Good day, ladies and gentlemen, and welcome to the Quarter 1 2014 Louisiana-Pacific Corporation Earnings Conference Call. My name is Patrick, and I will be your moderator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Sallie Bailey, Executive Vice President and Chief Financial Officer. Please proceed.

Thank you very much, Patrick, and good morning. Thank you for joining our conference call to discuss LP's financial results for the first quarter of 2014. 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 2014. This will be filed by some comments on the performance of individual segments and selected balance sheet items. After I finish my comments, Curt will discuss the general market environment in which LP has been operating, provide his perspective on our operating results for the first quarter of 2014, give some thoughts on the outlook for the remainder of 2014 and provide an update on the status of the planned Ainsworth acquisition. As we have discussed in the past, we have opened up this call to the public and are doing a webcast. That webcast can be accessed at www.lpcorp.com. Additionally, to help with the discussion, we provided a presentation or supplemental information that should be reviewed in conjunction with the earnings release. I will be referencing these slides in my comments this morning. We have also filed an 8-K this morning with some supplemental information and we'll file our 10-Q later this morning. I want to remind all the participants about the forward-looking statement 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 is some of the necessary reconciliations that has been supplemented by the Form 8-K filing we made this morning. Rather than reading these 2 statements, I…

Thank you, Sallie, for that review of the quarter. My comments today, as Sallie mentioned, will focus on accomplishments and challenges in the quarter, talking about the current state of the housing market, give you an update on the Ainsworth acquisition and provide you with my views of what is ahead for the rest of this year. The first quarter, we had a safety total instance rate 0.40 for the first quarter. In the quarter, we were recognized by the AF&PA, as the company with the best overall safety record 2013, and we also celebrated several safety milestones throughout the company with the highlight being 2.25 million hours -- safe hours in our Carthage, Texas mill over a 7-year period. As Sallie talked about, weather was a big story in Q1 throughout North America. This not only affected building activity in demand for our products but also created havoc with the truck and rail transportation systems. As a result, we had higher finished goods inventories than planned and we had to curtail operations at several of our facilities and were late on shipments to our customers. While getting better, rail service, particularly in Canada, has not yet returned to normal. Despite the weather, we did post positive adjusted EBITDA in each one of our segments, while significantly lower OSB prices compared to last year hurt our earnings, I was very pleased that our SmartSide siding products continued to show strong growth with this quarter setting a volume record compared to any other Q1 in the history. On our last call, I did mention that we went live on January 1 with our new ERP system. The magnitude of changes to our control operations, accounting and finance, customer and vendor interactions cannot be overstated. We've all heard the horror stories associated…

Great. Thank you, Curt. Patrick, we'd like to go to the queue for questions now.

[Operator Instructions] And your first question comes from the line of Michael Roxland with Bank of America Merrill Lynch.

This is actually John Babcock's sitting in for Michael Roxland. I just have a couple of questions for you. Obviously, refraining from saying anything about or rather asking about anything regarding Ainsworth. But first of all, with 2014 housing forecast coming in given the weather and lower affordability and other factors, how are you guys thinking about OSB capacity and utilization? And on top of that also, has LPX adjusted its production schedule with housing not materializing as expected?

Well, let me answer the second one. As I said, we did have quite a bit of disruption, particularly in Canada during the first quarter due to the rail problems. So we did take quite a significant amount of downtime in our Canadian mills, and we also had -- believe it or not -- we had rail problems in the south due to the snow and ice that we had down there. So we took additional downtime at our Clarke County mill. So yes, we did take a fair amount of downtime in the first quarter. In fact, I think our volumes were lower than they were in the fourth quarter of last year. As we look forward, I think I've talked about this in the past, we used to do budgeting and then we did forecasting and now we do now casting, so we are adjusting our production schedule based on-demand on a regular basis and we'll continue to do so.

Okay. And now, can you give us a sense of how much downtime you guys had during the quarter?

It's about 40 days.

About 40 mill days of downtime in the first quarter.

Okay. And then what was the operating rate for that?

Well, we don't include the Chambord mill, which is still shutdown. We operated at about 81%.

Okay. And now what do you got to do -- do you mind providing like what you guys anticipate having for downtime in the second quarter?

Well, the only downtime that we -- my -- talking about is we do have about 5 days related to capital projects. But other than that, we're not going to provide any more information.

Okay, sounds good. And then also, have you -- with some of the recent pilot curtail announcements, including Boise Smith [ph] for Oregon mill, the Ferry's mill in Mill City, Oregon and also the recent explosion at Georgia Pacific's mill, have you guy’s experienced better OSB demand from that?

Those aren't OSB mills.

Oh, sorry. Plywood.

It wouldn't be significant, so I can't tell you that we've seen anything as a result of those accidents.

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

Could you give us a little more detail on the $7 million? And I guess just a higher pre-tax GAAP between what you or -- distance between what you consider the non -- I'm sorry, the non-GAAP adjusted loss of a $0.05 a share and $0.10? I know you mentioned there's some Ainsworth expense, but do you have the pre of the elements of that difference?

Yes. Sure. I don't have -- I can tell you what they are at a high-level and then, you can follow-up, check with Becky. But Ainsworth would be a big piece of that and then there's a foreign exchange loss associated with some Canadian dollars that we bought in anticipation of the Ainsworth transactions and being completed last year and was a decrease in the Ainsworth -- I'm sorry, with the decrease in the value of the U.S. Canadian dollar relative to the U.S. dollar, we took a hit on that this quarter.

Got you. And will at least ask this -- I don't know if you'll answer, but do you think we'll know which way you guys will move on this by the time of the next quarterly call, in terms of how you would proceed regarding Ainsworth?

Well, let me just give you -- there is some timing in the agreement that we have. We did an extension of the arrangement agreement that takes us through June 4. We have the ability to unilaterally extend that for another 45 days, which takes us to the middle of July. Absent that, we would have to have an agreement with Ainsworth to extend beyond the middle of July.

I see, that's helpful. And the last thing is just in terms of your -- I know in mid-April, you all had some -- you talked a little bit about your plans of adding shifts or maybe what you could do, given I guess the slow start to the year with the winter weather and everything, are you proceeding as you maybe had thought you would back in December/January or have you slowed back in terms of some of the shifts you might add or the -- let's say, how fast Clarke County comes up?

Well, we started making that adjustment over last summer and we're continuing to look at that on a weekly basis.

Your next question comes from the line of Mark Connelly with CLSA.

Two questions. As you think about all of these restarts and then you -- we think back over the years, we spent a lot of time in the last 10 years adding capacity to the market. How are these restarts entering the market relative to history? Are you seeing bigger swings than usual in inventory? Are you seeing more deals getting cut?

Well, from a -- the restart -- the disruption that we saw in the first quarter, frankly, was all transportation related. I wouldn't say it was an impact on the restart. For us, what we have said is Dawson Creek, we brought up on a limited shift basis to support our TechShield and our foreign products principally. And then Clarke County, we've been on a steady ramp since this summer, we're continuing the ramp-up. Most of the downtime that we take is in Canada.

Okay, that's helpful. And just one minor question. You had talked awhile back about shipments to Asia and targeting a couple of million a month. Can you tell us whether that's still your target or is there anything bigger we can look forward to?

We look at that opportunistically. I would say that the shipments out of North America are principally going to Eastern Europe and Russia, not to Asia from our company. Some of the others that you've heard do ship more to Asia than we do. But our focus has been on the Eastern Europe and Russia.

And we do, do some shipment out of Brazil into Asia.

And is that number moving in any particular direction?

It improved.

It improved in the fourth quarter and first quarter.

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

First question, would you be able to quantify what the impact of weather was on the quarter and if things are normalizing weather-wise, you're going to see some of that cost to reverse as you move through the year?

It's hard to quantify. I mean we've had late shipment to customers and often that has a pricing impact. Probably the one number we could quantify is we spent about $2.7 million converting the truck. So we did have extra logistics costs that we couldn't pass on to our customers.

Okay. That's helpful. And then on the EWP side, so one of the key players is bringing on new capacity or I shouldn't say new but restarting capacity. Do you have any thoughts on how that may impact supply and demand as we move through 2014 and EWP?

I think you'd have to ask them why they restarted it, but we're expecting to have an increase in housing starts, and so I think that they are growing nicely[ph]. It was better in Q1 of this year than was Q1 of last year, even though housing starts were down.

Got it. And then more of a medium- to longer-term question, if we look at all the new OSB capacity that's been announced for restart and assuming that it comes online, what do you think the housing start level needs to be in order to be able to absorb that capacity? And then maybe looking at it a little bit longer than that assuming that all the idle capacity in OSB gets restarted, what housing start level do you think you could be at in order for that to be absorbed? Do you have any thoughts on those questions?

Well, the rule of thumb for just housing is 1.1 billion square feet of OSB per 100,000 housing starts. So if you think that over, I think the idle capacity today that has not been restarted is probably somewhere in the 1.5 billion range on what's started, and isn't fully running, it's probably another 2 billion. I would say you need roughly 300,000 more housing starts to absorb that. That was just 1.3 million, we're supposed to be 1.37 million next year. So starting at the end of next year, early in 2015, coming up to some limitations, which would require restarting the new -- the other mill that were idle.

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

I realized, Curt, you hadn't said anything additional to what you've already said on the Ainsworth situation, but just wanted to clarify, make sure I understood it correctly. So basically, are there kind of 3 alternatives now as one you either litigate; two, you walk away or three, you continue to work with the regulators, but that would also require a change in the initially contemplated transaction? Is that a fair summary or is there -- are other options, too?

The fourth is they can give up.

The regulators.

Well, presumably they would do that after you started the litigation process.

But, yes, I think those are the 3 options.

Okay, fair enough. And I'll throw one other. The new ERP system, can you quantify potential upside from getting that system in place?

We think that we will get -- and these are very high level numbers, but we ought to get $1 sales price by having better analytic tool and we ought to get $1 in cost. That's kind of the way we would quantify it.

Okay, great. So basically $10 million to $15 million across the system?

That time on all of our volume.

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

I just wanted -- I guess I just wanted to comment this question a little bit differently and the issue is basically with -- if you look at Richie's forecast, they're still using the last structural panel commentary of 1.2 million for housing starts and if we're now talking about 1.1 million or even less, that would -- and you overlay that, you're obviously, for this year, coming up with some pretty low operating rates. And I guess I'm just trying to get your perspective on how you think the industry is behaving or will behave, given these lower housing starts. I mean are you -- are some of these restarted facilities not fully ramping up or have you seen any slowdowns in that activity or -- just trying to get some color to see if there's -- if we can get a higher comfort level that operating rates will be at sort of reasonable levels this year? Because I certainly, understand you're looking out over the next couple of years, if we get up to 1.37 million and whatnot, we'll be in good shape but it's more looking at 2014 here. So do you have some perspective on that?

Really what I can talk about is what we're doing and I think I've said that. We have a much slower ramp-up at Dawson Creek than we've anticipated. We're not running full at Maniwaki and Swan, and we're in the ramp-up phase with Clarke County. So we really do adjust those schedules based on what we see as demand for our products in the marketplace.

Sure, I know you're not going to get in to talk about a specific competitor or anything, but I mean broadly out there, you sort of -- do you think other people are being that responsible in terms of taking out of that sort of being conservative and really being -- adjusting your production like that on a real-time basis or -- I just was curious with...

But I think the -- overall, I think the APA said volumes Q-to-Q were up 8%. Q1 last year to Q1 of this year, they said that, that was the production increase. That's probably a pretty good benchmark to look at as how -- what's being reported to them.

Your next question comes from the line of Steve Chercover with D.A. Davidson. Steven Chercover - D.A. Davidson & Co., Research Division: Question about Engineered Wood. The EBITDA was up quite nicely when you consider that the sales were rather flat, so is that due to lower costs as the OSB that you bring into that segment? The prices are far lower?

Yes, it was principally tied into the sales price increases that we announced in 2013 that reflected this quarter. And the second, as Sallie mentioned, was better utilization of the whole facility stood lower overall costs. Steven Chercover - D.A. Davidson & Co., Research Division: And I think you have some issues at Houlton, so with seasonality and no polar vortex, we should start to see some torque in that segment, correct?

Well, and this is -- we actually had a fire in the LSL line in Houlton, we were down the whole month of January. We were able to make OSB in that, though, during that time. But we didn't run any LSL in January. So we would expect to see some acceleration there, yes. Steven Chercover - D.A. Davidson & Co., Research Division: Okay. And then on the Ainsworth deal, I don't want to put words in your mouth, but the rationale is unchanged, so I guess the only reason to walk would be if the economics don't work. Is that how you look at it?

Well that's -- as I said in my comments, we're going to do what's best for shareholders and if the economics do change to a negative, then that would certainly be a consideration we got to take.

Your next question comes from the line of John Tumazos with Very Independent Research.

My question, I apologize, it's been asked a little bit different ways, but presumably, it doesn't require a specific decision by Kurt at the top level to reduce schedules or output or whatnot, you just have an order book and if the order book isn't full, the mills run on less shifts. And if there's too many mills open, the EBITDA is negative and you decide to have fewer sites active, et cetera. So is it sort of reasonable to look at your results and the EBITDA is still positive, so you're not at the point of curtailing capacity yet?

As I said, we are adjusting our production schedules based on-demand. So you're exactly right that what our salespeople see is demand from our customers, it dictates what we do from a production standpoint. And typically, what Jeff does, who runs that business, is he sets inventory targets at his mills and once you hit those targets, you adjust the schedules.

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

Just a question on -- we've seen a lift in OSB pricing last couple of weeks, just whether you attribute that to the delay in the U.S. home building activity as a result of weather or is that -- and if you could give an indication of what you see in, in-field inventories?

Yes, I think it is weather-related. As I mentioned in my comments, we did have late shipments, those are starting to show up but they're going right out to the field. So our sales people would say that inventories remain lean and the building season has begun in earnest, and that's a good thing. So I'm very happy about this.

Yes, I know. It's good to see it as well. Just on operating rates, just trying to understand what you're doing in Clarke County? It sounded like you took downtime in the quarter but that was more rail, maybe you could give an indication on what you expect to produce at that mill. And what you're running Dawson at, is that running 1 shift or 2?

No. I think Dawson, it moves between 1 and 2, it's no more than 2. And at Clarke County, we expect to produce this year somewhere in the $400 million range.

Patrick, I think that's all the time we have for questions, and that's the questions we have. So if you could please provide the replay number, we will move forward. And we'd like to thank everybody for participating in the call. Mike and Becky is always -- are here to answer any of your follow-up questions. So thank you, and have a good day.

Ladies and gentlemen, to access the replay, please dial 1 (866) 233-1854 and use replay code 63373789. Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.