Louisiana-Pacific Corp (LPX) 2020 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Louisiana-Pacific Corporation Q3 2020 Earnings Call. (Operator Instructions)

I would now like to introduce your host of today's conference call, Mr. Aaron Howald, Director, Investor Relations. You may begin.

Thank you, Kevin, and good morning, everyone. Thank you for joining us today to discuss LP's results for the third quarter of 2020 as well as our Q4 outlook. My name is Aaron Howald, and I am LP's Director of Investor Relations. I'm joined today by Brad Southern and Alan Haughie, LP's Chief Executive Officer and Chief Financial Officer, respectively.

As we've done in the past, we are hosting a simultaneous webcast in addition to this conference call. We have uploaded a presentation to which we will refer during this morning's comments. We also filed our 8-K this morning with some additional information. All of these materials are available on our IR website, www.investor.lpcorp.com.

I want to remind everyone on the call about forward-looking statements and the use of non-GAAP financial metrics during today's discussion. Slides 2 and 3 of the accompanying presentation provide more detail. The appendix of the presentation also has some necessary reconciliations that are supplemented by this morning's Form 8-K filing. Rather than reading those statements, I incorporate them herein by reference.

And now I'll turn the call over to Brad.

Thanks, Aaron, and thank you all for joining us this morning. We spoke with many of you a month ago at our Investor Day. This morning, I will focus mostly on what has changed since then, starting with the market, then moving to our transformation. The housing market has shown continued strength and our transformation is ahead of pace. This was an all-time record quarter for SmartSide volume and revenue. Compared to Q3 of 2019, SmartSide revenue grew by 22%, with 19% higher volume and 3% higher prices.

Cost of production was also a multiyear low. And of course, record OSB prices produced significant cash flows. As a result, and as I'm sure you saw in the 8-K we released this morning, we finished the quarter comfortably ahead of our most recent guidance with $273 million in EBITDA and $1.56 in adjusted diluted earnings per share.

There are more housing starts in the U.S. in Q3 than in any quarter since 2007. And the percentage of single-family starts was higher than in any other quarter since 2011, creating strong demand for our products. Mortgage rates are at historic lows, builder sentiment is at all-time highs and the inventory of existing homes measured in months of supply is at an all-time low. All of these are strong leading indicators for continued strength in new construction, for which LP is well positioned.

We are also seeing continued evidence of ongoing preference shift from multifamily to single family and away from cities to urban and rural areas. This is very positive for LP since building a single-family home consumes, on average, about 3x as much SmartSide and OSB as multifamily home.

Since our Investor Day, OSB prices have stabilized with Random Lengths prices flat in intervening weeks. While OSB prices remained unusually high and they will surely normalize eventually, relative price stability is a sign that supply and demand may be approaching near-term equilibrium. We are confident that our transformation strategy of growing SmartSide and managing OSB with efficiency and agility will continue to drive long-term value.

Slide 6 shows our progress toward our strategic transformation goals. Our target is $165 million of incremental EBITDA impact by 2021. We are well ahead of pace and our progress accelerated in Q3. We have achieved more EBITDA impact through 3 quarters of 2020 than we did in all of 2019. The SmartSide growth is the largest single contributing factor, closely followed by OEE gains in SmartSide and OSB within strategic sourcing. As a result, with $137 million of cumulative benefits achieved, we're almost a year ahead of pace to hit our 2021 targets. These improvements are normalized for OSB prices. Our strategic transformation is driven by sustainable growth and efficiency improvements is in no way inflated by current OSB prices.

Given our results for the last 2 quarters as well as the sustainable gains produced by our strategic transformation, we announced the resumption of share repurchases at Investor Day. Alan will give you a more detailed update of on our capital allocation strategy in a few minutes.

As you may have heard by now, MDI resin production in the U.S. has been constrained by the impact of Hurricanes Laura and Delta on suppliers of precursor chemicals. LP is taking steps to secure alternate sources of supply and shift to different resin types where possible. Due to lack of supply, we have curtailed production of laminated strand lumber at our EWP facility in Houlton, Maine for 4 weeks. We are working with customers to minimize the impacts of this disruption. We do not currently anticipate production impacts to SmartSide or OSB. The situation is fluid, and I am proud of the agility with which our supply chain, operations and logistics teams have managed through this disruption.

The housing market continued its strong recovery and OSB prices are high, but LP's performance was not merely the result of market uplift. Our teams overcame and adapted to many challenges in the quarter and helped our customers do the same. Multiple hurricanes threaten our mills and our employees' communities in the quarter. Our teams also helped our customers work through the challenges of tightening truck and rail availability, shrinking inventories and lead times increased by unprecedented demand. And of course, we are all still dealing with ongoing COVID-19 pandemic.

Some of our mills are located near COVID hotspots. We have seen a slight uptick in the number of employee cases, but thankfully, all impacted employees have recovered or are recovering. Our teams continue to take necessary precautions to minimize the spread of COVID-19 and safeguard themselves and each other. We have yet to have any mill closures caused by COVID-19 outbreaks, and we will maintain these precautions for as long as necessary to keep our employees, vendors and customers safe.

Despite these challenges, we executed relentlessly on our strategy. Of course, high OSB prices generate lots of cash. Both SmartSide growth of 22%, ongoing growth in Structural Solutions and an additional $2 million inefficiency gains in the quarter, all of which are sustainable. Our results are driven by much more than high OSB prices. In fact, given our growth and efficiency improvements, even if OSB prices have been flat to last year, EBITDA would still be nearly double that of Q3 of last year as a result of our growth and efficiency initiatives.

While we celebrate record results in a very challenging year, I am inspired by the adaptability and determination of LP's employees and grateful that by working together, we achieved outstanding results while staying safe.

And with that, I will turn the call over to Alan Haughie for more details on our results before we take your questions.

Thanks, Brad, and good morning, everyone. As Brad said, the housing and repair and remodel markets have continued their steep recovery and LP's strategic transformation has accelerated. The result is performance for the quarter that exceeded every aspect of the guidance we provided at our Investor Day. This morning, I'll detail those results, update you on our capital allocation strategy and offer some insight into the fourth quarter.

Slide 7 is a total company third quarter roll forward of revenue and EBITDA from 2019 to 2020. It is a summarized view, highlighting the elements, we believe, characterize quarter. Starting with revenue. Of the $192 million increase, $179 million is due to higher OSB prices alone. The remaining revenue growth of $13 million includes SmartSide growth of $47 million, partly offset by a $37 million reduction in fiber and CanExel revenue.

But while SmartSide growth added $23 million of EBITDA, the strategic exits from fiber reduced EBITDA by just $6 million, which brings us to EBITDA which increased overall by $224 million. And if we back out the OSB price impact, then everything else not related to OSB prices, contributed an impressive $45 million of increased EBITDA, including the $23 million of SmartSide growth I mentioned a moment ago.

So to repeat the point and put it in perspective, If OSB prices have not risen at all, then all of the things being equal, our EBITDA would have almost doubled to $94 million. And this point is easily lost in the current OSB price climate, but it vividly demonstrates the difference between the admittedly powerful cash generation of high OSB prices and the long-term value creation of almost everything else in our portfolio.

One last point on this slide before I move on. Our South American business had an outstanding quarter. Net of currency movements, revenue and EBITDA increased by $9 million and $4 million, respectively; but absent currency fluctuations, they increased by $16 million and $5 million.

Slide 8 shows the third quarter P&L compared to 2019. As I said, although the majority of the $192 million increase in revenue was price related, the remainder is volume and mix. So the fact that cost of sales fell by 5% or $26 million reflects outstanding performance on OEE, sourcing savings and general cost control. Additionally, SG&A expenses were reduced by 10% or $6 million.

Income from operations was up $234 million, reaching $242 million, resulting in net income of $177 million and adjusted diluted earnings per share of $1.56, better than last year by $1.48.

Slide 9 shows the third quarter revenue and EBITDA waterfall for Siding. The cumulative transformation impact of $31 million was driven by impressive SmartSide revenue growth of 22% at an incremental margin of 50%. Now it's not obvious from the waterfall, but the segment presented here today is almost entirely SmartSide. The EBITDA margin of 28% is more reflective of its earning power than at any point in the company's past. This is what a cleaner, simpler Siding segment looks like when we're not in the furrows of a mill conversion, when we are enjoying returns on our investment in selling and marketing and when we're running flat out. This ability to profitably grow gives us confidence that SmartSide alone can support and sustain a growing dividend.

Slide 10 is a similar presentation for the OSB segment, and is not surprisingly dominated by high OSB prices. Not only is the average Random Lengths price for the third quarter of 2020 a record, but the price this time last year was well below the cycle average, hence the large year-over-year impact.

But if we return to the theme of cash generation from high OSB prices versus value creation, then OSB has played its part. Beyond pricing, there was a further $11 million of EBITDA improvement, all the more impressive on the back of lower volumes and a richer mix of high value-added products. So we're continuing to transform this business through structural solutions growth and a relentless drive for efficiency, which is creating long-term value regardless of OSB prices, which brings us to cash flow on Slide 11.

Operating cash flow for the quarter was $218 million compared to $59 million in 2019. Note that in the third quarter, we paid $45 million in cash taxes, including a catch-up from the second quarter. Our capital allocation strategy, of course, remains unchanged, to return to shareholders at least 50% of cash from operations in excess of capital expenditures required to execute our strategic transformation. Accordingly, late in the third quarter and given our significant free cash flow generation, we resumed buying back shares. We spent $29 million buying back shares in the quarter in addition to making $16 million in dividend payments and ended the quarter with $420 million in cash.

As of today, we have spent $100 million of our $200 million of Board authorization for share repurchases. And given our strong balance sheet and our cash generation expectations for the fourth quarter, we expect to complete the remaining authorization for share repurchases by the end of the year.

So let's cover those fourth quarter expectations. Much uncertainty still surrounds COVID, the U.S. election underway as we speak, the broader economy and even housing. However, our order files give us enough visibility into the quarter to provide some limited guidance. Assuming no unforeseen events, We expect the fourth quarter in aggregate to look a lot like the third. SmartSide revenue will likely see the typical seasonal slowdown, but revenue growth is still expected to be in the neighborhood of 20% year-over-year. If so, this would result in full year SmartSide growth of about 12%.

OSB prices have held steady since Investor Day, in contrast to the steady climb over the third quarter. At this point and absent a sudden and steep drop, average OSB prices in the fourth quarter should be higher than in the third. Subject to these assumptions, the resulting EBITDA for the fourth quarter should be within $10 million of third quarter levels.

We do plan to spend a little more heavily on capital projects in the fourth quarter as circumstances permit, bringing spending for the year to about $80 million compared to the $70 million previously communicated. As Brad said, we're almost a year ahead of pace relative to our strategic transformation goals. We targeted a cumulative EBITDA impact by the end of 2021 of $165 million. And through the third quarter of this year, we have achieved a cumulative impact of $137 million.

So if the purely operational aspects of the fourth quarter pan out as I've just outlined, we expect to hit the $165 million target by the end of the year. And for the avoidance of doubt, let me reiterate that these transformation impacts in no way benefit from high OSB prices or low raw material costs.

And with OSB prices at an all-time high, it would be tempting to ascribe LP's outstanding quarter to that fact alone. To be sure, the OSB segment generates impressive cash flows at these prices, we often talk about the hidden value of LP SmartSide business. Earlier in SmartSide's growth trajectory, its revenue was routinely overshadowed by that of the OSB segment, and its profitability was clouded by the other products in the Siding segment. But if we apply the third quarter OSB volume and price realization to historic OSB prices, that puts this situation in context.

Since 1995, there have been only 8 quarters when OSB prices were high enough that at current volumes and realizations, the OSB segment would have earned more revenue than SmartSide's third quarter record of $260 million. So it's getting harder and harder to hide this incredible growth story and a SmartSide approach is $1 billion in revenue with high and stable margins is now hiding very much in plain sight.

And with that, we'll be happy to take your questions.

(Operator Instructions) Our first question comes from the line of Mark Connelly of Stephens Inc.

This is John Rider on for Mark. So in the -- more recently, you've said that Prefinish Siding is a strategic priority. And if we remember correctly, you said that it could be almost 1/3 of your sales. And to acquire your way to that sort of market share is clearly going to take a while and you are probably going to end up with hotchpotch assets. How do you balance the pros and cons of acquisition against building your own purpose-built standardized network of prefinishers? What does that ultimately cost? And on a related note, what does a prefinishing operation like that mean for working capital?

Okay. John, I'll try to -- correct me if I miss some of those sub-questions in there, but I do want to cover them all. So let me just provide an update on where we are now We have 3 prefinished facilities in operations, 2 of which were acquired, 1 of which was homegrown in our facility in Roaring River, North Carolina. From a capital standpoint as far as equipment, these are a relatively small investment, single-digit, millions of dollars to build or convert. They're also expandable kind of in a modular way. So as we grow the business, we basically had a pay line, which again is very low capital, I believe, in the scheme of things when it relates to OSB and Siding businesses.

We do see -- we will need continued growth. The geographies that we're in today with prefinishing is Green Bay, Wisconsin, St. Louis, Missouri and Roaring River, North Carolina. And so as we build out that eastern capability, there is possibility that we will acquire or build another facility or 2. But we certainly have the capacity in place or the partnerships in place and orders, so that production is not a constraint on our ability to grow our Prefinish business over the next couple of years.

Now as it relates to working capital, it's a great question. Pre-finishing is a significant departure from our efficient working capital arrangements we currently have or have had as it relates to SmartSide. Just think about this, if you offer 12 colors, you're 8-inch lab SKU that used to be only in prime, now is offered in those 12 colors. And servicing the market is important. So there needs to be sufficient inventory, both at our locations and in the channel in order to accommodate good customer service. Now we do rely on our distributor partners to carry the load on that, but it does require a working capital build internally for us to be able to serve our distributor base.

Okay. There was another part of that question that I didn't answer.

No, no. I think -- actually, sorry, just one last one. How do you balance the pros and cons of acquisition versus building your own homegrown Prefinishing business?

Yes. Great question. So the -- look, The one that we did not acquire, the one that's homegrown, was in North Carolina, where we had a hardboard mill that had a history of doing prefinishing. So it was rather logical for us to incorporate SmartSide prefinishing there. I would say in most other areas, it's not necessarily optimal for us to be at a mill location. We would rather be more in market.

So I would -- I'm biased to future growth being more acquisition than homegrown. But for each scenario, we'll look at both cases and make the best decisions. But as far as forecast in the future, I would say probably more leaning toward an acquisition strategy in a homegrown. Think about acquisition you're buying the competency to day 1 versus having to build that internally. So we have benefited from the 2 acquisitions that we did to get us into the business.

Our next question comes from John Babcock of Bank of America.

I guess just starting, I was wondering if you can talk about whether you're seeing much in the way of substitution of plywood from OSB, particularly with the price cap staying where it is now?

No. I have heard some anecdotal. I don't know if it's actually evidence or speculation that, that could be happening. But we have not seen that in any meaningful way and certainly in no way this impact our work file.

Okay. And then next, you talked earlier about the impact to MDI and how that limit, I guess, are going to limit production at the Houlton facility. Has there been any impact to your costs, particularly at the mills in the U.S. South or any of the OSB mills there? And then also, I was wondering if you can you just talk very briefly about if you have any sort of anecdotal evidence about that impacting any OSB production in the region?

So first, on the cost side, what we're doing is substituting phenolic resin for MDI. And so from a cost standpoint, it's immaterial, the difference between the 2, immaterial to our results and no impact there. And we really -- I think the industry overall has handled this MDI situation pretty well. So we've not heard of any significant restrictions in production anywhere as it relates to MDI limits.

I'll just speak for ourselves. We've retained -- in most of our facilities, we've retained the capability to switch back between MDI and phenolic resin. So that's what we've done, and I assume that's what some of our competitors have done as well.

Okay. And then just last question before I turn it over. Just on the Siding side of things, obviously, demand is really strong. It sounds like you're expecting pretty strong demand in 4Q as well. If this demand were to continue into 2021, I mean, how will that impact your thinking around pricing and kind of your typical schedule around how you do that?

John, was that question related to OSB or Siding?

Siding.

Yes. So yes, we're working on a price increase that we implemented in Q1 now. And so I don't -- we haven't made a decision on that. So there's some work to do there. But obviously, we're in a good position relative to underlying demand for the product, which puts us in a good position on pricing. But I do want to stress that we're really focused on volume growth. Given the expansion of our SKU offering with Prefinish and Smooth and ongoing strength as far as our ability to get even prime product in the marketplace, our focus is on -- of market share increases, and you have to be competitive on the price side in order to maintain that. So we balance those 2 kind of competing needs within the business. But given the current margins that we have in SmartSide, our focus is on growing the volume.

Our next question comes from the line of Ketan Mamtora of BMO Capital Markets.

First question on Siding, I was just curious if you can give us some sense of how your volumes have trended in Siding thus far in Q4?

We have strong volumes in Q4 thus far, I think. Alan?

I think I said I just -- as I said, we're looking at 20% revenue growth year-over-year. Obviously, the vast majority of that's from volume in our order book, gives us the confidence to say that right now.

Got it. Okay. And then -- so with volume staying really strong through 2020, are you pulling forward kind of timing on the next Siding project? At the end of September, you all had talked about a decision sometime in early 2021. I'm just curious if there is any rethink given how strong volumes have been?

I wouldn't call it a rethink. Just let me describe where we're at right now. We are full steam ahead on the next Siding conversion. We have begun to place -- do planning and place some orders for long lead time items that can be -- that are site agnostic. So in other words, equipment that we know we're going to need regardless of site. And so that is underway now. We're still looking at early next year announcement and Board approval for the project. Ketan, I think you can understand that there is -- it impacts the community and the employee base, where we choose And so we -- and we haven't chosen yet, but we want to be careful about kind of tipping our hand there until we make sure we cover all the bases locally on where we'll end up with the facility. But we are in the process, if you want -- if acquiring capital equipment and planning to do that as part of the process is well underway at LP.

I just want to remind folks on the call, we just converted Dawson Creek last year. This time last year, we were still talking about the start-up costs associated with that. So we're in a good position for this year and next. I mean obviously, inventory situation that us and our distributor base got into COVID related. We've -- it's been catch-up for the last couple of quarters. But I feel good about our ability to supply the market next year, especially if we can build a little inventory and the distributor base over the winter, and then we'll be in a good position for another mill start up in 2022 and should be able to continue the kind of growth that we've seen over the last 8 quarters or so.

Got it. That's very helpful. And then, Brad, any rough sense on kind of the capital that may be required? I'm not looking at a precise number, just sort of a rough ballpark on the conversion.

Yes. Just it is site dependent, Ketan, as I know you understand, but I would say, based on what we've done in Swan, in Dawson Creek, we thinking $80 million to $120 million. I know that's a wide range. We'll get a little -- we'll narrow that range over the next couple quarters as we talk about it some more. But if you plan around that, that would be a good number to start at.

Our next question comes from the line of Steve Chercover of D.A. Davidson.

So first of all, your operating rates in Siding and OSB are both in the upper 80s. So can you get to the mid-90s next year, assuming demand is there without really any additional expenditure beyond manpower and raw materials?

I think mid-90s would be pretty high for us, given where we are right now on our OEE journey, but I certainly believe we can be high 80s to low 90s consistently. And that's not including scheduled maintenance downtime that we may have to do. But while we're running, we have across our system in both OSB and Siding approached in a time sustained to 88% to 92% OEE. So I feel good about that. 95% would be a stretch for us right now, especially talking about that over the entire year.

Is it conceivable that if the demand grows the way housing looks poised to propel it both from starts and perhaps size as we move more to the burbs that you could almost be on allocation in both Siding and OSB?

Well, So we -- I don't think we'll be in allocation in Siding after we get through this winter. And we're doing some allocation now because of the price increase that we were implementing in Q1. I believe the inventories will be built in Q4 and allow more open order files that go into the spring. It is growth dependent. So it's possible. But I don't -- I mean, my opinion is we won't be on allocation through next year in Siding. And then we really don't do allocation in OSB because of our open market wood situation, it's really you kind of on the market or off the market depending on availability.

And so I don't see OSB being on allocation next year in any meaningful way. It doesn't mean that there's not times when you have to ration your open market order file across our good customer base, but not for an extended period of time in OSB. I don't foresee that. And it's really not how we operate in OSB anyway.

Okay. And because you gave us such sufficient and upbeat guidance on Siding and OSB, I've taken my questions elsewhere. But on EWP, which is not something you really talked about, the results were pretty good. And I'm assuming it was also absorbing some pretty high OSB pricing as an input. So was that operations or price? Is there a price increase pending in EWP?

So the primary driver for the results that you saw this past quarter was our efficiency gains, our OEE improvements in EWP. I just want to take a minute. While I'm really proud of the way our EWP group over the last 3 years has really got up after it on efficiency, we don't talk about that a lot on the calls, but it has been meaningful. We are in the process of implementing price increases in our EWP business. And look, EWP is going to be impacted by this rising OSB and lumber. We're -- Q3 results are a little behind that, I guess, is the right way to put it. It's caught us now, which is the reason we've had to go out with a price increase along with other industry participants in EWP. And so I think we'll be a little bit margin stressed in Q4. But we'll focus on the efficiency side. And I will say that the order file -- our order files in EWP are really strong as well. So we'll have the volume. We'll be fighting some raw material price pressure as we work through the price increase for our finished products on EWP in Q4.

Well, maybe to paraphrase James Bond, they've earned the right to die another day. Okay. Last question. Similarly in South America, they're making a decent contribution, too, and they're only at 75% operating rate. So is it fair to say that they have significant upside assuming that the demand materializes?

They have significant upside. We did a mill expansion down there last year, and we're still working through some constraints around thermal oil, that will be -- a unit will be installed in the next quarter or so and -- which will really open up that press line we put in there to full capacity. So we're expecting to see good growth in our South America business next year because of the continued start-up of that new press line that has been in operations for about a year.

Our next question comes from Sean Steuart of TD Securities.

Couple of questions. CapEx for next year, and I appreciate you're still in the planning stages. But if we're at $80 million this year and at the midpoint spending, maybe $100 million for the next Siding conversion, is $180 million to $200 million a safe bet for CapEx next year? Are there any other nuances to the projects you're thinking about for 2021?

It's Alan here. You about the right ballpark. I would divide it into a sort of base spend of maybe $120 million plus whatever we end up spending in-year on the next Siding mill. So in a reasonable estimate, which we'll update when we announce Q4 results would be $120 million base plus, let's say -- that's fairly about $80 million as a 2021 spend on next Siding mill. So maybe $200 million, yes, is a reasonable number for next year, divided into those 2 populations.

Understood. And any other context you can provide on the Peace Valley restart. We've had some positive single-family housing data since your Investor Day in late September. Any details you can provide on the thinking for that to restart?

Not a lot has changed since Investor Day, other than, as you pointed out, continued good numbers on housing, which is what we're following closely. Our strategy -- our plan is to continue to monitor the outlook for housing, and we're confident we've got at least a 2-year window in front of us, so good and strengthening housing. That's when we feel like we can justify internally the restart of that facility. So we're watching it closely, but we've -- nothing has changed since we talked about on Investor Day.

Our next question comes from Mark Weintraub of Seaport Global.

First question was on the Siding business. If you could give us a little more color, perhaps that there was strong growth, both in the third quarter and what you've been expecting -- what you've seen and expect to see in the fourth quarter? As we think of it through new residential repair, remodel sheds and/or geography, if you could give us some color on what the big drivers are?

Mark, it's all over, but I will go through it item by item. So I mean the home centers, retail home centers are just phenomenal growth as they report in their earnings releases. We're certainly at or above average even given their good numbers on the pull throughs. It's really been phenomenal. And driven by just better volume through there, but we've also introduced several new SKUs over the last year, and we just really hit the timing on that really well. Have lapped and trim in many of the now along with our panel offering.

And so I think certainly, the biggest growth area and as far as the segments go has been in retail. Shed has been extremely strong as well. I know -- I remember on the Q2 call, I got a question from somebody about shed, and I said, we're not seeing a lot of activity there. And like the next day, it changed. And that's been a real phenomenal growth as well. We hear anecdotally -- or not anecdotal, we hear from our customers in shed that the need for more space and even using shed as home offices, or either clear out an office by buying a shed and putting your junk in it so you can have an office inside your house. That's -- all that's for real. And it's been -- we've been -- as you know, we've been well positioned in that segment for a while. So we've seen really good growth there.

Single-family is going well as well across -- especially in the SMILE, you asked about the regions. So in the Southeast, the Mid-Atlantic, Texas has been a great market for us from a single-family perspective, very strong. And then repair and remodel, that has been for us more establishing of distribution around our Prefinish offering or I should say, maybe reestablishing a distribution. So we've seen good polls there. I don't have quite the visibility to be able to say exactly how that's ending up because it's been more of a distributor play this year for us. But -- and we're certainly building the network that we need to continue to drive good growth in our repair and remodel as we look into the future, which is all part of our plan that we outlined on Investor Day.

And just quickly on geography, you did ask that. The Midwest is very strong for us. That Central -- South Central region is extremely strong for us as well as the Southeast and Mid-Atlantic. And we have a good position on the West Coast and in California. So obviously, there's been some -- that's been a weaker housing market from a start standpoint, I think just due to the COVID and the fire situation out there. It's been kind of a tough summer for homebuilding. But where we've -- where we are positioned in the West, we've done well there. We've done it at least as good as the market, out West.

And I guess, I was trying to get to and since you did really well everywhere, it's sort of hard to get to what I was trying to get a sense of, which -- how much is this -- the overall market improving versus where you may be seeing gains from your product initiatives, et cetera? If you can provide a little color there, that would be helpful.

Well, single-family is improving, and there's no question about that. So that business is improving overall and then we're improving in our market share gains there. That single-family market is very strong. The shed market's strong, but I will say I think there is -- I don't expect it to sustain, especially from a growth percentage, anything here what we've seen this year. I think there's some temporariness to that.

And then retail is really to me the question mark because it's been very strong. And I think there might be some stickiness to that because as people -- as small contractors, the order line for retail realign their credit around retail environment, that positioning, that could be sticky from a market share growth. And that's coming from somewhere. I know that's not new demand. But I do think that there's been some competitive movement into retail from a distribution standpoint as part of this pandemic and the offering that they have and the way you can order online, et cetera.

And so it's fortunate that we've got a good position there that we can take advantage of that. But without question, Mark, what's driving the strength of, if you want one answer to it, single-family at all comes from somebody buying a new home, I think, is a key driver from a market tailwind standpoint right now for us.

Great. And just one more, if I could, on kind of CapEx on the capital allocation, you talked about 50% beyond the CapEx needs. And if we look at the third quarter, order of magnitude, it was -- you had $100 million this fourth quarter. If it's going to look similar, big picture, another $100 million. Your dividends for those 2 quarters would be $30 million, $35 million. So that would suggest that you've arguably got round numbers, $160 million, $170 million, which could got to share repurchase based on those 2 quarters.

Is -- A, is that a way to think about it? Or is it not that discrete? And then how does the timing work? Because it sounds like you've spent $30 million in the third quarter and $40 million since with the expectation of completing the $100 million, which I think would be another $30 million, if I'm getting my math right. But then there would be this extra earnings you've had that don't seem to be covered by the -- what you've got authorized to date?

Yes. So let me clarify my comments from earlier. We spent $30 million in the third quarter. As of today, since the end of September, we've spent another $70 million. And we're also going to spend another $100 million between today as it were and the end of the year, which means fourth quarter share buybacks will be $170 million.

(Operator Instructions) Our next question comes from the line of Paul Quinn of RBC Capital Markets.

Just a question on the building solutions transformation, great to see you are a year ahead. When do you think you actually have this done, i.e., the $165 million, is that the end of the program? Is that when the market will give you sort of a hearty-like multiple?

Okay. Let me just talk about Structural Solutions before I talk about the hearty-like multiple. So our near-term target is 50%, and we will not stop there. We believe we're -- have the ability to generate new products. We believe we've got a ton of growth opportunities, particularly with legacy flooring and WRB offering, FlameBlock in there as well. And so we're -- Paul, I would -- I hope one day we're 100% Structural Solutions. That may not happen unless you do the decision, but that's certainly going to be a target for us because of the value-add opportunity.

Our key -- I mean, just to kind of talk about the multiple question. I think the key for us is continuing to grow in Siding, which is -- our Siding business is better than Marty's. So we arguably could have a bit of a higher multiple is my personal view of that. And then if we can continue to grow that Structural Solutions, especially on the higher value-add items, like I mentioned, legacy, WRB and FlameBlock, that part of that OSB commodity production and moves them into more stable and certainly higher-margin panels.

And so that's the key for us to -- that's what we're focused on, Paul, as you know, that's what we come to work every day, focus on doing and executing and have plans around and budgets around and spend marketing dollars on. And I think we've been -- I think we've done a good job over the last few years getting to where we are, but -- and another way of looking at it, we're just getting started.

We've only had WRB really in the market for about a year, legacy for 2 years, Prefinish for 6 months, Smooth for 12 months. So we've got to contract really valuable differentiated products that have a lot of room for growth and market share gains. And so I think we're positioned well and -- but the conversion story for OSB, including as it relates to converting mills to Siding is not over at LP. It's not even in the middle of the book yet.

Okay. Would you ever consider monetizing selling Peace Valley to accelerate the transformation? And maybe you could give us a quick update on Entekra over the last month?

Yes. So consider selling, yes. I like that mill from a standpoint of now that we've converted Dawson, it's our only Western Canadian mill which got access to Western market in the U.S. So we -- our plan is to retain it, I mean to be candid with you, Paul. But I wouldn't say I'm kind of the mindset despite everything you have is for sale for the right price. But that's not -- our near-term plan is to, at the right time, we start that facility and use it to reestablish some better freight lines pipelines in the West Coast. That's part of the right now -- since we converted Dawson, we're serving out of Texas. So there would be some freight advantages to having that facility in our system.

The update on Entekra is -- I mean, we've seen continued growth in the order file even since Investor Day. I'm really encouraged by market acceptance of that technology. I'm really happy about the quality of the order file from a customer standpoint, names you would recognize are in our order file. And we're working through the start-up of that the big facility in Modesto.

So we're still, from an operation standpoint, very much in start-up mode. But from a reliability standpoint of delivering kits all time for our customer base, we're doing a good job with that. And we're trying to build that credibility in the marketplace that we could be a reliable alternative to stick build framing. And I mean, so far, so good. There's a lot that we are not even in chapter 1 in that story. But from a market standpoint, from an order file quality, it is very encouraging what's going on with Entekra right now.

Thank you. Ladies and gentlemen, that does conclude the Q&A portion and our conference for today. Thank you for participating. You may now disconnect.