill, so there's a little bit of capital that goes into it. And I think I mentioned on the first quarter call that Swan Valley is one of our most experienced mill teams. You know what, it wasn't easy for them. That's even with having that augmented with people from our siding mills to help them with that ramp up because unlike OSB, if you have a flaw in the face of the panel, it's downgraded. You can't see if you ship it (43:06). So it's a tougher standard for an external product and it's going to remain to be seen. I wouldn't surprise me, but we've heard it now for 10 years that people are going to come in the business and...

Okay. My last question I had, Sallie, it seems like even away from just fuel prices that conditions in the freight markets at least from where they were a year or two ago. Are you getting any benefit from what were freight costs either coming through on the rails or from a trucking standpoint? Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Yes. Nothing that's merit mentioning, Mark. And I think we're seeing pretty similar the rates – pretty similar to where they were in last year. Curtis M. Stevens - Chief Executive Officer & Director: So, Mark, I'll comment on that. They put fuel surcharges in for the rail companies, the trucking companies and the airline industry and none of them have come on. It doesn't make any sense if they haven't.

If something was to happen to fuel. Curtis M. Stevens - Chief Executive Officer & Director: Yeah, I know. But look at the airline; you got a fuel surcharge in the airline ticket every time you buy one.

Yeah. Curtis M. Stevens - Chief Executive Officer & Director: They don't come off generally. What I will say is, probably due more to weather than anything else, we did not have any rail disruptions in the first quarter. I mean, if you go back to 2013 and 2014, it was terrible. So we actually...

Okay. So you're focused... Curtis M. Stevens - Chief Executive Officer & Director: ...increased security in the railroad.

Yeah. So cost may not have come down, but the kind of the logistics that use with them less daunting, is that correct? Curtis M. Stevens - Chief Executive Officer & Director: That's exactly right. And as I mentioned, particularly in our OSB business, because of that reliability we were able to change how we treated reloads and how we treated inventory because we can rely on them because they are part customer and part of the improvement we had on pricing was better logistics.

Okay. That's helpful. I know between raw materials coming in and OSB and Sliding going out, freight is a really important piece to your cost structure. Curtis M. Stevens - Chief Executive Officer & Director: It is. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Yeah.

Okay. Very good. I'll turn it over. Thanks. Curtis M. Stevens - Chief Executive Officer & Director: Thanks. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Great. Thank you.

Thank you. And our next question comes from the line of Paul Quinn from RBC Capital markets.

Yeah. Thanks very much. Good morning, Curt and Sallie. Curtis M. Stevens - Chief Executive Officer & Director: Good morning, Paul. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Hi, Paul.

Just if you could talk about your inventory levels on the OSB side, where they are right now and whether they've dropped year-over-year. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Yeah. We actually ended up from where we were in the fourth quarter, and we're also up from where we were on finished goods in the first quarter of 2015. Yeah. We did take them down pretty significantly in the fourth quarter of 2015 and intended to bring them up. And I'd say they're ready to serve the customers that demand that we have.

Okay. And then how would you characterize your customer inventory levels? Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Same as we've been really talking about it for the last couple of quarters. We don't think there's a lot of inventory in the system right now.

Okay. And then just on the cost side, you mentioned the resin pricing, that you really – it sounds like Q1 was flat to last year. And you might expect a tailwind at some point during the year, but what have you seen on the fiber side? Sallie B. Bailey - Chief Financial Officer & Executive Vice President: I would say on the fiber side, we saw improvement primarily in OSB a little bit in Siding. And I don't want to – we've just seen some improvements, and I think I've mentioned that in my comment, in resin pricing and (47:24) relative to the first quarter of 2015.

Okay. Any, on Chambord, eventual start up, any update on timing of that start-up, any change there? Curtis M. Stevens - Chief Executive Officer & Director: Certainly not this year.

All right. And then just lastly, I think, Sallie, you mentioned CanExel, something about Europe. I'm just curious as to how much of that CanExel product line gets sold in Europe. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: The majority of that actually is sent to Europe. Curtis M. Stevens - Chief Executive Officer & Director: No, in Canada. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: No. The majority is in Canada and then probably, what, 10% or 15% sent to Europe.

10% or 15%. Okay. That's all I had. Best of luck. Thanks. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Thanks, Paul. Curtis M. Stevens - Chief Executive Officer & Director: Thanks, Paul.

Thank you. And our next question comes from the line of John Tumazos from John Tumazos Very Independent Research.

Thank you. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Hi, John.

The Norbord two-week outage, about 35 million square feet, big picture, doesn't seem to be that much, maybe 3% of your quarterly volume, for example. Is the dabble in the details or the logistics of giving product to market in the Western region where the distances are large? Is the trucking capacity available to move volumes a few hundred miles out of their normal routes? Curtis M. Stevens - Chief Executive Officer & Director: It's all in the mind of the buyer, John. This is an emotional response. It's a response with incomplete information. As information becomes available, then I think buyers will modify their behavior, but this was an emotional response. And we get that. For instance, when Martco announced they're going to build a new mill, pricing went down but that mill is going to be operational for two and a half years. It really is psychological and as a buyer can't get the wood, they have a tendency to raise the price.

For your two mills in BC, Peace River and Dawson Creek, do you anticipate any difficulty getting fiber or the foresters kind of put down their logging equipment and go fight a fire somewhere? Curtis M. Stevens - Chief Executive Officer & Director: Typically this time of year, you're not logging. So whatever you're going to run through the mills has to be already sitting in the log yard or in a satellite log yard. So our foresters won't be in the woods until next month at the earliest, is that right, Mike?

(49:58). Curtis M. Stevens - Chief Executive Officer & Director: So they won't be in the woods until next month, and then if there is a fire danger, they may limit what areas they can offer it in. So we fundamentally have enough wood in our yards to run through the middle of July in both Peace Valley and Dawson Creek.

Thank you. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Great. Well, thank you, John. Karen, I think that's all the time we have for questions, so if you could please provide the replay number. And I would 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 have a great day.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may now disconnect. Everyone, have a good day.