Good day, ladies and gentlemen, and welcome to the First Quarter 2013 Louisiana-Pacific Corp. Earnings Conference Call. My name is Erica, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Sallie Bailey, Executive Vice President and Financial Officer. Please proceed.

Great. Thank you, Erica, and good morning. Thank you for joining our conference call to discuss LP's financial results for the first quarter of 2013. 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'll begin the discussion with a review of the financial results for the first quarter of 2013. 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, provide his perspective on our operating results for the first quarter of 2013 and give some thoughts on the outlook for 2013. 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'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 also filed an 8-K this morning with some supplemental information and we have filed our 10-Q. I want to remind all the participants about the forward-looking 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. Rather than reading these 2 statements, I incorporate them into this earnings call by reference. The first quarter of 2013 is LP's best quarter since 2006.…

Thanks for that review, Sallie. I'd like to make a few comments on our performance this last quarter, give you an update on the actions that we are taking to respond to the improved housing market and provide some comments on what I see for the rest of the year. Before I do that, let me just talk about our safety performance in the first quarter. We had very good performance with a rolling total incident rate of 0.45. The EPA recently reported their safety awards for 2012 and LP had a virtual sweep including the safest company in our industry. However, on a sadder note, we were tragically reminded late last month that we can never let upon our safety focus. In our Ponta Grossa Brazil mill, we were at nearly 1 million safe hours, almost 4 years, when one of our employees was fatally injured when he failed to lock out the machine he was working on. A very sad occurrence for all of us at LP and a reminder that when it comes to safety, we must remain vigilant. As Sallie reflected in her comments, we had a very good first quarter as housing starts continued to improve, leading to higher demand for all of our products, which translated into solid financial results. The current estimates for housing starts for 2013 are 1 million. In fact, we achieved this rate in March of this year, and then for next year at 1.3 million. This is still quite a bit short of the 50-year average of 1.5 million starts but certainly an improvement over the last 6 years. As Sallie just reviewed, overall sales increased by almost 50%. We earned $0.45 per diluted share and had over $120 million in adjusted EBITDA. Higher OSB prices, record shipments of…

Thank you, Curt. Erica, we're ready for questions if we could go to the queue.

[Operator Instructions] And our first question comes from the line of Mark Connelly with CLSA. Mark W. Connelly - Credit Agricole Securities (USA) Inc., Research Division: Curt, 2 things. Obviously, lots of bullishness about housing, but we're also hearing that housing trends are changing. Can you give us a sense of what you're seeing in terms of changes in footprint? And we've also heard lately that there's actually been a small shift away from engineered components, and I'm wondering if that's a real shift or just mix. And then one bigger question, strategically, you've tried several times over the years to find a complementary business. Sidings is getting better, but would it still be your preference to find a second big business, if you can find one?

Well those are a lot of questions, Mark. Let me just talk on the housing trends. What we are seeing, as I mentioned, we're seeing erratic growth in multi families. It goes way up, and it goes way down, and goes way up and it comes way down. Multi family is important to us but it's not nearly as important as single family, so there's a lot less of our products in multifamily. On the single-family side, we did see a decline in the square footage from 2010 to 2011, but then that recovered between '11 and '12, back up to where it was. So really, we haven't seen a smaller footprint. But clearly, the mix between single-family and multifamily affects the product. You asked a question in Engineered Wood, we are not seeing a decline in the percentage of raised wood floors. Now there are areas of the country, Texas in particular, that does have a significant amount on slab and there you wouldn't use Engineered Wood. But on raised wood floors -- I think it's really mix where it happens. The raised wood floors I think interior wood was 52% of the market and it's been about that for the last several years. So there hasn't been a big change there. As far as we like to diversify into another product as profitable as OSB, we would, but I don't know what it is. The diversification that we have achieved is taking our strand-based technology and moving it into alternative products, like the Siding and our Laminated Strand Lumber, and then diversifying geographically with our investments in South America. Mark W. Connelly - Credit Agricole Securities (USA) Inc., Research Division: So for now -- no, no, no. So for now that will remain the focus, it's trying to keep moving with these trends and then -- and continue to expand geographically? Rather than using your balance sheet strength to look for something new?

I think that is the focus right now. We still have a lot of facilities that aren't running near capacity and we want to take advantage of that as the market comes back.

Your next question comes from the line of Chip Dillon with Vertical Partners.

First question is could you just talk a little bit about your cost experience in the quarter? I know you normally take more downtime in the fourth quarter, which I would assume would have a greater cost impact. And yet if I got those numbers right, it looks like your shipments were about 8% less in the first quarter than the fourth, even though you produced more looking at that swing you gave us. And yet the cash cost of goods sold, looked like they were pretty flat from fourth to first. So I was just wondering -- so the unit cost, obviously, went up. So maybe if you could just help us with that a little bit.

Sure, Chip. Let's start with reminding everybody that at LP, we operate at an FOB destination instead of FOB shipping. And so that has a lot to do with the seasonality that we see in our production versus our sales numbers. And if we look just specifically at your question around the cost of production, our cost of production really didn't increase very much from the fourth quarter to the first quarter. It's probably about 5% higher than the first quarter of 2012, and that would have been related to some of the input Cost. But on the cost of sales side, what you're really seeing there is the impact of the Peace Valley joint venture and that we only get 50% of the EBITDA right now coming out of that. And that did in fact -- we did see quarter-over-quarter that's probably almost a 20% increase in our cost of sales. And most of that is attributed to Peace Valley. A bit of that is going to be attributed to the higher -- to the cost associated with starting up Clarke County.

And -- okay. Got you. And can you update us on where -- sort of how that cost can you give us some are specifics on the costs of starting up Clarke County and sort of where you today? I know you've told us it will probably take several quarters to get that up to full speed. But how does it look now that you're in the process? How do you sort of see that ramping up? Will it be at 50%, for example, of capacity by summer? Or can you give us some specifics there?

Well what we said when we started -- when we were talking about starting a mill up, it would be $8 million to $10 million in capital and personnel costs and that's still a pretty good estimate. We started ramping that up -- or we started making some hiring decisions in November of last year. So we had virtually full staffing on board at the end of the first quarter. So we had a lot of those expenses in the first quarter. And the numbers are somewhere in the $4 million to $5 million range, about half of that probably happened in the first quarter. As I said in my comments, we did start up with production in April. And right now, we're troubleshooting, we are producing some product. I would expect that we're going to be -- I think the numbers that we have given is we expect to be at kind of 50% to 60% of capacity, sometimes towards the end of the summer.

Okay. And then the last question is you mentioned the seasonality between production and sales in the fourth and first quarter. Where do you see that in the second quarter? In other words, where do you see your sales relative to where production is?

Here's what happens. Let me just be very clear. So on the fourth quarter, we take the downtime and the shipments that we make in the fourth quarter generally happen in the first part of December. They reach the customer. And so that is a -- considered a sale. In the first quarter, anything we ship by rail in the last 2 weeks of the quarter still are inventory. Even though it's sold, it hasn't reached a customer yet so we don't recognize it. But -- so what you're really looking at is the difference of in-transit between the end of each quarter. So we would not anticipate much difference in the in-transit between Q2 and Q3 at the end of the month -- at the end of the quarter.

Great, or 3 or 4?

Or 3 or 4. So it's really the change in the in-transit that...

Part of the book end quarters.

And it was just more extreme than normal when we look at the fourth and the first?

Well I really think you have to consider is demand has been ramping up so much. So I think you're noticing the swing is probably more than you have in the last 6 years.

One last thing is what exacerbated that was my comments on the Canadian railroad. We had a lot of material that was sold but we couldn't get cars to ship it from Canada.

Got you. And then lastly, did you -- and you might have mentioned this, Curt, what sort of a good guess as to when the Peace Valley deal closes?

We hope to close it this quarter.

Your next question comes from the line of Gail Glazerman with UBS.

Curt, can you give a little bit more color on some of the capacity news that you were discussing? The change at Swan Valley, exactly what are you doing and what will that add? And I guess once you make all those changes what would be your operating rate assuming you're kind of running that? Would you have anything kind of less in your pocket?

Well what we are doing -- what we did in the first quarter is we ran 24/7 on our U.S. operations. In Canada, we were limited in Swan Valley, we have -- this is probably more detail than you want, but we have got to increase the stack heights so that we can meet all the environmental requirements to run that 24/7. So that's what we're doing there and we have to wait for the weather to accommodate that construction project. So we ran at about -- in Q1, the running mills, ran at about 83% of capacity. And then the only one that's not, that we haven't talked much about is Chambord. And what we did say of Chambord when we get to 1,000,001 kind of housing starts we're going to have to think about that one. So that's the only one that's not currently running and that's about a 450-million-square foot mill.

Okay. That's helpful. And can you maybe give a little bit more color? I guess you referenced some mix shift in OSB in the quarter, exactly kind of what that is? And was that a positive or negative impact just given how strong commodity prices were in the quarter?

I'm not...

Well yes, we did, we saw -- Gail, we saw more value-added in the quarter because we're continuing to increase our value-added. And so on a relative basis, you just do the percentages, you look at these percentage change in price. And you compare that to your commodity price, the percentage changes will be less on the value-added. So but the gross margin -- that doesn't mean the gross margin is less. So on a cash basis, it's good for the company, but on these realizations to the commodity, you're not going to see that same level of price realization.

Okay. And just, I guess, sticking with OSB and pricing, can you give a little bit perspective on what you think has starts the recent selloff? And do you think supplies suddenly caught up with demand? Or would you expect that to kind of bounce back in the near term?

I hate to do this, but I'm going to blame it on the weather. We had very severe winter in Canada and then we had a late winter in the northern tier of the U.S. In fact, last week we had, what, 19 inches of snow in Minnesota. So there wasn't much building going on in Minnesota. So I think part of it was a backup due to those weather considerations. The other piece of that, and I mentioned this, we're working closely with our customers. Customers are somewhat constrained because most of them are working on asset-based lending facilities on how much they can bring in and so they really need to get the flow-through because they don't have the ability to carry extra inventory. So I think it was related to that. We did have, in Q1, we had the highest Q1 OSB prices, at least since I've been in LP, for 15 years. So it's -- it was a high number and I think that some of the buyers were looking for an opportunity to pull back on the purchases so they could affect the price. And that's what we've seen over the last 4, 5 weeks. I would expect that as the weather improves, that all of our discussions with the builders is there's a lot of pent-up demand for that product and going to flow pretty quickly. And that we are going to be in a position where there's going to be tightness between available supply and demand.

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

If I remember right, you were also going to add a shift at Peace Valley, did that happen?

It did. I think I said that, yes.

Okay. Great. So when we take into account all the actions that you've taken and everything you're going to take x to possibility as Chambord, how much production of OSB do you think is, if you could -- let's say, next year kind of if we keep Chambord to the side? How much do you think you'll be able to produce?

Well, next year, if we have the ability to run 24/7, we could do about 1.3 billion, 1.4 billion per quarter. So I'd give you 4.2 billion roughly without Chambord.

So 5.2 billion without Chambord?

4.2 billion without Chambord. Oh, I'm sorry, I take that back. Yes, it would be about 5 with Peace Valley. I would -- didn't include Peace Valley. I'm sorry.

Okay. Great. And just also you mentioned at Clarke -- there have been some costs at Clarke County in the first quarter. Are there going to be similar types of costs in the second quarter related to Clarke County? Or does that start going away? And are there -- what other types of start up costs as you are ramping up your system might we be seeing in the short term?

Well, there will be costs associated -- I mean, Clarke County's production cost will be higher in the second quarter than what it will be when it's running. So but again you will absorb some of that $4 million that I talked about in the cost production.

Okay. And then lastly, just to make sure I understand, so how do you -- how did the OSB product that had gotten into -- onto the rail but haven't been delivered to the customer? Had the customer actually taken ownership of them prior to the end of the quarter? Can we just take the average profitability of the OSB system which was order of magnitude $130 per thousand board feet and times that by the $60 million and that was kind of -- was it accumulated in inventory that's going to show up in the second quarter?

You could do a part of that. The difficulty that we always have is when we disadvantage the customer by not delivering, they get the lower of the price of the order or when they actually get it. So in a declining market, we'll get a little bit of a hiccup there. So this rail situation has been problematic for us. But the customer, themselves do not own the inventory until it delivers to their site.

Your next question comes from the line of Graham Meagher with TD Securities.

I guess just thinking about the operating costs. If you could provide your -- a little bit of an outlook on fiber and resin and specifically, on labor as you're ramping up production in some of these mills?

Sure. In terms of fiber, we're really seeing, I'd say plus or minus, we're seeing costs that are pretty similar with where they were last -- in the -- towards the end of last year. So we're not seeing huge increases in our wood quarter-over-quarter. In terms of resins, as you recall, we talked about higher costs. And in particular, in our Siding business, we are seeing the impact of higher costs associated with our resins and wax. And quarter-over-quarter and while we don't expect that those will continue to increase consecutively, we have seen higher increases when you compare them to the prior year quarter. And labor, we haven't seen huge increases in our labor cost at this point.

Your next question comes from the line of Steve Chercover with D.A. D. Steven Chercover - D.A. Davidson & Co., Research Division: First of all, what level of capacity utilization do you need to get Engineered Wood profitable? And where do you think you are now?

Well it was an interesting quarter for Engineered Wood because we did see increased demand with housing coming back. And unfortunately, the cost of sales in I-Joist really overshadowed an improvement in profitability in both LVL and LSL. If you think about an I-Joist, when we had OSB pricing going up by 102% and lumber going up significantly, we just couldn't catch up with price increases quickly enough to offset the raw materials costs. So other than I-Joist, I actually was pretty pleased with the Q1 performance in Engineered Wood that it is coming back. So I do think... Steven Chercover - D.A. Davidson & Co., Research Division: So what do you think that the ingredients in the LVL sandwich are doing now? And will that help in the second quarter?

I think that there is increasing demand for both LVL and LSL. And as I said in my comments, we are adding production in both of those. Really the struggle for us has been in the I-Joist. Steven Chercover - D.A. Davidson & Co., Research Division: Yes. Sorry, I misquote, Curt. But yes, so -- but it looks like OSB and lumber prices are coming down. So...

And that will benefit EWP, but frankly it hurts me more in OSB, than it helps me in EWP. And Brian doesn't like that, he runs our EWP business. Steven Chercover - D.A. Davidson & Co., Research Division: So I guess, it just depends which pocket is bigger. And then with respect to Plan B, you didn't really articulate it but does that mean you might slow up some of the restarts?

Yes. That is -- it's that plus, we also have -- we have developed a cadre of customers that are export. But the export isn't willing to pay a North American price yet. But what it does allow us to do is move volume off profitably to make the supply/demand balance more favorable. Steven Chercover - D.A. Davidson & Co., Research Division: And final question. Good to see that we continue to ramp up in South America, so the third plant in Chile, what's the timeframe for that and -- just if I remember it correctly, is it St Michel Wood probably be the next machine to go down there?

No. It won't -- it probably won't be the St Michel. We actually have equipment available in a variety of configurations, and so I think that's the -- the discussion that we are having is what size expansion do we do and at what timeframe do we do that. So I would expect that we'll have a recommendation from our South American leadership sometime this summer, which would mean another 18 months to put the equipment in place. Steven Chercover - D.A. Davidson & Co., Research Division: But the 2 that you brought down, and one was from Colorado and other one was originally from Houlton, Maine, wasn't it?

No. It's from Chilco, Idaho. It was the first one and the second one, you're right, it was from Colorado. But we also have Silsbee, we have Athens that are permanently curtailed in the St Michel mill which you mentioned. The St Michel mill is about a 460-million-square foot mill which is probably too big of a bite to go down there and we have some other thoughts on redeploying that. We also need more siding capacity and so we need to think about what equipment we want to use for that. Steven Chercover - D.A. Davidson & Co., Research Division: Okay. Well, just is -- Canada seems to be the CanExel market, but do you think the LP SmartSide siding would be good for the Canadian market or you would ship it from St Michel?

Well I'm not sure we would start it up at St Michel because we are still working with a buyer on some of the other facilities there. I think what we would probably do is redeploy that equipment summer else into a wood basket that's logistically appropriate. The problem with St Michel is there's no rail siding there, and that makes it problematic for shipping.

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

Just a question on -- I guess, realization is where we missed. And it sounds like it's really from its effect on FOB destination versus shipping. Any idea of how you could quantify that and whether that's regular practice with the rest of the industry?

First, I don't think the realization is related to that. That's really just the sales volume versus production volumes is more of what that this. On the realization side, there's a couple of things to remember. First of all, we sell a whole series of products into all different markets. As Sallie talked about, I think in the first quarter, our value-added products are about 45% of our sales versus the commodity at 55%. If we just look at a commodity index and our commodity pricing, we're pretty close from a realization in that 90% to 95% range. When you get into the value added and a rising market in particular, there's a couple of things: one, the value-added pricing doesn't respond as quickly; and the second part of that is generally you sell this at a level and then there's an adder to it. But you don't get the market accelerator on the adder, the adder remains the same. So for instance, if we sell TechShield at Random Lengths plus $50, the plus $50 doesn't change. So you don't get an increase on that. The other piece of our realization as I just talked about with Steve on plan B. When we do see a supply demand imbalance, we do use our export market as a relief valve. And so when we sell in the export market, it's profitable business but it's not at the same pricing that we see in the domestic market, but the advantage to us is by tightening up that supply-demand, it gets reflected in the Random Lengths pricing, and so we're better off from that perspective. So those are kind of the elements of it, so it would be whatever we get, the increase we don't get on the adder. The slower response on some of the value-added products, as an example, 20 on our flooring products. The flooring products lagged the commodity index and Random Lengths pretty significantly in the first quarter. And we're the leading seller of flooring products. So those are kind of the elements of it. I can assure you that we spent a lot of time looking at realization. And on a strictly commodity side, we do very well. We're right on top of the index, if these other moving parts on what we decided to from an export standpoint and how the value-added products respond.

Okay. That's helpful. And then just on order files maybe you can comment on recent activity. It seems like from a number of trade publications that sales volumes did pick up in the last week or so. What you're seeing there and what you seeing on your order files going forward?

Well what Randomly Length said is that order files were sporadic depending on who they talk to. Some people have wood available next week, and some didn't have anything available until end of June. So it depends on the strategy for the various producers and various regions. I think it's fair to say that most producers extended order files last week. And we would expect to see that happen again, particularly with weather coming back and there's going to be more flow-through the channel, so they'll need to replenish. What random links said was there were a lot of buyers out there looking to fill back up their inventories.

Okay. And just lastly investors seem nervous with the announced capacity additions coming to the market. You based off your experience with Clarke County startup and all the other was you noticed out there versus what you expect on consensus starts and housing activity and hopefully better weather. Is that a concern to you?

It isn't. And I think, Paul, I've seen of the some of the work you've done, if we were going to think about 1.1 billion square feet per 100,000 housing starts. And we're going to go from 750,000 last year to 1.3 million. That's 6 billion square feet of OSB demand and what we've announced to startup is about 1.7 million. And that's going to start up overtime. So I think we're bringing it back in a very rational, rational way to meet the demand.

Well thank you very much. Thanks, everybody. Erica, if you could please provide the replay number? We'd like to thank everybody for participating on our call. And Mike and Becky are here to follow-up with any other questions you may have. Thank you all, and have a very good day.

The replay number for this call will be (866) 233-1854 or (617) 614-4949 with a replay access code of 23503432. Thank you for your participation in today's conference. This concludes the presentation. Everyone may now disconnect and have a great day.