Louisiana-Pacific (LPX) Q4 2016 Results - Earnings Call Transcript

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Louisiana-Pacific Corp. (NYSE:LPX) Q4 2016 Earnings Call February 8, 2017 9:30 AM ET

Executives

Sallie B. Bailey - Louisiana-Pacific Corp.

Curtis M. Stevens - Louisiana-Pacific Corp.

Analysts

Mark Connelly - CLSA Americas LLC

Clyde Alvin Dillon - Vertical Research Partners LLC

George Leon Staphos - Bank of America Merrill Lynch

Gail S. Glazerman - Roe Equity Research

Ketan Mamtora - BMO Capital Markets (United States)

Steven Pierre Chercover - D.A. Davidson & Co.

Mark Weintraub - The Buckingham Research Group, Inc.

Paul Quinn - RBC Capital Markets

Roger Neil Spitz - Bank of America Merrill Lynch

Sean Finlay Steuart - TD Securities, Inc.

John C. Tumazos - John Tumazos Very Independent Research LLC

Operator

Good day, ladies and gentlemen, and welcome to the Louisiana-Pacific Corporation Fourth Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, this call may be recorded.

I would now like to introduce your host for today's conference, Sallie Bailey, Executive Vice President and Chief Financial Officer. Please go ahead, ma'am.

Sallie B. Bailey - Louisiana-Pacific Corp.

Great. Thank you very much, Christie, and good morning. Thank you for joining our conference call to discuss LP's financial results for the fourth quarter and full year of 2016. I am Sallie Bailey, LP's Chief Financial Officer, and with me today are Curt Stevens, LP's Chief Executive Officer; Brad Southern, LP's Chief Operating Officer; as well as Mike Kinney and Becky Barckley, our primary Investor Relations contact.

I will begin the discussion today with a review of the financial results for the fourth quarter and full year for 2016. This will be followed by some comments on the performance of the individual segments and selective balance sheet items. After I finish my remarks, Curt will discuss the general market environment in which LP has been operating, and provide his perspective on our operating results and give some thoughts on the outlook.

As we have done in the past, we've opened up this call to 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 will be referencing these slides in my comments this morning.

We have filed an 8-K this morning with some supplemental information and plan to file our 10-K next week. I want to remind all the participants about the forward-looking statements comment on slide 2 of the presentation.

Please also be aware of the discussion of our use of non-GAAP financial information included on slide 3 of the presentation. The appendix attached to the presentation has some of the necessary reconciliations that have been supplemented by the Form 8-K filing we made this morning. Rather than reading these two statements, I incorporated them with this reference.

For 2016, LP is reporting our higher adjusted EBITDA since 2005 when housing starts were almost 1 million higher than they were in 2016. LP reported revenue of $2.2 billion and adjusted EBITDA of $346 million for 2016.

Our Siding segment had another record year with net sales of $752 million, a $154 million of adjusted EBTIDA, and an adjusted EBITDA margin of 20.5%. With improved OSB pricing from 2015 and Siding growth, we reported 2016 adjusted EBITDA margin over 15%.

In addition to the strong earnings and cash flow in 2016, we also cleaned up our balance sheet, refinanced our debt, lowered the interest rate and extended the maturity another four years, and identified significant research tax credits.

With that, let me go into the detail. Moving to slide 4 of the presentation for a discussion of the fourth quarter and full-year 2016 consolidated results. We are reporting net sales of $550 million for the fourth quarter of 2016, a 19% increase from the net sales of $463 million reported in the fourth quarter of 2015. In the fourth quarter, we recorded net income of $42 million or $0.29 per diluted share, compared to a loss of $8 million or a $0.05 loss per diluted share in the fourth quarter of 2015.

The adjusted income from continuing operations for the quarter was $32.8 million or $0.23 per diluted share based upon the normalized tax rate of 35%, as compared to $1 million or $0.01 per diluted share reported in the fourth quarter of 2015. Adjusted EBITDA from continuing operations was $85 million in the quarter, compared to $35 million in the fourth quarter of 2015.

For the year ended December 31, 2016 we recorded net income of $150 million or $1.03 per diluted share, compared to a net loss of $88 million or a loss of $0.62 per diluted share for 2015. The adjusted income for the year was $130 million, $0.89 per diluted share, based upon the normalized tax rate of 35%, compared to an adjusted loss of $46 million or a loss of $0.32 per diluted share in 2015. Adjusted EBITDA from continuing operations was $346 million for 2016, compared to $67 million in 2015.

Moving on to slide 5 and a review of our segment results, beginning with OSB. OSB reported net sales for the fourth quarter of 2016 of $276 million, up 34% from $206 million of net sales in the fourth quarter of 2015. OSB reported operating income of $60 million, compared to operating income of $11 million in the fourth quarter of 2015. Adjusted EBITDA from continuing operations was $74 million, compared to $25 million in 2015. We had a 15% increase in sales volume. Pricing for OSB was higher by 16%, which resulted in improving operating results by $39 million.

For the full year, OSB reported net sales of just over $1 billion compared to $808 million, up 27% from the prior year. OSB reported operating income of $186 million for 2016, compared to an operating loss of $46 million in 2015. Adjusted EBITDA for 2016 was $246 million, compared to $12 million in 2015.

Sales volumes increased 3%, and sales prices increased 25%. The increase in selling prices favorably impacted operating results by $204 million. And in addition to the increase in selling prices for the year, a reduction in raw material costs related to petroleum-based raw materials and improved operating efficiencies, favorably impacted the segment's results.

Slide 6 reports the results of the Siding business. We reported a record fourth quarter and record year. This segment includes our SmartSide and CanExel siding products, as well as OSB produced on one line at our Hayward, Wisconsin operation.

The Siding segment reported sales of $169 million, a 20% increase from the fourth quarter of 2015, operating income of $22 million and adjusted EBITDA of $29 million, significant improvement from the $14 million of operating income and the $19 million of adjusted EBITDA for the fourth quarter of 2015.

For the quarter, SmartSide average sales prices were up 4% and volumes increased 18%. Volume increased in our SmartSide siding line due to increased availability of our SmartSide siding product, following the conversion of our Swan Valley OSB mill. As a reminder, it was estimated that the expenses occurred at the Swan Valley facility during the fourth quarter of 2015 related to that conversion and also market-related downtime were approximately $6 million.

The Siding segment produced about 39 million feet of OSB at our Hayward Facility during the fourth quarter of 2016, compared to 19 million feet in the fourth quarter of 2015. For the year, the Siding segment reported sales of $752 million, an increase of 18% from $636 million reported in 2015. The Siding segment reported operating income of $126 million compared to $93 million, and adjusted EBITDA of $154 million as compared to $114 million in 2015.

SmartSide sales prices were flat and volumes were up 16%. The improvement in the Siding segment's results were due to the higher volumes as well as lower raw material and operating costs.

Please turn to slide 7 of the presentation, which shows the results of our Engineered Wood Products segment. This segment includes I-Joists, laminated strand lumber, laminated veneer lumber, OSB produced at our Houlton, Maine facility, plus other related products. This segment also includes the sale of I-Joists and LVL products produced by the Abitibi joint venture or under a sales arrangement with Murphy Plywood.

The Engineered Wood Products segment recorded sales of $66 million in the fourth quarter of 2016, down from $75 million in the fourth quarter of 2015. The segment's results were a loss of $4 million in the fourth quarter of 2016, as compared to breakeven in the fourth quarter of 2015.

For the fourth quarter of 2016, adjusted EBITDA from continuing operations was negative $1 million, as compared to adjusted EBITDA of $3 million in the fourth quarter of 2015. Volumes of I-Joists were down 14%, while volumes of LVL and LSL were down 12% compared to the same quarter last year. Pricing was up 3% in LVL and LSL, and up 2% in I-Joists.

For the year, sales were $297 million, up from $286 million in 2015. The segment's operating loss in 2016 was $6 million, as compared to $7 million in the same period of 2015. And adjusted EBITDA improved to $8 million for 2016 from $6 million in 2015.

Moving on to slide 8 of the presentation. For the quarter, our South American segment recorded sales of $34 million, flat with the fourth quarter of 2015. Operating income was $2 million and adjusted EBITDA was $4 million for the fourth quarter of 2016, both lower than the fourth quarter of 2015, primarily due to costs associated with the construction of the third Chilean mill of approximately $3.5 million.

Volumes in Chile were down 3% and volumes in Brazil were down 8% compared to the same quarter last year. The sales volume decrease in Chile was due to weakened housing demand and, in Brazil, due to continued economic recession in their local market.

Pricing was up 8% in Chile and up 12% in Brazil. In local currency, Chile's pricing was up 3% compared to the same quarter in 2015 and Brazil's pricing decreased by 6%. For the year, our South American segment recorded sales of $137 million, as compared to $135 million in 2015. Operating income was $17 million for 2016, compared to $10 million in 2015. Adjusted EBITDA increased to $26 million from $18 million in the same period of 2015.

Total selling, general and administrative expenses were higher for the fourth quarter and the full year of 2016 as compared to the same periods in 2015. The primary reason for the increase in these expenses is due to increases in management compensation incentives for 2016 and higher costs associated with sales and marketing.

Turning to the balance sheet. We completed the acceleration of notes receivable and the notes payable associated with the timber notes in the fourth quarter. And as a result of this transaction, we accelerated the receipt of $41 million of cash. Repayment of the timber notes is quite visible on our balance sheet, with the balance of long-term debt excluding the current portion declining from $752 million at the end of 2015 to $374 million at the end of 2016.

Accelerating the gain also caused the acceleration of $121 million of income taxes associated with the gain on the sale of timber from 2003. We anticipate offsetting much of the accelerated income tax with available carryover benefit.

Please refer to slide 9 of the presentation. As of December 31, 2016, we had cash, cash equivalents, investments and restricted cash of $677 million, working capital of $788 million, net cash of $317 million, and we had $2 million of availability on our credit facility.

Capital expenditures for 2016 were $125 million and net cash flow for the year was $225 million. We are budgeting capital expenditures for 2017 between $175 million and $200 million. This includes funding for the third mill in Chile, as well as funding for current signing capacity optimization as well as additional signing capacity.

As I mentioned on our last call, we anticipate beginning to pay cash taxes in 2017. The U.S. represents approximately 70% to 75% of our operating income. We don't anticipate paying cash taxes in Canada due to our net operating losses. The benefit amount of our available Canadian operating losses was $53 million at the end of 2015.

With that, I'd like to turn the call over to Curt for his comments.

Curtis M. Stevens - Louisiana-Pacific Corp.

Thank you, Sallie. Good morning and thanks for joining us on today's call, which I know is a little earlier than normal.

I'll start with our safety performance. 2016 was the second best safety year in LP's history with a total incident rate of 0.39. Amazingly, this marks the 10th consecutive year that LP has had a TIR below 1.0 and is the sixth year out of the last seven years we've been below 0.5.

Today, I'll be providing comments on our results and accomplishments in the fourth quarter and for the full year of 2016, give you my views on housing and the outlook for 2017, provide our thoughts on capital allocation, and try to answer your questions about what the new administration will mean to LP's business in the future, which certainly could be a challenge.

I know that Sallie just went through our financial results in detail, but I need a chance to talk about these great numbers briefly. Total sales in Q4 were 19% higher than Q4 of last year and produced net income of $48 million. For the year, total sales were $2.2 billion, 18% increase over last year. Net income was $156 million and diluted earnings per share $1.03.

All business segments recorded positive EBITDA in 2016 that totaled $346 million for the company. And with all that was accomplished with housing starts increasing less than 5%.

In addition to our outstanding safety performance for the financial results, Q4 was a busy quarter for us. We completed the mill swap in Québec with Norbord, and acquired a manufacturing site in Minnesota that gives us additional flexibility to add capacity to support the growth in our Siding business. Sallie mentioned, we collapsed the timber notes during the quarter, which cleaned up our balance sheet, greatly reduced notes receivable from asset sales and confusion related to the amount of notes payable, plus the release of $41 million in cash.

Organizationally, we did name Brad Southern as our Chief Operating Office in early November, followed by a change in leadership that was effective January 1 in our three North American businesses. The growth of our Siding business, as we reported, a nearly 20% increase in Q4 was also noted.

As I said earlier, housing starts for 2016 were higher by only 4.9% over the prior year, an increase that was less than half of the forecast at the beginning of the year. However, the mix between multi-family and single-family moved in our favor, with single-family growing at 9.3%, while multi-family declined by 3%. Also, as permits are a leading indicator, we are pleased to see an increase of 7.1% for single-family year-over-year, while multi-family declined 9.3% compared to the last year.

The current consensus for 2017 is 1.263 million, an 8% increase over last year. In Canada, 2016 starts were up slightly, while the forecast for 2017 is again slightly higher for a total of about 200,000 units.

Other economic news related to construction is a bit mixed. The weekly average rate for 30-year fixed mortgages was 4.12% for the week ended January 13. This compares to a rate of 3.47% at this time last quarter. The inventory of both new and existing homes for sales is at historic low levels. The value of non-residential construction put in place was $712 billion, the highest since The Great Recession. Consumer confidence remains high, and the unemployment rate ended the year at 4.7%. Retail sales of building materials and garden equipment were up almost 6% in 2016.

I just spent the last two days at the Policy Advisory Board Meeting of the Harvard Joint Center for Housing Studies in Washington, D.C. and had a chance to attend the International Builders' Show last month. There are a few key themes that have emerged from these discussions. Labor availability as well as the quality of the labor and the negative impact of aggressive enforcement of immigration has everybody scared.

On the regulatory side, it's clear that there are too many, they are too complicated and it adds too much expense in housing. Multi-family starts will continue to decline. Rents have been flat for 12 to 18 months, while their costs are rising. Watch out for inflation in the infrastructure spending and increasing debt.

Housing availability is a major issue of many of our urban markets, as is the low inventory of houses for sale. So, almost unanimously, the participants at the meeting in last two days expect 5% to 7% growth, all of that being in single-family and housing starts, and 4% to 7% growth in repair and remodel.

As many other CEOs have done in the last few weeks, I do want to provide a few comments on the possible implications that could result from the recent change in administration. Trying not to be political here, I'm trying to focus on the economy and our business interests.

On immigration, any actions that limit the availability of workers will not be good for housing. It is also true on the demand side if we further limit access to immigrants. The withdrawal from the TPP, the plan to renegotiate NAFTA, and the constant threat to our impunity of duties for products from Mexico, Canada, and China will raise the cost of living for our employees.

The selective duties threatened against U.S. companies who choose to produce elsewhere is also very scary. I do think the new administration will take a more balanced approach to regulations and enforcement, and appears to be focused on changes in tax policy to make the U.S. more competitive. I applaud all these efforts with a caveat that the border-adjusted tax suggested in the Ryan blueprint could have a negative impact on our Canadian operations.

We have seen a 0.75 point rise in interest rate since the election. There's also talk of Fannie Mae and Freddie Mac being once again privatized. On the positive side, changes and modifications to Dodd-Frank or the Consumer Financial Protection Bureau could allow financial institutions to increase the access to credit.

Sallie and I in our recent discussions with investors, we've been asked a lot of questions around capital allocation. I'd like to just take a few minutes to discuss. We do believe that our credit profile should support higher ratings from Moody's and Standard & Poor's. Sallie and her team will be meeting with them for an update later this quarter.

In both their comments, they highlight the volatility of OSB pricing as a reason to discount the rating. With our growing Siding business, we may be able to blunt this in the future. We do not believe we are being penalized by the market for the lower rating, as evidenced by our 4.875% bond issuance last September with very limited covenants.

With over $675 million in cash and investments, along with the available credit under our banking arrangements, we are in a very strong position to fund internal growth, pursue acquisitions, or returning cash to shareholders via dividends or share repurchase. We did review this topic in depth with our board at our meeting last week. Based on this discussion, we are aligned in our short-term priorities.

As Sallie mentioned, our capital investment plan for this year is between $175 million and $200 million that includes maintenance capital of around $75 million, with the remainder being growth or cost-out projects, including continued construction of the third mill in Chile, beginning work on the next siding mill, and expanding our siding capabilities at our existing mills. We continue to look at adjacent acquisitions that would add to our capabilities, and we are a buyer of existing OSB mills that could be converted to siding, should any be available.

The $100 million share repurchase authorization is still in place, although we haven't yet purchased any shares. We did discuss and review the implications of implementing at this level or increasing, but have no short-term plans to do so. We've also looked at reinstating either a fixed or variable dividend, but both present some challenges. The data shows that the building construction sector has the lowest average dividend yield at 1.1% and that a dividend has very little impact on the stock price.

So our priorities are clear, accelerate the growth of Siding, acquire OSB if available, look for acquisitions that enhance our current competitive position or are complementary to our businesses, and implement high-return capital projects, and do this in the context of transitioning from a traditional forest products company to a buildings products company with the attendant increase in multiple.

As to the core priorities for this quarter, we have seen a slight decline in OSB prices, but we started the year stronger than we anticipated. Also, late last week, we saw a pricing firm and Random Lengths Midweek show high-single digit increases in most regions.

As in the past, weather will be a major factor on the demand side in Q1, as the Pacific Northwest and Northern California were virtually shut down by winter storms for two weeks of January. We're seeing good demand for our Siding products and will be implementing selective price increases over the next several quarters.

Construction continues in our third mill in Chile. In preparation for this additional capacity, our team in South America is preparing to open sales offices in Peru, Argentina, and Colombia later this year. We are completing our engineering and operational analysis for the next siding mill and should be in a position to identify the sites on the next call.

Following our annual internal sales meeting and a well-attended International Builders' Show last month, our sales and marketing folks are out there aggressively pursuing new business to keep us on the growth trajectory.

With that, let me turn it back over to Sallie for some questions and answers.

Sallie B. Bailey - Louisiana-Pacific Corp.

Great. Thank you, Curt. Christie, we'd like to take questions now if we could go to the queue.

Question-and-Answer Session

Mark Connelly - CLSA Americas LLC

Thank you. Two things. Can you give us a sense of the rough split of your Siding products right now between new construction and R&R? And if housing does keep up with single-family the way you're expecting, is that going to be a significant shift towards R&R in 2017 or away?

Curtis M. Stevens - Louisiana-Pacific Corp.

So from a percentage of sales, we are roughly 40% new construction, and that would include both single-family and multi-family. And then the R&R side is actually a smaller piece of that. The R&R side, can't really tell with the home centers, but R&R is probably in that 20% and the rest would be going to non-traditional structures like the shed business that we have in outdoor building.

Mark Connelly - CLSA Americas LLC

Okay. Okay.

Curtis M. Stevens - Louisiana-Pacific Corp.

So we do see a big potential in R&R. On the new home construction side, as we grew 6% last year – sorry, less than 5% in housing starts, we think we probably did double that as the volume increased in new construction. So we are seeing some penetration as well as getting the lift from housing starts.

Mark Connelly - CLSA Americas LLC

Okay. That's fantastic. And just one more question. Can you talk about your current expectations of fiber and resin costs in this next quarter, in the first quarter?

Curtis M. Stevens - Louisiana-Pacific Corp.

Yeah. The fiber costs are going to be relatively flat. We are seeing a little bit of an increase in resin costs, principally MDI as benzene costs have gone up. But it shouldn't be meaningful in the first quarter.

Mark Connelly - CLSA Americas LLC

Super. Thank you.

Operator

Thank you. And our next question is from Chip Dillon of Vertical Research. Your line is open.

Clyde Alvin Dillon - Vertical Research Partners LLC

Yes. Good morning. First question has to do with the – you mentioned on – just so I hear this right, you were to likely identify, I guess, what would be the fourth siding plant on the next call. So I would assume this would include, as a possible candidate, the Cook site you bought or something else. Is that the way to think about that?

Curtis M. Stevens - Louisiana-Pacific Corp.

I think it's still – think about the Cook site, think about Val-d'Or, and think about any of our other aspen-based OSB mills.

Clyde Alvin Dillon - Vertical Research Partners LLC

Okay. Got you. Okay. And I thought – I see, okay. And I thought – just so I understand, so will this be the third plant or the fourth plant you're talking about?

Curtis M. Stevens - Louisiana-Pacific Corp.

Well, we actually have five strand-based siding plants now. We have the Swan Valley, our Hayward and then the three smaller mills in Tomahawk, Newberry and Two Harbors.

Clyde Alvin Dillon - Vertical Research Partners LLC

Got you. Okay. So really, I see what you're saying. So basically, it'll be Val-d'Or or Cook as the next one. And then, let's say you identify that, if you stay on your growth plan, I would assume you would want to have that up and running sometime late next year, is that fair, for the 2019 season, or am I delaying that too long?

Curtis M. Stevens - Louisiana-Pacific Corp.

No, that's fair. And the work we're going through, we may have to do work on both of those because Val-d'Or conversion is much quicker, which would beat the timeline you're talking about. And Cook would be a brownfield site and that would take longer than that, and we don't want to have a lack of capacity. So you likely will hear that we'll do both in a sequenced manner.

Clyde Alvin Dillon - Vertical Research Partners LLC

Got you. Got you. So maybe we'd see one up and running sometime in 2018 and the other one maybe in like 2020 or 2021, based on the way you see the market growing.

Curtis M. Stevens - Louisiana-Pacific Corp.

Could be even sooner than that. Val-d'Or is a small mill. So we think that gives us maybe a year-and-a-half of production.

Clyde Alvin Dillon - Vertical Research Partners LLC

Got you. Okay. That's helpful. And then, looking at the Engineered Wood Products business, I just didn't know if you had any kind of update in terms of how we should think about that for the long-term. Unlike what we're seeing in OSB and Siding, is it still fair to say that sort of a toggle-type situation, toggle meaning that we got to hit a certain level of housing starts for lumber prices before we really see that contributing?

Curtis M. Stevens - Louisiana-Pacific Corp.

Yeah. It's been a dilemma, well, during the downturn because it's been so heavily tied to single-family new construction, particularly where it's not on slab, so you have a raised floor, which – that raised floor mainly up in the north.

What we've done with our Engineered Wood business, and we announced this when we announced the changes in our General Manager structures, we've actually given the assignment to Mike Sims, who's been our Senior Vice President of Marketing and Sales. He now is also the General Manager of EWP. And we're doing a lot of things to restructure the cost basis there and to look at opportunities to drive costs out further.

It has been an underperforming business, largely because the housing hasn't come back and we have a lot of excess capacity. But we're definitely focused on that to increase the returns.

Sallie B. Bailey - Louisiana-Pacific Corp.

Yeah.

Curtis M. Stevens - Louisiana-Pacific Corp.

Now, the other thing I will remind you is, we also have capacity that we felt that we don't own all of. So we have a joint venture in I-Joists. And then in LVL, we actually buy from Murphy Plywood and remarket that. So we don't get the full manufacturing margins on those.

Sallie B. Bailey - Louisiana-Pacific Corp.

Yeah. And Chip, while I think it's fair to say it was a disappointing fourth quarter, if we look at the full-year results, we do see some improvement there both in terms of sales as well as the adjusted EBITDA and a 50-basis-point improvement in the adjusted EBITDA margin. And so it's pretty consistent with what we've been saying if housing starts get to 1.2 million.

Clyde Alvin Dillon - Vertical Research Partners LLC

Okay. And real quickly, the startup costs you mentioned in Swan, that was in the fourth quarter of 2015, not 2016, right?

Sallie B. Bailey - Louisiana-Pacific Corp.

Yes. That was the fourth quarter of 2015. That's correct.

Curtis M. Stevens - Louisiana-Pacific Corp.

Correct.

Sallie B. Bailey - Louisiana-Pacific Corp.

But it was...

Clyde Alvin Dillon - Vertical Research Partners LLC

Okay. I got you. I'll turn it over. Thank you.

Operator

Thank you. Our next question is from George Staphos of Bank of America Merrill Lynch. Your line is open.

George Leon Staphos - Bank of America Merrill Lynch

Thank. Hi, everyone. Good morning. Congratulations on the year. Thanks for the details. First question really maybe just segueing off of Chip's question on EWP. Is there a way to quantify what the impact of inflation in inputs were for EWP in the quarter, either sequentially or year-on-year? I'd imagine that was a little bit of also an offset in terms of why you didn't see perhaps even better performance.

Sallie B. Bailey - Louisiana-Pacific Corp.

George, our performance in EWP quarter-over-quarter really was more about demand. And if you think about...

George Leon Staphos - Bank of America Merrill Lynch

Okay.

Sallie B. Bailey - Louisiana-Pacific Corp.

...the fourth quarter of last year, we had strong utilization and we were changing distributors and we were selling more product – we were changing Canadian distributors. We think, again in the third quarter of 2016, we also saw some changes in our dealer distribution strategy. We think potentially those dealers were pre-stocking sort of or getting their stocking levels to the right amount so they have just less demand in the fourth quarter.

So our conversations actually on our EWP business have been very demand-focused. And secondarily, we did see some improvements in our volumes in the U.S., but where we really performed less than we anticipated was in our Canadian sales.

George Leon Staphos - Bank of America Merrill Lynch

Okay.

Curtis M. Stevens - Louisiana-Pacific Corp.

And George, I think if you look at overall EWP, the business was down 10% in the fourth quarter for the industry. So we are pretty consistent with the volumes being down with the industry.

George Leon Staphos - Bank of America Merrill Lynch

Okay. Yeah, I didn't want to overdo it obviously, given the rest of the business is much larger, but I would have expected maybe higher OSB prices might have leached into the margins there or other inputs. But it doesn't sound like that was the overriding factor from what you're saying.

Curtis M. Stevens - Louisiana-Pacific Corp.

No. It was really volume. I mean, they had an impact and I can't quantify it for you...

Sallie B. Bailey - Louisiana-Pacific Corp.

I can't quantify it either.

Curtis M. Stevens - Louisiana-Pacific Corp.

...but it was really the volume.

George Leon Staphos - Bank of America Merrill Lynch

Okay.

Curtis M. Stevens - Louisiana-Pacific Corp.

The other thing I will say is our laminated strand lumber, we had a record production year for laminated strand lumber. So we are seeing the adaption of that product.

George Leon Staphos - Bank of America Merrill Lynch

Okay.

Sallie B. Bailey - Louisiana-Pacific Corp.

And that helps our cost as well.

George Leon Staphos - Bank of America Merrill Lynch

Sure. Appreciate that, Sallie. I guess, next question, since we're on the topic of cost, obviously you've had some nice improvement in demand and price realizations in OSB year-on-year, and I want to get to that in a minute.

But from a manufacturing standpoint, you touched on improving operating efficiencies in the OSB mills. Can you quantify or talk maybe with a little bit more direction or color in terms of what you're doing to lower manufacturing cost breakeven levels within OSB during, obviously, what's a much better environment than we had, say, five years, six years, seven years ago?

Curtis M. Stevens - Louisiana-Pacific Corp.

Well, the first thing is coming from the demand side because as we utilize our mills more, we're going to drive the cost down as we're going to get throughput. And we took fewer down days in 2016 than we did in 2015. We do focus on the operating efficiencies. So we're looking at unscheduled downtime. We're looking at run rates. We're looking at line speed.

So we're doing all those things that frankly our competitors are also doing. And so the benefit this last year was on some selective capital projects that did reduce our costs. We put very little capital during the downturn into our business to drive costs down as it wasn't meaningful because extra production didn't help you.

So we're focused on getting our mills up to their operating levels and getting the utilization up. That's really what's done in OSB.

George Leon Staphos - Bank of America Merrill Lynch

Okay. In the quarter, Curt, could you talk about what mix or other factors were impacting realizations in OSB relative to just the published indices? And then my last question and I'll turn it over, you talked a little bit about border deductibility. Recognizing a lot of water has to flow under the bridge on that, if something like that occurred, could you comment at all in terms of how you would manage against that? Is there anything you could do within supply chain to manage that? Any thoughts would be helpful. Thank you, guys.

Curtis M. Stevens - Louisiana-Pacific Corp.

Okay. Your first question was on...

George Leon Staphos - Bank of America Merrill Lynch

OSB realizations and mix, yeah.

Curtis M. Stevens - Louisiana-Pacific Corp.

Yeah. We were up about 2% year-over-year. And the value-added percentage, I think we went from 44% to 46% of value-added. So, that had a small impact, but I wouldn't say it was significant. We're continuing to push obviously our value-added products, particularly those like FlameBlock which enjoy much higher margins and are not tied to Random Lengths. So we'll continue to push that.

On the border-adjusted tax, the way I understand it is if we produce it in Canada and bring it into the U.S., and either put it through our own distribution or sell it to our customers, then we'll be able to deduct that under cost of sale. Obviously, that'll have a negative impact. So I think what we have to think about is 35% of our capacity is in Canada from a OSB perspective, 65% in the U.S., obviously you're going to get a higher price for a U.S.-produced product than your Canadian-produced product, and where is the breakeven.

George Leon Staphos - Bank of America Merrill Lynch

Right.

Curtis M. Stevens - Louisiana-Pacific Corp.

So those are the numbers that you'd go through. I will say that the border-adjusted tax is in the Ryan plan and not in the Trump plan. So we'll see what happens. I don't think that the Republicans are united in their approach to this.

Sallie B. Bailey - Louisiana-Pacific Corp.

So, just to quantify that, we had in 2016 about 440 million products, Canadian sales coming into the U.S., out of 2.1 billion.

Curtis M. Stevens - Louisiana-Pacific Corp.

2.2 billion.

Sallie B. Bailey - Louisiana-Pacific Corp.

2.2 billion.

George Leon Staphos - Bank of America Merrill Lynch

Okay. Thank you, guys. I'll turn it over.

Operator

Thank you. Our next question is from Gail Glazerman of Roe Equity Research. Your line is open.

Gail S. Glazerman - Roe Equity Research

Hi. Good morning. Just going back to George's question on OSB realizations. Earlier in 2016, you talked about some of your value-add products actually selling at a discount to commodity. Has that started to reverse itself? Are you feeling that you're getting the premium you deserve on those products now? I think it was particularly in flooring that was an issue.

Curtis M. Stevens - Louisiana-Pacific Corp.

No, the commodity flooring is still a laggard and it's selling a little bit below commodity pricing. So it has an influence and that's why we're trying to push our 350 and 450 flooring which are higher value-added products.

Gail S. Glazerman - Roe Equity Research

Okay. And OSB volumes sequentially held up much better than I might have expected for year-end. Were you surprised by that? Do you think there is any customer inventory building? What do you think drove that?

Curtis M. Stevens - Louisiana-Pacific Corp.

I think what drove that is we really didn't see winter arrive until the middle of December. So we got an extra month of housing.

Gail S. Glazerman - Roe Equity Research

Okay. So, and I think you referenced that you saw – there was a headwind from kind of early Chilean construction work. Is there any outlook on how we should think about that project affecting operations in 2017?

Sallie B. Bailey - Louisiana-Pacific Corp.

Gail, right now, we don't really think that the expense portion, something that would impact the income statement, would be material to the 2017 result.

Curtis M. Stevens - Louisiana-Pacific Corp.

So, let me just give you a little color on that. We are redeploying equipment we had in the U.S. When you dismantle the equipment, you don't get to capitalize that. So, basically, the $3 million plus that Sallie talked about was the dismantling cost. That equipment has now arrived in Chile. So we don't have any that's going to happen this year so...

Sallie B. Bailey - Louisiana-Pacific Corp.

Right. We think most of the ongoing cost we'll be able to capitalize. To the extent we can't, we'll call those out, if that's material.

Gail S. Glazerman - Roe Equity Research

Okay. And just one last one. What was your operating rate both in the fourth quarter and I guess for all of 2016, and maybe down days as well if you can share that?

Sallie B. Bailey - Louisiana-Pacific Corp.

Sure. For all of 2016, we had 174 down days. We had 57 days in the quarter. And our capacity utilization was 87% in the quarter and it was 88% for the full year in OSB.

Gail S. Glazerman - Roe Equity Research

Okay. And does that include the capacity of Val-d'Or or no?

Curtis M. Stevens - Louisiana-Pacific Corp.

No.

Sallie B. Bailey - Louisiana-Pacific Corp.

No, it does not.

Gail S. Glazerman - Roe Equity Research

Okay. Thanks very much.

Sallie B. Bailey - Louisiana-Pacific Corp.

Sure.

Operator

Thank you. Our next question is from Ketan Mamtora of BMO Capital Markets. Your line is open.

Ketan Mamtora - BMO Capital Markets (United States)

Thank you. First question, can you provide some color on your comment earlier in your prepared remarks on interest in kind of adjacent and complementary products?

Sallie B. Bailey - Louisiana-Pacific Corp.

Yeah. So, Ketan, we're already talking about looking at adjacencies and FlameBlock is a great example of what we're talking about. So we sort of introduced FlameBlock I'd say, we talked about $15 million of capital last year, but we put some capabilities in. And that's a product that uses our sheathing and then we put a slurry, a coating on top of it, and go primarily into multi-family construction. So, that would be an adjacency to our typical OSB sheathing. In some 10 or plus years ago, TechShield would have been considered an adjacency.

So those are the ways that we're thinking about adjacencies and we're actively sort of growth and innovation grid (40:21), as well as just the sales teams in the market talking to customers around the types of ways we can use our products differently to expand organically our sales.

Curtis M. Stevens - Louisiana-Pacific Corp.

We talked about it in the past as we talked about some of the trends that we see in building. Clearly labor is an issue. So, anything we can do with our products, and acquiring technologies of companies that help us do that to reduce labor content is an important piece of that. Energy is going to be an important piece of that as we look at how we can add more energy-efficient elements to our products.

Acoustics with a zero lot line approach that we're now taking to single-family plus the multi-family. Fire-retardancy is going to continue to be an issue not only for multi-family but on the urban interface. And then weather resistance is another one. So, as you think about technologies that we might want to acquire, we would look at adjacencies in those areas.

Ketan Mamtora - BMO Capital Markets (United States)

I see. So, when you mentioned transitioning from a forest product company to a building products company, are these the kind of products that you all were looking at or should I also read that you all are open to kind of acquiring some kind of more building products-oriented businesses or products? Or is it within kind of OSB where you can do more things to kind of make it more value-added?

Curtis M. Stevens - Louisiana-Pacific Corp.

So we're looking at both. As I said, we are an acquirer of OSB. They can be converted to sidings as we're going to continue to grow that product line. And then if there are other building materials that would be common from a distribution standpoint, from sales standpoint, that would be attractive to us as well.

Sallie B. Bailey - Louisiana-Pacific Corp.

Ketan, I mean, our view is that our Siding business is not a forest product business. That's a building materials business.

Ketan Mamtora - BMO Capital Markets (United States)

Right.

Sallie B. Bailey - Louisiana-Pacific Corp.

So I think you should be thinking that we want to find more products that are similar to siding than commodity OSB.

Ketan Mamtora - BMO Capital Markets (United States)

So is it fair to say that it has to be more strand-based?

Curtis M. Stevens - Louisiana-Pacific Corp.

No.

Sallie B. Bailey - Louisiana-Pacific Corp.

No.

Ketan Mamtora - BMO Capital Markets (United States)

Okay. That's helpful. And then, on Siding, when you mentioned optimizing existing capacity, can you provide some color on that? Do you have room to kind of add another line at existing mills or is there anything else that you all can do?

Curtis M. Stevens - Louisiana-Pacific Corp.

It's mainly in the finishing end. So we produce trim, soffit. We do variable length trim. We do lap and we do panel siding. So when we try to optimize our system, we got to make sure that we have lap and trim capability for, as example, we have a big capital project in Hayward to add a lap capability into that mill so we can fully utilize it. So those are the kind of investments that we're making, mainly in the finishing end, it's not the front end.

Ketan Mamtora - BMO Capital Markets (United States)

I see. Okay. That's very helpful. I'll turn it over. Good luck in 2017.

Curtis M. Stevens - Louisiana-Pacific Corp.

Thank you.

Sallie B. Bailey - Louisiana-Pacific Corp.

Thank you.

Operator

Thank you. Our next question is from Steve Chercover of D.A. Davidson. Your line is open.

Steven Pierre Chercover - D.A. Davidson & Co.

Thanks. And good morning, everyone. A lot of my questions have been answered. But can you remind us what that $9.4 million gain on sale was in the quarter?

Curtis M. Stevens - Louisiana-Pacific Corp.

That was related to the swap that we did with Norbord. It's funny accounting, Steve. We ended up having a $9.4 million gain and I think they had a $16 million gain. And it's all based on appraisals and book values. You'd have to talk to Becky. Becky is probably the only one in this room that understands it.

Sallie B. Bailey - Louisiana-Pacific Corp.

I agree completely. She'd be happy to talk to somebody, do the accounting, if they're interested.

Curtis M. Stevens - Louisiana-Pacific Corp.

It's all non-cash.

Sallie B. Bailey - Louisiana-Pacific Corp.

I agree.

Steven Pierre Chercover - D.A. Davidson & Co.

I figured it might have been associated with Chambord and Val-d'Or, so...

Curtis M. Stevens - Louisiana-Pacific Corp.

Yeah.

Steven Pierre Chercover - D.A. Davidson & Co.

Okay. And have you actually got the forest licenses for Val-d'Or?

Curtis M. Stevens - Louisiana-Pacific Corp.

No. We are in discussions with the Québec Government, but we have not been awarded the licenses.

Steven Pierre Chercover - D.A. Davidson & Co.

Okay. Got it. And then – yeah, I mean that whole notion of the border taxes is pretty scary. But have you kind of ramped up even a stacked figure how you're going to get your head around that or -?

Curtis M. Stevens - Louisiana-Pacific Corp.

I think at this point there's so much uncertainty I'd be wasting time and money to get people to think about it.

Steven Pierre Chercover - D.A. Davidson & Co.

All right. But...

Sallie B. Bailey - Louisiana-Pacific Corp.

We certainly – we're monitoring it like everyone else is, and talking to our advisors as well as our trade association. So we're certainly on top. So I have to think about which direction it's going to go, but it seems directionless.

Curtis M. Stevens - Louisiana-Pacific Corp.

I think, as you know, I'm the Chairman of the Forest Products Association of Canada and we've got them working on it, as well as NAFTA, and as well as keeping their eye on the SLA.

Steven Pierre Chercover - D.A. Davidson & Co.

Yeah. I mean, at the end of the day, it's not really an SLA issue, but I certainly hope...

Curtis M. Stevens - Louisiana-Pacific Corp.

No, it isn't.

Steven Pierre Chercover - D.A. Davidson & Co.

...some sanity prevails because housing and construction jobs are also a national priority, so.

Curtis M. Stevens - Louisiana-Pacific Corp.

Yeah.

Steven Pierre Chercover - D.A. Davidson & Co.

It's beyond my pay-grade. Thanks.

Sallie B. Bailey - Louisiana-Pacific Corp.

Thanks, Steve.

Operator

Thank you. Our next question is from Mark Weintraub of Buckingham Research. Your line is open.

Mark Weintraub - The Buckingham Research Group, Inc.

Thank you. A couple of follow-ups. First, on the Siding business, it looks like volumes for the year were up 16% to 17%. You noted that in new construction you were up about 10%. So that sounds like there was some stronger growth in the other two buckets. Maybe a little bit more detail there would be helpful.

Curtis M. Stevens - Louisiana-Pacific Corp.

So we look at in five buckets. And so, one, the new home construction, both in multi-family, single-family; then we look at the repair-remodel; we look at retail. And retail was relatively flat and maybe their comps were up 3% to 5%. We're kind of in that range. And you don't really know where that goes, whether it goes to new construction or is going to repair-remodel.

And then the industrial applications and then the outdoor buildings which would be the shed business. Shed business is very strong for us this year. So it grew at a greater rate. And that number you gave on the growth, I think that included our hardboard siding sales, which we really don't plan on adding capacity. So we're going to be kind of limited in their growth. The growth there is going to come in sales prices, it's not going to come in volumes. And we're adding the capacity as we're adding in our strand capacity.

Mark Weintraub - The Buckingham Research Group, Inc.

Okay. And so, as you sit today with the type of single-family forecasts that you provided, what might realistic target in Siding be for growth in 2017?

Curtis M. Stevens - Louisiana-Pacific Corp.

So we've talked about this that we want to see our strand siding grow 12% to 14% a year.

Mark Weintraub - The Buckingham Research Group, Inc.

Okay. And then just a follow-up also on the OSB, the volume, which looks like it was up 15% or so, which was well ahead of the industry for the fourth quarter. Notably, Weyerhaeuser was down for the quarter because they had a facility down. So I'm just curious whether or not you had picked up some of that business. And if that was the case, is that sustainable?

Curtis M. Stevens - Louisiana-Pacific Corp.

Well, when we go into December, we generally plan for two weeks of downtime towards the end of the year because people aren't building, and we did cut some downtime as a result of that outage. And I'm sure our competitors are doing the same thing towards this quarter as we have Jasper down, probably won't come up until late this week, early next week. We did a press rebuild, so we are off the market all of January.

Mark Weintraub - The Buckingham Research Group, Inc.

Okay. And I guess does that become the contract business for you potentially, or is that more spot business and so it's changing hands all the time?

Curtis M. Stevens - Louisiana-Pacific Corp.

Well, our contracting strategy differs by mill, but generally we're 60% to 65% contracted and 35% to 40% in the open market. When we know Jasper is going down, we didn't commit the wood in the first quarter and we told our customers that.

Mark Weintraub - The Buckingham Research Group, Inc.

Okay. And then lastly, on the Engineered Wood, when you look at the profitability across that group, are there one or two facilities that are real outliers that may be are – I mean, I know at one point I believe Houlton was struggling quite a bit. I mean, do you have a barbell there or is it basically nothing is really doing great at this point?

And then, as a follow-up, looks like lumber prices are moving meaningfully higher and certainly with the SLA there is speculation that this can continue. How helpful can that be to the Houlton facility?

Curtis M. Stevens - Louisiana-Pacific Corp.

So the Houlton facility, we do LSL there and we also do OSB there. We have ramped up the production of OSB. And as I said, we had record volumes of LSL.

LSL has done a couple of things. One, in the first couple of years, most of that was going to industrial markets. It's now going into housing, which is a very positive sign for us. And so the increase in the growth and going to the market that we want to sell it to, I think, has been very good.

One of the advantages we have with LSL is we can use that for the fire retardant I-Joists. We can replace the fire retardant I-Joists with LSL. So, in the Pennsylvania, Ohio area, where the building codes require that, we have seen pretty good penetration there.

So I think Houlton is back to the point where it's not hurting us, but we need to get more volume in there so it can help us. In general, we're very competitive on our I-Joists and our I-Joists joint venture has been a pretty profitable operation for us. But there's just a lot of capacity in I-Joists, and as you know, it's mainly on raw materials costs of the plants and the Web. So, volume helps us in those facilities.

Mark Weintraub - The Buckingham Research Group, Inc.

Great. Thanks for the details.

Sallie B. Bailey - Louisiana-Pacific Corp.

Thanks, Mark.

Operator

Thank you. Our next question is from Paul Quinn of RBC Capital Markets. Your line is open.

Paul Quinn - RBC Capital Markets

Yeah. Thanks very much and good morning, Curt, Brad, Sallie. Couple of questions. One, very impressed with the 16% increase in SmartSide growth in 2016. Where are those inventories at right now, and where are you guys taking market share?

Curtis M. Stevens - Louisiana-Pacific Corp.

So inventories are – it's an interesting question on siding. In the remodeling sector, that really is a pre-finished product and we rely on third-party pre-finishers to do that. They take a lot of inventory at the front part of the year because they don't have the capacity to satisfy the need in painting if they don't take inventory early. But those inventories are not any different than they were last year. So they have not ramped that up.

Now we have announced selective price increases by segment, and we do allow our customers to buy a certain percentage ahead on that. So we probably did see a little bit of pull-forward based on price increases, but I don't think it's significantly different than it's been in prior years. So I think we're kind of right where we were last year from an inventory standpoint. I don't think it's any different.

Paul Quinn - RBC Capital Markets

Okay. Thanks. And then just number one question I get from investors is industry capacity restarts, and the only ones that I know that have been announced in 2017 are the small Forex mill in Québec and Martco's new mill coming online in Texas. Maybe you could just comment on anything else that you see out there, as well as OSB inventory levels that you're currently seeing with your customers?

Curtis M. Stevens - Louisiana-Pacific Corp.

Well, I had our new employee at Val-d'Or drove by the Forex mill. It is steel. There's no outside to the building and there is no equipment. It's not coming up anytime soon, it's just not, Paul. So I don't worry about that one much.

We fully believe that Martco will be up either late third quarter or early fourth quarter. They are on track from everything we've seen. They're hiring. Now we've heard rumors on GP running their mills more aggressively in South Carolina. We've checked the (53:23), and they're not hiring. So I don't know how you do with that, if you ramp up without people.

Sallie B. Bailey - Louisiana-Pacific Corp.

And OSB inventories in the channel are...

Curtis M. Stevens - Louisiana-Pacific Corp.

Yeah. According to Random Lengths, inventories are very low in the channel. So I think we're in good shape. Martco will come up, there's no doubt about that. And then, as you know, Norbord's got two mills with the Chambord mill and the Huguley mill that they'll make decisions on based on their own internal factors.

Paul Quinn - RBC Capital Markets

Great. I'm hearing the same thing on the Forex mill. I expect it now in Q3, if they're lucky. Just lastly on the acquisition front, you mentioned that you would look at OSB assets. Is that constrained to North America or would you look in other jurisdiction?

Curtis M. Stevens - Louisiana-Pacific Corp.

Well, there's nothing in South America and I actually think that the situation in Europe is pretty well balanced. And I'm not – we were in Europe with our mill in Ireland and I was the Chairman of that board and it was not a very fun experience. I'm not sure I want to go back into the European market.

Paul Quinn - RBC Capital Markets

I think that mill is still for sale.

Curtis M. Stevens - Louisiana-Pacific Corp.

Well, the Irish Government owns it now and they bought the Lamett mill too. So I think we would be focused in North America. And as I said in my comments, we'd like it to be in aspen-based wood baskets where they have the option to convert that siding.

Paul Quinn - RBC Capital Markets

Great. That's all I had. Best of luck. Thanks.

Sallie B. Bailey - Louisiana-Pacific Corp.

Great. Thank you, Paul.

Curtis M. Stevens - Louisiana-Pacific Corp.

Thanks.

Operator

Thank you. Our next question is from Roger Spitz of Bank of America. Your line is open.

Roger Neil Spitz - Bank of America Merrill Lynch

Hi. Yes. My questions have been asked. Thank you.

Sallie B. Bailey - Louisiana-Pacific Corp.

Thanks, Roger.

Curtis M. Stevens - Louisiana-Pacific Corp.

Thanks, Roger.

Operator

Thank you. Our next question is from Sean Steuart of TD Securities. Your line is open.

Sean Finlay Steuart - TD Securities, Inc.

Thanks. Just one question on CapEx. You talked about potentially sequencing Val-d'Or and Cook for the siding conversion. Can you give us an idea of what the total costs for each conversion would be and how much of that is in your discretionary CapEx guidance, so if I guess $100 million to $125 million in 2017?

Curtis M. Stevens - Louisiana-Pacific Corp.

So the CapEx guidance Sallie gave is $175 million to $200 million and we've got $40 million to $50 million for the targeted, but not identified for, siding capacity expansion, which could be some at Val-d'Or, some at Cook, or all at Val-d'Or. So, that's kind of the magnitude.

For the total cost, I wish I can give you an answer. I can't get one from my engineering people until they finish. So I don't have a good answer on that. I will say that the Cook site is a site, so that you can think about that as (56:09) OSB mill and adding siding capability to it.

Sean Finlay Steuart - TD Securities, Inc.

Got it. Okay. That's all I had. The rest has been answered. Thanks, guys.

Curtis M. Stevens - Louisiana-Pacific Corp.

All right.

Sallie B. Bailey - Louisiana-Pacific Corp.

Great. Thank you.

Operator

Thank you. Our last question is from John Tumazos of Independent Research. Your line is open.

John C. Tumazos - John Tumazos Very Independent Research LLC

Thank you. I wanted to make sure I understood your comments about dividends and acquisitions and reinvestments. You're not saying that a dividend discount model or net present value model is the wrong way for us to look at a company. You're saying that you want to be in value-added de-commoditized businesses. If I heard you right, is it fair to look at Kronospan in Europe as a model of what you want to be where the emphasis becomes value-added?

Sallie B. Bailey - Louisiana-Pacific Corp.

Well, I can't speak to the latter, but I think I can speak to the former, John, which is that we think we have a lot of really great opportunities with our current portfolio of products and investments, particularly back into siding, for the focus on in terms of capital allocation.

Curtis M. Stevens - Louisiana-Pacific Corp.

So I think, John...

John C. Tumazos - John Tumazos Very Independent Research LLC

Thank you. Are you opposed to dividends, period?

Sallie B. Bailey - Louisiana-Pacific Corp.

No, that's not what Curt – Curt didn't say it was our approach to dividends. I mean, we're looking at all sorts of options and understand capital allocation. I think what we're saying is, in the short-term, we're really going to focus on reinvesting back into the business. That should be the takeaway.

John C. Tumazos - John Tumazos Very Independent Research LLC

Thank you.

Operator

Thank you. And that concludes our Q&A session for today. I'd like to turn the call back over to Ms. Sallie Bailey for any further remarks.

Sallie B. Bailey - Louisiana-Pacific Corp.

Well, great. Thank you very much, Christie, and thanks everybody for participating in our call today. If you do have any questions in particular about the gain, please don't hesitate to contact Mike or Becky, and they're always available to answer any follow-up questions. Thanks, everybody, and have a great day.

Operator

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

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