Good day, ladies and gentlemen, and welcome to the Second Quarter 2016 Louisiana-Pacific Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, today's conference may be recorded. I would like to introduce your host for today's conference, Ms. Sallie Bailey, Executive VP and Chief Financial Officer. Ma'am, please go ahead. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Great. Thank you very much, Michelle, and good morning. Thank you for joining our conference call to discuss LP's financial results for the second 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 contacts. I'll begin the discussion with a review of the financial results for the second quarter of 2016 and the first half of 2016. 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, our capital projects and give some thoughts on our outlook. As we've done in the past, we have opened up this call to the public and are doing a webcast. The webcast can be accessed at www.lpcorp.com. Additionally, to help with the discussion, we have provided a presentation with supplemental information that should be reviewed in conjunction with the earnings release. I will be referencing these slides in my comments this morning. We filed an 8-K this morning with some supplemental information, as well as our Form 10-Q. I do want…

Thank you. Our first question comes from the line of James Armstrong with Vertical Research Partners. Your line is open. Please go ahead.

Good morning, and congrats on a good quarter. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Great. Thank you.

First question is you've made good progress on your cost per square foot since 2004. As housing rebounds to something more normalized, would you expect costs per unit to continue to come down? Or do you think that as we go forward, inflation's going to start taking hold and we'll see the cost start to rise again? Curtis M. Stevens - Chief Executive Officer & Director: James, I'll take that. I think there's two things we've benefited from. Obviously, with oil pricing coming down, our raw materials costs have come down, particularly in resins and wax. I don't see that going any lower. I think you will see some pressure as oil pricing comes up on that part of our cost curve. The other manufacturing costs, I do think as we increase our utilization of our facilities that we will see cost reductions really across the board. In our OSB business, I think we were at effective capacity at... Sallie B. Bailey - Chief Financial Officer & Executive Vice President: It was 89%. Curtis M. Stevens - Chief Executive Officer & Director: 89%. So we have a little bit more to go in OSB. In Siding, we're still filling out the demand from the Swan plant as it's not being fully utilized yet. And then in Engineered Wood, we have been significantly underutilizing our assets there. So I think you will see the manufacturing costs come down, but you might see a slight rise in raw material costs. The other part of our cost is wood, and I don't see any significant pressure on the wood side. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: And James, we had some benefit from the Canadian dollar as well.

Okay, perfect. That helps. And then switching to OSB, specifically in Canada. In the Quebec area, there has been articles that they have plenty of trees but no one's – they can't harvest the logs because they can't sell the residuals. Would you ever – are you considering restarting Chambord? And on that, do you have any other mills where you can still add shifts? Curtis M. Stevens - Chief Executive Officer & Director: So the residual is not an issue for us. How it becomes an issue is these are generally mixed stands, and so when you're logging, if you've a mixed stand then you put the log in right mill. So if nobody's taking the log for lumber, then it makes it more costly to get out the log for OSB. But we don't really have the problem selling residuals. Yes, we are underutilized in Maniwaki. We a running about 3.5 shifts there so we can still add some production capacity there. In Chambord, we have no plans to start that mill this year, but we constantly evaluate where we think housing starts are from a demand – and what that will lead for an OSB demand.

And then how long will it take to restart Chambord if you were to make that decision? Curtis M. Stevens - Chief Executive Officer & Director: I think it's probably – there are some environmental equipment upgrades we need to make. So I'm guessing it's a $6 million to $10 million cost and probably a nine-month period to bring that mill up.

Yeah. Perfect. Thank you very much. Curtis M. Stevens - Chief Executive Officer & Director: James, the other thing I would say is we don't currently have a wood license from the Quebec government. That wood has not been reallocated to anyone else, but we would have to procure the wood. There is enough private wood to run that at about 60%, but to go beyond that, we would need to reacquire that wood license.

And how long does that process take? And can you talk a little bit about the process of getting a wood license? Curtis M. Stevens - Chief Executive Officer & Director: I'm speaking without full knowledge, but I could bring 160 jobs to Quebec, I probably could get the license pretty quickly.

Okay. Fair enough. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: It probably wouldn't extend the 9 to 12 months that you... Curtis M. Stevens - Chief Executive Officer & Director: No, it would be within that probably. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Right.

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

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

Thank you. Curt, we're used to seeing OSB price declines flow through faster than OSB price hikes. Is that what we're seeing this quarter? Should we be expecting more in Q3 the way things have gone? And related to that, for Engineered Wood, does that mean we should be expecting a fairly significant headwind in Engineered Wood Products in the third quarter? Curtis M. Stevens - Chief Executive Officer & Director: So you're right, we see the decline before we see the – more than we see the increase. I think what hurt us more than that timing on the slope of the increase was actually flooring. Pricing was very low and we're the largest producer of commodity flooring. So flooring had more of an impact on the overall pricing than I think that timing did in Q2. But I think that there's (31:21)

Okay. Curtis M. Stevens - Chief Executive Officer & Director: As far as the cost for Engineered Wood, I know we went out into the marketplace with an increase in our Engineered Wood pricing due to raw materials being lumber and OSB.

And are you confident that the balance in that business is stronger than maybe it was a year ago to try to actually capture some of that? Curtis M. Stevens - Chief Executive Officer & Director: I think so. As I said in my comments, Engineered Wood is heavily dependent on single family. There's not a lot in the multi-family area. So the increase in single family helps Engineered Wood. And again, if there's duties put on for the softwood lumber agreement, it raises the price of Canadian imports, that could have a positive impact on EWP. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Yeah. Year-over-year, Mark, the utilization increased almost 10 percentage points in our LVL/LSL capacity, so it went from, say, around 55% or 54%, close to 53%. That's what's causing some of the improvements in the performance.

It's got to help somewhere. Thank you. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Thanks, Mark.

Thank you. And our next question comes from the line of Garik Shmois with Longbow Research. Your line is open. Please go ahead.

Hi. Thank you. My first question is on Siding. You did a good job recovering in the business this quarter as you added Swan Valley back into the system. Just wondering where you are from a capacity utilization standpoint with the transition? And how much more room do you have to pick up market share in Siding as you look out over the next couples of quarters? Curtis M. Stevens - Chief Executive Officer & Director: Well with the incremental capital, which gives us more flexibility to produce the right products in the right mill, which we're continuing to do, as I said in my comments we think we have enough capacity within the Siding business to last us through the end of 2018 for that kind of 12%, 14% kind of growth rate in volumes. So we are not – as I said in my comment, we are not fully utilizing Swan at this point, and part of that is that equipment because we're limited to doing panel production in Swan today and we need to add flexibility to do some other products in that mill. And we have plans to do that.

Okay, thanks. Just wanted to shift high level. You talked about your expectations on new housing. Wondering if you could talk a little bit about what you're seeing both at retail demand there, as well as just generally on the remodel side? Curtis M. Stevens - Chief Executive Officer & Director: On the retail side, the home centers reported increases of 6% to 7% on a same-store basis. Our first half retail business was a little bit short of that, it was 4% to 5% on a volume basis. And as we look to planning, we're kind of looking at that 4% to 6% kind of growth rate in the retail. We're not going to – we don't believe we're going to see significant expansion beyond that.

Okay. Thanks so much.

Thank you. And our next question comes from the line of Gail Glazerman with REO [sic] Roe (34:55) Equity Research. Your line is open. Please go ahead.

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

A couple of questions. First on the potential Siding expansion. If you're – I apologize if you got more explicit because I missed it but I mean if you think you need this capacity by the end of 2018 and it could take up to 24 months then should we expect a formal decision on exactly how you're going to proceed by the end of the year? Curtis M. Stevens - Chief Executive Officer & Director: It's probably not by the end of the year but we – as I said, we got approval from our Board on long lead time items which we will be ordering in the next couple of months and we also included in that request that we continue to do engineering so that we would have a much better estimate on what that would cost. If it's a new mill you probably can anticipate – our board meeting is early part of February. You could probably anticipate an announcement after that if it's a new mill. If it's a conversion of an existing mill, the timeframe is much shorter than that. It's nine months to do a conversion.

Okay. And I guess just on that topic, can you just remind us what you see as your kind of competitive advantage and barriers to entry for others to try to kind of get into this given your ability to get double-digit growth? Curtis M. Stevens - Chief Executive Officer & Director: So being a little bit facetious, we paid $1 billion in claims on Siding in the 1990s which I think has been somewhat of a deterrent to others getting into it. We did reformulate the product and we do have an exclusive with our supplier of zinc borate. We have an exclusive with our supplier of the paper overlay that we use in the product, and we've got years of experience in building or converting OSB mills, siding mills and running those. And then we have a sales force that's been selling these products since 1997.

Okay. And switching gears, the price gap between plywood and OSB, particularly North Central, has gotten quite narrow, I think one of the lowest levels we've seen in at least three years. And then there's some plywood capacity coming on. No one seems to be expecting much relief on the trade front. I'm just wondering any concerns that that might start to impact customer behavior and thought process? Curtis M. Stevens - Chief Executive Officer & Director: You know, we haven't seen it to-date. If plywood is lower priced than OSB, then certainly builders are going to convert back to plywood. But we have not seen any reduction in expected demand for our product due to plywood pricing at this point. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: And we didn't see that in 2013. We didn't see much substitution.

Okay. And just finally, if you look to the Chile project coming up, how much of that demand have you been supplying to-date with volumes coming out of North America? Curtis M. Stevens - Chief Executive Officer & Director: Yeah, that's a really good question, Gail. Last quarter we had our highest sales ever in Chile. So there was roughly 13,000 to 14,000 cubic meters of product that was imported, either by us directly or by some of our competitors into that marketplace. The expansion that we are planning on doing would allow us to cover all those imports. Now the imports are coming from our own facility in Brazil. A little bit came from North America, and we also saw imports because of the weak euro. We saw imports coming in from Bulgaria and Romania by some of the foreign competitors. We believe that when we have that mill there, we will have a significant advantage. We'll eliminate $100 per thousand of freight.

Okay. That's very, very helpful. Thanks so much.

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

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

Curt, could you just talk – I know that obviously OSB prices are terrific right now, but can you just talk about if there's anything new development-wise on the industrial applications, but also from a diversification standpoint? Curtis M. Stevens - Chief Executive Officer & Director: On the industrial side, we focused on the furniture market about four or five years ago. Now our competitors are focused on it. So I think that the furniture market is converting away from plywood into OSB Siding. Has been successful, although we haven't been able to pull much of an edge there, because everybody- our competitors are doing the same thing. But it does expand the market for OSB, which I think is good. The FlameBlock product, we are really targeting at multi-family more than we are single family. So that's kind of an entry in a play into the multi-family market. The other industrial applications that we've been pursuing have to do with container lining, cargo trailers, interior garage panels and some of those things. And we are making some progress there, but I think as you know in this industry, builders are kind of slow to adopt new products and new building techniques and we're pursuing that and we expect to have success in the future. But I wouldn't claim victory yet except in the furniture panel.

Any guess as to what that total percentage is of your OSB sales of all that other stuff? Curtis M. Stevens - Chief Executive Officer & Director: I can't tell you that, but for the – if you look at overall from the APA, there's about 10 billion square feet to 11 billion square feet of demand that is non-residential construction related. So today, if we're, call it, at 23 billion square feet of demand, so 13 billion square feet would be residential and 10 billion square feet to 11 billion square feet would be non-residential, and that's an overall percentage.

Perfect. No, that's fine. Thanks. And then second thing, just from this sort of capital allocation, obviously, you've got a lot of cash. Any thoughts on timing and when you're going to do something or announce something on your capital strategy? And as a part of that question, how much cash do you want to keep on the balance sheet? I mean, obviously, when we go through down cycles, you need a lot, so I'm curious where you... Curtis M. Stevens - Chief Executive Officer & Director: Well, the number we've used in the past is $250 million to $300 million in cash that we'd like to have on the balance sheet. Now basically it covers cash needs if we go into a 2009/2010 kind of downturn. I know you're a banker, Bill, but the banks aren't there when you need them so you have to have some cash on hand. So that's kind of the minimum that we've talked about. From a timing standpoint, I really do think we need to make this decision whether we're going to be converting an existing mill or building a new mill. And as I answered Gail's question, that's probably end of January, early February we'll make that preliminary decision. So I think that's when I will be asking the Board to really look at whether we consider a dividend or become more aggressive on share repurchase.

Okay. Thanks, Curt, and good luck, guys. Curtis M. Stevens - Chief Executive Officer & Director: Thanks. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Thank you.

Thank you. And our next question comes from the line of George Staphos with Bank of America. Your line is open. Please go ahead. John P. Babcock - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Good morning. This is actually John Babcock on the line for George. Just wanted to ask you question on the Siding side of things. First of all, I was wondering if you could remind us essentially what you see as the long-run potential of margins in the business. And then also, based on the alternatives you mentioned earlier, I don't know if you could provide any sort of probability to whether you'll lean towards a greenfield, a conversion of an existing mill or buying one from the outside? Curtis M. Stevens - Chief Executive Officer & Director: So Siding margins, we think that we can be in the low 20s on a pretty consistent basis. So that's kind of where our target is on that. As far as probabilities, it's a tough one. And when I talk about being a new mill, it actually will repurpose equipment we already own, so it's kind of a brownfield/greenfield is the way I would think about that. And I'd be reluctant to give you probabilities. We're exploring all of them pretty aggressively now. And as I said in my comments, we really appreciate everything the State of Minnesota has done. They've been very supportive of this, and I know they need the jobs in the Iron Range, and we have several mills in Wisconsin and they are some of our most productive and have our best workers. So I think it's a good place to be. John P. Babcock - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Okay. Thanks for that. And then with regards to checking out…

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

Thank you. Congrats on a very strong second quarter in Siding. I want to come back to the Siding capacity addition one more time. Can you give us, at this point, just in a ballpark basis, sort of any guideline on what CapEx would look like if it's a new mill? Obviously there's been some numbers that's been out from the trade press, so if you can just give us some color on that and potential capacity, that would be helpful. Curtis M. Stevens - Chief Executive Officer & Director: So I think the first advice I can give you is on a conversion, as you know we converted Swan which is about a 480 million square foot mill. We converted that for 85 million and we're going to get about 350 (47:10) Siding volume out of that, because you don't get the same volume in Siding as you do in OSB. So that's the number for our conversion. For a new mill, the numbers that are out there are numbers that the IRRRB, which I mentioned earlier, put out. The number that they publicly put out there was a $440 million number. That was their estimate for a double expansion. So it's putting in an initial line and then adding a second line. And I don't exactly know what their number is but for something like that it ought to be kind of like 800 million square feet. So it's a big number. So as you know, our Siding business has benefited from conversions of existing mills, so they basically got the OSB mill for nothing and then added the additional equipment. As I said in my comments, we're becoming pretty short of mills that we can do that in our own stable. So that's why we're looking at other alternatives.

Got it. Okay. And then is – I just wanted to sort of again following up on that, is kind of adding another line at one of your existing Siding mills is an option or that's not possible because of maybe fiber availability or just from a market standpoint? Curtis M. Stevens - Chief Executive Officer & Director: Yeah, that's a good point. We have looked at that and actually the mill that we thought would be best positioned for that, we just don't have the physical size of the site to allow that to happen. We have a lot of property owners around it and some other constraints. So that continues to be a consideration. As an example, not just Siding, but the third mill in Chile is actually going on an existing site and we'll use the same management team to manage both those lines. And what that'll allow us to do is do specialty products on one line and do the OSB on the other line there.

All right. So what do you see at this point? This is probably at the bottom end of the kind of option range in terms of additional no additional Siding capacity? Curtis M. Stevens - Chief Executive Officer & Director: I declined to give percentages a minute ago. I'm going to do it again.

Okay. And then just one last one on that. Is Chambord an option at all, or it's completely ruled out at this point? Curtis M. Stevens - Chief Executive Officer & Director: Chambord is an option we continue to look at. It doesn't have as good an Aspen wood supply. Their alternative species in that mill are 30% to 35%, which is a little high from our perspective – from a quality perspective, quality standard.

Got it. And then just on Siding EBITDA for the second quarter, how much EBITDA in the Siding business was from OSB? Sallie B. Bailey - Chief Financial Officer & Executive Vice President: It was pretty minimal. It was about – a little under $1 million.

Got it. Perfect. That's all I had. Good luck in the back half of the year. Thank you. Curtis M. Stevens - Chief Executive Officer & Director: Thank you. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Great. Thank you.

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

Thank you. You had mentioned that pricing for flooring was very low in the quarter, can you give us a little color around that? And perhaps more importantly, has that changed? Has flooring pricing moved up with the rest of the market? Curtis M. Stevens - Chief Executive Officer & Director: We were actually selling flooring – or the Random Lengths price for flooring was below commodity, which essentially means you're not being paid to put a tongue and groove in. So we are shifting our sales focus away from Siding, which is difficult because we have customers that like our Siding products. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Flooring. Curtis M. Stevens - Chief Executive Officer & Director: Our flooring products. So it's weird. Three years ago, flooring was at about a $25 to $30 premium, and this year it's at a negative. But it's a weird market. I wish I could explain it better than that, Mark.

And so it continues to be, though, at a negative? Even now? Curtis M. Stevens - Chief Executive Officer & Director: Mike, do you have the number on flooring?

No, I don't. No. And I don't think it's changed much. Curtis M. Stevens - Chief Executive Officer & Director: When you talk to Mike, he'll have the number because he'll have Random in front of him. We don't have it in front of us right now.

Sure. Curtis M. Stevens - Chief Executive Officer & Director: But I don't think it's changed a lot.

And maybe just as a follow-up, you had noted that Random Lengths was up 16%. I don't know if that's quarter-to-date or current versus the second quarter. Curtis M. Stevens - Chief Executive Officer & Director: It was current versus the average of last quarter.

And is that a number that we should view as reflective of what should likely be happening to your mix of business at this point? Curtis M. Stevens - Chief Executive Officer & Director: I just – that's just North Central. So you'd have to look at the other prints.

Part of the mix, yeah. Curtis M. Stevens - Chief Executive Officer & Director: And again, it came up from the end of last quarter. So the average isn't 2016. That was a point in time versus an average for last quarter.

Okay. Understood. Thank you.

Thank you. And our next question comes from the line of Steve Chercover with Davidson. Your line is open. Please go ahead. Steven Pierre Chercover - D. A. Davidson & Co.: Good morning, everyone. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Good morning. Curtis M. Stevens - Chief Executive Officer & Director: Hey, Steve. Steven Pierre Chercover - D. A. Davidson & Co.: So it's kind of late in the Q&A, but I did have a question about Jasper and how much lost production does that entail in the first half of 2016, and how much capacity will the new press add? Curtis M. Stevens - Chief Executive Officer & Director: So Jasper is about a $400 million, $420 million mill. These outages usually take 35 to 38 days being out. The advantage of these press rebuilds, Steve, comes in a couple areas. The capacity is pretty incremental. You might get 2% to 3% additional capacity. But what you get is you get a higher A grade because you have much better thickness control, and you also reduce your maintenance costs and your down time. So that's where you pick it up. You really pick it up on the cost side more than you do the volume side. Steven Pierre Chercover - D. A. Davidson & Co.: All right. And obviously your hurdle rate is 16%. So that's good? Curtis M. Stevens - Chief Executive Officer & Director: Well – wait, whoa. That's where capital projects that – are for return. We see press rebuilds as a necessary maintenance. We don't include those in the – you're not going to get a 16% return on a press rebuild. But if you don't do it, you're going to have a catastrophic loss of equipment. Steven Pierre Chercover…

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

Yeah. Thanks very much. Good morning. Just a couple easy questions. Just Sallie, you mentioned 89% operating rate in OSB. What was the downtime taken in Q2? Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Sure. The downtime, Paul, was 27 days. It was about 37 million square feet. And yeah, I want to reiterate what Curt said. Remember, that's off of rated operating capacity so how we determine the capacity utilization.

Okay. And then you mentioned a 30% increase in price year-over-year which translated into $59 million in EBITDA improvement. So the difference between on a year-over-year basis, I guess the remaining $4 million, how do you break that down between, I guess you saw lower cost, FX and also volume? Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Right. Yeah. We don't really – we don't provide that level of breakdown, Paul, but I think the Canadian... Curtis M. Stevens - Chief Executive Officer & Director: Well, volume was actually down a little bit. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Well, volume was down - Curtis M. Stevens - Chief Executive Officer & Director: Because Swan wasn't in there. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: – volume was down because Swan was – yes, thank you. But the Canadian dollar – I think of the – it varies there, so it's probably the largest impact.

Okay. Then just switching over to Siding there, the capacity add that you need by 2018, just so I've got it clear, that's – you need that because you still have latent capacity, I guess, at Swan, but is that also factoring in the conversion – well, not the conversion, but switching over the other line at Hayward from OSB to Siding as well? Curtis M. Stevens - Chief Executive Officer & Director: Yes, it does.

Okay... Curtis M. Stevens - Chief Executive Officer & Director: Yeah. And it includes adding a lot of capacity at various mills, putting the ability to do variable length panels and a whole bunch of other things that are in our capital plan the next two years.

Okay. And just lastly, if you could comment on the channel inventories on the OSB side, we've seen prices, obviously, you reported and commented that they've come up in Q3. But they slowed down here. Where are channel inventories and what do you expect for the balance of the quarter? Curtis M. Stevens - Chief Executive Officer & Director: I think they're pretty lean. I think we're going to be in an environment where the market's only going to order what they need and it's going to be pulled through pretty quickly.

Great. That's all I had. Best of luck. Thanks. Curtis M. Stevens - Chief Executive Officer & Director: Thanks, Paul. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: Thanks, Paul. Sallie B. Bailey - Chief Financial Officer & Executive Vice President: All right. Well, thank you, Michelle. I think that's all the time we have of questions. So if you could please provide the replay number, and I'd like to thank everyone for participating on our call today. As always, Mike and Becky are here to answer any follow-up questions you may have. And we hope everybody has a great day. Thank you.

Ladies and gentlemen, Thank you for your participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.