Good morning, ladies and gentlemen. Welcome to the West Fraser Timber Company Ltd. Third Quarter 2014 Results Call. During this conference call, West Fraser representatives will be making certain statements about potential future developments. These forward-looking statements are intended to provide reasonable guidance to investors, but the accuracy of these statements depends on a number of assumptions and is subject to various risks and uncertainties. Actual outcomes will depend on a number of factors that could affect the ability of the company to execute its business plans, including those matters described under Risks and Uncertainties in the company's annual MD&A, which can be accessed on West Fraser website or through SEDAR and as supplemented by the company's quarterly MD&As. Accordingly, listeners should exercise caution in relying upon forward-looking statements. I would now like to turn the meeting over to Mr. Ted Seraphim, President and CEO. Please go ahead, Mr. Seraphim.

Thank you, and good morning. I'm on the call today from our mill in Newberry, South Carolina, where we're about to start up 2 continuous kilns and a new planer over the next few months. [Audio Gap] our results. So first of all, West Fraser earned $70 million or $0.83 per share in the quarter. Adjusted earnings for the third quarter were $94 million or $1.12 per share, as compared to $66 million in the second quarter. EBITDA in the quarter was $156 million or 15% of sales, an increase of $10 million from the second quarter. Our lumber business generated $131 million in EBITDA, an increase of $25 million from the second quarter. This improvement was due to improved productivity, inclusion of the results from our 3 sawmill acquisitions as well as [Audio Gap] We are very pleased with the sawmill upgrade at Edson, which was completed in the second quarter. We completed the sawmill upgrade at our 100 Mile facility in mid-October, and that impacted operations during the quarter. We're looking forward to the startup of our 2 energy projects at Fraser Lake and Chetwynd, which are expected to start up later this year and the first quarter of next year, respectively. Our U.S. operations produced 500 million feet in the quarter, an increase of over 100 million feet from the third quarter of 2013, due to the restart of McDavid and our 2 acquisitions in Arkansas this year. Production does continue to be impacted by our significant cap [Audio Gap] as we continue to modernize our U.S. sawmills. As I mentioned during our second quarter call, our U.S. capital program is quite extensive this year. By the end of the year, we'll have completed the construction of 9 continuous kilns, upgrade a number of sawmills as well as 3 major planer projects, which will start up over the next few months. Our panels business generated $29 million in EBITDA, an increase of $16 million from the second quarter. This is primarily due to the higher shipment levels and higher selling prices. Our pulp and paper business generated only $9 million in EBITDA, down $21 million [Audio Gap] The lower earnings were primarily due to the extended maintenance shutdown and operational difficulties at our Hinton pulp mill as described in our MD&A. The lumber market strengthened during the quarter, but we expect that we'll see some continued volatility. The housing recovery in the U.S. continues to show positive momentum, albeit at a slower pace than most forecasted. Demand from China remains strong. Our outlook for our building products business continues to be optimistic for the medium term. Pulp markets are expected to be under continued pressure, as new capacity ramps up this year. With this, I'll turn the call [Audio Gap]

Thanks, Ted. I think we need a new telephone down at Newberry. You cut out just a little bit. But thank you, and thanks to everyone, joining us today. Please refer to the advisory contained in our quarterly MD&A concerning our use of terms such as EBITDA, adjusted earnings and adjusted basic earnings per share. As Ted indicated, for the third quarter, we reported earnings of $70 million or basic earnings per share of $0.83. The table on Page 3 of our MD&A describes and quantifies several nonoperational items, which affected our results. If we adjust the $11 million expense related to equity-based compensation and a loss of $16 million related to the translation of U.S. dollar-denominated debt, the result on an after-tax basis is adjusted earnings of $94 million or adjusted basic earnings per share of $1.12 for the quarter. The equity-based compensation expense reflected an increase of the company's share price over the quarter and a loss on the U.S. debt resulted from a weakening of the Canadian dollar on a period-to-ending basis. On a similarly adjusted basis, results of this quarter improved compared to those of the second quarter of 2014 when we achieved adjusted earnings of $66 million and adjusted basic earnings per share of $0.77. From an operating, earnings and EBITDA perspective, compared to the previous quarter, our lumber and panel results improved, while our pulp and paper results declined. EBITDA margin for lumber improved to 18% from 15% in the previous quarter and 14% in the same quarter of 2013. For panels, EBITDA margin reached 20%, up from 10% in the previous quarter and 8% in the third quarter of 2013. And pulp and paper EBITDA margins fell to 5% from 13% in the second quarter and 20% in the third quarter of 2013.…

Thank you, Larry. And operator, I think we're open for questions. And I do apologize if I'm cutting out. If I do get cut out while the questions are being asked or answered, then please just ask me to repeat the answer. Thank you.

[Operator Instructions] The first question is from Sean Steuart of TD Securities.

I'll start with a few questions and get back in the queue. Have you, Ted, dialed in your 2015 CapEx budget yet? And I guess what I'm trying to get at is your ability to find accretive discretionary projects and sustain spending at the sort of level we've seen over the last couple of years now.

Okay, Sean, I think just to remind the group, last year, we spent about -- we spent $358 million. This year, we'll be around $375 million. And we still have a lot of carryover into next year. And we expect to be [Audio Gap] this year, but it'll probably be in the area of about $300 million in CapEx for 2015.

Okay. And then your activity in the buyback program in the last couple of quarters, is there any read through with getting more aggressive on the NCIB relative to M&A opportunities for you out there? Have accretive sawmill acquisitions dried up a little bit, and that's why you've been more aggressive on it? Maybe just a little bit of context on that part of the capital allocation.

Well, I think really, we -- I think we really have kind of a three-pronged approach in terms of using our cash flow. I mean the first one is obviously capital. The second one are our acquisitions. We made 3 this year. We're continuing to look at smaller acquisitions, Sean. And then the third one is a share buyback. So I don't think one is mutually exclusive of the other. We're really looking at all 3, to be honest with you.

The following question is from Daryl Swetlishoff of Raymond James.

Ted, this might be a good question for Chris McIver, but I'm just wondering about Southern Yellow Pine price spreads. We saw narrows moving up quite a bit higher relative to the wider width. Can you give me a bit of West Fraser's explanation for that? And also, how does Southern Yellow Pine Western SPF spread? How do you think that will normalize over time?

Sure. I think Chris is on the line. So Chris, if you're able to answer the question, please go ahead.

Hi, Daryl, it's Chris here. Yes, just -- I'll ask you to repeat the second part in a minute. But the first part around the price spreads around SYP this year, we really saw a huge spread between the wides and the narrows. And really, our explanation for that really, we don't expect to see a great recovery on the wider widths until we see more normalized housing starts. So the 2x4 is being used a lot in R&R and treating. And so it certainly has held up very well compared to the wides. But as housing recovers, we expect to see that spread begin to narrow. And it's sort of a more normalized spread. And I missed the second part of your question, Daryl.

Just -- and then comparing Southern Yellow Pine to Western SPF, as that spreads open up, too, how do you see that resolving over time?

Well, again, that's mainly on the 2x4 as you saw the spread widen. I think that will tighten back up to more historical. Our view is that SPF will be under more price pressure going forward than SYP just to -- just because of supply.

The following question is from Mark Wilde of BMO.

Ted, I wondered if you could give us just a little more color on what you're seeing in the Chinese markets. Your commentary actually sounded a little more optimistic than we've heard from some other people recently.

Well, I'll start it. If you'd like a little bit more color, I'll have Chris help out as well. But I think, fundamentally, I think we have been slightly different point of view than many of our competitors over this year. We get asked the same question that you asked in this call and previous calls. And from our perspective, we've seen strong demand this year. In fact, our overall demand is stronger this year year-to-date than it was last year. So we continue to see strong demand. We continue to see a very good market for our lumber in China. So that's really -- it really hasn't changed at all from the first or second quarter. And our outlook continues to be the same.

Chris, are you going to add anything?

No. I would just add that we are really seeing our business continue to move inland. And so while the coastal cities may not be experiencing great demand, we're seeing growth everywhere. So just to echo Ted's comments, we have not seen a slowdown. And I was just over there a couple of weeks ago, and certainly, I think it's pretty steady as it goes for now.

Okay. And there's also been talk about more exports to China out of the Southern U.S. Can you talk about what you're doing there now, and where you think that market could move over the next few years?

Chris, you want to answer that?

Sure, Ted. I'll give it a try, anyways. Yes, we're not doing a tremendous amount out of the south. We are hearing that there is more happening. I think a lot of that product is being used in furniture, for example, where SYP will work very well there. So I suspect it will grow. I don't see it, by any means, in the magnitude of SPF.

And Chris, I don't believe we're really doing much business from the south, from our mills in China.

That's correct. That's correct.

I mean our focus is really primarily out of our Canadian mills. If the market develops, we'll be there. But we're putting a lot of our investment in continuing to build and really maintain our presence in China from our Canadian mills, Mark.

Okay. And then just the other question I had, just the trajectory, Ted, between this year and next year in terms of CapEx going into those Southern U.S. mills.

Yes. I'd say, by -- when we bought the mills and what we've talked about for the last little while is that we needed to spend $250 million to $300 million down here. We should be completed that phase of our capital spending down here by the end of next year. I'd say by the end of this year, we're probably 70% through that spending. And these are projects that we've had to go forward with for next year for some time. But that all being said, we continue to see even greater opportunities down here for great payback projects. So I don't think we're going to be -- we're not going to stop spending capital after next year. I think we want to take a little bit of a pause, make sure that our mills are running the capital that they've got. And so far, we've been very pleased. Let the mills run, get back to normal, then I think you could us looking at even spending more capital down here going forward even after next year. So we really don't see a -- we see it slowing down, but we see lots -- we see a lot more opportunities.

The following question is from Paul Quinn of RBC Capital Markets.

There's a little bit of conference call overlap, so I missed the beginning part of your presentation. But I just wanted to focus on Hinton. And you probably addressed it, but I missed it. But what was the operational issues on startup? And how do you expect to settle those going forward?

Well actually, you were -- you're the first one to ask that question, and thank you for doing that, Paul. So I can say today that Hinton is running well. I mean it's been running well for the last week or 10 days. This was a major shutdown. We do one every 3 years, and so we had a variety of difficulties. Nothing -- no one specific issue, to be honest with you, Paul. And I think as I've talked over the last few calls, we continue to focus on improving that mill through a liability. We’re not where we want to be. We have a plan to get there. And really, I think, just coming through the shutdown is sort of more evidence that we've got more work to do there. But the mill's been running well for [Audio Gap] Also as I've said before, we'll talk in terms of being happy when we've had a few good quarters put together. We have not done that for a while.

Okay. And just the on your pulp outlook, it seems pretty cautious. And I guess you're referring to hardwood mill expenses. But it seems like softwood prices, at least on the NBSK side, seem to be pretty stable here, and we've got a lower Canadian dollar. What is the -- what is your concern around pricing? Is that more on the BCTMP side?

Well, I think it's BTMP and NBSK. I mean the price gap between NBSK and hardwood kraft is pretty large. At this point, it's sustainable, but we don't see a significant upside to that spread, Paul. So we are concerned about that, to some degree. We also, in terms of BCTMP, it's affected a little bit by hardwood kraft. But to some degree, it's also affected by supply-demand dynamics for that particular grade. But I think we'll just see overall that with the capacity growth, it's only going to do one thing, and that will probably put some downward [Audio Gap] That all being said, I think we've been saying this for a while, and we've been, frankly, pleasantly surprised that the markets have performed better than we thought they would. So let's hope we're wrong this time as well. But I think it's prudent to be cautious.

Okay, I understand that. And just on the panel side, you had a great quarter. Is there any expectation that these very high results can't continue going forward?

Well, our panels business has been a strong performer for a number of years. And the big driver is Canadian plywood prices and Canada still seeming to be resilient. With that weaker Canadian dollar, that helps our competitive situation. So we don't -- our outlook for panels is really quite positive as we look over the next 3, 6 -- 3 to 6, 9 months. So we're feeling very positive about our outlook for our panels business.

Okay. And just lastly, just turning to the lumber side and M&A. You referenced the 3 acquisitions you've done this year. Can you give us an idea of what that overall pipeline looks like within North America? And where you're focused -- whether your focus is still on the U.S. South and Alberta?

Well, we are a large player in Alberta. We have about 35% of the lumber production in Alberta. So we see -- the growth there will be fairly marginal going forward. The U.S. South continues to be our focus for growth. And we can't really -- we don't really like to talk about specific opportunities. I think it's safe to say that when we do look at growth in the U.S. South, we look for a couple of things. We look for good timber drains. We look for to either buy or build the first or top first quartile or even top second quartile mill in terms of spending capital. And finally, we look for synergies with our existing footprint. So I think that's why we bought the 2 mills in Arkansas. It fit all 3 criteria. And we're going to continue to look for mills that fit that criteria. But we don't plan to grow just for the sake of growth in the U.S. South. We want to make sure it's profitable, long-term growth. And so it's got to meet all 3 of those criteria.

The following question is from Mark Kennedy of CIBC.

And again, I apologize. Like Paul, I was late getting on the call. I know there was just this recent trade mission over to China, Japan and Korea. And on the back of that, just wondering -- you may have already covered this, but just your outlook for your export markets for 2015, especially on lumber.

Well, actually, we did cover that, Mark, so I'll be brief. And if you'd like to follow-up with a little bit more, maybe you could give Rodger a call in the office. But fundamentally, our outlook is positive for China. Our business is big, it's grown [Audio Gap] Last year, and our outlook continues to be very optimistic. But if you'd like more, maybe give Rodger a call after this call.

Okay. And then just in terms of your EBITDA margins in lumber, which did improve this quarter, is that just evidence of your discretionary capital starting to show dividends in your numbers?

Yes, that's a good part of it. And we expect that to continue and expect even more EBITDA margin improvement next year versus this year for sure.

[Operator Instructions] The following question is from Sean Steuart of TD Securities.

A couple of follow-ups. Ted, do you guys have your downtime schedule for maintenance for the kraft mills set for 2015?

Yes, we have -- we don't have any major maintenance for our Hinton mill, but we will have some maintenance that will probably be 5 to 6 days over the period of next year. And then in terms of Cariboo, we are down every 2 years, and we're scheduled to do that next year. It will be kind of late second quarter, and that's a 12-day shutdown.

Okay. And with respect to potential sawmill growth in the South, you touched on the -- the acquisition pipeline. At what point do you guys maybe consider greenfield as an option in that region if you can find the right drain in a specific region?

Well, I think there's a couple of things before that. First of all, we have a significant capital program down here, which is taking a significant amount of time of our folks. Secondly, when -- just acquiring one mill in terms of integrating that in West Fraser and ensuring that it follows the values and the business principles that we want to run our mills, it takes a tremendous amount of time and effort by our senior management, Sean. So that's really where our primary focus is. And then when we look at greenfield, we look at where the timber drains are. And as you can see, there's only 1 company that's building a greenfield plant that I'm aware of in the U.S. South, and that's Klausner. And so we just don't see significant opportunity to do that. We'll do it at some point, but we just do not see significant opportunity. It won't be something, at least, from a West Fraser perspective where we will see material growth for greenfield, if at all.

There are no further questions registered at this time. I'd like to turn the meeting back over to Mr. Seraphim.

Well, thanks for joining the call, and I do apologize if we cut out a few times. Again, I'm calling from our mill in South Carolina, so I do apologize for that. Thanks for joining our call. And if you've got any further questions, I know Rodger's in the office. So I think that would -- give him a call, and I'm sure he'll be happy to speak to you. Thanks very much, everybody. And we'll talk to you in a few months.

Thank you. The conference has now ended. Please disconnect your lines at this time. We thank you for your participation.